In SIPCO, LLC v. Emerson Electric Co., [2018-1635] (September 25, 2019), the Federal Circuit reversed the PTAB’s construction of “low-power transceiver” and its finding that U.S. Patent No. 8,908,842 does not satisfy the second part of §42.301(b) defining “technological invention.” Because the Board did not address the applicability of the first part of § 42.301(b), the Federal Circuit vacated and remanded.

The Board found that the term “low-power” as used in the claims did not necessarily require that the device transmit and receive signals only within a “limited transmission range.” The Federal Circuit reversed, construing “low-power” to mean “a device that transmits and receives signals at a power level corresponding to limited transmission range.”

The Federal Circuit found that the Board’s conclusion that the claims recite an apparatus “for performing data processing or other operations used in the practice, administration, or management of a financial product or service” under AIA § 18(d)(1) was not arbitrary and capricious. The definition of a covered business method patent is not limited to products and services of only the financial industry, or to patents owned by or directly affecting the activities of financial institutions such as banks and brokerage houses. § 18(d)(1) on its face covers a wide range of finance-related activities.

While SIPCO argued before the Board and on appeal that because it disclaimed claims 3 and 4, the Board should not have relied on them in analyzing whether the ’842 patent is CBM eligible. However, SIPCO ultimately conceded at oral argument that a patent may be CBM eligible based on a single claim and that the Board could have properly relied on claims 3 or 4.

The Federal Circuit then turned to the Board’s decision as to whether the ’842 patent qualifies as a “technological invention” under § 18(d)(1). Section 18(d)(1) excludes “patents for technological inventions” from CBM review. However, Congress did not define technological invention, instead leaving it to the USPTO to issue regulations for determining whether a patent is for a technological invention.

37 C.F.R. § 42.301:

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: [1] whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and [2] solves a technical problem using a technical solution.

If each part of this definition is satisfied, then the patent is not eligible for CBM review.

The Federal Circuit held that the Board misread and mischaracterized the features of claim 1 in its analysis of dependent claims 3 and 4, and did not appreciate that the claims provide a technical solution to a technical problem under part 2 of 37 C.F.R. § 42.301. The Federal Circuit said that the question of whether a patent is for a “technological invention” is fact-specific and must be considered on a case-by-case basis. The Federal Circuit said that the problem solved by the claims is technical in nature. The Board limited its characterization of the “problem” being solved to an example problem provided in the background that is resolved by the claims — automating machine service requests. But it is clear from both the claims and the specification that the claimed invention implements a communication system that connects an unconnected, remote device with a central station.

The Federal Circuit identified the technical problem solved by the claims as: how to extend the reach of an existing communication system from a central location to a remote, unconnected device while protecting against unwanted interference with the transmitted signals. The Federal Circuit found that the claims solved this problem with a technical solution. Because SIPCO’s claims combine certain communication elements in a particular way to address a specific technical problem with a specific technical solution, the Federal Circuit reversed the Board’s finding that the patent does not satisfy the second part of its “technological invention” regulation.

The Federal Circuit found that the Board did not analyze whether the ’842 patent satisfied the first part of § 42.301(b) because it found that the patent did not satisfy the second part. Rather than address this issue in the first instance on appeal, the Federal Circuit remanded the case for the Board to address the first part of § 42.301(b) under the proper claim construction.

Judge Reyna dissented because the majority’s opinion was contrary to basic tenants of claim construction set forth in Phillips, and the deference owed to underlying factual findings under Teva. Judge Reyna said that the majority reached its own construction by improperly reading a functional limitation into the claim from a preferred embodiment. Further, the Board’s construction rests on factual findings that are supported by substantial evidence, including expert testimony on the meaning of the claim term “low-power transceiver” to a person of ordinary skill in the art.