On June 11, 2013, the Patent and Trial Appeal Board (“PTAB”) issued its first ever Final Written Decision in a post grant review proceeding. In an expedited trial, after oral arguments, the PTAB found that the claims of U.S. Pat. No. 6,553,350 challenged in a covered business method patent review are invalid under 35 U.S.C. § 101. See CBM2012-00001, Paper 70 (June 11, 2013).

Claim Construction Standard – Broadest Reasonable Interpretation

The Court first emphasized that in patent office proceedings, claims should be given their “broadest reasonable interpretation.” Citing a 1906 decision, the PTAB stated that “for at least a century,” when claims are evaluated at the patent office, in both pre-grant and post-grant review proceedings, they have always been given their broadest reasonable interpretation. The Court examined the legislative history of the America Invents Act and the Patent Office’s subsequent rule-making and concluded that the “broadest reasonable interpretation” standard continues to apply to inter partes review and claimed business method challenges:

With the passage of the AIA, Congress sought to provide a viable alternative to challenging patents in district court litigation, and therefore, replaced inter partes reexamination with new adjudicative review proceedings. As part of this transformation, Congress bestowed new rulemaking authority on the Office . . .. [T]he use of the broadest reasonable interpretation standard encourages clarity in claim language, which serves the important public notice function. . . . Accordingly, we . . . hold that the broadest reasonable interpretation standard is the one correct standard for post grant reviews.

See id. at 13, 17, 19.

Claim Construction – Rejects District Court Claim Interpretation

After discussing the claim construction standard, the PTAB rejected an earlier claim construction proffered by a District Court in a related litigation, and instead submitted its own:

We have reviewed [Patent Owner’s] contentions regarding the need to adopt the district court’s claim construction, but find them [] unavailing. For example, [Patent Owner] contends that stare decisis requires the Board to apply the district court’s claim construction. We disagree as appeals from this proceeding are exclusively to the Federal Circuit rather than to district courts.

See id. at 18 (internal citations omitted).

Section 101 Subject Matter Eligibility – Claims Found Abstract and Invalid

The PTAB began its analysis with a review of the recent § 101 Supreme Court opinions, including Mayo Collaboration Servs. v. Prometheus Labs, Inc. and Bilski v. Kappos. See 132 S. Ct. 1289, 1294 (2012); 130 S. Ct. 3218 (2010).¹ The PTAB stated that a claim reciting an “abstract idea” is invalid under § 101 unless it recites “significantly more.” CBM2012-00001, Paper 70 at 25-26. However, adding “additional steps that merely reflect routine, conventional activity of those who work in the field” cannot overcome a § 101 rejection. Id.

Agreeing with the petitioner, the Court found that using organizational hierarchies to determine a price is an abstract idea “as it represents a ‘disembodied concept,’ a basic building block of human ingenuity.” Id. at 29. The PTAB further noted that during cross-examination of the Patent Owner’s expert, the expert conceded “that the process steps [] could be performed by pen and paper.” Id. at 29.

Looking to other parts of the claim, the Court found that the claims failed to recite anything more than an abstract idea. Even if the abstract idea is used within a computer to gain a real marketplace improvement “the additional ‘specific’ steps that are appended to the abstract idea [fail to] provide meaningful limitations.” Id. at 33.

Accordingly, the PTAB ordered the challenged claims of U.S. Pat. No. 6,553,350 canceled as unpatentable under 35 U.S.C. § 101.