In 1998, the United States Court of Appeals for the Federal Circuit decided State Street Bank & Trust Co. v. Signature Financial Group, Inc., which upheld the patentability of business methods in the United States. Since then, an increasing number of business method patent applications have been filed at the United States Patent & Trademark Office (USPTO).
Thirteen years and thousands of issued business method patents later, Congress enacted the transitional program for post-grant review of covered business method (CBM) patents by the Patent Trial and Appeal Board (PTAB or Board) in the America Invents Act (AIA) of 2011. CBM reviews took effect in September 2012 to adjudicate the validity of a so-called business method patent in lieu of district court litigation. However, since enactment of the CBM procedure, there have been many issues with the process, including non-uniformity in PTAB rulings as to whether the challenged patent qualifies as a covered business method, i.e., whether the patent at issue 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. Although the PTAB has instituted CBM trials for patents that do not facially qualify as business method patents, recent Federal Circuit decisions have required a more strict reading of the AIA statute in instituting CBM trials.
What are CBMs?
CBMs are challenges to review the patentability of one or more claims in a “covered business method” patent. A CBM proceeding is a trial proceeding conducted at the PTAB that employs standards and procedures of a post-grant review, with certain exceptions. This is a transitional program for covered business method patents (TPCBM) because the procedure took effect September 16, 2012, but will sunset for new TPCBM petitions on September 16, 2020 (existing petitions/trials will continue to completion).
CBMs are one of the three post-grant proceedings enacted by the AIA, with the other two being Post Grant Reviews (PGRs) and Inter Partes Reviews (IPRs). IPRs and CBMs have various differences, but one key distinction is that CBMs permit petitioners to challenge claims under 35 U.S.C. §101, whereas such challenges are not allowed in IPR proceedings. Thus, CBM challenges typically include a patentable eligibility subject matter challenge.
Below is a timeline for a typical CBM proceeding. Notably, following institution of the trial, the PTAB will typically issue a final written decision within 12 months.
Standing for Instituting a CBM Proceeding
A Petitioner must have standing to institute the CBM proceeding under 37 C.F.R. § 42.302, including that the patent for which review is sought must be a CBM patent. Much controversy surrounds the inquiry of whether the patent qualifies as a CBM patent. The AIA defines a CBM patent 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.”
Various petitioners have argued that this definition was drafted to encompass patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” So, how broad is this definition?
The statute indicates that the focus is on the claims, and PTAB decisions have indicated that with respect to the “financial prong,” the question is to determine whether challenged claims recite a method of general utility vs. specific financial utility. When claims recite a specific financial utility, the PTAB has found the patent satisfies this financial prong. In a CBM proceeding, claim terms are interpreted according to their broadest reasonable interpretation (BRI) in light of specification, and under the BRI standard (absent any special definitions) claim terms are given their ordinary and customary meaning as would be understood by one of ordinary skill in the art in the context of the entire disclosure. So, while the focus is on the claims, the specification should be reviewed as well. CBM patent review is not available for patents that claim generally useful technologies that also happen to be useful to financial applications. Simply put, the mere ability to use a claimed invention in a financial context, standing alone, does not require finding that financial prong has been met. The fact that the specification may describe invention as capable of being used for commercial purposes does not mean that claims are limited to such applications.
Turning to recent CBM decisions, the PTAB has given some guidance. For instance, saving money is not considered a financial activity sufficient to confer CBM standing. Virtually every patented invention is intended to confer a financial benefit on its user, and so, the CBM statute cannot be read to be this broad. As another example, generating revenue is also not considered a financial activity sufficient to confer CBM standing. If ability to make money selling a claimed invention, or providing access to a claimed method, were sufficient, the “financial product or service” requirement would be rendered useless.
