US Cybersource Decision Puts Mental Steps Back Into Business Methods Patents

Amelia Manera is a JD candidate at Osgoode Hall Law School.

On August 16, 2011, the US Court of Appeal released the decision of Cybersource Corporation v Retail Decisions Inc. reinforcing that a process that can be done merely by a series of mental steps is not patentable subject matter under s.101 of Title 35 of the United States Code. This decision, if considered by the Canadian Federal Court of Appeal, could have negative implications for the case currently on appeal before it.

In Cybersource, the US Court of Appeal followed the US Supreme Court decision in Bilski v Kappos, holding that the “machine-or-transformation” test is not the sole test of the patentability of a process and that other tests, such as the mental steps test, may also be used in that determination. The “machine-or-transformation” test states that a process is patentable subject matter under s.101 if it is tied to a particular machine or if it transforms a particular item into another state or thing. The mental steps test, on the other hand, states that a process is not patentable subject matter under s.101 if it could be done merely by a series of mental steps.

In Re: Bilski, the full bench of the US Federal Court of Appeal affirmed the denial of a patent for a method of hedging risk management using the “machine-or-transformation” test. On appeal, the US Supreme Court affirmed the decision, but used the mental steps test in conjunction with the “machine-or-transformation” test to deny the patent. In the case of Cybersource, a patent was initially issued for the method of identifying online credit card fraud, but was held to be invalid by both the District Court and the US Court of Appeal using the mental steps test as in Bilski v Kappos. The case involves a process for allowing consumers to purchase items online with the click of one button. An analysis of the arguments in the appeal can be seen in this past IPilogue blog post.

The patentability of the “one-click” process under the Canadian Patent Act is at issue in the appeal. On the one hand, has a US patent for their “one-click” system (see US Patent No. 590,411).  This fact could weigh in favour of granting a Canadian patent for the same invention. Also, the Canadian Federal Court overturned the Commissioner of Patents’ decision to deny the patent in Canada. On the other hand, the invention must satisfy the rules of patentability of each new jurisdiction. In light of this, it is interesting to note that attempts to have the “one-click” patent granted by the European Patent Office (EPO) has been denied for a second time on appeal (see appeal decision here.) The European patent was denied on the ground that the idea of eliminating the number of steps in order for a consumer to make an online purchase is not patentable subject matter.

While case law from another jurisdiction is not binding on a Canadian court, it can be used to influence a court’s decision. Thus, despite the existence of the “one-click” US patent, the combination of the Bilski v Kappos decision, the Cybersource decision, and the denial of a “one-click” patent by the EPO may tip the scales towards denying a Canadian “one-click” patent.