Samsung Electronics v. Smartflash LLC; Motorola Mobility LLC v. Intellectual Ventures I LLC

Addressing the requirements for instituting a covered business method (CBM) review in three decisions, the U.S. Patent and Trademark Office (PTO) Patent Trial and Appeal Board (PTAB or Board) explained that the “financial product or service” requirement will be interpreted broadly, while the “technological inventions” exception will be applied narrowly. Samsung Electronics v. Smartflash LLC, Case No. CBM2014-00199 (PTAB, March 30, 2015) (Bisk, APJ.); Samsung Electronics v. Smartflash LLC, Case No. CBM2014-00200 (PTAB, March 30, 2015) (Anderson, APJ); Motorola Mobility LLC v. Intellectual Ventures I LLC, Case No. CBM2015-00005 (PTAB, Mar. 27, 2015) (Kokoski, APJ.).

In the Samsung cases, the petitioner Samsung sought to institute a CBM patent review of two patents directed to “a portable data carrier for storing and paying for data and to computer systems for providing access to data to be stored,” as well as corresponding methods and computer programs.  The patent owner argued that both petitions should be rejected because the challenged patents were not directed to “financial product[s] or service[s]” and  fall within the AIA exclusion for “technological inventions.”

With respect to the “financial product[s] or service[s]” requirement, the patent owner argued that the “financial product or service” requirement should be read narrowly as covering only technology limited to the financial industry.  According to the patent owner, the challenged patents were not financial in nature because they “omit […] the specifics of how payment is made.”  The PTAB disagreed.  Under the AIA, a CBM proceeding may be instituted with respect to a patent that “claims 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.”  The PTAB explained that “[t]he AIA does not include as a prerequisite for covered business method patent review, a ‘nexus’ to a ‘financial business.’”  Further, the Board explained that “the legislative history indicates that the phrase ‘financial product or service’ is not limited to the products or services of the ‘financial services industry’ and is to be interpreted broadly.”  Applying these principles to the patents-at-issue, the PTAB concluded that “payment validation is a financial activity, and conditioning data access based on payment validation amounts to a financial service.”

The patent owner also argued that the challenged claims fell under the exclusion for “technological inventions.”   According to the patent owner, both patents contained claims with at least one novel and unobvious technological feature, and that those claimed features solve the technological problem of writing data and an access rule from a data supplier into a data carrier.  The PTAB disagreed, finding that the challenged claims were “merely the recitation of a combination of known technologies,” which indicates that they are not a technological invention.  And, according to the PTAB, the problem being solved—data piracy—was a business problem.  For these reasons, the patents were found to be eligible for CBM patent review.

In Motorola, the patent owner raised similar arguments to those in the above Samsung cases, asserting that its patent was not directed to “financial product[s] or service[s],” and should be subject to the exclusion for “technological inventions.”  With respect to the first argument, the patent owner argued that “Congress did not intend the CBM statute to cover patents that claim subject matter that is generally applicable to many sectors including the financial services sector.”  The Board however disagreed, explaining that the challenged patent meets the broad CBM standard because the specification “contemplates the use of the claimed methods in operations that are at least incidental or complementary to the practice, administration, or management of a financial product or service.”

As for the patent owner’s “technological inventions” exception argument, the Board considered “(1) whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and (2) solves a technical problem using a technical solution.”  As in the Samsung cases, the Board here found that “the technological features of the claimed steps [were] directed to using known technologies.”  As such, the PTAB concluded “that the claimed subject matter, as a whole, does not recite a technological feature that is novel and unobvious over the prior art, [therefore] the patent is not directed to a technological invention.”  Accordingly, the PTAB found the patent to be eligible for a CBM patent review.

Practice Note:  The “financial product or service” requirement for a CBM patent review is not limited to products or service of the financial services industry but may also encompass patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.”