Unwired Planet, LLC v. Google Inc. , 841 F.3d 1376 ( 2016 )

United States Court of Appeals
for the Federal Circuit
______________________
UNWIRED PLANET, LLC,
Appellant
v.
GOOGLE INC.,
Appellee
______________________
2015-1812
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. CBM2014-
00006.
______________________
Decided: November 21, 2016
______________________
WILLIAM M. JAY, Goodwin Procter LLP, Washington,
DC, argued for appellant. Also represented by ELEANOR
M. YOST; BRETT M. SCHUMAN, DAVID ZIMMER, San Fran-
cisco, CA.
JON WRIGHT, Sterne Kessler Goldstein & Fox, PLLC,
Washington, DC, argued for appellee. Also represented by
MICHAEL V. MESSINGER, JOSEPH E. MUTSCHELKNAUS,
DEIRDRE M. WELLS; PETER ANDREW DETRE, Munger,
Tolles & Olson, LLP, San Francisco, CA; ADAM R.
LAWTON, Los Angeles, CA.
______________________
2 UNWIRED PLANET, LLC v. GOOGLE INC.
Before REYNA, PLAGER, and HUGHES, Circuit Judges.
REYNA, Circuit Judge.
Unwired Planet, LLC (“Unwired”) appeals from the
final written decision of the Patent Trial and Appeal
Board (“Board”) in Covered Business Method Patent
Review No. 2014-00006. Google Inc. v. Unwired Planet,
LLC, CBM2014-00006, 2015 WL 1570274 (P.T.A.B. Apr.
6, 2015) (“CBM Final Decision”). Because the Board
relied on an incorrect definition of covered business
method (“CBM”) patent in evaluating the challenged
patent, U.S. Patent No. 7,203,752 (the “’752 patent”), we
vacate and remand.
BACKGROUND
U.S. Patent No. 7,203,752The ’752 patent is entitled “Method and System for
Managing Location Information for Wireless Communica-
tions Devices.” It describes a system and method for
restricting access to a wireless device’s location infor-
mation. The specification describes a system that allows
users of wireless devices (e.g., cell phones) to set “privacy
preferences” that determine whether “client applications”
are allowed to access their device’s location information.
’752 patent col. 1 ll. 60–65. The privacy preferences used
to determine whether client applications are granted
access may include, for example, “the time of day of the
request, [the device’s] current location at the time the
request is made, the accuracy of the provided information
and/or the party who is seeking such information.” Id. at
col. 1 l. 65 to col. 2 l. 1. “In operation, a client application
will submit a request over a data network to the system
requesting location information for an identified wireless
communications device.” Id. at col. 3 ll. 30–33. The
system then determines, based on the user’s privacy
preferences, whether to provide the requested location
information to a client application. Id. at col. 3 ll. 38–50.
UNWIRED PLANET, LLC v. GOOGLE INC. 3
Claim 25 is representative for the purposes of this ap-
peal. It claims:
A method of controlling access to location infor-
mation for wireless communications devices
operating in a wireless communications net-
work, the method comprising:
receiving a request from a client application for
location information for a wireless device;
retrieving a subscriber profile from a memory, the
subscriber profile including a list of authorized
client applications and a permission set for
each of the authorized client applications,
wherein the permission set includes at least
one of a spatial limitation on access to the lo-
cation information or a temporal limitation on
access to the location information;
querying the subscribe[r] profile to determine
whether the client application is an authorized
client application;
querying the subscriber profile to determine
whether the permission set for the client ap-
plication authorizes the client application to
receive the location information for the wire-
less device;
determining that the client application is either
not an authorized client application or not au-
thorized to receive the location information;
and
denying the client application access to the loca-
tion information.
Id. at col. 16 ll. 18–40.
4 UNWIRED PLANET, LLC v. GOOGLE INC.
CBM 2014-00006
On October 9, 2013, Google Inc. (“Google”) petitioned
for CBM review of claims 25–29 of the ’752 patent. See
Leahy-Smith America Invents Act (“AIA”), Pub. L. No.
