[author: Gilbert Smolenski]

In an opinion regarding a covered business method (CBM) review at the Patent Trial and Appeal Board (PTAB), the US Court of Appeals for the Federal Circuit adopted a new claim construction and found the PTAB’s decision on CBM review eligibility to be arbitrary and capricious. SIPCO, LLC v. Emerson Electric, Co., Case No. 18-1635 (Fed. Cir. Sept. 25, 2019) (Chen, J) (Reyna, J, dissenting in part).

Emerson filed a petition in 2016 for CBM review of a SIPCO patent. The PTAB found the patent CBM review eligible and held that SIPCO’s patent was invalid. SIPCO raised three issues on appeal:

• “Low-power transceiver” was improperly construed.
• Its patent did not qualify as a CBM patent under America Invents Act (AIA) § 18(d)(1).
• Its patent was a technology invention under 37 CFR § 42.301(b).

First, the panel majority found that the PTAB incorrectly construed the disputed term. The majority noted the “distinction between using the specification to interpret the meaning of a claim and importing limitations from the specification into the claim can be a difficult one to apply in practice.” Phillips. Grappling with this distinction, the majority found that the specification limited the term at issue, and that the intrinsic evidence was sufficiently clear such that extrinsic evidence was not necessary. Accordingly, the Court reversed the PTAB’s claim construction and adopted its own construction. Judge Reyna dissented on this issue.

Second, the Court found that it was not arbitrary and capricious for the PTAB to find that the patent was a financial product or service. A patent is eligible for CBM review if the invention is “sufficiently ‘used in the practice, administration, or management of a financial product or service.’” Versata Development Group.

Here, the Court found that the PTAB correctly assessed that the concept of “communicating financial information from a device associated with an ATM” was central to the claimed device, meaning the device was used in a financial product or service. Although the dependent claims with these concepts were disclaimed after institution, the Court nevertheless relied on such claims. Accordingly, it was not arbitrary and capricious for the PTAB to institute CBM review on a patent even where the claims giving rise to CBM review were disclaimed after institution.

Finally, the Court found that it was arbitrary and capricious for the PTAB to find that the patent was not a technological invention. AIA § 18(d)(1) excludes technological inventions from CBM review. The US Patent and Trademark Office has adopted a two-part test to define technological invention. First, the PTAB considers “whether the claim subject matter as a whole recites a technological feature that is novel and unobvious over the prior art.” 37 CFR § 42.301(b). Second, the PTAB considers whether the patent “solves a technical problem using a technical solution.” Id. A patent is ineligible for CBM review only if each part is not satisfied.

Starting with the second element, the Court found that SIPCO’s patent was indeed a technical invention because “the claimed invention implements a communication system that connects an unconnected, remote device with a central station.” According to the Court, the claims combined various communication elements in a particular way to address a specific technical problem, and therefore the second part of the test was not satisfied. Thus, the PTAB’s decision on the second part was arbitrary and capricious.

Returning to the first part of the technological invention test, the Federal Circuit declined to comment on whether it was satisfied because the PTAB did not address the issue in its final written decision. Accordingly, the Court remanded to the PTAB with instructions to consider the first part of the test and vacated the PTAB’s findings of patent eligibility.