Last Monday, the Federal Circuit vacated and remanded the decision of the Patent Trial and Appeal Board (PTAB) in Unwired Planet v. Google. In this case, Unwired appealed on the grounds that the PTAB erred in applying the standard to institute a CBM review. A CBM review may be instituted only for a covered business method patent, which is a patent that claims a method for performing data processing or other operations used in the practice, administration, or management of a financial product or service. 37 C.F.R. 42.301(a). However, the PTAB did not apply the statutory definition. Instead, the PTAB stated that the proper inquiry is “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.”

The PTAB determined Unwired’s patent was a CBM patent because the location service disclosed by Unwired could involve an eventual sale of services. The PTAB pointed out that the specification provided that “client applications may be service or goods providers whose business is geographically oriented” such as a “hotel, restaurant, and/or store.” These businesses may wish to know a wireless device and its user are nearby so that “relevant advertising may be transmitted to the wireless communications device.” Based on this discussion, the PTAB found that the patent was a CBM patent because the subject matter was incidental or complimentary to potential sales resulting from advertising.

The Federal Circuit noted that the standard used by the PTAB had no textual support in the statute as it was a standard derived from a statement made by Senator Schumer during the Senate's deliberation on the statutory definition of a CBM patent. The Federal Circuit explained: “Neither the legislators’ views nor the PTO [Patent and Trademark Office] policy statement provides the operative legal standard. The authoritative statement of the Board’s authority to conduct a CBM review is the text of the statute.” The Federal Circuit further explained: “The Board’s application of the “incidental to” and “complementary to” language from the PTO policy statement instead of the statutory definition renders superfluous the limits Congress placed on the definition of a CBM patent. CBM patents are limited to those with claims that are directed to methods and apparatuses of particular types and with particular uses ‘in the practice, administration, or management of a financial product or service.’ AIA § 18(d). The patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.” To allow the PTAB to use “incidental to” and “complementary to” language as part of the standard could virtually make any patent a CBM patent.

Consequently, the Federal Circuit held that the PTAB’s "reliance on whether the patent claims activities incidental to or complementary to a financial activity as the legal standard to determine whether a patent is a CBM patent was not in accordance with law," vacated the PTAB's decision, and remanded the case back to the PTAB for further proceedings.