Senator Charles Schumer (D-NY) has frequently been quoted by the Patent Trial and Appeal Board when instituting a Covered Business Method review. The Board cites the Senator in the legislative history of the America Invents Act that “explains that the definition of covered business method patent was drafted to encompass patents ‘claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.’” [1] However, the Court of Appeals for the Federal Circuit in Unwired Planet, LLC. v. Google Inc., Case 2015-1812 (Fed. Cir. 2016) recently overturned the Board’s decision to institute a Covered Business Method review “[b]ecause the Board relied on an incorrect definition [2] of covered business method (“CBM”) patent.”

The Court held that the USPTO had overstepped its authority in its reliance upon Senator Schumer’s statement in that an “agency cannot apply or rely upon a general statement of policy as law” [3] and that “the Board’s authority to conduct a CBM review is the text of the statute.” [4] The Court especially disagreed with the Board’s definition of a CBM patent if the claims included activities that were “incidental to” or “complimentary to” a financial activity instead of the statutory definition of a patent with “claims that are directed to methods and apparatuses of particular types and with particular uses ‘in the practice, administration, or management of a financial product or service.’” [5] (Emphasis added.)

In the week prior to the Unwired Planet decision, the Patent Trial and Appeal Board suddenly reversed itself regarding the same question of what qualifies as a CBM patent review in CBM2015-00145, Global Tel*Link Corporation v. Securus Technologies, Inc. [6] Of note in the ’0145 decision is that the CBM patent review was instituted and an oral argument had already been held two months earlier, with the next expected action being the issuance of a final written decision. Rather than a final written decision the Board issued a decision to terminate the proceeding stating that “we vacate our Decision to Institute this proceeding and terminate the covered business method review.” [7]

In the ’0145 decision instituting a CBM patent review, the Board had relied on Senator Schumer’s comments stating “[o]ne requirement of a covered business method patent is for the patent to ‘claim[] a method or corresponding apparatus for performing data processing or other operations used in the practice’” and that the “legislative history of the AIA ‘explains that the definition of covered business method patent was drafted to encompass patents ‘claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.’’” [8] (Emphasis added.)

In the ’0145 decision to terminate the proceeding the Board clarified its earlier decision to institute trial stating that the “[p]etitioner bears the burden of demonstrating that the ’222 patent claims a method ‘used in the practice, administration, or management of a financial product or service.’” [9] (Emphasis added.) The Board further explained that “the focus is on the claims” and that “§18(d)(1) directs us to examine the claims when deciding whether a patent is a [CBM] patent.” [10] (Emphasis in original.)

Thus, given the Board’s decision in the ’0145 proceeding and the Federal Circuit’s decision in Unwired Planet, institution of a Covered Business Method review now appears to require that at least one claim must be directed to uses “in the practice, administration, or management of a financial product or service.” It is no longer sufficient that a petitioner can rely on the specification to recite activities that are “incidental to” or “complimentary to” a financial activity to quality as a CBM patent. This shift at the Board and the Federal Circuit pose a greater challenge to a petitioner thinking about filing a CBM patent review. This may lead a petitioner to split its litigation efforts between District Court for the determination of patentable subject matter under 35 U.S.C. §101 and the Patent Trial and Appeal Board for arguments under 35 U.S.C. §§102 and 103 in an Inter Partes Review proceeding.

[1] Transitional Program for Covered Business Method Patents––Definitions of Covered Business Method Patent and Technological Invention, 77 Fed. Reg. 48,734, 48,735 (Aug. 14, 2012) (quoting 157 Cong. Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer)).
[2] Unwired Planet, LLC. v. Google Inc., Case 2015-1812, *1 (Fed. Cir. 2016)
[3] Id.
[4] Id. at *11
[5] Id. at *12.
[6] Global Tel*Link Corporation v. Securus Technologies, Inc., Case CBM2015-00145, Decision to Terminate, Paper No. 49 (Nov. 15, 2016)
[7] Id. at *1
[8] Global Tel*Link Corporation v. Securus Technologies, Inc., Case CBM2015-00145, Decision to Institute Trial, Paper No. 20 at *10 (Nov. 15, 2016)
[9] Global Tel*Link Decision to Terminate at *10
[10] Id. at *11

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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