Perhaps your firm is a bank or insurer has been sued for infringing a “business method” patent. Or your firm owns such a patent, and must decide whether to sue a competitor for infringing it. Or your company is simply trying to assess the value of such an asset. A big factor in these scenarios is whether the patent’s validity may be challenged in the Patent Office in a proceeding called the Covered Business Method Review (“CBMR”). This proceeding permits petitioners to challenge a patent’s validity before the Patent Trial and Appeal Board (“PTAB”) on nearly any grounds that it could otherwise assert in court. Therefore, it is important to understand which patents may be susceptible to CBMR.
The America Invents Act of 2011 created CBMR to allow the validity of certain patents to be challenged before the PTAB if they pertain to “a financial product or service” that is not “technological.” This statute, and the Patent Office’s corresponding regulations on CBMR, provide little insight regarding what a non-technical “financial product or service” entails. The Court of Appeals for the Federal Circuit (“CAFC”) addressed this issue in several decisions in 2015 and 2016. It repeatedly found that a patent may be considered a Covered Business Method even if its subject matter relates to a business method outside the financial industry, e.g., banks, insurers, brokerages, and the like. It also determined that such patents may not be “technological” even if they include general purpose computers or similar components.
However, recently in Unwired Planet, LLC v. Google Inc., the CAFC retreated from this interpretation of “financial product or service” and held that a patent most be more than “incidental to or complementary to a financial activity” for it to be reviewable in a CBMR. As indicated by several PTAB decisions since it was decided, Unwired Planet may alter the types of patents susceptible to CBMR.
Precedent Regarding the Scope of CBMR
In its 2015 decision in Versata Development Group, Inc. v. SAP America, Inc., the Federal Circuit addressed the issue of what sort of patents may be challenged in a CBMR. The patent in Versata related to a method for determining prices, specifically, for determining product prices in a group of products by arranging them in hierarchical tables with groups of purchasing organizations. This patent was not explicitly directed to financial products. Rather, it disclosed embodiments that relate to pricing computer components, and so would have been within CBMR’s domain only if “financial product or service” encompassed businesses outside of the financial industry.
In Versata, the court examined the relevant statute, regulations and Patent Office guidance in assessing the scope of CBMR, starting with the definition of a “covered business method patent” in the AIA:
[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.
As the Versata court explained, in promulgating regulations regarding this statute, the Patent Office rejected the notion that the term “financial product or service” is limited to the products or services of the financial services industry, and interpreted “financial” literally, i.e., relating to monetary matters. The court agreed with the Patent Office that “the definition of ‘covered business method patent’ is not limited to products and services of only the financial industry, or to patents owned by or directly affecting the activities of financial institutions such as banks and brokerage houses.” With this view in mind, the court found the subject patent to relate to a “financial product or service.”
Turning to the exclusion of “technological inventions” from CBMR, the court considered the regulation defining a “technical” invention as one which solves a technical problem using a technical solution; not surprisingly, the court found this definition unhelpful. Nevertheless, in examining one representative claim in the patent, the court observed that, even if the invention required use of a computer, it did not constitute a “technological invention.” Rejecting the assertion that “leverage[ing] the hierarchal data structures used by large companies to organize pricing information” qualifies as “technical problem using a technical solution,” the court found the invention “more akin to creating organizational management charts.” Hence the patent was subject to CBMR.
In subsequent decisions, the CAFC reinforced the broad scope of CBMR delineated in Versata. In SightSound Technologies, LLC v. Apple Inc., the patents pertained to methods for the electronic sale and distribution of digital audio and video data over telecommunication lines. The court noted that the specifications of these patents “repeatedly refer to electronic ‘sale, ‘purchase,’ and ‘money,’” and the claims recite providing a credit card number to charge a party. The Court found no error in the PTAB’s conclusion that such electronic sales are a “financial activity,” and that such activity does not need to be directed to money management or banking. In finding that the patents were not “technical,” the court observed that while the claims included components like memory, transmitter and receiver, such generic hardwire devices do not amount to a technical invention.
