Federal Circuit Clips The Wings of Covered Business Method Review

In an opinion yesterday in Unwired Planet, LLC v. Google Inc., a three–judge panel of the Federal Circuit significantly limited the scope of Patent Office review of business method patents under the America Invents Act. The appellate court shrunk the universe of patents eligible for covered business method (CBM) review, a result which may please patent owners, but will not serve the underlying purpose of getting low–quality business method patents in front of the Patent Trial and Appeal Board quickly and efficiently. Put differently, barring a reversal by the entire Federal Circuit or the Supreme Court, it just got significantly harder to obtain speedy and affordable administrative review of business method patents.

Here are the details. In 2011, Congress created a proceeding CBM review. The idea was to expedite PTO review of certain classes of patents of suspect validity. The statute defines a “covered business method patent” as “a patent that claims 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, except that the term does not include patents for technological inventions” (emphasis added). Relying on a statement made by Sen. Schumer of New York in the legislative history, the PTO interpreted the highlighted language, “a financial product or service” broadly to include patents claiming activities that are “financial in nature, incidental to a financial activity, or complementary to a financial activity.” This broad interpretation of the definition of “covered business method patents” brought a larger number of patents within the scope of the PTO’s review. In concluding that the PTO erred in its interpretation, the Federal Circuit held that that the authority to review a patent to “a financial product or service” does not extend to patents claiming activities incidental or complementary to financial activities. This narrower definition means fewer patents count as covered business methods, diminishing the value of the CBM review proceeding in weeding out poor patents relating to financial products or services.