No real consensus yet on CBM Sunsetting

Once initiated, CBMs are identical to post-grant reviews (PGR) – allowing for patents to be challenged on any patentability grounds.  As implemented, this includes 101 and 112 challenges in addition to the more traditional obviousness and novelty grounds.   PGRs, however, are limited to only AIA-patents and must be filed within a 9-month window from issuance.  Those caveats have severely limited the number of PGR petitions filed thus far.   For CBMs, the AIA-patent restriction and 9-month window are both eliminated.  However, the statute creates a subject-matter limitation that restricts CBMs to only non-technological financial-services business method patents.

Another feature of the CBM program is that it is “transitional” – i.e., it sunsets in 2020 and no petitions will be accepted after that date.

Last week, I hosted a quick anonymous survey on the transitional Covered Business Method Review program — asking whether the CBM program should be allowed to sunset or somehow extended.  240 Patently-O readers responded with results shown in the chart below.  About 44% of responses favored ending of the program outright — allowing it to sunset.  About 29% favored extending the program as-is, with the narrow financial-services scope.  The remaining favored extension and expansion: 17% would expand the scope to include all information processing patents, and the remaining 10% would extend the program to include all patents.  This final option would essentially mean ending the 9-month window for PGR filing.

CBMSunset

 

The survey also offered (but did not require) an explanation of the answer.  A variety of themes emerge from that explanation. The following are a few examples.

For patent challengers, the key response is that “it works” as a mechanism for cancelling patents, and could be extended to other technology areas.  

  • CBM is a big success addressing one of the most abused categories of patents. Extend it to the very worst and most abused patents by including all of information processing and it can help clean up the system and make it stronger.
  • Business methods are not the only abstract processes being patented by the Office Patent. A majority of all information processing methods (even those outside of the Business arts) suffer from encompassing non-statutory abstract processes without reciting subject matter that amounts to anything significantly more than said abstract processes.

The historic problem associated with poor business method examination quality has now been fixed. 

  • It was intended to handle a temporary problem in a specific area.  State Street caused a flood of applications in an area that was new to the USPTO.  Now skills and databases have developed and the stats show that there is no particular need for either expanding or extending CBM.  Permanently singling out a particular subject matter for extra scrutiny could cause other countries to do the same in other areas.
  • If the goal was to clean up shoddy and overly broad patents and applications, then most all of the necessary work should be done by then.  There are existing mechanisms in place that should be forcing quality such that this becomes redundant and therefore unnecessary.
  • It was a political sop to begin with and should be allowed to expire per the legislation and the underlying political agreement.  It’s argument was to take care of “low-hanging fruit”, patents of old vintage, issued when the Office’s resources in this area were low.  8 years is more than enough time to pick that fruit.
  • CBM petitions are declining because most of the patents intended for consideration have already been undone.

Patents need to be strengthened, not weakened. 

  • The patent systems is already nearly dead.  Make patent owners in all areas feel the pain of having their patent rights trampled over by a kangaroo administrative court.
  • Broad restrictions on patentability are harming U.S. competitiveness in the areas of its greatest strength.  China and the EU are poised to eat our lunch, and we are serving it up to them.
  • A terrible idea from the outset.
  • It (CBM) deprives some of the best technological innovators the chance to protect their valuable property.  Abandon CBM, and instead seek recourse to the traditional approaches (102, 103 and 112) to rid the patent landscape of those patents that don’t rise to the level of technological innovation.

The PTAB process is either corrupt or incompetent. 

  • It has been abused by petitioners and PTAB has taken it too far.
  • Go back to district court litigation. The present scheme is a disaster.
  • The USPTO is turning into a mini-court system. That is not its competency. It needs to focus on technology, granting patents to those inventions that meet the basic statutory criteria, and leave the legal hair-splitting to courts.
  • This is a corrupt Review that benefits a specific class of infringers and is detrimental to the development of new technology.

The approach should be ended because it violates the constitutional rights of patent owners.

  • Unconstitutional.
  • AIA has overstepped its boundaries on constitutional grounds as patents are private rights.
  • All patent owners are entitled to due process, and that includes the right of access to a court of law before their patents are summarily cancelled by a political, the end-justifies-the means, so-called court.

Of course, there are other responses as well (perhaps more below in the comments).

