On March 1, 2016, the Federal Circuit issued an opinion in a number of related appeals between Blue Calypso, LLC and Groupon, Inc. These related appeals arise from five Covered Business Method (CBM) reviews of five patents owned by Blue Calypso (U.S. Patent Nos. 7,664,516; 8,155,679; 8,457,670; 8,438,055; and 8,452,640).
The USPTO Patent Trial and Appeal Board (PTAB) granted the CBM petitions, filed by Groupon, for review under the transitional program for covered business method patents. In its final written decisions, the PTAB found various claims of the Blue Calypso Patents unpatentable under 35 U.S.C. §§ 102 and 112. In addition, the Board rejected Groupon's remaining argument that additional claims were unpatentable under 35 U.S.C. § 103. Many issues were appealed by both Blue Calypso and Groupon, but here, we review Blue Calypso's appeal of the PTAB's decisions to review its patents and institute the CBM review in the first place, in which Blue Calypso asserted that the patents are not "covered business method" patents.
The Blue Calypso Patents are all related and generally describe a peer-to-peer advertising system that uses mobile communication devices. The '516 patent explains how advertising can be made to be more effective, compared to traditional broadcast advertising, when an advertiser enlists one of its customers to electronically forward advertisements to his like-minded peers. A "subsidy program" is described to induce customers ("subscribers") to increase exposure of an advertisement. An advertiser may customize its subsidy program by specifying the nature of the subsidy or incentive -- e.g., product discounts or rewards points -- and by identifying necessary demographic criteria that a user must meet before being eligible for the advertiser's subsidy program. The advertiser can determine which subscribers satisfy the advertiser's criteria and are therefore eligible for the subsidy program. Each subscriber may then select from the subsidy programs for which it qualified. Only after this mutual ("bidirectional") selection does an advertiser transmit advertisements to that subscriber. The advertisement includes a link, which, when executed, connects the subscriber to the advertiser's website for additional information, offers, or coupons. The subscriber, using a "source communication device" may then forward this advertisement to his peer's "destination communication device."
Independent claim 2 of the '516 patent is representative and reproduced below.
2. A method for providing access to an advertisement from an advertiser to a source communication device possessed by a subscriber and distributing the access to the advertisement from the source communication device to a destination communication device possessed by a recipient, wherein the destination communication device is compatible with the source communication device, and the recipient having a relationship to the subscriber, the method comprising the steps of:
comparing a desired demographic profile to a subscriber demographic profile to derive a match;
establishing a bi-lateral endorsement between the subscriber and the advertiser;
providing a subsidy program to the subscriber based on the match;
sending a token related to the advertisement to the source communication device;
activating an endorsement manager in the source communication device;
initiating a communication session between the source communication device and the destination communication device;
transmitting a message, including the token, from the source communication device to the destination communication device contemporaneously with the communication session; and
recognizing a subsidy, according to the subsidy program, for the subscriber after a termination of the communication session.
Groupon petitioned the Board for CBM review of the Blue Calypso Patents under § 18(a) of the Leahy-Smith America Invents Act (AIA). Groupon asserted that the claims were unpatentable under either 35 U.S.C. §§ 102 or 103, and some claims as being unpatentable for failing to satisfy the written description requirement of 35 U.S.C. § 112. After examining the claims, the Board concluded that they met the statutory definition of a "covered business method patent," granted the petition, and instituted review.
Can Federal Circuit Review Institution of CBM?
Blue Calypso argued that the Board exceeded its statutory authority by interpreting the statutory CBM definition in an overly broad way that improperly sweeps in Blue Calypso's patents. In Blue Calypso's view, the Board never should have instituted the CBM review of its patents.
Although the Board's decision to institute a CBM review is, per the AIA, "final and nonappealable," see AIA § 18(a)(1); 35 U.S.C. § 324(e), the Federal Circuit has held that the question of whether a challenged patent claim is a CBM relates to the Board's authority to issue a final decision in a CBM review. Versata Dev. Grp., Inc. v. SAP Am., Inc. (Versata II), 793 F.3d 1306 (Fed. Cir. 2015). Thus, because the Federal Circuit has jurisdiction to review the Board's final decisions in CBM reviews, see AIA § 18(a)(1); 35 U.S.C. § 329, the AIA does not preclude the Federal Circuit from reviewing the Board's conclusion that the challenged patent claims are "covered business methods" that lack any "technological invention."
