Supreme Court Review in CLS Bank to Create Perfect Storm for CBM Filings
Patent Holders in the business method patent space received a sobering dose of reality a few weeks back when the USPTO Patent Trial & Appeal Board (PTAB) cancelled the claims of the very first Covered Business Method (CBM) patent challenge. The petition (here) challenged U.S. Patent 6,553,350 of Versata Development Group. In May of 2011, Versata secured a $391 million dollar verdict in the Eastern District of Texas against CBM challenger SAP. Aside from the speed at which the USPTO acted on the petition, perhaps the most noteworthy aspect of the decision was the basis for the cancellation.
The PTAB expedited the typical 12 month CBM duration to 9 months since the only challenge to patentability was based on 35 U.S.C. § 101 (i.e., whether or not the claims were directed to subject matter that was eligible for patenting in the first instance). The PTAB found that the claims were not patentable under 101, and cancelled the challenged claims as being directed to an abstract idea. (Written Decision here)
The PTAB's decision is this case was an eye opener to many business method patent litigants that had become accustomed to the "too slow to matter" world of USPTO patent reexamination. The SAP CBM decision made clear that the new post grant patent proceedings of the America Invents Act (AIA) can truly serve as a faster and cost effective alternative to patent litigation.
With the CAFC's decision in CLS Bank v. Alice Corp (considering computer implemented business method claims) seemingly destined for Supreme Court Review, the PTAB may very quickly become the 101 court of choice going forward.
Of course not every CBM filer will be a late stage litigant, such as SAP, that needs to expedite a 12 month proceeding to 9 months. Still, the SAP proceeding illustrates one of the unique components of a CBM challenge—estoppel is only based on grounds actually raised. As a result, a CBM filer can choose to forego challenges on art based grounds of unpatentability for later use. (i.e., a later court battle if the CBM is unsuccessful).
One benefit of a "101 only" filing is the avoidance of taking a position on the art that may complicate non-infringment positions/claim construction, and to limit potential additional discovery under the "good cause" CBM threshold. In the case of a 101 only challenge, should the Supreme Court's decision in CLS further restrict these types of patents going forward, patent challengers would be foolish not to take the "free shot" CBM filing. In addition to being alow risk, low cost strategic option, such a filing will almost certainly stay any copending litigation for the duration of the CBM proceeding.
With Congress now actively considering expanding the CBM proceeding to make a clearer case for its application against e-commerce related patents, the golden age of such business method patent trolls is clearly drawing to a close.