On February 21, 2017, the U.S. Court of Appeals for the Federal Circuit issued a precedential decision in Secure Axcess, LLC v. PNC Bank National Association, 2016-1353 regarding what constitutes a covered business method (CBM) patent for the purpose of CBM review by the Patent Trial and Appeal Board (the “Board”).
The Federal Circuit panel consisted of Judges Lourie, Plager, and Taranto. Judge Plager delivered the majority opinion, with Judge Lourie dissenting.
Procedurally, Secure Axcess challenged a Final Written Decision of the Board. In the Final Written Decision, the Board reaffirmed its determination that the patent at issue, U.S. Patent No. 7,631,191, was a CBM patent under § 18 of the Leahy-Smith America Invents Act (the “AIA”). The Board also held that all the claims of the patent were unpatentable because they were obvious over the cited prior art.
On appeal to the Federal Circuit, Secure Axcess challenged the Board’s determination to decide the case as a CBM patent, as well as the Board’s determination of obviousness. The Federal Circuit ultimately agreed with Secure Axcess that the Board improperly found its patent to be a CBM patent, and thus did not reach the merits of the obviousness issue.
First, an understanding of Secure Axcess’s patent would be helpful. According to the patent, the “invention relates generally to computer security, and more particularly, to systems and methods for authenticating a web page.” Illustrative Claim 1 recites the following:
1. A method comprising:
transforming, at an authentication host computer, received data by inserting an authenticity key to create formatted data; and
returning, from the authentication host computer, the formatted data to enable the authenticity key to be retrieved from the formatted data and to locate a preferences file,
wherein an authenticity stamp is retrieved from the preferences file.
Additionally, illustrative Claim 17 recites the following:
17. An authentication system comprising:
an authentication processor configured to insert an authenticity key into formatted data to enable authentication of the authenticity key to verify a source of the formatted data and to retrieve an authenticity stamp from a preferences file.
Addressing the CBM issue, the majority opinion initially indicated that while “on occasion, the written description [of Secure Axcess’s patent] contains references that might be considered to concern (at least facially) activities that are financial in nature,” those references were brief and “the last several paragraphs of the written description provide several more detailed and possibly relevant references” such as “the use, sale or distribution of any goods, services or information over any network having similar functionality” and “online commerce transactions”. The majority opinion then stated that it was in reference to things such as these “online commerce transactions” that Secure Axcess’s patent happened to referenced banks.
Then, when examining whether the claims themselves were sufficient for CBM review, the majority opinion noted that “Congress did not leave the decision of what qualifies as a CBM patent to chance. The statute first states that ‘The Director may institute a [CBM proceeding under § 18] only for a patent that is a covered business method patent.”
The majority opinion then cited what Congress defined as a CBM patent per AIA § 18(d)(1): “[A] patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”
When applying that definition to the present case, the majority opinion rejected as too limiting Secure Axcess’s proposal that CBM review should be limited to “products and services such as credit, loans, real estate transactions, securities and investment products, and similar financial products and services”. However, the Federal Circuit also rejected the Board’s much more expansive approach that CBM review should apply to financial products or services that were merely “used in” and “incidental to” a financial activity.
Among other cases, the majority opinion discussed its recent decision in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016). In Unwired Planet, the Federal Circuit held that the terms “incidental to” a financial activity and “complimentary to” a financial activity were not part of the statutory definition of a CBM patent. Applying that to the Board’s decision that Secure Axcess’s patent was a CBM patent, the majority opinion rejected the Board’s approach in which it stated that the patent “perform[s] operations used in…[and] incidental to a financial activity”. In doing so, the majority opinion explicitly indicated that “incidental to a financial activity” is not part of the statutory definition and concluded that such a definition was beyond the scope of the statutory standard.
However, the Federal Circuit further stipulated the following: “To be clear: the phrasing of a qualifying claim does not require particular talismanic words. When properly construed in light of the written description, the claim need only require one of a ‘wide range of finance-related activities,’ examples of which can be found in the cases which we have held to be within the CBM provision.” Those cases include Versata Development Group, Inc. v. SAP America, Inc., 793 F.3d 1306 (Fed. Cir. 2015), Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331 (Fed. Cir. 2016), and SightSound Technologies, LLC v. Apple Inc., 809 F.3d 1307 (Fed. Cir. 2015).
The Federal Circuit then concluded with the following: “In sum, if a patent that fits the term covered business method patent, as defined in AIA § 18(d)(1), is to be usefully distinguished from all other patents, the distinction will not lie based on non-statutory phrases like ‘incidental to’ or ‘complementary to’ financial activity. Such phrases can have unintended consequences. For example, it is safe to assume that most, if not virtually all, inventors of methods or products claimed in a patent have some expectation that complementary financial activity will result—stated another way, that eventually their invention will produce financial rewards for their efforts. A definition that could sweep that broadly obviously will not do. Necessarily, the statutory definition of a CBM patent requires that the patent have a claim that contains, however phrased, a financial activity element.”
In dissent, Judge Lourie disagreed with the majority’s holding on the basis of Secure Axcess’s claims being “surely claims to ‘a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.’” This, he argued, was because “[t]here can be little doubt that such claims meet the ‘method or apparatus for performing data processing’ limitation of the statute.”
Judge Lourie further argued that Secure Axcess’s claims also met the “financial product or service” language of the statute because the patent makes clear that “the invention is to be used in the management of a financial service” and that “[n]o other applications of the invention are described in the patent.”
Judge Lourie also cited the type of defendants Secure Axcess had sued, most of which were financial institutions. However, the majority opinion had already rejected this approach since “a patent owner’s choice of litigation targets could be influenced by a number of considerations, such as the volume of a particular target’s perceived infringement; the financial condition of the target; which targets are most likely to be willing to settle rather than bear the cost of litigating; available and friendly venues; and so on. Those choices do not necessarily define a patent as a CBM patent, nor even necessarily illuminate an understanding of the invention as claimed.”
Judge Lourie then argued that while “[i]t is true that the word ‘financial’ does not appear in the claims…[a]s a matter of patent law, claims do not necessarily need to recite uses of products.” He explained that the written description of the patent, “in accordance with the requirements of the statute…tells us that the invention is to be used for financial management…The inventors, complying with the statute, thus told us what the invention is to be used for. The claims recite an invention used in the practice of a financial product, and the uses are described in the written description of the patent.”
Judge Lourie then concluded by saying that the majority “pointedly overlooks the nature of the invention and the meaning of the statute” and “virtually ignores the statutory language ‘used in the practice.’ The written description clearly describes how this invention is ‘used in the practice’ of a financial product. And, while not conclusive, the post-issuance litigation history makes the point unmistakable. To ignore that is to close one’s eyes to the obvious.”