January 2014
Intellectual Property & Technology Law Journal
Authored by Jason E. Stach and Andrew G. Strickland
The recently implemented America Invents Act provides several tools for challenging the validity of patent. One of those tools is the Transitional Program for Covered Business Method Patents, which provides for Covered Business Method Reviews (CBM reviews). A CBM review is an administrative trial conducted by the Patent Trial and Appeal Board (Board) to determine the validity of a patent.1 This type of proceeding will be available until September 15, 2020.2
A CBM review can be a powerful tool for accused infringers wanting to challenge the validity of a patent because it does not have the limitations of other patent validity challenging tools. For example, unlike an ex parte reexamination, a CBM review is an adversarial proceeding in which the accused infringer can participate after filing the petition to start the proceeding.3 Also, unlike an inter partes review, an adversarial proceeding that only allows a party to challenge the validity of a patent using prior-art patents and prior-art printed publications,4 a CBM review allows validity challenges on any ground that is a condition for patentability.5 Unlike a post grant review, an adversarial proceeding that must be filed within nine months from the issue date of a patent,6 a party may file a petition for CBM review at any time post grant review is not available.7
Not all patents, however, can be the subject of a CBM review. CBM review is available only to patents that the Board determines are "covered business method patents" (CBM patents). U.S. Patent and Trademark Office (USPTO) regulations define a CBM patent as a patent having claims: (1) used in the practice, administration, or management of a financial product or service, and (2) that do not claim a "technological invention."8 Although the regulatory definition does not provide much guidance as to the definition of a financial product/service or technological invention, early Board decisions regarding institution of a CBM review provide some guidance. Even though the regulatory definition of CBM patents appears to be narrow on its face, in its early decisions, the Board has applied a broader definition of CBM patents than some believe the language of the regulation suggests. In cases where a party to a CBM review disputes the patent's qualification as a CBM patent, the Board has applied a broad interpretation of financial product or service, or a narrow definition of technological innovation, to determine that the patent at issue is a CBM patent. The result of the Board's interpretation is that, in some cases, patentees may find their asserted patents unexpectedly subject to CBM review. Conversely, in some cases, accused infringers may have an additional, unforeseen tool for challenging the validity of a patent. All parties may benefit from the lessons in these early Board decisions.
In the first CBM review instituted by the Board, SAP America, Inc. v. Versata Development Group, Inc.,9 the Board provided its first indication that financial product or service would be broadly construed in determining whether a patent was eligible for CBM review. SAP America filed a CBM review petition to challenge Versata's U.S. Patent No. 6,553,350. Versata's patent is directed to a method and apparatus for determining the price of a product offered to purchasers. Information about purchasers and products is arranged into groups, and pricing information and special pricing adjustments are associated with the purchaser and product groups. Those groups are used to determine the pricing of a particular product for a particular purchaser. Versata contended that its patent claims directed to this type of pricing analysis were not directly related to the financial services industry or to financial products or services. Instead, Versata argued that the embodiments described in its patent related to the purchase of goods, such as computer hardware and software, so they were not properly subject to CBM review.
SAP America argued that because the claims of Versata's patent were directed to determining prices and the management of pricing data, they were directed to a financial product or service. The Board agreed with SAP America. In doing so, the Board leveraged the legislative history and what it viewed as the intent behind CBM review. It discussed the USPTO's notice of proposed rulemaking, noting that "financial product or service" should be interpreted to broadly include "activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity."10 The Board noted that the term "financial" is an adjective that simply means relating to money matters, and the patent need not be related to the financial services industry.11 Accordingly, the Board found that Versata's patent was a proper candidate for CBM review.
The Board took an even broader view of what constitutes a CBM patent in CRS Advanced Technologies, Inc. v. Frontline Technologies, Inc.,12 and arguably expanded the scope of what facts the Board considers when determining whether a patent is a CBM patent. In that case, CRS filed a petition to initiate CBM review of Frontline's U.S. Patent No. 6,675,151. Frontline's patent relates to a human resource management system using "substitute fulfillment," which assigns a replacement worker to substitute for a regular, permanent worker during a temporary absence. While the specification of Frontline's patent includes a preferred embodiment that assigns replacement workers for a bank, and claim 1 of Frontline's patent is specifically directed to replacing workers in a "retail bank," the claims for which CSR requested review were not directed to a retail bank. Instead, the challenged claims were directed to "a plurality of different organizations."
