Federal Circuit, July 9, 2015, 2014-1194

Versata is the first appellate decision of a covered business method (CBM) patent review under the America Invents Act (AIA), and the Federal Circuit provides guidance on how such appeals and reviews will be handled.  Versata had sued SAP for patent infringement in district court.  During litigation, SAP filed a petition to the U.S. Patent and Trademark Office (USPTO), requesting a CBM review of whether the claims of U.S. Patent No. 6,553,350 (the '350 patent) were unpatentable for failing to comply with 35 U.S.C. § 101.  Versata appealed from a final written decision of the Patent Trial and Appeal Board (PTAB) holding that the challenged claims of the '350 patent were directed to patent ineligible subject matter.

The claims of the '350 patent are directed to a technique for arranging customers into a hierarchy of customer groups and products into a hierarchy of product groups, and pricing the customer and product groups.

In the decision, first, the Federal Circuit held that it may review the PTAB's final written decision in a CBM review.  More specifically, the court indicated that 35 U.S.C. § 324(e) bars review of the PTAB's determination to institute a post-grant review, but does not bar review of the PTAB's final written decision to invalidate a CBM patent.

Second, the Federal Circuit held that the '350 patent is a CBM patent.  Under AIA § 18(d)(1), a CBM patent claims a method or apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.  In this case, the court appeared to use an even broader standard and stated that "Versata's '350 patent claims methods and products for determining a price and that these claims, which are complementary to a financial activity and relate to monetary matters, are considered financial products and services."

Third, the Federal Circuit held that the '350 patent does not fall within the "technological invention" exception to be disqualified from the CBM review.  In 37 C.F.R. § 42.301(b), the USPTO defines a technological invention as one in which the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art, and solves a technical problem using a technical solution.  Even though "this definition is notable as much for what it does not say as for what it does say," the Federal Circuit ruled that "even if the invention required the use of a computer, the claim did not constitute a technological invention" because "this is not a technical solution but more akin to creating organizational management charts."

Fourth, the Federal Circuit held that in a CBM review, the PTAB may apply the USPTO's "broadest reasonable interpretation" standard for claim construction.  The Federal Circuit indicated that it already decided this issue for inter partes reviews in In re Cuozzo Speed Technologies, LLC, No. 2014-1301, 2015 U.S. App. LEXIS 11714 (Fed. Cir. July 8, 2015).  However, a narrower court standard was not ruled out.

Fifth, the Federal Circuit held that the PTAB chose the correct substantive tests (i.e., § 101) to apply in its CBM review of the '350 patent.  Versata argued that the AIA permits invalidation in a CBM review as to a "condition of patentability," which does not explicitly include § 101.  However, the Federal Circuit stated, "Versata is correct that a strict adherence to the section titles can support an argument that § 101 is not listed as a 'condition of patentability,' … However, as noted by the USPTO, both our opinions and the Supreme Court's opinions over the years have established that § 101 challenges constitute validity and patentability challenges."

Lastly, the Federal Circuit held that the PTAB correctly applied the substantive tests (i.e., § 101) in its CBM review of the '350 patent.  That is, the Federal Circuit agreed with the PTAB that the '350 patent was unpatentable over § 101 because the claims were directed to the abstract idea of determining a price, using group hierarchies, like the abstract idea of intermediated settlement in Alice, and thus fails the first step of the two-part analysis from Alice.  Regarding the second step of the two-part analysis from Alice, the Federal Circuit indicated that "none of the claims have sufficient additional limitations to transform the nature of any claim into a patent-eligible application of an abstract idea."