Addressing the issue of whether claims directed to real estate appraisal techniques were patent-eligible, the Patent Trial and Appeal Board (Board), in a Covered Business Method (CBM) post-grant review, determined the claims in issue were non-statutory under §101.  While the claims recited a “computer-implemented process,” the Board explained that the mere recitation of a computer “is not a per se indicator of patentability.”  Rather, as the Board explained, in order to be patent eligible, a patent claim “must incorporate enough meaningful limitations to ensure that what is clamed is more than just an abstract idea and is not a mere drafting effort designed to monopolize an abstract idea itself.”  Interthinx, Inc., v. Corelogic Solutions, LLC, Case CBM2012-00007, Patent 5,361,201 (PTAB, Jan. 30, 2014) (McNamara, APJ.)

In a patent infringement lawsuit between Interthinx, and Corelogic Solutions, the district court found that the Corelogic patent in issue was directed to patent-eligible subject matter under 35 U.S.C. §101 and was not infringed by Interthinx.  While the district court case was pending, Interthinx initiated a CBM review of the patent.  After the judgment was entered by the district court and the lawsuit was settled, Interthinx and Corelogic moved to terminate the pending CBM review proceeding.  However, the Board simply terminated Interthinx’s involvement in the proceeding, but not the CBM review itself.

Corelogic argued that, under the principles of res judicata and collateral estoppel, the Board should not review its patent under the CBM proceeding because the patent eligibility issue was already decided by the district court.

Res judicata precludes a legal claim from being raised in a second proceeding if the legal claim could have been raised in an earlier first proceeding.  For res judicata to apply, the legal claims of the second proceeding must have been raised (or could have been raised) in the first proceeding, and the parties in the second proceeding must be identical to the parties of the first proceeding.  In this case, the Board found that the legal claims were different since the district court, in its summary judgment decision, reviewed the validity of the challenged patent claims under a clear and convincing evidence standard.  In contrast, the Board, in a CBM proceeding, reviews issues relating to patentability (and the underlying factual determinations) under the lower threshold preponderance of the evidence standard.  Thus, because the Board applies a different evidentiary standard, the Board concluded that the legal claims in the second (CBM) proceeding were different from the legal claims in the district court proceeding.  Furthermore, the Board found that the parties to the lawsuit included only Interthinx and Corelogic, while the parties to the CBM proceeding also included the government, represented by the Patent Office.  Thus, the Board concluded that parties to the second proceeding were not the same as the parties to the first (district court) proceeding, and therefore that the principles of res judicata did not apply.

Collateral estoppel requires that where an issue was decided in a first proceeding, the issue must be treated as decided, without further proof, in a later in time proceeding.  For collateral estoppel to be applied in a second proceeding, there must have been an earlier proceeding where the issue was considered, the issue must have been actually litigated in the first proceeding and the party against whom collateral estoppel is being asserted must have had a full and fair opportunity to litigate the issue in the first proceeding, and the issue must have been decided in the first proceeding.  Here, the Board concluded that the issues before the Board and the district court were different due to the difference between validity and patent eligibility and the different evidentiary standards used in a CBM review versus a district court proceeding.  Also, reiterating that inclusion of the Patent and Trademark Office (PTO) as a party resulted in different parties vis–à–vis the district court, the Board concluded that collateral estoppel did not apply either.

Turning to the patent eligibility issue, the challenged claims were generally directed to a computer-implemented process for appraising a real estate property.  The claims were directed to a computer-based method that generally recited the steps of creating a predictive statistical model, generating a signal indicative of an appraised value of the real estate property and then generating a signal indicative of an error range for the appraised value using the predictive statistical model.  Corelogic argued that the challenged claims were directed to patent-eligible subject matter since “a computer is central to all the [patent] claims and the processes cannot be done manually.”  The Board rebuffed that argument, concluding that the presence of the computer “is not a per se indicator of patentability.”  Rather, a challenged patent claim “must incorporate enough meaningful limitations to ensure that what is claimed is more than just an abstract idea and is not a mere drafting effort designed to monopolize an abstract idea itself.”

The Board explained that the creating a predictive statistical model, as claimed in the patent, is an abstract concept that is commonly applied in the statistical field.  The Board noted expert testimony that the predictive model, as recited in the challenged claims, could be developed manually, as well as by computer, using a limited number of observations.  In sum, the Board found the challenged patent claims to not be patent eligible since they were directed to an abstract idea rather than to a novel computerized technique:  “a [patent] claim is not patent eligible where it merely recites a law of nature and adds additional steps that merely reflect routine, conventional activity of those who work in the field.”

Practice Note:  To avoid similar problems, practitioners may consider drafting claims that clearly recite the role of the computer and its components—e.g., processor, memory, network interface, etc. —as a part of the inventive technique.