Here’s a Quarter … : Continued Tricks in Defining what as a Covered Business Method Patent

SIPCO, LLC v. Emerson Electric Co. (Fed. Cir. 2019) On appeal from CBM2016-
00095 (Covered Business Method Review).

In its final written decision, the PTAB sided with the patent challenger Emerson Electric — finding claims of SIPCO’s U.S. Patent 8,908,842 invalid as lacking eligibility and as obvious. Claims 1, 7, 9, 16, and 17.

The patent at issue requires a “low-power transceiver” connected to the internet and wirelessly connected to a remote device.  The patent included dependent claims 3 and 4 that defined the remote device as a “vending machine” and “ATM” respectively.  However, those claims were disclaimed during prosecution — and part of appeal argument is the role of disclaimed claims in construction of the remaining claims.

Note for younger attorneys, the item labeled 110 is a “pay phone.”

Covered Business Method Review (CBM) allows a third-party to challenge to certain business-method patents in an AIA-Trial.  Inter partes review (IPR) proceedings are limited to novelty and obviousness challenges and “only on the basis of prior art consisting of patents or printed publications.”  35 U.S.C. 311.  Post-grant review (PGR) proceedings have much broader scope — any condition of patentability except best-mode. 35 U.S.C. 321.  However, PGR proceedings may only be filed against post-AIA patent and must be filed within 9 months of issuance.

The third category – CBM – has the same scope of patentability challenges as PGR  (including eligibility, enablement, and indefiniteness), but can only be filed against patents that meet the definition of a “covered business method patent”

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.

SEC. 18 of the AIA. Looking at the definition above, you’ll note that this is a narrow definition of a “business method” patent — especially the notion that it cannot cover “patents for technological inventions.” (Technological is left undefined in the statute).  Note, the CBM provisions are not codified in Title 35 because the program is not permanent — it is set to sunset 8-years after the first CBM was permitted to be filed. My calculation of that date is September 16, 2020 and no new petitions will be accepted after that date.

NonAppealable: In the appeal, SIPCO argues that its patent is a technological invention and thus should be immune from CBM challenge. And, although the PTO’s decision to initiate a CBM proceeding is “nonappealable,” the Federal Circuit has repeatedly ruled that it can review the PTO decision of whether the challenged patent satisfies the legal limits of the CBM process — i.e., whether the patent challenged in a CBM is a technological invention.

Two Step Test for Technological: The USPTO has issued regulations defining technological inventions as requiring (1) recitation of a nonobvious technological feature; and (2) solving a technical problem using a technical solution.  37 C.F.R. § 42.301(b).  Thus, claims that recite “post-solution” technology could still be deemed not technological.  A reminder here – that the judgment of whether a patent is amenable to CBM review is considered on a patent-by-patent basis — it is either all-in or all-out — and not on a claim-by-claim basis.

After reviewing “both the claims and the specification,” the Federal Circuit concluded that the invention satisfied step two of the two step test – the invention “implements a communication system that connects an unconnected, remote device with a central station . . . by taking advantage of a set of intermediate nodes … connected to the central station over an existing communication network.”  The patent discusses the problems of signal interference, contention, and hacking — and offers its solution of using a “two-step” communications and low-powered transceivers that limit transmission range.  The PTAB had not considered step 1 and so on remand the PTAB will consider whether the claims recite nonobvious technological features.  Although the court left this issue for the PTAB to decide, it noted that the nonobviousness here might be a different sort of analysis than what is used for Section 103.

Low Power = Limited Range: The Federal Circuit’s conclusion of technological solution is substantially based upon a narrow claim construction of the term “low power transceiver.”  The court found that the term should be interpreted (as properly read in light of the specification) as meaning a transceiver with a limited transmission range.  That result comes from one of the goals of the invention — avoiding conflict between transceiver communications. “It is only if the signal transmission is limited in range that the problems of unwanted circumvention, contention, and unlawful interception of the electromagnetic signals described in column six [of the patent] are alleviated.”  This construction differs from the PTAB who had found the “low power” aspect of the transceiver did not necessarily limit its range to only a few feet. This “limited range” aspect of the invention appears to be the major key to the technological result.

