Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-14-01194/USCOURTS-ca13-14-01194-0/pdf.json

Parties Involved:
Director of the United States Patent and Trademark Office
Intervenor
SAP AG
Appellee
SAP America, Inc.
Appellee
Under Secretary of Commerce for Intellectual Property
Intervenor
Versata Development Group, Inc.
Appellant

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

VERSATA DEVELOPMENT GROUP, INC.,

Appellant

v.

SAP AMERICA, INC., SAP AG,

Appellees

UNDER SECRETARY OF COMMERCE FOR 

INTELLECTUAL PROPERTY, DIRECTOR OF THE 

UNITED STATES PATENT AND TRADEMARK 

OFFICE,

Intervenor

______________________ 

2014-1194

______________________ 

Appeal from the United States Patent and Trademark 

Office, Patent Trial and Appeal Board, in No. CBM2012-

00001.

______________________ 

Decided: July 9, 2015

______________________ 

JEFFREY A. LAMKEN, MoloLamken LLP, Washington, 

DC, argued for appellant. Also represented by NANCY JO 

LINCK, MARTIN MOSS ZOLTICK, ROBERT DANNY 

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2 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

HUNTINGTON, BRIAN S. ROSENBLOOM, Rothwell, Figg, 

Ernst & Manbeck, P.C., Washington, DC.

ERIKA ARNER, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Reston, VA, argued for appellees.

Also represented by J. MICHAEL JAKES, MICHAEL A.

MORIN, Washington, DC; EDWARD R. REINES, Weil, Gotshal & Manges LLP, Redwood Shores, CA.

MELISSA N. PATTERSON, Appellate Staff, Civil Division, United States Department of Justice, Washington, 

DC, argued for intervenor. Also represented by STUART F.

DELERY, MARK R. FREEMAN; SCOTT WEIDENFELLER,

NATHAN K. KELLEY, JOSEPH MATAL, WILLIAM LAMARCA, 

Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA.

DAN L. BAGATELL, CHRISTOPHER S. COLEMAN, Perkins 

Coie LLP, Phoenix, AZ, for amici curiae Intel Corporation, 

Asustek Computer, Inc., Broadcom Corporation, HTC 

Corporation, ZTE (USA) Inc. 

 

ANN A. BYUN, Hewlett-Packard Company, Wayne, PA, 

for amicus curiae Hewlett-Packard Company.

DARYL JOSEFFER, ASHLEY CHARLES PARRIS, King & 

Spalding LLP, Washington, DC, for amicus curiae The 

Internet Association. 

MICHAEL E. JOFFRE, MELANIE L. BOSTWICK, Kellogg, 

Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, 

DC, for amici curiae Dell Inc., eBay Inc., Facebook, Inc., 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 3

Limelight Networks, Inc., Newegg Inc., QVC, Inc., Rackspace Hosting, Inc., Red Hat, Inc., SAS Institute Inc., 

VIZIO, Inc., Xilinx, Inc. Dell Inc. also represented by 

ANTHONY PETERMAN, Dell Inc., Round Rock, TX.

SUZANNE MICHEL, Google Inc., Washington, DC, for 

amicus curiae Google Inc.

BARBARA A. FIACCO, DONALD ROSS WARE, SARAH BURG, 

Foley Hoag LLP, Boston, MA, for amici curiae 3M Company, Caterpillar Inc., Eli Lilly and Company, General 

Electric Company, Johnson & Johnson, The Procter & 

Gamble Company, Amgen Inc., BP America, Inc., Glaxosmithkline LLC, Illinois Tool Works, Inc., Pfizer Inc., 

Qualcomm Incorporated, Sanofi US. 

______________________ 

Before NEWMAN, PLAGER, and HUGHES, Circuit 

Judges.

Opinion for the court filed by Circuit Judge PLAGER. 

Opinion concurring in part and dissenting in part 

filed by Circuit Judge HUGHES. 

PLAGER, Circuit Judge. 

INTRODUCTION

This is a covered business method (“CBM”) patent 

case, under § 18 of the Leahy-Smith America Invents Act

(“AIA”), Pub. L. No. 112-29, 125 Stat. 284 (2011). It

comes to us as an appeal of a final written decision of the 

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Patent Trial and Appeal Board (“PTAB”),1 the recentlycreated adjudicatory arm of the United States Patent and 

Trademark Office (“USPTO” or “Government”).2 The case 

originated as a petition to the USPTO, submitted by

appellees SAP America, Inc. and SAP AG (collectively, 

“SAP”), pursuant to the provisions of the AIA.

SAP requested that the USPTO institute review of the 

validity of certain claims in U.S. Patent No. 6,553,350 

(“’350 patent”). The ’350 patent is owned by the appellant, Versata Development Group, Inc. (“Versata”), who 

had sued SAP for infringing the patent. In its petition to 

the USPTO, SAP alleged that the patent was a covered 

business method patent.

Covered business method patents are subject to the 

special provisions of AIA § 18. See 125 Stat. at 329–31.3 

Section 18 establishes a separately-designated transition1 For oral argument purposes, this case, denominated as Versata I, was consolidated with Case No. 2014-

1145, on appeal from the United States District Court for 

the Eastern District of Virginia, involving the same 

parties, the same patent, and essentially the same issues. 

That case will issue as Versata II. 2 The PTAB, established by § 7 of the AIA, is the 

successor to the Board of Patent Appeals and Interferences (“BPAI”). Compare 35 U.S.C. § 6 (2006) (concerning 

the BPAI) with 35 U.S.C. § 6 (2012) (concerning the 

PTAB).

3 In general, the AIA is codified in various parts of 

35 U.S. Code. Section 18 of the AIA is not however codified; it is found in 125 Stat. References to § 18 in this 

opinion are to pages 329–31 of 125 Stat.

 

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al program4 under which the USPTO conducts post-grant 

review proceedings concerning the validity of covered 

business method patents. As the title suggests, the 

special program provided by § 18 is available only for 

“covered business method patents,” as that term is defined by the statute. However, for purposes of conducting 

proceedings thereunder, § 18 is considered a part of the 

broader chapter 32 provisions of title 35, U.S. Code, 

governing post-grant review (“PGR”), 35 U.S.C. §§ 321–

329; § 18 expressly incorporates, with certain exceptions 

not relevant here, the standards and procedures found in 

that chapter.5 § 18(a)(1).

In addition to the merits of the decision rendered by 

the PTAB (which held the claims at issue invalid), the 

parties to the appeal dispute several predicate issues. 

These include:

4 The program is called ‘transitional’ because it is 

scheduled to ‘sunset’ eight years after implementing 

regulations are issued. § 18(a)(3)(A).

5 A note on terminology: The potential under the 

AIA for more than the usual confusion that accompanies 

new congressional mandates stems in part from incidental features of the AIA. In particular, various new 

procedures intersect with earlier procedures of a similarsounding kind, e.g., inter partes review (“IPR”) has replaced inter partes reexamination, compare 35 U.S.C. 

