United States: Open For Business: The PTO Offers A Fast And Low-Cost Shot At Invalidating Business Method Patents

Last Updated: May 21 2014
Article by Andrew F. Pratt, Annette K. Kwok and Trent B. Ostler

Business method patents exploded in the mid-1990s, leaving companies vulnerable to patents that many felt never should have been issued. The expense of litigation and the high hurdle to invalidating issued patents caused many companies to pay license fees rather than wage Pyrrhic legal battles. But the good times for business method patentees may be ending.

A new procedure called the Covered Business Method Review (CBM) was created by the America Invents Act, and it allows companies to challenge issued business method patents in the Patent Office. The procedure is fast, normally concluding in just one year, and allows petitioners to prove invalidity by a mere preponderance of the evidence – not the more stringent clear and convincing evidence standard used in district court. And unlike the more popular inter partes review procedure (IPR), a threatened party can challenge business method patents on additional grounds, including §§ 101 and 112 (but not best mode).

So far, CBM has been a resounding success for petitioners: the PTO has invalidated nearly every business method patent claim reviewed under CBM. Despite this favorable statistic and CBM's attractive features, as of May 8, 2014, only 162 petitions have been filed so far – less than 15% of the more restrictive IPR.1Why is that? One obvious reason is that non-business method patents cannot be challenged in a CBM. Nevertheless, CBM seems underutilized when one considers the significant assertion activities of business method patentees versus the relatively small number of CBM filings. The reason may be that Congress requires CBM petitioners to meet certain conditions that are causing uncertainty in the minds of would-be filers.

Fortunately, as explained below, guidance exists for prospective petitioners to evaluate whether a CBM is a good option to challenge a vulnerable business method patent.

A. Qualifying for CBM Review

The CBM process includes a number of formal requirements that petitioners must satisfy before filing. Most are straightforward, dealing primarily with the timing and content of the petition itself, and will not be discussed in this article. However, two broad requirements seem to raise the most questions in petitioners' minds, which are discussed in turn below: standing to bring a petition, and exactly what qualifies as a covered business method patent.

1. Standing: Petitioners Must Demonstrate a Real Threat

CBM is open only to those parties who are targets of a business method patent holder. This is a significant difference from an IPR petition, which may be brought by anyone for any recognized reason. To establish standing to seek CBM review, the petitioner must demonstrate either that it or its customer has been directly sued for infringing that patent, or that there exists a real and substantial controversy regarding infringement. This standard is similar to the declaratory judgment standard used in federal district courts.2

2. Claims Must Relate to a "Financial Product or Service" (Construed Expansively), but Not Claim a "Technological Invention"

The term "covered business method patent" is defined 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,
  • except that the term does not include patents for technological inventions.3

Thus, sensibly, a potential petitioner must evaluate: (1) whether at least one claim of the patent covers a "financial product or service" and (2) whether the patent is for a "technological invention."4

a. "Financial Product or Service:" Any Commerce of Any Business – Not Just Banks and Financial Services

During CBM's creation in Congress, Senator Charles Schumer explained that "a financial product is an agreement between two parties stipulating movements of money or other consideration now or in the future."5 The Board has seized on this and similar statements to reject patent owners' arguments that would limit "financial product or service" to just products or services of the "financial services industry."6 Rather, the Board has construed the term "financial product or service" to encompass patents that "claim[] activities that are financial in nature, incidental to financial activity or complementary to a financial activity."7 In other words, the focus is on the claimed activity and not its specific business application. Qualifying examples of such activities have included the following:

  • electronic movement of money between financially distinct entities;8
  • the electronic sale of something, including charging a fee to a party's account;9
  • adjudicating an insurance claim and processing payment for that claim;10 and
  • e-commerce transactions that are "complementary to a financial activity" and "relate to monetary matters."11

Notably, of the 11 petitions that have been denied for CBM, none was denied on the basis of not covering a financial product or service, corroborating the Board's stated view that the term should be construed broadly.

b. Using Conventional Software and Hardware Components to Transact Business Is "Not...a Technological Invention," but Using a Novel Data-Processing Algorithm Incident to the Transaction Probably Is

To qualify for CBM, the petitioner must also show that the patent is not for a technological invention. In making this determination, the Board asks: (1) does the claimed subject matter as a whole recite a technological feature that is novel and nonobvious over the prior art, and (2) do the claims solve a technical problem using a technical solution?12 In answering those questions, the board has determined that using the following generic technology terms does not magically transform the claimed subject matter into a technological invention:

  • a web browser, a communication network, various software modules, and a computer;13
  • first memory, second memory, telecommunications line, transmitter, and receiver;14 and
  • a medical service terminal and computer generated image files.15

On the other hand, a technological invention may be found where the patentee specifically identifies a technical solution for a technical problem and the petitioner fails to show the technical solution was known in the art at the time of the invention.16 For example, "an intermediary server" for a "recording step" and an "intermediate server" for a "forming step" were found to be technological inventions.17 Tellingly, only 2 of the 11 CBM denials concerned the "technological invention" exception, suggesting that, in practice, this may be a relatively easy call.

B. Businesses Should Take Another Look at this Powerful and Underutilized Weapon in the Fight Against Shaky Business Method Patents

CBM is a powerful weapon for challenging patents on grounds unavailable to IPRs, as long as they qualify. By now, however, any uncertainty has been addressed by numerous Board decisions clarifying what is eligible for CBM review. When a CBM petition does qualify, the results for threatened business have been very good indeed. Going forward, paying business method patentees to go away should no longer be "business as usual," at least not until a CBM petition has been seriously considered.


1 http://www.uspto.gov/ip/boards/bpai/stats/050814_aia_stat_graph.pdf

2 America Invents Act, Section 18(a)(1)(B).

3 Id. at §18(d).

4 See Apple Inc. v. Sightsound Techs., LLC (CBM2013-00019).

5 17 Cong. Rec. S 5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer).

6 See Apple Inc. v. Sightsound Techs. LLC (CBM2013-00019).

7 Id.

8 See id.

9 See Apple Inc. v. Sightsound Techs., LLC (CBM2013-00021).

10 See David Gillman v. Stoneeagle Servs., Inc. (CBM2013-00047).

11 See Experian Marketing Solutions, Inc. v. RPost Commns. Ltd. (CBM2014-00010).

12 37 C.F.R. § 42.301.

13 See Liberty Mutual Insurance Co. v. Progressive Casualty Insurance Co. (CBM2012-00011).

14 See Apple Inc. v. Sightsound Techs., LLC (CBM2013-00019).

15 See Gillman v. Stoneeagle Servs., Inc. (CBM2013-00047).

16 See Experian Marketing Solutions, Inc. v. RPost Commns. Ltd. (CBM2014-00010).


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
McDermott Will & Emery
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McDermott Will & Emery
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions