PTAB Error In Claim Construction Leads To Federal Circuit Finding Of “Technological Invention” CBM Exclusion

  • November 1, 2019


SIPCO, LLC v. Emerson Elec. Co., No. 18-1635

In SIPCO, the Federal Circuit held that the Patent Trial and Appeal Board lacked jurisdiction to hear a petition for Covered Business Method review of SIPCO’s patent, because the patent was a “technological invention,” and thus outside of the scope of the CBM review statute. The Federal Circuit’s ruling provides further guidance regarding the differences between covered business method patents, and patents directed to a technological invention.

Emerson petitioned for CBM review of SIPCO’s patent directed to a device such as an ATM or vending machine that could relay a communication from a remote device, such as a bank card or key fob, to a central location. For security, the connection between the remote device and the ATM was claimed as a “low-power transceiver” to minimize the potential for unwanted circumvention or interception of the communication link. SIPCO, the patent owner, alleged that the Board did not have jurisdiction to hear Emerson’s petition because its patent was directed to a technological invention, and not a business method. The Board determined that SIPCO’s patent was eligible for CBM review and found the challenged claims to be patent-ineligible under section 101 of the Patent Act, and unpatentable as being obvious in view of the prior art under section 103. SIPCO appealed.

CBM review was passed into law as part of the Leahy-Smith America Invents Act of 2011. Unlike inter partes review, which was also created through the AIA and is limited to patentability challenges based on printed publications, CBM review allows validity challenges on any condition for patentability. However, this review is only available to challenge “covered business method” patents, defined to mean patents having claims that (1) are used in the practice, administration and management of a financial product or service, and (2) do not claim a technological invention. A patent claims a technological invention if the claimed subject matter as a whole is directed to a technological feature that is novel and unobvious over the prior art, and that solves a technical problem using a technical solution.

The Federal Circuit upheld PTAB’s determination of some claims in the patent being used in a financial product or service. However, the Federal Circuit reversed the Board’s decision regarding the “technological exception.” The Federal Circuit held that the challenged claims provided a solution to a technical problem.

The issue was whether the claims were fundamentally directed to improving the transaction using generic computer components – making the transmission of information to a central location using an intermediary better or faster – or whether the claims sought to improve the intermediary device itself. The Federal Circuit focused on the “low-power transceiver” of the claims and determined that his feature presented a technical solution to a technical problem. The fact that low-power transceivers were well-known in the art at the time of the invention of the patent was not determinative, because the transceiver still represented more than an abstract-idea-based solution using generic components in a conventional way. SIPCO’s claims combined specific communication elements in a particular way to address a specific technical problem with a specific technical solution. Thus, the claims were directed to a technical solution and were not eligible for CBM review.

Key Takeaway: A patent is not eligible for covered business method patent review if the claimed subject matter as a whole is directed to a technical solution to a technical problem, rather than an improvement to a financial service or transaction. Such a technical solution may combine known or conventional components, so long as it offers more than an abstract idea implemented with generic components.


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