Federal circuit said board used wrong definition of CBM patent

The United States Court of Appeals for the Federal Circuit recently issued a decision in Unwired Planet v. Google that should raise serious questions about what is going on at the Patent Trial and Appeal Board of the United States Patent and Trademark Office. The case asked the court to determine whether the PTAB properly instituted a Covered Business Method review, a controversial form of post-grant challenge created by the America Invents Act that was supposed to be limited to business method patents relating to the financial services sector.

The PTAB has long been criticized for ignoring the limiting statutory language that narrowly defines a CBM patent. The board routinely institutes CBM reviews on patents that do not qualify for the process, having instituted review on graphical user interfaces despite legislative history clearly stating that GUI patents are not to be considered a CBM patent. With its November 21 decision in Unwired Planet, the federal circuit has again stood up to abusive PTAB practices and said: Enough!

No Basis for Review

In this case, Unwired Planet, LLC appealed from the final written decision of the PTAB in CBM No. 2014-00006, which was filed by Google, Inc. on Oct. 9, 2013. The patent in question— U.S. Patent No. 7,203,752—is entitled “Method and System for Managing Location Information for Wireless Communications Devices.” The ‘752 patent describes a system and method for restricting access to a wireless device’s location information. On April 8, 2014, the PTAB instituted CBM review of all of the challenged claims.

The PTAB instituted the review on four grounds: (1) lack of patent eligibility with respect to claims 25–29; (2) lack of written description support for claim 26; (3) obviousness of claim 25; and (4) obviousness of claim 25. Ultimately, in the final written decision issued by the PTAB on April 6, 2015, it upheld only the first point, finding that the challenged claims were directed to unpatentable subject matter under Section 101.

But the PTAB used the wrong standard to institute the CBM proceeding in the first place, which led the federal circuit to vacate the board’s decision and remand the case for further consideration by the PTAB—namely, the application of the proper standard.

According to Section 18 of the AIA, the PTAB may institute a CBM proceeding only for a patent that claims a method for performing data processing or other operations used in the practice, administration or management of a financial product or service. Specifically excluded from the definition of a Covered Business Method patent are those that relate to technological inventions. To determine whether a patent is for a technological invention, the PTAB is supposed to consider whether the claimed subject matter recites a technological feature that is novel and unobvious over the prior art, and solves a technical problem using a technical solution.

In deciding to institute the Google-requested CBM against the ‘752 patent, the board did not apply the statutory definition. Instead, the board stated that the proper inquiry “is whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” The board determined that the ’752 patent was a CBM patent because the location service could involve an eventual sale of services.

PTAB Ignored its Limits

As the federal circuit pointed out later: “All patents, at some level, relate to potential sale of a good or service.” To allow this PTAB-created standard that has no textual support in the statute to be applied would be to allow virtually any patent to be the subject of a CBM.

The “incidental” or “complementary” language used by the PTAB is not found in the statute. This specific language comes only from a statement by Sen. Chuck Schumer (D-N.Y.) found in the legislative history, which the USPTO quoted in its response to public comments concerning interpretations of the statutory definition of what qualifies as a CBM patent. There were, however, clearly conflicting statements in the legislative history, which makes any statements from that source unhelpful.

The federal circuit explained: “The Board’s application of the ‘incidental to’ and ‘complementary to’ language from the PTO policy statement instead of the statutory definition renders superfluous the limits Congress placed on the definition of a CBM patent. CBM patents are limited to those with claims that are directed to methods and apparatuses of particular types and with particular uses ‘in the practice, administration, or management of a financial product or service.’ 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.

Ultimately, the federal circuit did not reach the merits of the 101 decision. Instead, the circuit vacated the PTAB’s final writ – ten decision and remanded “the case for a decision in the first instance, and in accordance with this opinion, whether the ’752 patent is a CBM patent.”

The post-grant administrative proceedings ushered in by the AIA were a horrible mistake. Now that we’ve seen these pro – ceedings play out over the last four-plus years, we know that they are even worse than predicted. The PTAB provides few (if any) procedural safeguards for patent owners; it ignores the statute and does whatever it wants. Recent instances of the fed – eral circuit finding the PTAB inconsistent with the law are on the rise, evidence that the board is out of control.