By Reza Mollaaghababa
Under the administrative trial rules of the America Invents Act (AIA) a patent is eligible for covered business method (CBM) review if it only 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.” 37 C.F.R. 42.301(a). Notwithstanding, such a patent is exempt from CBM review if it includes a “technological invention.” Id.

In determining whether a patent includes a technological invention for the purposes of CBM review, U.S. Patent Office rules require the Patent Trial and Appeal Board (PTAB) consider “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).

In SIPCO LLC v. Emerson Electric Co. (IPR 2017-0001), the PTAB concluded that SIPCO’s U.S. Patent No. 8,908,842 was not excluded from CBM review under the statutory “technological exception.” The CAFC disagreed and vacated the PTAB’s decision.

SIPCO’s patent relates to a two-step system that sets up a two-step communication path between a remote device and a central location through a set of intermediate nodes that takes advantage of the nodes’ already-provided communication link (e.g., a public-switched telephone network (PSTN)) to the central location. To alleviate the problems associated with contention between two or more remote devices communicating at the same time or an interloper attempting to intercept the signal, SIPCO’s patent discloses the use of a low-power remote transmitter, which the patent explains requires the user to be in “close proximity” to a communication node.

The PTAB determined that the patent did not provide a technical solution to a technical problem and hence did not meet part 2 of the technological exception. The Board did not analyze part one. The Board focused on the features of claim 1 as incorporated into dependent claims 3 and 4, which recite, respectively, that the remote device is associated with a vending machine and an Automated Teller Machine (ATM). The Board asserted that these features were no more than generic and known hardware elements and routine computing features. Specifically, the Board noted that the only wireless transmission required by claims 3 and 4 was a signal from a low-power transceiver, which was well know in the art at the time of the invention.

The CAFC held that the Board misread and mischaracterized the features of claim 1 in its analysis of claims 3 and 4. The CAFC noted that the problem solved by SIPCO’s patent was technical in nature in that it related to how to extend the reach of an existing communication system from a central location to a remote, unconnected device while protecting against unwanted interference within the transmitted signals. SIPCO’s patent solved this problem with a technical solution, namely, the creation of a two-step communication system that communicates information through a low-power transceiver over a first, wireless stop, that taps into the intermediate nodes’ existing network connection to transport information to the central location.

The CAFC concluded that “[b]ecause SIPCO’s claims combine certain communication elements in a particular way to address a specific technical problem with a specific technical solution, we reverse the Board’s finding that the patent does not satisfy the second part of its “technological invention” regulation.”