Salesforce.com, Inc. v. Applications in Internet Time LLC; JP Morgan Chase & Co. et al. v. Intellectual Ventures II LLC

Narrowing the application of covered business method (CBM) patent review, in two recent cases, the Patent Trial and Appeal Board (PTAB or Board) concluded that patents whose claims may apply to industries other than the financial sector are not covered business methods for purposes of 37 CFR § 42.30.  Salesforce.com, Inc. v. Applications in Internet Time LLC, Case No. CBM2014-00168 (PTAB, Feb. 2, 2015) (Pettigrew, APJ.); JP Morgan Chase & Co. et al. v. Intellectual Ventures II LLC, Case No. CBM2014-00160 (PTAB, Jan. 29, 2015) (Busch, APJ.). 

Under AIA § 18(d)(1), a covered business method patent must include at least one claim for “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.”  Based on the legislative history, this definition encompasses patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.”

The two patents at issue in these decisions are applicable to financial and other business sectors. AIT’s patent is directed to a system for managing changes in regulatory and non-regulatory requirements for business activities at an industrial or commercial facility.  The changes are managed through the use of databases.  Intellectual Ventures’ patent is directed to secure communications.  Specifically, it discloses data encryption achieved by distributing public and private keys and certificates between connected devices.

In both cases, the PTAB concluded that the underlying patent did not qualify as a CBM patent.  CBM patents are those that claim activities that are financial in nature or otherwise are incidental or complementary to a financial activity.  Most important to the Board’s analysis was the claim scope.  In each case, although the claimed subject matter could be applied to financial activities, it was not limited to financial activities.  For example, in AIT’s patent the claims were directed to technology common in business environments across sectors and were not tied to financial services.  Similarly, the Intellectual Ventures’ patent was directed to secure communications that can cover various types of transactions besides financial transactions.  Thus, the PTAB denied institution on the requests for CBM review in both instances.

In doing so, the PTAB also rejected the petitioners’ other arguments premised on the patent specifications, prosecution histories and litigation.  Although the patent specifications may have disclosed financial activity applications, neither petitioner established that any reference to financial services in the specification limited the scope of the claims.  The PTAB also assigned little weight to arguments that the examiner, during prosecution, searched for prior art in the financial services sector.  Similarly, the PTAB found unpersuasive the argument that the class the PTO assigned to a patent demonstrates that the claims are directed to a CBM.  Finally, the PTAB summarily rejected arguments premised on the financial nature of the products the patent owners had accused of infringement.

Specifically, in the case involving the AIT patent, based on its abstract, the Board noted that the patent is directed to an “integrated system for managing changes in regulatory and non-regulatory requirements for business activities at an industrial or commercial facility.”  The patent discloses the management of four layers of information about a program that is constantly changing.  The claims of the patent recite a server computer with these four layers, which interact to distribute information and generate functionality to an application run on a client computer when the client computer is connected to the server computer.

The petitioner argued that both the patent classification and the patent specification characterize the invention as usable in “banking, financial and securities activities.”  However, the PTAB stated that the petitioner’s argument didn’t address how the classification or specification relates to a “financial product or service” or an activity that is “financial in nature, incidental to a financial activity or complementary to a financial activity.”  Moreover, the PTAB indicated that “Petitioner’s argument fails to address the language of the claims, which is the focus of our inquiry.”  Thus, the PTAB found that none of the claims [of the AIT patent] expressly recited a method or apparatus “for performing data processing or other operations used in the practice, administration, or management of a financial product or service,” and denied institution of the CBM patent review because the claims have “no particular relat[ionship] to the financial services sector.”

Practice Note:  When seeking CBM patent review, focus the analysis on the claims themselves and why their scope is limited to financial products or services.