Federal Circuit Narrows USPTO's Definition of "Covered Business Method"
The America Invents Act (AIA) defines a covered business method (CBM) patent 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." For the purpose of determining whether a CBM review is to be instituted, the USPTO's Patent Trial and Appeal Board (PTAB) considers "whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity." Perhaps it was only a matter of time before these two competing definitions ended up butting heads with one another before the Federal Circuit.
Unwired Planet owns U.S. Patent No. 7,203,752, which is directed to restricting access to a wireless device's location information. Particularly, a user of such a wireless device may specify "privacy preferences that determine whether client applications are allowed to access their device's location information." A server is used as a clearinghouse for requests of the location information. Notably, "a client application will submit a request over a data network to the system requesting location information for an identified wireless communications device," and "[t]he system then determines, based on the user's privacy preferences, whether to provide the requested location information to a client application."
Claim 25 of the '752 patent was deemed representative:
A method of controlling access to location information for wireless communications devices operating in a wireless communications network, the method comprising:
receiving a request from a client application for location information for a wireless device;
retrieving a subscriber profile from a memory, the subscriber profile including a list of authorized client applications and a permission set for each of the authorized client applications, wherein the permission set includes at least one of a spatial limitation on access to the location information or a temporal limitation on access to the location information;
querying the subscribe[r] profile to determine whether the client application is an authorized client application;
querying the subscriber profile to determine whether the permission set for the client application authorizes the client application to receive the location information for the wireless device;
determining that the client application is either not an authorized client application or not authorized to receive the location information; and
denying the client application access to the location information.
On April 8, 2014, the PTAB instituted CBM review of claim 25, as well as other claims of the patent. In doing so, the PTAB found that:
The '752 patent disclosure indicates the "client application" may be associated with a service provider or a goods provider, such as a hotel, restaurant, or store, that wants to know a wireless device is in its area so relevant advertising may be transmitted to the wireless device. Thus, the subject matter recited in claim 25 of the '752 patent is incidental or complementary to the financial activity of service or product sales. Therefore, claim 25 is directed to a method for performing data processing or other operations used in the practice, administration, or management of a financial product or service.
In its April 6, 2015 final written decision, the PTAB held that the challenged claims were patent-ineligible under 35 U.S.C. § 101. Unwired Planet appealed.
The gist of Unwired Planet's arguments was that the PTAB applied a broader standard than what is set forth in the AIA when determining whether the '752 patent was a CBM patent. Particularly, claim 25 did not recite a financial product or service, but the PTAB looked to disclosure in the patent's specification on how to monetize the invention.
The Federal Circuit observed that the USPTO adopted the narrower statutory definition of CBM patents without alteration, and did not use its rulemaking authority to further refine this definition. Further, the PTAB did not apply the statutory definition, but instead used the more extensive designation of "whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity."
In the PTAB's view, the specification's discussion of "client applications [that] may be service or goods providers whose business is geographically oriented [such as a] hotel, restaurant, and/or store" was determinative, because "[t]hese businesses may wish to know a wireless device and its user are nearby so that 'relevant advertising may be transmitted to the wireless communications device.'" Relying on this statement, the PTAB found claim 25 to recite subject matter "incidental or complementary to potential sales resulting from advertising."
The Court considered the origin of the "incidental or complementary to" language. The USPTO derived these terms from a statement made by Senator Schumer during the Senate's deliberation on the AIA's statutory definition of a CBM patent. But the Court pointed out that this quote was just one floor comment that was not representative of the legislative history. Notably, Senator Durbin took a different view on the scope of CBM patents. Ultimately, the Court held that "the legislative history cannot supplant the statutory definition actually adopted," and in any event "the views of a single legislator, even a bill's sponsor, are not controlling." Further, the USPTO did not adopt this general policy statement through its rulemaking procedures and regardless was not permitted to "adopt regulations that expand its authority beyond that granted by Congress."
Drilling that point home, the Court provided examples of inventions that, although not being financial in nature, could be categorized as covered business methods under the USPTO's definition:
The patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.
Consequently, the Court held that the PTAB's "reliance on whether the patent claims activities incidental to or complementary to a financial activity as the legal standard to determine whether a patent is a CBM patent was not in accordance with law," vacated the PTAB's decision, and remanded the case back to the PTAB for further proceedings. There is no doubt that this ruling has made it more difficult for challengers to establish the necessary grounds for CBM institution.
Unwired Planet, LLC v. Google Inc. (Fed. Cir. 2016)
Panel: Circuit Judges Reyna, Plager, and Hughes
Opinion by Circuit Judge Reyna