Yesterday’s Federal Circuit decision in Smartflash LLC v. Apple illustrates the difference that even a few months can make when an accused infringer seeks to stay litigation pending covered business method (CBM) reviews of the asserted patent claims. Smartflash is asserting a series of digital rights management patents against Apple and Samsung in the Eastern District of Texas. All of Smartflash’s asserted claims are the subject of CBM reviews concerning Section 101 issues. Apple and Samsung sought to stay the litigations pending completion of the CBM process, but the district court denied these requests. On appeal, the Federal Circuit affirmed the denial of Apple’s motion, but ordered that Smartflash’s case against Samsung be stayed pending the CBM reviews.
The Federal Circuit’s recent decision in Versata Development Group v. SAP America, Inc. validates the PTAB’s overall approach to “covered business method” (CBM) proceedings and suggests that patent owners face an uphill battle when appealing the cancellation of claims following CBM review. Significantly, however, the Federal Circuit ruled that it has the power when reviewing a final written decision to consider whether the patent qualified for CBM review at all. The USPTO had disagreed, maintaining that the Federal Circuit lacked authority to review this threshold question because it concerned the PTAB’s decision whether or not to institute CBM review at all—a determination that by law is “nonappealable.” The Federal Circuit’s decision offers hope for other patent owners who face CBM reviews and believe that the PTAB erred in deciding that the challenged patent even qualifies. It also indicates that the Federal Circuit will not always be willing to accept the USPTO’s reading of key language in the America Invents Act.