Transitional Program for Covered Business Method Patents under the America Invents ActLee Davis and Gregory L. Porter
The Leahy-Smith America Invents Act (AIA) includes expanded procedures for challenging patents administratively rather than through the courts. One of the new post-grant review procedures for challenging covered business method patents went into effect on September 16, 2012.
Post-grant review of covered business method patents is available to challenge any patent, even patents issued before the effective date of the AIA, and is handled by the newly created Patent Trial and Appeals Board (PTAB). For purposes of post-grant review, a “covered business method” (CBM) patent claims a method or corresponding apparatus for performing data processing or other operations used in practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions. Whether a patent claims a “technological invention” is considered on a case-by-case basis, and a technological invention is defined as claimed subject matter that as a whole recites a technological feature that is novel and unobvious over the prior art and solves a technical problem using a technical solution.
There are likely to be patents that fall on the outskirts of the definition of a covered business method patent. The Final Rules promulgated by the U.S. Patent and Trademark Office provide some guidance. For example, the Rules suggest that CBM patents subject to post-grant review are anticipated to be typically classified in Class 705 of the United States Patent Classification System. Class 705 is the classification for patents directed to data processing in the following areas: financial, business practice, management or cost/price determination. While the Rules specifically refer only to Class 705, they make clear that patents in other classifications, which fit the definition of business method patents, may also be subject to post-grant review.
To institute post-grant proceedings for CBM patents, the person challenging the patent must have been sued for infringement or have been charged with infringement under the patent. If post-grant review is sought, a party may seek a stay of any pending civil patent infringement action. In considering whether to grant the stay, the district court decides whether a stay will simplify the issues in question and streamline the trial, whether discovery is complete or a trial date has been set, whether a stay would prejudice the nonmoving party or present a tactical advantage to the moving party, and whether a stay will reduce the burden of litigation on the parties and the court. A party may take an immediate interlocutory appeal to the U.S. Court of Appeals for the Federal Circuit for de novo review of a district court’s decision. Affording immediate interlocutory appeal of the district court’s decision indicates the AIA’s strong preference for use of the new post-grant review proceedings for covered business method patents. Therefore, absent unusual circumstances it appears that most lawsuits in their early stages will be stayed.
Institution of post-grant review proceedings requires that the petitioner demonstrate that it is more likely than not that at least one of the claims challenged is unpatentable. If instituted, a trial proceeds only on the challenged claims for which the threshold standard has been met. The Board will enter a Scheduling Order concurrent with a decision to institute a trial that sets due dates for taking action and accounts for the complexity of the proceeding. The Scheduling Order sets out a sequenced discovery process where each party is provided respective discovery periods, beginning with the patent owner. The sequenced discovery is to allow meaningful discovery before motions and oppositions are submitted during trial. Thus, discovery before the PTAB is focused on what the parties reasonably need to respond to the grounds raised by their opponent. The types of discovery available under the Federal Rules of Civil Procedure can be sought by the parties, and requests for such discovery are considered under a “good cause” standard. The clear intent here is to reduce the scope and amount of discovery and its attendant costs from that in a district court case.
Each party to the proceeding is afforded an opportunity to present their case before at least three members of the PTAB at an oral hearing. Prior to any decision by the Board on the merits, the parties may agree in writing to terminate the proceedings. The PTAB will enter a final written decision not more than a year from the date trial was instituted, except that the time may be extended up to six months for good cause. A party dissatisfied with the PTAB’s final written decision may file a request for rehearing and/or an appeal to the U.S. Court of Appeals for the Federal Circuit.
Several petitions challenging a number of business method patents have already been filed since the new post-grant review procedures took effect. Based on today’s count, the PTAB Patent Review Processing System (PRPS) shows 10 pending petitions for post-grant review of alleged CBM patents. It is interesting to note that all of the patents are classified in Class 705, therefore we are unlikely to have an early ruling on a patent outside of Class 705. While the first petition was filed on September 16, 2012, as of about one month later, no trial has been instituted or scheduling orders entered for even the oldest petition. Thus, answers to what patents will be considered, what discovery will be sought and allowed, and the time to trial under these rules remain open.
In sum, only time will tell if the new post-grant procedures provide a more efficient, less costly manner of challenging business method patents.
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