Alert August 04, 2014

PTAB Issues Its First Precedential Opinion in CBM Review Proceeding Litigated by Goodwin Procter

Summary

On July 31, 2014, the Patent Trial and Appeal Board (PTAB) designated as “precedential” its decision in Covered Business Method Review (CBM) proceeding SecureBuy, LLC v. CardinalCommerce Corporation, CBM 2014-00035 (Pat. Tr. & App. Bd., April 25, 2014). In this decision, the PTAB held that it will not institute a CBM proceeding against a patent if the petitioner previously filed a declaratory judgment action challenging the validity of the patent. This is significant because when the PTAB designates a decision as precedential it binds subsequent PTAB panels unlike decisions not so designated. This is the first decision that the PTAB has designated precedential under the new post-grant proceedings implemented by the America Invents Act.

On November 1, 2013, SecureBuy, LLC filed two separate civil actions seeking a declaratory judgment that the claims of U.S. Patent No. 7,051,002 (the “’002 Patent”), owned by CardinalCommerce Corporation are invalid. See SecureBuy, LLC v. CardinalCommerce Corp., Civil Action No. 1:13-cv-01792-LPS (D. Del. Nov. 1, 2013); SecureBuy, LLC v. CardinalCommerce Corp., Civil Action No. 1:13-cv-00417-HSO-RHW (S.D. Miss. Nov. 1, 2013).

Two weeks later, on November 15, 2013, SecureBuy filed a petition requesting review of the ’002 Patent under the transitional program for covered business method patents.

Under Section 18(a) of the Leahy-Smith America Invents Act (“AIA”), CBM proceedings are regarded as, and shall employ the standards and procedures of a post-grant review (35 U.S.C. §§ 321-329) except that 35 U.S.C. § 321(c) and § 325(b), (e)(2) and (f) shall not apply to CBMs.

Thus, 35 U.S.C. § 325(a)(1) applies to CBMs and provides:

(1)        POST-GRANT REVIEW BARRED BY CIVIL ACTION.  – A post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

Similarly, 37 C.F.R. § 42.201(a) allows the filing of “a petition to institute post-grant review of the patent unless: (a) Before the date on which the petition for review is filed, the petitioner or real party-in-interest filed a civil action challenging the validity of a claim of the patent.”

Prior to the PTAB’s decision in SecureBuy, however, there was confusion in the PTAB’s Rules created by 37 C.F.R. § 42.300(a) which appeared to exempt CBM proceedings from the Rule set forth in 37 C.F.R. § 42.201(a), and provides as follows: “A covered business method patent review is a trial subject to the procedures set forth in subpart A of this part and is also subject to the post-grant review procedures set forth in subpart C except for §§ 42.200, 42.201, 42.202, and 42.204.” (emphasis added).

An early PTAB decision instituted CBM review of a patent that was the subject of a prior declaratory judgment action in district court, but did not expressly consider the jurisdictional issue raised by the statute. SAP America, Inc. v. Pi-Net Int’l, Inc., CBM 2013-00013 (Pat. Tr. & App. Bd., Sept. 19, 2013) (Paper 15). However, in Branch Banking and Trust Co. v. Maxim Integrated Prods., Inc., CBM 2013-00059 (Pat. Tr. & App. Bd., March 20, 2014) (Paper 12), the PTAB expressly addressed the jurisdictional issue and denied institution of the CBM where the petitioner had filed a declaratory judgment of invalidity before seeking CBM review. 

In the SecureBuy decision, the PTAB conclusively settled this conflict holding that the Patent Act expressly provides that the PTAB may not institute a CBM review of a challenged patent when the petitioner filed a civil action challenging the validity of a claim of the patent before the date on which the petition for review is filed.

This decision is now binding on subsequent PTAB panels.

The Patent Owner CardinalCommerce was represented by Goodwin Procter attorneys Mark Abate and Calvin Wingfield both in the district court actions as well as before the PTAB.