America Invents Act Delivers:
Quick Administrative Decision On Patent Challenge Brings Hope to Accused Infringers

Kerry L. Timbers

By Kerry Timbers. Co-Chair of our Litigation Practice Group

June 2013 IP Update

When the America Invents Act (AIA) was enacted last year to overhaul the patent laws, one of its goals was to provide cheaper and faster ways to attack patents, relative to the multimillion-dollar patent lawsuits that seem to take forever to resolve.

One of these new procedures, the Covered Business Method (CMB) review procedure, provides a relatively quick way to attack method patents in the financial and banking areas. This month, the first party to pursue the challenge was rewarded with a ruling from the Patent Trial and Appeal Board (PTAB) invalidating the patent asserted against it in a pending district court lawsuit.

SAP America has been in a multi-year infringement battle with patent owner Versata Development Group over a software-based patent for determining pricing based on which customer, from which geographic region, is buying which product. Versata claimed great success with its software until the much larger SAP introduced a competing product which, according to Versata, destroyed Versata’s customer base.

Versata sued for patent infringement and in late 2011 won a jury verdict of over $330 million. While this case was being appealed, CBM reviews became available under the AIA on September 16, 2012, and SAP took advantage of it on the very day the law took effect.

CBM reviews are available only to parties being sued or threatened on a patent involving a financial product or service. Unlike prior post-issuance reviews of patents, CBMs allow attacks on a patent not only on the basis of prior art, but also on the basis of lack of written description, lack of enablement, and indefiniteness, as well as whether the patent’s subject matter is even eligible for patenting.

The SAP review was expedited when SAP dropped all its attacks except subject matter eligibility  the argument that Versata’s patent was claiming nothing more than an unpatentable abstract idea  and on June 11, 2013, less than nine months after it began the procedure, SAP won a ruling invalidating the patent.

The PTAB ruled that Versata did indeed attempt to patent an abstract idea that could be performed not only on a computer but also by using pen and paper. It found the recitation of computer implementation or hardware to be insignificant, one “that fails to narrow the claims relative to the abstract idea.” Thus, the claims were unpatentable subject matter, and the patent was held invalid.

As quick as the ruling was, it didn’t come soon enough for SAP. Its appeal from the federal lawsuit that it lost had been decided about six weeks earlier, and the patent’s validity was upheld. It remains unclear whether SAP will be able to use the PTAB’s ruling to undo the huge verdict against it in the district court.

Still, the PTAB decision is significant in several respects. It shows that, as envisioned by the AIA, the PTAB can provide litigants with patent validity determinations much faster and cheaper than in federal court litigation. It reveals also that the PTAB can be truly independent, and not merely rubber-stamp earlier decisions of the patent office to grant the patent, or be swayed by federal court rulings upholding the validity of the patent.

The decision was also significant in confirming that the standard for claim construction in post-grant reviews is “broadest reasonable interpretation,” the same standard used in all other patent office proceedings, but one which is broader than that used in federal court cases.

This is all good news for those accused of patent infringement, who now have a new procedure for invalidating patents that may keep them from going through what SAP went through, years of expensive litigation in federal court.