Transitional CBM Challenge Program Sunsets Today

The America Invents Act (AIA) placed an expiration date on Covered Business Method (CBM) challenges.  That is, CBM review proceedings were designed as a “transitional program” that would sunset 8 years from enactment of the AIA – today is that day.

The legislative rationale behind setting an expiration for CBM was to target specific patents, namely, those  business method patents that issued between the State Street Bank, and Bilski decisions.  These patents were considered to be largely invalid under 35 U.S.C. § 101 having been issued under the more liberal 101 standard of State Street, and, providing a USPTO option for such 101 challenges was argued by the financial industry as the most efficient and cost effective path to resolution (as compared to the litigation of such issues by non-traditional patent defendants).

But, has the CBM program succeeded in neutralizing this alleged blip of invalid business method patents? If not, what is being done to potentially extend the program?

First, CBM filings have plainly fallen in number in recent years.  Critics would argue that these declining stats prove that the program is no longer necessary. Yet, these numbers may be proving, the opposite, that the value of the CBM threat has led to fewer overall disputes. Keep in mind, unlike IPR or PGR, CBM requires standing to file (i.e., suit or threat of suit).  Fewer suits, fewer filings.

CBM poses a significant risk to the monetization of qualifying patents.  For example, CBM filings can be made at any time during a litigation, and include a special provisions to virtually ensure a stay pending PTAB review (interlocutory review of a denial).  Thus, CBM filings can shut down even the most reluctant of Texas courts in continuing on with a business method patent trial.  Likewise, CBM reviews include a smaller potential estoppel footprint as compared to an IPR filing since there is no “reasonably could have raised” component to its estoppel provision.

Litigation Funds investing in patent portfolio assertions based upon a likelihood of a return have considered business method patents a bad bet for the last 8 years. Thus, even with the current trend of filing suit in the WDTX to avoid the PTAB, such a tactic could not prevent a stay under the CBM statutes.

If CBM is not extended, profiteers would be fools not to dust off these portfolios and rush to WDTX.  Without CBM and with the WDTX refusing to stay for IPR filings, these patents are suddenly valuable again.

For this reason, there is an ongoing effort by legislators to extend CBM (or, as of tomorrow, to bring it back) by adding the necessary language to the pending budget bill necessary to fund the continued operation of the federal government beyond September. My bet is that a CBM extension gets in the bill.

Stay tuned.