Court Tells Banks No on Business Method Patent Challenges

By Tony Dutra

A large group of banks June 6 lost their bid for review by the full U.S. Court of Appeals for the Federal Circuit of a panel ruling that overturned their challenge to a patent on a method of ensuring that a user is on the right internet web page.

The ruling said Secure Axcess LLC’s U.S. Patent No. 7,631,191 couldn’t be challenged at the Patent and Trademark Office as a covered business method because it was not specifically directed to financial activity. The CBM proceeding offers petitioners more options and fewer time constraints to make patent invalidity charges.

The court, in a 6-5 vote, rejected separate petitions for en banc review by PNC Bank N.A., U.S. Bancorp, Santander Bank N.A., and Nationwide Bank ( Secure Axcess, LLC v. PNC Bank N.A. , 2017 BL 189446, Fed. Cir., No. 2016-1353, 6/6/17 ).

The court has already defined CBM broadly enough “to go well beyond the financial industry,” said Judge Richard G. Taranto, who wrote one of the majority opinions.

Taranto also pointed out, as reasons not to rehear the case, that petitioners had other options, and that the “little-used” CBM challenges will be unavailable after the program expires in three years.

“We believe the underlying decision was incorrect and we are actively considering filing a petition for certiorari with the US Supreme Court,” U.S. Bancorp’s counsel Terence P. Ross of Katten Muchin Rosenman LLP, Washington, said in an email.

CBM Dead in 3 Years Unless Congress Acts

The CBM challenge was included as a “transitional program” in the America Invents Act of 2011, set to expire Sept. 16, 2020. The AIA’s inter partes review proceeding has been far more popular, but it only allows challenges to a patent’s novelty or obviousness, based on prior art references the original examiner either missed or didn’t adequately analyze. An IPR petition must also be filed within one year of an infringement charge in federal court.

CBM petitioners must be involved in a court case, but there is no time limit for filing. They also can challenge a patent for being directed to ineligible subject matter, or as as indefinite, not enabled by the written description, or as lacking support in the written description.

However, the Patent Trial and Appeal Board’s invalidity ruling on Secure Axcess’s ‘191 patent was based on non-novelty and obviousness only. Because of that, Taranto said, the banks did not necessarily need the CBM proceeding. PNC’s CBM petition did challenge the patent on patent eligibility grounds, under 35 §U.S.C. 101, but the board rejected those grounds when it instituted trial.

Further, he said, CBM petitions are typically favored by those asserting a patent-eligibility challenge, but “recent experience makes clear that relatively fast adjudications are now often available in court"—a reference to the hundreds of patents found ineligible under the U.S. Supreme Court’s 2014 decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l.

Congress can always extend the CBM program if it so desires, Taranto said. And if it does, the legislators can expand the definition at that time.

Battle Over Congressional Intent

Judge Alan D. Lourie’s dissent, joined by four other judges, said that the court’s definition is “severely limiting” and “frustrates Congress’s intent in establishing CBM review.”

Lourie’s opinion reflected the difficulty the court and the PTAB have had in determining Congress’s intent. The transitional program’s primary sponsor was Sen. Charles E. Schumer (D-N.Y.), who Lourie cited six times. For example, Schumer said the board should review a patent as a CBM so long as the patent holder alleged infringement by a financial product or service, “regardless of whether the asserted claims specifically reference the type of product [or] service accused of infringing.”

In a May 2016 PTAB ruling, though, the board quoted the AIA’s main Senate sponsor, Sen. Patrick J. Leahy (D-Vt.), for saying the CBM provision specifically excluded “technologies common in business environments across sectors and that have no particular relation to the financial services sector, such as computers, communications networks, and business software.”

Wilmer Cutler Pickering Hale and Dorr LLP represented PNC Bank; Parker Ibrahim & Berg LLC represented Santander; and Kirkland & Ellis LLP represented Nationwide.

Bruster PLLC and the Albritton Law Firm represented Secure Axcess.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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