The standard for CBM review is limited to patents "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, except that the term does not include patents for technological inventions." AIA § 18(d)(1) (emphasis added).
Eligibility for CBM Review: (1) Financial Product or Service?
Blue Calypso asserts that its patents are not CBM patents because they relate to a method for managing and distributing advertising content, which is not "a financial product or service" that traditionally originated in the financial sector, e.g., banks, brokerages, holding companies, and insurance firms.
However, in Versata II, the Federal Circuit concluded that the statute "on its face covers a wide range of finance-related activities" and "[t]he statutory definition makes no reference to financial institutions as such, and does not limit itself only to those institutions." The legislative history was found to support the proposition that the definition of CBM be broadly interpreted to encompass patents claiming activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity. More recently, in SightSound Techs., LLC v. Apple Inc., 809 F.3d 1307 (Fed. Cir. 2015), the Federal Circuit noted that a financial activity not directed to money management or banking can constitute a financial product or service within the meaning of the statute. Thus, CBM review is not limited to patent claims tied to the financial sector.
In determining that the Blue Calypso Patents are CBM patents, the Board reviewed the claims, noting, for example, claim 1's recitation of "subsidizing the qualified subscriber according to the chosen subsidy program." The Board construed the claim term "subsidy" as "financial assistance given by one to another." The Board concluded that the challenged claims were financial in nature and therefore subject to CBM review under § 18(d)(1).
The Federal Circuit agreed with the Board because, in its opinion, the claims of the Blue Calypso Patents are directed to methods in which advertisers financially induce "subscribers" to assist their advertising efforts. Because the Federal Circuit found the claims at issue to have an express financial component in the form of a subsidy, the claims of the Blue Calypso Patents were found to meet the statutory definition of a CBM patent.
Eligibility for CBM Review: (2) Technological Invention Exception?
Blue Calypso alternatively contended that the challenged claims fall within the technological invention exception for CBM review because the claims are computer-based and contemplate hardware, software, a network, and communication devices.
Congress created the technological inventions exception in § 18(d)(1), but expressly delegated authority to the PTO to provide a definition of "technological inventions" that would be excluded from CBM review. The resulting regulation, 37 C.F.R. § 42.301(b), explains that a patent claims a technological invention if "the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution" (37 C.F.R. § 42.301(b)).
The USPTO's Patent Trial Practice Guide lists certain claim drafting techniques that are insufficient to render a patent a technological invention: (1) mere recitation of known technologies; (2) reciting the use of known prior art technology; and (3) combining prior art structures to achieve the normal, expected, or predictable results of that combination.
Thus, merely reciting the use of a computer does not satisfy the technological invention exception. The Federal Circuit noted that "the presence of a general purpose computer to facilitate operations through uninventive steps does not change the fundamental character of an invention," and cited to Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014). Thus, the Federal Circuit agreed that the Board correctly rejected Blue Calypso's proposed interpretation of "technological invention."
Blue Calypso, however, contended that the claims represent technological inventions because they are directed to a solution that remedies technological limitations of traditional broadcast advertising. But, the Federal Circuit noted that the only recitation in the claims of hardware is nothing more than general computer system components used to carry out the claimed process of incentivizing consumers to forward advertisement campaigns to their peer destination communication devices. There is no technological aspect in the claims that rises above the general and conventional. Thus, the technological invention exception does not apply here.
Thus, the Federal Circuit concluded that the Board acted within its authority in conducting CBM review of the challenged claims of the Blue Calypso Patents.
This case illustrates the PTAB's broad reach under CBM review. The claims at issue clearly include technical aspects, but the recitation of a "subsidy program" doomed them as being directed to a business method rather than a technical invention. The PTAB has an ability to consider many patents as being CBM patents, since the technological invention exception has the caveat that a technological feature is only present if the feature is both "novel and unobvious over the prior art", which of course involves a § 102 and § 103 analysis as well. But, while this is the standard, the PTAB did not undertake that analysis here, and rather, seemed to be able to know on its own when such features are well-known versus being new. Of course, it is widely accepted that mere recitation of a computer or processor is not new or non-obvious, but it would seem plausible that the claims here solve a technical problem using a technical solution, and at least required some cursory analysis under §§ 102/103 to rule out the technological invention exception.
Blue Calypso, LLC v. Groupon, Inc. (Fed. Cir. 2016)
Panel: Circuit Judges Reyna, Schall, and Chen
Opinion by Circuit Judge Chen; opinion dissenting in part by Circuit Judge Schall
