Case sheds light on PTAB proceedings

IP WATCH

Over the past several years, patent litigation has been transformed by the patent reviews available through the Patent Trial and Appeal Board (PTAB), established by the America Invents Act (AIA) in 2011. However, the operation of the PTAB remains dynamic as the kinks in administering patent laws through this new forum are being worked out. The recent case of Unwired Planet LLC v. Google, in which the U.S. Court of Appeals for the Federal Circuit rejected the PTAB's approach to the scope of covered business method (CBM) patent review, is illustrative.

Covered business method review provides a streamlined administrative proceeding for challenging the validity of covered patents on any ground of patentability. Covered business method is distinguished from the other review proceedings established by the AIA, including inter partes review, which limits challenges to prior art in the form of patents and printed publications, and post-grant review, which must be brought within nine months after issuance of a patent. These proceedings have led to the invalidation of many patents by the PTAB. Patents directed to software applications have been particularly affected by these changes, whether under CBM review or other kinds of review.

Under the AIA, CBM review is limited to "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." AIA Section 18(d)(1). In accordance with the statute, if a patent relates to financial products or services but is not a technological invention, it is not eligible for CBM review. The U.S. Patent & Trademark Office promulgated regulations defining technological invention as one that recites a novel and nonobvious technological feature that applies a technical solution to a technical problem.

Despite the statutory language in the AIA, the PTAB adopted its own standard, by which it granted CBM review where the "patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity." This approach was based in part on a statement from a senator during the debate over the AIA, but did not reflect other comments made during the legislative history. Using its own definition, the PTAB found that the patent at issue in Unwired Planet "was a CBM patent because the location service could involve an eventual sale of services." This conclusion was consistent with the PTAB's record of frequently interpreting the scope of CBM review broadly, while narrowly construing the exception for technological inventions.

The Federal Circuit struck down the PTAB's standard as improperly broadening the scope of CBM review. It held that the "Board's application of the 'incidental to' and 'complementary to' language ... renders superfluous the limits Congress placed on the definition of a CBM patent." The court stressed the statutory language defining the scope of CBM review as "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.'" AIA Section 18(d). The court reasoned that "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." The court did not reach the merits of the claims the PTAB had found invalid, and instead remanded the case for the PTAB to determine whether the patent at issue was subject to CBM review using the correct statutory standard.

The Unwired Planet decision corrects a flawed regulation which likely subjected patents to CBM review that should not have been. From now until Sept. 15, 2020, the remaining time in which CBM review will be available, the PTAB will be considering petitions in line with the governing statute. The decision also underscores that the AIA and the PTAB it established remain a work in progress that will be continually refined through appellate review.