The US Court of Appeals for the Federal Circuit upheld the broad applicability of the financial prong of the eligibility test for covered business method (CBM) review, agreeing with the Patent Trial and Appeal Board’s (PTAB’s or Board’s) decision to institute a CBM patent review of peer-to-peer advertising system patents. Blue Calypso, LLC v. Groupon, Inc., Case Nos. 2015-1391; -1393; -1394; -1396; -1397; -1398; -1399; -1401 (Fed. Cir., Mar. 1, 2016) (Chen, J) (Schall, J, dissenting in past).
Petitioner Groupon filed for CBM review of five patents owned by Blue Calypso pursuant to § 18(a) of the America Invents Act (AIA). The patents all relate to a peer-to-peer advertising system that uses mobile communication devices. A “subsidy program” is described to induce customers (subscribers) to increase exposure of an advertisement. After examining the claims, the Board concluded that they met the statutory definition of a CBM patent, granted the petition and instituted review.
Blue Calypso argued that the US Patent and Trademark Office and the Board exceeded their statutory authority by interpreting the statutory CBM definition in an overly broad way that improperly captured the Blue Calypso patents. CBM review is limited to patents “that claim 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.” Blue Calypso asserted that its patents are not CBM patents because they relate to a method for managing and distributing advertising content, which is not “a financial product or service” that traditionally originated in the financial sector.
The Board declined to limit the application of CBM review to patent claims tied to the financial sector, consistent with recent Federal Circuit case law (Versata II, IP Update, Vol. 18, No. 8, and SightSound, IP Update, Vol. 19, No. 1). The Board considered the legislative history of the AIA, which explained that the definition of a CBM patent encompasses patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” The Board construed the claim term “subsidy” as “financial assistance given by one to another,” and, significantly, Blue Calypso did not challenge that interpretation. Based on this interpretation, the Board concluded that the claims are directed to methods in which advertisers financially induce “subscribers” to assist with their advertising efforts, and thus are financial in nature and subject to CBM review.
The Federal Circuit agreed with the Board, finding that the claims at issue have an express financial component in the form of subsidy, or financial inducement that encourages consumers to participate in the distribution of advertisements.
Blue Calypso alternatively contended that the challenged claims fall within the technological invention exception for CBM review, because the claims are computer-based and contemplate hardware, software, a network and communication devices. The Federal Circuit looked to the applicable Board rules and practice guide to determine whether a patent claims a technological invention, considering whether “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.” Citing Alice, the Court rejected the argument that merely reciting the use of a computer would satisfy the technological invention exception, noting that “the presence of a general purpose computer to facilitate operations through uninventive steps does not change the fundamental character of an invention.” On this issue, the Court found that the elements of the Blue Calypso patents are nothing more than general computer system components used to carry out the claimed process of incentivizing consumers to forward advertisement campaigns to their peers. “Blue Calypso has not pointed to any technological aspect in the claims that rises above the general and conventional.”
Accordingly, the Federal Circuit concluded that the Board acted within its authority in conducting CBM review of the challenged claims of the Blue Calypso patents.
Judge Schall dissented on an issue of validity unrelated to the Board’s CBM jurisdiction.
Practice Note: Also see this issue’s article on the Board’s decision in Square, Inc. v. Protegrity Corp, IP Update, this issue.