Covered Business Method Patent Survives Alice

Patent claims can survive a patent-eligibility challenge under Alice and 35 U.S.C. § 101 even without a showing of a technological improvement.  In Dailygobble, Inc. v. SCVNGR, Inc., Case No. CBM2018-00002 (May 8, 2018), the USPTO’s Patent Trial and Appeal Board declined to institute a Covered Business Method Review (CBM).  The PTAB found that claims of U.S. Patent No. 8,924,260B1 fell within the statutory definition of “covered business method patent,” i.e., were (1) directed to a financial product or service and (2) were not directed to a technological invention.  Nonetheless, the PTAB declined to institute a CBM proceeding because it agreed with a district court analysis that the ’260 patent claims were patent-eligible because, as in Enfish, LLC v. Microsoft Corp. (Fed. Cir. 2016), the claims “as a whole” were not “directed to excluded subject matter.”

Claim 1 of the ’260 patent recites:

A method of processing a transaction at a point-of-sale (POS) terminal, the method comprising the steps of:

receiving, by the POS terminal, a stream of data from a credential reader;

recognizing, by the POS terminal, a first data sequence in the received data stream;

in response to the recognized first data sequence, handling, by the POS terminal, transaction data coming in sequence after the first data sequence according to a data-processing protocol stored on the POS terminal;

recognizing, by the POS terminal, a second data sequence in the received data stream;

in response to the recognized second data sequence, terminating, by the POS terminal, data handling according to the data-processing protocol; and

completing, by the POS terminal, a transaction based on the transaction data,

wherein the data-processing protocol comprises, by the POS terminal:

interrupting execution of a current task; and

combining the transaction data with item-purchase data received at the POS terminal and transmitting the data to a transaction-processing server for approval.

In U.S. District Court litigation over the ’260 patent, DailyGobble, the petitioner in this CBM proceeding, moved for judgment on the pleadings that the ’260 patent claims were invalid under 35 U.S.C. § 101.  The district court denied the motion.  Although the PTAB declined to grant estoppel effect to the district court decision, because it was not clearly a final judgment, the PTAB did agree with the district court’s conclusion.

But first, the PTAB had to decide whether the ’260 patent qualified for CBM review.  The patent owner did not dispute that either prong of the inquiry concerning whether the ’260 patent was a CBM patent was met.  Concerning the first prong, the PTAB agreed that passages quoted by the petitioner discussing point-of-sale (POS) transaction processing were sufficient to show that at least one claim was directed to a financial product or service.  Concerning the second prong, the petitioner had argued, and the PTAB accepted, that the claims simply used existing POS technology, did not solve any technological problem, and provided no technological invention.

Because the patent-eligibility inquiry so often focuses on whether claims are directed to a “technological solution,” one might have justifiably thought that the ’260 patent was in trouble at this point.  No so.  After dispensing with the question of estoppel, mentioned above, the PTAB agreed with the district court “in every respect” that:

“[c]ategorizing the claims in the ’260 patent as nothing more than recognizing and processing transaction data improperly describes the claims at a high level of abstraction, as warned against in Enfish.”  [Citation omitted.]  Rather, the District Court held that “[t]he claims in the ’260 patent . . . apply to a single method for differentiating between different forms of data streams and interrupting a current function of the POS terminal,” and that such a concept is not an abstract idea.

The PTAB also declined to institute a CBM on alleged grounds of invalidity under 35 U.S.C. §§ 102 and 103.

Lessons for Practice

This PTAB opinion, like the district court decision on which it relied, is not precedent that binds patent examiners or other PTAB panels.  And would the PTAB have decided differently if it did not have the district court decision to refer to?

Being thus limited to its facts, trying to export those facts and the PTAB’s reasoning to another set of patent claims probably falls into the don’t-try-this-yourself-at-home category.  That is, this case provides a lesson in showing that claims can survive an Alice patent-eligibility challenge even without a technological improvement.  And it is worth noting that these claims were somewhat detailed, and arguably narrow enough so as to not preempt all POS  transactions.  But beyond these broad lessons, patent-eligibility remains a subjective exercise, and it seems a futile enterprise to try to find a rule in a case such as this that can be applied to other cases.

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