Who Knew? Banks are People Too

In Bozeman Financial LLC v. Federal Reserve Bank, [2019-1018, 2019-1020] (April 10, 2020). the Federal Circuit affirmed the PTAB’s decision in a CBM that Banks are “persons” who may petition for post-issuance review under the AIA, and that claims 21–24 of U.S. Patent No. 6,754,640 and 1–20 of U.S. Patent No. are ineligible under § 101.

On the issued of standing to bring a CBM, the Federal Circuit held that the Banks are “persons” under the AIA and the Board had authority to resolve the issues raised in their petitions. The Federal Circuit distinguished Return Mail, where the Supreme Court held that federal agencies are not “persons” able to seek post-issuance review of a patent under the AIA. The Federal Circuit said that the Supreme Court held that the government was not a “person,” such that it was capable of petitioning for any of the three post-issuance proceedings before the USPTO—inter partes review, post-grant review, and CBM review. However the Federal Circuit agreed with the banks that they are distinct from the government for purposes of the AIA, such that they are “persons” capable of bringing petitions for post-issuance review under the AIA.

Bozeman argued that the Banks were merely part of the government, but the Federal Circuit agreed with the Banks that they are corporations that are not government-owned and are operationally distinct from the federal government.

On the issue of eligibility, the Federal Circuit agreed with the Board that the ‘640 patent, which claim a computer implemented method for detecting fraud in financial transactions during a payment clearing process, are directed to the abstract idea of “collecting, displaying, and analyzing information to reconcile check information against a ledger. The Federal Circuit further agreed that the claims do not contain an inventive concept to render them eligible under § 101. Similarly, the Federal Circuit agreed with the Board that the claims of the ‘840 patent are directed to the abstract idea of “collecting and analyzing information for financial transaction fraud or error detection.” The Federal Circuit further agreed that It found that the claims recite generic computer technology and that the claim elements considered individually and as an ordered combination merely “apply the abstract concept of collecting, storing, analyzing, and communicating information to reconcile financial information.”

Board Misread and Mischaracterized Features of the Claims, and Thus Failed to Appreciate that the Claims Provide a Technical Solution to a Technical Problem

In Sipco, LLC v. Emerson Electric Co., [2018-1635] (September 25, 2019), the Federal Circuit reversed the PTAB’s construction of “low power transceiver” and its finding that U.S. Patent No. 8,908,842 does not satisfy the second part of §42.301(b) defining “technological invention.” § 42.301(b). Because the Board did not address the applicability of the first part of § 42.301(b), the Federal Circuit vacated and remanded.

The Board found that the term “low-power” as used in the claims did not necessarily require that the device transmit and receive signals only within a “limited transmission range.” The Federal Circuit reversed, construing “low-power” to mean “a device that transmits and receives signals at a power level corresponding to limited transmission range.”

The Federal Circuit found that the Board’s conclusion that the claims recite an apparatus “for performing data processing or other operations used in the practice, administration, or management of a financial product or service” under AIA § 18(d)(1) was not arbitrary and capricious. The definition of a 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. § 18(d)(1) on its face covers a wide range of finance-related activities.

While SIPCO argued before the Board and on appeal that because it disclaimed claims 3 and 4, the Board should not have relied on them in analyzing whether the ’842 patent is CBM eligible. However, SIPCO ultimately conceded at oral argument that a patent may be CBM eligible based on a single claim and that the Board could have properly relied on claims 3 or 4.

The Federal Circuit then turned to the Board’s decision as to whether the ’842 patent qualifies as a “technological invention” under § 18(d)(1). Section 18(d)(1) excludes “patents for technological inventions” from CBM review. However, Congress did not define technological invention, instead leaving it to the USPTO to issue regulations for determining whether a patent is for a technological invention. 37 C.F.R. § 42.301:

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: [1] whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and [2] solves a technical problem using a technical solution.

If each part of this definition is satisfied, then the patent is not eligible for CBM review.

