CBM Statute Inadvertently Excludes Best Source of CBM Prior Art

In fashioning the Covered Business Method (CBM) statutes of the America Invents Act (AIA), Congress was sensitive to the resources of the USPTO. That is, Congress realized that certain types of “secret prior art” would be very discovery intensive to analyze within the mandated 12 month time frame that the USPTO must conclude a CBM proceeding. An example of such art would be secret public use of a claimed method that predated a patent filing, such as described in Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co. 153 F. 2d 516 (CA2 1946). To avoid this type of discovery intensive prior art being applied in CBM proceeding, Congress excluded it under the definition of prior art provided in Section 18(C) of the AIA.

The problem with Section 18 (C) is that its definition of prior art inadvertently excluded 102(e).

AIA Sec. 18 recites as follows:

(C) A petitioner in a transitional proceeding who challenges the validity of 1 or more claims in a covered business method patent on a ground raised under section 102 or 103 of title 35, United States Code, as in effect on the day before the effective date set forth in section 3(n)(1), may support such ground only on the basis of–

(i) prior art that is described by section 102(a) of such title of such title (as in effect on the day before such effective date); or

(ii) prior art that–

(I) discloses the invention more than 1 year before the date of the application for patent in the United States; and

(II) would be described by section 102(a) of such title (as in effect on the day before the effective date set forth in section 3(n)(1)) if the disclosure had been made by another before the invention thereof by the applicant for patent.

In a nutshell, Section 18(C) defines CBM art as only art that qualifies under 102(a); or that 102(b) art that is not secret. While it was not the intent of the drafters to exclude 102(e), or even 102(d) for that matter, the language of the statute indicates otherwise. Yet, excluding 102(e) cripples the statute with respect to its intended purpose — combatting suspect business method patents.

102(e) art is also sometimes referred to as “secret” art as it is typically based on a patent application that was not known at the time of a later filing directed to the same invention. This first filed application is later published, and is effective as prior art against the second application based on its filing date. This type of prior art is especially prevalent in the CBM context as many such patents were pursued in the late 1990s in response to State Street Bank, and as a precursor to the “dot-com-bubble.” As patent applications did not publish in the 1990s, it is not uncommon for an application filed in 1997 to be effective prior art against the same application filed in 2000, but the earlier filed application does not issue as a patent until 2002 (i.e., remains non-public). As this type of “secret” art is documented and requires no discovery, it is routinely considered by the USPTO in the patent examination context. This art was not the focus of the Sec. 18(C) carve out but is nevertheless exlcuded by the language of the statute.

To date, many CBM filers have mistakenly assumed that 102(e) art was fair game understanding only that Congress provided a special definition of prior art in Sec. 18(C) to exclude secret public uses. Indeed filers such as Google have based entire petitions on 102(e) art in some cases. The PTAB has also instituted trials on 102(e) art. However, more recently, the PTAB has been sua sponte spotting the issue (CBM2013-00008).

Over the past month I have discussed this issue with legislative staffers working  on the next round of patent reform initiatives, and drafted a fix for their consideration. My understanding is that this technical fix, along with other AIA technical fixes will be included in the next round of patent reform  bills, and that the CBM fix will be made retroactive.