By: Audrey A. Millemann

Over the last 15 years, the United States Patent and Trademark Office has issued many business method patents.  Many of these patents seem overly broad or obvious, and the tech industry has been strongly critical of the PTO for issuing these patents.

Congress has been listening.  Under a new program enacted as part of the America Invents Act (“AIA”), business method patents can be challenged in a specific procedure in the PTO.  The program, called the “Transitional Program for Covered Business Method Patents” and referred to as CBM Review, is set forth in section 18 of the AIA.  CBM Review went into effect in September 2012 and has a sunset provision of September 2020.

Under the CBM Review program, a defendant accused of infringement of a patent covering a business method may challenge the validity of the patent in the PTO.  CBM Review is conducted before a new administrative law board, the Patent Trial and Appeal Board (“PTAB”).     Section 18 (d)(i) of the AIA defines a covered business method to be a method or apparatus directed to data processing or other activities used in financial products or services.  The statute excludes patents covering “technological inventions,” which the PTO has defined as inventions that solve a technical problem using a technical solution.

The purpose of CBM Review is to provide a quick and less costly alternative to federal court litigation for determining the validity of business methods patents.  Under the CBM Review program, a patent may be challenged as invalid on any number of grounds, including that the claims are directed to unpatentable subject matter under 35 U.S.C. section 101, in particular, abstract ideas.  Business method patents can also be challenged on the basis or prior art. 

In adopting the CBM Review program, one of the sponsors of the law stated:

“Litigation over invalid patents places a substantial burden on U.S. courts and the U.S. economy.  Business-method inventions generally are not and have not been patentable in countries other than the United States.  In order to reduce the burden placed on courts and the economy by this back-and-forth shift in judicial precedent, the transitional proceeding authorizes a temporary administrative alternative for reviewing business method patents.”

Unlike other previous methods for challenging patents in the PTO, CBM Review is intended to be quick.  The process begins when a petition is filed in the PTO by a party threatened with or sued for patent infringement.  The petition must show that the patent falls within the definition of covered business methods and that at least one claim in the patent is “more likely than not” unpatentable.  The patent owner has three months in which it may file a response.  Within six months of the filing of the petition, a panel of three patent administrative law judges of the PTAB decides whether to grant the petition for review.  If the petition is granted, CBM Review is instituted.  The process, called a trial, is adversarial and involves both the patent owner and the challenger, and includes discovery, motions, and an oral hearing.  The patent owner may seek to amend the claims and the challenger may oppose the amendment.  The process must be completed by the PTAB with a final decision within one year of its institution, although it can be extended 6 months for good cause.

CBM Review should only be undertaken after a careful consideration of strategy, because estoppel applies to subsequent action by the petitioner.  The petitioner may not assert a grounds for invalidity in a subsequent PTO proceeding that was raised or reasonably could have been raised in the CBM Review, nor may the petitioner assert in a subsequent district court patent infringement case a grounds that was raised in the CBM Review.  Thus, the petitioner should be sure that CBM Review is the best process and forum for its challenge.

So far, the PTAB has moved expeditiously in administering CBM Review.  The first petition for CBM Review ever filed, on September 16, 2012, was granted in January 2013, and the PTAB issued its written decision in June 2013, less than nine months after the petition was filed and only six months after institution of review.  In its decision, the PTAB invalidated all of the challenged claims as unpatentable abstract ideas.

As of January 30, 2014, 113 petitions for CBM Review had been filed.  The majority of the petitions that have been filed are in the electrical and computer fields.  Up to the present, the PTAB has instituted CBM Review in about 85% of the petitions filed.  Of those, several cases have been settled, the PTAB has invalidated several patents, and many cases are still ongoing.