The Software IP Report

PTAB Holds Claims Invalid Under 35 U.S.C. § 101 in Covered Business Method Review Proceeding

The USPTO’s Patent Trial and Appeal Board (PTAB), in its first final decision on a Covered Business Method Patent Review, has invalidated claims of U.S. Patent No. 6,553,350 under 35 U.S.C. § 101. SAP America, Inc. v. Versata Development Group, Inc., Case No. CBM2012-00001 (MPT) (PTAB June 11, 2013).

The claims of the ’350 patent were “directed to a method and apparatus for pricing products and services.” The purpose of the claimed invention was to simplify the prior art’s requirement for large data tables used to determine who (i.e., what customers) was purchasing what (i.e., what products). Accordingly, the ’350 patent claimed “arranging customers into a hierarchy of customer groups and products into a hierarchy of product groups.”

The PTAB began its opinion by disagreeing with the patent owner’s argument that the Board’s use of the “broadest reasonable interpretation” standard was erroneous. In fact, the PTO has been using the standard for over a century in both pre-issuance and post-issuance proceedings. As with prior proceedings, the new AIA proceedings allow claims, which provide an important notice function, to be amended. Accordingly, “use of the broadest reasonable interpretation encourages patent owners to remove ambiguities and to narrow their claims by amendment, such that the inventor’s contribution to the art is expressed in clear, precise and unambiguous terms.”

Further, the USPTO’s rules require use of the broadest reasonable interpretation standard in covered business method patent reviews. 37 C.F.R § 42,300(b). The PTAB spent over eight pages, which will not be detailed here, explaining that the USPTO was within its rulemaking authority in adopting the broadest reasonable interpretation standard.

The PTAB then turned to claim construction. Of particular interest is the construction of the term “data source.” Versata, the patent owner, argued that “data source” would have been understood “to mean a conventional or unconventional computer database.” SAP, on the other hand, argued that “the invention can be implemented using any data source that may be different from the conventional database.” The PTAB construed “’data source’ . . . as requiring the use of a computer storage medium as the ’350 patent defines the field of the invention as ‘computer-based’ pricing of products.” The PTAB then added that it’s Section 101 analysis would not be altered even if this construction was incorrect, “i.e., the claim is unpatentable whether we adopt Versata’s or SAP’s construction.”

After 24 pages of preliminaries, the PTAB turned to the question of subject matter eligibility under 35 U.S.C. § 101. The PTAB’s review of Section 101 precedent included some of the usual suspects (Bilski, Gottschalk v. Benson, Mayo Collaboration Services v. Prometheus Labs, Inc., and Diamond v. Diehr), before getting to the heart of the matter: “Versata Claims 17 and 26-29 are Unpatentably Abstract.” The PTAB agreed with SAP “that each of [the] challenged claims involves the use of an abstract idea: determining a price using organizational and product group hierarchies, which are akin to management organizational claim charts.” Because this “abstract idea does not represent patent-eligible subject matter,” it was necessary to “further analyze Versata’s claims to determine whether they incorporate sufficient meaningful limitations to ensure that the claims are more than just an abstract idea and not just a mere drafting effort designed to monopolize the abstract idea itself.”

Here, although “the challenged claims are drafted to include computer hardware limitations, the underlying process that is implemented on such hardware could also be performed via pen and paper.” Simply reciting “generic general-purpose computer hardware” failed “to narrow the claims relative to the abstract idea.” Moreover, additional claimed steps combined with the abstract idea were not “anything other than conventional, routine steps that are a consequence of implementing the abstract idea.”