On February 21, in Secure Axcess, LLC v. PNC Bank Nat’l. Assoc’n, the U.S. Court of Appeals for the Federal Circuit reversed the Patent Trial and Appeal Board’s (PTAB) characterization of Axcess’s patent as a covered business method (CBM) patent, by holding that the patent is outside the definition of a CBM patent that Congress provided by statute. The court found that a patent containing claims that do not contain “a financial activity element,” but merely are incidental or complementary to a “financial activity,” will not fit the statutory definition of a CBM set forth in AIA § 18(d)(1).
The Federal Circuit’s holding in this case is largely consistent with its decision last year in Unwired Planet LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016), where the panel unanimously held that the PTAB’s evaluation of CBM eligibility based on whether the patent claimed activities merely “incidental to” or “complementary to” a financial activity was “not in accordance with law.” (Id. at 1382). However, the Federal Circuit’s holding in this case further narrows the scope of CBM patents to those claims which contain “a financial activity element.” (Secure Axcess, LLC v. PNC Bank Nat’l Ass’n et al., No. 2016-1353, 2017 WL 676601, at *9 (Fed. Cir. Feb. 21, 2017))
Further, the Federal Circuit’s decision in this case includes a strongly-worded dissent from Judge Alan Lourie, which may offer a future path to broaden the scope of patents which are available for CBM review, and for a patent owner’s choice of litigation targets to influence whether a patent is a CBM patent.
A “covered business method patent” is
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.
(AIA § 18(d)(1); 37 C.F.R. 42.301). Covered business method patents are eligible for CBM review before the PTAB, a transitional program which, unless renewed, will expire on September 16, 2020. (AIA § 18(a)(3)). CBM review can be sought based on any ground of invalidity, including not only novelty and obviousness under 35 U.S.C. §§ 102, 103, but also patentable subject matter under 35 U.S.C. § 101.
In 2014, PNC Bank et al. challenged the validity of Axcess’s 7,631,191 patent (’191 patent) in a Covered Business Method (CBM) Review before the PTAB. The ’191-patent is entitled “System and Method for Authenticating a Web Page,” and relates to general authentication technology, with a number of references to financial activities. For example, to illustrate authentication problems, the ’191 patent uses a single exemplary URL, “‘www.bigbank.com’ vs. ‘www.b[l]gbank.com’ (with an ‘l’ instead of an ‘i’).” (Secure Axcess, LLC v. PNC Bank Nat’l Ass’n et al., No. 2016-1353, 2017 WL 676601, at *2 (Fed. Cir. Feb. 21, 2017); ’191 patent at 1:31-33). The specification of the ’191 patent goes on to refer to “the bank” when describing the exemplary embodiment, and refers specifically to bank computers and merchant computers. (See Secure Axcess at *2-*3; ’191 patent at 11:17-67).
At the institution stage, the PTAB found that the ’191-patent was a CBM patent under Section 18(d)(1) of the Leahy-Smith America Invents Act (AIA). (See PNC Bank, N.A. v. Secure Axcess, LLC, CBM2014-00100, Paper 10 (PTAB September 9, 2014) (citing Pub. L. No. 112–29, 125 Stat. 284 (2011) at § 18(d)(1)). Then, the PTAB issued a Final Written Decision, rejecting Axcess’s argument that the ’191 patent was not a CBM patent, and holding that all claims of the patent were unpatentable as obvious under cited prior art. (See PNC Bank, N.A. v. Secure Axcess, LLC, CBM2014-00100, Paper 43 (PTAB September 8, 2015)). The Board reasoned that, because “[t]he ’191 patent is directed to solving problems related to providing a web site to customers of financial institutions . . . the ’191 patent covers the ancillary activity related to a financial product or service of Web site management and functionality and so, according to the legislative history of the AIA, the method and apparatus of the ’191 patent perform operations used in the administration of a financial product or service.” (Id. at 10-11). The Board further found that, the patent owner’s allegations of infringement by “approximately fifty financial institutions is a factor weighing toward the conclusion that the ’191 patent claims a method or apparatus that at least is incidental to a financial activity, even if other types of companies also practice the claimed invention.” (Id. at 11).