Referring back to definition of a CBM patent, there is an exception provided by the AIA. CBM patents, by definition, do not include patents for “technological inventions.” The USPTO has further defined “technological invention” rather circularly, namely that: (1) 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. To demonstrate that the technological exception applies, and thus, the patent is ineligible for CBM review, a patent owner may identify that a specific technical implementation of the claimed invention solves a technical problem, and not merely a business problem. The USPTO has issued a patent trial practice guide which provides examples that invoke the exception:
(a) A patent that claims a novel and non-obvious hedging machine for hedging risk in the field of commodities trading.
(b) A patent that claims a novel and non-obvious credit card reader for verifying the validity of a credit card transaction.
Post-Grant Proceeding Statistics
As of this past winter (2016), there have been approximately 476 CBM petitions filed. Among those petitions, 215 trials were instituted. Thus, petitioners were about 54% successful in instituting a trial. When a trial was instituted, however, 82% of those trials resulted in all claims being found unpatentable. Why such high rates of claims being found invalid? The change in application of 35 U.S.C. § 101 relating to patentable subject matter is the main cause.
Moreover, there has been non-uniformity in the interpretation of the AIA statute within PTAB rulings. Some PTAB decisions find that if the claim is in any way related to financial activity, then the patent is eligible for CBM review. Other PTAB decisions require that the claim include specific limitations that make it clear that the invention is financial in nature. Why do we have such varying PTAB decisions? One potential reason is that the makeup of the PTAB has changed in the past four years, increasing in size from about 75 judges to over 225 judges today. The increase in the number of judges lends itself to an increase in variance of opinion in interpreting and applying the AIA statute. In addition, there are few binding or precedential PTAB decisions, namely, only 35 total of which three are based on CBM decisions. All three precedential CBM decisions are procedural in nature, thereby providing little guidance for substantive CBM issues.
Recently, though, the Federal Circuit issued a decision in Unwired Planet, LLC v. Google Inc., in which the Federal Circuit vacated the Board’s finding that the patent was patent ineligible under 35 U.S.C. § 101 because the PTAB used an overbroad definition in evaluating whether the challenged patent was eligible for CBM review. The Board stated that the proper inquiry “is whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” However, this “incidental” or “complementary” language is not found in the AIA statute. The Federal Circuit noted that the Board’s application of the “incidental to” and “complementary to” language from a PTO policy statement renders superfluous the limits Congress placed on the definition of a CBM patent. CBM patents are limited to those that claim “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.” The Federal Circuit elaborated with a few examples, namely, 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, and likewise, 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.
Thus, following the Federal Circuit’s decision, determining whether a patent is a CBM patent will no longer rely on whether a patent claims activities “incidental to” or “complementary to” a financial activity. This decision should cause the Board to focus more closely on specific claim language itself to only institute CBM review for actual business method patents that do not claim a technological invention.
 149 F.3d 1368 (Fed. Cir. 1998).
 Office Patent Trial Practice Guide, 77 Fed. Reg. 48,374, 48,735 (Aug. 14, 2012) (quoting 157 Cong. Rec. S5432 (daily ed. Sept. 8, 2011)).
 Office Patent Trial Practice Guide, 77 Fed. Reg. 48,734, 48,736 (Aug. 14, 2012).
 AT&T Mobility LLC v. Intellectual Ventures II LLC, CBM2015-00185 (May 4, 2016).
 Qualtrics, LLC v. Opinionlab, Inc., CBM2016-00003 (April 13, 2016).
 BMC Software Inc. v. zIT Consulting GMBH, CBM2016-00044 (August 23, 2016).
 CoreLogic, Inc. v. Boundary Solutions, Inc., CBM2016-00017 (May 24, 2016).
 See 37 C.F.R. § 42.301(a) (“Covered business method patent means 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.”).
 37 C.F.R. 42.301(b).
 Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,763-64 (Aug. 14, 2012).
 841 F.3d 1376 (Fed. Cir. 2016).
 Unwired Planet, LLC v. Google Inc., CBM2014-00006 (April 8, 2014).
 Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1382 (Fed. Cir. 2016).
 AIA § 18(d).
 Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1382 (Fed. Cir. 2016).