Since 2012, the Patent Trial & Appeal Board (PTAB) has reined in its definition of a covered business method (CBM) patent under Section 18 of the AIA. In early CBM decisions, it was enough for the patent specification to reference some incidental or complimentary financial service aspect for the PTAB to find CBM eligibility. Since those early decisions, the PTAB has recalibrated its CBM eligibility analysis. Today, the Board increasingly seeks out claim language explicitly related to financial transactions/services.
Yesterday, in Unwired Planet, LLC v. Google Inc., (here) the Federal Circuit had occasion to consider CBM eligibility in the context of one of those earlier PTAB decisions. In Unwired, the CAFC rejected the specification-based analysis, a decision that is sure to reverberate across pending CBM appeals of the same vintage now before the Federal Circuit.
In its decision, the CAFC focused the definitional scope applied by the PTAB for assessing CBM patent eligibility. In the appealed PTAB decision, the Board based CBM eligibility on “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” Using this standard, the Board determined that Unwired’s patent was eligible for CBM review because the product could help facilitate advertising targeted onto wireless devices, ultimately finding the patent unpatentable under 35 U.S.C.§ 101. On appeal, Unwired challenged whether its patent was a CBM patent, arguing that the Board erred in applying a standard that is broader than the AIA contemplated.
In the opinion by Judge Reyna, it was noted that the Board did not apply the statutory definition. Rather, the Board’s standard originated in a statement from Senator Schumer that the PTO quoted in its response to public comments concerning proposed interpretations of the statutory definition for a CBM patent. But, the Court explained that “[g]eneral policy statements, however, are not legally binding” and held that the PTO should not apply or rely upon such general statements of policy as law.
In this case, the PTO’s reliance on a policy statement impermissibly expanded the PTO’s authority beyond that granted by Congress:
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 patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.
As noted above, the broad, specification-based view of CBM eligibility is no longer as prevalent at the PTAB as it was a few years back. Still, Unwired is noteworthy as the first CAFC decision to identify outer boundaries of CBM eligibility. There are a number of CBM appeals at the CAFC that will likely follow the Unwired path to remand.