In a series of cases addressing the standard for initiating a covered business method (CBM) review, both the US Court of Appeals for the Federal Circuit and the Patent Trial and Appeal Board (PTAB) reached the same conclusion, finding the patents not eligible for CBM review. Secure Axcess, LLC v. PNC Bank National Association, Case No. 16-1353 (Fed. Cir., Feb. 21, 2017) (Plager, J) (Lourie, J, dissenting); Twilio Inc. v. Telesign Corporation, Case No. CBM2016-00099 (PTAB, Feb. 27, 2017) (Arbes, APJ); Google Inc. v. Klaustech, Inc., Case No. CBM2016-00096 (PTAB, Feb, 27, 2017) (Zecher, APJ). These decisions come on the heels of the Federal Circuit’s Unwired Planet decision, where the Court found Unwired Planet’s patent to be ineligible for CBM review because the PTAB improperly used an overly broad definition of a CBM patent (IP Update, Vol. 19, No. 12).

In Secure Axcess, the patent at issue relates to computer security with a focus on authenticating a web page. The PTAB instituted CBM review of Secure Axcess’s patent, explaining that “because the patent is directed to solving problems related to providing a web site to customers of financial institutions . . . , the patent covers the ancillary activity related to a financial product or service.” The PTAB also reasoned that the patent disclosed a need by financial institutions to ensure that customers are confident that a financial institution’s web page is authentic. In its final written decision, the PTAB maintained that Secure Axcess’s patent was subject to CBM review. Secure Axcess appealed.

On appeal, the Federal Circuit reversed the PTAB, concluding that “the statutory definition of a CBM patent requires that the patent have a claim that contains . . . a financial activity element.” The Court explained that Congress intended the CBM program to be more limited in scope, and that a broad reading of the statute would allow any patent to qualify for CBM review if it claimed a method or corresponding apparatus for performing any operations that happen to be used in “the practice, administration, or management of a financial product or service.” According to the Court, to find otherwise would give the CBM program “a virtually unconstrained reach.” In this case, as part of its broader discussion of what is a “financial product or service,” the PTAB concluded that “[t]he method and apparatus claimed by the [] patent perform operations used in the practice, administration, or management of a financial product or service and are incidental to a financial activity” (emphasis in original). Citing Unwired Planet, the Court explained that the phrase “incidental to a financial activity” is not part of the statutory definition of a CBM patent. Thus, by expanding the definition, the PTAB reached beyond the question of whether the claims, as understood in light of the written description, met the statutory definition. For these reasons, the Court vacated the PTAB’s ruling and remanded the case back to the PTAB.

In dissent, Judge Lourie argued that that the claims of the patent are directed to “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” (emphasis in original). He also argued that the patent met the statutory definition for a “financial product or service” because of the discussion in the specification regarding specific applications in the management of a financial service. Judge Lourie acknowledged that the term “financial” does not appear in the patent claims, but argued that should not decide the outcome because, as a matter of patent law, claims are not required to recite uses of products.

In Telesign, the PTAB denied institution of a CBM review of a patent directed to the verification of user identity during an online registration process. The PTAB determined that the claims of the challenged patent failed to meet this definition. Citing the Federal Circuit decision in Unwired Planet, the PTAB explained that the challenged patent must have at least one claim that contains “a financial activity element” to be eligible for CBM review. In this case, the PTAB found the words “service” and “notification event,” as used in the claims, to be “generic, context-neutral terms, without any express or implicit connection to financial products or services.” Even though the PTAB agreed with the petitioner that the specification describes embodiments pertaining to finance-related services, the specification does not indicate that such embodiments are limited to finance-related activities. Rather, the specification describes the embodiments in contexts beyond those that are financial in nature. 

In Klaustech, Google filed a petition challenging claims of Klaustech’s patent directed to internet advertising with centralized control of ad content being presented at a browser. Before the patent owner’s preliminary response, the PTAB afforded the petitioner an opportunity to file a paper in view of the Federal Circuit’s decision in Unwired Planet. After considering the issues, the PTAB declined to institute CBM review, finding that the patent did not include any claim that satisfied the financial prong of the CBM patent eligibility test. The PTAB also considered Secure Axcess, but found that that case did not alter the final outcome or analysis, concluding it was consistent with Unwired Planet

The PTAB explained that the CBM patent eligibility test is focused on the claim language and requires determining whether the claims recite explicit or inherent terminology or limitations that are financial in nature. The PTAB was not persuaded by petitioner’s argument that the claims, when read in light of the specification, are directed to a CBM, explaining that the examples in the specification were permissive and did not limit the scope of the claims to being financial in nature. Although the PTAB acknowledged that internet advertising involves the sale of ad space, it concluded that the fact that a sale has occurred or may occur is not sufficient to transform a patent into a CBM-eligible patent when the challenged claims neither recite a sale nor are otherwise directed to the practice, administration or management of a financial product or service.

Practice Note: Going forward, petitioners seeking CBM review should be careful to make a showing that the challenged patent claims specifically relate to finance, since, in the wake of Unwired Planet, the PTAB is giving significant scrutiny to the “financial product or service” aspect of the CBM definition.