The bottom line here, as you might expect, is that there is not yet any consensus on whether to extend the CBM program.  My own general framework begins with the recognition that CBM does no longer adds much value post Alice/Mayo and with district court eligibility determinations being done on the pleadings.  However, I would like to see the empirical evidence.   The point of creating legislation that sunsets is that it effectively places the burden of proof on anyone wanting to continue the program.  That work has not yet been done.

 

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.

54 thoughts on “No real consensus yet on CBM Sunsetting

  1. The funniest thing about the title of this thread, being as it concerns a poll of the readers, is the word “yet.”

    The only way “yet” is ever reached is if the editing controls create that situation.

    Maybe “yet” is closer than anyone may think (and that is NOT a good thing).

  2. Is the patent world still unready to accept the fact that the President of the United States is a deranged senile lun@tic?

    Maybe that’s more important than worrying about how the worst thing ever is to have a program for getting rid of junk patents that is “only” used 100 times a year.

  3. As I recall, the CBM was passed basically as a private bill for the large banks to invalidate that electronic check presentment family of patents. That was done. So let the statute sunset.

  4. ” patent systems is already nearly dead… the pain of having their patent rights trampled over by a kangaroo administrative court.”

    Hahaha.

    Would it be bad form to speculate as to author?

  5. Assuming the voluntary comments DC quotes are proportional, it’s interesting that although the majority of respondents favor extending with or without conditions, far fewer favoring extension felt the need to supply a rationale compared to the voluminous commentary of those favoring sunsetting.

    1. Not sure that you can make that connection.

      Why would you want to?

      1. “Not sure that you can make that connection. Why …?”

        Because I find it preferable to a construction where I assumes DC for some reason is disproportionately providing comments from the “sunset” group versus those in the “extend” group.

        Why would he want to?

        Going back to the presumption of proportionality (arguendo), why do those who vote “extend” mostly not stir themselves to say why? Are they less passionate about the matter?

        Sort of a “Yuh, if I had my druthers, I’d say extend, but I’m not so worried about whichever way it goes”?

        1. I do not read into the selection of comments ANY “reasoning.”

          I view these as merely comments that struck his fancy. I make no assumptions as to them being in any way an objective reflection of the poll results.

          If you have been around this blog for any length of time, you would recognize that objectivity is not a hallmark.

          It is less a case of needing a reason to be “purposefully disproportionate” and more a case that even the thought of being proportionate or disproportionate was not likely present.

          I just don’t see the presumption even being there to argue about.

          1. “If you have been around this blog for any length of time,”

            I think I started commenting here around 2008, although it could have been a bit earlier.

            Not daily like you and MM, of course.

            More like, comment a few days, wander off for a month or two, comment a few days, etc. Wander back and find someone else had adopted the same handle, if I’d been using something other than “anonymous” (or more often, just plain forget what handle I had been using).

            1. That’s nice.

              But there is still no reason to expect some type of decision on the part of Prof. Crouch to have purposefully chosen EITHER to post comments accompanying the poll proportionately or disproportionately

      2. To further explain:

        Think of the 240 respondents as voters polled on their view of a particular referendum up for vote. Maybe they are representative of a larger population of voters.

        A majority favor “A”, while the minority oppose “A”, but the margins are not so great.

        But the majority are tepid in their support of “A”.

        The minority are vigorous and vociferous in their opposition to “A”.

        When it comes time to rally the troops and especially when it comes time to get out there and actually vote, tepid usually doesn’t win in the end.

        1. MW, the real problem with this CBM retention poll is that it only polling the readers of this blog, many of whom quite naturally consider any PTO post grant system a threat to their income. Whereas those who had strongly and effectively lobbied for the enactment of CBMs were primarily large banks [because several had then been sued on Bilski type patent claims]. Many such large banks are in NYC, hence the S. Schumer connection. Obviously, those banks will have vastly more influence on any CBM extension proposals. So a more predictive poll would be to see if they plan to push for an extension?

          1. “only polling the readers of this blog, many of whom quite naturally consider any PTO post grant system a threat to their income. ”

            All the more surprising, then, that the “extends” exceed the “sunsets”?

            “banks will have vastly more influence on any CBM extension proposals. ”

            Ah, thanks.

          2. Thanks Paul, I tried to reply and wel’ll see when/if it comes through.
            The modware seems almost random.

          3. a threat to their income

            Utter dross.

