I wrote an article last year in The Tampa Tribune entitled "The Death of American Innovation?" discussing the impact of the America Invents Act (passed in 2011) on the validity and enforceability of patents in our country. One of the tools put in place through that Act is the ability to challenge (and eventually kill) patents that are purportedly directed to "Covered Business Methods."

The Act defined "Covered Business Methods" as methods "for performing data processing or other operations used in the practice, administration, or management of a financial product or service." As I mentioned in the article, to challenge a patent using this system, a challenger must pay the Patent Office a significant filing fee (currently $30,000).

When asked to review a patent under this "Covered Business Method" review system, the Patent Trial and Appeal Board (PTAB) was first tasked with determining whether or not a patent was directed to a "Covered Business Method." Instead of relying just on the language above, the PTAB instead focused on whether the claimed invention was directed to activities "that are financial in nature, incidental to a financial activity, or complementary to a financial activity." Such a standard is significantly broader, and obviously swallowed up significantly more patents than just those directed only to data processing or the like in the practice, administration, or management of a financial product itself.

Yesterday, the Federal Circuit (hopefully) put an end to this overreaching by the PTAB. Using an example I've used myself, the Federal Circuit explained the fallacy of such overbreadth:

The patent for a novel lightbulb that is found to work particularly well in bank vault 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. Take, for example, a patent for an apparatus for digging ditches. Does the sale of the dirt that results from use of the ditch digger render the patent a CBM patent? No, because the claims of the ditch-digging method or apparatus are not directed to "performing data processing or other operations" or "used in the practice, administration, or management of a financial product or service," as required b y the statute.

The PTAB's reliance on its "incidental to" or "complementary to" a financial activity standard was not proper under the law, and is no more. This is certainly a victory to those patent owners facing CBM Petitions and appealing recent adverse rulings from the PTAB.