Secure Axcess, LLC v. PNC Bank Nat’l Ass’n
848 F.3d 1370 (Fed. Cir. 2017)
Authored by Peter McDonald
Statement of Facts: This case arose from a patent infringement claim that Secure Axcess, LLC brought against approximately 50 financial institutions. Secure Axcess owns U.S. Patent No. 7,631,191 (“the ’191 patent”), which is entitled “System and Method for Authenticating a Web Page.” The ‘191 patent “relates generally to computer security, and more particularly, to systems and methods for authenticating a web page.” ‘191 patent at 1:16–18. The ‘191 patent explains that an Internet user might be misled to the wrong website without proper authentication. The written description of the ‘191 patent generally discusses computer security with a focus on authenticating a web page, but contains some references that might be considered to concern activities that are financial in nature. In addition, despite typically referring to Internet “users,” the patent occasionally refers to “customers” and “consumers.” Id. at 1:28–29, 1:44.
Procedural History: At the initial decision-to-institute stage, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”) determined that the ‘191 patent was a covered business method (“CBM”) patent. After consolidating three separate CBM review proceedings with regard to the ‘191 patent, in each of which the patent was treated as a CBM patent, PTAB issued the Final Written Decision at issue on appeal. In its Final Written Decision, PTAB maintained that the ‘191 patent was a CBM patent.
Furthermore, PTAB held that claims 1–32 of the ‘191 patent were unpatentable because they would have been obvious under 35 U.S.C. § 103 in light of the cited prior art. PTAB focused most of its reasoning on the ‘191 patent claims as dealing with activities that are or might be financial in nature. PTAB reasoned that since the patent is “directed to solving problems related to providing a web site to customers of financial institutions . . . the ‘191 patent covers the ancillary activity related to a financial product or service of Web site management and functionality.” 848 F.3d at 1375. PTAB further explained that the “method and apparatus of the ‘191 patent perform operations used in the administration of a financial product or service.” Id. PTAB also observed that Secure Axcess’s allegations of infringement by approximately 50 financial institutions was a factor “weighing toward the conclusion that the ‘191 patent claims a method or apparatus that at least is incidental to a financial activity.” Id. at 1376. Secure Axcess timely appealed the PTAB’s Final Written Decision.
Questions Presented: 1) Whether the ‘191 patent is a CBM patent subject to review under Section 18 of the Leahy-Smith America Invents Act (“AIA”); 2) Whether PTAB’s claim constructions are reasonable under the broadest reasonable construction standard.
Holdings: 1) The ‘191 patent is outside the definition of a CBM patent that Congress provided by statute. PTAB’s conclusion is reversed; 2) PTAB’s constructions are reasonable in light of the standard PTAB used, but the ruling is vacated because PTAB used the wrong standard in making their obviousness determination.
Reasoning: Judge Plager described the standard of review of PTAB’s determination regarding whether the ‘191 patent is within the scope of the CBM statute. The standard of review in this case is under the Administrative Procedures Act § 706(2): “The reviewing court shall . . . hold unlawful and set aside agency actions, findings, and conclusions found to be–– (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. . . [or] (C) in excess of statutory jurisdiction, authority, or limitation, or short of statutory right . . . ” Judge Plager explained that the issue here is whether PTAB properly understood the scope of the statutory definition of CBM patent, which is a question of law. Judge Plager concluded that, as a matter of law, the statutory definition of a CBM patent precludes PTAB’s determination that the ‘191 patent is a CBM patent. Thus, Judge Plager concluded that PTAB acted “not in accordance with law” and “in excess of statutory jurisdiction.”
Judge Plager noted that Congress defined a CBM 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.” AIA § 18(d)(1). Judge Plager focused primarily on two phrases from that definition: “a patent that claims . . .” and “. . . a financial product or service.” Judge Plager explains that the question here is whether the requirement that a patent claim something applies only to the first clause or whether it applies to both clauses. Judge Plager concluded that both phrases must be read and analyzed in conjunction in order for the statute to work as Congress intended.