II. Federal Circuit Decision
Secure Axcess raised two issues on appeal: First, whether the ’191 patent is a “covered business method patent” subject to CBM review and, second, whether the PTAB’s claim constructions were unreasonable under the “broadest reasonable interpretation” standard. As an issue of first impression, Secure Axcess specifically raised whether a patent’s eligibility for CBM review should be determined based on its claim language in light of the specification, or whether the PTAB should also consider post-grant evidence such as a patent owner’s litigation history.
In its majority opinion, the Federal Circuit pointed to its prior decision in Unwired Planet, where it held that the PTAB’s decision that patents which were “incidental to” or “complementary to” a financial service were CBM patents which were “not in accordance with law.” The Federal Circuit also stated that the patent owner’s choices of litigation targets “do not necessarily define a patent as a CBM patent, nor even necessarily illuminate an understanding of the invention as claimed.” (Secure Axcess, LLC v. PNC Bank Nat’l Ass’n et al., No. 2016-1353, 2017 WL 676601, at *8 (Fed. Cir. Feb. 21, 2017)). Interpreting the statute itself, the Federal Circuit held that “the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element.” (Id.). Finding that the PTAB’s claim constructions were reasonable for the purpose of determining whether the ’191 patent was a CBM patent, the Federal Circuit reversed the PTAB’s conclusion that the ’191 patent is a CBM patent, and vacated the Board’s other determinations, including that the claims are obvious over the prior art.
However, unlike the Unwired Planet decision, where the Federal Circuit panel decided unanimously, in this case, Judge Lourie wrote a strongly-worded dissenting opinion, accusing the majority of “virtually ignor[ing] the statutory language ‘used in the practice,’” and of “clos[ing] one’s eyes to the obvious” by failing to consider the written description and the post-issuance litigation history of the patent. (Id. at *12). In his dissenting opinion, Judge Lourie agreed with the PTAB’s determination, stating that “[t]he claims of the ’191 patent are surely claims to ‘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.’” (Id. (emphasis in original)). While Judge Lourie agreed with the majority that the PTAB’s decision contained overly broad language not consistent with the CBM patent statutory definition, Judge Lourie stated that Secure Axcess’s “litigation pattern speaks volumes about what they believe their invention is ‘used’ for,” and that the ’191 patent is a CBM patent. (Id. at *11). Finally, distinguishing this case from Unwired Planet, Judge Lourie found that “the relation of this invention to the financial world is one of substantial identity compared with an incidentally-used invention like a lightbulb or ditch-digging.” (Id. at *13 (emphasis added)). III. Impact of Decision
This decision is largely consistent with the Federal Circuit’s prior decision in Unwired Planet, although the majority’s holding that “the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element” further narrows the scope of CBM patents beyond the Federal Circuit’s prior decision. (Id. at 9). This narrowing of the scope of CBM patents presents a potential boon to patent owners, who may be able to avoid section 101 challenges at the PTAB by arguing that their claims do not contain “a financial activity element.”
However, Secure Axcess may still file a request for rehearing en banc. If a request for rehearing en banc is granted, the Federal Circuit could decide to follow the dissent, holding that the ’191 patent is a CBM patent, and that litigation history is informative in determining whether a patent is a CBM patent.
IV. Practical Advice
Patent practitioners and patent owners can use this decision to further defend against the institution of CBM review at the PTAB, by arguing that their claims do not contain “a financial activity element.”
However, patent practitioners and patent owners should continue to monitor this case, particularly if a petition for rehearing en banc is granted by the Federal Circuit. Patent owners seeking to avoid CBM review of their patents should consider including non-financial examples in their patent applications, and should consider how the choice of only financial industry litigation targets may impact the interpretation of their patents.