§§ 311–318 (2006) (concerning inter partes reexamination), with 35 U.S.C. §§ 311–319 (2012) (concerning IPR). 

The statute also employs identical terminology to mean 

different things, e.g., the heading of AIA § 6 is entitled 

“Post-Grant Review Proceedings,” 125 Stat. at 299, while

one of the programs thereunder shares the same name—

“Chapter 32—Post-Grant Review.” It is not uncommon 

for the entirety of AIA proceedings to be referred to informally as ‘post-grant review.’ 

 

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6 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

• if the PTAB makes an initial determination 

under § 18 of the AIA that the patented invention qualifies for “covered business 

method” treatment under § 18, may a court 

review that issue when reviewing as part of 

a final written decision the invalidation of 

claims under the authority of § 18? 

• if the answer is yes, for purposes of postgrant review by the USPTO how is the term 

“covered business method patent” to be understood, and does the patent at issue here 

qualify as a CBM patent? 

• if the PTAB correctly determines that under § 18 of the AIA a patent comes within 

the definition of a CBM patent, what are

the criteria for determining whether the patent is excluded from review under § 18 because the patent falls within the 

statutorily-excepted category of “technological invention,” and how do those criteria 

apply to the ’350 patent? 

• if, in deciding the merits of the case—the 

validity of the challenged claims in the patent—the PTAB is called upon to engage in 

claim construction, does the PTAB apply 

the USPTO’s general rule of the “broadest 

reasonable interpretation,” or does it apply 

the judicial standard of the “one correct 

construction”? 

• finally, on appeal at the final written decision stage to this court, during which we 

must decide whether the PTAB applied the 

substantive tests for validity correctly, may 

a court determine whether as an initial 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 7

tive tests to apply, and did the PTAB apply 

them correctly here? 

After determining the answers to these queries, contested by the parties, as explained below, we address their 

application to the ’350 patent at issue. 

BACKGROUND

The ’350 Patent

Versata owns the ’350 patent, entitled “method and 

apparatus for pricing products in multi-level product and 

organizational groups.” ’350 patent, col. 1, ll. 1–3. The 

“invention operates under the paradigm of WHO (the 

purchasing organization) is buying WHAT (the product).” 

Id. at col. 3, ll. 24–25. An example of the WHO/WHAT 

paradigm, known in the prior art according to the patent, 

is depicted in Figure 1 of the ’350 patent, reproduced 

below: 

 

See id. at col. 4, ll. 17–18.

The ’350 patent, however, states that prior art pricing 

tables for WHO/WHAT required large data tables. See id.

at col. 1, ll. 52–59. The patent is said to improve upon the 

prior art and reduce the need for large data tables by, 

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inter alia, arranging customers (purchasing organizations) into a hierarchy of customer groups and products 

into a hierarchy of product groups. Id. at col. 3, ll. 24–27, 

41–42, 66 – col. 4, l. 14. WHO is defined by the creation of 

an organizational hierarchy of organizational groups, 

where each group represents a characteristic of the organizational group. Id. at col. 3, ll. 24–27. Figure 4A of the 

patent, below, shows an example of an arrangement of an 

organizational group:

 

See id. at col. 4, ll. 24–25.

Similarly, a product group hierarchy is defined that 

can be applied to products (WHAT). Id. at col. 3, ll. 41–

42. Pricing information is then associated with the customer and product groups. Id. at col. 8, ll. 17–25. Special 

pricing adjustments may be defined as applying to all 

members of a specific customer group or a specific product 

group. Id. at col. 3, ll. 26–49.

We are concerned with claims 17 and 26–29. Claim 

17 recites a “method for determining a price of a product 

offered to a purchasing organization” comprising certain 

steps. Id. at col. 20, l. 66 – col. 21, l. 29. Claim 26 recites 

a “computer readable storage media comprising: computer 

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instructions to implement the method of claim 17.” Id. at 

col. 21, ll. 61–62. Claim 27 recites a “computer implemented method for determining a price of a product 

offered to a purchasing organization” comprising certain 

steps. Id. at col. 21, l. 63 – col. 22, l. 12. Claim 28 recites 

a “computer readable storage media comprising: computer 

instructions to implement the method of claim 27.” Id. at 

col. 22, ll. 13–14. Claim 29 recites an “apparatus for 

determining a price of a product offered to a purchasing 

organization” comprising certain limitations. Id. at col. 

22, ll. 15–35.

Claim 17 is representative:

A method for determining a price of a product offered to a purchasing organization comprising: arranging a hierarchy of organizational groups 

comprising a plurality of branches such that an 

organizational group below a higher organizational group in each of the branches is a subset of the 

higher organizational group; arranging a hierarchy of product groups comprising a plurality of 

branches such that a product group below a higher product group in each of the branches in a subset of the higher product group; storing pricing 

information in a data source, wherein the pricing 

information is associated, with (i) a pricing type, 

(ii) the organizational groups, and (iii) the product 

groups; retrieving applicable pricing information 

corresponding to the product, the purchasing organization, each product group above the product 

group in each branch of the hierarchy of product 

groups in which the product is a member, and 

each organizational group above the purchasing 

organization in each branch of the hierarchy of 

organizational groups in which the purchasing organization is a member; sorting the pricing information according to the pricing types, the product, 

the purchasing organization, the hierarchy of 

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product groups, and the hierarchy of organizational groups; eliminating any of the pricing information that is less restrictive; and determining 

the product price using the sorted pricing information.

Id. at col. 20, l. 66 – col. 21, l. 29.

Prior Litigation

On April 20, 2007, Versata, along with Versata Software, Inc. and Versata Computer Industry Solutions, Inc., 

sued SAP for, inter alia, infringement of the ’350 patent in 

the U.S. District Court for the Eastern District of Texas. 

The case proceeded to trial, and a jury found infringement 

and awarded damages. The district court upheld the 

infringement verdict but reversed other rulings unrelated 

to the ’350 patent, resulting in a new trial on damages. A 

jury then found that SAP’s post-patch software continued 

to infringe and awarded lost-profits damages and reasonable royalty damages. The district court upheld those 

awards. 

SAP appealed the district court’s final judgment to 

our court. In Versata Software, Inc. v. SAP Am., Inc., 717 

F.3d 1255 (Fed. Cir. 2013), we affirmed the jury’s infringement verdict and damages award, but vacated as 

overbroad a permanent injunction entered by the district 

court. Id. at 1258. The case was remanded for the district court to enter an order conforming to our opinion. 

Id.; see also Versata Computer Indus. Solutions, Inc. v. 

SAP AG, 564 F. App’x 600 (Fed. Cir. 2014) (per curiam).

