Covered business method reviews are an important component of AIA patent trials, but the extent of patents eligible for CBM review has not been subject to a consistent standard. In Part 1, we discussed the Federal Circuit’s decisions narrowing the scope of CBM eligibility, eliminating from CBM review patents claiming activities that are only “incidental to” or “complementary to” financial activity, and its most recent order denying en banc rehearing in Secure Axcess — which may have settled the legal question of CBM scope. In Part 2 (herein), we discuss recent PTAB decisions showing how the Board has adjusted its approach in evaluating whether a patent is eligible for CBM review in view of the Federal Circuit’s guidance, along with considerations for parties and practitioners going forward.

PTAB Decisions after Unwired Planet and Secure Axcess Applying Narrower CBM Scope:

One would expect that the PTAB would now follow the Federal Circuit’s clear, and rather forceful, guidance, even in an inquiry as case-dependent as determining whether a patent claims a covered business method. Recent decisions, discussed below, show that the PTAB is indeed following the Federal Circuit’s lead, and no longer is relying on the former standard of activities that are only “incidental to” or “complementary to” financial activity.

Dish Network v. Customedia.^[1]  In a series of cases involving a patent family, the Board determined that patents relating to renting or purchasing data products for immediate, on-demand delivery qualified for covered business method review. In each case, the Board explained that the statute, which defines covered business method in terms of performing operations used in a financial product or service, requires a CBM patent to have a claim that contains a financial activity element. For support, the Board cited the recent Federal Circuit decision in Secure Axcess, in which the court first imposed a requirement for CBM patents to have a claim with a financial activity element.^[2] Evaluating the claims of U.S. Patent No. 8,955,029, the Board determined that dependent claim 49, which recites “wherein the virtual return of the stored rented digital data comprises enabling the purchase of the rented digital data,” explicitly includes the financial activity of renting and purchasing data.^[3] In relying on the dependent claim language, which had not been argued by the petitioner, the Board sidestepped the parties’ dispute over whether the independent claims’ “virtual return” feature included a financial activity element, and thus did not need to address the patent owner’s argument that the challenged claims merely recited manipulation of rented data. The Board similarly relied (at least in part) on unchallenged dependent claims in the other two cases to conclude that the claims recited a financial activity element.^[4]

Life Techs. v. Unisone.^[5]  This case involved U.S. Patent No. 6,996,538, relating to electronic inventory tracking by a third party. In a final written decision, the Board confirmed its prior ruling (entered prior to the Federal Circuit’s narrowing of CBM eligibility) that the patent qualifies for CBM review. Here, the Board focused on whether the patent meets the statutory language for a covered business method, finding that at least claim 19 meets the standard by reciting steps for collecting and providing customer access to cost information and ordering inventory based on customer information.^[6] Notably, the Board did not discuss the requirement under Secure Axcess for claiming a “financial activity element,” but nonetheless found that, for the same reasons discussed above for claim 19, the patent is directed to activities “financial in nature” — the standard endorsed by the Federal Circuit in Unwired Planet and Blue Calypso.^[7]

Walgreen v. AMS.^[8]  In an opinion covering two related CBM proceedings involving the same patent, the Board ruled that U.S. Patent No. 8,370,199 claims a covered business method. The Board concluded that claim 15 is directed to apparatus for performing operations used in the practice, administration or management of a financial product or service, using language tracking the statutory definition. Claim 15 of the ’199 patent recites a “discount vehicle” which, as explained by the Board, was described in the specification as an apparatus used in conjunction with providing discounts for retail sales. While the claim also recited tracking purchased products, and prices thereof, for individual purchasers, the Board focused its brief discussion on the specification rather than on this additional claim language. Notably, the Board used the precise statutory definition and did not rely on the “financial in nature” language that had been upheld by the Federal Circuit in Blue Calypso.

Google v. Zuili.^[9] In three related cases, the Board found that patents directed to a pay-per-click system qualified for CBM review. The patent in Zuili I recited, in the preamble of independent claim 1, a “method for identifying invalid click(s)” by a system providing links associated with merchant sites (i.e., ads), which the Board interpreted as being directed to a pay-per-click system based on the balance of the claim language as read in light of the specification. In the other two cases, the patents each recited a “method for detecting fraudulent activity in a pay-per-click system” in the preamble of independent claim 1. Claim 1 in each case also recited user clicks on the ad links, and in each case the Board ruled that the recited user clicks are themselves financial transactions because each valid click results in a fee charged to the merchant. Comparing the Zuili claims to the subject matter in Blue Calypso — a case in which the Federal Circuit found the patent to be CBM-eligible — the Board in Zuili II and Zuili III concluded that the financial nature of the Zuili invention (obligation to pay for clicks) is greater than in Blue Calypso (subsidy for forwarding ads). Accordingly, the Board determined that each of the patents is directed to a financial product or service and, hence, claims a covered business method.

