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Polsinelli Intellectual Property & Technology Litigation


July 2015


Federal Circuit Affirms Unpatentability in Much Anticipated First Review of CBM Decision







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Robyn Ast-Gmoser



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Keith J. Grady

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Gary E. Hood

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Since the America Invents Act (AIA) passed in 2012, Covered Business Method (CBM) reviews have become the Sword of Damocles hanging over the heads of non-practicing entities, also referred to as patent trolls. Many CBM reviews have been filed seeking to invalidate patents which the owners have asserted against seemingly anyone conducting business on the internet. The first filed CBM review, which involved Versata's product pricing method, has finally made it through the patent office and through appeal in Versata Development Group Inc. v. SAP America Inc. et al.

CBM proceedings challenge whether patents which cover a business method are unpatentable for being directed to an abstract idea or for failing to meet the requirements of Section 101. SAP America Inc., who had been sued by Versata Development Group Inc., filed for CBM the first day the AIA took effect. The Patent Trial and Appeal Board held that Versata's patent was unpatentable as claiming the abstract idea of using a computer to determine price. "The claims recite unpatentable abstract ideas and the claims do not provide enough significant meaningful limitations to transform these abstract ideas into patent-eligible applications of these abstractions," the Board concluded. The Federal Circuit affirmed the Board's decision.

Beyond the impact to the parties in this particular case, the ruling also gives important guidance to all those seeking to initiate CBM reviews by addressing a number of issues of first impression. Prior to the Federal Circuit's decision there was disagreement whether CBM reviews should be limited to review of whether the patent covered an abstract idea, or whether the review could also include any challenge under Section 101. The Federal Circuit held that a broader approach was more appropriate and in keeping with the spirit of the established law. The Federal Circuit's decision also endorsed the Patent and Trade Office (PTO)'s interpretation of which patents are eligible for review as those business method patents used in the practice or management of a financial product or service, and not merely those related to banks or brokerage, etc., as Versata and others argued. In addressing Versata's arguments regarding how claims are construed by the Patent office and on appeal, the Court referred to its recent Cuozzo decision approving of the PTO's practice of reading claims according to their broadest reasonable interpretation. Finally, the Federal Circuit ruling cleared up how the decision to institute a CBM is reviewed and how the final written decision is reviewed.

For More Information

With the clarity provided by the long awaited Federal Circuit ruling, we expect that CBM reviews will continue to be popular when businesses are faced with suits from non-practicing entities. For more information on this ruling or how it may impact your business concerns, please contact the author or your Polsinelli attorney.













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