Inconsistent Judgments on the Breadth of CBM Review?

Guest Post by Jeffrey Berkowitz and Jonathan R.K. Stroud  |

If you are looking for clarity on what qualifies as a “Covered Business Method” for review under Section 18 of the AIA (America Invents Act), the PTAB’s (Patent Trial and Appeal Board) decisions offer little guidance. Congress established the PTAB to provide a more effective, efficient, and consistent review of issued patents. But the PTAB has a ways to go as far as consistency is concerned. Case in point: The PTAB’s denial of CBM review in four related CBMs styled Par Pharmaceutical, Inc. v. Jazz Pharmaceuticals, Inc.[1]

Section 18 of the AIA governs the transitional program for “covered business method patent” reviews. Section 18(a)(1)(E) states that a transitional proceeding may be instituted only for a “covered business method patent,” which is “[1] 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 [2] the term does not include patents for technological inventions.”

Par, the first-ever pharmaceutical-related CBM challenge, joins the short list of rejected challenges under the first [1] “financial product” test of section 18(a)(1)(E). The PTAB panel denied institution of four related CBM challenges. All of the patents relate to distributing a prescription drug via the checking, controlling, shipping, and mailing of prescription drugs for a fee.[2] According to the panel, the claims “do not recite a product or service particular to or characteristic of financial institutions such as banks, insurance companies, and investment houses.”[3]

Previously, however, a different panel emphasized in the PTAB’s first decision to institute a trial of a CBM patent (“the SAP decision”) that “the legislative history explained that the definition of covered business method patents supported the notion that the definition be broadly interpreted and encompass patents claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.”[4]  In the same decision, the panel added that “[t]he Office also . . . did not adopt the suggestion that the term financial product or service be limited to the products or services of the financial services industry as it ran contrary to the intent behind § 18(d)(1).”[5]  In line with the legislative history, the panel refused to adopt a definition limiting financial services or products to a particular industry, financial services industry, because this was considered but not adopted during rulemaking. As such, a narrow construction would be contrary to the legislative history of Section 18:

We do not interpret the statute as requiring the literal recitation of the terms financial products or services. The term financial is an adjective that simply means relating to monetary matters. This definition is consistent with the legislative history for Section 18, which explains that the definition was intended to encompass patents claiming activities incidental and complementary to a financial activity. We hold that [the] patent claims methods and products for determining a price and that these claims, which are complementary to a financial activity and relate to monetary matters, are considered financial products and services under § 18(d)(1).[6]

In contrast, the panel in Par rejected CBM petitions because the Petitioner did “not analyze the claim language, in detail and in context, to explain how the claim language recites method steps involving the movement of money or extension of credit in exchange for a product or service . . . .”[7]  This requirement, however, is not found in Section 18, its legislative history, or the Office’s related rulemaking history.  It also contradicts earlier decisions interpreting Section 18, as reflected by the SAP decision.

This isn’t the first time the PTAB has denied patents CBM review for failing to meet the standards, but it is notable because the patents in Par are classified in class 705, the so-called “sweet spot” of CBM patents.[8] In the handful of decisions that have denied institution because the challenged patent is not a CBM, the respective panel denied the petition because the claims failed the “financial product” test,[9] or failed the “technical invention” test.[10] But no panel has denied a petition against a patent classified in Class 705.

The PTAB continues to develop a body of decisions interpreting Section 18. Because its decisions are made when deciding institution, the PTAB is the sole interpreter of what qualifies for CBM review. If the Federal Circuit holds that such decisions are entirely unappealable, the risk of inconsistent judgments remains. In the meantime, practitioners must be mindful of the different applications and potential different interpretations of Section 18 as they craft CBM petitions and prepare responses to petitions.


[1] CBMs2014-00149, -00150, -00151, and -00153, Paper 12 (Jan. 13, 2015).

[2] Id. at 12.

[3] Id. at 12.

[4] SAP v. Versata, CBM2012-00001, Paper 70, at 21–22 (June 11, 2013).

[5] SAP at 22 (citation omitted).

[6] SAP at 22 (emphasis added).

[7] CBMs2014-00149, -00150, -00151, and -00153, Paper 12, at 12 (Jan. 13, 2015) (emphasis added).

[8] See MeridianLink, Inc. v. DH Holdings, LLC, CBM2012-00008, Paper 1 (P.T.A.B. Nov. 13, 2012).

[9] See PNC Fin. Serv. Grp., Inc. v. Intellectual Ventures I LLC, CBM2014-00032, Paper X (May 22, 2014)

[10] See Epsilon Data Mgmt., LLC v. RPost Comm’n, Ltd., CBM2014-00010 & CBM2014-00014, Paper X (Apr. 22, 2014).

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