Authored by Jeffrey A. Berkowitz and Elliot C. Cook
Patents for financial technologies are in the crosshairs. They were targeted in Bilski1 and have been besieged since Alice.2 Although FinTech patents have been grabbing many recent headlines, reliable data addressing exactly how these patents have fared in Patent Trial and Appeal Board3 validity challenges remains sparse. For example, the U.S. Patent and Trademark Office4 publishes statistics about petition filings by technology classification,5 but does not publish statistics about win rates by classification. Further, the USPTO’s published data combines the categories of "mechanical" and "business method,"6 which makes it difficult to isolate trends affecting FinTech patents alone.
We have examined claim survival rates in PTAB proceedings—separately for covered business method review and inter partes review—on a technology-by-technology basis.7 The data reveals that claim survival rates for all FinTech technologies are relatively low. The claim survival rates are significantly lower in CBM proceedings (which are inherently susceptible to FinTech patents) than in IPR proceedings. As discussed below, this is likely due to the different grounds of attack permitted, and the different thresholds required for institution, in the two types of proceedings.
FinTech Patents in CBMs
By statute, the definition of a CBM patent includes FinTech patents—specifically, those directed to "a financial product or service."8 Most FinTech patents are classified within certain technology centers, including: 2100—Computer Architecture, Software, and Information Security; 2600—Communications; 2800—Semiconductors, Electrical and Optical Systems and Components; and 3600—Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review.
As of Jan. 1, 2016, the PTAB has issued a total of 78 final written decisions in CBM proceedings. The technological breakdown of the patents involved in these decisions is shown below. The majority (55 percent) of the patents are classified in Technology Center 3600—Transportation & E-Commerce. Within this technology center, electronic commerce accounts for most of the patents involved in final written decisions.
Claim survival rates for instituted CBM proceedings are notoriously low. Indeed, from the date of the first CBM final written decision on June 11, 2013, until Dec. 17, 2014, no instituted claim in a CBM proceeding had survived in a final written decision. As shown in the graph below, the cancellation rates vary by technology center, but all rates are low. The rates range from a bleak 0.94 percent (2600—Communications) to just 6 percent (2100—Computer Architecture, Software, and Information Security).
FinTech Patents in IPRs
Unlike CBM, IPR is subject-matter neutral, making it available to challenge any "patent" regardless of the technology to which it pertains.9 As of Jan. 1, 2016, 610 IPR final written decisions have issued. The chart below confirms that IPR final written decisions have addressed a variety of patented technologies, including both FinTech patents and numerous types of other patents.
In contrast to CBM final written decisions, where one technology center (3600—Transportation & E-Commerce) dominates the decisions, IPR final written decisions are spread more evenly over technology centers, with no single center claiming a majority. Further, IPR final written decisions include various technologies that are not represented in CBM final written decisions, such as biotechnology, chemistry, and materials engineering.
Claim survival rates for IPR final written decisions are shown in the chart below. A comparison of claim survival rates between CBM and IPR proceedings is revealing. Within the four technology centers that comprise FinTech patents, claim survival rates are consistently higher for IPR proceedings than for CBM proceedings.
For example, in the technology center with the most number of CBM final written decisions (3600), the claim survival rate for IPR is 25.7 percent, while for CBM the corresponding rate is just 2.7 percent. Much of this difference is likely based on the fact that challenges under 35 U.S.C. § 101 are available for CBM proceedings, but not for IPR proceedings. Because of the nature of § 101 challenges, if the PTAB decides to institute a CBM proceeding there is less the patent owner can do to persuade the PTAB that its initial consideration of the § 101 inquiry was erroneous. Part of the explanation may also derive from the different institution thresholds for the two types of proceedings. IPR petitions must meet a "reasonable likelihood" of success threshold to be instituted,10 while CBM petitions must meet a "more likely than not" threshold.11 Again, for CBM, if the PTAB has already decided to institute a proceeding then it is inherently more difficult to explain the error in institution than for IPR.
The low claim survival rates at the PTAB for FinTech patents demonstrate the high scrutiny that these types of patents currently receive. One clear takeaway is that the claim survival rates are much lower in CBM proceedings than in IPR proceedings, even for patents within the same technology center classification. For petitioners, this often makes a CBM (if available) the proceeding of choice, especially where a challenge under 35 U.S.C. § 101 has merit. For patent owners, while IPR provides higher claim survival rates for FinTech patents, the rates themselves are still relatively low, ranging from 7.94 percent (computer networks) to 25.71 percent (transportation and e-commerce). Thus, for both types of proceedings, the data reveals that if the PTAB decides to institute a proceeding, the odds are against the patent owners. Depending on the particular facts of a given proceeding, the claim cancellation trends at the PTAB weigh in favor of patent owners giving careful consideration to strategies designed to avoid institution in the first place.
1 Bilski v. Kappos, 130 S. Ct. 3218 (2010).
2 Alice Corp. Pty. Ltd. v. CLS Bank Int’l., 134 S. Ct. 2347 (2014).
3 Patent Trial and Appeal Board.
4 United States Patent and Trademark Office.
7 Finnegan has collected the unique data presented in this article; select portions of this data are regularly published on the AIA Blog (www.aiablog.com).
8 Leahy-Smith America Invents Act ("AIA"), Pub. L. No. 11229, 125 Stat. 284 § 18(d)(1)(2011).
9 35 U.S.C. § 311(a), (b).
10 35 U.S.C. § 314(a).
Originally printed in Law360 (www.law360.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.