Covered Business Method Patent Review

While all that was going on, SAP on September 16, 

2012, petitioned the PTAB to institute a covered business 

method review of Versata’s ’350 patent on the grounds 

that claims 17 and 26–29 of the patent were unpatentable 

for failure to comply with 35 U.S.C. §§ 101, 102, and 112, 

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1st and 2nd paragraphs. On January 9, 2013, the PTAB 

granted SAP’s petition and instituted a covered business 

method review of the ’350 patent. In accordance with the 

statutory standard for instituting a review, the PTAB 

determined that claims 17 and 26–29 were more likely 

than not unpatentable under 35 U.S.C. §§ 101 and 102. 

The PTAB declined to review the claims under § 112 

because, in the PTAB’s view, SAP had not met the standard in that regard. Versata did not seek rehearing of the 

decision to institute. 

Subsequently, at SAP’s request, the PTAB agreed to 

forego the § 102 review and expedite the § 101 review. On 

June 11, 2013, the PTAB issued its final written decision 

cancelling claims 17 and 26–29 as unpatentable under 

§ 101. Versata sought rehearing of the final written 

decision, which the PTAB denied. Versata then appealed 

the final written decision to this court; that is the case we 

decide here. 

Proceedings Before the District Court

Before turning to the case before us, there is one additional litigation to be noted which is of direct relevance to 

this case. On March 13, 2013, while the PTAB was conducting its CBM review, Versata sued the USPTO in the 

U.S. District Court for the Eastern District of Virginia, 

seeking to set aside the PTAB’s decision to institute CBM 

review. SAP filed a motion to intervene, which the district court granted. On August 7, 2013, the district court 

granted the USPTO’s motions to dismiss for lack of subject matter jurisdiction and failure to state a claim, and 

SAP’s motion to dismiss for lack of subject matter jurisdiction. 

The district court held that it lacked subject matter 

jurisdiction “because the AIA’s express language, detailed 

structure and scheme for administrative and judicial 

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12 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

tive action evince Congress’s clear intent to preclude 

subject matter jurisdiction over the PTAB’s decision to 

institute patent reexamination [sic] proceedings.” Versata 

Dev. Corp. v. Rea, 959 F. Supp. 2d 912, 915 (E.D. Va. 

2013). The district court also held that “the decision to 

institute post-grant review is merely an initial step in the 

PTAB’s process to resolve the ultimate question of patent 

validity, not a final agency action as contemplated by 5 

U.S.C. § 704. . . . Plaintiff retains an alternative adequate

remedy through appeal to the Court of Appeals for the 

Federal Circuit.” Id. On October 5, 2013, the district 

court denied Versata’s motion to alter or amend the 

judgment. Versata appealed the district court’s judgment 

to this court; that appeal is pending as Versata II. 

We have jurisdiction over this case, Versata I, pursuant to 28 U.S.C. § 1295(a)(4)(A). 

DISCUSSION

Ultimately the issue to be decided on appeal concerns 

the substantive merits: whether the PTAB ruled correctly 

that the challenged earlier-issued claims of the ’350 

patent are invalid for the reasons given by the PTAB, 

namely, non-compliance with 35 U.S.C. § 101. Before 

addressing this ultimate merits issue, however, we must 

address the several predicate issues of process and procedure that the parties raise—issues that could have decisive effect on the outcome of the case regardless of its 

substantive merits.

Issue Number 1—Judicial Review

The initial decision to institute review in response to a 

petition is the first step in the post-grant review process. 

In this case, the PTAB at the initial decision to institute 

stage determined that the petition to review the ’350 

patent should be granted. In making that determination, 

the PTAB’s three-judge panel concluded:

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• that the ’350 patent was a “covered business method patent” as that term is defined 

in the statute; 

• that it was not a “technological invention,” 

a statutorily-stated exception to that definition; 

• that § 101 was applicable to patents reviewed under the CBM process; 

• and that, as required by § 324(a), “it is more 

likely than not that at least 1 of the claims 

challenged in the petition is unpatentable.” 

In its patent owner’s preliminary response at the decision to institute stage, Versata had challenged each of 

these propositions. The PTAB addressed Versata’s arguments and rejected them.

After a review is instituted, the review proceeds to a 

trial before the PTAB, and concludes with the PTAB’s 

‘final written decision’: “the [PTAB] shall issue a final 

written decision with respect to the patentability of any 

patent claim challenged by the petitioner.” § 328(a). 

Section 329 further provides for appeal of that decision to 

the Court of Appeals for the Federal Circuit pursuant to 

§§ 141–144; section 144 provides that “[t]he United States 

Court of Appeals for the Federal Circuit shall review the 

decision from which an appeal is taken on the record

before the Patent and Trademark Office.” 

Before us then are the merits of the final written 

decision rendered by the PTAB in this case. To be clear, it 

is the merits of the final written decision that are on 

appeal; we are not here called upon to review the determination by the PTAB whether to institute a CBM review, and indeed the statute expressly instructs that we 

may not: 

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The determination by the Director whether to institute a post-grant review under this section shall 

be final and nonappealable.

35 U.S.C. § 324(e) (emphasis added). As noted, this 

statute is applicable to post-grant reviews and CBM 

proceedings; the PTAB acts for the Director in deciding 

whether to institute a review, see 35 U.S.C. § 326(c); 37 

C.F.R. § 42.4 (2014). 

Turning to the merits, the PTAB, in its final written 

decision, held Versata’s CBM patent claims 17 and 26–29 

unpatentable under 35 U.S.C. § 101, and ordered them 

cancelled. Versata on appeal challenges that holding on 

multiple grounds:

• Versata’s patent does not claim a “covered 

business method,” and in any event falls 

within the safe harbor of a “technological 

invention”; 

• The PTAB does not have authority to review CBM patents for subject-matter eligibility under 35 U.S.C. § 101;

• The PTAB’s claim construction is wrong, it 

applied the “broadest reasonable interpretation” to its claim construction, which it 

should not have, and had it correctly analyzed § 101 under the proper claim construction it would not have reached the 

holding it did.

SAP responds that, absent a finding that these issues 

are either non-appealable or waived, on the merits the

USPTO correctly held that the ’350 patent is a “covered 

business method patent” under § 18(a)(1)(E), and that the 

AIA authorizes § 101 subject-matter eligibility as a 

ground for CBM review.

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The USPTO entered the case as intervenor, as authorized by § 143. The USPTO devotes a substantial part of 

its brief to the argument that this court lacks jurisdiction 

to review the Director’s decision to institute a post-grant 

review of the ’350 patent. On its face that argument 

would appear curious, since as earlier explained the issue 

on appeal before the court is only the merits of the final 

written decision. However, the USPTO makes the point 

that the question of whether the patent at issue here falls 

within the scope of the PTAB’s authority under § 18 as a 

“covered business method patent” (not one claiming a 

“technological invention”) was decided by the PTAB at the 

decision to institute stage, and on that basis it is immunized from later judicial review at the final decision stage. 

SAP, but not the USPTO, makes the additional argument that, under the specific terms of the judicial 

review bar in § 324(e), supra, we do not have authority to 

review any questions decided by the PTAB in the course 

of making its initial decision to institute review, including 

whether ineligibility under § 101 is a permissible ground 

for invalidation under the CBM authority invoked by the 

PTAB. 

