Federal Circuit Finds “Technological Invention” Exception May Bar CBM Review
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  • Federal Circuit Finds “Technological Invention” Exception May Bar CBM Review

    On September 25, 2019, the United States Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion vacating a final written decision by the Patent Trial and Appeal Board (“PTAB”) finding certain patent claims eligible for covered-business-method-patent (“CBM”) review.  SIPCO, LLC v. Emerson Elec. Co., —F.3d—, (Fed. Cir. September 25, 2019).  The CAFC remanded to the PTAB for further consideration of the statutory “technical invention” exception to CBM eligibility.

    In July 2016, Emerson Electric Co. (the “Company”) filed a petition for CBM review.  The challenged claims recite a low-power transceiver configured to wirelessly transmit, e.g., credit card information, with a central server, e.g., a credit card verification system, via a network of addressable intermediary devices, e.g., including an ATM or vending machine.  The Company argued, inter alia, that these claims are directed to the patent-ineligible abstract idea of “establishing a communication route between two points to relay information.”

    The PTAB instituted review, concluding that the challenged claims qualified for CBM review under AIA § 18(d)(1), which defines a CBM 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.”  The PTAB then determined that the patent was not drawn to a “technological invention,” because the problem being solved was a financial problem, i.e., reducing the cost of having to dispatch service personnel to fix ATMs and vending machines, rather than to a technical problem.

    After institution, SIPCO disclaimed its claims reciting ATMs and vending machines, but the PTAB, in its final written decision, maintained that post-institution disclaimer did not affect its CBM eligibility determination.

    SIPCO appealed. Citing the Federal Circuit’s decision in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016), SIPCO argued that its patent was not subject to CBM review, because only certain of its claims were associated with ATMs and vending machines, that it had disclaimed those claims, and that the claims did not require communication of financial data.  The CAFC disagreed, observing that the patent expressly contemplates the transmission of information that identifies a user’s bank account and identity.  The CAFC also agreed with the PTAB that only one claim, at the time of institution, need meet the requirements of § 18(d)(1).

    The CAFC next reviewed the PTAB’s determination that SIPCO’s claims did not meet the “technological invention” exception under § 18(d)(1).  The definition of “technological invention” is given in 37 C.F.R. § 42.301, which states:
    In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: [1] whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and [2] solves a technical problem using a technical solution.

    § 42.301(b).

    With respect to part two, the CAFC concluded that the PTAB erred in concluding that the claims were directed to reducing the cost of repair, and instead were directed to the technical problem of unlawful interference, signal contention, and unwanted circumvention of electromagnetic signals, and included a technological solution including low-power, limited-range transmission technology.

    Because the CAFC reversed the PTAB as to part two, it remanded for further consideration of part one of the “technological invention” exception.  The CAFC also indicated that it did not necessarily view part one as coextensive with obviousness analysis under 35 U.S.C. 103, and asked the Board to “explain what part one of the regulation means.”