CBM patent review: more than meets the eye
On September 16, 2011, the Leahy-Smith America Invents Act (AIA) was signed into law. The AIA represents the most dramatic changes to US patent law since the 1950s. One of the more controversial aspects of the new law is a provision that especially impacts patents directed to financial products or services, as well as software patents and patents whose technology might interact with financial products or services.
Section 18 of the AIA created a new contested proceeding before the US Patent and Trademark Office (USPTO): a “transitional post-grant review (PGR) proceeding” for reviewing the validity of “covered business method patents”.
Ambiguities in the definition of a covered business method (CBM) leave many in the industry wondering just how broadly the USPTO will apply the definition. Also, unique stay and estoppel provisions for CBMs will likely be attractive to defendants in infringement suits, making this an important issue for patent owners as well.
What is CBM patent review?
The purpose of CBM patent review is to provide an option for accused infringers to challenge certain types of patents as an alternative to costly litigation in the courts. In fact, this review is available only to parties that have been sued or charged with infringement. CBM patent review mostly follows the procedures for PGR, with differences including grounds for standing, timing, and prior art requirements.
The term ‘covered business method’ is itself a bit misleading, because CBM patent review is available for patents other than method patents, and the definition of a CBM also goes beyond what is typically considered to be a business method patent.
What is a CBM patent?
A CBM patent is 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.
This definition requires a two-part analysis: (i) whether the patent claims involve “the practice, administration, or management of a financial product or service”; and (ii) whether the patent is directed to a “technological invention”. Note that not all claims in the patent need to satisfy this definition. If only one claim in the patent meets this definition, the entire patent can be brought into a CBM patent review proceeding, including claims not directed to CBMs.
“FOR PATENTS THAT ARE ORIGINALLY FILED ON OR AFTER MARCH 16, 2013, CBM PATENT REVIEW WILL FOLLOW THE PRIOR ART PROVISIONS DESCRIBED IN THE ‘NEW’ SECTIONS 102 AND 103 OF THE PATENT STATUTE.”
Although what it means to be used “in the practice, administration, or management of a financial product or service” is somewhat ambiguous, the legislative history and recent comments from the USPTO indicate that it will interpret the requirement broadly. In fact, the USPTO issued comments on August 14, 2012, stating that the definition “is not limited to the products or services of the financial services industry” and was intended to encompass patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity”.
As for the technological invention prong, a technological invention itself has to satisfy two factors: (i) the claim as a whole must recite a technological feature that is novel and unobvious over the prior art; and (ii) the claim as a whole must solve a technical problem, using a technical solution. The USPTO will consider these factors on a case-by-case basis.
Patent owners who are faced with a CBM patent review can file an optional patent owner response to show why the patent does not qualify as a CBM.
Who can file a CBM patent review proceeding and when is it available?
Only certain types of petitioners are allowed to file a CBM patent review petition. The petitioner (or a privy or real party-in-interest) must have been sued or charged with infringement of the patent at issue. The standard for determining whether a party has been “charged with infringement” is essentially the same as determining whether the party has standing to bring a declaratory judgment action in the US Federal Court.
Importantly, CBM patent review can be filed against any issued patent meeting the CBM patent review definition—regardless of filing or issue date—so long as PGR is not available. PGR applies only to patents with a filing date on or after March 16, 2013, and is available for the first nine months after issuance. Additionally, CBM patent review can be filed against the patent at any point during a litigation, unlike inter partes review (IPR), which must be filed within one year of service of the complaint.
Section 18 does include a sunset provision, though. Unless the US Congress decides to extend Section 18, the proceeding will cease to be available on September 16, 2020. Accordingly, defendants wishing to take advantage of this proceeding must file a CBM patent review petition within the next eight years. Any CBM patent review still pending at the time of sunset will be allowed to be completed.
Estoppels and stays
For defendants in a civil patent infringement suit, the most attractive aspects of CBM patent review are its estoppel and stay provisions. In both IPR and PGR, a petitioner is estopped from raising, in a civil action (ie, Federal court or the International Trade Commission), any grounds of invalidity which were raised, or which reasonably could have been raised, in the USPTO proceeding.
Such a broad estoppel may deter some defendants from filing IPRs or PGRs, as they might want to keep their options open in the civil action. Such estoppels do not apply to CBM patent review—here the petitioner is prevented only from raising, in a civil action, those grounds which were actually raised during the CBM patent review.
It is unclear how much weight courts will give to each of the four factors, but legislative history regarding this test indicates that Congress intended a stay to be issued in most cases. Further, the AIA provided an immediate right of interlocutory appeal by either party to the Federal Circuit, which is required to review the stay decision de novo. Section 18 of the AIA also includes stay provisions that are unique to CBM patent review. If a stay is requested in a Federal court case based on a concurrent CBM patent review at the USPTO, the court must use a specific fourfactor test provided in Section 18.
What prior art is available in a CBM patent review proceeding?
For patents that are originally filed on or after March 16, 2013 (first-inventor-to-file patents), CBM patent review will follow the prior art provisions described in the ‘new’ Sections 102 and 103 of the patent statute. For older patents (first-to-invent patents), prior art must fall within a special class of prior art identified by Section 18 of the AIA.
This special class includes art showing that the invention was known or used by others in the US, or patented or described in a printed publication in the US or a foreign country, before the invention thereof by the applicant for patent (ie, Section 102[a] before the AIA took effect).
This special class of prior art also includes art that discloses the invention more than a year before the patent’s filing date and which would be eligible under the above qualifications “if the disclosure had been made by another before the invention thereof by the applicant for patent”. While this language might ultimately be interpreted in a number of ways, it appears to be intended to cover certain types of ‘old’ Section 102(b) art, such as evidence of prior use or sale.
In light of the above, CBM patent review proceedings allow a petitioner to cite some prior art that would not be available in an IPR. For example, IPRs are limited to patents and printed publications under Sections 102 and 103. CBM patent review includes no such limitations. Any ground of invalidity can serve as basis for the petition, eg, Sections 101, 112 and, with caveats, 102/103. Further, the prior art evidence is not limited to patents and printed publications.
What should I do now?
CBM patent review has stay provisions that may be attractive to a defendant in a co-pending lawsuit. Further, the estoppel provisions for civil actions are less restrictive than other post-issuance proceedings, attaching only to arguments that were actually raised in the CBM patent review proceeding, not arguments that could have been raised. As discussed, CBM patent review is available to a wide scope of business method patents, regardless of issue date.
Potential petitioners will want to evaluate their current litigations to see whether CBM patent review is applicable, as CBM patent review can be used to disrupt a pending trial. CBM patent review might also be useful in cases where IPR is not available to the petitioner.
Patent owners will also want to review their existing litigations, to see if any of their patents are susceptible to CBM patent review, and should allocate budget accordingly. Should a CBM patent review be fi led against one of those patents, a patent owner should use the optional patent owner response available in the CBM patent review process to show why the patent does not qualify as a CBM.
Once the patent has been decided by the USPTO to be a CBM, the proceeding continues in the same way as a PGR.
Michelle Holoubek is a director in the electronics group at Sterne, Kessler, Goldstein & Fox. She can be contacted at: holoubek@skgf.com
