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.[1]
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.”[2] 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.[3] 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.[4] 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.[5] 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.[6]
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.[7] 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.”[8] 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.[9] 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.”[10] 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.[11] 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.[12] 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.[13] 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.[14]
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.[15] Citing Versata and SightSound, the court found that this subject matter to related to a financial activity.[16] 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.”[17] 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.[18] 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.[19] 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.[20] 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.[21]
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...