Frontline argued that its claims were not subject to CBM review because the claims at issue are neutral with respect to the practice, administration, or management of a financial product or service, and no claim elements of its patent are directed to money, financial transactions, or any type of activity that is inherently a financial product or service.13 The Board rejected Frontline's argument. It reasoned that because some of Frontline's patent claims are directed to activities at retail banks, Frontline's patent as a whole is at least incidental or complementary to a financial activity. It also found that the challenged claims directed to a "plurality of different organizations" were broad enough to encompass the retail banks specified in other claims and disclosed in the patent specification. As a result, the Board found Frontline's patent claims subject to CBM review, even though the claims at issue were not directed to what some traditionally would consider financial activities.14
Without saying so, the Board effectively expanded the scope of what facts it considers in determining whether a patent is a CBM patent. Under CRS Advanced Technologies, the Board likely will consider other claims in the challenged patent, as well as embodiments described in the specification.
The Board's holdings in SAP America and CRS Advanced Technologies provide a rough framework for analyzing the financial-product-or-service prong of the CBM patent determination. First, under SAP America, a patent is directed to a financial product or service when it relates to activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity. When a patent's claims relate to money matters, the patent relates to a financial product or service even though some might argue that the claims are not related to the financial services industry. Second, under a broad reading of CRS Advanced Technologies, a patent is directed to a financial product or service when its claims can be performed by a financial institution and the patent elsewhere refers to a financial institution.
In addition to broadly interpreting financial product or service, the Board has further expanded the scope of CBM review by narrowly interpreting the technological invention exception. Even if a patent relates to a financial service or product, it is not a CBM patent if it is directed to a "technological invention."15 USPTO regulations define a technological invention as one whose subject matter as a whole recites a technological feature that is novel and unobvious over the prior art, and solves a technical problem using a technical solution.16
The regulation provides little guidance, however, the USPTO issued comments identifying two examples of patents that claim technological inventions and that would not be subject to a CBM review:17 (1) a patent that claims a novel and nonobvious hedging machine for hedging risk in the field of commodities trading, and (2) a patent that claims a novel and nonobvious credit card reader. In response to comments concerning these limited examples, the USPTO agreed that more examples would be helpful but stated that they would not be provided until the Board issues written opinions in CBM reviews.18
The USPTO also issued comments identifying claim features that do not transform an otherwise nontechnological invention into a technological one.19 First, a claim is not directed to a technological invention if its technical elements merely recite known technologies, such as computer hardware, communication or computer networks, software, memory, computer readable storage media, scanners, display devices, databases, or specialized machines such as ATMs or point-of-sale devices. Second, a claim is not directed to a technological invention if it merely recites known prior-art technology to accomplish a process or method, even if that process or method is itself novel and nonobvious. Finally, a claim is not directed to a technological invention if it combines prior art structures to achieve the normal, expected, or predictable result of that combination.
With this backdrop, in SAP America, the Board first analyzed the technological invention exception. It began by stating that a single non-technological claim of a patent is sufficient to institute a CBM review. It then focused on claim 17 of Versata's patent. Although Versata argued that claim 17's data structure and software-implemented pricing procedure was a novel and technological invention, the Board determined that claim 17 lacked a novel and unobvious technological feature because its steps could be performed with a pencil and paper.20 The Board also relied on Versata's patent specification, which states that the invention may be implemented in any type of computer system or other programming or processing environment. Because Versata's patent requires no specific, unconventional software, computer equipment, tools, or processing capabilities, the Board found that the claims were not directed to a technological invention. The mere fact that the method of claim 17 could be performed by a computer did not transform claim 17 into a technological invention. Accordingly, the technological invention exception did not apply to Versata's patent.
