Patent Office Issues First Decision Invalidating Patent Under New AIA Rules

The U.S. Patent & Trademark Office recently issued its first decision under the America Invents Act’s new system for reviewing the validity of patents.  See SAP America, Inc. v. Versata Dev. Group, Inc., Case CBM2012-00001 (MPT) (P.T.A.B. June 11, 2013).  The decision involved a “covered business method” (CBM) review, but is significant for those considering any of the AIA review proceedings — inter partes review, post-grant review and covered business method review.

SAP filed a CBM proceeding in an effort to invalidate a Versata business method patent.  SAP argued that the Versata patent lacked utility under 35 U.S.C. § 101 because its claims recited unpatentable “abstract ideas.”  After conducting a detailed analysis of the claimed subject matter, the PTO invalidated the challenged claims.  This decision confirms that the PTO is taking a fresh look at patentability in the new AIA proceedings, and that such proceedings are a viable forum for challenging issued patents. 

The challenged claims related to methods for determining the price of a product by organizing data about products and customer organizations using hierarchical charts (i.e., “organization charts”), and then calculating a price using those data.  Additional claims covered computer media containing code to perform the method, and a computer apparatus that performs the method. 

The PTO found that all of the claims merely recite the abstract idea of “determining a price using organizational and product group hierarchies.”  The PTO added that reciting additional computer hardware limitations did not render the claims patentable, because the only practical application of the underlying method was in connection with a digital computer.  See Gottschalk v. Benson, 409 U.S. 63, 68 (1972).  The PTO also held that the additional claim steps that apply the price computation formula — such as storing, retrieving, and arranging the data — are “routine conventional activities” and not an “inventive concept” that could make the claims patentable.  See Parker v. Flook, 437 U.S. 584, 594 (1978).

The PTO also vigorously defended its use of the “broadest reasonable construction” standard for claim construction in AIA proceedings, as opposed to the district court standard articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc).  Under this standard, the PTO is often able to consider more prior art than would be available in a district court proceeding.  The PTO relied on the AIA’s expanded grant of rulemaking authority and a century of use in PTO proceedings, including pre-AIA post-grant proceedings.  The PTO held that “broadest reasonable construction” is “the one correct standard for post-grant reviews.” 

This decision is an important signal to the intellectual property community that the PTO is committed to conducting fresh, thorough, and timely reviews of issued patents under all of the new AIA review procedures.

To view a copy of the decision, please click here.