Thus, the USPTO contends that the CBM-specific invalidation here must be upheld even if the PTAB incorrectly interpreted the statute regarding what is a CBM 

patent and the patent is not a CBM patent under the 

correct law, and SAP further contends that the invalidation under § 101 must be upheld even if the PTAB’s CBMinvalidation authority does not permit invalidation under 

§ 101.

This is the first case challenging the scope of § 324(e) 

at the final written decision stage. There are, however, 

several recent cases decided by this court construing a 

parallel statutory review bar—§ 314(d) under separate 

chapter 31 of the AIA, Inter Partes Review. With one 

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exception to be addressed later, these cases have arisen in 

the context of attempts at interlocutory review of PTAB 

IPR decisions to institute. 

In St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp., 749 F.3d 1373 (Fed. Cir. 2014), the first of the 

interlocutory review cases, the patentee had initiated an 

infringement suit. The defendant in the suit counterclaimed, asserting infringement of the defendant’s patent 

by the initiating patentee. The initiating patentee then 

sought post-grant review of the defendant’s patent under 

the IPR provisions. The PTAB decided not to institute 

review, a decision the patentee appealed directly to this 

court.

We held that the patentee’s appeal of the PTAB decision was statutorily barred by § 314(d), and granted the 

motion by the defendant and the USPTO to dismiss the 

appeal. In its decision to deny direct review, our court 

examined the application of § 314(d) to the case. As 

noted, this section—314(d)—is the counter-part to the one 

with which we are concerned here—§ 324(e), except that 

314(d) applies specifically to IPR cases, whereas 324(e) 

applies to PGR and CBM (§ 18) cases.

The court commented that § 314(d) “may well preclude all review by any route, which we need not decide. 

It certainly bars an appeal of the non-institution decision 

here.” 749 F.3d at 1376. The court thus distinguished the 

question of the availability of immediate “appeal” under 

35 U.S.C. §§ 141(c) and 319, which it was deciding, from 

the question of “review” (in the course of bringing other 

actions, such as appeals from final decisions or APA 

actions in district court), which it expressly said it was 

not deciding. The court based its holding “on the structure of the inter partes review provisions, on the language 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 17

dictional statute read in light of those provisions.” Id. at 

1375.

The same day the court issued St. Jude, we issued two 

other opinions reaching the same result under the same 

statute, though in different procedural contexts. See In re 

Dominion Dealer Solutions, LLC, 749 F.3d 1379 (Fed. Cir. 

2014) (PTAB declined to institute IPR review; held, for 

the reasons explained in St. Jude, we did not have jurisdiction to hear petitioner’s mandamus action challenging 

the PTAB’s decision); In re Procter & Gamble Co., 749 

F.3d 1376, 1377 (Fed. Cir. 2014) (PTAB granted rather 

than refused to institute IPR review; held, that for the 

same reasons, the difference between a denial and a grant 

of review made no difference to our mandamus jurisdiction—“immediate review of such a decision is not available in this court.”).

In its opinion in In re Procter & Gamble Co., the court 

explained what it was not deciding: 

It is a separate question whether section 314(d) 

means that the decision to institute the review is 

unchallengeable later—if the Board reaches a decision under section 318(a) and an appeal is taken 

under section 319 [appeal to this court of the final 

written decision of the PTAB]. Perhaps section 

314(d)’s broad language precludes all judicial review of the institution decision, even in an eventual section 319 appeal. We need not decide that 

question, which can be addressed in a section 319 

appeal. Nor need we address whether an immediate challenge could be brought in district court 

[through an APA action].

749 F.3d at 1379.

Again, the statutory references are to the IPR ch. 31 

provisions, which, though not directly applicable to CBM 

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18 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

cases, parallel those of the PGR ch. 32 provisions with 

which we are concerned here. 

Two other recent opinions by this court warrant comment since they arise directly under chapter 32 and § 18, 

and, though they involve different fact settings from those 

discussed above, they cast light on how we are to understand § 18.6 In VirtualAgility Inc. v. Salesforce.com, Inc., 

759 F.3d 1307 (Fed. Cir. 2014), the issue was whether a 

district court had properly denied a request for a stay of 

previously-commenced litigation. The defendant in the 

district court litigation had petitioned the USPTO for 

post-grant review of an alleged CBM patent under § 18. 

The PTAB had instituted review, and trial by the PTAB of 

the validity of the patent claims was on-going when the 

stay was requested. 

This court reversed the district court’s denial of the 

stay. We noted that the district court had erred to the 

extent it had undertaken a review of the merits of the 

PTAB decision to institute review. We said:

Indeed, a challenge to the PTAB’s “more likely 

than not” determination at this stage amounts to 

an improper collateral attack on the PTAB’s decision to institute CBM review, and allowing it 

would create serious practical problems. . . . Congress clearly did not intend district courts to hold 

mini-trials reviewing the PTAB’s decision on the 

merits of the CBM review. . . . The stay determination is not the time or the place to review the 

PTAB’s decisions to institute a CBM proceeding.

6 See also GTNX, Inc. v. INTTRA, Inc., Nos. 15-

1349, -1350, -1352, -1353, 2015 WL 3692319 (Fed. Cir. 

June 16, 2015) (a third case).

 

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Id. at 1313.7

And in Benefit Funding Systems LLC v. Advance 

America Cash Advance Centers Inc., 767 F.3d 1383 (Fed. 

Cir. 2014), the question was whether a district court 

decision to grant a stay of proceedings was proper pending 

the outcome of an on-going post-grant review at the 

PTAB.

The patentee’s sole argument on appeal was that the 

USPTO could not institute review proceedings of a CBM 

patent on the grounds of a violation of § 101. Section 101 

specifies the kinds of inventions that are patentable and 

is an issue in this case as well. In affirming the district 

court’s stay determination, we said “‘[t]he stay determination is not the time or the place to review the PTAB’s 

decisions to institute a CBM proceeding.’” Id. at 1386 

(quoting VirtualAgility, 759 F.3d at 1313). We then 

added:

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. . . . 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.

7 Judge Newman dissented on the ground that the 

district court in its decision was not given the deference to 

which it was entitled.

 

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20 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

Returning to the case before us, Versata, as earlier 

noted, had brought an action in the U.S. District Court for 

the Eastern District of Virginia, under the Administrative 

Procedure Act (“APA”), to prevent the PTAB from proceeding with the § 18 CBM review of the ’350 patent at 

issue in this case. Versata challenged the authority of the 

PTAB to have instituted the review of the ’350 patent 

under § 18; SAP and the USPTO moved to dismiss the 

complaint.

