Tension in the PTAB: How to Determine Whether a Patent Claims a Covered Business Method?

Authored by Brian S. Mudge and Andrew D. Kasnevich
piciprCongress enacted the transitional program for post-grant review of covered business method (“CBM”) patents by the Patent Trial and Appeal Board as a quick and cost-effective way to adjudicate the validity of business method patents. In determining whether to institute a patent trial, the PTAB normally decides, as a threshold matter, whether the challenged patent qualifies as a covered business method, i.e., whether the patent claims a method, or corresponding apparatus, that is used in the practice, administration, or management of a financial product or service. In the early stages of the program’s existence, the PTAB found a range of business methods and software patents eligible for CBM review.1

A comparison of several recent decisions indicates that conflicting approaches exist within the PTAB for assessing a patent’s eligibility for CBM review and for what is to be considered in making this determination.


Section 18(d)(1) of the America Invents Act (“AIA”) defines a covered business method patent as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”2 The legislative history of the AIA “explains that the definition of covered business method patent was drafted to encompass patents ‘claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.’”3 And in approving the PTAB’s broad reading of the statute, the Federal Circuit interpreted this standard to include patents directed to a wide range of “finance-related activities,” while flatly rejecting any limit to patents only in the financial industry.4

Non-Uniformity in PTAB Rulings:

Recent PTAB opinions show differing approaches to determining whether a patent qualifies for CBM review. As summarized below, these approaches clearly affect the outcome.

Google v. ContentGuard.In this case, the PTAB confirmed a prior ruling that U.S. Patent No. 7,774,280 – which relates to a method for managing the transfer of rights associated with digital works using shared state variables – qualifies for CBM review. The Board looked first to the preamble of claim 1, which recites a “method for transferring rights adapted to be associated with items from a rights supplier to a rights consumer.” According to the opinion, the transfer of rights from a supplier to a consumer is incidental or complementary to a financial activity. The Board further consulted the specification, which explained that the transfer of rights may require payment of a fee or use of a clearinghouse to process payments.6

T. Rowe Price Investment Servs., Inc. v. Secure Axcess, LLC.7 The Board confirmed a prior ruling that U.S. Patent No. 7,631,191, which relates to authenticating data, such as a web page, is subject to CBM review. Although the claims do not recite any financial terminology, the PTAB explained that the specification discloses a need by financial institutions to ensure customers of its web site’s authenticity and describes use of alternative embodiments by financial institutions. The Board also relied on the fact that the patent owner asserted the patent against approximately fifty financial institutions as further support for its conclusion that the patent claims a method incidental to financial activity.8

Google v. Zuili.9 This case involves claims to a “pay-per-click” system to monitor the activity of a client and determine fraudulent activity based on the frequency of the client’s clicks on website links. The PTAB ruled the patent, No. 7,953,667, eligible for CBM review. Citing both the claims of the ’667 patent and its specification, the PTAB found this patent related to a payment arrangement that is itself financial in nature and involved the exchange of money, and was also incidental or complementary to other financial activities that followed, such as the user’s purchase of a product. The PTAB further found that the claims and specification related to advertising, in that merchants would pay to have links to their website included in the provided set.10

Apple v. Mirror World.11 The PTAB held U.S. Patent No. 6,006,227 – which relates to a document stream operating system for managing personal information – eligible for CBM review as well. The panel majority noted that the specification describes use of the invention for organizing a user’s personal finances, such as managing accounts or checking a stock portfolio. Rejecting the patent owner’s argument that the claims were “context neutral,” the majority reasoned that “a literal recitation of the terms data processing or financial or similar terms” was not necessary.12 The majority panel reached this decision over the concurrence of Judge McKone, who disagreed that the challenged patent was eligible for CBM review. According to Judge McKone, the plain language of the statute focuses on the patent’s claims and, based on the Federal Circuit’s decision in Blue Calypso, the Board should not look to the specification of the challenged patent for examples of financial uses.13

