En banc denial in Challenge to Versata-Review of CBM Decisions

by Dennis Crouch

Unwired Planet v. Google (Fed. Cir. 2017) (en banc denied)

The Federal Circuit has denied Google’s petition for rehearing en banc.  The patent challenger asked the Federal Circuit to overturn Versata in light of the Supreme Court’s decision in Cuozzo.  The issue is well known to attorneys involved in the post-grant review of covered-business-method (CBM) patents.

According to the statute, the CBM process begins with a petition and institution decision by the Director.  Once instituted, the PTAB holds trial and issues a final decision.  The statute indicates that CBM review may be instituted “only for” CBM patents but that the Director’s institution decision “shall be final and nonappealable.”

In Versata, a divided Federal Circuit panel held that the CBM question could be reviewed since – a non-CBM patent is “outside the PTAB’s invalidation authority.”  In its briefing, Google argued that Versata was wrong when it was decided, and was extra-wrong following the Supreme Court’s Cuozzo decision that gave substantial force to the non-appealable provision of the statute.  Of course, Cuozzo offered a number of ‘outs’ – suggesting generally that there will be times when appeals of initiation decisions may still be allowed.

Versata v. SAP: Federal Circuit Claims Broad Review of CBM Decisions

In what appears to be a unanimous denial, the Federal Circuit has rejected Google’s petition. Judge Hughes wrote a short concurring opinion in dissent – arguing (as he did in the original Versata case) that the statute no-appeal provision should be given more weight.

I continue to believe that Versata was incorrectly decided. I further believe that Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) confirms that our review of the Patent Trial and Appeal Board’s decision should be limited to the ultimate merits of the patent validity determination and should not, with narrow exception, extend to any decisions related to institution. Those exceptions may include the rare circumstances where the agency acts unconstitutionally or in complete disregard of the limits on its statutory authority.

I expect that the Supreme Court would agree with the Federal Circuit on this particular issue based upon how the court sees eligibility as a threshold and almost jurisdictional issue and the close tie between the CBM definition and patent eligibility.  In the eyes of the Supreme Court, these issues are categorically different from the likelihood-of-invalidation question that is the substantive focus of initiation decisions.

Despite my prognostications here, Google is likely to petition for writ of certiorari.  Top Supreme Court Litigator Neal Katyal handled the failed petition here that particularly asked two questions: (1) Whether the Federal Circuit has jurisdiction to review a PTAB determination that a patent is a “covered business method” patent. (2) Whether the Federal Circuit should defer to the Patent and Trademark Office’s reasonable interpretation of the definition of a “covered business method” patent.

I have discussed the first question above. The second question is also an interesting issue of administrative law that may be mooted if Congress enacts the Separation of Powers Restoration Act of 2017.

Separation of Powers Restoration Act

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

7 thoughts on “En banc denial in Challenge to Versata-Review of CBM Decisions

  1. I do not think the Separation of Powers Restoration Act will cause the Supremes to reconsider and reverse THIS [IPR institutions] part of the Cuozzo decision [as distinguished from the other, BRI, issue], because the “Chevron deference” legal doctrine was strangely sidestepped by almost everyone arguing this issue in Chevron, including the PTO, and not relied upon in the decision.

  2. Minor, minor point that I hesitate a bit to add.
    In what appears to be a 12-1 denial

    Per the footnote on the opening page, Judge Plager participated only in the decision re: panel rehearing (because he’s a senior judge). So, 11-1 on denying en banc rehearing.

    Also, Judge Hughes concurs (not dissents) in the denial of en banc rehearing — he has something he wants to say, but still voted no, so really 12-0 on denying en banc rehearing, but with some remarks by Judge Hughes.

  3. Dennis: I expect that the Supreme Court would agree with the Federal Circuit on this particular issue based upon how the court sees eligibility as a threshold and almost jurisdictional issue and the close tie between the CBM definition and patent eligibility. In the eyes of the Supreme Court, these issues are categorically different from the likelihood-of-invalidation question that is the substantive focus of initiation decisions.

    Maybe the coffee needs to kick in but I am having a difficult time following this argument. Why should institution of a specific type of inter partes review that is “not reviewable” be treated differently than another type of inter partes review that is “not reviewable”?

    The more interesting question is this one: (2) Whether the Federal Circuit should defer to the Patent and Trademark Office’s reasonable interpretation of the definition of a “covered business method” patent.

    Why isn’t the correct answer to this question “yes. of course the CAFC should defer to the PTO’s reasonable interpretation of the definition”?

    1. Regarding (1), “based upon how the court sees eligibility as a threshold and almost jurisdictional issue and the close tie between the CBM definition and patent eligibility” may mean
      because
      (a) court sees eligibility like a jurisdictional issue, and
      (b) CMB definition is closely tied to eligibility,
      then the court may be inclined to think of the question as one of CBM jurisdiction of the PTAB, as a matter of legal authority to conduct the trial (which reviewable, either under APA or AIA), instead of a run of mill prior art/anticipation/obviousness application (that would not be reviewable).

      Regarding (2), the Patent and Trademark Office’s reasonable interpretation of the definition of a “covered business method” patent is actually just the USPTO parroting back the statute. Under Chevron, if I remember correctly, the court generally doesn’t grant deference for interpretations that are not interpretations at all.

      Now, if you think the PTAB is using adjudicatory mechanisms to define the rule for “CMB patents”, then that’s a different discussion, and controlled under different rules. Maybe it would receive deference under that process, but I’m not aware of the PTO asserting it’s authority in that manner.

      1. if you think the PTAB is using adjudicatory mechanisms to define the rule for “CMB patents”, then that’s a different discussion, and controlled under different rules. Maybe it would receive deference under that process, but I’m not aware of the PTO asserting it’s authority

        Not sure what you mean by “asserting its authority.” It’s interpreted the statute. And it’s interpretation has been relentlessly chewed on by the CAFC with the end result being that incredibly junky and ineligible “do it on a computer” biz method claims are deemed to be outside the scope of CBMs simply because they don’t expressly recite the term “finance”.

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