In its second decision addressing the scope of CBM review, Liberty Mutual Insurance Co. v. Progressive Casualty Insurance Co.,21 the Board again limited the technological invention exception. Liberty Mutual filed a petition to institute a CBM review of Progressive's U.S. Patent No. 6,064,970. Progressive's patent is directed to methods of administering and managing an insurance policy by adjusting insurance premiums based on monitored vehicle data. The specification of Progressive's patent describes embodiments where a sensor is placed within a vehicle and the sensor collects data regarding the driver's driving characteristics. Progressive argued that because its patent discloses and claims inventions involving computers and sensors, it is directed to a technological invention that cannot be the subject of a CBM review. Progressive also compared its claims to a credit card reader, which was one example of a technological invention the USPTO identified in its comments regarding CBM review. According to Progressive, the claimed invention was at least as technological as the Patent Office's exemplary technological invention.
The Board was not persuaded. It reiterated that determining whether a patent is a CBM patent depends on its claims, and an entire patent is eligible for CBM review if it contains at least one CBM claim. Reviewing claim 4 of Progressive's patent, the Board determined it was not directed to a technological invention because that claim recites a method without a specific technological element (e.g., an electrical sensor). Although the specification and certain claims of Progressive's patent recite a sensor, the method of claim 4 does not; a passenger sitting in the vehicle could perform the monitoring steps of the method. As a result, the Board rejected Progressive's argument and held that its patent was a CBM patent.
The Board further explained in Bloomberg Inc. et al. v. Markets-Alert PTY LTD22 that claims having only technical features known in the prior art would not fall under the technological invention exception. In Bloomberg, the petitioners sought CBM Review of Markets-Alert's U.S. Patent No. 7,941,357. That patent's claims recite steps for monitoring stock market data and notifying users in real time of stock market events based on the user's instructions. In reaching its decision that Markets-Alert's patent was not directed to a technological invention, the Board noted that the patent's technological features, such as a network of computers and remote communication devices, referred to generic hardware that was well known in the prior art at the time of invention. The Board also quoted the patent's Background section, which acknowledged that several techniques for stock market analysis were already known at the time of the invention, including many of the patent's claimed method steps. Although the claims required that the method be performed in real time, this did not render the invention technological because the real-time feature was due to the use of known networked computers. Similar to its decision in SAP America, the Board noted that the specification of Markets-Alert's patent did not describe any specific computer, program, or processing beyond what was known in the art at the time of invention.
Relying on legislative history, Markets-Alert argued that software-type claims were intended to be excluded from CBM review under the technological invention exception. The Board disagreed, noting that there is no presumption that certain categories of invention fall within the technological invention exception. Although the legislative history indicates that novel software tools and graphical user interfaces could fall under the exception, each claimed invention must be evaluated individually and on a case-by-case basis. Because Markets-Alert's claims did not recite a novel software tool, graphical user interface, or other technological feature that was not already known at the time of the invention, the Board declined to apply the technological invention exception.
The Board's decisions in SAP America, Liberty Mutual, and Bloomberg, provide some insight into how the Board will interpret the technological invention exception. First, claims to technological inventions likely will need to recite some form of novel and nonobvious software, computer equipment, or tools. Merely reciting known computing components such as processors, memory, or networks may not trigger the technological invention exception. Second, if one can perform the claim's process without a computer (e.g., with pencil and paper or mentally), the Board is unlikely to deem the invention technological. Finally, the Board stressed in all three decisions that a single claim directed to a non-technological invention will disqualify an entire patent from the technological invention exception. Thus, in cases where some claims of a patent recite novel technological features, such as a specialized sensor, and others claims do not, the technological exception will not apply to any claim of the patent.