In support of its motions to dismiss, the USPTO argued, consistent with the suggestion noted supra in 

Benefit Funding, that there was an available remedy 

under the AIA statute—the issues decided by the PTAB 

at the institution stage are preserved for review at the 

time of an appeal to the Federal Circuit of the PTAB’s 

final written decision. The district court granted the 

USPTO’s motions and SAP’s motion and dismissed Versata’s APA complaint on two alternative grounds, including 

that “an adequate remedy exists by way of direct appeal 

[of the final written decision] to the Federal Circuit.” 

Versata Dev. Corp., 959 F. Supp. 2d at 927.

The district court suit involved essentially the same 

parties, the same patent, and the same basic issues. 

Accordingly, based on the USPTO’s representations to the 

district court, despite (or in accordance with) the provisions of § 324(e), this court should entertain and decide 

the predicate questions raised by the parties regarding 

the USPTO’s authority over this patent, and whether the 

proper law was applied. This is so even though the challenged decisions were initially made at the decision to 

institute stage. 

The USPTO, however, now represented in this appeal 

by the Department of Justice Civil Division Appellate 

Staff, advises the court that the Government has reconsidered its position. The Government now argues for 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 21

what it characterizes as a “jurisdiction[al]” bar on this 

court’s review of at least some of the issues decided at the 

initial decision to institute stage. Intervenor’s Br. at 13. 

Some of the Government’s language suggests a bar on 

reviewing any PTAB determination made when instituting review. This language would seem to cover even 

whether § 101 is an available ground of invalidation, but 

the Government does not expressly make that contention. 

Its nonreviewability argument is limited to the contention 

that we may not review whether the ’350 patent is a CBM 

patent under § 18. (Judge Hughes likewise limits his 

Dissent in Part to the CBM question.)

In response to the Government’s new position, Versata argues that the Government is estopped from reconsidering its position in the district court APA action, citing 

New Hampshire v. Maine, 532 U.S. 742, 749 (2001). The 

Government responds that it is better that it acknowledges its errors rather than compound them. 

Ordinarily, the Government’s willingness to confess 

error should be encouraged. However, given the fact that 

the district court action and this appeal share the same 

parties, the same patent, and the same contested issues, 

there is a ‘bait-and-switch’ aspect to the Government’s 

newly-arrived-at position: when it helps the Government’s 

position, a predicate issue, they argue, can be reviewed on 

appeal; but when it might hurt, the issue becomes not 

reviewable. 

Fortunately, we need not judge the astuteness of the 

Government’s confession. Nor, in deciding the question of 

reviewability, need we decide the strength of Versata’s 

estoppel position. This is because the Government was 

right the first time—for the reasons we shall next explain, 

its original position on reviewability, with some clarification, was the correct one.

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22 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

We have before us Versata’s appeal from the final 

written decision of the PTAB invalidating Versata’s 

patent under § 18 authority, an authority limited to CBM 

patents. On the reviewability issue that divides Versata 

and the Government, Versata argues that the invalidation must be reversed as beyond the § 18 authority because the ’350 patent is not actually a CBM patent under 

the law if properly understood, and so is outside the 

PTAB’s invalidation authority under § 18. The Government contends to the contrary: as a threshold matter, we 

may not review—indeed, we have no “jurisdiction” to 

decide—whether the ’350 patent is a CBM patent since 

that was initially decided by the PTAB at the institution

stage. Intervenor’s Br. at 13.

To determine this reviewability issue, two related 

questions must be answered: first, does the § 324(e) 

judicial review bar permit judicial review, when conducted with regard to the final written decision, of PTAB 

compliance with any requirement that involves the ultimate authority of the PTAB to invalidate a patent; second, if yes, is the restriction of § 18 to CBM patents such 

a limit. We answer both questions in the affirmative, and 

therefore reject the contention that we may not review 

whether the ’350 patent is a CBM patent covered by § 18.

As to the first question: what § 324(e) says is that 

“[t]he determination by the [PTAB] whether to institute a 

post-grant review under this section shall be final and 

nonappealable.” 35 U.S.C. § 324(e) (emphasis added). 

That language does not by its terms apply to limits on the 

authority to enter a “final written decision” invalidating a 

patent. Institution and invalidation are two distinct 

actions by the PTAB. In addition to being deeply embedCase: 14-1194 Document: 133-2 Page: 22 Filed: 07/09/2015
VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 23

ded in federal administrative law,8 the distinction is built 

into the structure of this particular AIA statute, as explained above, and § 324(e) applies only to the decision to 

institute.

The distinct agency actions do not become the same 

just because the agency decides certain issues at both 

stages of the process. Nor do they become the same just 

because the agency chooses, or even follows a congressional directive, to decide an issue determining finalaction authority at the initiation stage and then does not 

revisit the issue later. Early-stage decision of a basic 

authority question can make sense as an efficiency matter. There is no good reason to launch a proceeding if it is 

clear that the agency will have no authority to act at its 

conclusion. On the other hand, some determinations 

normally made at the initiation stage may not affect 

authority to render a final decision whenever made. 

Overlap of issues is not determinative, neither is the 

timing determinative. Indeed, the Government implicitly 

agrees. Unlike SAP, it pointedly does not contend that 

8 Under the APA, an agency initiation of proceedings 

is an agency action, 5 U.S.C. § 702, but it commonly is not 

a reviewable “final agency action,” id. § 704. See Bennett 

v. Spear, 520 U.S. 154 (1997); FTC v. Standard Oil Co. of 

Cal., 449 U.S. 232 (1980); S. Ry. Co. v. Seaboard Allied 

Milling Corp., 442 U.S. 444, 452 (1979); Automated 

Merch. Sys., Inc. v. Lee, 782 F.3d 1376 (Fed. Cir. 2015) 

(adopting the Government’s argument that even a decision to continue a proceeding is not a final agency action, 

which generally will occur only upon conclusion of the 

proceeding); see also Sackett v. EPA, 132 S. Ct. 1367 

(2012); 16 Charles Alan Wright et al., Federal Practice & 

Procedure § 3942; 32 Charles Alan Wright et al., Federal 

Practice & Procedure § 8220.

 

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24 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

§ 324(e) bars our review of whether § 101 is an available 

ground for invalidation under § 18, regardless of when the 

PTAB considered that issue. 

It would not only run counter to the language of 

§ 324(e) to read it as barring review of whether the PTAB 

exceeded statutory limits on its authority to invalidate. It 

would also run counter to our long tradition of judicial 

review of government actions that alter the legal rights of 

an affected person, a hallmark of the distinction between 

(generally reviewable) final agency action and (generally 

unreviewable) agency action that merely initiates a 

process to consider such an alteration. See Bennett, 520 

U.S. at 177–78.

It has long been the law that “[a]dministrative determinations must have a basis in law and must be within 

the granted authority. . . . An agency may not finally 

decide the limits of its statutory power. That is a judicial 

function.” Soc. Sec. Bd. v. Nierotko, 327 U.S. 358, 369 

(1946). The Supreme Court has repeatedly emphasized 

“the strong presumption that Congress intends judicial 

review of administrative action,” and that “[f]rom the 

beginning ‘our cases [have established] that judicial 

review of a final agency action by an aggrieved person will 

not be cut off unless there is persuasive reason to believe 

that such was the purpose of Congress.’” Bowen v. Mich. 