The results were similar in Blue Calypso, LLC v. Groupon, Inc. There, the patents related to methods for peer-to-peer advertising where advertisers financially induce mobile communication device users to assist their advertising efforts. Citing Versata and SightSound, the court found that this subject matter to related to a financial activity. The court also found that recitations in the claims of a “network” and “communication device” were general computer system components that did not render the invention “technological.” Hence the patents were subject to CBMR.
Unwired Planet Narrows Scope of What Patents Are Subject to CBMR
In Unwired Planet, the patents related to allowing wireless devices users to set privacy settings that determine access to their device’s location information. The court found that, in addressing whether this subject matter is a “financial product or service,” the PTAB had improperly analyzed whether the patent claims were “complementary” or “incidental” to a financial activity.Unwired Planet echoed Versata in opining that regulations do not clearly define a CBM patent, and noted that the legislative debate reflected conflicting views on the subject. Grounding its decision in the statutory language, the court held that the test for whether a patent is a CBM patent is not whether it is “incidental to” or “complementary to” a financial activity. It reasoned that:
The patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.
Interestingly, the three judges who decided Unwired Planet had joined the previous opinions interpreting the scope of CBM patents broadly. The Unwired Planet opinion was written by Judge Reyna and joined by Judge Plager and Judge Hughes. Judge Reyna had joined the opinion in Blue Calypso, Judge Plager had authored the Versata opinion, and Judge Hughes had joined the opinion in SightSound. Hence Unwired Planet indicates that appellate judges view the scope of CBMR differently, and that their opinions are evolving.
Shortly after deciding Unwired Planet, the CAFC affirmed a PTAB decision denying a CBMR on the grounds that the patents were not CBM patents. The patents in Ameranth involved computer-implemented methods for generating menus in restaurants. The court did not address whether the patents pertained to a “financial product or service”, but did affirm the PTAB’s decision that the patented invention was not “technological.”
More recently in Secure Axcess v. PNC Bank, the CAFC applied Unwired Planet in finding that a patent entitled “System and Method for Authenticating a Web Page” was not CBMR eligible. The court reiterated that CBMR eligibility requires more than mere complementary or incidental financial activity. The written description’s example of authenticating the website “www.bigbank.com” did not sufficiently relate the claims to financial activity. Notably, a factor in the PTAB’s decision to institute had been that the patent had been asserted against approximately fifty financial institutions. The court found that a patent owner’s choice of litigation targets does not necessarily define a patent as a CBM patent. In contrast, Judge Lourie gave weight to this factor in his dissenting opinion.
Impact of Unwired Planet in the PTAB
Since Unwired Planet was decided in November 2016, the PTAB has ruled seven times on whether to institute a CBMR. These decisions reflect a trend of towards a narrower interpretation of what patents are “financial,” and they demonstrate the importance of assessing the “financial” nature of claims by examining both the claims themselves and the specification:
Facebook, Inc. and Instagram, LLC v. Skky, LLC, CBM2016-00091, Paper 7 (Nov. 23, 2016) – The PTAB denied institution in view of Unwired Planet. The relevant claim related to wirelessly delivering one or more digital audio and/or visual files from one or more servers to one or more cell phones. More, specifically, it involved using a certain signal modulation to encode bits of data files for wireless transmission. The Petitioner argued that the claim was a financial product or service because one feature of the claim, when read in view of the specification, included the ability to “track” user selections in order to facilitate royalty payments. The PTAB agreed with the patent owner that “tracking” file selection could be applied in a number of non-financial contexts, and therefore was not a financial product or service.
IBG, LLC et al. v. Trading Technologies International, Inc., CBM2016-00090, Paper 11 (Dec. 9, 2016) – The PTAB instituted CBMR without addressing Unwired Planet. The patent at issue was entitled “Click Based Trading with Intuitive Grid Display of Market Depth” and related to a graphic user interface for dynamically displaying the market depth of a commodities market to allow efficient trading. The PTAB concluded with little explanation that the invention was a financial product or service.
Kayak Software Corp. et al. v. International Business Machines, Corp., CBM2016-00075, Paper 16 (Dec. 15, 2016) – The PTAB denied institution on grounds unrelated to whether the challenged patent was subject to CBMR. The patent at issue generally related to distributed, interactive computing on a large network of simultaneous users. Although the patent owner had argued that the patent was exempt from CMBR as pertaining to a technological invention, the PTAB declined to rule on this issue.
