The Software IP Report

PTAB Invalidates Business Method Claims in CBM Review

Inter partes review (IPR) and post-grant review proceedings conducted by the Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office are emerging as a potent tool for invalidating patents. Under the Covered Business Method (CBM) PG-Review available to accused infringers, the PTAB can invalidate patent claims under 35 U.S.C. § 101, in addition to under prior art provisions, 35 U.S.C §§ 102, 103. A good example of this trend is found in, Inc. v. VirtualAgility, Inc., Case CBM2013–00024 (PTAB Sept. 16, 2014), where the PTAB invalidated claims of U.S. Patent No. 8,095,413 under Section 101, in addition to finding the claims anticipated under Section 102.

Summary of the Patent under Review

Claim 1 of the ’413 patent was directed to “[a] system for supporting management of a collaborative activity by persons involved therein, the persons not being specialists in information technology, the system being implemented using a processor and a storage device accessible to the processor.” The patent described acquiring data sets to represent a model entity, e.g., an organization having customer relationships, processes, capabilities, economic information, etc.  A first data set could be associated with a second data set so that entities could be related. The model entities could be organized hierarchically to support budgeting, investment analysis, and strategic planning.

Decision to Institute CBM Review

The PTAB had previously decided that the ’413 patent was “a covered business method patent as defined in § 18(a)(1)(E) of the AIA and 37 C.F.R. § 42.301, because at least one claim of the ’413 patent is directed to a covered business method.” The Patent Owner sought to revisit this decision, arguing that a patent should not be considered related to financial products or services just because it could be used in the financial services industry. The PTAB disagreed, because “the ’413 patent discloses use of the claimed method and apparatus for the practice, administration, or management of collaborative activity that can include financial aspects or activities of an organization.” The PTAB then quoted various portions of the specification discussing financial or economic analysis. The PTAB also disagreed that the statute’s phrase “financial product or service” should be construed narrowly, and further dismissed the argument that the classification of the patent during prosecution at the USPTO was relevant.

Section 101 Analysis

After performing a claim construction exercise, the PTAB turned to the question of validity under 35 U.S.C. § 101. Following the framework of Mayo Collaborative Servs. v. Prometheus Labs., Inc. and Alice Corp. Pty, Ltd. v. CLS Bank International, the PTAB turned to whether the patent claims were directed to “laws of nature, natural phenomena, and abstract ideas,” or claimed “patent-eligible applications of these concepts.” After reviewing the disclosure of the ’413 patent, the PTAB concluded that the claims are directed to the “abstract idea” of “the creation and use of models to aid in processing management information by organizing and making the information readily accessible by the collaborators of the project.”

Further, the claims lacked an inventive concept to transform them “into a patent-eligible application of an abstract idea.”  As the Petitioner argued, the claims did “not add any inventive concept to the abstract idea of managing collaborative activity.” There was no specialized algorithm, and the use of a computer processor was in no way specialized. The recited storage device simply stored data. There were no “meaningful substantive limitations.”

The Patent Owner had argued that the recited “model of collaborative activity, model entities, and a plurality of hierarchies having a plurality of types” described “a particular type of model,” therefore “removing the claims from the realm of the abstract.” The PTAB responded that these claim limitations were all “overly broad in scope and essentially would preempts the entirety of [the] abstract idea (i.e., it would preclude individuals from using a model to organize and make available management information to collaborators jointly working on a project).” Further, “the claims are not limited to a particular type of collaborative activity, or to a particular industry or business.”

Finally, the PTAB was unpersuaded by the “Patent Owner’s argument that the claims have been reviewed previously by the Board of Patent Appeals and Interferences, as well as a district court, and have been found to cover patent-eligible subject matter.” Those decisions were prior to Alice. Further, any similarity to the claims in WildTangent, Inc. v. Ultramercial, LLC, was irrelevant because that case is being reconsidered by the Federal Circuit in view of Alice, and because the claims here, unlike those in Ultramercial, are only “directed to a general, rather than a specific, computer system.”

Although outside the scope of this blog post, as noted above, adding further insult to the Patent Owner’s injury, the claims of the ’413 patent were also held unpatentable under Section 102.


This case illustrates two important features of CBM review. First, the requirement that claims be related to the financial industry will be interpreted fairly loosely. Second, although at least one recent PTAB case indicates otherwise, the bar for proving Section 101 invalidity in a CBM proceeding before the PTAB is fairly low, as it is in federal court proceedings.