First, Judge Plager explains that the phrase “a patent that claims” has a clear meaning, and that it refers to the claims of the patent which, as properly construed, define the scope of the patentee’s rights. Judge Plager notes that, for a claim to be properly construed, it must be understood in light of the patent’s written description. However, Judge Plager explains that the written description of the patent alone cannot substitute for what may be missing in the patent “claims” and cannot, in isolation, determine CBM status. In addition, Judge Plager notes that reading the statute as only to the first phrase would give the CBM program unconstrained reach. Any claim for a method for performing any operations that happen to be used in the practice or administration of a financial product or service would be covered under such a broad reading. Judge Plager explains that Congress intended for the CBM patent program to be more limited in scope and not to refer to any patent that can or would be used in the sale of a good or service.
Judge Plager, in his discussion about “financial product or service,” argued that PTAB’s phrase that it used as part of its reasoning for its ‘191 patent determination is not part of the statutory definition of what is a CBM patent. 848 F.3d at 1379–81. PTAB concluded that “the method and apparatus claimed by the ‘191 patent perform operations used in the practice, administration, or management of a financial product or service and are incidental to a financial activity.” Id. at 1380 (emphasis added). Judge Plager pointed out that the Federal Circuit in Unwired Planet v. Google, 841 F.3d 1379, 1381–82 (Fed. Cir. 2016) had ruled that PTAB must limit itself to the express language of the statutory definition of a CBM patent because the plain words of the CBM statutory definition are clear, and they do not support additional interpretive phrases. In Unwired Planet, the Federal Circuit held that the emphasized phrases in the case were not part of the statutory definition, and when used “as the legal standard to determine whether a patent is a CBM patent” that standard “was not in accordance with law.” 841 F.3d at 1382. Here, Judge Plager explains that PTAB did not limit itself to the statutory definition, as it pointed to the legislative history of the CBM statute when coming to its determination of the proper legal standard. Judge Plager rules that PTAB’s use of legislative history is consistent with Unwired Planet, and the Federal Circuit must conclude that the definition used in this case is beyond the scope of the statutory standard and thus, is “not in accordance with law.”
After determining that PTAB used an overly-broad interpretation of the CBM statute, Judge Plager, writing for the 2-1 panel majority and joined by Judge Taranto, reversed the PTAB’s conclusion that the ‘191 patent is a CBM patent. As for the second issue in the case, Judge Plager and the majority vacated the board’s other determinations as they bear on obviousness. Judge Plager explained that, since the first issue was reversed, it would be better for PTAB to revisit its other determinations using the correct definition.
Dissenting Opinion: Judge Lourie respectfully dissented from the majority’s conclusion that the claims of the ‘191 patent are not directed to a CBM and are not subject to review under AIA § 18. Judge Lourie argues that the claims of the ‘191 patent are covered under the plain language of the statute. Judge Lourie explains that the claims of the ‘191 patent should qualify as a CBM patent under a reasonable interpretation of both phrases in the CBM statute. Judge Louire also explains that an examination of the ‘191 patent leads to the conclusion that the invention is clearly intended to be used in the management of a financial service. Judge Lourie also points out that the fact that Secure Axcess has sued multiple financial institutions for infringement of this patent shows that Secure Axcess believes their invention is used for the management of a financial service or product. The fact that the word “financial” does not appear in the claims of the ‘191 patent should not automatically lead to a conclusion that the claims would not meet the plain language of the statute. Judge Lourie cites other decisions from the Federal Circuit where CBM patent claims were not limited to financial products or services. In Judge Lourie’s view, PTAB correctly concluded that the claims of the ‘191 patent are in accordance with the CBM patent statutory definition, and Judge Lourie would not have reversed the decision. Judge Lourie recognizes that PTAB’s “overly broad language” has been cabined by the Unwired Planet decision, but believes that this should not cause the panel to “topple over an otherwise sound decision.” 848 F.3d at 1385.