New Wave of Patent Litigation Possible After Covered Business Method Review Program Ends

The transitional Covered Business Method (CBM) review program saw its end on September 16, 2020. Under the CBM review program, a party believing that a patent directed to a financial product or service did not cover patentable subject matter (i.e., the invention was directed to a “business method”) could petition the Patent Office to institute a review of the patent to determine whether it covers a patentable invention. This review provided a less costly alternative to challenging business method patents than civil litigation.

The transitional CBM review program began as a reaction to the Patent Office issuing a host of patents for business related functions that were of dubious merit. The Patent Office was not adequately equipped to evaluate inventions relating to business methods and did not apply the same rigor as it does for more technologically focused inventions. Eventually, rulings from the Supreme Court limited the subject matter of patentable inventions to exclude inventions that are merely abstract ideas. However, by that time, many patents had already been granted for inventions that were mere abstract ideas, and those patents were being asserted against companies in the financial and other service industries.

In 2011, Congress passed the American Invents Act which introduced the CBM review program. The CBM review program became effective in 2012 and was limited to patents for 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.” Because the CBM review program was instituted to address those patents issued prior to the Supreme Court rulings limiting patentable subject matter, the program was designed to be transitional in nature and sunset after eight years.

The CBM review program has been an effective tool for companies that have been accused of infringing low-quality business method patents. The vast majority of patents that have been reviewed have seen some or all of their patent claims invalidated.

Certain industries have been particularly susceptible to claims of infringement of business method patents. Financial and other service industries such as banks, restaurants and retail companies have frequently been the targets of infringement claims. Most often, these infringement claims have been made by patent assertion entities that accumulate business method patents and subsequently accuse companies of infringement in order to recover nuisance settlements.

Service industry trade associations claim that patent assertion entities have begun to rapidly stockpile business method patents, pointing out that the secondary market activity for sales of such patents is up 12.6% over last year and the number of patents sold is up 69%. These trade associations fear that these patent assertion entities have been waiting for the expiration of the CBM review program and plan to assert these patents after the CBM review program sunsets. At that time, the only recourse to challenge the issuance of these patents is through costly patent litigation.

The service industry trade associations have lobbied Congress for a short-term extension of the transitional CBM review program during which time they would likely propose that a permanent review program be developed and put into place. A coalition of patent owner groups, including patent assertion entities, have similarly lobbied to maintain the sunset provisions. To date, Congress has taken no action to extend the CBM review program. However with the sunset of the CBM review program coming into effect, time will tell if the fears of the service industry trade associations come to pass.