United States: CAFC Rejects Broad Eligibility For CBM Review, Adds To Program Uncertainty

We have previously written about the uncertainty in CBM reviews resulting from the PTAB's inconsistent approaches in determining whether patents qualify for CBM review.1 What had been consistent, however, was the PTAB's broad definition of a CBM patent. In a recent decision, however, the Federal Circuit has rejected the PTAB's broad reading of eligibility for CBM review, finding that the standard applied by the PTAB did not follow the statutory definition. The case, Unwired Planet, LLC v. Google Inc.,2 ruled that the Board could not apply a CBM standard that queried whether a patent claimed activities "incidental to" or "complementary to" a financial activity.

Key Takeaway:  The Federal Circuit's rejection of the PTAB's broad standard for CBM eligibility means greater uncertainty for the CBM program. The Board will need to revisit its application of the statutory definition for covered business method patents and develop a new body of case law over time. Patent owners should be alert for the opportunity to challenge allegations that a patent meets the statutory definition for CBM patents, and to seek rehearing or appeal of prior determinations, where available. Patent challengers need to be aware of greater scrutiny and, likely, narrower application of the CBM standard for patents.

Background:  Congress enacted the CBM program as a quick and cost-effective way to adjudicate the validity of business method patents. When determining whether to institute a CBM patent trial, the PTAB normally decides, as a threshold matter, whether the challenged patent qualifies as a covered business method. Beginning with the earliest CBM cases, the Board concluded that covered business method review should broadly encompass patents claiming "activities that are financial in nature, incidental to a financial activity or complementary to a financial activity." 3

In the Unwired Planet case, the Board instituted CBM review of U.S. patent 7,203,752, which relates to restricting access to a wireless device's location information. Applying its broad CBM definition (as stated above), the Board determined that the '752 patent claimed subject matter "incidental or complementary to the financial activity of service or product sales," thus qualifying for CBM review. In reaching this conclusion, the PTAB reasoned that the '752 patent disclosed a client application for a goods or service provider, such as a hotel, restaurant, or store, that transmits relevant advertising to a wireless device in the area. In its final written decision, the Board determined that challenged claims were unpatentable, though it did not discuss CBM qualification.4

Unwired Planet appealed the PTAB's final decision on unpatentability, raising, inter alia, the issue whether the '752 patent qualified for CBM review. Google did not cross-appeal, and the PTO did not intervene.

CAFC Rejects Broad Aspects of CBM Eligibility Standard:  In its decision on appeal, the Federal Circuit addressed a single issue — namely, whether the Board's standard for CBM patent eligibility was consistent with the AIA statutory definition. The court answered this question in the negative.

The CAFC began its analysis with the definition of "covered business method patent" set forth in the AIA: "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, ..." 5 Next, the court acknowledged that the PTO adopted by regulation the statutory CBM definition without change. Noting that the PTO has broad rulemaking authority regarding the CBM program, the court remarked that it "might have been helpful if the [PTO] had used [its] authority to elaborate on its understanding of the definition [of CBM] provided in the statute," but observed that the PTO did not do so.6

Then the court turned to the institution decision, immediately recognizing that the Board did not apply the statutory definition of a covered business method patent, but rather applied its oft-used standard "whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity." Although acknowledging that the court had previously endorsed the "financial in nature" aspect of the Board's standard, the CAFC stated that the "incidental" or "complementary" prongs are not found in the statute.7 Instead, the court noted that the Board's standard derived from a general policy statement issued by the PTO in comments regarding implementation of the CBM review program, which in turn quoted a statement by Senator Schumer during floor debate over the AIA.

However, the CAFC opined that a general policy statement by the PTO cannot become binding law where the PTO did not adopt the policy as part a rule through its rulemaking process. The court further opined that a single statement in the legislative history cannot be controlling, particularly where, as here, the legislative history contains inconsistent statements on the issue. In particular, the court noted that the Board's use of "incidental to financial activity" would encompass activities such as counting money or sorting currency that might be excluded from CBM review according to some statements in the legislative history.8 While recognizing that some patents meeting the PTO policy statement would also fall within what the court termed a "narrow" statutory CBM definition, the court criticized the expansive nature of the "incidental" or "complementary" prongs of the Board's standard. Of concern to the court was the breadth of the standard, which might capture such (hypothetical) patents as a light bulb that works well in a bank vault, or a ditch digger used to extract dirt that is sold – patents that the CAFC clearly believed fall outside of the statutory definition and, thus, not subject to CBM review.9 Indeed, the court indicated that sales activity should not be a determinative factor, even if the specification suggests a potential sale, since "[a]ll patents, at some level, relate to potential sale of a good or service." 10

As a result, the Federal Circuit concluded that the PTAB's use of "incidental" or "complementary" to financial activity as part of its standard for determining CBM review did not comply with the statute. Accordingly, the court vacated the Board's decision and remanded the case to the Board to reconsider and determine whether the '752 patent is eligible for CBM review. Thus, the court's opinion did not foreclose the possibility that on remand the Board could, consistent with proper consideration of the statutory definition, conclude that the '752 patent claims a covered business method.

