The Software IP Report

PTAB: No Technical Solution = Covered Business Method Patent

Patent claims directed to an electronic inventory patent recited a covered business method, and moreover are patent-ineligible, said the PTAB in a Final Written Decision in a Covered Business Method (CBM) proceeding.  Life Technologies Corporation v. Unisone Strategic IP, Inc., Case CBM2016-00025; Patent 6,996,538 B2/C1 (PTAB June 23, 2017).  This case will be interesting to many in part because of the Patent Owner’s unsuccessful attempt to contest the PTAB’s subject matter jurisdiction based on its failure to submit responses or participate in the proceedings as called for in the Scheduling Order.  But I write about it because the PTAB’s analysis of the validity question under 35 U.S.C. § 101 is an exemplar of how the problem-solution approach has taken over patent-eligibility analysis, albeit in this case in the context of determining whether claims qualify for Covered Business Method Review under § 18 of the Leahy-Smith America Invents Act (“AIA”).

Representative Claim 19 of the ’538 patent recites:

A method for inventory management, comprising the steps of:

(a) collecting and storing, on one or more databases having client software, at least the following data:

(1) customer inventory information

(2) inventory and cost information for a plurality of manufacturers, suppliers, or distributors, and

(3) inventory restocking parameters provided by said customer;

(b) evaluating via at least one computer said customer inventory information and inventory or cost information for a plurality of manufacturers, suppliers, or distributors inventory or cost information for a plurality of users selected from the group consisting of customers, manufacturers, suppliers, and distributors in light of said restocking parameters provided by said customer;

(c) ordering manufacturer, supplier, or distributor inventory which best fulfills said inventory restocking parameters provided by said customer;

(d) tracking inventory items in said databases for (1) said customer and (2) said manufacturer, supplier, or distributor, as inventory items are added to, restocked to, or removed from said inventories,

wherein said tracking step is executed by detecting an RFID tag associated with each said inventory item;

(e) updating said data on said one or more databases, using information obtained in said inventory tracking step, through at least one software interface to said databases; and

(f) providing access via client software to information in said one or more databases to each said customer, manufacturer, supplier, or distributor,

wherein said client software allows one or more customers, manufacturers, suppliers, or distributors to be classified into groups, and where permissions or roles are assigned to such groups.

This claim qualified for Covered Business Method Review under AIA § 18(d)(1) because steps related to tracking inventory were “financial in nature.”  There was no technical invention; rather, conventional computing technology was used.

And to that point, the claim did not qualify for the “technological invention” exclusion in AIA § 18(d)(1).  In a CBM proceeding, a technical invention is determined, “on a case-by-case basis” by “whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.”  37 C.F.R. § 42.301.

Here, no technical feature defined over the prior art.  Moreover, there was no technical solution to a technical problem: “the PTAB agreed “that ‘shifting the burden of inventory tracking onto a third party’ so as ‘to reduce delivery costs, to reduce labor costs, and to allow users to take advantage of manufacturer specials’ are not technical problems.”  And various “business rules” did “not provide a “technical solution” in relation to an improvement of the technical equipment itself, i.e., the recited databases, software, or RFID tag.”

The challenged claims having qualified for Covered Business Method Review, it was easy to hold them unpatentable under 35 U.S.C. § 101; as noted above, the Patent Owner had failed to earlier participate in the proceedings, and now was held to have waived arguments not previously made to support patentability.

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