Federal Circuit slams PTAB for wrong definition of CBM patent in Unwired Planet v. Google

“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.”

judge-jimmie-reyna

Judge Jimmie Reyna delivered the opinion of a unanimous panel in Unwired Planet v. Google.

Earlier today the United States Court of Appeals for the Federal Circuit issued a decision in Unwired Planet v. Google. The case asked the court to determine whether the Patent Trial and Appeal Board (PTAB) has properly instituted a Covered Business Method (CBM) review. The PTAB has long been criticized for ignoring the limiting statutory language that narrowly allows a CBM to be filed only on financial service patents. Indeed, the PTAB routinely ignores the statute and institutes CBM reviews on patents that simply do not qualify for review. Today that changes. The Federal Circuit, in a decision by Judge Reyna who was joined by Judges Plager and Hughes, has again stood up to abusive PTAB practices and said enough!

In this case Unwired Planet, LLC appealed from the final written decision of the PTAB in CBM No. 2014-00006, which was filed by Google, Inc, on October 9, 2013. The patent in question – U.S. Patent No. 7,203,752 – is entitled Method and System for Managing Location Information for Wireless Communications Devices. The ‘752 patent describes a system and method for restricting access to a wireless device’s location information. On April 8, 2014, the PTAB instituted CBM review of all the challenged claims.

The PTAB instituted the CBM review on four grounds: (1) lack of patent eligibility with respect to claims 25–29; (2) lack of written description support for claim 26; (3) obviousness of claim 25; and (4) obviousness of claim 25. Ultimately, in the final written decision issued by the PTAB on April 6, 2015, they upheld only the first ground, finding that the challenged claims were directed to unpatentable subject matter under section 101.

The problem here was that the PTAB used the wrong standard to institute the CBM proceeding in the first place, which lead the Federal Circuit to vacate the PTAB decision and remand the case for further consideration by the PTAB – namely the application of the proper standard.

According to Section 18 of the America Invents Act (AIA), the PTAB may institute a CBM proceeding only for a patent that is a covered business method patent. A covered business method patent is defined as 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. Specifically excluded from the definition of a covered business method patents are those that relate to technological inventions. See 37 C.F.R. 42.301(a). To determine whether a patent is for a technological invention the PTAB is supposed to consider whether the claimed subject matter recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution. See 37 C.F.R. 42.301(b).

[PTAB-1]

In deciding to institute the Google requested CBM against the ‘752 patent the Board did not apply the statutory definition. Instead, the Board 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 Board determined that the ’752 patent was a CBM patent because the location service could involve an eventual sale of services.

As the Federal Circuit would point out later: “All patents, at some level, relate to potential sale of a good or service.” To allow this PTAB created standard that has no textual support in the statute to be applied would be to allow virtually any patent to be the subject of a CBM. That was clearly was not the intent of Congress and it would fly directly and unambiguously in the face of the explicit language of the statute. The PTAB is significantly limited in their power to institute a CBM.

The “incidental” or “complementary” language used by the PTAB is not found in the statute. This specific language comes only from a statement by Senator Chuck Schumer (D-NY) found in the Legislative History, which the USPTO quoted in its response to public comments concerning interpretations of the statutory definition of what qualifies as a CBM patent. There were, however, clearly conflicting statements in the Legislative History, which makes any statements from the Legislative History unhelpful. In any event, the Federal Circuit explained: “Neither the legislators’ views nor the PTO 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 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.

Ultimately, the Federal Circuit did not reach the merits of the 101 decision and instead vacated the PTAB’s final written decision and remanded “the case for a decision in the first instance, and in accordance with this opinion, whether the ’752 patent is a CBM patent.”

While the events here may seem shocking to those unfamiliar with the PTAB, sadly this type of dictatorial ruling without regard to the statute, without regard to due process or procedural fairness is commonplace. The audacity of the PTAB knows no bounds. Indeed, it is this type of intellectual dishonesty that has so many in the patent community demanding significant PTAB reforms, and others beginning to make the case for the dismantling of the PTAB altogether.

I’ve said it before many times and for many years, and I’ll say it again. The post grant administrative proceedings ushered in by the America Invents Act (AIA) were a horrible mistake – they never should have been created in the first place. Now that we’ve seen these proceedings play out over the last 4+ years we know with certainty that they are even worse than anyone could have predicted. The PTAB provides few (if any) procedural safeguards for patent owners; they ignore the statute and do whatever they want. In recent months instances of the Federal Circuit finding PTAB actions to be arbitrary and capricious are on the rise. The PTAB is truly a rogue tribunal that is out of control.

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17 comments so far.

  • [Avatar for Anon]
    Anon
    November 26, 2016 08:30 am

    To play off of your meme, Curious, going to the doctor when curing the flue means that the patient is dead won’t endear too many patients to go to the doctor (while those who benefit from the life insurance policies are only too happy for such a development).

  • [Avatar for Curious]
    Curious
    November 25, 2016 11:59 pm

    the answer to concerns like that are well presented appeals to the Fed. Cir. like this one
    Going to the doctor after you got the flu is one way addressing the issue. However, flu prevention is probably a better approach. In this instance, perhaps it would be better if we didn’t have a USPTO that didn’t try to game every statute in disfavor of patentees/applicants.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    November 24, 2016 09:51 am

    Re Curious: the answer to concerns like that are well presented appeals to the Fed. Cir. like this one.

  • [Avatar for Night Writer]
    Night Writer
    November 24, 2016 08:45 am

    The cynic in me thinks that this was done by a Google judge just so that the technical character of an invention can be fleshed out for use in 101.