CoreLogic v. Boundary Solutions.14 The PTAB reached the opposite conclusion in another recent institution decision, involving U.S. Patent No. 8,065,352. The ’352 patent relates to a portal providing online delivery of parcel-level map data. The petitioner argued that the patent specification describes a process in which subscribers pay to gain access to map data and, thus, the purpose is to provide data in exchange for money. Further, the petitioner argued that the specification described different revenue models for using map data to generate revenue.15 Rejecting the petitioner’s arguments, the PTAB ruled that the petition had failed to adequately explain how the any of the claims of the ’352 patent related to financial activity in any way – in particular, the petition lacked discussion of how the claim limitations relate to any financial activity. And the Board noted that petitioner’s discussion of the specification (such as revenue generating aspects) failed to address how these disclosures related to the claim language – for example, no limitations require payment for use of the map data – and ignored the discussion of how map data could be provided “for free.”16

Differing Views on the Subject Matter Considered: Specification, Claims, or Both?

It is not surprising that determining whether a patent claims “activities that are financial in nature, incidental to a financial activity or complementary to a financial activity” may be difficult. What is worth considering, however, is the PTAB’s approach to making this determination, and the consistency with which the Board approaches this question.

The Mirror World decision shows both strains of the apparent disagreement on what should be considered in determining eligibility for CBM review. In finding the challenged patent eligible for CBM review, the PTAB panel majority held that eligibility was not based on the use of the claimed method in the practice, administration, or management of a financial product or service, but rather that the data process or other operations performed by the claimed method are used in such activities or products. According to the majority, the specification’s guidance is necessary in this determination.17 Conversely, Judge McKone in his concurrence concluded that, under the plain language of Section 18(d)(1), a “covered business method patent” is one that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service. Judge McKone’s inquiry accordingly focuses on the patent’s claims, and CBM review would be limited to methods used in the performance of a financial activity, not “usable in” as may be suggested by the patent’s specification.18

As the Mirror World majority recognized, this distinction is significant, and their ruling “shifts the focus away from a narrow examination of claim language for terms that are ‘explicitly or inherently financial’” and to the “broader question of how the operations performed by the claimed methods and apparatus are intended to be applied.”19 As noted in Mirror World, answering the question of how the operations performed by the claimed methods and apparatus are “intended to be applied” inevitably leads to consulting the specification.20

Other decisions fall on both sides of this divide. The specification of the challenged patent played a large role in the PTAB’s instituting CBM review in the Zuili case. In that decision, the PTAB relied on the specification, finding that even if the preamble of the challenged claim (reciting a pay-per-click system) was not considered, the claimed method was finance-related because all of the disclosed embodiments involve the use of a pay-per-click system – one involving payments between merchants and providers based on user clicks.21 Thus, in Zuili, written description of a system carrying out a financial activity was sufficient to institute CBM review of the challenged claims, even absent an express recitation in the claims.

That was the case in Secure Axcess, and the PTAB reached the same conclusion. There, claims directed to methods of authenticating a web page were found to be incidental to a financial activity because the specification disclosed “a need by financial institutions to ensure customers are confident that the financial institution’s web page is authentic,” and described use of embodiments of the invention by financial institutions.22 This determination was made despite the lack of any claim limitations directed to a financial activity or containing finance-related terminology.

In contrast, the PTAB focused on the claims, and refused to rely on the specification, in denying institution in CoreLogic. There, the petitioner argued that the patent is directed to a financial process because the specification described granting subscribers access to, and ways to generate revenue from, map data, whereas the patent owner took the opposite position and argued that the analysis must remain focused on the claims, which did not recite any financial terms.23 In agreeing with the patent owner that the challenged patent was not eligible for CBM review, the Board found that the petitioner had not identified any claim limitation that related to a financial activity in any way. Notably, the PTAB dismissed the petitioner’s citation to the specification, on grounds that its disclosure did not relate directly to, or meaningfully inform, the analysis of the claim language. At most, the PTAB found that the claimed method could generate revenue in a number of ways, while not reciting any exchange of money or financially-related step.24