The Federal Circuit held that the Board misread and mischaracterized the features of claim 1 in its analysis of dependent claims 3 and 4, it did not appreciate that the claims provide a technical solution to a technical problem, under part 2 of 37 C.F.R. § 42.301. The Federal Circuit said that the question of whether a patent is for a “technological invention” is fact-specific and must be considered on a case-by-case basis. The Federal Circuit said that the problem solved by the claims is technical in nature. The Board limited its characterization of the “problem” being solved to an example problem provided in the background that is resolved by the claims—automating machine service requests. But it is clear from both the claims and the specification that the claimed invention implements a communication system that connects an unconnected, remote device with a central station.

The Federal Circuit identified the technical problem solved by the claims as: 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. The Federal Circuit found that the claims solved this problem with a technical solution. Because SIPCO’s claims combine certain communication elements in a particular way to address a specific technical problem with a specific technical solution, the Federal Circuit reversed the Board’s finding that the patent does not satisfy the second part of its “technological invention” regulation.

The Federal Circuit found that the Board did not analyze whether the ’842 patent satisfied the first part of § 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 Federal Circuit remanded the case for the Board to address the first part of § 42.301(b) under the proper claim construction.

Judge Reyna dissented because the majority’s opinion was contrary to basic tenants of claim construction set forth in Phillips, and the deference owed to underlying factual findings under Teva. Judge Reyna said that the majority reached its own construction by improperly reading a functional limitation into the claim from a preferred embodiment. Further, the Board’s construction rests on factual findings that are supported by substantial evidence, including expert testimony on the meaning of the claim term “low-power transceiver” to a person of ordinary skill in the art.

Preemption is “Part and Parcel” of the §101; But Lack of Preemption Does Not Necessarily Establish Patentability

In Return Mail, Inc. v. United States Postal Service, [2016-1502] (August 28, 2017), the Federal Circuit affirmed the PTAB’s decision that the US Postal Service had standing to challenge Return Mails patents in an CBMR, and that as a result of that challenge the patents were not patentable subject matter under 35 USC §101.

The Federal Circuit held that it had authority to review the standing issue, concluding that Cuozzo and Achates are distinguishable and do not dictate the availability of judicial review in this case.  The Federal Circuit distinguished Cuozzo, finding that whether a party is statutorily allowed to petition for CBM review does not amount to “little more than a challenge to the [PTO’s] conclusion” about the petition’s likelihood of success on the merits.  The Federal Circuit distinguished Achates based on differences in the statutory framework for IPR and CBM review, CBM review being reserved only to parties who have have been sued for or charged with infringement of the underlying patent.  The Federal Circuit further noted that unlike the IPR time bar at issue in Achates, which is simply a procedural requirement that rights be exercised in a timely manner, § 18(a)(1)(B) relates to a party’s right to seek CBM review in the first instance.  The Federal Circuit held that § 324(e) does not bar judicial review of the Board’s decision that a party satisfies § 18(a)(1)(B)’s requirements to petition for CBM review.

On the standing issue, the Federal Circuit found that Return Mail made several cogent arguments why a §1498(a) suit is not one for “infringement,” but despite the important differences between §1498(a) suits against the government and suits for infringement against private parties, these differences, along with Return Mail’s other arguments,
were insufficient to compel a conclusion that Congress intended to exclude a government-related party sued under § 1498(a) from being able to petition for CBM review.

On the patentable subject matter issue under 35 USC 101, Return Mail argued that the claims may involve the abstract idea of “relaying mailing
address data” but are not directed to such an abstract idea.  Return Mail first argued that the claims do not preempt other systems for relaying mailing address data; and second, that the claims are directed to a specific improvement to technology for relaying mailing address data.  The Federal Circuit disagreed, finding that the claims were directed to an abstract idea, much like the claims in Content Extraction and  FairWarning.  The Federal Circuit further found the argument that the claims were directed to a specific improvement was also unavailing, noting that limiting the abstract idea to a particular environment such as a mail processing system with generic computing technology, “does not make the claims any less abstract for the Alice Step 1 analysis.

