by Dennis Crouch
This case represents an important decision limiting the scope of Covered Business Method reviews. However, its short consideration of agency-deference leaves it open to further challenge.
Secure Axcess v. PNC (and other banks) (Fed. Cir. 2017) [secureaxcess]
The America Invents Act created a temporary mechanism (8-year) for challenging certain “covered” business method patents. The program will sunset for new petitions in the “Transitional Program for Covered Business Method Patents” (“CBM review”) sunsets on September 16, 2020. The program allows for CBM patents to be challenged on any ground of patentability (e.g., Sections 101, 102, 103, and 112) and is not limited to post-AIA patents.
Not all business method patents fit within the program, but only those covering non-technological inventions related to a financial product or service. In particular, the defintion states:
For purposes of this section, the term “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.
AIA Section 18(d)(1).
Here, Secure Axcess’s patent covers a computer security method that uses an authenticity key to “create formatted data” that is then sent to another computer to be used to locate an authenticity stamp from a preferences file. Patent No. 7,203,838. Although the the patent is not limited to financial services, the patentee has sued dozens of banks and financial service providers for patent infringement. In particular, it appears that the patentee has only sued financial service providers.
The PTAB determined that the patent here fits the CBM definition. On appeal, however, the Federal Circuit reversed holding that “the patent at issue is outside the definition of a CBM patent that Congress provided by statute.” This decision follows the court’s recent decision in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016).
Claiming Financial Services: In its decision, the court walked through the statute – noting that the focus is on the claimed invention rather than the asserted marketplace or potential uses of the invention. Thus, the relevant question is not how the invention is used, but rather whether the claims are directed to a financial service. According to the court, any other reading, would “give the CBM program a virtually unconstrained reach.”
Statutory Interpretation – A Question of Law: A very interesting aspect of the decision is the standard-of-review. Both parties suggested that the USPTO should be given some deference of its own interpretation of the statute. With only limited discussion, the Federal Circuit rejected that suggestion and instead held that statutory interpretation is simply a matter of law, reviewed de novo on appeal:
[T]he issue here is whether the Board properly understood the scope of the statutory definition. That is a question of law.
The court did not, however cite or refer to Chevron or other Supreme Court precedents requiring deference to certain agency interpretations of law.
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The majority opinion was penned by Judge Plager and joined by Judge Taranto. Judge Lourie wrote in dissent. The dissent would expand the scope of CBM to include patents directed to financial services even when claims themselves are not expressly limited to financial services. In this case, the exemplary embodiment of the invention uses the security mechanism for financial services. Further, the only example URL in the patent is “bigbank.com.” Judge Lourie also found the patentee’s “litigation pattern” relevant to the financial services use (having asserted the patent against dozens of banks, and nobody else).
Of interest for administrative law folks, Judge Lourie also failed to consider whether deference should be given to PTO interpretation of the statute.
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In a parallel decision, the Federal Circuit today issued a R.36 judgment (improperly in my view) affirming the PTAB’s cancellation of the the claims of a family member patent as obvious. U.S. Patent No. 7,631,191.