What Does the Court's Ruling Mean for the Future of the CBM Program?  At least in the near term, the CAFC's Unwired Planet decision shows that the court may be reeling in the Board's expansive reading of the CBM statute, and the result is likely to introduce more unpredictability into the program. Since the Board has, from the beginning of the program, relied on the now-rejected standard in making its CBM institution decisions, it will need to build up a new body of case law that focuses more specifically on the precise statutory language set out in the AIA. And the PTO may undertake additional rulemaking efforts to further refine the statutory definition. In the meantime, the PTAB will likely need to revisit more decisions, as patent owners take the opportunity to request rehearing or appeal of rulings where a patent was found to meet the old CBM standard.

Of course, the Unwired Planet case may not be finished at the appellate stage. The petitioner, Google, has been granted an extension of time in which to file a request for rehearing or rehearing en banc. And a petition for certiorari to have the case heard by the Supreme Court is not out of the question.

Further appellate review might be prompted for a couple of reasons. First, the Unwired Planet opinion casts the statutory definition as a "narrow" one.  But this "narrow" viewpoint contrasts with the opinions of the Federal Circuit in Versata11 and Blue Calypso,12 which characterized CBM review as having a "wide" reach. In Versata, the court rejected limiting the CBM program only to patents affecting the financial industry or financial institutions such as banks, opining that the statutory definition of a CBM patent "on its face covers a wide range of finance-related [sic] activities." 13 Similarly, the court in Blue Calypso rejected limiting CBM review to only those patents tied to the financial sector, relying upon the reasoning in Versata.14 And in both cases the court recognized that the PTO (and its adjudicatory arm, the PTAB) announced an intent to apply a broad brush to the CBM program, citing (among other things) the PTO's policy statement which included the "incidental" and "complementary" language. Although neither case adopted the "incidental" and "complementary" language, they also did not conclude that the PTO had overstepped the statutory bounds by relying on such broad language; the only criticism concerned the PTO's adoption of a rule that repeated the statute without further elaboration in the rule itself.

A second reason for further appellate consideration goes to the jurisdiction of the CAFC to review the CBM determination on appeal. The AIA provides a bar on appeal of decisions by the Board to institute trial. See 35 U.S.C §324(e) (applying to post-grant reviews, including CBMs) and 35 U.S.C §314(d) (applying to IPRs). In Versata, the court split 2-1 on whether it could review on appeal the Board's ruling that the patent was a CBM patent. In upholding the ability to review the Board's CBM determination on appeal, the court distinguished its decision in Cuozzo (but before the Supreme Court's ruling in that case).15

In any event, we can expect to see greater uncertainty in the CBM program over the near future.


1 See "Tension in the PTAB: How to Determine Whether a Patent Claims a Covered Business Method?", Andrews Kurth Kenyon IPR Blog, http://interpartesreviewblog.com/tension-ptab-determine-whether-patent-claims-covered-business-method/ (Aug. 8, 2016); see also "PTAB Is Inconsistent On Qualifications For CBM Review," Law360, http://www.law360.com/articles/824686/ptab-is-inconsistent-on-qualifications-for-cbm-review (Aug. 10, 2016).

2 Unwired Planet, LLC v. Google Inc., No. 15-1812 (Fed. Cir. Nov. 21, 2016).

3 E.g., SAP Am., Inc. v. Versata Dev. Grp., Inc., Case No. CBM 2012-00001, paper 36 at 21-22 (PTAB Jan. 9, 2013); CRS Advanced Techs., Inc. v. Frontline Techs., Inc., Case No. CBM 2012-00005, paper 17 at 7-8 (PTAB at Jan. 23, 2013).

4 Unwired Planet, slip op at 4-5.

5 Unwired Planet, slip op at 7 (quoting AIA § 18(d)(1)). Of note, the statutory definition explicitly excludes patents for "technological inventions," but the parties did not dispute whether the '752 patent falls within this exception.

6 Id., quoting Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306, 1325 (Fed. Cir. 2015).

7 Unwired Planet, slip op at 8.

8 Id. at 10-11.

9 Id. at 11-12.

10 Id. at 12.

11 Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015).

12 Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331 (Fed. Cir. 2016).

13 Versata, 793 F.3d at 1325 (emphasis added)

14 Blue Calypso, 815 F.3d at 1338.

15 In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed.Cir. 2015), aff'd sub nom. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).

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
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
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