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Attempts to Appeal Institution Decision Is SIPCOed

Reinforcing the impact of the Supreme Court of the United States’ 2019 decision in Thryv v. Click-to-Call, the US Court of Appeals for the Federal Circuit reiterated that the Patent Trial and Appeal Board’s threshold determination as to whether it will institute a proceeding under the America Invents Act (AIA), in this instance a Covered Business Method (CBM) review, is not appealable because it is closely tied to the institution decision. cxLoyalty, Inc. v. Maritz Holdings Inc., Case Nos. 20-1307, -1309 (Fed. Cir. Feb. 8, 2021) (Prost, C.J.)

cxLoyalty petitioned for CBM review of a patent owned by Maritz. The patent relates to a system and method for permitting a loyalty program customer to redeem loyalty points for rewards offered by vendors without human intervention. A participant (i.e., a customer) uses a graphical user interface (GUI) to communicate with a web-based vendor system (e.g., an airline reservation system). An application programming interface (API) facilitates information transfer between the GUI and the vendor system.

The Board instituted CBM review and concluded that the original claims in the patent were ineligible for patenting under 35 USC § 101, but that the proposed substitute claims were patent eligible. The Board found the original and substitute claims amounted “to a fundamental economic practice long prevalent in commerce” and therefore were directed to abstract ideas. However, the Board found that, unlike the original claims, the substitute claims contained an inventive concept. cxLoyalty appealed the Board’s ruling as to the substitute claims. Maritz cross-appealed the Board’s determination that the patent was eligible for CBM review and the Board’s ruling as to the original claims.

The Federal Circuit quickly disposed of Maritz’s challenge to the CBM-eligibility of the patent, citing to its 2020 SIPCO v. Emerson decision. In SIPCO, the Court held that Thryv made clear that the Board’s threshold determination as to whether a patent qualifies for CBM review is a non-appealable decision. Whether CBM review is an available mechanism is conditioned on whether the patent qualifies, since patents that are directed to “technological inventions” are excluded from CBM review. Because the determination of whether a patent qualifies for CBM review is inextricably tied to the decision to institute, it is not appealable. SIPCO was decided after briefing but before oral argument of this case. Indeed, Maritz’s counsel acknowledged during oral argument that SIPCO foreclosed Maritz’s CBM eligibility challenge.

As to the merits, the Federal Circuit agreed with the Board that both the original and substitute claims were directed to patent-ineligible subject matter under § 101. Maritz argued that the claim features of permitting a participant to redeem points for rewards “without knowing that the actual transaction is a currency transaction at less than the perceived price” saved the claims from being merely abstract ideas. The Court disagreed. After applying the Alice/Mayo two-step analysis, the Court found that 1) the claims were directed to abstract ideas, and 2) the claims merely recited generic and conventional computer components or functionality for carrying out the abstract [...]

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USPTO Proposes New Rules for Post-Grant Proceedings

The United States Patent and Trademark Office (USPTO) proposed changes to the rules of practice for instituting review on all challenged claims or none in inter partes review (IPR), post-grant review (PGR) and the transitional program for covered business method patents (CBM) proceedings before the Patent Trial and Appeal Board (PTAB) in accordance with the 2018 Supreme Court decision in SAS Institute Inc. v. Iancu, IP Update, Vol. 21, No. 5 (SAS). Additionally, the USPTO proposed changes to the rules to conform to the current standard practice of providing sur-replies to principal briefs and providing that a Patent Owner response and reply may respond to a decision on institution. The USPTO further proposed a change to eliminate the presumption that a genuine issue of material fact created by the Patent Owner’s testimonial evidence filed with a preliminary response will be viewed in the light most favorable to the petitioner for purposes of deciding whether to institute a review.

In SAS, the Supreme Court held that a decision to institute an IPR under 35 U.S.C. § 314 may not institute on fewer than all claims challenged in a petition. The Court held that the PTAB only has the discretion to institute on all of the claims challenged in the petition or to deny the petition. Previously, the PTAB exercised discretion to institute an IPR, PGR or CBM on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted in a petition.

In light of SAS, the USPTO now proposes to amend the rules pertaining to instituting any post-grant proceeding (IPR, PGR or CBM) to require institution on all challenged claims (and all of the grounds) presented in a petition or on none. In addition, in all pending proceedings, the PTAB would either institute review on all of the challenged claims and grounds of unpatentability presented in the petition or deny the petition.

The second proposed change would amend the rules pertaining to briefing regarding sur-replies to principal briefs and to provide that a reply may respond to a decision on institution. The amended rules would permit (1) replies and Patent Owner responses to address issues discussed in the institution decision and (2) sur-replies to principal briefs (i.e., to a reply to a Patent Owner response or to a reply to an opposition to a motion to amend). However, the sur-reply may not be accompanied by new evidence other than deposition transcripts of the cross-examination of any reply witness. Sur-replies may only respond to arguments made in reply briefs, comment on reply declaration testimony or point to cross-examination testimony. A sur-reply also may address the institution decision if necessary to respond to the petitioner’s reply.

Finally, the USPTO proposes to amend the rules to eliminate the presumption in favor of the petitioner for a genuine issue of material fact created by testimonial evidence submitted with a

Patent Owner’s preliminary response when deciding whether to institute an IPR, PGR or CBM review. As with all other evidentiary questions at the institution phase, the [...]

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