Sipco, LLC v. Emerson Elec. Co.

• Decision Date: 25 September 2019
• Docket Number: 2018-1635
• Citation: 939 F.3d 1301
• Parties: SIPCO, LLC, Appellant v. EMERSON ELECTRIC CO., Appellee
• Court: U.S. Court of Appeals — Federal Circuit

939 F.3d 1301

SIPCO, LLC, Appellant

v.EMERSON ELECTRIC CO., Appellee

2018-1635

United States Court of Appeals, Federal Circuit.

Decided: September 25, 2019

James R. Barney, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC, argued for appellant. Also represented by Kelly Lu ; Gregory J. Gonsalves, Gonsalves Law Firm, Falls Church, VA.

Douglas Hallward-Driemeier, Ropes & Gray LLP, Washington, DC, argued for appellee. Also represented by James Richard Batchelder, James Lawrence Davis, Jr., East Palo Alto, CA.

Before O’Malley, Reyna, and Chen, Circuit Judges.

Opinion concurring-in-part and dissenting-in-part filed by Circuit Judge Reyna.

Chen, Circuit Judge.

SIPCO, LLC (SIPCO) appeals a final written decision of the Patent Trial and Appeal Board (Board) in a covered business method (CBM) review of its U.S. Patent No. 8,908,842 (’842 patent). After instituting CBM review, the Board found claims 1, 7, 9, 16, and 17 of the ’842 patent ineligible for patent protection under 35 U.S.C. § 101 and unpatentable for obviousness under 35 U.S.C. § 103. SIPCO appeals these findings, as well as the Board’s determination that the ’842 patent was subject to CBM review.

In determining that the ’842 patent qualifies for CBM review, the Board found that the patent is not excluded from review under the statutory "technological invention" exception. See America Invents Act (AIA) § 18(d). Under 37 C.F.R. § 42.301(b), the Board must consider "whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution." Applying just the second part of this regulatory standard, the Board here found that the patent contained no technical solution to a technical problem.

We reverse the Board’s claim construction of "low power transceiver" and its finding that the ’842 patent does not satisfy the second part of the regulation defining "technological invention." § 42.301(b). Because the Board did not address the applicability of § 42.301(b) ’s first part, we vacate and remand for consideration consistent with this opinion.

BACKGROUND

1. The ’842 Patent

The ’842 patent, based on a provisional application filed in 1997, explains that there are a variety of circumstances in which it is desirable to communicate information from a previously unconnected, remote device to a central location. ’842 patent at col. 1, ll. 43–45. Rather than set up a direct communication link from the remote device to the central location, however, the invention of the ’842 patent sets up a two-step communication path through a set of intermediate nodes that takes advantage of the nodes’ already-provided communications link (e.g. , a public-switched telephone network (PSTN)) to the central location. Id. at claim 1. The claimed invention completes the communication path by having the remote device communicate wirelessly to an intermediate node. For example, a user may wish to replace the bank and credit cards he or she carries with a remote transmitting unit, similar to an automobile remote key, that has one or more buttons each associated with a bank or credit card. Id. at col. 5, ll. 9–64. When the user depresses the button, the remote transmitter transmits the user’s banking card account and PIN information to, for example, the ATM. Id. at col. 5, ll. 43–61. The ATM then transmits the information over, for example, a PSTN to the central location for verification. Id. at col. 7, ll. 41–44.

In implementing this two-step system, the inventors recognized problems that arose. Id. at col. 5, l. 67 – col. 6, l. 11. For example, contention between two or more remote devices communicating at the same time caused more distantly located users to circumvent closer users. Id. at col. 6, ll. 4–7. In addition, an interloper could unlawfully intercept the electromagnetic signals carrying sensitive data. Id. at col. 6, ll. 7–11. To alleviate these problems, the ’842 patent recites the use of a low-power remote transmitter, which the specification explains would require the user to be in "close proximity," "e.g., several feet," in order for the user to be able to use it. Id. at col. 5, l. 67 – col. 6, l. 11.