And in the ContentGuard case, the PTAB similarly focused on the explicit claim language for transferring rights from a supplier to a consumer, and found that this consumer/supplier relationship was sufficient to classify the challenged patent as incidental or complementary to a financial activity.25 The opinion cited the specification’s description of fees paid for a transfer of rights only as reinforcement for its determination that the express claim language involved a financial activity.26

Uncertainty Moving Forward

From a review of these decisions, there appears to be some tension, or at least an inconsistency, within the PTAB as to what should be considered in assessing the eligibility of a patent for CBM review. That is, the Mirror World majority, Zuili, and Secure Axcess cited the specification in establishing eligibility, and in the latter two decisions, the PTAB found the specification’s disclosure sufficient even in the absence of explicit finance-related claim terms. In contrast, the Mirror World concurrence and the CoreLogic and ContentGuard decisions take a different approach — with a clear focus on the claim language, and resort to the specification only if the disclosure directly relates to, or meaningfully informs, specific claim limitations.

Of course, there is little room for debate as to whether a patent expressly claiming a financial or monetary activity is eligible for CBM review and, as the Federal Circuit explained in Blue Calypso, each case will turn on its particular facts and the patents at issue.27 Yet against that backdrop, a Federal Circuit panel in a recent oral argument appeared skeptical of an unduly broad view of patents that cover financial products or services.28

Regardless, “incidental to a financial activity or complementary to a financial activity” is a difficult standard to assess, and the diverging nature of recent decisions indicates that there is more uncertainty ahead.

1 See, e.g., B. Mudge, “Covered Business Method Patents: One Year On,” Intellectual Property Magazine, Jan. 31, 2014, available at http://www.kenyon.com/NewsEvents/Publications/2014/1-31-Covered-Business-Method-Patent-One-Year-On.aspx.
2Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1338 (Fed. Cir. 2016).
3Transitional Program for Covered Business Method Patents—Definitions of Covered Business Method Patent and Technological Invention; Final Rule, 77 Fed. Reg. 48, 734, 48,735 (Aug. 14, 2012) (“CBM Final Rules”).
4Versata Development Group Inc. v. SAP America Inc., 793 F.3d 1306, 1325 (Fed. Cir. 2015).
5Google, Inc. v. ContentGuard Holdings, Inc., Case No. CBM2015-00040, Paper 34 (June 21, 2016).
6Id. at 11-12.
7T. Rowe Price Investment Servs., Inc. v. Secure Axcess, LLC, Case No. CBM2015-00027, Paper 31 (June 13, 2016).
8Id. at 11-12.
9Google, Inc. v. Zuili, Case No. CBM2016-00021, Paper 11 (June 1, 2016).
10Id. at 13-14.
11Apple, Inc. v. Mirror World Techs. LLC, Case No. CBM2016-00019, Paper 12 (May 26, 2016).
12Id. at 6-7.
13Id. at 20-22.
14CoreLogic, Inc. v. Boundary Solutions, Inc., Case No. CBM2016-00018, Paper 9 (May 24, 2016).
15Id. at 7.
16Id. at 9.
17Mirror World, Paper 12 at 7-8, citing 157 Cong. Rec. S1365 (daily ed. Mar. 8, 2011) (Statement of Sen. Schumer) (“As recognized in the legislative history: ‘[t]o meet this [eligibility] requirement [under the AIA] the patent need not recite a specific financial product or service. Rather, the patent claims must only be broad enough to cover a financial product or service.’”).
18Id. at 20.
19Id. at 8 (italics in original).
21Zuili, Paper 11 at 13-14.
22Secure Axcess, Paper 31, at 11-12.
23CoreLogic, Paper 9 at 7-8.
24Id. at 9-10. Indeed, according to the PTAB, the specification contemplated that the claimed inventions could be used free of charge — undermining the petitioner’s argument.
25ContentGuard, Paper 34 at 11-12.
26Id. at 11, 13.
27815 F.3d at 1340.
28M. Macagnone, “Fed. Circ. Probes Limits Of Business Method Patent Review,” Law360 (June 7, 2016), available at http://www.law360.com/articles/804633 (discussing Unwired Planet LLC v. Google Inc., Case Nos. 15-1810 and 15-1812 (Fed. Cir.)).