by Dennis Crouch
In Unwired Planet v. Google, the Federal Circuit has vacated a PTAB covered business method decision – holding that the PTO’s definition of a “covered business method” was unduly broad.
The America Invents Act created a powerful set of post-issuance administrative review procedures known generally as AIA trials, including the covered business method (CBM) review. CBM is designed as a transitional proceeding that will sunset in the year 2020 barring congressional action. The most popular form of AIA trial is inter partes review (IPR) that allows for review of any issued patent but is limited to only novelty and obviousness challenges based upon prior art. CBM review applies to a much narrower set of patents – only “covered business methods” – but those patents can be challenged on almost any patentability ground, including eligibility. Here, the Board found the challenged claims unpatentable subject matter under section 101.
The term covered business method is particularly defined to include any 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.” AIA § 18(d)(1). In its implementing rules, the PTO did not further define or explain the CBM definition within its official rules – although the PTO did propose the “incidental” or “complementary” language in its official responses to comments on its proposed rules. On appeal, the Federal Circuit has rejected the more expansive definition as contrary to the statute.
Here Unwired’s Patent No. 7,203,752 claims a method of using privacy preferences to configure when various applications are permitted to access a wireless device’s location information. PTAB found CBM claims by noting that businesses may want “to know a wireless device is in its area so relevant advertising may be transmitted.” The PTAB’s finding here was not conjecture but instead came from the patent’s written description. On appeal, however, the Federal Circuit found the required “financial product or service” link too tenuous. The court explains:
The Board’s application of the “incidental to” and “complementary to” language from the PTO policy statement instead of the statutory definition renders superfluous the limits Congress placed on the definition of a CBM patent.
The court then provides a few analogies:
The patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service. Take, for example, a patent for an apparatus for digging ditches. Does the sale of the dirt that results from use of the ditch digger render the patent a CBM patent? No, because the claims of the ditch-digging method or apparatus are not directed to “performing data processing or other operations” or “used in the practice, administration, or management of a financial product or service,” as required by the statute. It is not enough that a sale has occurred or may occur, or even that the specification speculates such a potential sale might occur.
The decision here thus appears to eliminate any chance that the patent will be considered a CBM and thus the Section 101 decision by the PTAB goes away.
No Appeal? Like IPR proceedings, CBM proceedings begin with an initiation decision followed by a trial decision. And, like IPR proceedings, the decision to initiate a CBM is not appealable. In Versata, however, the Federal Circuit held that the initiation question of whether a patent is a CBM patent may be reviewed on appeal. Despite the statutory language and the intervening Supreme Court decision in Cuozzo, the court here held that it still has jurisdiction to review the CBM initiation question on appeal.
Deference: In reviewing the PTAB determination, the court gave no deference to the Board’s interpretation of the law. “We review the Board’s statutory interpretation de novo.” The Court also gave no deference to the PTO’s “policy statement” made in its notice of final rules. The court does implicitly suggest – as it did in Versata – that implementation of a more thorough definition in the CFR rules would be given deference. However, the PTO has not taken that approach.
I do not know yet whether Google will push this case to the Supreme Court. The strongest argument is that Cuozzo implicitly overruled Versata. That is the holding suggested by Alito’s dissenting interpretation of the Cuozzo majority.