Can a bank request inter partes review of a patent? BOZEMAN v. FEDERAL RESERVE

Can a bank request inter partes review of a patent? BOZEMAN v. FEDERAL RESERVE

A patent is a set of exclusive rights granted to the inventor of a new invention.  To be granted a patent in the United States an inventor must file a patent application with the United States Patent and Trademark Office. If the patent application demonstrates that the invention is new useful and not obvious, the United States Patent and Trademark Office will grant the inventor a patent on the invention.  A patent gives the owner of the patent exclusive right to make, use, sell or import the invention into the United States. A patent will typically last 20 years from the earliest filing date, however even after a patent is granted the validity of the patent can be challenged.

The Leahy–Smith America Invents Act is a United States federal statute that was signed into law on September 16, 2011.  The America Invents Act introduced created several new quasi-adjudicatory proceedings before the United States Patent and Trademark Office for determining the patentability of issued patent claims. These proceedings include inter partes review (“IPR”), post-grant review (“PGR”), and review of Covered Business Method patents (“CBM review”).  Prior to this someone who wanted to challenge the validity of a patent had more limited options.

Like any new law in the United States, people that disagree with the law challenge the definition of every term that is ambiguous.   A point of contention in the America Invents Act is who may challenge the validity of a patent.  The law states that “a person” may institute an action to challenge the validity of a patent.  United States law generally recognizes “a person” to mean both a private individual and a corporation, but Federal Reserve Banks are a special entity under United Stats law.  Federal Reserve Banks are not directly government agencies, however they are chartered to  implement the monetary and fiscal policies of the United States.

In Return Mail, Inc. v. U.S. Postal Serv.,  139 S. Ct. 1853 (2018)  the United States Supreme Court held that governmental agencies such as the Postal services are not “persons” under the AIA.  The questions then becomes, are Federal Reserve Banks “persons” under the AIA?

BOZEMAN FINANCIAL LLC v. FEDERAL RESERVE BANK, 2019-1018 (C.A.F.C. 2020) is a case which answers this question.  Plaintiff in this case owns U.S. Patent Nos. 6,754,640 and 8,768,840.  The ’840 and ’640 patents are directed to methods for authorizing and clearing financial transactions to detect and prevent fraud.  Defendants in this case are several Federal Reserve Banks who petitioned for CBM review of the patents.

The Patent Trial and Appeal Board found that the patents were invalid.   The Board determined that the ’640 patent’s claims are directed to the abstract idea of “collecting, displaying, and analyzing information to reconcile check information against a ledger.”  The ’840 patent claims are directed to the abstract idea of “collecting and analyzing information for financial transaction fraud or error detection.” The Board found that the claims of the patents do not contain an inventive concept to render them eligible for patent protection under § 101.  Plaintiff appealed the Boards decision on the grounds that the Federal Reserve Banks were not persons under the AIA, and that the Board erred in its determination that the patents were directed to abstract ideas.

The Court of Appeals for the Federal Circuit affirmed the Board’s decision.  With respect to the Banks being persons the Federal Circuit distinguished the present case from the facts in Return Mail.  The Banks may sue or be sued in any court of law or equity, unlike a government agency.  Moreover, the Banks do not receive funding from the government, the government exercises limited control over the operation of the Banks. Instead, the “direct supervision and control of each Bank is exercised by its board of directors.” And the Banks cannot promulgate regulations with the force of law. For all these reasons the Federal Circuit concluded that Banks are “persons” for the purposes of the AIA.

With respect to  Board’s determinations holding that the ’840 and ’640 patents are ineligible for patent protection the Federal Circuit applied the two-step Alice test to determine patent-eligibility under § 101.  The Federal Circuit ultimately agreed with the Board that  the ’840 and ’640 patents were directed to abstract concepts without an inventive concept.

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