Acad. of Family Physicians, 476 U.S. 667, 670 (1986) 

(quoting Abbott Labs. v. Gardner, 387 U.S. 136, 140

(1967)).9

More specifically, when doubt about congressional intent exists, the general presumption favoring judicial 

9 See Shalala v. Illinois Council on Long Term 

Care, Inc., 529 U.S. 1 (2000), for the Court’s refinement of 

Bowen’s application to specific Medicare statutes.

 

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review of rights-changing administrative action is controlling. Block v. Cmty. Nutrition Inst., 467 U.S. 340, 351 

(1984). As a result, an agency seeking to overcome this 

strong presumption faces a “heavy burden” and must do 

so by “clear and convincing” evidence. Bowen, 476 U.S. at 

671–72. The Supreme Court recently reiterated the 

agency’s heavy burden to overcome the strong presumption against unreviewability. See Mach Mining, LLC v. 

E.E.O.C., 135 S. Ct. 1645, 1651 (2015).

Congress explained the anomalous nature of a bar to 

judicial review of final agency action:

Very rarely do statutes withhold judicial review. 

It has never been the policy of Congress to prevent 

the administration of its own statutes from being 

judicially confined to the scope of authority granted or to the objectives specified. Its policy could 

not be otherwise, for in such a case statutes would 

in effect be blank checks drawn to the credit of 

some administrative officer or board.

S. Rep. No. 79-752, at 26 (1945); H.R. Rep. No. 79-1980, at 

41 (1946) (same); Bowen, 476 U.S. at 671 (quoting same). 

Here, nothing in § 324(e) meets the high standard for 

precluding review of whether the PTAB has violated a 

limit on its invalidation authority under § 18. 

As to the second question implicit in the Government’s nonreviewability contention: one of the limits on 

§ 18 invalidation authority is that the patent at issue be a 

CBM patent. Congress created a special review regime, 

over and above any other authority the PTAB might have,

for reviewing and invalidating patents that qualify as 

CBM patents. And it put a time limit (eight years) on the 

PTAB’s authority under that regime. This requirement 

defines the PTAB’s authority to invalidate under § 18. If 

a particular patent is not a CBM patent, there is no 

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26 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

proper pleading that could be filed to bring it within the 

PTAB’s § 18 authority. 

In so concluding, we need not and do not consider all 

of the various determinations the PTAB may make to 

initiate proceedings and which may constitute limits on 

ultimate invalidation authority, reviewable on appeal 

from a final written decision invalidating a patent. It is 

enough for us to determine here that the defining characteristic of a patent as a CBM patent, subjecting it to a 

special PTAB power to invalidate, is such a limit.10

The Government and SAP have not identified any 

reason to draw different conclusions. It is clear from the 

legislative history of the AIA that Congress purposely set 

out to create a relatively simple and expedited administrative process. See, e.g., H.R. Rep. No. 112-98, at 48 

(2011). However, nothing in that purpose precludes or 

argues against this court, in an appeal of a final written 

decision, deciding contested questions regarding premises 

necessary to the agency’s ultimate relied-on authority to 

take the action on appeal—here, invalidation of the 

patent claims under the CBM authorization—just because 

the agency first addressed those premises at the initiation 

stage of the proceeding. The appeal process, with its 

inherent delays, is already committed. Any further delay 

caused by having the court decide as part of the basic 

merits case a predicate issue such as raised here, would 

be limited. Indeed, when the answers to these predicate 

issues are decided as a matter of precedent, further delay, 

if any, will be minimal, if not essentially disappear.

10 The Government and SAP argue that the PTAB 

found Versata waived this issue during the trial. As we 

have explained, this is a predicate issue, and a necessary 

part of the record on appeal. 

 

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The parties, digging through the legislative record, 

come up with competing statements from various legislators with regard to the possible scope of the issues to be 

heard on appeal. Even assuming such statements are 

thought to be relevant, the variety of conflicting views 

illustrates why we must focus on the structure and language of the act, not on what its advocates and detractors 

may say about it.

Looking at the structure of § 18, the Government, in 

support of its new-found position against judicial review, 

notes that the only provision of the AIA that allows an 

appeal to this court from a post-grant review proceeding is 

§ 329; that section authorizes judicial review of the “final 

written decision” of the PTAB made pursuant to § 328(a). 

The government reads this as limiting review to only the 

final written decision, and not anything in the initial 

decision to institute. But that of course begs the question—what aspects of the final written decision are subject to review?

The Government finds significance in the fact that 

§ 328(a) directs the PTAB to issue a decision with respect 

to the patentability of any patent claim. Putting this 

provision together with § 329, the Government argues 

that on appeal the court is limited to only what the PTAB 

is directed to do. But that is a non-sequitur. The statutory description of an agency’s decisional duties does not 

necessarily define the scope of an appellate court’s ultimate merits considerations. 

The Government also draws parallels between this issue under the AIA and the USPTO’s practice in the priorestablished ex parte reexamination proceedings, and in its 

prior practice under the now-superseded provisions for 

inter partes reexamination. We do not find that either of 

those proceedings, established under different statutory 

provisions and dealing with different issues, is controlling 

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28 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

here. It is worth noting, however, that the pre-AIA case 

law made clear that limitations on the scope of reexamination authority were reviewable upon the final decision 

even though the USPTO considered such limitations 

solely at the initiation stage and initiation itself was long 

held to be unreviewable. See In re NTP, Inc., 654 F.3d 

1268 (Fed. Cir. 2011); In re Hiniker Co., 150 F.3d 1362

(Fed. Cir. 1998); In re Portola Packaging, Inc., 110 F.3d 

786 (Fed. Cir. 1997), superseded by statute as recognized 

in In re NTP, Inc., 654 F.3d at 1277; In re Recreative 

Techs. Corp., 83 F.3d 1394 (Fed. Cir. 1996).

In short, we do not find that the Government’s arguments approach meeting the “heavy burden” of persuasion 

needed to overcome the “strong presumption” of judicial 

review. Congress, by limiting the scope of the review bar 

in § 324 as we have described, struck a balance between 

Congress’s desire for a prompt and efficient review process at the USPTO, on the one hand, and, on the other, 

the necessary recognition of the traditional role of judicial 

review of final agency action. We find that balance carefully crafted and consistent with the roles the Constitution assigns to the Judicial and Executive Branches.

In re Cuozzo Speed Technologies, LLC, No. 14-1301 

(Fed. Cir. July 8, 2015), decided by the court after the 

briefing had concluded in this case, is not to the contrary.11 The court in Cuozzo did not answer either of the two 

questions we decide in concluding that we may review 

whether Versata’s patent is a CBM patent. That is clear 

11 The original opinion and dissent in Cuozzo issued

on February 4, 2015. 778 F.3d 1271 (Newman, J., dissenting). A revised panel opinion and dissent issued on 

July 8, 2015. On the same day, the court denied a petition for rehearing en banc with a concurrence and two 

dissents to the denial.

