A Court Divided: Judges File Widely Varying Opinions on CBM Review Eligibility
The standards used by the Patent Trial and Appeal Board (PTAB) for determining what qualifies as a covered business method (CBM) patent under AIA § 18(d)(1) and 37 CFR 42.301(a) have not always been consistent. Even though the US Court of Appeals for the Federal Circuit appears to have settled on a uniform standard as set forth in the panel decisions of Unwired Planet and Secure Axcess, recently filed concurrences and dissents in a per curium denial of an en banc rehearing show that the Federal Circuit remains sharply divided on the scope of a patent’s eligibility for CBM review. Secure Axcess v. PNC Nat’l Assoc., Case No. 16-1353 (Fed. Cir., June 6, 2017) (denying en banc review) (per curium) (Taranto, J, concurring, joined by Moore, J) (O’Malley, J, concurring) (Reyna, J, concurring) (Lourie, J, dissenting, joined by Prost, CJ; Dyk, J; Wallach, J; and Hughes, J) (Dyk, J, dissenting, joined by Wallach, J, and Hughes, J) (Plager, J, concurring).
Judge Plager wrote the Federal Circuit’s original panel decision in Secure Axcess, holding that “the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element,” and reiterating Unwired Planet’s holding that qualifying claims could not be merely “incidental to” or “complementary to” a financial activity. Judge Plager’s concurring opinion in support of denial of en banc review reiterated his position that in view of the PTAB’s constructions, the claims were not directed to the use of a financial product and therefore fell outside the statutory definition of a CBM. He characterized Judge Lourie’s proposed test as one not grounded in claim construction. Judges O’Malley and Reyna wrote separately to concur with Judge Plager’s reasoning.
Judge Taranto also concurred in Judge Plager’s conclusion, as he had done in the original panel decision. This time, he wrote a separate opinion to highlight that the panel opinion “soundly resolves an ambiguity in the statutory language and is consistent with every one of our precedents and with a number of Patent Trial and Appeal Board decisions dating to when the program began.” He further stressed the temporary nature of the CBM review program and, given that it was set to expire in three years and that this issue touched on only a limited number of patents, emphasized that it would be a waste of judicial resources to continue to debate the issue en banc, especially where any ambiguity had been correctly, consistently and conclusively resolved.
Judge Lourie disagreed, writing a dissent with which Judges Prost, Dyk, Wallach and Hughes joined. Judge Lourie had previously dissented in the Secure Axcess panel decision, and he reiterated here his position that while “the subject matter of the claim must have a particular relation to a financial product or service, and not merely be an incidentally-used invention like a light-bulb or ditch-digging,” he found Judge Plager’s interpretation to be too narrow. Judge Lourie suggested a “common sense” approach to interpreting whether the written description supports an understanding that the claims of a patent are directed to uses in the practice of financial products or services.
Judge Dyk, joined by Judge Lourie, wrote separately to address a different topic. He would have held that the entire issue of whether a patent qualifies as a CBM is limited to the institution decision and therefore is not appealable. He encouraged overturning the Court’s prior decisions—Versata and its progeny—as inconsistent with the Supreme Court of the United States’ more recent decision in Cuozzo. Versata explains that whether a patent qualifies for CBM review is inextricably bound up with the final determination; Judge Dyk believes that this position conflicts with Cuozzo because that decision interpreted an almost identically worded statute directed to appeals from inter partes reviews.
Practice Note: Although the judges’ opinions reveal a deeply divided Federal Circuit, one message is clear: the judges appear to agree that if Congress chooses to extend the transitional program for CBM review, it would be wise to draft new legislation resolving the ambiguity concerning eligibility.