Credit Acceptance Corp. v. Westlake Services

Credit Acceptance Corp. v. Westlake Services
859 F.3d 1044 (Fed. Cir. 2017)
Authored by Christopher Carchia

Statement of Facts: Credit Acceptance Corp. (“CAC”) is the assignee of the ’807 patent which has both system and method claims allowing a customer to choose a product from a dealer’s inventory. The example given is a car dealership’s database for its inventory and matching that inventory with possible financing options using a prospective customer’s financial information. Westlake Services (“Westlake”) petitioned the Patent Trial and Appeal Board (“PTAB”) for a Covered Business Method (“CBM”) review of all patent claims (1–42), claiming that the patent claims are ineligible for patenting under 35 U.S.C. § 101.

Procedural History: In March of 2014, PTAB instituted review on claims 1–9, 13, and 34–42 and did not institute review on claims 10–12 and 14–33. Three months later, the Supreme Court issued its decision in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014) which vacated the decision in Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013) (“Ultramercial II”) which further developed understanding of 35 U.S.C. § 101. In August 2014, Westlake filed a second petition for CBM review due to the Supreme Court’s decision in Alice, challenging claims 10–12 and 14–33 as patent-ineligible under § 101. In November 2014, the Federal Circuit issued a revised Ultramercial decision, Ultramercial, Inc v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014) holding the claims patent-ineligible under § 101. Based on these two new decisions, PTAB instituted review of claims 10–12 and 14–33.

PTAB rejected the argument that Westlake was estopped from challenging claims 10–12 and 14–33 because of the existence of the first proceeding. PTAB determined the estoppel claim was not ripe because there was not a final written decision in the first proceeding. In March 2015, PTAB issued a final written decision as to claims 1–9, 13, and 34–42 stating that those claims were un-patentable under 35 U.S.C. § 101. CAC then moved to terminate the second proceeding arguing that Westlake was estopped by 35 U.S.C. § 325(e)(1) (providing for estoppel of claims in proceedings before the Patent Office) from challenging claims 10–12 and 14–33 because a final written decision of the first proceeding had been issued. PTAB denied CAC’s motion, stating that estoppel under § 325(e)(1) was decided on a claim-by-claim basis, therefore Westlake was not estopped on claims 10–12 and 14–33 because the first proceeding only decided claims 1–9, 13, and 34–42.

In January 2016, PTAB issued a final written decision in the second CBM proceeding finding that claims 10–12 and 14–33 were un-patentable under 35 U.S.C. § 101. CAC appealed this second decision, arguing that Westlake should have been estopped from maintaining the second proceeding in which it challenged claims 10–12 and 14–33 and that PTAB’s § 101 decision was in error. Westlake opposed and the United States Patent and Trademark Office (“USPTO”) intervened to support PTAB on all issues.

Questions Presented: First, does the Federal Circuit have jurisdiction to review a PTAB determination under 35 U.S.C. § 325(e)(1)? Second, does estoppel under 35 U.S.C. § 325(e)(1) apply to claims that were not instituted for review when a final written decision was issued for some of the claims petitioned for review? Third, did PTAB commit error by determining that claims 10–12 and 14–33 were patent ineligible?

Holdings: First, a majority on the Federal Circuit concluded that the court had jurisdiction to review the estoppel argument brought under 35 U.S.C. § 325(e)(1). Second, the majority found that Westlake was not estopped from having CBM review under 35 U.S.C. § 101 for claims 10–12 and 14–33 because 35 U.S.C. § 325(e)(1) (estoppel) does not apply in subsequent proceedings to claims that PTAB declined to review. Third, the majority found that claims 10–12 and 14–33 were not directed to patent-eligible subject matter under 35 U.S.C. § 101. The latter two holdings affirm PTAB’s holdings below.

