Blog | 03/07/2017

Patent Claims, Not Embodiments Disclosed in Specification or Litigation Strategy, Determine Eligibility for Covered Business Method Review


A divided Federal Circuit panel recently vacated a Patent Trial and Appeal Board final decision ruling that challenged patent claims were unpatentable, by holding that the patent was not eligible for review under the transitional program for covered business method (“CBM”) patents. The appeals court held that a CBM patent must “have a claim that contains, however phrased, a financial activity element.” Secure Axcess, LLC v. PNC Bank N.A., Case No. 2016-1353 (Fed. Cir. Feb. 21, 2017), slip op. at 19. The decision continues the Federal Circuit’s approach of defining CBM patents narrowly by focusing on the claimed invention, rather than the specification or other factors.

Secure Access, LLC (“Secure”) owns U.S. Patent No. 7,631,191, covering systems and methods for authenticating a webpage. The ‘191 patent claims do not mention banking, financial institutions, or any other commercial activity. Furthermore, the specification states that the invention can be applicable to “any site, for example a commercial web site, such as a merchant site, a government site, an educational site, etc.” ‘191 patent at 3:34–37. The specification however, includes four paragraphs describing exemplary embodiments involving a bank, customers, and merchants in financial transactions, and states that the “bank” in the examples “may represent other types of card issuing institutions, such as credit card companies, card sponsoring companies, or third party issuers under contract with financial institutions.” Id. at 11:22-29.

PNC Bank, N.A. filed a petition for covered business method review of all claims in the ‘191 patent. The PTAB instituted review, ruling that the patent satisfied the definition for a CBM patent under Section 18(d)(1) of the America Invents Act:

For purposes of this section, the term “covered business method patent” means 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.

The PTAB ultimately ruled that all claims were unpatentable as obvious, and Secure appealed the final decision to the Federal Circuit.

In an opinion by Senior Judge Plager, the Federal Circuit reversed the ruling that the ‘191 patent met the requirements for CBM review and vacated the unpatentability decision.

First, the court held that the Board applied an incorrect standard for CBM patents. Relying on the legislative history of the AIA, the PTAB held that Section 18(d)(1) covered patents that cover activities “incidental” to a financial activity. The appeals court noted that the PTAB’s construction of Section 18(d)(1) was rejected in an earlier decision, Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016). See [Link to BK Blog Post on Unwired Planet]. It ruled that the phrase “incidental to a financial activity” is not part of the statutory definition for a CBM patent, and is “beyond the scope of the statutory standard and thus is not in accordance with law.” Slip op. at 18.

Second, the Federal Circuit discussed the correct interpretation of Section 18(d)(1). It noted that Section 18(d)(1) used the term “a patent that claims,” a phrase rarely found in the Patent Act, and is was capable of two potential interpretations: Does the definition cover all patents with claims satisfying the first phrase following those words, “a method or corresponding apparatus for performing data processing or other operations,” or only those that also satisfy the second phrase, “used in the practice, administration, or management of a financial product or service[.]” The court held that if Section 18(d)(1) did not require a patent to claim both phrases, the provision would cover almost all subject matter, and would overlap with the inter partes review, which includes restrictions on review not present in CBM review. Thus,

It follows that bifurcating the statute so that the phrase “a patent that claims” should apply only to the first phrase, and not to the entire definition Congress provided, would be radically out of keeping with the statute and congressional intent, considered in the context of other provisions in the statute.

Slip op. at 15

In addition, the court held that in determining what a “patent claims” for purposes of applying Section 18(d)(1), the claim language must be interpreted in light of the patent specification. “[T]he written description alone cannot substitute for what may be missing in the patent ‘claims,’ and therefore does not in isolation determine CBM status.” Slip op. at 14. Although no specific words are required to establish a CBM patent, “the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element.” Id. at 19.

Finally, the court ruled that the Board incorrectly found that the ‘191 patent claimed a financial product or service. Although the specification included exemplary embodiments involving banks and financial transactions, that disclosure did not result in claims having financial activity as an element of the claimed invention. By expanding the CBM definition to include activities incidental to financial activity, the Board “reach[ed] out beyond the question of whether the claims, as understood in light of the written description, met the statutory definition.” Slip op. at 18.

The court also held that the PTAB improperly considered the fact that Secure has only enforced the ‘191 patent against banks and other financial institutions:

But a patent owner’s choice of litigation targets could be influenced by a number of considerations, such as the volume of a particular target’s perceived infringement; the financial condition of the target; which targets are most likely to be willing to settle rather than bear the cost of litigating; available and friendly venues; and so on. Those choices do not necessarily define a patent as a CBM patent, nor even necessarily illuminate an understanding of the invention as claimed.

Slip op. at 18-19. Thus, the PTAB’s decision was vacated.

The Secure Axcess decision is consistent with last year’s Unwired Planet decision in rejecting the PTAB’s expansive approach to CBM review eligibility. The court’s focus continues to be on the claimed invention, and although the claim should be construed using the tools normally used to determine claims scope, some embodiments in the specification will not trigger CBM review eligibility when the claims do not recite a limitation requiring some financial activity. The decision continues to narrow the availability of CBM review for patents that cover subject matter only peripheral to financial activity.

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