Writing in dissent, Judge Reyna argued that the construction of “low power” as meaning “low range” involves “improperly reading a functional limitation into the claim from a preferred embodiment.”

= = = =

Looking back to the Vending Machine and ATM limitations of cancelled Claim 3 & 4. The PTAB used those claims (and the written description) to conclude that the invention was “financial” in nature — a qualifying characterization for CBM review.  On appeal, the majority affirmed the agency’s determination.

As the Board explained, claims 3 and 4 recite the remote device being associated with an ATM or vending machine. The patent expressly contemplates that the information communicated through the claimed system is financial information that identifies the user’s bank account and the user’s identity. The Board is correct in its assessment that the concept of communicating financial information from a device associated with an ATM to a central location is “central to the operation of the claimed device” in claim 3.

Those two claims were disclaimed and SIPCO originally argued that they could not be used to show that the patent was a CBM patent.  However, at oral arguments SIPCO’s attorney conceded that it was proper for the PTO to consider those claims in its analysis.

36 thoughts on “Here’s a Quarter … : Continued Tricks in Defining what as a Covered Business Method Patent

  1. 7

    For what its worth, low power does not mean, and is not equivalent to, “limited range.”

    For instance, I consider 5 watts to be low power and I have had signals received and relayed by equipment over 200 miles away, on the International Space Station, using a 5 watt transmitter.

    Furthermore, even a 50,000 watt signal has some limit to its range.

    I don’t know what Voyager II ‘s Transmit power is, but it can’t be too high, and its outside the solar system now and if we are not still receiving signals from it, we were a year or so ago…

    1. 7.1

      Update. I’ve since done some research.

      Voyager’s transmitter power is/was 23 watts.

  2. 6

    With regard to the thread here about having to pay up to treble damages for willful infringement, don’t overlook the real possibility these days of also being forced to pay the other sides attorney fees.

    1. 6.1

      How often have you seen defendants being hit with fees? I cannot recall too many examples of that, even post-Octane.

      1. 6.1.1

        Greg, I recall seeing a surprising number of defendants held to be willful infringers w/o a credible defense hit with attorney fees, per some published statistics I saw. But I do not recall actual numbers, which would be interesting. IPO used to publish them, but stopped.

  3. 5

    Dennis, in your title here, did you not mean “what is” rather than what as?

  4. 4

    “My calculation of that date is September 16, 2020 and no new petitions will be accepted after that date.”

    Dennis –thought I’d read somewhere sometime back that the Patent Office would not be accepting any more CBM petitions after 9.16.2019 given the requirement that any such challenges must be completed within one year …

    1. 4.1

      …in other words, the critical date for submitting a CBM petition is not past. (?)

    2. 4.2

      Here is the CBM Statute provision:
      “(3) SUNSET-
      (A) IN GENERAL- This subsection, and the regulations issued under this subsection, are repealed effective upon the expiration of the 8-year period beginning on the date that the regulations issued under to paragraph (1) take effect.
      (B) APPLICABILITY- Notwithstanding subparagraph (A), this subsection and the regulations issued under this subsection shall continue to apply, after the date of the repeal under subparagraph (A), to any petition for a transitional proceeding that is filed before the date of such repeal.”

      1. 4.2.1

        Thanks Paul – very helpful.

        Although after reading some of Boundy’s comments for the USPTO Fee setting notice, I have to wonder if the sunset (whenever it is set to occur) was properly reflected in the Fee calculation/configuration.

        1. 4.2.1.1

          “Although after reading some of Boundy’s comments for the USPTO Fee setting notice, I have to wonder if the sunset (whenever it is set to occur) was properly reflected in the Fee calculation/configuration.”

          Not even close.

      2. 4.2.2

        Thanks Paul. Given what you supply regarding CBM Sunset, the 9.16.19 filing cutoff date I’m certain I read (wish now I’d kept the cite / reasoning) may have been based on the following; found at the top of p.9 of the Aug, 2018 Trial Practice Guide Update:

        “The Director’s discretion is informed by 35 U.S.C. §§ 316(b) and 326(b), which require the Director to “consider the effect of any such regulation [under this section] on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.”

        Noting in particular: “… the ability of the Office to timely complete proceedings instituted under this chapter.”