 

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even putting aside any difference there might be between 

§ 314(d)—at issue in Cuozzo—and § 324(e)—at issue here.

To take the two questions in reverse order: Cuozzo did 

not decide whether status as a CBM patent was a limit on 

invalidation of authority under § 18. It could hardly have 

done so. Cuozzo did not involve a purported CBM patent 

or the PTAB’s § 18 authority.

More broadly, Cuozzo did not address, and had no occasion to address, the question whether (despite § 314(d))

a final written decision can be reviewed for compliance 

with a limit on the PTAB’s invalidation authority. Recognizing the distinction between initiation and final invalidation, Cuozzo, slip op. at 5–8, the court ruled only on 

review of the initiation decision itself, not about whether 

the final decision breached any limit on invalidation 

authority. 

And that focus was inherent in the substance of the 

challenge, for a reason Cuozzo noted. The challenge was 

simply that the IPR petition at issue had not cited particular prior art the PTAB ultimately relied on for invalidation. A proper petition undisputedly could have cited it, 

thereby plainly giving the PTAB authority to invalidate 

the patent at issue in the IPR. Id. at 7–8. The alleged 

error in initiation was “irrelevant” because it was like the 

error that was “washed clean” in Hiniker. Id. The court 

in Cuozzo did not rule on or have before it an asserted 

violation of a limit on the PTAB’s ultimate authority to 

invalidate that could not have been cured by a proper 

pleading.12

12 In that light, and following the issuance of the 

original opinion in Cuozzo, Versata, in a letter citing 

supplemental authority, requested that if necessary its 

 

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30 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

For the foregoing reasons, we hold that we have authority to review whether the ’350 patent is within the 

PTAB’s § 18 authority. 

Issue Number 2—Is the ’350 Patent a “Covered 

Business Method Patent”? 

AIA section 18 establishes a post-grant review proceeding “for review of the validity of covered business 

method patents.” § 18(a)(1). In case anyone wished to 

argue the question, Congress left no doubt about the scope 

of § 18: “The Director may institute a transitional proceeding [under § 18] only for a patent that is a covered 

business method patent.” § 18(a)(1)(E).

The statute defines a “covered business method patent” 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 . . . .

§ 18(d)(1). 

A basic disagreement between the parties to this case is 

how broadly this language should be read, and accordingly, whether it encompasses the invention set out in the 

’350 patent.

In addition to the boundaries inherent in the statutory definition, Congress also provided a specific exception: 

“the term [covered business method patent] does not 

include patents for technological inventions.” Id. Unhelpfully, Congress did not then define a “technological invention,” but instead instructed the USPTO to “issue 

regulations for determining whether a patent is for a 

appeal be treated as a mandamus petition. In view of our 

disposition of the case, the request is moot. 

 

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technological invention.” § 18(d)(2). The USPTO has by 

regulation promulgated its version of a definition of a 

“technological invention.” 37 C.F.R. § 42.301(b). The 

parties disagree as to whether the invention in this case is 

such an excepted “technological invention.”

Congress, in addition to the specific authorization to 

the USPTO to adopt regulations defining the meaning of 

“technological invention,” also gave the USPTO broad 

authority over the entire § 18 program—authority to 

“issue regulations establishing and implementing a 

transitional post-grant review proceeding for review of the 

validity of covered business method patents.” § 18(a)(1). 

Pursuant to that broad authority, the USPTO adopted 

extensive regulations governing the § 18 program. See 37 

C.F.R. §§ 42.300–.304. Thus the regulations, in addition 

to a definition of “technological invention,” id. § 42.301(b), 

also contain a definition of “covered business method 

patent,” id. § 42.301(a).

We first consider what, under the statute and the issued regulations, is a “covered business method patent,”

and whether the term applies to the patent at issue in 

this case. Subsequently we consider what the USPTO 

regulations, in the absence of a statutory definition, 

understand the exception for a “technological invention”

to be, and again its application to this patent. 

The Scope of the Term “Covered Business Method Patent”

We set out above the statutory definition of a “covered 

business method patent” found in § 18(d)(1). The 

USPTO’s regulation, defining the same term, restates 

verbatim the statutory definition and nothing more. 

Though that avoids any question of whether the regulation is consistent with the statute, regrettably it adds 

nothing to our understanding of the scope question.

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32 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

In response to Versata’s objection that the ’350 patent 

was not a covered business method patent, the PTAB was 

therefore left to its own devices. The PTAB undertook an 

analysis regarding whether Versata’s claims 17 and 26–

29 must necessarily be directed to “financial products or 

services,” as these terms are used in the definition.13 The 

PTAB noted that, as part of the process of implementing 

§ 18, the USPTO had published notices of proposed and 

final rulemaking, and that among the rules proposed and 

subsequently adopted was the definition of “covered 

business method patent” contained in 37 C.F.R. 

§ 42.301(a), the definition described above. 

The PTAB observed that in its notices the USPTO 

considered the legislative debates and history, as well as 

the overall transitional program itself. See J.A. 21–22 

(citing Transitional Program for Covered Business Method Patents—Definitions of Covered Business Method 

Patent and Technological Invention, 77 Fed. Reg. 48734, 

48735 (Aug. 14, 2012)). Also, the PTAB observed that in 

its final notice of rulemaking the agency explained that 

the legislative history supported the proposition that the 

definition be broadly interpreted to “encompass patents 

claiming activities that are financial in nature, incidental 

to a financial activity or complementary to a financial 

activity.” Id.

Further, in the Federal Register notice explaining the 

agency’s decision to adopt its final rule, the agency notice 

observes that one commentator responding to the rule 

proposal suggested that the regulatory definition of 

covered business method should be limited specifically to 

the products and services of the financial services indus13 As noted earlier, this issue was addressed in the 

PTAB’s decision to institute review, not in its final written decision.

 

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try. 77 Fed. Reg. at 48736. Another suggestion was that 

the agency should make specific reference in the definition to Class 705 of the United States Classification 

System, used by USPTO examiners. Id. (This classification is generally considered to be focused primarily on 

financial institutions as such.)14

The PTAB noted that the agency summarily rejected 

these proposals. Instead, the USPTO stated that:

The suggestion to clarify that the term “financial 

product or service” is limited to the products or 

services of the financial services industry is not 

adopted. Such a narrow construction of the term 

would limit the scope of the definition of covered 

business method patents beyond the intent of section 18(d)(1) of the AIA.

Id.

The PTAB thus declined to interpret the statute as 

requiring that the patent’s invention literally comprehend 

a financial product or service: “The term financial is an 

adjective that simply means relating to monetary matters.” J.A. 23. The PTAB concluded that “Versata’s ’350 

patent claims methods and products for determining a 

price and that these claims, which are complementary to 

a financial activity and relate to monetary matters, are 

considered financial products and services under 

§ 18(d)(1).” Id.

