IP Law Daily PTAB must review challenged patent under statutory definition of ‘CBM patent’
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Monday, November 21, 2016

PTAB must review challenged patent under statutory definition of ‘CBM patent’

By Mark Engstrom, J.D.

In its covered business method (CBM) review of multiple patent claims that were challenged by Google Inc., the Patent Trial and Appeal Board relied on an incorrect definition of "covered business method patent" in evaluating a patent by Unwired Planet on a system and method for restricting access to the location information of a wireless device, the U.S. Court of Appeals for the Federal Circuit has ruled. Because the Board did not apply the statutory definition of a CBM patent—but instead decided that the proper inquiry was whether the patent claimed activities that were financial in nature, "incidental" to a financial activity, or "complementary" to a financial activity—the ruling of the district court was vacated and remanded to determine, under the statutory definition, whether the challenged patent was a CBM patent (Unwired Planet, LLC v. Google Inc., November 21, 2016, Reyna, J.).

The America Invents Act (AIA) defined a "covered business method patent" as a patent that claimed "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." In its CBM review of five claims of U.S. Patent No. 7,203,752, owned by Unwired Planet LLC, the Board based its review on whether the patent claimed activities that were "financial in nature, incidental to a financial activity, or complementary to a financial activity." The Board concluded that the challenged patent was a CBM patent and that five of its claims were directed to unpatentable subject matter under 35 U.S.C. §101. Unwired appealed.

The Federal Circuit noted that, in reaching the CBM decision, the Board did not apply the statutory definition of a CBM patent. Significantly, the AIA statute did not include the "incidental" and "complementary" language that the Board had used; that language came from Senator Charles E. Schumer (D-NY), who used it during a Senate debate over the AIA. The PTO quoted Senator Schumer in its response to public comments about the agency’s consideration of proposed interpretations of the statutory definition of a CBM patent.

As part of its general policy statement about how the PTO would act in administering the CBM program, the PTO had quoted a single floor comment as an example of legislative history. The PTO did not, however, adopt that statement through rulemaking procedures, and general policy statements were not legally binding. Without adopting a general policy statement through the rulemaking process, the agency could not apply it or rely on it as law, the court explained. To the extent that the PTO’s response reflected the legislative history of the AIA, the views of a single legislator were not controlling, even if the legislator was the sponsor of the underlying bill.

The authoritative statement of the Board’s authority to conduct a CBM review was the text of the statute itself, the court explained, and patents that fell outside of the statutory definition of a CBM patent were outside of the Board’s authority to review them as a CBM patent. In any event, the PTO’s regulatory authority did not permit the agency to adopt regulations that expanded its authority beyond the authority that was granted by Congress.

The Board’s application of the "incidental to" and "complementary to" language from the PTO’s policy statement—instead of the statutory definition—rendered the limits that Congress had placed on the definition of a CBM patent "superfluous," the court explained. CBM patents were limited to patents with claims that were directed to methods and apparatuses of particular types and with particular uses "in the practice, administration, or management of a financial product or service."

For those reasons, the Federal Circuit ruled that the Board’s reliance on whether the patent had claimed activities that were "incidental to" or "complementary to" a financial activity—as the legal standard to determine whether a patent was a CBM patent—was not in accordance with the law. Because a remand was required to determine whether the challenged patent was a CBM patent under the statutory definition, the court did not reach the patentability of the challenged claims under §101.

The case is No. 2015-1812.

Attorneys: William M. Jay, Eleanor M. Yost, Brett M. Schuman, and David Zimmer (Goodwin Procter LLP) for Unwired Planet, LLC. Jon Wright, Michael V. Messinger, Joseph E. Mutschelknaus, and Deirdre M. Wells (Sterne, Kessler, Goldstein & Fox, PLLC) and Peter Andrew Detre and Adam R. Lawton (Munger, Tolles & Olson, LLP) for Google Inc.

Companies: Unwired Planet, LLC; Google Inc.

MainStory: TopStory Patent FedCirNews

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