Federal Court in Delaware Issues First Stay Pending Covered Business Method Review under Section 18(b)(1) of the America Invents Act

by Wilson Sonsini Goodrich & Rosati

On February 5, 2013, Judge Gregory M. Sleet of the U.S. District Court for the District of Delaware issued an order staying litigation pending review by the Patent Trial and Appeal Board under the Transitional Program for Covered Business Method Patents ("CBM review").1 The decision is the first of its kind and demonstrates the viability of post-grant review procedures available under the America Invents Act for the efficient resolution of a patent infringement dispute where the patent at issue is directed at a covered business method.

Covered Business Method Review

Congress implemented CBM review as part of the America Invents Act to address costly litigation arising from "poor business method patents," especially those issuing from patent applications filed during the dot-com bubble of the late 1990s and early 2000s.2 CBM review allows the United States Patent and Trademark Office (USPTO) to reassess the validity of the patents in light of any grounds that may be raised under 35 U.S.C. §282(b)(2) and (3), including statutory eligibility, novelty, obviousness, written description, enablement, and definiteness requirements. This new procedure went into effect on September 16, 2012.

CBM review is permitted for any "patent[s] 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."3 The USPTO broadly interprets the definition of "covered business method patents" as encompassing patents claiming activities that involve, are incidental to, or are complementary to a financial activity,4 and does not limit the term "financial product or service" to products or services of the financial services industry.5 In addition, the USPTO construes the "technological invention" exception narrowly. A patent claim only is excluded from CBM review as 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."6 Thus, a "mere recitation of known technologies" and the recitation of "the use of known prior art technology to accomplish a process or method, even if that process or method is novel and non-obvious," fails to meet the "technological invention" standard in the context of the exception.7

CBM review offers several advantages to an accused infringer. First, it provides defendants with an initial opportunity to challenge the subject patent at a considerably lower cost than in traditional district court litigation. While the procedure is new and there is not yet data on outcomes, CBM review is expected to result in invalidation or narrowing of the patent's claims in a number of cases. Second, as with the related post-grant review and inter partes review proceedings, CBM review decisions are rendered quickly—typically within 12-18 months of filing. Third, CBM review may include challenges based on the patentable subject matter, written description, and enablement requirements (among others) of 35 U.S.C. §§ 101 and 112, and not merely prior-art-based challenges under Sections 102 and 103. Fourth, estoppel is limited to those grounds actually raised in the proceeding, thereby preserving any unasserted defenses for use in litigation.

In addition, America Invents Act Section 18(b)(1) expressly allows courts to stay litigation during the CBM review and includes, as part of the four-factor test, an inquiry as to whether a stay will "reduce the burden of litigation on the parties and on the court." When enacting the America Invents Act, Congress contemplated that "the entire purpose of the transitional program at the PTO is to reduce the burden of litigation" and that the four-factor test was intended to "place[] a very heavy thumb on the scale in favor of the stay."8

Background of the Markets-Alert Litigation

In June 2012, Markets-Alert Pty. Ltd. filed suit against online brokerages and financial service providers including TD Ameritrade, E*TRADE, Bloomberg, and Charles Schwab, alleging that the defendants infringe Markets-Alert's U.S. Patent No. 7,941,357. The '357 patent is directed to a particular method of providing alerts based on real-time application of "stock market technical analysis formulae." In October 2012, these defendants filed a petition for CBM review of the Markets-Alert patent.

Shortly after filing the petition, the defendants moved pursuant to Section 18(b)(1) of the America Invents Act to stay Markets-Alert's suit pending the Patent Trial and Appeal Board's resolution of post-grant review. On February 5, 2013, the court granted the defendants' motion and entered the stay. Wilson Sonsini Goodrich & Rosati attorneys filed the petition on behalf of TD Ameritrade, E*TRADE, Bloomberg, and Charles Schwab, and filed the motion to stay on behalf of TD Ameritrade, E*TRADE, and Bloomberg.


Defendants accused of infringing business method patents should consider CBM review as part of their overall defense strategy. Judge Sleet's decision to stay litigation in favor of CBM review indicates that CBM review may provide an efficient and effective alternative to traditional patent infringement litigation.

For more information or any questions regarding any new America Invents Act-instituted proceeding (including CBM review, post-grant review, and inter partes review), please contact Michael Rosato at mrosato@wsgr.com or (206) 883-2529; Michael Levin at mlevin@wsgr.com or (650) 320-4929; or any member of the firm's patents and innovations or IP litigation practices.

1 Case No. 1:12-cv-00780-GMS, Dkt. No. 25.

2 H.R. REP. NO. 112-98, pt. 1 at 54 (2011).

3 America Invents Act § 18(d)(2).

4 See 77 Fed. Reg. 157 (August 14, 2012) at 48734-35.

5 Id. at 48736.

6 37 C.F.R. 42.301(b); see also 77 Fed. Reg. 157 (August 14, 2012) at 48763-64.

7 Id.

8 157 Cong. Rec. S1053 (March 1, 2011).


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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