SCOTUS Watch: Supreme Court Vacates CBM Scope Definition

103 AIA CBM obviousness patent PTAB scotus watch

On May 14, 2018, the U.S. Supreme Court granted PNC Bank National Assoc.’s petition for writ of certiorari and vacated the Fed Circuit’s ruling limiting the scope of a covered business method (CBM), in PNC Bank Nat’l Ass’n v. Secure Axcess, LLC.[1]  The Supreme Court, in its orders, wrote:

The petition for writ of certiorari is granted.  The judgment is vacated as moot, and the case is remanded to the United States Court of Appeals for the Federal Circuit with instructions to remand the case to the Patent Trial and Appeal Board to vacate the Board’s order.  See United States v. Munsingwear, Inc., 340 U.S. 36 (1950).  Justice Alito took no part in the consideration or decision of this petition.

The issues presented in the petition were:

  1. Whether the court of appeals’ (i.e., Fed Circuit) judgment should be vacated and remanded with instructions to dismiss the appeal as moot, in accordance with United States v. Munsingwear, Inc. (citations omitted), where the claims of the challenged patent are invalid and there is no longer a live case or controversy between Petitioners and Respondent.
  1. If the case is not moot, whether the court of appeals erred in holding that the statutory definition of a patent eligible for CBM review requires that the claims of the patent expressly include a “financial activity element” – in other words, that the claim have no use outside of financial activity – rather than making CBM review available for patents that claim “a method or corresponding apparatus for performing data processing or other operations used int eh practice, administration, or management of a financial product or service.”

The procedural background of the case is convoluted.  Patent assertion entity Secure Axcess owns U.S. Patent No. 7,631,191 (“191 patent”), directed to system and method for authenticating a web page.  The issue before the PTAB was what constituted a patent for purposes of a CBM proceeding (37 C.F.R. §300).  CBMs are post-grant proceedings conducted within the PTAB to review patentability of one or more claims in a CBM patent.  CBMs sunrised September 16, 2012, through the AIA, and will sunset September 16, 2020.

Claim 1 recites:

A method comprising:

transforming, at an authentication host computer, received data by inserting an authenticating 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 preferences file,

wherein an authenticity stamp is retrieved from the preferences file.

The ‘191 patent’s written description generally describes computer security focused on authentication of a web page.  The Fed Circuit in the original case ruled that the statutory definition of a patent eligible for a CBM proceeding is one that has claims that contain a financial activity element.[2]  It was a definition that essentially eviscerated Appellant Secure Axcess’ ability to have the ‘191 patent’s invalidation reversed.  Secure Axcess had argued that the statutory phrase “financial product or service” (AIA §18(d)(1) or 37 C.F.R. §42.301(a)) did not apply to the ‘191 patent because that phrase only applied to “financial products such as credit, loans, real estate transactions, check cashing and processing, financial services and instruments, and securities and investment products.”[3]  The Fed Circuit panel disagreed, that although the authentication system of the ‘191 patent could be directed to other services other than financial, the ‘191 patent disclosed needs of financial institutions to ensure web page authentication, as well as disclosing embodiments used by financial institutions.[4]  As a result, the Fed Circuit found the ‘191 patent eligible for CBM review.  Secure Axcess petitioned for en banc review.

In the en banc decision, the Fed Circuit noted, in affirming its earlier decision:

If Congress chooses to consider extending or revising the CBM program, it might of course conclude that a different definition of the scope of a CBM program is preferable.  It is free to do so, and to address the relevant practical, policy, and textual issues in pursing its aims.  In the meantime, investment of further judicial resources to struggle with the issues as an interpretive matter is not worthwhile for this sunsetting, comparatively little-used program.[5]

In a related IPR proceeding before the PTAB, the PTAB found nearly all of the ‘191 claims were invalid as obvious.  The PTAB had, before finding the claims invalid, found that the ‘191 patent was, indeed, eligible for CBM review.[6]  This appeal before the Fed Circuit was affirmed and, more importantly, no petition for writ of certiorari filed to the U.S. Supreme Court, which for all practical purposes meant the ‘191 claims were invalid.[7]  As a result, PNC had argued there was no live “case or controversy” that existed.

The practical effect of the Supreme Court order will reopen the debate surrounding what can or cannot be deemed a patent eligible for CBM review.  The justices dealt with the first question, by finding the case moot, but punted on the second.  By finding the case moot, the justices did not have to address the scope of a CBM review.  This will leave its scope to Fed Circuit interpretation.  This, in turn, will maintain the ambiguities which created this issue in the first place.  More litigation on this issue will probably flare up before the TPCBM sunsets in 2020.

 

[1] 584 U.S.___ (2018), vacating as moot and remanding, 848 F.3d 1370 (Fed. Cir. 2017), reh’g en banc denied, 859 F.3d 998 (Fed. Cir. 2017), vacating PNC Bank, N.A. v. Secure Axcess, LLC, CBM2014-00100, Bank of the West v. Secure Axcess, LLC, CBM2015-00009, T. Rowe Price Iv. Servs., Inc. v. Secure Axcess, LLC, CBM2015-00027 (P.T.A.B. Jun. 22, 2015).

[2] See 848 F.3d at 1381.

[3] Id. at 1375.

[4] Id. at 1376.

[5] See 859 F.3d at 1003.

[6] See EMC Corp. v. Secure Axcess, LLC, No. IPR2014-00475, 2015 WL 5316521 (PTAB Sept. 8, 2015).

[7] See Secure Axcess, LLC v. EMC Corp., 680 F. App’x 947 (Fed. Cir. 2017).