On August 22, 2014, the PTAB issued its first Final Written Decision in a Covered Business Method (CBM) Review applying the Supreme Court’s decision in Alice Corp. v. CLS Bank (CBM2013-00014, Paper No. 33)The case is U.S. Bancorp v. Retirement Capital Access Management Company  and the decision is the first consequential Final Written Decision for a CBM since Alice Corp.  In the Final Written Decision, Administrative Patent Judge Trenton Ward addressed several important questions regarding the use of 35 U.S.C. § 101 as a ground of review in CBM reviews. 

First, the PTAB emphatically confirmed that 35 U.S.C. § 101 is a proper ground of review upon which a CBM review may be maintained, contrary to the arguments of Patent Owner and others.  Second, the PTAB identified characteristics of a business method directed towards an abstract idea.  Third, the PTAB explores the “significantly more” prong of Alice Corp. in greater detail and, in particular, the significance of claim preambles and means-plus-function claims in the “significantly more” analysis.  Fourth, the PTAB addresses and rejects an argument that Petitioners are required to provide expert testimony in support of a challenge under 35 U.S.C. § 101.

U.S. Bancorp filed CBM2013-00014 in response to a lawsuit brought by Retirement Capital due to U.S. Bancorp’s alleged infringement of U.S. Patent No. 6,625,582 (“the ‘582 patent”).  In their opening Petition, U.S. Bancorp challenged the validity of claims 1, 13, 14, 18, 30, and 31 of Retirement Capital’s ‘582 patent under 35 U.S.C. § 101.  Notably, Petitioner U.S. Bancorp raised no other grounds of invalidity against the claims of the ‘582 patent.

The ‘582 patent is directed towards, “enabling recipients of Social Security payments to convert a designated portion of future payments into currently available financial resources…” The patent explains that the beneficiary may access current capital through a funding source in exchange for payment of a predetermined portion of the beneficiary’s future retirement benefits. Paper No. 33 at 3. 

In its Patent Owner Response, Retirement Capital argued the determination of patent eligibility under 35 U.S.C. § 101 is not a condition for patentability, such as those set forth in 35 U.S.C. §§ 102–103 and therefore not a valid ground for review in CBM proceedings.  The argument, although seemingly novel and unorthodox, has been discussed in recent academic scholarship.  (See, e.g. David Hricik’s analysis of this topic).  In rejecting this argument, Judge Ward cited Federal Circuit and Supreme Court precedent and AIA legislative history, noting, “The specified purpose of the covered business method review program was to allow the Office to revisit business method patents post-Bilski and evaluate whether the patents were too abstract to be patentable under § 101.”  Paper No. 33 at 10.

Upon confirming § 101 as a condition for patentability, the PTAB turned to the first step of the “Mayo framework” - whether the challenged claims were directed towards an abstract idea.  The PTAB identified that claims 1, 13, 14, 18, 30, and 31 of the ‘582 patent are directed towards an abstract idea.  Specifically, the PTAB determined that, “the concept of advancing funds based on future retirement payments is an economic practice long prevalent in our system of commerce and squarely within the realm of abstract ideas.”  Id. at 13.  Although the PTAB did not illustrate an explicit test for identifying an abstract idea, this analysis indicates that the age and prevalence of the practice of, “advancing funds based on future retirement payments” was important to finding the challenged claims as being directed towards an abstract idea.  (However, Patent Owner’s statements at the Oral Hearing did not help their position.  The PTAB appears to have taken Patent Owner’s statement that it was, “happy to accept what [Petitioner] claim[s] is the abstract concept” as an admission that the claims are directed towards an abstract idea.) 

Turning towards the second step of the “Mayo framework”, the PTAB inquired whether the challenged claims included an “element or combination of elements that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.’” Id.  Patent Owner Retirement Capital argued that their claims included several such elements.  First, Retirement Capital argued that several claims recited the limitation that monetary benefits would be provided to beneficiaries, “without encumbering said beneficiary's right to said future retirement payments and without violating legislated proscriptions in the United States against alienation of future retirement benefits.”  The PTAB was unpersuaded, finding that this limitation, “requires only that the transaction be lawful, and, thus, only theoretical illegal methods of advancing future retirement benefits are excluded from the abstract concept” and “neither the claims themselves nor the specification provide any guidance as to how the “without encumbering” step is performed.”  Id. at 14. 

Retirement Capital next argued that the preambles of claims 1 and 18 both recited that the methods are “computerized methods”.  Finding that the preamble merely limited the claims to intended use of the claims, the PTAB found that the preambles did not meaningfully limit the claims.

In a similar manner, Retirement Capital attempted to argue that claims 1 and 18 required the use of a computer and are therefore not “directed toward purely mental processes.”  Id. at 15.  The PTAB determined that Retirement Capital was incorrect and that, “the steps of method claims 1 and 18 could be performed as a series of verbal transactions exchanging physical money or via pen and paper.”  Id. at 16.  More importantly, the PTAB determined that the limitation of a general purpose computer would not affect the patent eligibility of the claims because, “the claims amount to nothing significantly more than an instruction to apply the abstract idea of advancing funds based on future retirement payments using an unspecified, generic computer.”  Id. at 17.  Patent Owner was able to assert that “means-plus-function” claims 13 and 30 required a computer configured for electronic funds transfer.  However, such claims were similarly not patent eligible because, “the means-plus function limitations merely require “utilizing the well-known technique of electronic funds transfer.”

Finally, Retirement Capital asserted that Petitioner needed to provide, “sufficient factual evidence to support unpatentability” because “a § 101 analysis requires factual inquiries into the nature of the invention.”  Id. at 18.  The PTAB was completely unpersuaded on this point, while leaving the possibility that complex technological implementations may require such evidence.

It is worth noting that the ‘582 patent, like the patents at issue in Alice Corp., is written at a fairly broad level.  As a result, the present Final Written Decision may be simpler than later decisions involving more intricate and narrow patents.  However, its relevance in the post-Alice Corp. landscape makes it worthy of review.  Prospective Petitioners should review the analysis with care as it indicates that the PTAB is willing to aggressively use its power and the Alice Corp. decision to invalidate claims.  Patent Owners conversely should avoid admissions  that their patents are directed towards abstract ideas and carefully identify elements that show that, “the patent in practice amounts to significantly more than a patent upon” the alleged abstract idea, itself.