Google v. Cioffi.^[10]  In a series of six related cases, the PTAB rejected arguments that three reissued patents relating to protecting against malware intrusions qualify for CBM review. The patents, which all reissued from a common base patent, described computer architecture using two processors sharing a memory space, with only one processor having access to a protected memory space. In each of the cases, petitioner argued that the respective patent qualified for CBM review because the claims covered the Internet banking embodiment described in the specification. However, the Board rejected this argument, holding that for a patent to be CBM eligible a claim must be “directed to” (and not merely cover) a financial product or service; mere discussion of an embodiment of a financial product or service in the specification is not sufficient. Since none of the claims recited elements of a financial product or service, the Board ruled that the patents do not qualify for CBM review. In two of the cases, the Board also rejected petitioner’s argument that dependent claims reciting Internet advertising rendered the ’529 patent CBM-eligible. According to the Board, reciting Internet advertising, without more, does not make the claim directed to a financial product or service, because the possibility of sale of ad space or sale of the advertised product does not render advertising a financial product or service.

Facebook v. Skky.^[11]  In this case, the PTAB found that a patent relating to a method for the delivery of audio and/or video files was not a covered business method patent.  U.S. Patent No. 9,219,810 claims a method of delivering a data file between a server and a wireless device, but does not require any financial activity as part of the delivery method, although a disclaimed dependent claim recited charging a fee. The specification was largely silent as to any financial activity, but the petitioner pointed to the description of a method of purchasing as part of downloading content. The PTAB ruled that was, at best, an optional part of the invention.^[12]

Ford v. Versata.^[13]  The PTAB ruled that U.S. Patent No. 8,805,825, which relates to combined configuration data model and the use of this model to provide configuration answers to queries, was not eligible for CBM review.^[14] The ’825 patent’s claims do not recite anything relating to selling products or services, and while the specification describes the use of price as an attribute for the model, it also described a number of non-financial attributes, along with applications to a range of non-financial industries, including manufacturing and construction.^[15]

Patents That Are Only “Incidental to” or “Complementary to” Financial Activities No Longer Qualify for CBM Review:

As these PTAB cases show, the Board is no longer finding patents eligible for CBM review if they have claims that are only “incidental to” or “complementary to” financial activity. The Board made this point expressly in denying institution in Ford v. Versata, noting that the petitioner’s arguments were based on the “incidental to” or “complementary to” language rejected in Unwired Planet. Evaluating the claims under the Federal Circuit’s narrower standard, the PTAB focused first and foremost on the claim language, which broadly and generically described a computer configuration data model but did not specify anything applicable to sales of products, financial services, or other financial applications. Accordingly, the Board ruled that the claims directed to the manipulation of generic data and were not financial in nature.^[16] While acknowledging that the challenged patent’s specification described applying the invention to, inter alia, the financial services industry, the PTAB concluded that the written description alone could not substitute for the lack of reciting financial activity in the claims themselves.^[17] This is a marked departure from prior Board cases, which in some instances relied upon the specification to conclude that a claim covered a financial activity.^[18]

Similarly, the PTAB has refused to institute CBM review in other cases even though the specification referred to financial activity — which previously may have triggered review under the “incidental to” prong. In Facebook v. Skky, the Board ruled that nothing in the specification required financial activity; although the specification described potential financial activity, such as a sale, in connection with the claimed method, the PTAB cited Unwired Planet in explaining that all patents, at some level, relate to potential sale of a good or service.^[19] And in Google v. Cioffi, the Board rejected arguments for CBM review based on an Internet banking embodiment described in the specification.

The other recent Board cases discussed above confirm that the Board is no longer applying the “incidental to” or “complementary to” prongs of its former CBM standard. Rather, the Board is reciting the precise statutory definition, or relying upon the Federal Circuit’s guidance approving the “financial in nature” or the “financial activity element” formulations.

