Federal Circuit Finds CBM Eligibility Reviewable on Appeal
The Federal Circuit yesterday issued a precedential opinion in Versata Development Group v. SAP America, Inc., Appeal No. 2014-1194 (Fed. Cir. Jul. 9, 2015), finding the claims invalid under 35 U.S.C. § 101. In addition to the case-specific merits, the Federal Circuit addressed several threshold issues regarding CBM procedure.
CBM eligibility is reviewable on appeal –
The Federal Circuit had previously held that the PTAB’s institution decision is final and nonappealable (In re Cuozzo Speed Technologies, LLC, 778 F.3d 1271 (Fed. Cir. Feb. 4, 2015), revised Jul. 8, 2015). But even though CBM eligibility is determined at the institution stage, the Versata court held that CBM eligibility was nonetheless reviewable after final written decision.
Please see full alert below for more information.
The Federal Circuit yesterday issued a precedential opinion in Versata Development Group v.
SAP America, Inc., Appeal No. 2014-1194 (Fed. Cir. Jul. 9, 2015), finding the claims invalid under
35 U.S.C. § 101. In addition to the case-specific merits, the Federal Circuit addressed several
threshold issues regarding CBM procedure.
CBM eligibility is reviewable on appeal
The Federal Circuit had previously held that the PTAB’s institution decision is final and non-
appealable (In re Cuozzo Speed Technologies, LLC, 778 F.3d 1271 (Fed. Cir. Feb. 4, 2015), revised
Jul. 8, 2015). But even though CBM eligibility is determined at the institution stage, the Versata
court held that CBM eligibility was nonetheless reviewable after final written decision.
The case turned on whether an issue – such as whether a patent qualifies as a “covered business
method patent” under the statute – is “part of or a predicate to the ultimate merits” of the
case. That is, does the issue affect whether the PTAB has authorization to invalidate a patent?
Here, the majority panel stated that CBM eligibility is such a threshold issue. If a patent is not
CBM eligible in the first place, then the PTAB would have no statutory authority to invalidate the
patent – and any overstepping of authority by an agency is generally reviewable by the courts.
In reconciling this holding with Cuozzo, the court noted that the issues were different. In Cuozzo,
the court said, the PTAB’s ultimate “authority to invalidate” was not in question – only the
appropriateness of the prior art grounds used to invalidate.
Judge Hughes dissented from this finding, reading the statute to bar review of any part of the
institution decision. He felt that a presumption of judicial review was overcome by the statute,
and that the majority effectively rewrote the statute in separating “invalidation authority” issues
from the institution decision. It remains to be seen whether an en banc rehearing will be held
to address this issue further.
CBM institution based on § 101 is reviewable on appeal
Using the same rationale, because the merits of the invalidity decision depend on the § 101
analysis, the majority panel also held that a decision to institute under § 101 is reviewable. “The
authority of the PTAB under the relevant statutes to apply § 101 law to the claims under review
goes to the power of the PTAB to decide the case presented to it.” Further, the Federal Circuit
confirmed that § 101 is a “condition of patentability” and thus a proper basis for CBM review,
noting that to decide otherwise would be contrary to the purpose of § 18, the portion of the
America Invents Act that provides for the CBM program.
The CBM definition is not limited to the financial sector
Versata had argued that the definition of a “covered business method patent” should be limited
to products or services from the financial sector. The Federal Circuit disagreed. Though the
court noted that the USPTO missed an opportunity to clarify the statute through its rulemaking,
the court found no such limitations within the words of the definition. Instead, the definition “on
its face covers a wide range of finance-related activities.” The court again pointed out that such
a restriction would be contrary to the purpose of § 18.
Federal Circuit Finds CBM
Eligibility Reviewable on Appeal
July 10, 2015
Michelle K. Holoubek
The Federal Circuit is also confused by the term “technological invention”
Patents directed to “technological inventions” are excepted from CBM eligibility. As defined in
the USPTO rules, “a ‘technological invention’ is one in which ‘the claimed subject matter as a
whole recites a technological feature that is novel and unobvious over the prior art; and solves a
technical problem using a technical solution.’” The Federal Circuit takes issue with this definition,
saying that there is “little cause” to support the “novel and unobvious” determination at such
early stages. Regarding the problem/solution factor, the court states, “[d]efining a term in terms
of itself does not seem to offer much help.” But, the court also notes that the USPTO was given
broad authority to set the definition to its own liking. As such, the court declined to explore
the outer bounds of the rule, noting that Versata’s patent does not fall within the exception,
“whatever that exception may otherwise mean.”
CBM claims are construed under the broadest reasonable interpretation
In accordance with the Cuozzo decision, the court confirmed that the PTAB’s use of BRI was
For more information, please contact:
Michelle K. Holoubek, Director
© 2015 Sterne, Kessler, Goldstein & Fox P.L.L.C.
1100 New York Ave. NW, Washington, DC 20005
S K G F. C O M
Report Note close
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.