by Dennis Crouch
Versata v. SAP and the USPTO (Fed. Cir. 2015)
This an important decision stemming from the first Covered Business Method (CBM) Review Proceeding, the Federal Circuit has affirmed the PTAB properly cancelled the challenged claims for lacking patent eligible subject matter. However, in petit Marbury v. Madison style, the court also exerted its power of review over the PTABs decisions, including whether the challenged patent is a “covered business method patent.” Judge Plager drafted the majority opinion that was joined by Judge Newman. In a concurring opinion, Judge Hughes wrote that “[t]he majority’s interpretation of § 324(e) to permit review of whether Versata’s patent is a ‘covered business method patent’ directly conflicts with our precedential decision in In re Cuozzo Speed Technologies, LLC, (Fed. Cir. July 8, 2015).” The cited statute indicates that “the determination by the Director whether to institute a post-grant review [or CBM review] under this section shall be final and nonappealable.” Judge Hughes argued that the question of whether a patent fits within the CBM definition is answered at the petition stage and thus not reviewable on appeal.
In its decision, the court also directly ruled that CBM review proceeding (and thus future post-grant review proceedings) can include Section 101 challenges. The statute provides that CBM/PGR proceedings can be used to challenge patent claims “on any ground that could be raised under paragraph (2) or (3) of section 282(b) (relating to invalidity of the patent or any claim).” 35 U.S.C. 321(b). Section 282(b), in turn, reads as follows:
(b)(2) Invalidity of the patent or any claim … on any ground specified in part II as a condition for patentability.
(b)(3) Invalidity of the patent or any claim … for failure to comply with— (A) any requirement of section 112 [except best mode] or (B) any requirement of section 251.
In our 2012 essays, Professor Hricik and I explained an argument why subject matter eligibility does not fit within these invalidity grounds of Section 282.
- David Hricik, Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?
- Dennis Crouch, Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO’s new Post-Grant Review Procedure?
Our argument was that the only way patent eligibility fits into Section 282 is under pat (b)(2) since “part II” of the Patent Act does include Section 101. However, not all sections of Part II (Sections 100 to 212) are conditions for patentability, and, in fact, only sections 102 and 103 are so-labelled. The court agreed with our agument, but found it to be overwhelmed by history:
Versata is correct that a strict adherence to the section titles can support an argument that § 101 is not listed as a “condition of patentability,” but rather has the heading of “inventions patentable.” However, as noted by the USPTO, both our opinions and the Supreme Court’s opinions over the years have established that § 101 challenges constitute validity and patentability challenges. . . .
It would require a hyper-technical adherence to form rather than an understanding of substance to arrive at a conclusion that § 101 is not a ground available to test patents under either the PGR or § 18 processes. Section 101 validity challenges today are a major industry, and they appear in case after case in our court and in Supreme Court cases, not to mention now in final written decisions in reviews under the AIA. The numerous cases in our court and in the Supreme Court need no citation. . .
As Judge Hughes writes, a major portion of the ruling here is in tension with Couzzo because it allows the Federal Circuit to review whether the grant of the review was proper. However, because the PTO won its case, it seemingly has no right to appeal that particular issue. As such, the majority opinion regarding reviewability could also be seen as simply dicta since, if they had decided that the CBM issue was not reviewable then the case would have also been affirmed.