Versata: The Federal Circuit Explains The Parameters And Appealability Of CBM Proceedings

On July 9, 2015, the Federal Circuit decided its first appeal of a covered business method ("CBM") patent review. In Versata Development Group Inc. v. SAP America, Inc. et al., Case No. 14-1194 (Fed. Cir. July 9, 2015) ("Versata I"), the court addressed four issues relating to CBM proceedings generally: (1) the scope of judicial review; (2) the definition of a "CBM patent"; (3) the applicable claim construction standard; and (4) whether 35 U.S.C. § 101 arguments are available. The court ultimately affirmed the decision of the Patent Trial and Appeal Board ("PTAB") that a product-pricing patent was invalid as claiming only abstract ideas.

In a separate decision issued on July 13, 2015, the Federal Circuit further held that a patentee may not file a lawsuit in federal district court to challenge the PTAB's initial decision to institute CBM review. Versata Development Group Inc. v. Lee, Case No. 2014-1145 (Fed. Cir. July 13, 2015) ("Versata II").

BACKGROUND

In 2007, Versata Software Inc. sued SAP America, Inc. for allegedly infringing U.S. Patent No. 6,553,350 ("the '350 patent"). After a 2011 trial, a jury found that SAP infringed the '350 patent and awarded Versata $391 million in damages. In May 2013, the Federal Circuit affirmed the jury verdict.

While the initial appeal was pending, SAP petitioned for CBM review of Versata's patent under AIA Section 18. In granting SAP's petition, the PTAB concluded that the '350 patent qualified as a CBM patent and that Section 101 applied during CBM proceedings. In June 2013, the PTAB issued a final written decision, holding the patent invalid under Section 101 as covering only the abstract idea of calculating a product price.

In March 2013, Versata separately sued the U.S. Patent Office ("PTO") in the Eastern District of Virginia, seeking to set aside the PTAB's decision to institute. The district court dismissed the case for lack of subject matter jurisdiction and for failure to state a claim. It did so because "the decision to institute post-grant review is merely an initial step in the PTAB's process to resolve the ultimate question of patent validity, not a final agency action." Versata Dev. Corp. v. Rea, 959 F. Supp. 2d 912, 915 (E.D. Va. 2013). The court further noted that Congress clearly intended "to preclude subject matter jurisdiction over the PTAB's decision to institute patent reexamination [sic] proceedings." Id.

Versata appealed both the PTAB's final decision and the district court's...