Indeed, it is now patent owners relying on the “incidental to” language in attempting to avoid CBM review. For example, in the Dish Network cases, the patent owner argued that claims were no more than incidental or complementary to financial activity, thus lying outside the reach of CBM review under the narrower Federal Circuit standard. But the Board rejected the argument based on the specific claim language in the cases, relying on dependent claims that recited express financial activity language. Similarly, the patent owner in Google v Zuili argued that the claims were incidental to financial activity and, thus, ineligible for CBM review. Again, the Board rejected patent owner’s argument, explaining that some claims meeting the formerly overbroad “incidental to” standard may nevertheless also fall within the narrower standard as well.

Despite the new clarity of the law on CBM scope, there still appears to be some disagreement within the PTAB regarding the policy underlying it. In a concurring opinion to the PTAB’s decision in Ford, Judge Turner agreed that the ’825 patent did not qualify for CBM review under the Federal Circuit’s Unwired Planet and Secure Axcess precedents. However, the judge expressed his concern that the current standard allows for a broad claim to escape CBM review where a narrower claim that explicitly focuses on a financial activity would not – even though the broader claim would cover that financial activity as well.^[20]  Thus, accused infringers may be denied the opportunity to institute a CBM review on a patent covering eligible subject matter simply because the claims are broadly written.

Impact on Practitioners and Parties:

The Federal Circuit’s Unwired Planet and Secure Axcess decisions clearly limit the scope of CBM review, which has already impacted PTAB decisions. This narrower CBM scope will continue to have a significant impact on the CBM review program, and accompanying strategy and planning, for both petitioners and patent owners.

Accused infringers considering requesting a CBM review should critically assess the patent in question to ensure that the patent claims require a financial activity. Any petition filed should address eligibility for CBM review in detail, preferably with explicit citation to claim limitations reciting a financial activity element. If there is a plausible case that this requirement cannot be met, strong consideration should be given to other post-grant challenges. Inter partes reviews and post-grant reviews are certainly an alternative if the timing requirements are met, and the latter, like a CBM review, permits subject matter eligibility challenges under 35 U.S.C. § 101.^[21] However, Section 101 challenges are powerful, and the ability to bring such a challenge may be the deciding factor in favor of seeking CBM review in a marginal case.

Patent owners opposing the institution of a CBM review should, of course, look first to eligibility as grounds for denial and place a strong emphasis in the plain language of the claims. If the claims are even slightly less than clear in reciting a financial activity, this argument should be made and will have a considerable chance of succeeding under the current standard. This is especially true now that the Federal Circuit has diminished the import of the specification in this inquiry; a few sentences describing the sale of a product or one embodiment relating to an activity performed by a financial institution is not likely to save CBM review of claims that fall short of reciting a financial activity element. Arguing claims are no more than incidental or complementary to financial activity is a strategy that patent owners may be expected to use, to take advantage of the Federal Circuit rulings rejecting those prongs of the former CBM test employed by the PTAB.

Finally, as mentioned in Part 1, some patent owners have successfully sought to avoid CBM review by entering statutory disclaimer of claims containing specifically-recited financial terms.^[22] In such cases, the Board has treated disclaimed claims as if they never existed. Patent owners may consider, in appropriate cases, whether disclaimer could be used as a way to eliminate claims that would, if considered by the Board, likely lead to CBM review, but this involves balancing the avoidance of CBM review against the loss of potentially narrowing claims having better odds of withstanding a prior art challenge. In any event, given the comments by Federal Circuit judges in denying en banc review in Secure Axcess,^[23] the court may eventually weigh in on the effect of disclaimer on CBM review.^[24]

The Future of CBM Reviews:

The Federal Circuit has provided clarity to the definition of a covered business method and to what patents claim covered business methods.  While each case will still turn on the particular facts and the patent at issue, the Unwired Planet and Secure Axcess decisions should ultimately result in fewer CBM petitions being filed, as challengers direct their efforts against marginal patents elsewhere. Conversely, of the petitions that are filed, it is likely that the PTAB institutes review at the same, if not higher, rate as before, as petitioners are strongly incentivized to challenge only patents with claims requiring financial activities that are very likely to meet the new standard. No standard is perfect, however, but petitioners, patent owners, and the PTAB, should all benefit from less uncertainty moving forward.

