10/03/14

Benefit Funding Sys. v. Advance Am. Cash Advance Centers: No Collateral Attack on PTABs Decision to Institute a CBM


Category: Post-Grant Proceedings  
 
 
 
 By: Jesus Hernandez, Blog Editor/Contributor
 
TitleBenefit Funding Sys., LLC v. Advance Am. Cash Advance Centers Inc.., No. 2014-1122, -1124, -1125 (Fed. Cir. Sept. 25, 2014).
IssueAppellants’ argument on appeal rests on the single premise that the PTAB is not authorized to conduct CBM review based on § 101 grounds. Consequently, according to Appellants, the district court would not be bound by the results of the CBM review […]
Benefit Funding Sys., LLC, at *6.
HoldingThe argument that § 101 cannot support CBM review is a collateral attack [since a district court should not review the PTAB’s determination that contested claims are more likely than not invalid in the posture of a ruling on a motion to stay.]
Id. at *6-7 (text added).
 
 
Procedural HistoryAppellants, Benefit Funding Systems LLC and Retirement Capital Access Management Company LLC, appeal from the district court’s stay of patent infringement litigation pending covered business method review of the asserted claims.
Benefit Funding Sys., LLC at *3.
 
 
 
Legal Reasoning (PROST, Lourie, Hughes)
Background
CBMAbout ten months into the litigation, U.S. Bancorp filed a petition with the Patent Trial and Appeal Board (“PTAB”) for post-grant review of the asserted claims under the Transitional Program for Covered Business Method Patents. See America Invents Act, Pub. L. No. 112-29, § 18, 125 Stat. 284, 329–31 (2011) (“AIA”). All Appellees then filed motions to stay litigation pending review. The district court denied those motions. Subsequently, the PTAB instituted the requested covered business method (“CBM”) review on the sole basis of subject matter eligibility under 35 U.S.C. § 101, holding that “it is more likely than not that the challenged claims are unpatentable.” U.S. Bancorp v. Ret. Capital Access Mgmt. Co., No. CBM2013-00014, slip op. at 2 (P.T.A.B. Sept. 20, 2013) (order instituting review). Appellees renewed their motions to stay, and the district court orally granted the motions.
Benefit Funding Sys., LLC at *3.
Legal Standard, Stay for CBMsSection 18(b) of the AIA governs stays pending resolution of a CBM review. It identifies the following four factors that a district court should consider when deciding whether to grant a stay:
(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
AIA § 18(b)(1).
Id. at *4.
Analysis
Collateral Attack that § 101 cannot support CBM review We […] find Appellants’ argument unpersuasive. The argument that § 101 cannot support CBM review is a collateral attack similar to ones that we have recently held impermissible. Specifically, in VirtualAgility we held that a district court should not “‘review’ the PTAB’s determination that the [contested claims] are more likely than not invalid in the posture of a ruling on a motion to stay.” 2014 WL 3360806, at *5. Such review “amounts to an improper collateral attack on the PTAB’s decision to institute CBM review, and allowing it would create serious practical problems,” including “mini-trials” that would “overwhelm and dramatically expand the nature of the stay determination.” Id. Further, other similar collateral attacks are also impermissible: It would also be inappropriate for the district court to evaluate the potential success of an APA challenge to the PTAB’s determination that the ’413 patent is a “covered business method patent” when analyzing whether CBM review will simplify the issues and reduce the burdens on the parties and the court. Like the district court’s validity analysis, this inquiry would amount to an improper collateral attack on the PTAB’s decision to institute CBM review. Id. at *5 n.3. In short, “[t]he stay determination is not the time or the place to review the PTAB’s decisions to institute a CBM proceeding.” Id. at *5.
Benefit Funding Sys., LLC at *6-7.
Collateral Attack to Challenge PTAB AuthoritySimilarly, Appellants’ argument questioning the PTAB’s authority to conduct the CBM review is also an impermissible collateral attack. A district court, in the context of a stay determination, need not and should not analyze whether the PTAB might, at some later date, be determined to have acted outside its authority in instituting and conducting the CBM review. Such an analysis would, among other things, be antithetical to the efficiency goals of such a stay. This is not to say that a patent owner could never attack the PTAB’s authority to conduct CBM review. Indeed, Appellants might potentially challenge that authority in the context of a direct appeal of the PTAB’s final decision.1 See 35 U.S.C. § 141(c) (“A party to . . . a post-grant review who is dissatisfied with the final written decision of the [PTAB] . . . may appeal the [PTAB’s] decision only to the United States Court of Appeals for the Federal Circuit.”). They simply cannot mount such a challenge as a collateral attack in opposition to a stay. Having rejected Appellants’ argument as an impermissible collateral attack, we do not address the underlying merits of that attack, namely whether § 101 is a valid ground for CBM review.
Id. at *7-8.
Conclusion
We conclude that the district court properly granted the stay pending CBM review and therefore affirm.
Benefit Funding Sys., LLC at *9.
 
 
 
 
 
 
 
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