To qualify for a Covered Business Method (“CBM”) review proceeding, a patent must “claim[] a method or corresponding apparatus...used in the practice, administration, or management of a financial product or service...”1 The Patent Trial and Appeal Board (“PTAB”) has broadly interpreted this provision to include patents that claim activities “incidental” or “complementary” to a commercial transaction,2 an interpretation at least partially supported by the Federal Circuit in Versata Development Group v. SAP America, Inc.3 Despite the incredible breadth of patents potentially implicated by that interpretation, recent PTAB decisions further delineate an outer boundary that is instructive in the context of both prosecution and litigation.

“Financial Product or Service” in CBM Review

The PTAB determines whether a patent meets the “financial product or service” provision “based on what the patent claims.”4 Many PTAB decisions implementing CBM review did so at least partially based on claim limitations and terms that were generally financial/commercial in nature, e.g., “cost information”/“ordering...inventory”5 and “payment data.”6 The analysis goes beyond the claim language, however, and can be colored by the supporting description. For instance, in one decision, the PTAB found a patent met the “financial product or service” provision when the claims of the patent did not include financial or commercial terms, but the specification described the invention within the context of banking transactions.7

In early decisions the PTAB rarely disqualified patents from CBM review for failure to satisfy the “financial product or service” requirement. Recent decisions, however, demonstrate that the provision has bite and can be used to exclude patents from CBM review in certain instances.

Common Technology with “No Particular Relation to the Financial Services Sector”

In Fedex Corp. v. Ronald A. Katz Tech. Licensing, L.P.,8 the petitioner filed a petition seeking CBM review of claims 11 and 18 of U.S. Patent No. 6,292,547 patent (“‘547 Patent”). The ‘547 Patent generally describes an automated operator system that interfaces with callers, gathers and stores information related to the callers, and performs statistical processes to identify a subset of the callers.9 Claim 11 covers these concepts by reciting an “interface structure,” a “record testing structure,” an “analysis structure,” and a “storage structure for storing certain of said data provided by said individual callers including item data for ordering particular items.10 The petition focused primarily on the “item data for ordering particular items” limitation from claim 11, and a supporting section of the specification that describes the process being used in a “mail-order operation.”11 This “mail-order operation,” the petitioner argued, was the “financial system[]” to which claim 11 was directed.12

The PTAB was unpersuaded by the petitioner’s arguments, and denied the CBM request for failure to fulfill the “financial product or service” provision. Specifically, the PTAB found that the “item data for ordering” limitation in claim 11 does not recite the actual step of ordering an item, and the “mail-order operation” described in the specification “can be used for inventory control” that does not “necessarily involve[] ‘movements of money.’”13 The PTAB further noted the ‘547 Patent discusses “various types of transactions separate from financial transactions,” such as identifying a subset of people susceptible to a particular disease.14

In addition to the fact-specific findings, the PTAB made a broad statement regarding the claims of the ’547 Patent that instructs the application of the “financial product or service” provision-- “the claims on their face are directed to technology ‘common in business environments across sectors’ with ‘no particular relation to the financial services sector’ which the legislative history indicates is outside the scope of covered business method patent review.”15Thus, the PTAB’s statutory interpretation does not encompass patents with broad commercial applicability beyond, and not specifically tied to, the financial industry.

No Stated Relationship to Financial Products or Services Within the Claims or Specification

In Fairchild Semiconductor Corp. v. In-Depth Tests LLC,16 the petitioner sought review of U.S. Patent No. 6,792,373 (“‘373 Patent”), which is directed to a method for testing “semiconductor devices on a wafer, circuit boards, packaged devices, or other electrical or optical systems.”17 The claimed test process identifies outliers in the test data that can be analyzed "to identify various potential problems and/or improvements in the test and manufacturing processes.”18 The claims and specification of the ‘373 Patent do not discuss financial activities.

Without any explicit claim or specification language to rely on for the financial product or service requirement, the petitioner focused on the inherent commercial nature of identifying faulty parts in a manufacturing process; namely, that identifying faulty parts is part of a company’s cost-saving process, which is a financial activity.19 The petitioner also argued that the claims are “at least incidental or complementary to financial transactions, because semiconductors are ubiquitous components in the modern financial system.”20Finally, the petitioner argued that the claims could be interpreted broadly enough to cover banks.21

The PTAB rejected each argument in turn by noting they were untethered from the actual words in the patent and that none of the claims or specification include language associating the patent with any financial product or service.22With respect to the inherent financial nature of the testing process, for instance, the PTAB stated

Petitioner does not cite to—and we do not find—any language in claims 1–20 constituting or otherwise describing lower repair costs, reduced variability, product quality, or cost saving activities, let alone any specific financial product or service or finance- related activity. Nor does Petitioner cite to—and, again, we do not find—any language in the specification of the ’373 patent relating to a financial product or service.23

Moreover, the PTAB expressed concern that instituting CBM review solely “because semiconductors are ubiquitous components in the modern financial system” would be inconsistent with the “financial product or service” provision and would “confer covered business method patent review eligibility on any patent claiming something used ‘in the modern financial system.’”24 This concern is equally applicable to the rationale expressed in the Fedex decision.

Practice Tips

When attempting to institute a CBM review, the petition should focus on the words and concepts within the specification. The first priority should be to select at least one claim for review that includes a term or limitation that can be tied to the “movement of money” or to the finance industry generally. That said, claims that could be interpreted to have broad applicability beyond the finance industry should be avoided, if possible. The petition should also include specific citations to the specification in which commercial or financial activities are discussed. Preferably, those activities would be tied to the claim terms highlighted in the petition.

These cases also provide guidance to patent prosecutors drafting patent applications that could be subject to subsequent CBM review. In particular, terms that can be easily associated with the “movement of money” and the finance industry generally should be avoided, if at all possible. If they cannot be avoided, the claims should be drafted such that they do not specifically require transactions or other commercial activities. To the extent the specification needs to address the finance industry or other commercial topics to provide context to the claims, it should be written as broadly as possible and discuss finance-related embodiments within the context of any non-finance-related embodiments that may exist.