Intellectual Property Alert: First Decision In New AIA Process Invalidates Software Business Method Patent As Unpatentable Subject Matter

by Stinson Leonard Street

On June 11, 2013, the first decision in the new post grant review (PGR) process created by the 2011 America Invents Act (AIA) was issued. SAP America, Inc. v. Versata Development Group, Inc., Case CBM2012-00001 (MPT) (PTAB June 11, 2013). The decision was issued by the new Patent Trial and Appeal Board (PTAB) in the United States Patent and Trademark Office. The decision invalidated a business method patent relating to product pricing as unpatentable subject matter under 35 U.S.C. § 101. The PTAB decided that the Versata patent was invalid under § 101 because it only covers an abstract idea: "We conclude that Versata's claims do not add meaningful limitations beyond the recited abstract idea and, in practical effect, preempt the abstract idea."

The PTAB decision was issued nine months after the PGR petition was filed and was, therefore, relatively expedient, especially compared to the district court litigation that preceded it. Versata had sued SAP in federal district court in 2007, Versata prevailed at trial, and SAP appealed to the United States Court of Appeals for the Federal Circuit in 2011. The Federal Circuit upheld the jury's infringement verdict—and its more than $300 million damages award—with respect to the same patent just last month. Versata Software, Inc. v. SAP America, Inc., Nos. 2012-1029, -1049, slip op. at 2 (Fed. Cir. May 1, 2013).

Undeterred by the jury verdict, SAP had also filed a PGR petition on September 16, 2012, while the Federal Circuit appeal was pending. SAP's petition had challenged the patent under 35 U.S.C. §§ 101 (inventions must be patentable subject matter), 102 (inventions must be new), and 112 (inventions must be adequately described), but the petition was granted with respect to only §§ 101 and 102. SAP requested expedited review of its § 101 challenge, which was granted in light of SAP's agreement to forego its § 102 challenge. A hearing on SAP's challenge was held by the PTAB on April 17, 2013.

Despite its relative speed, the PTAB decision is likely not the end of this dispute. Versata can—and reportedly will—challenge the PGR decision by appealing it to the Federal Circuit. 35 U.S.C. §329; 35 U.S.C. §141(c). The appeal process will likely take months, to possibly years. (SAP's prior appeal from the jury verdict had not raised any claim construction or invalidity issues, so there is no risk of conflicting Federal Circuit decisions, at least not in this case.)

The PTAB decision shows that PGR may be a viable option for challenging the validity of issued patents in some disputes. Not only did the decision invalidate the patent at issue, but also the decision suggests it may be at least theoretically easier to invalidate patents in PGR than in a district court lawsuit. This is because the decision confirmed that the PTAB—unlike district courts—does not presume that patent claims are valid and construes patent claims under the "broadest reasonable interpretation" standard.

PGR may be especially viable for business method patents because the time limit for filing a PGR petition for other patents (9 months from issuance of the patent) does not apply to business method patents. In addition, the preclusive effect of PGR on subsequent district court litigation created by the AIA (which applies to both validity challenges that were actually brought as well as those that could have been brought) does not apply to PGR of business method patents, so the risk from a failed PGR petition is much less. In sum, the possibility of PGR should be considered in patent disputes, especially those involving business method patents.


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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