            There is NO reason to believe that the other side views elimination of the PTO post grant system as a threat to THEIR income – but I don’t make that argument because it is a pathetic argument to make and assumes that attorneys have no code of ethics.

            For shame Paul.
            For shame.

  6. This is truly hilarious:

    ◾It’s argument was to take care of “low-hanging fruit”, patents of old vintage, issued when the Office’s resources in this area were low. 8 years is more than enough time to pick that fruit.
    ◾CBM petitions are declining because most of the patents intended for consideration have already been undone.

    Bilki was decided in 2010 and the PTO’s response to Bilski was to ignore it. Then the PTO took the wrong position in Prometheus, which was decided in 2012. Alice was decided only three years ago and the PTO and the Federal Circuit are both bending over backwards to create “exceptions” out of thin air.

    The idea that “most of the patents have already been undone” is absolutely absurd. A more accurate statement would be that less than 0.1% of all junky biz method patents “have been undone.” And the PTO continues to grant junky biz method patents, every week.

    1. The idea that “most of the patents have already been undone” is absolutely absurd.

      Just look at the PTO’s statistics on this point. CBM petitions are declining sharply over time (by this point in FY2015 there had been 87 petitions filed, compared to only 34 by this point in FY2017). This program was intended to take care of a particular set of claims, and it has mostly done so. There are not many such pre-AIA patents left. Basically, CBMs have done all of the work that they were ever intended to do. If, as you say, there are still scores of patents that deserve to be tanked under CBM review, why is the flow of petitions for CBM review slowing so notably?

      1. If, as you say, there are still scores of patents that deserve to be tanked under CBM review, why is the flow of petitions for CBM review slowing so notably?

        Because the CAFC has been busy de-clawing the statute since it’s been enacted.

        1. An even bigger reason may be that almost all CBMs are filed in response to being sued on such patents. Many CBMs had been based on Alice-101 challenges. But now that so many Alice-101 challenges are made in the D.C. right up front in motions filed in prompt response to the suit complaint on patents with such claims, and quite a few such motions are now promptly granted, there would seem to be less perceived need to also file a CBM to get a faster and cheaper termination of litigation expenses?
          The number of CBMs has always been a very small fraction of the number of IPRs.

        2. The CAFC has only decided about a dozen CBM cases. The first decision reversing a CBM on the grounds that the patent at issue was not statutorily amenable to CBM consideration was Unwired Planet v. Google, 841 F.3d 1376 (Fed. Cir. 2016), which came in Nov. 2016, so it is part of the PTO’s statistics for FY2017. As shown in the statistics that I cited above, CBM petitions were already declining rapidly before Unwired Planet, and the rate of decline in CBM petitions has not accelerated since Unwired Planet. In other words, your explanation does not hold water in view of the data.

          1. B-b-but that’s how he feels

        3. “Because the CAFC has been busy de-clawing the statute since it’s been enacted.”

          There’s nothing the PTO can do about that. That would have to be congress undoing that work.

      2. The other thing to keep in mind is that the mere existence of the CBM proceedings is a strong deterrent and a devaluator of ineligible junk.

        The libertarian patent maximalist crowd should be very familiar with the concept of deterrence. Of course they’re familiar with it. That’s why they want the CBM proceedings eradicated.

        1. Potential Double Post due to filter…

          Libertarian….?

          Anything (and I do mean anything) not aligned with Malcolm’s feelings simply “must” be wrong.

          What
          A
          Putz

      3. Maybe owners are keeping their CBM patents ‘in the bunker’ until CBM review expires and they can then unleash them on an unsuspecting public?

        1. That is no good. CBMs are just a variety of PGR. If you have held on to your CBM claim this long, then you are going to end up filing it as an AIA patent, in which case it is going to be subject to PGR anyway.

          1. Greg, “in the bunker”, I took not to mean “withholding filing patent application” but rather to mean “withholding filing of infringement claims in already-granted patents” until sunset so as to avoid triggering a CBM review.

            1. Good idea, now that the Supremes have eliminated laches.

          2. Greg, PGRs are almost unused. Besides their devastating scope of estoppel they cannot wait be filed until sued – they can only be filed within a few months after the patent issues.

    2. “Federal Circuit are both bending over backwards to create “exceptions” out of thin air.”

      Ya mean like the abstract idea, natural law, natural phenomena, mental step, fundamental building block, mathematical formula, preemption exceptions?