Reasoning: Westlake and the USPTO argued that an estoppel determination by PTAB under 35 U.S.C. § 325(e)(1) was not appealable and therefore the Federal Circuit had no jurisdiction to review the finding that Westlake was not estopped. The USPTO argued that, under 35 U.S.C. § 324(e), the determination whether to institute post-grant review “shall be final and nonappealable.” The USPTO argued that the decision on estoppel was like a decision to institute review, which is not appealable. The majority then looked to Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), that considered the parallel “no appeal” statute for inter partes review under 35 U.S.C. § 314(d). Cuozzo held that PTAB decisions are non-appealable “where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.” Cuozzo at 2141. The majority distinguished the current case and 35 U.S.C. § 325(e)(1) from Cuozzo and 35 U.S.C. § 314(d) by finding that § 325(e)(1) is not limited only to institution decisions. The majority then referenced its interpretation of 35 U.S.C. § 317(b) (2006) in In re Affinity Labs of Texas, LLC, 856 F.3d 883 (Fed. Cir. 2017), which held that the “maintain” language of § 317(b) (similar to the language in § 325(e)(1)) terminates an inter partes reexamination proceeding already in progress when there is a final decision (of the issue) in a civil action and applied this reading to the “maintain” language in § 325(e)(1). Additionally, the majority noted that the Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112-29. § 18, 125 Stat. 284, 329-31 (2011), adopted the 35 U.S.C. chapter 32 provisions on post-grant review. See SightSound Technologies, LLC v. Apple Inc., 809 F.3d 1307 (Fed. Cir. 2015). Using substantially similar language as § 325(e)(1), § 18(a)(1)(D) of the AIA applies estoppel to district court and International Trade Commission proceedings. The majority found no evidence that the Federal Circuit lacked jurisdiction to consider estoppel issues arising from the district court or International Trade Commission. The majority believed it would therefore be inconsistent to allow for appeal of a decision on estoppel from the district court while not allowing appeal of a PTAB decision on estoppel. The majority noted that allowing the Federal Circuit to have jurisdiction over estoppel from written decisions of the district courts but not from PTAB could lead to conflicting outcomes without a clear way to correct PTAB’s decision in subsequent proceedings. The majority also cited the need for uniformity between estoppel decisions from the district courts and PTAB as strongly in favor of finding appealability here.

CAC argued that under 35 U.S.C. § 325(e)(1) estoppel applies to a claim previously subject to review “that results in a final written decision under section 328(a).” Additionally, CAC argued that a final decision under § 328(a) applied to all claims “challenged” in a petition, not just the claims for which review was instituted. Further, CAC argued that reading the two statutes together, § 325(e)(1) and § 328(a) apply estoppel to all claims challenged in a petition where any part of the petition results in a final written decision even if there are claims challenged for which review was not instituted. The Federal Circuit found that a final written decision did not cover claims that had not been instituted; therefore, a final written decision is not a final determination of patentability of non-instituted claims. In Synopsys v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016), the Federal Circuit interpreted language in § 318(a) and found that claims for which PTAB did not institute inter partes review could still be litigated in district court and that PTAB can institute inter partes review on a claim-by-claim basis. Further, the Federal Circuit found that § 318(a) (at issue in Synopsys) was identical to § 328(a) in relevant part and that they only require PTAB to address claims for which review was granted in a final written decision. The Federal Circuit therefore concluded that, since there was not a final determination, there was no estoppel. The Federal Circuit also relied on Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016) where the petitioner had requested inter partes review on three separate grounds; however, PTAB only instituted review on two of those grounds. PTAB then issued a final written decision upholding the claims over the two instituted grounds. 817 F.3d at 1297. On appeal in Shaw, the Federal Circuit held that the inter partes review statute only applied to grounds the petitioner raised or reasonably could have raised during the first review. Further, because the third ground for petition was denied, it was not raised nor could have reasonably been raised during the instituted inter partes review. Here, the Federal Circuit adopts the reasoning of these inter partes review cases because the inter partes review and covered business method review statutes have the same language and were enacted together under the AIA. The majority defers to the Supreme Court’s decision in IBP, Inc. v. Alvarez, 546 U.S. 21 (2005) which stated that the “normal rule of statutory interpretation [is] that identical words used in different parts of the same statute are generally presumed to have the same meaning.” Id. at 34.

