On December 1, 2017, the PTAB denied institution of a covered business method (“CBM”) petition because the challenged patent is directed to a “technological invention” and therefore is ineligible for CBM review under section 18 of the AIA. HTC Corp. v. Ancora Techs., Inc., CBM2017-00054, Paper 7 (PTAB Dec. 1, 2017). A CBM patent is one that “claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.” AIA §18(d)(1); see 37 C.F.R. §42.301(a). To determine whether the “technological invention” exception applies, the PTAB considers “whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.” 37 C.F.R. §42.301(b). Here, the PTAB was persuaded that the exception applies to the patent at issue, US 6,411,941 (“the ‘941 Patent”).
The ‘941 Patent is directed to “[a] method of restricting software operation within a license limitation that is applicable for a computer having a first non-volatile memory area, a second non-volatile memory area, and a volatile memory area.” ‘941 Patent, Abstract, Claim 1. The ‘941 patent was previously challenged by Apple, Inc. in another CBM proceeding which was terminated before the Patent Owner filed a preliminary response. Apple, Inc. v. Ancora Techs., Inc., CBM2016-00023, Paper 7 (PTAB Apr. 26, 2016). Like Apple, HTC argued that the “technological invention” exception should not apply to the ‘941 Patent because (1) the patent addresses “the grand proliferation of illegally copied software” and replaces expensive and inconvenient prior art hardware, which are business problems rather than technical problems, (2) the patent “describes and claims organizational choices for the locations where a key and license-record should be stored,” which is not a technical solution, and (3) the patent discloses “conventional” elements. CBM2017-00054, Paper 7 at 7-8.
The PTAB rejected the Petitioner’s arguments and declined to institute CBM review, stating:
Petitioner misidentifies the problem addressed by the claims. Prelim. Resp. 19–20. The “problem” the ’941 patent seeks to address is the technical problems resulting from the vulnerability of license authentication and software restriction using conventional data storage techniques—software based products that are vulnerable to hacking and hardware based products that are expensive, inconvenient, and not suitable for downloaded software. Ex. 1001, 1:19–32. In other words, the claims of the ’941 patent recite a technological improvement to problems arising in prior art software and hardware methods of restricting an unauthorized software program’s operation. Thus, we determine the disclosed method addresses a “technical problem.”
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Petitioner’s “organizational” argument is unavailing because the ’941 patent not only changes the location to store data—license-record and key—but the disclosed method also varies the type of medium used—non-volatile media instead of prior art volatile memory.
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Petitioner . . . does not address the technological feature of storing the license-record and key in the nonvolatile memory of the BIOS as opposed to volatile memory, such as a hard disk, but rather refers to the individual elements of the claims without considering the claims as a whole, as required by § 42.301(b). . . Petitioner’s argument is, thus, unavailing.
Id. at 9-11.
Takeaway: Persuading the PTAB to forego the “technological invention” exception is no trivial matter. To develop the most persuasive arguments against applying the exception, CBM petitioners should make sure that they precisely articulate the problem that the challenged patent is directed to, and address the claims as a whole rather than just the individual elements.