112–29, § 18, 125 Stat. 284, 329–31 (2011). 1 On April 8,
2014, the Board instituted CBM review of all the chal-
lenged claims. As a threshold matter, the Board reviewed
whether the ’752 patent is a CBM patent. See AIA § 18(d);
37 C.F.R. § 42.301. The Board based its review on
“whether the patent claims activities that are financial in
nature, incidental to a financial activity, or complemen-
tary to a financial activity.” Google Inc. v. Unwired
Planet, LLC, CBM2014-00006, 2014 WL 1396978, at *7
(P.T.A.B. Apr. 8, 2014) (“CBM Institution Decision”)
(citing Board decisions). After examining the ’752 pa-
tent’s specification, the Board found the ’752 patent to be
a CBM patent, reasoning:
The ’752 patent disclosure indicates the “client
application” may be associated with a service pro-
vider or a goods provider, such as a hotel, restau-
rant, or store, that wants to know a wireless
device is in its area so relevant advertising may be
transmitted to the wireless device. See [’752 pa-
tent col. 11 ll.] 12–17. Thus, the subject matter
recited in claim 25 of the ’752 patent is incidental
or complementary to the financial activity of ser-
vice or product sales. Therefore, claim 25 is di-
rected to a method for performing data processing
or other operations used in the practice, admin-
istration, or management of a financial product or
service.
1 Section 18 of the AIA, pertaining to CBM review,
is not codified. References to AIA § 18 in this opinion are
to the statutes at large.
UNWIRED PLANET, LLC v. GOOGLE INC. 5
Id. The Board instituted the CBM review on four
grounds: (1) claims 25–29 for unpatentable subject matter
under 35 U.S.C. § 101, (2) claim 26 for lack of written
description under 35 U.S.C. § 112, (3) claim 25 for obvi-
ousness under 35 U.S.C. § 103 over two references, and
(4) claim 25 for obviousness over a different combination
of two references. CBM Institution Decision, 2014 WL
1396978, at *1, *4, *20–21.
The Board issued its final written decision on April 6,
2015. The Board upheld only the first ground, finding
that the challenged claims were directed to unpatentable
subject matter under section 101. CBM Final Decision,
2015 WL 1570274, at *18. Unwired appeals. Google does
not cross-appeal. The only issues on appeal are whether
the patents are CBM patents and whether the challenged
claims are directed to patentable subject matter under
section 101. We have jurisdiction under 28 U.S.C.
§ 1295(a)(4)(A) and 35 U.S.C. § 329. Our jurisdiction
includes review of whether the ’752 patent is a CBM
patent. Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d
1306, 1323 (Fed. Cir. 2015).
STANDARD OF REVIEW
We review Board determinations under the standards
provided in the Administrative Procedure Act (“APA”), 5
U.S.C. § 706. Pride Mobility Prods. Corp. v. Permobil,
Inc., 818 F.3d 1307, 1313 (Fed. Cir. 2016); Power Integra-
tions, Inc. v. Lee, 797 F.3d 1318, 1323 (Fed. Cir. 2015).
“Under 5 U.S.C. § 706(2)(A), (E), the Board’s actions here
are to be set aside if ‘arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law’ or
‘unsupported by substantial evidence.’” Pride Mobility,
6 UNWIRED PLANET, LLC v. GOOGLE INC.
818 F.3d at 1313. 2 We review the Board’s statutory
interpretation de novo. Belkin Int’l, Inc. v. Kappos, 696
F.3d 1379, 1381 (Fed. Cir. 2012).
DISCUSSION
Unwired argues that the Board erred in applying a
standard that is broader than the AIA contemplates to
determine whether the ’752 patent was a CBM patent. It
notes that the challenged claims themselves do not dis-
close or otherwise describe a financial product or service.
In Unwired’s view, the Board’s reliance on the sections of
the specification discussing ways to monetize the inven-
tion by selling advertising is improper speculation.