    3. MM, I agree with everything you just said. However, Paul’s point below is equally valid. Patents with abstract claims are being hammered, and justifiably so, on motions to dismiss under 12(b)(6). Faster and cheaper.

  7. Wanting “evidence” is ‘nice,’ but what will suffice for proper evidence on this topic?

    One of (but certainly not the only) problem with attempting to rule out areas of innovation comes from the unprovable assertion that “patents block progress.”

    There is no – and can be no – evidence of such a conjectural and forward looking statement.

    Such statements are purely emotive triggers meant for policy arguments.

    1. purely emotive triggers

      LOLOL

      Totally different from “anon” and his cohorts endless hyperventilating about

      NOTHING IS PATENTABLE ANYMORE!
      PATENTS ARE WORTHLESS!
      AFTER PATENTS ARE TAKEN, OBAMA IS GOING TO TAKE ALL YOUR PERSONAL PROPERTY!
      CHINA IS WINNING!
      JANE FONDA LOVES INTER PARTES REVIEW!
      WE’RE TURNING INTO AN AMISH IRON-AGE COUNTRY!
      STAR CHAMBER!
      GESTAPO TACTICS!

      I’ll say it again: the patent maximalists are the world’s biggest hypocrites. Also among the worst attorneys ever, who ever practiced. It’s the complete lack of self-awareness and entitlement that is truly astounding, even after so many years of mocking them right out in the open. They can’t learn because they lack the intelligence.

      1. Says the number one hypocrite with his number one meme of Accuse Others Of That Which Malcolm Does.

        Stultifying.

      2. Then identify one patent that, in your judgement, is valid.

    2. what will suffice for proper evidence on this topic?

      Regular use of CBMs to expunge the system of ineligible biz method garbage.

      Oh look: the evidence is right in front of you already. And that’s in spite of the CAFC’s transparent and l@me efforts to gut the CBM statute.

      1. Maybe you want to address what I actually posted…

        Yeah, that’s what I thought.

  8. Surprised no one mentioned another significant difference in CBMs* that could be changed to make them perhaps somewhat more palatable to some, if extended [which seems doubtful].** Namely, their narrow scope of its estoppel – limited to the grounds raised – not extending to any grounds that reasonably could have been raised:
    “The petitioner in a transitional proceeding that results in a final written decision under section 328(a) of title 35, United States Code, with respect to a claim in a covered business method patent, or the petitioner’s real party in interest, may not assert, either in a civil action arising in whole or in part under section 1338 of title 28, United States Code, or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), that the claim is invalid on any ground that the petitioner raised during that transitional proceeding.”
    *After the Fed. Cir. decision, will CBMs now only be available if at least one claim is specifically claiming a non-technical business method?

    **As I recall, CBMs were added to the AIA late in its adoption process by S. Schumer, who obviously has far less influence in the present Senate.

  9. Broad restrictions on patentability are harming U.S. competitiveness in the areas of its greatest strength. China and the EU are poised to eat our lunch, and we are serving it up to them.

    This argument is a great pet peeve of mine, because it makes no sense. It is premised on the idea that Chinese patents incentivize Chinese inventors, while U.S. patents incentivize U.S. inventors. This is not true. Chinese inventors get U.S. patents, and U.S. inventors get Chinese patents.

    If U.S. companies are somehow losing competitive fitness relative to Chinese companies because of a lack of patent protection, then those U.S. companies have no one to blame but themselves. The U.S. companies working in these technological spaces should apply for Chinese patents.

    1. Not sure if this being a pet peeve of your – because it makes no sense to you is all that compelling, Greg.

      I think that you err by trying to tie the nationality to the sovereign. It is not a matter that any particular nationality within a sovereign is advantaged, but rather, it is the sovereign in comparison to another sovereign that is advantaged.

      Looking at this in the proper perspective, one readily sees historical evidence of particular industries blossoming in Sovereigns that have decided for their own sovereign to allow patents in areas that other sovereigns have foreclosed protection.

      Heck, even the EPO recognized this by providing HUGE wiggle room with “as such” and “per se” ‘outs’ to their sovereign exclusions.

      1. [O]ne readily sees historical evidence of particular industries blossoming in Sovereigns that have decided for their own sovereign to allow patents in areas that other sovereigns have foreclosed protection.

        Such as?

