I. Background of Covered Business Method review
Under U.S. patent laws, the United States Patent and Trademark Office (USPTO) can review the validity of patents that are financial in nature under a Covered Business Method (“CBM”) review. CBM review is great for potential defendants who might want to invalidate a patent that they may be infringing. The USPTO is also helping by taking a broad view of what financial means.
As discussed further below, Blue Calypso, LLC v. Groupon (Fed. Cir. March 1, 2016) clarified what is included in the scope of Covered Business Method review. Also, in dictum, the Federal Circuit appears to have broadened the definition of “financial” to include non-monetary transactions so that the CMB review of patents also applies to claims that have a non-monetary aspect or at least an indirect monetary aspect.
A. Covered Business Method beneficial due to wide range of potential prior art
The Covered Business Method review of patents is advantageous for those charged with patent infringement (i.e., defendants) and offers advantages over other post patent grant review proceedings because of the wide range of prior art that can be used to invalidate the patent. A CBM review, unlike other narrow post grant review procedures, also allows the petitioner to challenge the validity of the patent based on eligibility issues, defects in the written description, enablement and definiteness requirements.
B. Covered Business Method beneficial due to broad interpretation of claims
Moreover, Covered Business Method review and other post patent grant review proceedings beneficially, for infringers construe the claims broadly under the broadest reasonable interpretation standard for the purposes of determining whether the patent claims are so broad as to be anticipated by the prior art. This is advantageous to defendants engaged in a patent infringement lawsuit because in general, the broader the claims are construed the more likely the patent claims are to be invalidated based on a prior art reference. Hence, defendants may more easily avoid patent infringement by invalidating the claims under the broad interpretations used in these post grant reviews.
In contrast, during litigation, the claims are not construed as broadly. Instead, they are given their plain and ordinary meaning based on the use of the terms in the patent and during prosecution, which usually results in a narrower meaning than what is used during the post grant review proceedings, and thus, it is less likely that the defendant would infringe the patent claims.
C. Statute governing Covered Business Method
The statute that governs what is covered under a Covered Business Method review states that CMB review is applicable only to patents that claim:
“a method or corresponding apparatus for performing data processing or other operation used in the practice, administration, or management of a financial product or services, except that the term does not include patents for technological inventions.” (Emphasis added). AIA §18(d)(1).
The patent claims must be related in some way to a financial product or service.
D. Applicability of Covered Business Method review prior to Blue Calypso
Before Blue Calypso, the Versata II Court construed this statute so that Covered Business Method review applied to all finance-related activities even if the patent claims are not related to financial institutions. The Court did not require the patent claims to be related to a financial institution for CBM review to be applicable to the patent claims.
II. Blue Calypso enlarges scope of applicability of Covered Business Method review
Blue Calypso further refined what types of patent claims are finance related activities and thus applicable to Covered Business Method review.
A. Background facts of the Blue Calypso case
In Blue Calypso, the patent described a peer-to-peer advertising system wherein the system induced subscribers to assist in their advertising efforts with a subsidy. Significantly, the subsidy was construed by the court as financial assistance given by one to another. Also, the subsidy concept was central to the claims because without the subsidy, there was no incentive for a subscriber to perform the other steps in the claims. Based on these findings, the Federal Circuit held that the CBM review applied to the patent claims.
B. Covered Business Method review applicable to non-monetary consideration
Blue Calypso attempted to argue that the subsidy was not financial in nature. However, the Federal Circuit found that Blue Calypso had waived such arguments. Nonetheless, the Federal Circuit in footnote 3 rejected Blue Calypso’s arguments in dictum and those comments provide further definition as to what “financial products or services” includes. The Federal Circuit said that even if “coupons” and “reward codes” are not financial as argued by Blue Calypso, these also qualify as “financial assistance given by one to another.” The Federal Circuit seems to suggest in dictum that even non-monetary benefits are considered financial.
This decision refined and clarified the standard to determine whether CBM review is applicable to a patent claim. Also, the Federal Circuit in dictum broadened the potential applicability of CBM review to include non-monetary aspects of financial transactions.
I invite you to contact me with your patent questions at (949) 716-8178. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.