Bloomberg Finance LP v. Quest Licensing Corporation; Apple Inc. v. Smartflash LLC; Ally Bank v. Secure Axcess, LLC

In four orders addressing the requirements for instituting a covered business method (CBM) review, the U.S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB)) found the “financial product or service” requirement easily met, while more strictly examining the “technological inventions” exception. Bloomberg Finance LP v. Quest Licensing Corporation, Case No. CBM2015-00205 (PTAB, Apr. 7, 2015) (Giannetti, APJ); Apple Inc. v. Smartflash LLC, Case No. CBM2015-00015 (PTAB, Apr. 10, 2015) (Bisk, APJ); Apple Inc. v. Smartflash LLC, Case No. CBM2015-00009 (PTAB, Apr. 13, 2015) (Clements, APJ); Ally Bank v. Secure Axcess, LLC, Case No. CBM2015-00005 (PTAB, Mar. 27, 2015) (Benoit, APJ).

In order to qualify for CBM review, a petitioner must not only establish that a challenged claim is directed to a “financial product or service” under § 18(d)(1) of the AIA, but also that notwithstanding the financial aspects of the claimed invention, the claim as a whole does not meet the “technological exception,” i.e., does not address a technological problem and provide a technological solution.

In the Apple cases, the petitioner, Apple, sought to institute a CBM patent review of two patents directed to “a portable data carrier,” as well as corresponding methods and computer programs. The patent owner argued that both petitions should be rejected because the challenged patents were not directed to “financial product[s] or service[s]” and moreover fall within the exclusion for “technological inventions.”

The patent owner argued that the “financial product or service” requirement should be read narrowly as covering only technology limited specifically to the financial or banking industry. The PTAB, noting that the statutory language controls, explained that the phrase “financial product or service” simply 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 explained that “[t]he AIA does not include as a prerequisite for covered business method patent review, a ‘nexus’ to a ‘financial business.’” Applying these principles to the patents-at-issue, the PTAB concluded that “[e]lectronic transfer of money is a financial activity, and providing for such a transfer amounts to a financial service.”

Turning to the “technological inventions” exception, the PTAB concluded that each of the challenged claims “as a whole does not recite a technological feature that is novel and unobvious over the prior art,” because the specifications disclose that the system “may be one that is already in use or otherwise commercially available” and indicate that claimed elements “were known.” For these reasons, the patents were found to be eligible for CBM patent review.

In the Ally Bank case (as in the Apple cases), the patent owner argued that the challenged patent was not a CBM patent “because (1) the claimed method and apparatus can be used by a business generally, and (2) the claim language is devoid of any financial or monetary terms.” The PTAB disagreed, explaining that the written description of the patent “discloses a need by financial institutions to ensure customers are confident that the financial institution’s web page is authentic” and that “alternative embodiments of the invention are disclosed as being used by financial institutions and used in commerce.” The PTAB also factored in the patent owner’s patent infringement lawsuits against approximately 50 financial institutions to find that the patent “claims a method or apparatus that at least is incidental to a financial activity.” On the technological exception prong, just as it did in the Apple cases, the PTAB found that “the technological features of the claimed steps are directed to using known technologies,” and therefore the exception did not apply. Thus, the PTAB found the patent to be eligible for a CBM patent review.

In Bloomberg, the patent owner did not dispute the petitioner’s contention that the specification and several claims “expressly reflect the financial aspect of the invention.” Instead, the patent owner focused on the technological inventions exclusion, explaining how the claims “address the existing problems and combine software and hardware to change the fundamental operation of data delivery systems.” The PTAB agreed, finding that the petitioner “has failed to assess the claims as a whole as required by 37 C.F.R. § 42.301(b), and has instead focused on certain individual elements.” Unlike in the Apple and Ally Bank cases, the PTAB here found that the “petitioner failed to carry its burden to establish standing by showing that the patent is not directed to a technological invention.” Thus, the PTAB found the challenged patent to be ineligible for a CBM patent review.

Practice Note: The “financial product or service” requirement for a CBM review is not limited to products or service of the financial services industry, but may also include patents claiming activities that are “financial in nature” or “incidental to a financial activity.” On the other hand, even claims that “expressly reflect the financial aspect of the invention” may not qualify for CBM review if the claims as a whole are shown to meet the statutory technological invention exclusion.