_{[1]  E.g., Dish Network Corp. v. Customedia Techs.,L.L.C., CBM2017-00031, Paper 10 (PTAB July 18, 2017); the PTAB issued similar rulings in CBM2017-00019 and CBM2017-00023.}

_{[2]  Secure Axcess LLC v. PNC Bank Nat’l Ass’n, 848 F.3d 1370, 1381 (Fed. Cir. 2017), rehearing en banc denied, 859 F.3d 998 (Fed. Cir. June 6, 2017). The “financial activity element” requirement derives from the statutory definition as interpreted in prior Federal Circuit cases, and makes clear that the financial activity element must be recited in the claim itself.}

_{[3]  Dish Network, CBM2017-00031, Paper 10 at 8.}

_{[4]  Dish Network, CBM2017-00019, Paper 11 at 6-7 (dependent claim 17 reciting payment system, dependent claim 18 reciting credit card, checking or ATM account); CBM2017-00023, Paper 11 at 11 (dependent claim 10 reciting associated financial transactions).}

_{[5]  Life Techs. Corp. v. Unisone Strategic IP, Inc., CBM2016-0025, Paper 24 (PTAB June 23, 2017).}

_{[6]  Id. at 15-16.}

_{[7]  Unwired Planet LLC v. Google Inc., 841 F.3d 1376, 1380 n.5 (Fed. Cir. 2016); Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1340 (Fed. Cir. 2016).}

_{[8]  Walgreen Co. v. Advanced Marketing Sys., LLC, CBM2016-00014 & CBM2016-00015, paper 35 (PTAB May 24, 2017).}

_{[9]  Google Inc. v. Zuili, CBM2016-00008, Paper 56 (PTAB Apr. 24, 2017) (“Zuili I”); Google Inc. v. Zuili, CBM2016-00021, Paper 48 (PTAB May 5, 2017) (“Zuili II”); Google Inc. v. Zuili, CBM2016-00022, Paper 48 (PTAB May 5, 2017) (“Zuili III”).}

_{[10]  E.g., Google Inc. v. Cioffi, CBM2017-00009, Paper 10 (PTAB May 1, 2017); the PTAB issued similar rulings in related proceedings CBM2017-00010, CBM2017-00011, CBM2017-00014, CBM2017-00015, and CBM2017-00016.}

_{[11]  Facebook, Inc. v. Skky, LLC, CBM2017-00003, Paper 9 (PTAB April 12, 2017).}

_{[12]  Id. at 13-15.}

_{[13]  Ford Motor Co. v. Versata Dev. Grp., Inc., CBM2016-00100, Paper 12 (PTAB March 20, 2017).}

_{[14]  Id. at 3-5.}

_{[15]  Id. at 9-11.}

_{[16]  Ford, Paper 12 at 9-10.}

_{[17]  Id. at 10-11.}

_{[18]  B. Mudge and A. Kasnevich, “PTAB Is Inconsistent On Qualifications For CBM Review,” Law360 (August 10, 2016), available at https://www.law360.com/articles/824686/ptab-is-inconsistent-on-qualifications-for-cbm-review.}

_{[19]  Facebook, Paper 9 at 13-15 (citing Unwired Planet, 841 F.3d at 1382).}

_{[20]  Ford, Paper 12, Turner concurrence at 1-3.}

_{[21]  Post-grant reviews are only available for first-inventor-to-file patents within nine months of issuance.}

_{[22]  See, e.g., Ford, Paper 12 at 8; Facebook, Paper 9 at 15. Note that in each case the petitioner has filed a request for rehearing of the decision denying institution, arguing that the Board should not have disregarded the language in the disclaimed claims from its consideration of CBM eligibility. Decisions on rehearing are pending in each case.}

_{[23]  See Secure Axcess, 859 F.3d at 1003 n.5 (Taranto, J., concurring) (downplaying concerns) and id. at 1005 (Lourie, J., dissenting) (“Such a result ‘elevate[s] form over substance’ and allows ‘[c]lever drafting to ‘avoid PTO review under [the CBM provisions] in contravention of congressional intent.”).}

_{[24]  Patent owners evaluating new claims in prosecution should also take notice of Judge Turner’s concurrence in Ford, and consider avoiding claims that recite a financial activity element. Of course, the broader the claim the higher the risk it will be held invalid in view of the prior art, but a balance between breadth and validity exists for any patent application. If a pending application is relevant to the financial industry, writing claims slightly more broadly, or at least more generically, could result in the avoidance of a CBM review altogether.}