On the Alice Step 2 analysis, the Federal Circuit said that the
claims at issue were not analogous to claims “directed to a specific implementation of a solution to a problem in the software arts,” which it has held not to be directed to an abstract idea.  The Federal Circuit found that the claims only recite routine, conventional activities such as identifying undeliverable mail items, decoding data on those mail items, and creating output data.

At Return Mail’s instance, the Federal Circuit expounded on the role of preemption in the  §101 analysis.  The Federal Circuit noted that preemption is the underlying concern that drives the §101 analysis.  The Federal Circuit said that monopolization of the basic tools of scientific and
technological work  would thwart the primary object of the patent laws to promote future innovation, concluding that “[p]reemption is therefore part and parcel with the §101 inquiry.”  The Federal Circuit noted that while it has often cited the lack of preemption concerns to support a determination that a claim is patent-eligible under § 101, it has consistently held that claims that are otherwise directed to patent-ineligible subject matter cannot be saved by arguing the absence of complete preemption.

Estoppel in CBMR is Both Reviewable and Determined on a Claim by Claim Basis

In Credit Acceptance Corp. v. Westlake Services, [2016-2001](June 9, 2017), the Federal Circuit affirmed the PTAB decision that Westlake was not estopped to bring a CBMR challenge to U.S. Patent No. 6,950,807, and that the challenged claims of this patent were invalid under  35 U.S.C. § 101.

On the estoppel issue Westlake petitioned for CBMR review of all of the claims fo the ‘807, but the Board instituted only as to some of the claims,.  Westlake filed a second CBMR, and Credit Acceptance argued that Westlake was estopped to petition for a second review.  However, since the first CBMR had not yet resulted in a Final Written Decision, the Board found the estoppel argument premature.  After the Final Written Decision in the first CBMR, Credit Acceptance renewed its effort to terminate the second proceeding on estoppel grounds, but the Board decided that estoppel is applied on a claim by claim business, and thus the first proceeding did not impact the second proceeding.

At the outset, the Federal Circuit rejected Westlake’s and the USPTO’s position that the decision on estoppel was akin to a institution decision that is not reviewable.  After finding the estoppel provision was reviewable, the Federal Circuit went on to agree with the Board, that estoppel is determined in on a claim by claim basis.

As to the merits of the CBMR, The Federal Circuit noted that Board determined that the claims are directed to the abstract idea of “processing an application for financing a purchase,” and agreed.  The Federal Circuit said that each of the claims is directed to the abstract idea of processing an application for financing a purchase. The Court saw no meaningful distinction between this type of financial industry practice and “the concept of intermediated settlement” held to be abstract in Alice, or the “basic concept of hedging” held to be abstract in Bilski.

Covered Business Method Patent: You Keep Using Those Words . . . We do not Think They Mean What You Think They Means

In Secure Access, LLC v. PNC BANK NATIONAL ASSOCIATION, [2016-1353] (February 21, 2017), the Federal Circuit vacated the Board’s decision in CBM2014-
00100 on the ground that U.S. Patent No. 7,631,191 on a system and method for
authenticating a web page” was not a business method patent.  Claim 1 of the patent recites:

1. A method comprising:
transforming, at an authentication host computer, received data by inserting an authenticity key to create formatted data; and
returning, from the authentication host computer, the formatted data to enable the authenticity key to be retrieved from the formatted data and to locate a preferences file, wherein an authenticity stamp is retrieved from the preferences file.

The Board started out in the right direction, quoting the statute, which is found in AIA § 18(d)(1) and which is repeated verbatim at 37 C.F.R. § 42.301(a),

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 . . .

and rejected the patent owner’s argument that it the patent was not a covered business method patent.  First, the Board rejected the argument that “financial product or service” as used in the definition included “only financial products such as credit, loans, real estate transactions, check cashing and processing, financial services and instruments, and securities and investment products.”  The Board reasoned that because the patent was directed to solving problems related to providing a web site to customers of financial institutions, it therefore covers the ancillary activity related to a financial product or service of Web site management and functionality and according to the legislative history of the AIA, perform operations used in the administration of a financial product or service.

