The America Invents Act (“AIA”) enacted two powerful post-grant review tools for accused patent infringers: inter partes review (“IPR”) and covered business method (“CBM”) review. These post-grant proceedings have crippled many patent litigation assertions by invalidating the asserted patent(s) at the Patent Trial and Appeal Board (“PTAB”).1 Accused infringers face a lower burden to prove invalidity at the PTAB in front of highly trained technical examiners that can scrutinize the patents and the prior art.

Statistically, a patent owner has little likelihood of escaping a post-grant review with all claims intact.2 As such, patent owners often attempt to sidestep the substantive challenges in these proceedings in favor of procedural ones, such as the decision to institute a post-grant review. The Federal Circuit recently concluded that such a procedural determination is non-appealable.3 For example, one well-known procedural strategy concerns attacking the identification of the real party-in-interest for the request for post-grant review.4 If the PTAB agrees that a petitioner failed to identify all of the statutorily mandated real parties-in-interest, the petition is found defective, and trial is not instituted.5

A lesser known procedural strategy unique to CBM review exists for patent owners that have asserted their patent in district court litigation. CBM review is only available for claims that are directed to “a method or corresponding apparatus for performing data processing or other operation used in the practice, administration, or management of a financial product or service. . . .”6By disclaiming a subset of the asserted claims that potentially provide the basis for instituting the CBM review, a patent owner could eliminate the basis for instituting a CBM review, stopping the post-grant review process before it even starts.

PTAB’s Consideration of Disclaimers

The PTAB nearly addressed the use of such a strategy in a CBM review requested by in its petition challenging United States Patent Number 8,484,111 (“the ’111 Patent”) owned by Applications In Internet Time.7The petitioner challenged all claims of the ’111 Patent under anticipation and obviousness grounds and additionally challenged claims 1-12 under 35 U.S.C. § 101 for failing to meet the statutory standard for patentability.8 The petitioner argued that claims 1-12 in particular concerned “a system with a graphical user interface that (1) monitors an information source and (2) updates other, stored information in response to changes observed or otherwise detected in that information source.”9 These limitations concerned the abstract idea of change management, and the petitioner reasoned that the patent would pre-empt use of change management “in all fields, and would effectively grant a monopoly over an abstract idea.”10 Petitioner relied on two passages in the specification to show that the ’111 Patent concerned a financial product or service.11 The petitioner did not challenge independent claim 13 and its dependents on Section 101 grounds in the CBM review, but did challenge those claims on anticipation and obviousness grounds.12

Prior to filing its preliminary response, the patent owner disavowed claims 1-12 of the ’111 Patent by filing a statutory disclaimer.13 In its preliminary response, patent owner reasoned that the CBM should not be instituted because the remaining patent claims were not subject to CBM review.14 The patent owner argued that under 35 U.S.C. § 253, a disclaimer under 37 C.F.R. 1.321 operates “as part of the original patent,” and as such, the disclaimer must be treated as if the ’111 Patent never had claims 1-12.15 Without claims 1-12, patent owner reasoned that the petition would fail as a matter of law because no claims remain that could be considered under the CBM standard.16

The PTAB accepted the disclaimer for claims 1-12 and ruled that “no covered business method patent review will be instituted for claims 1-12.”17 As to the remaining claims, the PTAB denied the petition and found that the ’111 Patent is not a CBM patent pursuant to the definition in section 18(d)(1) of the AIA.18The PTAB ultimately based the decision on petitioner’s failure to explain how any of the remaining claims were directed to a financial activity.19

Based on the legislative intent and history for section 18(d)(1) of the AIA, the PTAB found that to qualify for CBM review, a patent must claim activities that are financial in nature.20 Thus, in determining whether a patent qualifies as a covered business method, the PTAB focuses on the claims.21 The patent owner argued that because the only claims petitioner cited as a basis for initiating CBM review had been disclaimed, the petition should be dismissed.22The PTAB rejected this argument and found that the petitioner had generally alleged that the subject matter of the patent and the claims as a whole qualified it as a CBM patent.23

The PTAB next evaluated whether the remaining claims of the ’111 Patent were directed to a financial product or service as required to initiate a CBM review.24Focusing on the remaining independent claim 13, the PTAB concluded that the references to “finance” in the specification constituted examples of business areas rather than being directed to the financial field overall.25 Nothing in claim 13 triggered activity directed to a financial product or service. Thus, the PTAB concluded that the petitioner failed to address how the lone remaining independent claim is directed to a CBM, which is the focus of the inquiry.26 The PTAB’s decision to not institute the petition focused on the petitioner’s failure to explain how the remaining claims were directed to a financial activity. Though the PTAB did not explicitly decide the issue of whether disclaimed claims may prevent a CBM from being declared, the ruling in effect led to the denial of the CBM by preventing the PTAB from considering the disclaimed claims. Had claim 1 not been disclaimed, or petitioner included an argument as to why the remaining claim 13 qualified as a covered business method, the result might have been different.

Practical Implications for CBM Review

For an accused infringer, CBM reviews present several advantages over aninter partes review. First, unlike an inter partes review, an accused infringer can file a CBM outside the one year limitation from service of a patent infringement lawsuit.27 Second, CBM review includes unique estoppel provisions that are less extensive that post-grant review. Specifically, estoppel under CBM review extends only to grounds actually asserted but not to grounds that reasonably could have been asserted.28 Third, and perhaps most significant, is the ability to challenge the patent’s validity under Section 101, a test which the Supreme Court expanded in its recent decision in Alice Corporation v. CLS Bank International.29

Despite these advantages, petitioners should be wary that patent owners can disclaim certain claims that triggered the CBM review as a strategy to avoid having a CBM review declared at all. For a patent with two sets of independent claims when only one set triggers a § 101 challenge, the petitioner should consider how the remaining claims may fall under CBM review. This may prevent a patent owner from strategically dropping certain claims in CBM review while maintaining other claims in the district court litigation that may no longer be subject to post-grant review. Moreover, such a decision to not institute a CBM review can terminate a proceeding with no right to appeal.30 If an accused infringer chooses the CBM route and the CBM is not instituted, the one year bar may run before the accused infringer can re-file the petition as an inter partesreview, leaving the accused infringer with no recourse at the PTAB to pursue an invalidity defense. Thus, an accused infringer should consider the strategic implications of such a possibility in evaluating the type of post-grant review to institute, including whether the added expense of filing a concurrent inter partesreview is justified in view of the litigation assertions.