United States: Federal Circuit Significantly Narrows CBM Review Eligibility

On November 21, 2016, in Unwired Planet, LLC v. Google Inc.,1 the Federal Circuit significantly scaled back the number of patents eligible for covered business method ("CBM") review. Specifically, the court eliminated from the PTAB-expanded definition for CBM eligibility "financial" activity that is merely "incidental" or "complementary" to the activity. Section 18(d)(1) of the America Invents Act ("AIA")—adopted verbatim by the USPTO in 37 C.F.R. § 42.301—provides that a patent is eligible for CBM review—an estoppel-limited, petitioner-friendly patent review—if (1) it "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," and (2) the claims are not directed to a "technological invention."2

As to the first prong, the PTAB has broadly defined it to include not only claims "that are financial in nature," but also claims that are only "incidental" or "complementary" to a financial activity, thus resulting in claims that do not appear to be "financial in nature" nonetheless being eligible for CBM review.3 Specifically, the PTAB has often looked to the patent specification to see if there is a direct or indirect financial-related activity. For example, in Unwired Planet, the PTAB found claims directed to restricting access to a wireless device's location information to be "incidental" or "complementary" to financial activity because the asserted patent's "disclosure indicates the 'client application' may be associated with a service provider or a goods provider, such as a hotel, restaurant, or store that wants to know a wireless device is in its area so relevant advertising may be transmitted to the wireless device."4 That is, while the asserted Unwired Planet patent claims are not themselves directed to a "financial activity," the claimed "location service could involve an eventual sale of services."5

In Unwired Planet, for the first time, the Federal Circuit disagreed with the overall PTAB approach, holding that the PTAB's definition exceeds and "renders superfluous the limits Congress placed on the definition of a CBM patent," and vacating and remanding the PTAB decision.6 The court emphasized that the "incidental" or "complementary" activity appears nowhere in the statute—it derives from a senator's single statement on general policy indicating that the definition should be broadly interpreted.7 And, the court noted, the PTAB adopted in its rulemaking the exact statutory definition, not the general policy statement.8 Such policy statements "are not legally binding, and without adopting a policy as a rule through rulemaking, an 'agency cannot apply or rely on upon a general statement of policy as law.'"9 The court also chastised the PTAB for cherrypicking a single statement from a broader congressional debate that contained inconsistent views.10 This decision—as well as the more recent Secure Axcess decision (discussed below)—ends the PTAB's expansive interpretation of CBM-eligible patents. The PTAB is already scaling back its CBM eligibility approach, relying on the revamped CBM definition to deny institution of claims that, pre-Unwired Planet, may well have been found "incidental" or "complementary" to a financial activity.11 We expect these trends to continue.


1 841 F.3d 1376 (Fed. Cir. 2016).

2 AIA § 18(d)(1) (emphasis added); see also 37 C.F.R. § 42.301.

3 E.g., Google Inc. v. Unwired Planet, LLC, CBM2014-00006, 2015 WL 1570274, at *7 (PTAB Apr. 6, 2015).

4 Unwired Planet, 841 F.3d at 1378.

5 Id. at 1380 (emphasis added).

6 Id. at 1382.

7 Id. at 1380.

8 Id. at 1381; compare AIA § 18(d)(1) with 37 C.F.R. § 42.301.

9 Unwired Planet, 841 F.3d at 1381.

10 Id.

11 E.g., Google Inc. v. HBAC Matchmaker Media Inc., CBM2016-00097, Paper 16 at 16 (PTAB Feb. 27, 2017) ("We agree with Patent Owner that, based on the Federal Circuit's new guidance in Unwired, Petitioner has not demonstrated that the challenged claims . . . are directed to a method or apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service."); Google Inc. v. KlausTech Inc., CBM2016-00096, Paper 10 at 11 (PTAB Feb. 27, 2017) ("Although we recognize that Internet advertising generally involves the sale of ad space, the fact that a sale has occurred or may occur is not enough when the challenged claims neither recite, a sale nor are otherwise directed to the practice, administration, or management of a financial product or service." (citing Unwired Planet, 841 F.3d at 1382)).

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