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.
