The applicability of Covered Business Method Review was significantly reigned back by the Federal Circuit in Unwired Planet, LLC. v. Google Inc. (Fed. Cir. 2016). Covered Business Method Review is a type of post grant proceeding at the USPTO wherein a third party, usually a defendant or an accused patent infringer, challenges the validity of a patent in order to avoid patent infringement liability or to put pressure on the patent owner to negotiate a settlement agreement.
For defendants or accused patent infringers, a Covered Business Method Review is beneficial because any type of prior art reference could be raised and used to invalidate the patent including public demonstrations and verbal offers for sales (i.e., non-documentary types of prior art). In other types of post grant proceedings, the type of prior art references that could be raised and used to invalidate the patent was severely limited to printed publications (e.g., printed advertisements, etc.), pre-grant patent publications and issued patents. Hence, the petition to have the Covered Business Method Review instituted was easier to institute and win than other post grant proceedings because a broader range of invalidating prior art could be used. Covered Business Method Review was thus available to many potential patent infringement cases.
Another advantage to Covered Business Method Review was the limited scope of estoppel should the dispute between the parties be pursued in court. In other types of post grant proceedings, the defendant or the accused patent infringer would be estopped for using any prior art documents that could have been raised during the post grant proceedings. Not so with a Covered Business Method Review. The accused patent infringer is only estopped from raising the same prior art references during litigation that the third party used during Covered Business Method Review but all other potentially invalidating prior art references is still fair game during litigation. .
Although the Covered Business Method Review is beneficial for defendants and accused patent infringers, its applicability under the statue was limited to financial related patents. In particular, under the America Invents Act (“AIA”), a Covered Business Method Review is only applicable to “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).
However, the Patent and Trademark Appeal Board (“Board”) began applying a broader standard for instituting a Covered Business Method Review, a standard that was not limited to the statutory definition. The Board added to the statutory definition by additionally allowing for Covered Business Method Review of patents that claimed activities not only financial in nature but more broadly incidental or complementary to a financial activity.
The incidental or complementary language used by the Board was based on a response made by the Patent Office to a comment concerning the statutory definition of when Covered Business Method Review is appropriate when the AIA was being legislated but such language was never adopted even when the Patent Office had an opportunity to do so. Simply put, the Patent Office made the comment during drafting of the legislation but never adopted the language when making the rules to implement the Covered Business Method Review procedures.
The Federal Circuit explained that the broader standard applied by the Board in determining applicability of Covered Business Method Review was just too broad. In essence, the broader definition could encompass almost any patent claim given the broad meanings of “incidental” or “complementary.” For example, a patent for a novel light bulb that is found to work well in a bank vault could be up for Covered Business Method Review because the bulb was used in the operation of a bank. A ditch digger could be a Covered Business Method Review because the dirt could be sold. The Federal Circuit explained that the statute’s language was not so broad.
The Federal Circuit held that applicability of Covered Business Method Review is limited only to those patents as specified by the statute, specifically, to patents directed to performing data processing or other operations used in the practice, administration or management of a financial product or service.
For now, the applicability of Covered Business Method Review of patents has been reigned back – which is good news for patent owners because the ability to invalidate a patent based on CBM review is applicable to a more limited universe of patents.
I invite you to contact me with your patent questions (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.