The parties do not dispute the Board’s treatment of claim 1 as representative. Claim 1 recites the following:

1. A device for communicating information, the device comprising:

a low-power transceiver configured to wirelessly transmit a signal comprising instruction data for delivery to a network of addressable devices;

an interface circuit for communicating with a central location; and

a controller coupled to the interface circuit and to the low-power transceiver, the controller configured to establish a communication link between at least one device in the network of addressable devices and the central location using an address included in the signal, the communication link comprising one or more devices in the network of addressable, the controller further configured to receive one or more signals via the low-power transceiver and communicate information contained within the signals to the central location.

Id. at claim 1. Dependent claims 3 and 4 are particularly relevant to this appeal:

3. The device of claim 2, wherein the remote device is a [sic] associated with a vending machine.

4. The device of claim 2, wherein the remote device is associated with an Automated Teller Machine (ATM).

Id. at claims 3, 4.

2. Board’s Institution Decision

In July 2016, Emerson Electric Co. (Emerson) filed a petition requesting CBM review of the ’842 patent on, inter alia , §§ 101 and 103 grounds. Emerson argued that the challenged claims were directed to the patent-ineligible abstract idea of "establishing a communication route between two points to relay information." J.A. 215. According to Emerson, "[t]his concept has been practiced for centuries in applications such as the Postal Service, Pony Express, and telegraph, where a route is established to relay mail or other communications from one point to another." Id. Emerson also argued that the ’842 patent was unpatentable for obviousness over U.S. Patent No. 5,157,687 (Tymes). J.A. 261.

The Board instituted on both grounds. J.A. 432. In its institution decision, the Board analyzed whether the ’842 patent qualified as a "covered business method patent" under AIA § 18(d)(1), which defines the term as "a patent 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." The Board determined that claim 3—associating the device with a vending machine—and claim 4—associating the device with an ATM—recited apparatuses "used in the practice, administration, or management of a financial product or service" under § 18(d)(1). J.A. 387–89.

The Board then determined that the patent was not drawn to a "technological invention." The Board applied its regulation 37 C.F.R. § 42.301(b), which provides a two-part test for determining whether a patent is for a "technological invention": "whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution." The Board explained that both parts of the regulation must be satisfied in order to exempt the patent from CBM review. J.A. 390. Because the Board concluded that the patent did not provide a technical solution to a technical problem and therefore did not meet part two, the Board did not analyze part one. J.A. 390–92.

Citing the Patent Office’s 2012 Office Patent Trial Practice Guide, the Board focused on the features of claim 1, as incorporated in dependent claims 3 and 4, and determined that they are no more than generic and known hardware elements and routine computer functions. J.A. 390–91. The Board found that "[t]he only wireless transmission required by claims 3 and 4 is a signal from a low-power transceiver," which the Board noted was well-known in the art at the time of the invention. J.A. 391. The Board stated that the problem being solved by the ’842 patent was the financial problem of reducing the cost of having to dispatch service personnel to fix these machines frequently, rather than a technical problem. J.A. 392. Ultimately finding that the features from claim 1 were not drawn to a technical solution to a technical problem and, therefore, not drawn to a "technological invention," the Board determined that the ’842 patent was subject to CBM review. J.A. 392–93.

The Board construed, among other terms, "low-power transceiver." J.A. 396–99. Emerson did not provide a construction in its petition; SIPCO proposed a construction that specified that the transceiver "transmits and receives signals having a limited transmission range." J.A. 397. SIPCO supported its proposed construction with citations to the patent and an exhibit showing that the FCC discusses "low-power" transceivers in a manner that limits their range to "a few meters." J.A. 397–98. The Board disagreed with SIPCO’s proposed construction, finding that the term "low-power" as used in claim 1 did not necessarily require that the device transmit and receive signals only within a "limited transmission range." J.A. 398.

The Board also declined to limit the term based on the discussion of low-power transmitters found in columns five and six of the specification, because that discussion related to "extremely low-power transmitters" rather than "low-power transceiver[s]." J.A. 398–99. The Board dismissed the FCC document cited by SIPCO because the sentence discussing low-power transmitters described the distance between people and consumer products, not the low-power transmitters’ transmission range. J.A. 399 (quoting J.A. 2791 ("At any time of day, most people are within a few meters of consumer products that use low-power,...