Unwired further argues that the Board erred by looking
to whether the claims are “incidental” or “complementary”
to financial activity because these broad terms conflict
with the AIA’s limits on covered patents.
Google responds that the Board applied the correct
definition of CBM patents in light of the comments the
United States Patent and Trademark Office (“PTO”) made
during the regulatory process. Google argues that the
“Board’s broad application of CBM review is well-known
and has been recognized by this Court.” Google Br. 24
(citing Versata, 793 F.3d at 1324). Google further notes
that the specification discusses using the claimed method
to facilitate advertising, which would thereby facilitate
financial activity. 3 In Google’s view, proposed use of the
2 When reviewing the Board’s decisions pursuant to
the APA, we often use the terms “abuse of discretion” and
“arbitrary and capricious” interchangeably. Japanese
Found. for Cancer Research v. Lee, 773 F.3d 1300, 1304
n.3 (Fed. Cir. 2014).
3 Google also argues that the limitations of certain
non-challenged claims should be considered. It did not
UNWIRED PLANET, LLC v. GOOGLE INC. 7
claimed method in facilitating advertising is sufficient to
support the Board’s determination that the ’752 patent is
a CBM patent. We disagree.
In accordance with the statute, a CBM review is
available only for a “covered business method patent,”
which the AIA defines as “a patent that claims a method
or corresponding apparatus for performing data pro-
cessing or other operations used in the practice, admin-
istration, or management of a financial product or service,
except that the term does not include patents for techno-
logical inventions.” AIA § 18(d)(1). 4
The PTO adopted the statutory definition of CBM pa-
tents by regulation without alteration. Transitional
Program for Covered Business Method Patents—
Definitions of Covered Business Method Patent and
Technological Invention, 77 Fed. Reg. 48,734 (Aug. 14,
2012) (“Transitional Program”). We have noted that the
PTO has a “broad delegation of rulemaking authority in
the establishment and implementation of” CBM review.
Versata, 793 F.3d at 1325. “It might have been helpful if
the [PTO] had used [its] authority to elaborate on its
understanding of the definition [of CBM] provided in the
statute.” Versata, 793 F.3d at 1325. But the PTO did not
do so, instead adopting by regulation the statutory defini-
tion of a CBM patent. 37 C.F.R. § 42.301(a).
raise these arguments to the Board, J.A. 81, and we
decline to consider them in the first instance. See Redline
Detection, LLC v. Star Envirotech, Inc., 811 F.3d 435, 450
(Fed. Cir. 2015).
4 The parties do not dispute whether the ’752 pa-
tent is a patent for a “technological invention.” See 37
C.F.R. § 42.301(b).
8 UNWIRED PLANET, LLC v. GOOGLE INC.
To reach its decision in this case, the Board did not
apply the statutory definition. Instead, the Board stated
that the proper inquiry “is whether the patent claims
activities that are financial in nature, incidental to a
financial activity, or complementary to a financial activi-
ty.” CBM Institution Decision, 2014 WL 1396978, at *7
(citing Board cases). The Board determined that the ’752
patent was a CBM patent because the location service
could involve an eventual sale of services. The Board
noted that the specification provides that “client applica-
tions may be service or goods providers whose business is
geographically oriented,” such as a “hotel, restaurant,
and/or store.” ’752 patent col. 11 ll. 12–13. These busi-
nesses may wish to know a wireless device and its user
are nearby so that “relevant advertising may be transmit-
ted to the wireless communications device.” Id. at ll. 13–
17. The Board relied on this discussion to find that the
’752 patent is a CBM patent because “the subject matter
recited in claim 25 of the ’752 patent is incidental or
complementary to” potential sales resulting from adver-
tising. CBM Institution Decision, 2014 WL 1396978, at
*7. Indeed, the finding that sales could result from adver-
tising related to the practice of the patent is the sole
evidence the Board relied on to find that the ’752 patent is
a CBM patent. See id.; Google Br. 29–30.