  • [Avatar for step back]
    step back
    November 23, 2016 02:35 pm

    Anon @12

    Yeah, that’s right, real estate rights are “real” while IP rights are intangible (tongue is in cheek 😉 )

    https://patentu.blogspot.com/2016/11/the-libertarian-delusion-re-physical.html

  • [Avatar for Anon]
    Anon
    November 22, 2016 06:21 pm

    Curious,

    It’s a few pages back now, but I added a post vis a vis Constitutional considerations and takings law (upshot is that personal property takings and regulatory takings are viewed a little differently).

  • [Avatar for Curious]
    Curious
    November 22, 2016 06:13 pm

    However, let’s put some facts in perspective re how “common” this problem really is.
    The relative minor impact this case will have is that the important issue. The important issue is that the is USPTO so gungho about invalidating patents that they set forth an incredibly unreasonable interpretation of the statute so as to institute the CBM. These are the SAME people that are deciding how the interpret the IPR statutes and promulgating the patentee-unfriendly rules that we are seeing today.

  • [Avatar for Anon]
    Anon
    November 22, 2016 05:47 pm

    The ever present soothing tones of Mr. Morgan and the “everything is all right with IPRs”…

    Rather not on point to this thread, but why not clasp the hands over the eyes anyway? What harm could come from such a “I see no problem” lullaby?

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    November 22, 2016 05:09 pm

    This Fed. Cir. decision in Unwired Planet, LLC v. Google Inc., desirably provided more specific [and narrowed] ground rules for the proper technology claim scope for CBM institutions, and that was long overdue.
    However, let’s put some facts in perspective re how “common” this problem really is. Only CBMs have this very limited scope of claim technology [they were supposed to have been enacted to challenge “business method” claims]. That claim coverage limitation excludes the vast majority patent from CBMs. They also have other limitations, such as requiring the CBM petitioner to have been actually sued or threatened with suit for patent infringement. As of 11/22/16, over the years since the AIA enacted CBMs and IPRs, only 489 CBM petitions have even been filed, and many have not been instituted [versus 5397 petitions filed for IPRs]. Finally, the entire CBM system automatically ends (sunsets) on Sept. 16, 2020.
    As to allegations that due process violations in IPRs or CBMs are “common”, that was not even the issue in this case, and out of hundreds of Fed. Cir. appeals of IPRs and CBM PTAB decisions there have only been a couple where either that or an APA violation was ever successfully alleged and remands granted.

  • [Avatar for Valuationguy]
    Valuationguy
    November 22, 2016 03:31 pm

    If you want a reason for the swing back at the CAFC look no further than the affect that time and the realization of the longer-term consequences of poorly thought out decisions have moderates on the Court.

    I personally believe that the coup that occurred at the CAFC resulting in Rader’s retirement…..just as the first cases filed under the AIA were getting to the CAFC…enable Prost’s (and Dyk’s) ‘anti-patent’ faction to decimate patent law with precedential decisions that no one but Newman realizing how far out of bounds the new rules were taking everyone.

    With the benefit of hindsight….the moderates on the court have finally started reining in the ‘crappification’ (when it can) that occurred over the past four years…but its going to take a LONG TIME….without SCOTUS intervention.

  • [Avatar for Gene Quinn]
    Gene Quinn
    November 22, 2016 12:33 pm

    IPdude-

    I’m trying to get my head around that and hope to have a post on that next week. I hear Phil Johnson’s name being brought up again, which would be great if he can actually get past the Senate blockade by Schumer this time. I understand Todd Dickinson may also be on the short list. Either of them would be very good, as would Bob Stoll or Terry Rea.

    -Gene

  • [Avatar for Gene Quinn]
    Gene Quinn
    November 22, 2016 12:31 pm

    Bemused-

    I don’t know about that. I’m not sure what happened at the CAFC, but things seemed to rather dramatically shift about 6 months ago. I personally think a lot of it has to do with SCOTUS not taking Sequenom and the CAFC realizing that they would need to be the ones to make sense of the SCOTUS mess. They have been willing to find biotech and software patent eligible over that time frame, and have really started to slam the PTAB (about time). Would be interesting to know what changed, but this is a different court for sure over the past 6 months.

    -Gene

  • [Avatar for angry dude]
    angry dude
    November 21, 2016 09:08 pm

    Methinks google should have bought more patents in their patent palooza action, as they are now making all those fancy smartphones and all kinds of goodies with big patent problems

  • [Avatar for Curious]
    Curious
    November 21, 2016 07:35 pm

    As the Federal Circuit would point out later: “All patents, at some level, relate to potential sale of a good or service.” To allow this PTAB created standard that has no textual support in the statute to be applied would be to allow virtually any patent to be the subject of a CBM.
    Its about time the Federal Circuit slammed the USPTO on this. What gets me is the blatant disregard for the statutes by the USPTO. What other agency gets away with $#*^ like this? I don’t know if the Court can sanction a Federal Agency, but putting forth an argument like that certainly deserves sanctioning.

  • [Avatar for JPM]
    JPM
    November 21, 2016 07:10 pm

    I like many of you are hoping that the Trump administration shuts the PTAB down; it is a corrupt kangaroo court.

  • [Avatar for Bemused]
    Bemused
    November 21, 2016 04:56 pm

    Hmmm….just engaging in some speculation here but I wonder if this decision against Google has anything remotely to do with an incoming administration which is not bought and paid for by Google?

    And least anything think this speculation is too far-fetched, remember that there hasn’t been a single patent infringement judgment against Google that has gotten past the CAFC without getting knocked out. Two recent plaintiffs/examples who got their judgments wiped out by the CAFC: I/P Engine (Vringo) and Simple Air.

  • [Avatar for IPdude]
    IPdude
    November 21, 2016 04:16 pm

    Gene,

    Who do you think Trump will appoint as the new Director? This nonsense has to stop. We need change already!

    IPdude