In Unwired Planet, LLC v. Google Inc., the Federal Circuit vacated the PTAB’s final decision in a CBM review because the PTAB had applied an overly broad standard to determine that the challenged claims were directed to a “financial product or service” subject to CBM review, and remanded the case for evaluation under the proper standard.

Google had filed a petition for CBM review of Unwired’s patent entitled “Method and System for Managing Location Information for Wireless Communications,” and in particular, claims directed to methods of limiting access to location information for wireless communication devices. According to Google, the patent is eligible for CBM review, and it notes that the specification discusses using the claimed methods to facilitate advertising, which would facilitate financial activity. On appeal, Unwired argued that the PTAB erred in instituting review, based on a standard broader than specified in the AIA to determine if the challenged patent was a CBM patent. Citing Versata, the Federal Circuit evaluated whether the challenged patent was properly subject to review as a CBM patent.

Under the AIA, CBM review is available only for a “covered business method patent,” which the AIA defines as “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). As noted by the court, the PTO rules adopted the statutory definition of CBM patents without alteration. 37 C.F.R. § 42.301(a).

In deciding whether to institute CBM review, instead of applying the statutory definition of a CBM patent, the PTAB evaluated “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” The “incidental to” or “complementary to” language the PTAB applied is not found in the statute, and instead appears in a PTO general policy statement derived from the AIA’s legislative history, in particular, comments of Senator Schumer made during Senate debate over the AIA.

The Federal Circuit determined that the PTAB erred in relying on legislative history, which cannot supplant the statutory definition, and also by relying on the comments of a single senator, where the legislative history also includes statements of other senators, which indicate that there was a clear conflict about the scope of patents subject to CBM review. The court determined that the PTAB’s application of the “incidental to” and “complementary to” language from the policy statement improperly broadened the proper scope of patents subject to CBM review:

The Board’s application of the “incidental to” and “complementary to” language from the PTO policy statement instead of the statutory definition renders superfluous the limits Congress placed on the definition of a CBM patent. CBM patents are limited to those with claims that are directed to methods and apparatuses of particular types and with particular uses “in the practice, administration, or management of a financial product or service.” AIA § 18(d).

The court noted that the PTAB’s incorrect, broad language could qualify as eligible for CBM review virtually any patent, all of which “at some level, relate to a potential sale of a good or service.” Accordingly, the court remanded the case for application of the proper standard by the PTAB to determine whether the patent is eligible for CBM review.

As we suggested earlier, the court’s decision rejecting the PTAB’s broad “incidental to” and “complementary to” language may significantly limit the number of patents subject to CBM review.