It is not disputed that this “incidental” or “comple-
mentary” language is not found in the statute. 5 The
origin of this language is a statement from Senator
Schumer that the PTO quoted in its response to public
5 By contrast, we endorsed the “financial in nature”
portion of the standard as consistent with the statutory
definition of “covered business method patent” in Blue
Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1340 (Fed.
Cir. 2016).
UNWIRED PLANET, LLC v. GOOGLE INC. 9
comments concerning its consideration of proposed inter-
pretations of the statutory definition for a CBM patent.
Transitional Program (response to comment 1) (quoting
157 Cong. Rec. S5432 (daily ed. Sept. 8, 2011) (statement
of Sen. Schumer) (appearing in the permanent edition of
the Congressional Record at 157 Cong. Rec. 13,190
(2011))). 6 As part of this statement on general policy
about how it will act “in administering the program,” the
PTO response quotes a single floor comment during the
Senate debate over the AIA as an example of the legisla-
tive history. Id. The PTO did not adopt the general
policy statement through ruling making procedures.
6 The full text of comment 1 and the response is:
Comment 1: Several comments suggested that the
Office interpret “financial product or service”
broadly.
Response: The definition set forth in § 42.301(a)
for covered business method patent adopts the
definition for covered business method patent
provided in section 18(d)(1) of the AIA. In admin-
istering the program, the Office will consider the
legislative intent and history behind the public
law definition and the transitional program itself.
For example, the legislative history explains that
the definition of covered business method patent
was drafted to encompass patents “claiming activ-
ities that are financial in nature, incidental to a
financial activity or complementary to a financial
activity.” 157 Cong. Rec. 13,190 (2011) (statement
of Sen. Schumer). This remark tends to support
the notion that “financial product or service”
should be interpreted broadly.
10 UNWIRED PLANET, LLC v. GOOGLE INC.
General policy statements, however, are not legally
binding and, without adopting a policy as a rule through
rulemaking, an “agency cannot apply or rely upon a
general statement of policy as law.” Pac. Gas & Elec. Co.
v. Fed. Power Comm’n, 506 F.2d 33, 38 (D.C. Cir. 1974);
Chrysler Corp. v. Brown, 441 U.S. 281, 302 n.31 (1979)
(suggesting that general statements of policy “do not have
the force and effect of law”); Hamlet v. United States, 63
F.3d 1097, 1105 n.6 (Fed. Cir. 1995) (noting that a “sub-
stantive rule” is “far more likely to be considered a bind-
ing regulation” than a general statement of policy).
Likewise, the legislative history cannot supplant the
statutory definition actually adopted. Ratzlaf v. United
States, 510 U.S. 135, 147–48 (1994) (“[W]e do not resort to
legislative history to cloud a statutory text that is clear.”).
To the extent the PTO’s response is viewed as reflecting
the legislative history, “the views of a single legislator,
even a bill’s sponsor, are not controlling.” Mims v. Arrow
Fin. Servs., LLC, 132 S. Ct. 740, 752 (2012) (citing Con-
sumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447
U.S. 102, 118 (1980)).
The legislative debate concerning the scope of a CBM
review includes statements from more than a single
senator. It includes inconsistent views, some of which
speak more clearly and directly on the definition than
does the single statement picked by the PTO. For exam-
ple, various legislators offered divergent views on whether
patents on check scanning methods and apparatuses are
CBM patents. Senator Kyl urged that the CBM “section
grew out of concerns” with patents on technology used to
“clear checks electronically,” which he claimed should be
covered as “products or services that are particular to or
characteristic of financial institutions.” 157 Cong. Rec.
3432–33 (2011) (statement of Sen. Kyl). Senator Durbin
expressed concerns that the section should not cover
patents on “novel machinery to count, sort, and authenti-
cate currency and paper instruments.” 157 Cong. Rec.
