July 31, 2018
On July 11, 2018, in Apple Inc., Google LLC v. ContentGuard Holdings, Inc., the Federal Circuit agreed with Fitch Even client ContentGuard Holdings that the Patent Trial and Appeal Board (PTAB) applied the wrong legal standard to determine that ContentGuard’s U.S. Patent No. 7,774,280 qualified as a covered business method (CBM) patent. As a result, the Federal Circuit vacated the PTAB’s decision and remanded the case back to them to reconsider whether the ’280 patent qualifies under the proper standard.
At the PTAB, Apple and Google collectively submitted 35 petitions for inter partes review (IPR) and CBM review of nine patents from ContentGuard’s digital rights management portfolio, including the ’280 patent, which is directed to methods for controlling how digital content may be used by downstream users. ContentGuard successfully knocked out 34 of the 35 petitions at the preliminary stage, including 29 complete denials of institution of trial and five voluntary dismissals. In the remaining CBM review, the PTAB determined that the ’280 patent qualified as a covered business method (CBM) patent and instituted trial on three of the five challenged claims.
Claim 1 of the ’280 patent recites:
1. A computer-implemented method for transferring rights adapted to be associated with items from a rights supplier to a rights consumer, the method comprising:
obtaining a set of rights associated with an item, the set of rights including a meta-right specifying a right that can be created when the meta-right is exercised, wherein the meta-right is provided in digital form and is enforceable by a repository;
determining, by a repository, whether the rights consumer is entitled to the right specified by the meta-right; and
exercising the meta-right to create the right specified by the meta-right if the rights consumer is entitled to the right specified by the meta-right, wherein the created right includes at least one state variable based on the set of rights and used for determining a state of the created right.
When determining whether the ’280 patent was eligible for CBM review, the PTAB focused on the preamble language “transferring rights adapted to be associated with items from a rights supplier to a rights consumer” (emphasis added), stating it was “an activity that, at the very least, is incidental or complementary to a financial activity.” The PTAB also relied on portions of the specification that disclose how the transfer of rights “may require the payment of a fee or processing by a clearinghouse.” The PTAB thus determined that the transfer of rights associated with an item “from a supplier to a consumer is, at the very least, incidental or complementary to a financial activity.”
In the final written decision, the PTAB found three of the challenged claims unpatentable as obvious, but granted ContentGuard’s contingent motion to amend, which replaced claim 1 with a substitute claim that explicitly incorporated the district court’s construction of a disputed claim term “meta-right” from the parallel litigation. This claim term had been construed more broadly by the PTAB using the broadest reasonable interpretation standard. The PTAB found the substitute claim valid over the asserted prior art and issued a finding at ContentGuard’s request that the substitute claim is substantially identical to the original patent claim within the meaning of 35 U.S.C. § 252, effectively a finding that intervening rights should not apply to the substitute claim. Apple and Google appealed the grant of ContentGuard’s motion to amend, and ContentGuard cross-appealed the PTAB’s determination that the CBM patent qualified for CBM review in the first instance.
Finding that the PTAB applied the incorrect standard, the Federal Circuit reiterated its holding from Unwired Planet v. Google, which issued after the final written decision. Unwired Planet rejected the “incidental to or complementary to a financial activity” standard and reasoned that it is not enough for CBM jurisdiction that the practice of a patent could involve a potential sale of a good or a service, or that the specification speculates that a potential sale might occur. Unwired Planet further holds that “CBM patents are limited to those with claims that are directed to methods and apparatuses of particular types and with particular uses ‘in the practice, administration, or management of a financial product or service.’” The court reiterated that “the mere possiblity that a patent can be used in financial transactions is not enough to make it a CBM patent.” The court noted that while the ’280 patent describes embodiments that use the claimed system to monetize digital works, it also describes embodiments that do not involve financial transactions, such as managing healthcare records. The court instructed that “it is not enough for the specification to describe how the invention could, in some instances, be used to facilitate financial transactions.”
The court vacated the PTAB’s decision and remanded the case for the PTAB to assess whether the ’280 patent is a CBM patent using the proper standard.