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PTAB’s Definition of CBM Patent is Wrong and Too Broad, Federal Circuit Says

The America Invents Act (“AIA”) mandates that a Covered Business Method Review is available only for challenging the validity of covered business method patents.  On November 21, 2016, the Federal Circuit ruled in Unwired Planet v. Google that the Patent Trial and Appeal Board (PTAB) had rendered this limitation “superfluous” by failing to apply the correct statutory definition of “covered business method patent.”  Accordingly, the Federal Circuit vacated PTAB’s final written decision and remanded the case for a threshold determination of whether the challenged patent is a covered business method patent under the controlling statutory definition.

On October 9, 2013, Google petitioned for Covered Business Method (CBM) patent review of Unwired Planet’s U.S. Patent No. 7,203,752.  On April 8, 2014, PTAB instituted CMB review (CBM 2014-00006), stating that, when determining whether the ’752 patent was a CBM patent, the proper inquiry is “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.”  Applying this standard, PTAB determined that the ’752 patent was a CBM patent eligible for CBM review because the claimed invention could be used to facilitate advertising and therefore is incidental or complementary to a financial activity.

On appeal, Unwired Planet argued that PTAB had erred by applying the wrong standard for determining whether the ’752 patent was a CBM patent eligible for CBM review.  The Federal Circuit agreed.

The Federal Circuit noted that the AIA statutorily defines a CBM patent 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.”  But in determining whether the ʼ752 patent was a CBM patent, PTAB did not apply this statutory definition.  Instead, PTAB relied solely on its determination that the ’752 patent claimed subject matter was incidental or complementary to a financial activity.

As a result, the Federal Circuit determined that PTAB had exceeded its statutory authority.  According to the Federal Circuit, “patents that fall outside the definition of a CBM patent are outside [PTAB’s] authority to review as a CBM patent.”  Because there was no dispute that the “incidental” and “complementary” language applied and relied on by PTAB was not found in the statutory definition of a covered business method patent, PTAB’s “application of the ‘incidental to’ and ‘complementary to’ language … instead of the statutory definition render[ed] superfluous the limits Congress placed on the definition of a CBM Patent.”  Contrary to PTAB’s position, it is not enough that claims are merely incidental or complementary to a financial activity; rather, by statute, they must be directed to subject matter for “performing data processing or other operations” or “used in the practice, administration, or management of a financial product or service.” The Federal Circuit therefore remanded the case to PTAB for a determination of whether the ’752 patent is a CBM patent under this controlling definition.

CBM review remains a powerful weapon because it allows petitioners to challenge patents on several grounds unavailable in an Inter Partes Review, such as unpatentable subject matter under §101 and lack of written description under §112. But as Unwired Planet v. Google reminds us, petitioners and patent owners alike must remain aware of the statutory limitations placed on those patents that are eligible for CBM review.

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William A. Meunier is a Mintz attorney who has mastered inter partes review (IPR) proceedings and high-stakes patent litigation. He has helped patent owners achieve success in over 90% of IPRs, compared to the industry average of only 35%. Bill has decades of experience litigating patent cases.