        1. China is becoming the world leader in bingo management software.

          You can smell the blossoming from here.

          1. Your feelings are noted.

            Always feel free to simply abstain from any innovation that you feel such disdain for.

        2. Software and certain areas of biotech.

          1. That is not much of an answer. Can you give an example of a jurisdiction that had very little activity in industry X, and then they revised their patent laws to grant patents in industry X, and next thing you know the industry is taking off?

            This is very much an empirical questions, so I am willing to revise my priors in view of empirical contradiction, but I find the idea of jump starting a particular industry by revising patent laws so implausible ex ante that I really would want to see a very clear example of the concept you are describing.

            1. idea of jump starting a particular industry by revising patent laws

              That’s not what I said nor indicated, and if that is your taleaway, I apologize for my lack of clarity.

              It is no secret (and no, I do not have the empirical data handy, although I do trust that it is out there) that the (existing) openness in regards to the areas that I mentioned combined with decisions in other sovereigns clamping down (I am thinking in particular to the EP and Pharma-human related things – stem cells if I recall correctly) that opened the door to a lot of companies moving their operations to the US.

              1. Further, the historical treatment of viewing 101 as a wide open welcoming gate – contrasted with its current state – goes hand in hand with the fact that Congress should not – and in truth cannot – write laws “picking” areas of innovation because innovation does not work like that.

                One does not know a priori how innovation will unfold and it is actually the counter point of the Soviet style “block” programs of five years of innovation in pre-selected areas that show the miserable failure of the counter examples.

                I would posit that this is an area where the contra positive does not yield a logical fallacy.

                1. Anon, since you know very little about history and care for none of it prior to ’52, your statement about history and historical treatment of 101 is almost laughable.

                  It is interesting that both the British and American courts were developing the idea circuit 1840 that one could not patent laws and phenomena of nature, or principles in the abstract. Story’s reported decisions in Wyeth v. Stone, which I linked another post that is still caught in the filter, is a case in point.

                  I have come to view it the issue as thus: even though there are other ways of invalidating a patent that is too broad, for example under 112, it remains that the courts for 150 years prior to Benson, Flook, Bilski and Alice, both in Britain and in the United States, recognized that one could not patent abstract ideas but had instead to patent the particular means and methods disclosed for carrying out the invention disclosed, not the results.

                  You should know that one time, even Judge Rich recognized that one could not claim a result. See his opinion in Application of Tarczy-Hornoch, 397 F.2d 856 (C.C.P.A. 1968). But the result is nothing more than claiming a principal in the abstract.

                2. I care more about history – and the accurate portrayal of its current effects than you do Ned.

                  Clearly, as can be seen but the number of times you run away or mis state items in the Act of 1952 or both.

    2. Greg, excellent logic there. Pokes a big hole in another recent bogus argument of the IBM and its acolytes.

      1. Not so excellent – and not so surprising that your “6-is-an-Einstein-because-he-agrees-with-me” affliction kicks in.

    3. A country provides a patent system to incentivize invention in that country, not to allow foreign companies to flood the country with patents that prevent local industry from being established.

      But the consistent effort of US companies, represented by the USTR, to get other countries to establish IP rights systems and to protect IP, is fully intended to allow US companies to do such flooding so as to protect the markets for its goods and services.

      Now, to some extent, this is a legitimate request and effort by the USTR to represent the interests of US companies. But protecting foreign company IP rights provides little incentive for local inventions unless the patents of locals can be enforced in the courts against all infringers. I do not believe that is actually the case in places like China for the small inventor or startup where the defendant company is part of the regime or politically connected.

      On the other hand, state institutions in China file a lot of patent applications precisely for the same reason that most big companies do — to provide cross licensing leverage so that effectively they can operate as if the patent system did not exist.

      1. not to allow foreign companies to flood the country with patents that prevent local industry from being established

        Your anti-foreign view is (sadly) not new, but let me speak in the words of an historical figure that you might recognize:

        The advancement of agriculture, commerce and manufactures, by all proper means, will not, I trust, need recommendation. But I cannot forbear intimating to you the expediency of giving effectual encouragement as well to the introduction of new and useful inventions from abroad, as to the exertions of skill and genius in producing them at home.
        — George Washington
        Early suggestion for awarding patent protection. In First Annual Message to Congress on the State of the Union (8 Jan 1790).

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