CAFC in SightSound v. Apple reaffirms the Board’s finality of decision in initiation of CBM or PGR proceedings, and their reviewability of whether a patent qualifies as CBM

CAFC in SightSound v. Apple reaffirms the Board’s finality of decision

in initiation of CBM or PGR proceedings, and

their reviewability of whether a patent qualifies as CBM

San Diego Patent Prep & Pros, Inc. – Mary Fales

Dec 15, 2015

In this case[1], Apple had previously petitioned the PTAB for covered business method (CBM) review of SightSound’s US 5,191,573 and US 5,966,440 patents. The Board held that the ‘573 and ‘440 patents qualified as CBM for review and found them obvious. Specifically, the Board held that the ‘573 and ‘440 patents were CBM patents, because they described “the electronic movement of money between financially distinct entities ... and do not include novel or non-obvious technology features that would otherwise exclude them from CBM treatment.”[2] Moreover, even though Apple only asserted 102 rejections based on the CompuSonics art, the Board initiated 103 rejections on its own:[3] SightSound argued the Board exceeded its jurisdiction. The Board reaffirmed its decision to self-initiate 103 grounds.[4] SightSound appealed to the CAFC. The Court affirmed the Board’s findings except for a minor claim construction issue and its jurisdiction over which patents qualify as CBM.

The CAFC first addressed the issue of if they had review over the Board’s decision to initiate the CBM proceedings. CBM are governed by AIA § 18 and chapter 32 of title 35.[5]  The Court held, referring to 35 USC  § 324(e)[6], that initiation decisions for CBM review by the Board are not reviewable.[7] The Court adhered to their prior decision rational from In re Cuozzo Speed Technologies, 793 F.3d 1268 (Fed. Cir. 2015). The Court in Cuozzo considered a similar issue regarding the Board’s finality of decision making for initiating Board reviews under 35 USC § 314(d). The Court stated that  § 314(d) “mirrors” 35 USC  § 324(e) regarding the finality and non-appealability of final Board decisions concerning initiating a review.[8] SightSound argued that the Board’s initiation was invalid, because Apple had not asserted the obvious grounds. The Court stated that their holding from Cuozzo still applies, that in general, “institution decisions are not reviewable, and in particular a challenge based on a defect in the initiation that could have been cured by proper pleading is not reviewable.”[9] SightSound argued that § 324(e) only bars review of initiating final decisions based on the grounds pleaded. The CAFC rejected this argument as well, concluding that § 324(e) bars “review of any institution decisions.”[10]

The second issue addressed by the Court was the issue of whether or not the ‘573 and ‘440 patents qualified as CBM. Apple and the PTO argued that the CAFC was barred from reviewing this decision as well. However, the Court disagreed stating that their decision from Versata II[11] still holds.[12]  SightSound went on to argue that in order to qualify as a CBM, the invention “as a whole” had to be directed to the management of money, banking, investment, or credit.[13] The Court disagreed citing to Versata II stating that a “financial activity” not directed to money management or banking could constitute a “financial product or service.”[14] SightSound contended the inventions claimed were “technology inventions,” because they recite a “computer” to transmit and “memory” to store, and therefore are not CBM. The Court disagreed stating that “the presence of a general purpose computer” or “generic hardware” that does “uninventive steps” doesn’t render the invention as “technology inventions.”[15] The CAFC upheld the Board’s finding that the ‘573 and ‘440 patents were CBM patents and that the findings were not “arbitrary or capricious” as SightSound had argued.[16]

Next, the Court addressed the third issue of claim construction, finding the Board’s reasoning incorrect in their construction of the claim term “second memory” on one matter, but correct on others. The Court said the Board had erred when it said in order for “second memory” to exclude the three media types, as SightSound argued, it required a “clear disclaimer” in the specification. The Court disagreed reaffirming the need to use the specification as the best guide to interpret the claims, and that claim terms must be consistently construed across the patent family.[17] In contrast, the Court upheld the Board’s finding that “floppy disks” wasn’t excluded from the “second memory” interpretation. SightSound argued that “all removable memory” including floppy disks should be excluded, but the Court upheld the Board’s reasoning: there was no language in the specification linking the disadvantages noted in the specification regarding the three media to included all removable media. In short, the Court concluded that the specification did not support the limitations for excluding all removable media.[18] 

Finally, the Court addressed the issue of obviousness. The Court upheld the Board’s finding of obviousness stating that the references had taught that it would have been commercially desirable to have the system as claimed.[19] Also, the Court stating the claims merely recited “known technologies to perform a method” and the combination of those technologies would have been obvious.[20]

Take Away: The Board has non-reviewable finality of decision concerning initiating CBM and PGR reviews over patents; even if a party doesn’t plead a specific ground for review, the Board can initiate one on its own. The Court continues to uphold established case law regarding claim construction and obviousness.

[1] SightSound Technologies, LLC v. Apple Inc., Appeal No. 15-1159, http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1159.Opinion.12-11-2015.1.PDF, (Fed. Cir. Dec 15, 2015).       

[2] Id. at 4.

[3] Id.

[4] Id. at 5 (the Board said even though Apple didn’t “explicitly” assert 103 grounds, they had supported their 103 assertion by providing “detailed explanation” of the CompuSonic art).

[5] Id.

[6] The Court also stated that this was true for PGRs as well.

[7] SightSound Technologies, LLC v. Apple Inc., Appeal No. 15-1159 at 6.

[8] Id. at 8.

[9] Id. at 7.

[10] Id. at 8.

[11] Versata II, Appeal No. 14-1145, (Fed. Cir 2015).

[12] SightSound Technologies, LLC v. Apple Inc., Appeal No. 15-1159 at 9.

[13] Id. at 10.

[14] Id. at 10-11.

[15] Id. at 11-12.

[16] Id (The Court stated that the Board, for example, read in the specification where the invention was described with terms of transactions of “sale,” “purchase,” “credit card number” and “money.”).

[17] Id. at 14 (The Court noted that the specifications had some language noting the disadvantages of using the three media).

[18] Id. at 16 (Moreover, the Court stated that the Board had found conflicting arguments from SightSound in the prosecution history. In addition, the Court said the Board found no teaching away from or disparagement of the claimed invention in the references.)

[19] Id. at 17 (The Board also found that SightSound had failed to prove commercial success).

[20] Id. at 12.