The Federal Circuit Court of Appeals has reminded the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office in no uncertain terms that covered business method review has limits.  In Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 2016 U.S. App. LEXIS 20764 (November 21, 2016), the court held that the PTAB had improperly instituted covered business method (“CBM”) review of Unwired’s patent.  CBM review is a procedure enacted in the America Invents Act by which a business method patent can be challenged in the PTAB.

Unwired owned U.S. patent no. 7,203,752 for a system and method to limit access to the location information of wireless devices.  The system allows a cell phone user to set their phones privacy preferences to restrict access to the phone’s location information to specific permitted requesters.

In October 2013, Google filed a petition in the PTAB for CBM review of certain claims of Unwired’s patent.  In April 2014, the PTAB instituted CBM review.  The PTAB determined that the ‘752 patent was a CBM patent, applying the following test: “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.”  Unwired, supra, at *4.  The PTAB’s rationale was that the ‘752 patent’s specification stated that the requesters of the location information could include business like hotels and restaurants who could send targeted advertising to nearby cell phone users.  Id.  The PTAB found that this discussion in the ‘752 patent satisfied the requirement that the claims be “incidental or complementary to a financial activity.”  Id.

The PTAB instituted CBM review of the ’752 patent on several grounds, including invalidity for unpatentable subject matter under 35 U.S.C. §101, obviousness under 35 U.S.C. §103, and written description under 35 U.S.C. §112.  In April 2015, the PTAB issued its decision invalidating all of the challenged claims under §101.

Unwired appealed to the Federal Circuit, arguing that the PTAB had erroneously applied its own improper test (“claims incidental or complementary to a financial activity”), rather than the test set forth in the America Invents Act, for whether the ‘752 patent was a CBM patent.  Google responded that, because the PTAB’s interpretation was based on comments made during the rulemaking process when the AIA was enacted, the PTAB had correctly interpreted the statutory definition of a CBM patent.  Google also argued that the PTAB properly relied on the ‘752 patent’s discussion of potential advertising uses for the invention.

The Federal Circuit gave a straightforward answer to a straightforward question.  The court disagreed with the PTAB and Google.  The court held that the PTAB must apply the statutory definition of a CBM patent set forth in the AIA and cannot use commentary from the rulemaking process to create a broader definition.  Id. at *7.

Under the AIA, §18(d)(1), a CBM patent is one 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 . . .”.  The court noted that the PTO had adopted this definition without change.  Id. at *7.  However, the PTAB had applied a different definition (“incidental or complimentary to a financial activity”) to the ‘752 patent, one which is broader than the statutory definition.  The court explained that the PTAB relied on a comment made by Senator Schumer during the Senate’s discussion of the AIA, but the comment, like many of the comments made during the Senate hearings, was not included in the statutory definition.  Id. at *8-9.  The comments made by various legislators are irrelevant; the statute is the “operative legal standard” — the PTAB cannot “expand its authority beyond that granted by Congress.”  Id. at *12-13.

The court emphasized its point, at *13:

“The patent for a novel lightbulb that is found to work particularly well in bank vaults does 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. . . . It is not enough that a sale has occurred or may occur, or even that the specification speculates such a potential sale might occur.”

The court did not reach the question of the patentability of the claims of the ‘752 patent under §101.  The court vacated the PTAB’s decision and remanded the case to the PTAB.

This case clearly establishes that there are limits what a CBM patent is.  The statutory definition is not so broad as to encompass any patent that relates to a financial activity.  CBM review can only be used to challenge patents that cover operations used in the practice, administration, or management of a financial product or service.  Any attempt to broaden the application of CBM review is not supported by law.