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Fresh From the Bench: Precedential Patent Cases From the Federal Circuit

February 24, 2017

Overview

Of course, the real news this week is the Supreme Court’s reversal of the Life Technologies v. Promega case. There, the Supreme Court reversed the ‎Circuit’s ruling that shipping a single component of a ‎claimed invention to be combined with other components ‎outside of the country can constitute infringement. View summary of Life Technologies.

In its only precedential case of the week, a divided panel of the Circuit reverses the Board, ruling that the claims at issue do not qualify as Covered Business Method claims.

Pete

Secure Axcess v. PNC Bank - The Circuit continues to further restrict what constitutes a Covered Business Method patent, ruling that a system for authenticating a web page does not constitute a CBM patent. Over the dissent of Judge Lourie, the majority rejects the patentee’s argument and the Board’s holding that its history of suing financial institutions for infringement should be considered in evaluating whether or not the patent qualifies as a CBM patent.

A representative claim states:

  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.

The written description similarly discusses computer security with a focus on authenticating a web page. However, the written description does contain references that might be considered to concern “at least facially,” according to the opinion, activities that are financial in nature.

The AIA § 18(a)(1)(E) defines a “covered business method patent” as: “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 . . . .”

Secure Axcess first argued that the requirement that the “patent claims” applies only to the first clause—a method or corresponding apparatus for performing data processing or other operations—and not to that clause and the second clause—used in the practice, etc., of a financial product or service. On that issue, the majority rules construing the claim as argued by Secure Axcess would be radically out of keeping with the statute and congressional intent, considered in the context of other provisions in the statute.

The majority then turns to the more interesting issue as to whether this is properly considered “a financial product or service.” The patent owner argued to the Board that the ’191 patent was ineligible for CBM review because covered financial products and services were limited to products and services such as credit, loans, real estate transactions, securities and investment products, and similar financial products and services. The Board correctly pointed out that both the PTO in its rulemaking, and the Circuit in its then-recent Versata opinion, rejected that narrow view.

Moreover, in its Unwired Planet decision, the Circuit was called upon to determine if it had to limit itself to the express language of the statutory definition of a CBM patent, or could incorporate comments from the legislative history. The Circuit concluded that the additional phrases are not part of the statutory definition, and when used “as the legal standard to determine whether a patent is a CBM patent, that standard was not in accordance with law.” The majority also holds that Blue Calypso v. Groupon is not to the contrary. There, the phrase used by the Board was “financial in nature,” which does not involve the statutory broadening at issue in Unwired Planet.

In deciding the issue of whether or not these claims qualify under the CBM statute, the Board took into consideration the litigation history of Secure Axcess suing Bank of America, GE Capital and 40 other financial institutions. The majority holds that the litigation history should not be considered because 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 infringement; the financial condition of the target; which targets are most likely to be willing to settle; available and friendly venues; and so on. The opinion might have added that those other factors are particularly significant here, given that Secure Axcess is an NPE.

The majority concludes that a remand to the Board for further consideration of the issues would be a wasteful act, since an affirmative finding that this patent so qualifies would be, in terms of the APA standard, arbitrary or capricious. The Board’s conclusion that this is a CBM patent is therefore reversed.

Read the full opinion

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