September 2014

PTAB Designates First Precedential AIA Trial Decision

5 min

On July 31, 2014, the Patent Trial and Appeal Board (PTAB) designated a decision in a Covered Business Method (CBM) Review, SecureBuy LLC v. CardinalCommerce Corporation, CBM 2014-00035, Paper 12 (April 25, 2014) as "precedential" under Standard Operating Procedure 2 (SOP 2). This marks the first time that the PTAB has designated a decision in an AIA trial to be binding precedent. This article discusses the opinion itself and the PTAB's mechanism for designating an opinion as "precedential."

I. How does an opinion get designated as "precedential"?

In its SOP 2, the PTAB lays out a complex process by which a decision becomes designated as precedential. Any opinion can be designated as precedential "but particular emphasis will be placed on opinions resolving conflicts or addressing novel questions."1 The process for designating an opinion as precedential is shown below.

Specifically, the procedure involves nomination of an opinion, followed by circulation of the opinion by the Chief Judge to all members of the PTAB with an invitation to vote and comment "on whether the opinion should be designated as precedential."2 Any PTAB member may nominate the opinion.3 Members of the public (including parties to the decision) may request nomination of the opinion in writing, but only within 60 days of issuance of the opinion. In the case of written request, the Chief Judge must confirm receipt.4 Once the opinion is circulated, the members of the PTAB then have a limited period (typically 10 days) to respond.5 At the end of this period, if the majority of the PTAB agrees after considering the comments, the Chief Judge notifies the Director of the results of the voting.6 If the Director concurs, then the opinion is designated, published, and labeled as precedential.7

The procedures for de-designating a "precedential" opinion are similar, but in reverse. Members of the PTAB may notify the Chief Judge that they believe a "precedential" opinion has been overcome by subsequent binding authority.8 The Chief Judge then determines whether the opinion has indeed been overcome and ultimately must "notify the Director of the Board's determination and the basis therefore."9 The Director makes the final decision and "[i]f the Director concurs, the Director will so notify the Chief Judge, and the subject Board opinion shall be removed from the electronic posting of 'Precedential' opinions."10

II. The First Precedential Decision Clarifies the Statutory Requirements for Instituting a CBM

At issue in SecureBuy LLC v. CardinalCommerce Corporation, CBM 2014-00035, Paper 12 (April 25, 2014) was the statutory requirement for instituting a CBM. Because SecureBuy failed to meet the statutory requirements, the PTAB denied the institution of a CBM of U.S. Patent No. 7,051,002.

The relevant facts are simple. On November 1, 2013, SecureBuy LLC filed two separate declaratory judgment actions alleging invalidity of the '002 patent.11 On November 15, 2013, SecureBuy LLC also petitioned for a CBM of the patent.12

The opinion clarifies that CBM proceedings "shall employ all the statutory standards and procedures of a post-grant review [PGR] (i.e., 35 U.S.C. §§ 321–29) except for those expressly excluded (i.e., 35 U.S.C. §§ 321(c); 325(b), (e)(2), (f))."13 Thus, CBMs are subject to the same statutory bars as PGRs.14 A CBM, like a PGR or IPR, cannot be filed if before the date of the petition, "the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent."15 SecureBuy, LLC filed two separate civil actions challenging the validity of the '002 patent two weeks prior to the filing of the petition for CBM, and accordingly, the PTAB denied the petition for CBM of the '002 patent.

III. Lessons Learned

The first precedential opinion clarifies the statutory requirement for instituting a CBM and the sections of Title 35 that are applicable to CBMs. This decision is important because while CBMs were enacted as Section 18 of the Leahy-Smith America Invents Act, they were not codified into Title 35. Since it is the first precedential opinion, it is likely that this decision will be cited often in subsequent PTAB decisions.

Moreover, the first precedential opinion illustrates the complexity of the PTAB's SOP 2. One can only imagine the logistical issues associated with designating an opinion as precedential. For example, SOP 2 requires that the Chief Judge may have to consider the vote and written comment (where applicable) from each member of the PTAB on whether an opinion is "precedential."16 Thus, it is not surprising that the first precedential opinion is short and uncontroversial. It is likely that the PTAB will eventually revisit SOP 2 and implement a more streamlined mechanism to designate an opinion as precedential. In the meantime, with the PTAB's size and workload significantly increasing, it is likely that it will become increasingly difficult to designate an opinion as "precedential" under SOP 2.

[1] Patent Trial and Appeal Board, Standard Operating Procedure 2 (Revision 8) Publications of Opinions and Designation of Opinions as Precedential at pg. 2.

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id. at pg. 3

[9] Id.

[10] Id.

[11] SecureBuy LLC v. CardinalCommerce Corporation, CBM 2014-00035, Paper 12 at 2.

[12] Id. at pg. 2

[13] Id. at pg. 2

[14] Id. at pg. 3

[15] Id. at pg. 2-3 (quoting 35 U.S.C. § 325(a)(1))

[16] Patent Trial and Appeal Board, Standard Operating Procedure 2 (Revision 8) at pg. 2 ("each Board member will be invited to vote and will have an opportunity to comment in writing on whether the opinion should be designated as precedential")