IP Law Daily PTAB decision invalidating communication system claims vacated, remanded
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Wednesday, September 25, 2019

PTAB decision invalidating communication system claims vacated, remanded

By Thomas Long, J.D.

In instituting review, the PTAB failed to fully analyze whether the challenged patent was excluded from CBM review under a regulatory exception for technological inventions.

In instituting a covered business method (CBM) review of a patent related to a system and method for communicating information between remote devices and a central location (such as a vending machine or ATM), the Patent Trial and Appeal Board conducted an incomplete analysis of whether the patent was eligible for CBM review, the U.S. Court of Appeals for the Federal Circuit has decided. Although the Board correctly determined that the claims at issue were used in a financial product or service, the court reversed the Board’s finding that the challenged patent was not excluded from CBM review under one part of a two-part test in a USPTO regulation because it did not contain a technical solution to a technical problem. That decision, in the court’s view, was based on an incorrect claim construction, and the correct construction made it clear that a technical solution was employed. The Board failed to consider whether the patent was excluded from CBM review under the second part of the test—whether the claimed subject matter as a whole recited a technological feature that was novel and unobvious over the prior art. Accordingly, the court vacated and remanded the Board’s decision finding five claims of the patent ineligible for protection under 35 U.S.C. § 101 and unpatentable for obviousness under 35 U.S.C. § 103. One member of the three-judge panel wrote separately to dissent from the majority’s rejection of the Board’s claim construction in favor of its own construction (SIPCO, LLC v. Emerson Electric Co., September 25, 2019, Chen, R.).

Patent at issue. The patent at issue was U.S. Patent No. 8,908,842 ("the ’842 patent"), owned by SIPCO, LLC. The ’842 patent involved ways to communicate information from a previously unconnected, remote device to a central location. Rather than establishing a direct link between the remote device and the central location, the invention of the ’842 patent set up a two-step communication path through a set of intermediate nodes that took advantage of the nodes’ existing communications link (such as a public-switched telephone network) to the central location. The invention completed the communication path by having the remote device communicate wirelessly to an intermediate node. To alleviate problems involving data security and communications conflicts between remote devices communicating at the same time, the ’842 patent recited the use of a low-power remote transceiver, which would require the user to be in "close proximity" to use it. Two dependent claims described use of the claimed communications device in which the remote device was associated with a vending machine and an automated teller machine, respectively.

CBM review petition. Emerson Electric Co. filed a petition requesting CBM review of the ’842 patent on Sections 101 and 103 grounds. Emerson argued that the challenged claims were directed to the patent-ineligible abstract idea of "establishing a communication route between two points to relay information." Emerson also contended that the ’842 patent was unpatentable for obviousness over U.S. Patent No. 5,157,687 ("Tymes").

Institution of review. The Board instituted review on both grounds. In its institution decision, the Board analyzed whether the ’842 patent qualified as a "covered business method patent" under America Invents Act (AIA) Section 18(d)(1), which defines the term as "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." According to the Board, the claims associating the device with a vending machine and an ATM—recited apparatuses "used in the practice, administration, or management of a financial product or service." The Board then applied 37 C.F.R. § 42.301(b) and determined that the patent was not drawn to a "technological invention." Section 42.301(b) provides a two-part test for determining whether a patent is for a "technological invention": "whether 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." Because the Board concluded that the patent did not provide a technical solution to a technical problem and therefore did not meet part two of the Section 42.301(b) test, the Board did not analyze part one. The Board concluded that the ’842 patent did not fall under the AIA Section 18(d)(1) exception and instituted CBM review.

Board’s claim construction. Among other claim terms, the Board construed "low-power transceiver." The Board found that the term "low-power" did not necessarily require that the device transmit and receive signals only within a "limited transmission range." The Board agreed with SIPCO that the construction should "encompass" a device that "transmits and receives signals having a limited transmission range" but declined to limit its construction to that phrase.

