Federal Circuit Narrows Patent Eligibility for CBM Review

by LeClairRyan


In the recently decided Unwired Planet, LLC v. Google, Inc. case, the Federal Circuit significantly narrowed the eligibility standards for covered business method (CBM) patent review. Prior to the decision in Unwired Planet, the Patent and Trademark Trials and Appeals Board (PTAB) broadly interpreted the scope of the definition of a CBM patent to include patents “incidental” or “complementary” to financial services. The Federal Circuit held that the PTAB had relied on an incorrect definition of CBM in evaluating the challenged patent, and that the statutory definition must be more strictly applied. The Federal Circuit’s decision significantly narrows the field of patents that qualify as CBM patents.

CBM post-grant review allows a petitioner who has been sued for infringement of ‒ or charged with infringement under ‒ a patent meeting the statutory definition of CBM to challenge the validity of the patent before the PTAB. A CBM patent is statutorily defined 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.” The petition for review must establish ‒ as a threshold matter ‒ that the patent is a CBM patent available for review. CBM review, unlike the inter partes review procedure, allows the petitioner to challenge the patent on, inter alia, subject matter eligibility grounds.

Background Information

The patent involved in Unwired Planet relates to a method and system for restricting access to a wireless device’s location information. Specifically, the system allows users of wireless devices to set privacy preferences that determine whether client applications are allowed to access the device’s location information. The PTAB instituted CBM review, determining as a threshold matter that the patent-at-issue qualified as a CBM patent. The PTAB based its determination regarding CBM eligibility on “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to financial activity.” In reviewing the specification for the patent-at-issue, the PTAB determined that the claims were incidental or complementary to the financial activity of service or products sales because the “client applications” recited in the claims were described as possibly being associated with a service provider or goods provider that wants to know whether a wireless device is nearby for advertising purposes.

The PTAB instituted CBM review based on its eligibility standard, which resulted in a final written decision finding the claims to be directed to unpatentable subject matter. The patentee appealed the PTAB’s decision to the Federal Circuit challenging that the patent-at-issue qualified as a CBM patent. Specifically, the patentee maintained that the PTAB applied a standard broader than contemplated by the statutory definition of a CBM patent in rendering its threshold determination of whether the patent-at-issue qualified as a CBM patent.

Federal Circuit Decision

The Federal Circuit agreed with the patentee and vacated the final written decision. In particular, the Federal Circuit noted that the PTAB did not apply the statutory definition of a CBM patent, as the terms “incidental” or “complementary” are not included in that definition. The Federal Circuit determined that the PTAB’s use of those words rendered superfluous the limits that Congress placed on the definition of a CBM patent in the statutory definition. The Federal Circuit noted that all patents, at some level, relate to a potential sale of a good or service, and that sales could potentially result from advertising related to the practice of the patent.

Going forward, the PTAB will have to adhere more closely to the statutory definition to determine whether a patent qualifies for CBM review. That is, the patent must relate to a method or apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service that does not constitute a technological invention.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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