Despite acknowledging the Federal Circuit’s guidance in Versata Development
Group, Inc. v. SAP America, Inc., 793 F.3d 1306 (Fed. Cir. 2015) questioning the use of various legislators’ competing statements in the legislative history of the AIA, the Board nonetheless found that at least one legislator appeared to view “customer interfaces” and “web site management and functionality,” as activity encompassed by the statutory language.  The Board buttressed its conclusion with the fact that the patent owner was in fact enforcing the patent against financial institutions.

The Federal Circuit looked at the question as whether eligibility for CBM review should be determined on its claim language in light of the specification as understood at the earliest effective filing date, or should the PTAB also consider post-grant evidence such as a patent owner’s litigation history?  The Federal Circuit Circuit viewed the case not as a question of whether the patent was in the statutory definition of covered business method patent, but as a legal question of whether the Board properly understood the scope of the statutory definition.  The Federal Circuit found that it did not.

The Federal Circuit examined the question “What does the statute mean when it says that a patent claims something?”  The Fedeal Circuit held that the meaning cannot be determined from an isolated reading of the claim itself:

A claim in a patent does not live in isolation from the rest of the patent, as if it can be cut out of the document and read with Webster’s Dictionary at hand. Established patent doctrine requires that claims must be properly construed—
that is, understood in light of the patent’s written description; that is a fundamental thesis in claim construction.

The Federal Circuit reasoned that if the use in the practice, administration, or
management of a financial product or service does not have to be part of the
claim as properly construed, essentially every patent could be the subject of a CBM petition.  The Federal Circuit found that Congress intended to give the CBM program a much more limited scope.  The Federal Circuit concluded that the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element.  The Court said: just because an invention could be used by various institutions that include a financial institution, among others, does not mean a patent on the invention qualifies under the proper definition of a CBM patent.


A Patent Does Not Become a CBM Patent Because its Practice Could Involve a Potential Sale of a Product or Service

In Unwired Planet, LLC, v. Google, Inc., [2015-1812] (November 21, 2016) the Federal Circuit vacated and remanded the PTAB’s final written decision in Covered Business Method Patent Review No. 2014-00006, that found the claims of U.S. Patent No. 7,203,752 invalid, because the patent was not directed to a business method patent

The only issues on appeal was whether the patents are CBM patents and whether the challenged claims are directed to patentable subject matter under section 101. The Federal Circuit’s jurisdiction was based on 28 U.S.C. §1295(a)(4)(A) and 35 U.S.C. § 329, and included whether the ’752 patent is a CBM patent. Under the Administrative Procedure Act, the the Board’s actions are to be set aside if ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’ or ‘unsupported by substantial evidence.’”

In accordance with the statute, a CBM review is available only for a “covered business method patent,” which the AIA defines 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.” AIA § 18(d)(1).  The Federal Circuit said that while it might have been helpful if the PTO had used its authority to elaborate on its understanding of the definition of CBM provided in the statute, it did not do so, instead adopting by regulation the statutory definition of a CBM patent.

The Federal Circuit found that the Board did not apply the statutory definition, instead inquiring whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.  The Federal Circuit said that the Board determined that the ’752 patent was a CBM patent because the claimed location service could involve an eventual sale of services.  The finding that sales could result from advertising related to the practice of the patent was the sole evidence the Board relied on to find that the ’752 patent is a CBM patent.

The Federal Circuit rejected the use of general policy statements, or the legislative history, noting  neither the legislators’ views nor the PTO policy statement provides the operative legal standard. The authoritative statement of the Board’s authority to conduct a CBM review is the text of the statute.  The Board is only empowered to review “the validity of covered business method patents.” AIA § 18(a)(1).  Patents that fall outside the definition of a CBM patent are outside the Board’s authority to review as a CBM patent, and the PTO’s regulatory authority does not permit it to adopt regulations that expand its authority beyond that granted by Congress.

The Federal Circuit criticized the incidental or complementary language in the test applied by the Board, noting that a 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, a patent covering a method and corresponding apparatuses does not become 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 Federal Circuit vacated the Board’s decision.