The U.S. Court of Appeals for the Federal Circuit recently issued three interesting, related opinions interpreting and applying the “technological invention” exception to Covered Business Method Review (“CBM Review”). These opinions serve as a reminder that litigation often turns on an advocate’s effectiveness in framing (or re-framing) a critical issue of law before the court.
The three Federal Circuit opinions are:
- IBG LLC, Interactive Brokers LLC v. Trading Technologies Int’l, Inc. (Fed. Cir. Feb. 13, 2019) (available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-1732.Opinion.2-13-2019.pdf )(“TTI I”);
- Trading Tech. Int’l, Inc. v. IBG LLC, Interactive Brokers, LLC (Fed. Cir. Apr. 18, 2019) (available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-2257.Opinion.4-18-2019.pdf) (“TTI II”); and
- Trading Tech. Int’l, Inc. v. IBG LLC, Interactive Brokers, LLC (Fed. Cir. Apr. 30, 2019) (available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-2323.Opinion.4-30-2019.pdf) (“TTI III”).
These cases involved the same parties, featured patents directed to near-identical subject matter (purported innovations in graphic user interfaces (“GUIs”) for electronic trading systems), and arrived at the Federal Circuit in the same exact procedural posture. They also featured the same exact questions of law: whether the Patent Trial and Appeal Board (“PTAB”) had incorrectly considered and applied the “technological invention” exception to its jurisdiction to conduct a CBM Review – a determination that preceded and informed the PTAB’s subsequent finding that the majority of the patents-in-suit in TTI I, TTI II and TTI III were directed to ineligible subject matter under 35 U.S.C. § 101. While the Federal Circuit deemed its decision in TTI I non-precedential, it is instructive to review and compare the Court’s reasoning in TTI I to the precedential decisions in TTI II and TTI III.
Recall that under §18(d)(1) of the America Invents Act (Pub. L. No. 112-29, 125 Stat. 284, 329-31 (2011)), the PTAB may only institute a CBM Review for a patent that is a “covered business method patent.” A CBM patent is defined as 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.” Id. (emphasis added). Seeking to clarify this “technological invention” exception, the Patent and Trademark Office promulgated 37 C.F.R. § 42.301(b), under which the PTAB is to consider “whether the claimed subject matter . . . solves a technical problem using a technical solution” when determining whether the patents at issue are subject to this exception to CBM Review.
The impact of the vague terminology used in these standards has unsurprisingly led to inconsistent application by the PTAB and the Federal Circuit – a frustrating state that is represented by the three TTI decisions.
Most instructive, of course, to the proper application of the “technological invention” exception are the precedential decisions in TTI II and TTI III. As noted above, the claims-in-suit in TTI II and TTI III were directed to near-identical subject matter: purported innovations in GUI tools incorporated into trading software systems that variously improved the “speed,” “accuracy,” “usability,” “visualization,” and “efficiency” of prior art trading screens by implementing a more user-friendly design that prevents traders from submitting an order at an unintended price (TTI II), or by providing the trader with “highly relevant information” that is “not normally provided in an electronic exchanges data feed nor displayed by a trading screen.” (TTI III). TTI II, Slip Op. at 8, 11-12; TTI III, Slip Op. at 6-7. In affirming the PTAB’s finding that the claims in the patents under review in TTI II and TTI III were CBM patents, the Federal Circuit in both decisions stressed that the claimed innovations “relate to the practice of a financial product, not a technological invention” in the sense that the disclosed inventions “make[ ] the trader faster and more efficient, not the computer.” TTI II, Slip Op. at 9, 13; see also TTI III, Slip Op. at 7 (concluding that the claims “focus[ ] on improving the trader, not the functioning of the computer.”).
Like TTI II and TTI III, the patents under review in TTI I disclosed purported innovations to GUIs for a trading system – but unlike TTI II and TTI III, in TTI I, the Federal Circuit panel was persuaded that the disclosed invention qualified for the “technical invention” exception, and found that the claims at issue were not properly subject to CBM Review.
The difference-maker in TTI I appears to have been the subtle reframing of the claims at issue in TTI I as solving a “computer” problem versus a “trader” problem. More specifically, the panel was convinced in TTI I that the claims at issue addressed “[a] technical problem with prior GUIs in which the inside market remains stationary” by “displaying market depth on a vertical or horizontal plane, which fluctuates logically up or down, left or right across the plane as the market fluctuates.” TTI I, Slip Op. at 7. In that sense, the Court held that the claims at issue in TTI I resembled similar ones directed to GUI improvements that were found to satisfy the requirements of Section 101 in an earlier non-precedential opinion that also involved TTI patents. See Trading Techs. Int’l, Inc. v. CQG, Inc., et al., Slip Op at 9 (Fed. Cir. Jan. 18, 2017) (available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/16-1616.Opinion.1-13-2017.1.PDF) (affirming district court finding of validity under Section 101 because “the claimed subject matter is directed to a specific improvement in the way computers operate, for the claimed [GUI] method imparts a specific functionality to a trading system directed to a specific implementation of a solution to a problem in the software arts.” (internal citations omitted)).
So, what lessons to draw from these recent TTI decisions? At least, these decisions provide valuable guidance for practitioners on the importance of carefully framing the nature of the innovations embodied in software-based claim sets (and specifically, those directed to GUI enhancements). It appears to be insufficient to merely point to increased functionality or usefulness over prior art systems – instead, tying the claimed invention to specific improvements made to prior art computer systems will likely increase chances of successfully navigating CBM Review proceedings, as well as challenges to patent eligibility under Section 101. Ideally, such an argument can be supported by evidence showing bona fide improvements in computer operation though the application of novel technique (e.g., a solution to a difficult software engineering problem), rather than the simple addition of a new feature or unique architecture through the use of well-known software engineering solutions.