Patent owners and accused infringers can take away several lessons from early Board decisions concerning the scope of CBM reviews. Recognize that the Board is taking a broader interpretation of which patents can be subject to CBM review than some expected. Patents that include claims related to money, pricing, or financial institutions, even if the claims are not otherwise related to a financial product, likely will qualify as a financial product or service patent potentially subject to CBM review. Thus, both patent owners and accused infringers should consider the possibility of a CBM review for patent claims including terms related to spending, purchasing, pricing, credit, banking, or money. If the possibility of a CBM review is of concern to a client, whenever possible, patent drafters should write the patent's specification and claims without indicating that the invention relates to money, pricing, financial institutions, or any other feature that might be deemed complementary to a financial product or service.
Also recognize that the Board is applying a narrow interpretation of the technological invention exception. For the technological invention exception to apply, all of the claims of the patent at issue must recite a technological feature that was novel and not obvious at the time of the invention. Accordingly, patent owners should be aware that the technological invention exception may not apply to their patents if some claims of the patent do not recite novel, specialized hardware or claim a novel software tool or graphical user interface. Conversely, accused infringers should be on the lookout for weak links in the claims, as finding only a single non-technological claim can avoid triggering the exception and may allow the Board to institute a CBM review.
While a CBM patent must meet both the financial-product-or-service prong and the non-technological-invention prong of the current definition, bills pending in the Senate and House of Representatives propose changing the definition. For example, on May 6, 2013, Senator Charles Schumer introduced a bill called the Patent Quality Improvement Act of 2013, which seeks to strike the financial-product-or-service prong from the CBM patent definition.23 On July 22, 2013, Representatives Darrell Issa, Judy Chu, and Jared Huffman introduced the Stopping the Offensive Use of Patents Act (or STOP Act), which is a different bill that seeks to change the definition of a CBM patent. The STOP Act seeks to replace the financial-product-or-service prong with a broader definition defining a CBM patent as "a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of an enterprise, a product, or a service."24 Both proposals keep the technological invention exception currently in the CBM patent definition.
Regardless of whether Congress enacts one of the bills, they reflect the sentiment that CBM review should apply broadly. As the Board issues more decisions concerning CBM review, and as Congress continues to contemplate the Patent Quality Improvement Act and the STOP Act, patentees and accused infringers should recognize that the scope of CBM review is broader than what they may have understood originally and it is likely expanding. As a result, both patentees and accused infringers should consider the impact of CBM review when evaluating their patent strategies.
Endnotes
1 See 37 c.f.r. 42.300(a).
2 See 37 c.f.r. 42.300(d).
3 37 c.f.r. 42.300(a).
4 See 37 c.f.r. 42.104(b)(2).
5 See 37 c.f.r. 42.304(b)(2).
6 See 37 c.f.r. 42.202(b)(2).
7 See 37 c.f.r. 42.302(b)(2).
8 See 37 c.f.r. 42.301(a) ( "Covered business method patent means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.").
9 SAP Am., Inc. v. Versata Dev. Group, Inc., No. CBM2012-000001, Paper No. 36 (P.T.A.B. Jan. 9, 2013).
10 Id. at 21-22.
11 Id. at 23.
12 CRS Advanced Techs, Inc. v. Frontline Techs, Inc., No. CBM2012-00005, Paper No. 17 (P.T.A.B. Jan. 23,
2013).
13 Id. at at 7.
14 Id. at 8-9.
15 See AIA §18(d)(1); 37 c.f.r. 42.301(a).
16 See, 37 c.f.r. 42.301(a) ( "In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.").
17 Id.
18 Id. at 48737.
19 77 Fed. Reg. 157 (Aug. 14, 2012) at 48763-48764.
20 SAP Am. at 26-27.
21 Liberty Mutual Insurance Co. v. Progressive Casualty Insurance Co., No. CBM2012-00002, Paper No. 10 (P.T.A.B. Jan. 23, 2013).
22 Bloomberg Inc. et al. v. Markets-Alert PTY LTD, No. CBM2013-00005, Paper No. 18 (P.T.A.B. Mar. 29, 2013).
23 Patent Quality Improvement Act of 2013, S. 866, 113th Cong. (2013).
24 Stopping the Offensive Use of Patents Act, H.R. 2766, 113th Cong. (2013).
Originally printed in Intellectual Property Magazine (www.intellectualpropertymagazine.com). Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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