The only issues on appeal were whether the patents are CBM patents and whether the challenged claims are directed to patentable subject matter under section 101. The Federal Circuit’s jurisdiction was based on 28 U.S.C. §1295(a)(4)(A) and 35 U.S.C. § 329, and included whether the ’752 patent is a CBM patent. Under the Administrative Procedure Act, the the Board’s actions are to be set aside if “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or “unsupported by substantial evidence.”
In accordance with the statute, a CBM review is available only for a “covered business method patent,” which the AIA defines 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, except that the term does not include patents for technological inventions.” AIA § 18(d)(1). The Federal Circuit said that while it might have been helpful if the PTO had used its authority to elaborate on its understanding of the definition of CBM provided in the statute, it did not do so, instead adopting by regulation the statutory definition of a CBM patent.
The Federal Circuit found that the Board did not apply the statutory definition, instead inquiring whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity. The Federal Circuit said that the Board determined that the ’752 patent was a CBM patent because the claimed location service could involve an eventual sale of services. The finding that sales could result from advertising related to the practice of the patent was the sole evidence the Board relied on to find that the ’752 patent is a CBM patent.
The Federal Circuit rejected the use of general policy statements, or the legislative history, noting neither the legislators’ views nor the PTO policy statement provides the operative legal standard. The authoritative statement of the Board’s authority to conduct a CBM review is the text of the statute. The Board is only empowered to review “the validity of covered business method patents.” AIA § 18(a)(1). Patents that fall outside the definition of a CBM patent are outside the Board’s authority to review as a CBM patent, and the PTO’s regulatory authority does not permit it to adopt regulations that expand its authority beyond that granted by Congress.
The Federal Circuit criticized the incidental or complementary language in the test applied by the Board, noting that a patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, a patent covering a method and corresponding apparatuses does not become a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service.
The Federal Circuit vacated the Board’s decision.