Board’s final written decision. The Board concluded that the challenged claims were patent-ineligible under Section 101 because they were directed to the abstract concept of "establishing a communication route between two points to relay information" and did not contain any additional inventive concept. In the Board’s view, the claims were directed to transmitting data between locations using conventional or generic computer components. The Board also found the ’842 patent obvious over Tymes. SIPCO appealed the Board’s determination that the ’842 patent was subject to CBM review, as well as the Board determinations as to Sections 101 and 103.

"Low-power transceiver" construction. The parties disputed whether "low-power" was properly read, in light of the specification, to correlate with limited transmission range. The Federal Circuit concluded that the Board’s construction failed to give appropriate meaning to the term "low-power" in "low-power transceiver." The Board had rejected SIPCO’s proposed construction, reasoning that SIPCO was conflating the concepts of low-power and transmission range. However, the court pointed out, the specification explains that the reason that the ’842 patent contemplated a transmitter having low power is "so that a user will have to be in close proximity, (e.g., several feet) to the receiver" to use it. The problems described by the patent—unwanted circumvention, contention, and unlawful interception of the electromagnetic signals—only were solved if the signal transmission was limited in range. The specification tied the low-power transceiver to a limited transmission distance; accordingly, a skilled artisan would understand "low-power" to mean that the transceiver operated at a power level corresponding to "limited transmission range," said the court. The court reversed the Board’s construction of "low-power transceiver" and construed it to mean "a device that transmits and receives signals at a power level corresponding to limited transmission range."

Financial product or service. Turning to the question of whether the Board correctly decided to institute CBM review, the court first found that the Board’s conclusion that the dependent claims regarding a vending machine and an ATM recited an apparatus "for performing data processing or other operations used in the practice, administration, or management of a financial product or service" under AIA Section 18(d)(1) was not arbitrary and capricious. The court explained that to qualify under Section 18(d)(1), the claimed apparatus need only be "used in" the practice, administration, or management of a financial product or service, and it did not have to be "directed to" such a product or service. "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 court said.

Technological invention exception. Because the Board misread and mischaracterized the features of the independent claim in its analysis of the dependent claims, "it did not appreciate that the claims provide a technical solution to a technical problem," according to the court. The problem solved by the claims was technical in nature. The Board limited its characterization of the "problem" being solved to an example problem provided in the background that was resolved by the claims—automating machine service requests. However, the claims and the specification made it clear that the claimed invention implemented a communication system that connected an unconnected, remote device with a central station, by taking advantage of a set of intermediate nodes ("a network of addressable devices") that were already connected to the central station over an existing communication network. The claims solved the problem of how to extend the reach of an existing communication system from a central location to a remote, unconnected device while protecting against unwanted interference with the transmitted signals. They did so using a technical solution: the creation of a two-step communication system that communicated information through a low-power (that is, limited transmission range) transceiver over a first, wireless step, that tapped into the intermediate node’s existing network connection to transport information to the central location. The court therefore reversed the Board’s finding that the patent did not satisfy the second part of the 37 C.F.R. § 42.301(b) test.

The Board did not analyze whether the ’842 patent satisfied the first part of Section 42.301(b) because it found that the patent did not satisfy the second part. Rather than address this issue in the first instance on appeal, the court decided to remand the case so that the Board could address the first part of Section 42.301(b) under the proper construction.

Concurring and dissenting opinion. Circuit Judge Jimmie Reyna dissented from the majority’s decision that rejects the Board’s claim construction in favor of its own construction. In Judge Reyna’s view, the majority reached its own construction by improperly reading a functional limitation into the claim from a preferred embodiment, and the Board’s construction rested on factual findings that were supported by substantial evidence, including expert testimony. Although Judge Reyna disagreed with the majority’s decision to reverse on claim construction, he said that he shared the majority’s concern about the Board’s avoidance of the first prong of the regulatory definition of "technological invention" under 37 C.F.R. § 42.301, and opined that remand was necessary so that the Board may in the first instance interpret the regulation.

This case is No. 2018-1635.

Attorneys: James R. Barney (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for SIPCO, LLC. Douglas Hallward-Driemeier (Ropes & Gray LLP) for Emerson Electric Co.

Companies: SIPCO, LLC; Emerson Electric Co.

MainStory: TopStory Patent FedCirNews

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