The Software IP Report

Covered Business Method Patent Found Likely Patent-Eligible Under 35 U.S.C. § 101

The Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office has arguably held that business method patent claims may be patent-eligible under 35 U.S.C. § 101. In PNC Bank v. Secure Axcess, LLC, Case CBM2014-00100 (PTAB Sept. 9, 2014), the PTAB held that U.S. Patent No. 7,631,191 was eligible for Covered Business Method review to be instituted under 35 U.S.C. § 324. However, the PTAB was “not persuaded Petitioner has demonstrated that it is more likely than not that the claims challenged in the Petition are unpatentable under 35 U.S.C. § 101.” Therefore, while instituting a CBM review because it found that the Petitioner was likely to prove the patent claims obvious under 35 U.S.C. § 103, the PTAB denied Section 101 as a ground for the proceeding.

Claim 1 of the ’191 patent recites as follows:

A method comprising:

transforming, at an authentication host computer, received data by inserting an authenticity key to create formatted data; and

returning, from the authentication host computer, the formatted data (i) to enable the authenticity key to be retrieved from the formatted data and (ii) to locate a preferences file,

wherein an authenticity stamp is retrieved from the preferences file.

Eligibility for Covered Business Method Patent Review

Following a claim construction analysis, the PTAB turned to the question of standing. The question was whether the ’191 patent was a “covered business method patent” under AIA § 18(d)(1) and 37 C.F.R. § 42.301(a). Specifically, did the ’191 patent claim “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,” excluding “patents for technological invention?”

The Patent Owner claimed that the ’191 patent was directed to an authentication server that authenticated data such as a webpage. The Petitioner argued that “the financial product or service requirement” was met. The Petitioner noted that the Patent Owner had “sued approximately 50 financial institutions, including banks,” and that “the patent specification includes discussions of financial services using the claimed systems and processes.”

The PTAB agreed that “the method and apparatus claimed by the ’191 patent are incidental to a financial activity.” The disclosure discussed subject matter used by financial institutions, and in commerce. Further, the fact that the Patent Owner had brought suits against many financial institutions weighed in favor of finding that the ’191 patent claims were “at least . . . incidental to a financial activity,” even if not dispositive.

Moreover, the ’191 patent claims recited only technological features that used “known technologies.” Such known technologies include known computers, known operating systems, known networks, and “known cryptography techniques for encrypting and decrypting the authenticity key.” The Patent Owner had “not shown persuasively that the claimed subject matter, as a whole, requires any specific, unconventional software, computer equipment, cryptography algorithms, processing capabilities, or other technological features.”

The PTAB accordingly concluded that “the ’191 patent is eligible for a covered business method patent review.”

Patentability Under Section 101

Citing Alice Corp. Pty, Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014), for the proposition that the claims should be considered as a whole, the PTAB applied the framework of Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012) , and turned to the question of whether the patent claims recited an “abstract idea.”

Somewhat belying the conclusion that the ’191 patent claims were directed, at least incidentally, to a financial activity, and used only known technologies, the PTAB began by stating that:

Claim 1, as a whole, relates to a computer-implemented method to transform data in a particular manner—by inserting an authenticity key to create formatted data, enabling a particular type of computer file to be located and from which an authenticity stamp is retrieved. On its face, there is nothing immediately apparent about these physical steps that would indicate the claim is directed to an abstract idea.

According to the PTAB, the claims of the ’191 patent were distinguishable from the claims in Alice and Bilski, which were directed to economic and financial methods. The PTAB rejected the Petitioner’s argument that claim 1 was nothing more than the abstract idea of “computerizing a purported centuries-old practice of placing a trusted stamp or seal on a document to indicate the authenticity of the document.” The claims did not recite “placing the stamp, much less doing so on a paper document.”

The claims here were distinguishable from an abstract idea for the further reason that the recited transforming data. Moreover, as such, the claims satisfied the “transformation” prong of the “machine-or-transformation” test. The PTAB explained:

We are not persuaded that “transforming . . . received data by inserting an authenticity key to create formatted data” fails to satisfy the transformation prong. The claim language recites “transforming” one thing (“received data”) “to create” something else (“formatted data”) and further recites a particular manner of transforming (“by inserting an authenticity key”).

Accordingly, the Petitioner had failed to demonstrate “that it is more likely than not that the claims challenged in the Petition are unpatentable under 35 U.S.C. § 101.”

Conclusion

It is hard to know what to make of this decision, or whether it could be the beginning of any sort of trend, because the conclusion that the ’191 patent is directed, at least incidentally, to known financial activities and not “technological” subject matter seems at odds with the conclusion that this non-technological subject matter does not embody an abstract idea. On the other hand, the Supreme Court has explicitly stated that there is no general rule that business methods are unpatentable, and therefore the mere fact that a patent qualifies for CBM review should not mean that the patent recites ineligible subject matter under Section 101.

Perhaps the best way to read this opinion is to note the PTAB’s decision to consider the claims “as a whole.” Although historically the case law has mandated this approach, many recent cases from the district courts all the way to the Supreme Court have broken the claims down to isolate an alleged “abstract idea,” and then to determine whether the claims recite “something more” that narrows the claims or describes an innovation eligible for patent protection. The PTAB did not take this approach here, instead concluding that the ’191 patent claims simply did not recite an abstract idea at all. It certainly seems that the PTAB would have reached a certain result had considered the elements of the claims separately, rather than as a whole.

Regardless of the PTAB’s Section 101 analysis, as mentioned above, the Board did find that the ’191 patent was likely invalid as obvious over prior art under 35 U.S.C. § 103.

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