United States: PTAB Prevails In First Appeal Of A CBM Review

Versata Development Group, Inc. v. SAP America, Inc.

In the first appeal of a covered business method (CBM) review, the U.S. Court of Appeals for the Federal Circuit affirmed the Patent Trial and Appeal Board's (PTAB or Board) decision, and explained that the eligibility of a patent for CBM review can be reviewed on appeal only as part of the Court's review of the Board's final written decision. Versata Development Group, Inc. v. SAP America, Inc. (Fed. Cir., July, 9 2015) (Plager, J.) (Hughes, J., concurring in part and dissenting in part).

SAP petitioned for CBM review of Versata's patent, which disclosed a method and apparatus for pricing products in multi-level product organizational groups. In granting SAP's petition, the Board concluded that Versata's patent qualified for CBM review and that § 101 was an applicable basis for review of patents in CBM proceedings. In a final written decision, the Board concluded that all of the challenged claims of Versata's patent were unpatentable under § 101. Versata appealed.

On appeal, the Federal Circuit addressed the Court's jurisdiction to review whether a patent qualifies for CBM review, the claim construction standard for CBM proceedings, and whether the Board can hear and decide § 101 challenges in CBM proceedings.

Section 324(e) bars an appeal from an initial decision by the Board to institute a CBM review. However, the Federal Circuit concluded that it has jurisdiction to review the merits of the final written decision, and such review includes the question of whether the challenged patent is CBM-eligible. The Court reasoned that the language of § 324(e) "does not by its terms apply to limits on the authority to enter a 'final written decision' invalidating a patent," as institution and invalidation are two distinct actions by the Board. The Court further explained that barring judicial review of some aspects of a final written decision would "run counter to our long tradition of judicial review of government actions that alter the legal rights of an affected person." Additionally, the Court noted (as an analog to the present situation) that prior to enactment of the America Invents Act (AIA), limitations on the scope of reexamination authority was reviewable upon final decision.

Regarding the proper basis for claim construction in connection with CBM review, the Federal Circuit rejected Versata's argument that it was improper for the Board to apply the "broadest reasonable interpretation" in CBM proceedings. Citing its own precedent, In re Cuozzo Speed Technologies ( IP Update, Vol. 18, No. 2) the Court explained that the "broadest reasonable interpretation" applies in all post-grant proceedings. Although Cuozzo Speed Technologies did not expressly address the standard for claim construction in CBM proceedings, the Court saw "no basis for distinguishing between the two proceedings [IPR and CBM] for purposes of the PTAB's use of BRI in claim construction here."

As for the use of § 101 as a basis for CBM review, the Federal Circuit determined that the Board can hear and decide § 101 challenges as part of a CBM review, explaining that excluding § 101 challenges from CBM reviews would require clear direction by Congress, as the statute provides that in both CBM and PGR proceeding the Board may hear challenges on any ground that could be raised under paragraph (2) or (3) of § 282(b). The Federal Circuit was not persuaded by patent owner's argument that only § 282(b)(2) is relevant in terms of the § 101 argument and that § 101 is not included as "Part II" of the Patent Act, the portion referenced in § 282(b)(2). According to the Court, it would put form over substance to conclude that § 101 is not a ground available in a CBM review.

Turning to the merits, the Federal Circuit concluded that the patent at issue was a proper subject to a CBM review, noting that the definition of a CBM patent is not limited to only products and services of the financial industry. In addition, the Court agreed that the patent failed to recite a technological invention and was directed to "the abstract idea of determining a price, using organizational and product group hierarchies." For these reasons, the Court affirmed the Board's decision that the challenged claims were unpatentable under § 101.

PTAB Prevails In First Appeal Of A CBM Review

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