Under Alice’s two-step analysis on the issue of patentability, the first question is whether the claims are directed toward an abstract idea. Alice Corp. v. CLS Bank Int’l., 134 S. Ct. 2347. If yes, then the court searches for an “inventive concept–i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” Id. at 2355. The majority agreed with PTAB’s finding below that the claims were directed at an abstract idea. CAC’s arguments that the claims were not abstract because they “improve the functionality of the general purpose computer by programming fundamentally new features” 859 F.3d at 1055, and that the claim was not directed at the abstract idea of financial processes, but to configuring a computer system to combine data from multiple sources to create a report of possible finance options, failed to sway the majority. Citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016) the Federal Circuit found that the cases make clear neither the automation of a manual process using generic computer parts nor an invention’s communication between previously unconnected systems amounts to an improvement in computer technology. Under Enfish, 822 F.3d 1327 the inquiry is whether the focus of the claims is on a specific improvement in computer capabilities or on a process that qualifies as an abstract idea for which the computer is merely a tool. Claims that qualify as abstract ideas for which computers are merely tools are not patentable. Using this framework the majority found that the claims at issue here were focused on a method of financing where the computer was simply a tool, stating that collecting information is within the realm of abstract ideas, citing Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016). The majority also found that data processing to facilitate financing is ineligible for patenting as an abstract concept, citing Mortgage Grader, Inc. v. First Choice Loan Services, Inc., 811 F.3d 1314 (Fed. Cir. 2016).

Under the second step of the Alice analysis, 134 S. Ct. 2347, PTAB below had found that the claims were not an inventive concept and the majority here agreed. CAC argued that before the ’807 patent, computers were unable to perform the claimed process and the claims improve the arduous task of manual automobile financing because it provides software that allows computers to supplant and enhance the existing series of steps, which computers were not previously configured to do. The Federal Circuit, citing Alice, 134 S. Ct. 2347, found that merely configuring generic computers to supplant and enhance a manual process is ineligible for patenting. The Federal Circuit found it significant that the claims did not provide any details as to any non-conventional software for enhancing the financing process, citing Electric Power Group, 830 F.3d at 1354.

Finally, CAC also argued that PTAB’s decision was legally defective because PTAB did not analyze the claims as an “ordered combination” to determine if there was an inventive concept. Alice, 134 S. Ct. at 2355. The Federal Circuit also rejected this argument, finding that PTAB did adequately consider the claims as an ordered combination and found it significant that CAC did not clearly identify any particular inventive concept that PTAB overlooked.

Dissenting Opinion: Judge Mayer dissented in part. Judge Mayer agreed that the challenged claims were patent ineligible however, Judge Mayer did not believe that the Federal Circuit had jurisdiction to review a decision by the PTAB “to deny a motion to terminate a post-grant review proceeding as barred by 35 U.S.C. § 325(e)(1).” 859 F.3d 1044, 1057 (Fed. Cir. 2017) (J. Mayer dissenting). Judge Mayer found that, in Cuozzo 136 S. Ct. 2131 (2016), the Supreme Court decided that the Federal Circuit had no jurisdiction to review determinations about the application and interpretation of statutes closely tied to USPTO’s decision to initiate reviews. Judge Mayer stated that 35 U.S.C. § 325(e)(1) was closely related to the USPTO’s decision to initiate review because when the statute applies, estoppel bars the PTAB from instituting review on a challenge to a claim on any ground raised or that reasonably could have been raised during the earlier review. Further, Judge Mayer found that PTAB’s decision as to whether a petitioner can or cannot bring or maintain a claim before the USPTO is a “central aspect of the determination to institute review,” 859 F.3d at 1058, and is barred from appellate review under 35 U.S.C § 324(e), which makes the Director of the USPTO’s decision on whether to institute review of the challenged claims final and un-appealable. Judge Mayer bases his decision on Husky Injection Molding Systems Ltd. v. Athena Automation Ltd., 838 F.3d 1236 (Fed. Cir. 2016) where the Federal Circuit found that it did not have jurisdiction to review whether PTAB had correctly resolved a question of assignor estoppel. The court in Husky found that assignor estoppel only prevents certain petitioners from challenging a patent (as opposed to affecting PTAB’s authority to declare claims unpatentable) which was part of the ban on review of decisions to institute challenges to claims. Judge Mayer analogizes assignor estoppel to § 325(e)(1) estoppel in that they both only affect who can petition for review and therefore reflected on PTAB’s decision to institute claim review.

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