        So, since CBMs, like IPRs and PGRs, must be completed within one year of institution …

  5. 3

    My basic take on this case is that the majority got it right. The CAFC’s claim construction looks more convincing than the board’s. Once one corrects the construction as the CAFC does, then the step two analysis on “technological invention” falls out as the CAFC concludes. This means that a remand to the PTAB is necessary for the full two-part test. Solid work by Judges O’Malley & Chen.

  6. 2

    Under either claim interpretation of this 1997 filing, why does not this claim read on any possible Wi-Fi or Bluetooth system?
    “1. A device for communicating information, the device comprising:
    a low-power transceiver configured to wirelessly transmit a signal comprising instruction data for delivery to a network of addressable devices;
    an interface circuit for communicating with a central location; and a controller coupled to the interface circuit and to the low-power transceiver, the controller configured to establish a communication link between at least one device in the network of addressable devices and the central location using an address included in the signal, the communication link comprising one or more devices in the network of addressable, the controller further configured to receive one or more signals via the low-power transceiver and communicate information contained within the signals to the central location. “

  7. 1

    The circular definition of “technological” with either of “technological” or “technical” is the clearest evidence that the America Invents Act is some of the very worst patent legislation ever written.

    This is directly due to the forces of Efficient Infringers and their “voi€e$” (augmented with the likes of Citizens United).

    1. 1.1

      Who are these Efficient Infringers and how do I obtain their membership application?

      1. 1.1.1

        Do you really want to pretend that Efficient Infringement is not a real force?

        1. 1.1.1.1

          I really want to know why they are written of as a Proper Noun and how one can join their glorious ranks. The Illuminati aren’t pulling their weight, so it’s time to move on to bigger and better things.

          1. 1.1.1.1.1

            The “proper noun” effect is what you want to focus on (while you do not want to disagree with the reality that such forces exist)….?

            That says more than I think that you realize.

            1. 1.1.1.1.1.1

              The question, “who are these Efficient Infringers,” does disagree with the reality that some unified force exists. It appears to me that it is merely a label that you apply to anyone who does not agree with your views.

              I’m also quite comfortable with what my question says about me. That you cannot answer it is telling.

              1. 1.1.1.1.1.1.1

                What “appears to you” is rather unimportant to what I actually wrote.

                What you responded with — again — says far more than you appear to realize.

              2. 1.1.1.1.1.1.2

                It appears to me that it is merely a label that you apply to anyone who does not agree with your views.

                Bingo! We have a winner!

                As it happens, efficient infringement is a real strategy employed by real market actors, and it is not a good thing. There is a reason why the law allows for treble damages for willful infringement. It is possible that the treble number is not a sufficient counterincentive. Perhaps the multiple allowed needs to be raised.

                One way or another, however, none of this has anything to do with “efficient infringer” as the term is used by some on these boards. In many mouths around here, this is just one of those vacuous verbal cudgels (like “anti-patent” or “patent maximalist”) whose real cash value is “person with whom I disagree, but against whom I cannot sustain a logical critique.”

                1. “It is possible that the treble number is not a sufficient counterincentive. Perhaps the multiple allowed needs to be raised.”

                  This sounds like a really good idea! Do if know if anyone is publicly pushing for it?

                2. As it happens, efficient infringement is a real strategy employed by real market actors, and it is not a good thing.

                  LOL – but never mind what I actually said, Greg “snipe from the sidelines” will side with anyone disagreeing with that “mean” anon…

                3. but against whom I cannot sustain a logical critique.”

                  Which is the real reason why Greg does not engage!

                  Oh, the irony!

                4. This sounds like a really good idea! Do if know if anyone is publicly pushing for it?

                  I am not aware of any organized campaigns for that specific change to the statute, no. As it happens, I am agnostic about the value of such a change. Maybe it is necessary, maybe it is not.

                  Whether the treble multiplier is a sufficient counterincentive is an empirical question, whose answer I do not know absent actual econometric research. I would like to see some reputable group(s) do the study before anyone starts organizing the advocacy effort.

                5. Out of genuine curiosity, does your opinion regarding efficient infringement match with your opinion regarding efficient breach of contract?

                6. Are you asking me?

                  I regard efficient infringement as unsalutary to the well functioning of the patent system. I regard efficient breach as salutary to the well functioning of the commercial economy.

