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Articles

USPTO handles first case under Covered Business Method review procedure

January 18, 2013

Articles

USPTO handles first case under Covered Business Method review procedure

January 18, 2013

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Written by: John C. Phillips

SAP America, Inc. v. Versata Development Group, Inc., slip op. CBM2012-00001 (PTAB Jan. 9, 2013).

In the very first case brought under the U.S Patent and Trademark Office’s Covered Business Method (“CBM”) review procedure, the Patent Trial and Appeal Board (“PTAB”) provided invaluable guidance in its decision holding that a petition seeking CBM review of a patent[1] warranted institution of a CBM review proceeding.  Among other things, the PTAB signaled that it would interpret the requirements for instituting CBM review liberally, thereby enhancing the procedure’s potential value to defendants charged with infringing business method patents.

By statute, a patent is eligible for CBM review only if all the following prerequisites are established by the CBM review Petitioner (i.e., the party seeking CBM review):

  • Petitioner has been sued for infringement of the patent in question;
  • The patent claims are directed to “financial products or services”; and
  • The patent claims do not recite a “technological invention.”

Although Patent Owner challenged the CBM review petition as being deficient on all three grounds, the PTAB found otherwise and ordered institution of CBM review.

First, and somewhat surprisingly, Patent Owner argued that Petitioner had not been “sued for infringement of the patent” – even though Patent Owner had in fact sued Petitioner for infringement in an ongoing federal district court litigation – because the district court had already ruled on patent validity and thus “the related litigation has progressed beyond the point where the statute contemplated it would be employed.”  The PTAB disagreed with Patent Owner’s position, however, opting instead to give the statute “its literal meaning and conclude that a party sued for infringement of a patent, and not otherwise estopped from challenging validity, may file a [CBM] petition.”

Second, the PTAB rejected Patent Owner’s argument that the “broadest reasonable definition of financial services or products would exclude its claimed invention.”  In that regard, Patent Owner proffered several different definitions of “financial product or service,” referencing various sources.  The PTAB was not persuaded, however, finding each definition overly narrow and concluding that its acceptance of them would be contrary to the relevant legislative history, which made clear that the definition of CBM was to be “broadly interpreted and encompass patents claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” The PTAB further rejected Patent Owner’s argument that a claim could be deemed as being directed to a financial product or service only if the express language of the claims said so:  “We do not interpret the statute as requiring the literal recitation [in the claims] of the terms financial products or services.”

Third, the PTAB rejected Patent Owner’s argument that Petitioner had failed to establish that the patent claims did not recite a technological invention.  In that regard, Patent Owner argued that its patent was sufficiently technological – and thus not a CBM – because the “patent discloses and claims a software invention.”  The PTAB disagreed, however, holding that the claimed subject matter as a whole neither recited a technological feature nor solved a technical problem using a technical solution, because “no specific, unconventional software, computer equipment, tools or processing capabilities are required.”  The PTAB noted that, to the contrary, the patent “states that its invention may be implemented in any type of computer system or programming or processing environment.”

The PTAB further rejected Patent Owner’s argument that 35 U.S.C. § 101 was impermissible grounds for challenging claims in a CBM review.  Relying on language excerpted from a Supreme Court opinion,[2] Patent Owner asserted that the permissible “condition[s] for patentability” included only Title 35 sections 102 and above.  The PTAB disagreed, finding that the language relied on by Patent Owner – along with the statute, regulations, legislative history and case law – was “entirely consistent with the proposition that § 101 is a general condition for patent eligibility” and thus a proper grounds for consideration in a CBM review.

Although the PTAB’s decision in SAP v. Versata represents only a single data point, it arguably suggests that the PTAB is friendly to finding patents subject to CBM review.  Consequently, a party that has been sued for infringement of a patent that might be characterized as relating to a business method may be well advised to consider seeking CBM review of the patent in question.

Written by: John C. Phillips


[1] U.S. Patent 6,553,350

[2] Diamond v. Diehr, 450 U.S. 175, 189-90 (1981) (“Section 101 … is a general statement of the type of subject matter that is eligible for patent protection. … Specific conditions for patentability follow [section 101].”).

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