Win or Draw or LoseThe Federal Circuit recently issued its opinion deciding SAP v. Versata, an appeal of the first PTAB final written decision in a post grant AIA trial. The court’s opinion (split on one issue) is significant because it decides a number of issues that will guide pending and future AIA trials, especially CBM proceedings. Below is a short summary of who—patent owners or petitioners—can claim victory in the court’s five major conclusions. 

  1. The court held that it has jurisdictional authority to review the PTAB’s determination as to whether a patent qualifies as a covered business method (CBM) patent subject to CBM review. This is a victory for patent owners because now aggrieved patent owners can ask the court to review the PTAB’s institution on this issue. A dissenting opinion questions the propriety of this holding in view of the court’s earlier decision in In re Cuozzo, which stated that AIA trial institution decisions are not reviewable. (A forthcoming post will further discuss the dissent’s views.)
  1. The court further determined that the definition of a CBM patent is not limited to products and services of only the financial industry, or to patents owned by or directly affecting the activities of financial institutions. This is a victory for petitioners because this determination permits an expansive reading of what patents may be subjected to CBM review.

The Federal Circuit chastised Congress and the Patent Office for failing to offer the public proper guidance on what qualifies as a “technological invention.”

  1. The court affirmed the PTAB’s conclusion that Versata’s patent claims did not recite a “technological invention” excepted from the CBM patent definition, although it also chastised the other two branches of government—Congress and the Patent Office—for failing to offer the public proper statutory and regulatory guidance on what qualifies as a “technological invention:”
    S. Patel 8.3Regrettably, the decision itself offers no further guidance beyond deciding that Versata’s claim, directed to leveraging hierarchical data structures used by large companies to organize price information, recites no technological invention. This continued ambiguity may be favorable to petitioners to the extent it permits a broader interpretation of CBM-eligible subject matter.
  2. The court states it is bound by its recent decision in In re Cuozzo, which upheld  the PTAB’s use of the broadest reasonable (claim) interpretation (“BRI”) standard in inter partes review (IPR) proceedings, to conclude that the use of the BRI standard is also appropriate in CBM proceedings. In dissenting from the court’s denial of Cuozzo’s petition for rehearing en banc that same issue (link), one of the Federal Circuit judges said the nation was the loser on that issue because the BRI standard thwarts the AIA’s plan to have the PTAB “apply the law reliably and expertly, to achieve expedited and correct determination of patent validity.” Further, the court states that a different construction standard here would not likely change the ultimate decision of unpatentability.
  3. The court concludes also that the PTAB has the authority to decide section 101 issues (e.g., patent eligibility) in a CBM review. Versata had argued to the contrary; specifically that only the defenses authorized under section 282 of the Patent Act could serve as bases for CBM review and that section 101 was not among the defenses articulated in section 282. No matter, the court refused to apply a hyper-technical reading of section 282 that would substantially change the law as understood in various precedents. This is a victory for the status quo and for petitioners because it ensures that CBM proceedings offer additional bases for challenging patent validity (compared to IPR proceedings).

Finally, on the parties’ specific patentability dispute, the court applied the Alice/Mayo 2-step test to conclude and confirm the propriety of the PTAB’s analyses that Versata’s claims recite an abstract idea ineligible for patent. This is a victory for SAP, even though SAP lost a parallel district court action in which it was adjudged to owe Versata $390 million for infringement of the now-patent-ineligible claims.