Are you being inundated with charges of infringing business method patents? Are you currently in litigation with a business method patent? Do the settlement amounts exceed your litigation expenses? If so, you should consider cherry-picking a § 101 challenge to quickly and inexpensively launch a covered business method post-grant review petition.1
The effectiveness of § 101 challenges continues to rise in view of recent U.S. Supreme Court jurisprudence and the Federal Circuit’s willingness to grant stays, sometimes even before the Patent Trial and Appeal Board decides whether to institute a trial for CBM post-grant review.2 This makes §101 challenges an attractive option in CBM petitions
As a § 101 analysis under Alice Corp. does not require the time and expense necessary to analyze prior art, swiftly launching a CBM petition that relies either solely or primarily on § 101 challenges presents a cost-effective approach with good potential for success. This is especially true in view of the limited estoppel particular to CBM post-grant reviews, which would allow for subsequent challenges under §§ 102, 103 and 112, at the district court. In addition, a CBM, unlike an inter partes review is not required to be filed within one year after a district court patent infringement suit is initiated. Note, however, that upon a final written decision, § 325(e)(1) estoppel will still bar grounds that the petitioner “raised or reasonably could have been raised” in pending or future PTO proceedings, this is true even if the parties settle.
Versata Software Inc. v. Callidus Software Inc. provides an example of this strategy. In Versata, the Federal Circuit reversed the district court’s refusal to stay an action in view of an initial set of CBM petitions that proposed only § 101 grounds on a subset of claims. Appeal No. 2014-1468 (2014). After plaintiff Versata identified its asserted claims in the district court litigation, Callidus filed additional CBM petitions challenging the asserted claims not challenged in the initial petitions, again only under § 101. After the PTAB instituted trials based on the initial set of petitions, the district court granted a stay as to the patent having all claims challenged in the initial set of petitions, but denied a stay as to the remaining two patents. During the pendency of Callidus’ interlocutory appeal, the PTAB instituted trials based on the second set of petitions, which the Federal Circuit considered along with stay factors particular to CBM post-grant review.3
The Federal Circuit found that each of the CBM-specific stay factors favored a stay. For the first factor — simplification of issues — the Federal Circuit noted that petitioners need not address all invalidity defenses and claims in a first petition; simplification of any issues weighs in favor of a stay.4 The Federal Circuit found that the second factor — status of discovery — also weighed in favor of a stay because, even though discovery began, much remained.5 The third factor — undue prejudice or tactical advantage — weighed in favor of a stay because any advantage or prejudice was inherent in a stay; there was nothing unique to the facts of the case.6 And finally, if the CBM results in canceled claims, the litigation burden will vanish.7 Thus, each factor favored a stay, and would often weigh similarly if you file the petition early in litigation.
While the § 101-focused approach may be attractive when budget and time are at a premium, or when the goal is to facilitate settlement, it does bring risks. First, the PTAB may deny a follow-on prior-art-based CBM petition as redundant or otherwise unnecessary in view of the initial § 101-based petition. Petitioners can reduce this risk by explaining that considering the follow-on petition is a just, speedy, and inexpensive method of resolving additional challenges. In any event, be sure to have a strong § 101 challenge. Second, any follow-on prior-art-based petition will also be subject to the additional filing fees (e.g., in the range of $30,000 minimum), preparation fees, and prosecution fees. Additionally, some claims might not be as susceptible to a § 101 challenge, in which case some prior-art-based grounds would be desirable.
Finally, the petitioner should consider the timing of the second petition to avoid being estopped from maintaining the second petition under § 325(e)(1), but only for the claims at issue in the first CBM. Still, under the right circumstances, launching a §101-based CBM petition may prove to be a powerful and efficient weapon in the arsenal for challenging covered business method patents.
To summarize, filing a quick § 101-based CBM petition has many benefits. First, since it is not a laborious prior art based petition, it reduces the amount of work and therefore shortens the time to filing and reduces costs by obviating the need to analyze prior art. At the same time, petitioners may continue developing a prior art defense strategy for litigation or a follow-on CBM petition.
Second, given the additional incentive for the court to stay litigation based on a CBM in view of Versata, there is now a greater likelihood that a court will grant such stay.
Third, petitioners have an ability to launch CBM challenges outside of the one-year bar that is particular to IPR proceedings and retain may options due to the minimal estoppel of CBM post-grant reviews.8
Finally, the PTAB has already shown willingness to accelerate a CBM post-grant review that solely relies on § 101.9 This is but one of many methods to maximize the efficiencies of filing a CBM review petition under the AIA.
1 CBM petitions apply to covered business method patents, such 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.” AIA § 18(d) (1).
2 Courts often want to wait for the decision on institution, but California courts sometimes grant stays before institution. See e.g., Warsaw Orthopedic v NuVasive No. 12- cv-2738-CAB (SD Cal, Jan. 10, 2014). This may become more common if the PTAB institution and cancellation rate remains high.
3 AIA § 18(b)(1).
4 Versata, Slip Op. at 6.
5 Id. at 10.
6 Id. at 11–12.
7 Id. at 13.
8 Additionally, under Fresenius v. Baxter, accused infringers can get a “second bite at the apple” in the event of a loss at district court. Fresenius v. Baxter, 721 F.3d 1330 (Fed. Cir. 2013).
9 CBM2012-00001, paper 45. All Content © 2003-2015, Portfolio Media, Inc.
This article was first published in Law360 on May 7, 2015.