Legislative History Does Not Replace Statute as Legal Standard in Determining Whether a Patent is Eligible For Covered Business Method (CBM) Review

Bill Schertler | December 27, 2016

Unwired Planet, LLC v. Google

November 21, 2016

Before Reyna, Plager and Hughes. Opinion by Reyna.

Summary:

Google petitioned for CBM review of claims 25-29 of U.S. Patent No. 7,203,752 (the “’752 patent”) directed to a system and method for restricting access to a wireless device’s location information.  The Patent Trial and Appeal Board (“the Board”) instituted review of all challenged claims, and, as a threshold matter, reviewed whether the ‘752 patent is a CBM patent, and therefore the subject of CBM review.  The Board instituted the CBM review on several grounds, including lack of written description, obviousness, and the ground that claims 25-29 are not patent eligible under 35 U.S.C. §101.  The Board upheld only the ground that the claims are not patent eligible under 35 U.S.C. §101.

Unwired Planet, LLC (“Unwired”) appealed the Board’s decision arguing, inter alia, that the Board erred in applying a standard that is broader than the AIA contemplates to determine whether the ’752 patent was a CBM patent.  The CAFC reversed and remanded, holding that the Board relied on an incorrect definition of covered business method in evaluating the challenged patent.

Details:

The claims at issue are directed to a system and method for restricting access to a wireless device’s location information.  The system allows users of wireless devices (e.g., cell phones) to set “privacy preferences” that determine whether “client applications” are allowed to access their device’s location information.  The privacy preferences used to determine whether client applications are granted access may include, for example, the time of day of the request, the device’s current location at the time the request is made, the accuracy of the provided information and/or the party who is seeking such information.

Claim 25 is representative for the purposes of Unwired’s appeal.  It claims:

25.  A method of controlling access to location information for wireless communications devices operating in a wireless communications network, the method comprising:

receiving a request from a client application for location information for a wireless device;

retrieving a subscriber profile from a memory, the subscriber profile including a list of authorized client applications and a permission set for each of the authorized client applications, wherein the permission set includes at least one of a spatial limitation on access to the location information or a temporal limitation on access to the location information;

querying the subscribe[r] profile to determine whether the client application is an authorized client application;

querying the subscriber profile to determine whether the permission set for the client application authorizes the client application to receive the location information for the wire- less device;

determining that the client application is either not an authorized client application or not authorized to receive the location information; and

denying the client application access to the location information.

Not all patents are eligible to be the subject of a CBM review.  In accordance with the statute (37 C.F.R. 42.301(a)), a CBM review is available only for a “covered business method patent,” which the AIA defines 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.” AIA § 18(d)(1).

However, to reach it’s decision that the ’752 patent was a CBM patent, the Board did not apply the statutory definition.  Instead, the Board stated that the proper inquiry “is whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” The origin of the “incidental” or “complementary” language is not found in the statute.  This language is found in a statement from Senator Schumer that the PTO quoted in its response to public comments concerning its consideration of proposed interpretations of the statutory definition for a CBM patent.  The full text of the public comment and the PTO’s response is:

Comment 1: Several comments suggested that the Office interpret “financial product or service” broadly.

Response: The definition set forth in § 42.301(a) for covered business method patent adopts the definition for covered business method patent provided in section 18(d)(1) of the AIA.  In administering the program, the Office will consider the legislative intent and history behind the public law definition and the transitional program itself. For example, the legislative history explains that the definition of covered business method patent was drafted to encompass patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” 157 Cong. Rec. 13,190 (2011) (statement of Sen. Schumer).  This remark tends to support the notion that “financial product or service” should be interpreted broadly.”

Using the inquiry “whether the patent claims activities that are…incidental to a financial activity, or complementary to a financial activity”, the Board found that the ’752 patent is a CBM patent because “the subject matter recited in claim 25 of the ’752 patent is incidental or complementary to” potential sales resulting from advertising.  The finding that sales could result from advertising related to the practice of the patent is the sole evidence the Board relied on to find that the ’752 patent is a CBM patent.

In rejecting the Board’s rationale for finding the ‘752 patent to be a CBM patent, the CAFC stated that “As part of this statement on general policy about how it will act ‘in administering the program,’ the PTO response quotes a single floor comment during the Senate debate over the AIA as an example of the legislative history.”  The CAFC continued “General policy statements, however, are not legally binding and, without adopting a policy as a rule through rulemaking, an ‘agency cannot apply or rely upon a general statement of policy as law.’”

The PTO’s regulatory authority does not permit it to adopt regulations that expand its authority beyond that granted by Congress.  The CAFC held that the Board’s reliance on whether the patent claims activities “incidental to” or “complementary to” a financial activity as the legal standard to determine whether a patent is a CBM patent was not in accordance with law.

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