                  I am not sure that it is meaningful to call these two views “inconsistent,” because infringement and breach are not meaningfully analogous things. Patent infringement is a strict-liability tort. Commil USA v. Cisco Sys., 135 S. Ct. 1920, 1926 (2015). Breach of contract is not any sort of tort at all. The legal rules regarding each are different because each serves a different function in the legal system, and in the overall function of the economy. Apples and oranges.

                7. Ordinary,

                  What Greg’s answer does not share is the fact that the difference is intentionally being obfuscated.

                  So while Greg acknowledges the veracity of what I say (and is in essence complete agreement with my initial post), he STILL wants to snipe from the sidelines.

      2. 1.1.2

        Anyone who is sincerely concerned with efficient infringement (pro tip here—the folks who most frequently toss around the term “efficient infringer” are not in the least sincerely concerned) should be gratified by the advent of CBMs (and IPRs, and PGRs) like the one at issue in this case. It is, of course, not actual “efficient infringement” to infringe an invalid claim (such a practice is more properly termed “engaging in lawful business” rather than “efficient infringement”).

        AIA trials provide a cost-effective mechanism by which questions about the validity of claims can be quickly and efficiently resolved. To the extent that one can sort the genuinely valid claims from the dross, it becomes that much easier to identify which businesses are the real efficient infringer wrongdoers, and which are just innocent practitioners of the arts in the public domain.

        1. 1.1.2.1

          The flip side of efficient infringement is efficient enforcement. Just as the efficient infringer acts with reckless disregard for whether s/he is infringing others’ patents—treating the liability thus potentially engendered as just a cost of doing business—so too the efficient enforcer asserts patents against market actors with reckless indifference to the question of whether the IP being asserted is valid or relevant, once again treating mistakes as just a cost of doing business.

          Both are corrosive to the well functioning of a patent system. Anyone who wants the patent system to serve its intended public policy ends should be opposed to both “efficient” infringement and “efficient” enforcement. The AIA trial system has proven an effective corrective against the latter. Anyone opposing AIA trials at this point is really just giving away the truth that they are not concerned for the well functioning of the patent system, but rather merely for their own self interest.

          Nothing wrong with acting to further one’s own self interest, of course. One simply should not be deceived about what agendas are really being advanced by criticisms of the IPR/PGR/CBM systems.

          1. 1.1.2.1.1

            Interesting flip side, but when have you heard of a single instance of “Efficient Enforcement” reaching in through the Monied Voice (courtesy of the likes of Citizen United) to change patent law and weaken the US patent right in order to provide more power to the entities that would rather compete on non-innovation terms?

            Further, you insert a bit of a strawman with your “asserts patents against market actors with reckless indifference</I" given that there is a very real difference (especially to the attorneys and their ethics to which they are bound) between reckless assertions IN COURT and reckless infringement OUTSIDE OF COURT.

            That is just NOT a level playing field.

            "Anyone opposing AIA trials at this point is really just giving away the truth that they are not concerned for the well functioning of the patent system, but rather merely for their own self interest.

            Unfettered Hogwash.

            Nothing wrong with acting to further one’s own self interest, of course.

            Nice equivocation. The statement is of course not correct on its own, and needs qualifiers such as “within the bounds of law” and “within the ethical constraints of practitioners.”

            That you seem to want to use the term to say that the views may be OK, but what is not OK is the “slippery” agenda that MUST BE there is itself beyond slippery and is downright reprehensible.

        2. 1.1.2.2

          (pro tip here—the folks who most frequently toss around the term “efficient infringer” are not in the least sincerely concerned)

          Greg,

          Quite frankly, this “holier than thou” B$ that you continue to spout means nothing coming from you.

          You confuse a professed Ends with the provided Means and think that those Ends justify the Means at hand.

          This is the same type of “critical thinking” that would upend criminal law because “well, if you are innocent then you don’t need all those protections.”

          “Cost effective” was the “oh shiny” LACK of critical thinking put forth to sell the overall weakening of the US patent.

          1. 1.1.2.2.1

            Why are you ignored?

          2. 1.1.2.2.2

            Everybody is wondering why you ran away.

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