Unwired Planet, LLC v. Google Inc.

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. 7,203,752

The ’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.