SAP Am., Inc. v. Versata Dev. Group, Inc.,

Case CBM2012-00001, Paper 70 (PTAB June 11, 2013). =CBM2012-00001_70

Section 18 of the 2011 America Invents Act (AIA) introduced post-grant review proceedings at the Patent Office for challenging the validity of business method patents. In its first decision under this new law, a panel of three judges on the Patent Trial and Appeal Board (PTAB) invalidated key claims of a patent that had been asserted successfully at trial.

Versata sued SAP in 2007 for alleged infringement of business method patent U.S. 6,553,350. The case proceeded to trial and a jury returned a verdict of validity and infringement. On appeal, the Federal Circuit affirmed the finding of infringement and a damages award of $391 million. While the appeal was pending, SAP petitioned the USPTO for a Section 18 proceeding to challenge the patent’s validity. The request was granted with respect to SAP’s §101 and §102 arguments but not its §112 arguments, and SAP subsequently dropped §102 in return for an expedited trial on its §101 issues. A hearing was held on April 17, 2013, and the USPTO issued a Final Written Decision on June 11, 2013.

The Decision first addresses the parties’ dispute regarding the applicable standard for claim construction in AIA reviews. SAP argued that claims should be reviewed under the USPTO’s broadest reasonable interpretation (“BRI”) standard and not the Phillips standard that governs in federal court. The USPTO agreed, stating that the BRI standard is used throughout the Patent Office and was formally adopted for AIA reviews in 37 C.F.R. §42.300(b). The USPTO further noted that BRI is appropriate because AIA reviews— like reissue and reexamination proceedings—permit patentees to amend claims. As the first ruling of its kind, the Decision lays out in detail the USPTO’s reasoning and statutory authority for adopting the BRI standard in AIA reviews.

Turning to the merits of the §101 challenge, the Decision explains that the ‘350 patent relates to a pricing scheme for customers and products. Traditional pricing tables with rows of customers and columns of products could be replaced with an organizational hierarchy, wherein individual customers and products could be categorized into a hierarchy of groups and, for example, pricing adjustments could be then applied to an entire group of customers or products at one time.

In view of the Supreme Court’s Benson and Mayo decisions – and the parties’ expert testimony— the USPTO rejected the ‘350 patent’s claims as reflecting an abstract idea for “determining a price using organizational and product group hierarchies.” The Decision focuses on a few key points: (1) even claims with computer limitations will be unpatentable when “the underlying process … [can] be performed via pen and paper;” (2) claim limitations requiring “general purpose hardware and programming” only reinforce that notion; and (3) “insignificant, conventional and routine steps are implicit in [an] abstract idea itself” (e.g., storing, retrieving, sorting, eliminating, determining, etc.).