First CBM Review Affirmed on Rehearing, on to the Next Stage

Authored by A. Antony Pfeffer

SAP’s initiated CBM review of a Versata patent (CBM 2012-001), is finally nearing its end. The PTAB has denied Versata’s motion for rehearing rejecting all of Versata’s arguments (2013-0001 Dkt 81). This ruling clears the way for this CBM review to move on to the next stage.

In its request for rehearing, as characterized by the PTAB panel, Versata had argued that (1) the patent under review was not a “covered business method patent;” (2) there was claim and issue preclusion with respect to SAP’s challenge; (3) Section 101 was not a valid basis for review; (4) the “broadest reasonable interpretation standard” was improper in a PTAB trial (distinguished from prosecution or reexamination); (5) the PTAB’s claim constructions were unreasonable even under the “broadest reasonable interpretation standard;” and (6) a number of the claims recited patent eligible subject matter.

With respect to the first three issues, Versata had raised them in its preliminary owner’s response, but did not raise them again in its patent owner response after initiation of the CBM review. Accordingly, the PTAB panel held these arguments to be waived, and improper to raise on a motion for reconsideration.

With respect to issues four and five (regarding the “broadest reasonable interpretation standard”), the PTAB panel rejected Versata’s arguments that CBM reviews and IPRs should treat claim construction in the same manner as in district court litigations and follow the standard set forth in Phillips v. AHW Corp., 415 F.3d 1303 (Fed. Cir. 2005). Instead, the proper standard was reiterated by the PTAB panel to be the standard used in prosecution and in reexamination proceedings, i.e., the “broadest reasonable interpretation standard” based on In re Yamamoto, 740 F.2d 1569 (Fed. Cir. 1984). Of note here is that the parties had been involved in district court litigation and Versata had obtained a claim construction from the district court different (and presumably more favorable) than that applied by the PTAB for the CBM review.

Finally, with respect to issue six, the PTAB panel reiterated that none of the claims under review recited patentable subject matter. One basis for the motion for rehearing was the Federal Circuit’s intervening decision in Ultramercial, Inc. v. Hulu, LLC, No. 2010-1544, 2013 U.S. App. LEXIS 12715 (Fed. Cir. 2013). The PTAB panel stated that its earlier decision comported with the holdings of the Ultramercial decision. This is the issue that SAP had been granted leave to file a paper regarding as discussed here.

We can only assume that this case will now move on to the next stages of review, and possibly result in the first Federal Circuit review of an IPR or CBM.