CBM Review Cannot be Predicated on Incidental Activity

30 Apr 2017

In Secure Axcess, LLC v. PNC Bank Nat’l Ass’n (Fed. Cir., 2017), the Federal Circuit examined the meaning of a covered business method (CBM) patent as intended by Congress.

In a final Written Decision of a post grant review, the Board held that US Patent No. 7631191 (the ‘191 patent), entitled “System and Method for Authenticating a Web Page” and owned by Secure Axcess, was a CBM patent under § 18 of the Leahy-Smith America Invents Act (“AIA”). The Board also held that all the claims in the ‘191 patent were unpatentable because they would have been obvious in view of cited prior art.

CBM is one of the post grant review procedures available for challenging the validity of patents. § 18(d)(1) of the AIA 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.”

The Board determined that the ‘191 patent was not for a technological invention. The Board further determined that the ‘191 patent was a CBM patent because it covers the ancillary activity related to a financial product or service of Web site management and functionality. The Board cited the approximately 50 financial institutions that Secure Axcess has sued as a factor weighing in determining that the ‘191 patent claims a method or apparatus that is at least incidental to a financial activity.

The Federal Circuit in its review of the Board’s decision mulled over the scope of the CBM program as intended by Congress. On the one hand, the Federal Circuit wanted to know if it suffices that the method or apparatus claimed in a patent is used in a financial activity for the patent to qualify as a CBM patent. On the other hand, the Federal Circuit wanted to know if the claims must recite, explicitly or implicitly, that the method or apparatus is used in a financial activity for the patent to qualify as a CBM patent. According to the Federal, the former interpretation would create “a virtually unconstrained reach,” whereas the latter interpretation would result in a more limited scope that is amenable to the temporary nature of the CBM program.

The illustrative claims of the ‘191 patent do not make any references to a financial product or service.

The Board included the phrase “incidental to a financial activity” in its interpretation of a CBM patent (“[t]he method and apparatus claimed by the ‘191 patent perform operations used in the practice, administration, or management of a financial product or service and are incidental to a financial activity”). However, the statutory definition of a CBM patent does not contain the phrasing “incidental to a financial activity.” The Federal Circuit argued that this phrase is beyond the scope of the statutory standard and not in accordance with law. The Federal Circuit noted that "if a patent that fits the term covered business method patent, as defined in AIA § 18(d)(1), is to be usefully distinguished from all other patents, the distinction will not lie based on non-statutory phrases like 'incidental to' or 'complementary to' financial activity."

The Federal Circuit also objected to the Board’s approach of taking into account the litigation history of Secure Axcess in determining whether the ‘191 patent was a CBM patent. The Federal Circuit argued that the choices of litigation targets “do not necessarily define a patent, nor even necessarily illuminate an understanding of the invention as claimed.”