Kayak Software Corp. et al. v. International Business Machines, Corp., CBM2016-00076, Paper 16 (Dec. 15, 2016) – As with the case CBM2016-00075 above involving the same patent, the PTAB denied institution and declined to rule on CBMR eligibility.
Kayak Software Corp. et al. v. International Business Machines, Corp., CBM2016-00077, Paper 15 (Dec. 15, 2016) – The PTAB denied institution because the patent was not a financial product or service subject to CBMR. Here, the patent related to “a method for presenting applications in a distributed processing, interactive computer network intended to provide very large numbers of simultaneous users.” The PTAB agreed with the Petitioner that the specification depicted an application of claim 1 that was “financial in nature.” Looking past Unwired Planet, the PTAB opined that “the question that Blue Calypso requires us to answer is not whether the applications may be financial, but rather whether they must be financial.” It went on to state that “claims of general utility are not converted into finance-related claims merely because the Specification of the challenged patent suggests that the scope of the claims is broad enough to encompass some finance-related activities.” Since the claims lacked any “explicit or inherent finance-related terminology or limitations,” the PTAB concluded the patent was ineligible for CBMR. In a concurring opinion, one judge cautioned against “a bright line test that the relevant claims must be explicitly or inherently limited to financial contexts in order for them to considered ‘financial.’”
Kayak Software Corp. et al. v. International Business Machines, Corp., CBM2016-00078, Paper 15 (Dec. 15, 2016) – As with case CBM2016-00077 above involving the same patent, the PTAB denied institution because the claims were not sufficiently financial-related. It also noted that “if the Specification were to make clear that the claims should be interpreted as limited to finance-related contexts, the presence of general-utility claim language would not preclude a finding of CBM eligibility.”
Emerson Electric, Co. v. SIPCO, LLC, CBM2016-00095, Paper 15 (Jan. 23, 2017) – The PTAB found the patent eligible for CBMR. The patent was directed to a communication architecture, specifically, a general purpose transceiver and a method for communicating information from receivers in remote sites to a central location. One claim recited a “vending machine” as a remote device, whereas another claimed an “automated telling machine (ATM).” The specification described various vending machines such as soda machines, and an embodiment of the invention with “an automatic financial transaction machine (AFTM).” The PTAB found this sufficient to find the invention was directed to a financial product or service. Furthermore, after noting that many of the components in the specification were described as “general purpose,” the PTAB concluded that the invention was not “technological.”
These decisions indicate that, since Unwired Planet, the PTAB is likely to take a narrower view of what is a “covered business method” patent and, before deciding whether a patent us CBMR eligible, will look for specific language in the claims or specification that associates the invention with more than some monetary or commercial purpose. In sum, the full impact of Unwired Planet remains to be seen, especially given apparent disagreement among members of the Federal Circuit. As of the date of this post, the petition for en banc rehearing of Unwired Planet remains pending. Stay tuned.
 These patents are most likely to be in Class 705 Data Processing: Financial, Business Practice, Management, or Cost/Price Determination. However, it is the subject matter of the patent, not the classification on the face of the patent, that will ultimately render it subject to CBMR or not.
 “[A] ‘technological invention’ is one in which ‘the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.’” Id. at 1326 (citing 37 C.F.R. § 42.301(b)).
Authors: Brian J. Doyle, Thomas Rozylowicz, Michael T. Zoppo
The opinions expressed are those of the authors on the date noted above and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes only and is not intended to be and should not be taken as legal advice. No attorney-client relationship is formed.
Michael T. Zoppo focuses his practice on the IP needs of financial services companies nationwide, whether that means taking a case to trial, developing an IP portfolio, or strategic counseling.
As a trial lawyer with first-chair experience and versed in a broad range of technologies, Michael frequently serves as lead counsel in high...
Tom Rozylowicz is a principal in the Washington, D.C.*, office of Fish & Richardson P.C. His practice includes all aspects of intellectual property law, with particular emphasis on patent procurement, post-grant America Invents Act (AIA) proceedings, and licensing in the software, electronics, communications, and medical device...