UNWIRED PLANET, LLC v. GOOGLE INC. 11
13,186 (2011) (statement of Sen. Durbin). In response to
those views, Senator Schumer assured that “it is not the
understanding of Congress that such patents would be
reviewed and invalidated under Section 18.” Id. (state-
ment of Sen. Schumer). These views show clear conflict
about whether methods and apparatuses used for count-
ing money, sorting currency denominations, and authen-
ticating financial instruments are within the definition of
a CBM patent. Equally clear is that, under the Board’s
current definition of the scope of CBM patents, such
methods and apparatuses would be, at minimum, inci-
dental to financial activity. Certainly, an apparatus used
to sort currency denominations, or a method directed to
authenticating financial instruments, are more related to
the statutory definition than the patent in this case.
Neither the legislators’ views nor the PTO policy
statement provides the operative legal standard. The
authoritative statement of the Board’s authority to con-
duct a CBM review is the text of the statute. Exxon Mobil
Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005).
The Board is only empowered to review “the validity of
covered business method patents.” AIA § 18(a)(1). To be
sure, claims that satisfy the PTO’s policy statement may
also fall within the narrow statutory definition. See, e.g.,
Blue Calypso, 815 F.3d at 1337, 1340 (CBM patent’s claim
included “recognizing a subsidy” step to “financially
induce” participant action) (emphasis in original). But
patents that fall outside the definition of a CBM patent
are outside the Board’s authority to review as a CBM
patent. In any event, the PTO’s regulatory authority does
not permit it to adopt regulations that expand its authori-
ty beyond that granted by Congress. “Indeed, it is the
quintessential function of the reviewing court to interpret
legislative delegations of power and to strike down those
agency actions that traverse the limits of statutory au-
thority.” Office of Commc’n of United Church of Christ v.
FCC, 707 F.2d 1413, 1423 (D.C. Cir. 1983).
12 UNWIRED PLANET, LLC v. GOOGLE INC.
The Board’s application of the “incidental to” and
“complementary to” language from the PTO policy state-
ment instead of the statutory definition renders superflu-
ous the limits Congress placed on the definition of a CBM
patent. CBM patents are limited to those with claims
that are directed to methods and apparatuses of particu-
lar types and with particular uses “in the practice, admin-
istration, or management of a financial product or
service.” AIA § 18(d). The patent for a novel lightbulb
that is found to work particularly well in bank vaults does
not become a CBM patent because of its incidental or
complementary use in banks. Likewise, it cannot be the
case that a patent covering a method and corresponding
apparatuses becomes a CBM patent because its practice
could involve a potential sale of a good or service. All
patents, at some level, relate to potential sale of a good or
service. See 35 U.S.C. § 101. 7 Take, for example, a patent
for an apparatus for digging ditches. Does the sale of the
dirt that results from use of the ditch digger render the
patent a CBM patent? No, because the claims of the
ditch-digging method or apparatus are not directed to
“performing data processing or other operations” or “used
in the practice, administration, or management of a
financial product or service,” as required by the statute.
AIA § 18(d); 37 C.F.R. § 42.301(a). It is not enough that a
sale has occurred or may occur, or even that the specifica-
tion speculates such a potential sale might occur.
7 Indeed, the fundamental incentive of obtaining a
patent—the right to exclude—necessarily impacts the
marketplace. See, e.g., C.R. Bard, Inc. v. M3 Sys., Inc.,
157 F.3d 1340, 1367–68 (Fed. Cir. 1998) (discussing the
relationship between a patent owner’s right to exclude
and marketplace monopolies); Mallinckrodt, Inc.
v. Medipart, Inc., 976 F.2d 700, 703–09 (Fed. Cir. 1992)
(same).
UNWIRED PLANET, LLC v. GOOGLE INC. 13
We hold that the Board’s reliance on whether the pa-
tent claims activities “incidental to” or “complementary
to” a financial activity as the legal standard to determine
whether a patent is a CBM patent was not in accordance
with law. We do not reach the patentability of the chal-
lenged claims under section 101.
CONCLUSION
We vacate the Board’s final written decision and re-
mand the case for a decision in the first instance, and in
accordance with this opinion, whether the ’752 patent is a
CBM patent.
VACATED AND REMANDED
COSTS
No costs.