14 There is a considerable amount of history regarding Class 705—the technology class associated with the 

volume of business method patents that issued in the 

early 2000s. See, e.g., 157 Cong. Rec. 3432 (2011). Class 

705 itself apparently served as the original template for 

the definition of a “covered business method,” but was 

thought to be too narrow. Id. at 13167. 

 

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34 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

In its appeal here, Versata renews its argument 

against the PTAB position. Versata takes the position 

that Congress used the phrase “financial product or 

service” for a reason and that the plain meaning of the 

text of the statute limits the PTAB’s jurisdiction to products or services from the financial sector—i.e., banks, 

brokerages, holding companies, insurance, and similar 

institutions with a finance focus. If Congress had intended the scope of the definition to capture other things 

incidental to commerce, it could have said so, and it would 

have used different words.

SAP responds that the ’350 patent claims “[a] method 

for determining a price of a product offered to a purchasing organization.” Appellees’ Br. at 45 (quoting ’350 

patent col. 19, ll. 57–58). Under any interpretation of the 

statutory definition, argues SAP, price calculations plainly fall within the “practice, administration, or management of a financial product or service” language of AIA 

§ 18(d)(1). Even if Congress’s intent in this regard could 

be considered unclear, the USPTO’s interpretation of 

§ 18(d)(1) as broadly interpreted and “encompass[ing] 

patents claiming activities that are financial in nature, 

incidental to a financial activity or complementary to a 

financial activity,” is, according to SAP, entitled to deference under Cooper Technologies Co. v. Dudas, 536 F.3d 

1330, 1337 (Fed. Cir. 2008). According to SAP, the patent 

claims a “method for determining price,” ’350 patent, col. 

20, l. 66, not something Versata calls a “hierarchical 

pricing engine.” Appellees’ Br. at 49. The PTAB made 

specific findings that the claimed steps “could be performed . . . with pencil and paper,” and “no specific, unconventional software, computer equipment, tools or 

processing capabilities are required.” J.A. 27–28. These 

findings, argues SAP, support its determination.

The USPTO in its brief as intervenor notes that the 

PTAB’s interpretation of “financial” as “relating to moneCase: 14-1194 Document: 133-2 Page: 34 Filed: 07/09/2015
VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 35

tary matters” comports with the dictionary definition, 

citing The Random House Dictionary of the English 

Language 719 (2d ed. 1987) (defining, according to the 

USPTO, “financial” as “pertaining or relating to money 

matters”). This interpretation, it is said, readily embraces 

the ’350 patent which expressly claims a “method for 

determining a price of a product” in claim 17. ’350 patent, 

col. 20, l. 66. According to the USPTO, nothing in the text 

of the statute limits AIA § 18(d)(1) to any one sector or 

industry. Further, the legislative history supports the 

broader definition. Thus, argues the USPTO, the PTAB’s 

interpretation was not arbitrary or capricious.

We agree with the USPTO that, as a matter of statutory construction, the definition of “covered business 

method patent” is not limited to products and services of 

only the financial industry, or to patents owned by or 

directly affecting the activities of financial institutions 

such as banks and brokerage houses. The plain text of 

the statutory definition contained in § 18(d)(1)—

“performing . . . operations used in the practice, administration, or management of a financial product or service”—on its face covers a wide range of finance-related 

activities. The statutory definition makes no reference to 

financial institutions as such, and does not limit itself 

only to those institutions.

To limit the definition as Versata argues would require reading limitations into the statute that are not 

there. This understanding of the text is reinforced by the 

scope of the entire § 18 program, and the general concern, 

including within the halls of Congress, regarding litigation abuse over business method patents. These concerns 

caused Congress to create a special program for these 

patents in the first place.

Furthermore, the expertise of the USPTO entitles the 

agency to substantial deference in how it defines its 

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36 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

mission. Congress recognized this by its broad delegation 

of rulemaking authority in the establishment and implementation of this transitional post-grant review proceeding. See § 18(a)(1). It might have been helpful if the 

agency had used that authority to elaborate on its understanding of the definition provided in the statute. Nevertheless, for the reasons we have explained, we conclude 

that the ’350 patent and the invention it comprises fall

well within the terms of the statutory definition of a 

“covered business method patent.”

The Meaning of “Technological Invention”

Section 18(d) states that the term “covered business 

method patent” does not include patents for “technological 

inventions.” The parties dispute whether the ’350 patent 

is for a technological invention. This requires that we 

first determine what is meant by that term, and then 

whether the PTAB was correct in finding this patent is 

not such an invention. As earlier noted, Congress did not 

define the term, but left it to the USPTO to do. The 

USPTO followed Congress’s instructions, and in 37 C.F.R. 

§ 42.301(b) promulgated its definition.

According to the regulation, a “technological invention” is one in which “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.” Id. The regulation specifies that these criteria will be considered “on a case-bycase basis.” Id. This definition is notable as much for 

what it does not say as for what it does say.

First, the requirement that a technological invention 

should be novel and nonobvious over the prior art could be 

said to be rather obvious, and not novel. This is because 

in order to be eligible for patenting in the first place, any 

invention must be novel (35 U.S.C. § 102) and nonobvious 

(35 U.S.C. § 103); presumably the invention under review, 

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since it has already been covered by an issued patent, was 

earlier determined by the USPTO to be novel and nonobvious. At this early stage of the process, when the 

USPTO is first determining whether the patent at issue is 

even a CBM, there would seem to be little cause to determine what will be one of the ultimate questions if review 

is granted—did the USPTO err in the first instance when 

it originally determined that the invention was novel and 

nonobvious?

Putting this part of the regulation’s definition aside, 

we are left with a definition of a “technological invention” 

as essentially one having a “technological” feature that 

solves a “technical” problem using a “technical” solution. 

Defining a term in terms of itself does not seem to offer 

much help. In short, neither the statute’s punt to the 

USPTO nor the agency’s lateral of the ball offer anything 

very useful in understanding the meaning of the term 

“technological invention.”

Thus the PTAB, in concluding that it had jurisdiction 

over the ’350 patent as a covered business method patent 

that was not within the exception for a technical invention, had to craft its own understanding of what is meant 

by a “technological invention.” First, the PTAB recited 

the fact that the USPTO had adopted a definition and had 

published a related notice, see Office Patent Trial Practice 

Guide, 77 Fed. Reg. 48756, 48763–64 (Aug. 14, 2012). The 

notice listed certain characteristics which, if present, did 

not help support a finding that the invention was within 

the “technological invention” exception from CBM treatment. These are: 1) mere “recitation of known technologies”; 2) “reciting the use of known prior art technology”; 

and 3) “combining prior art structures to achieve the 

normal, expected, or predictable result of that combination.” Id. at 48764.

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The PTAB, taking the position that the presence of a 

single qualifying claim is sufficient to institute covered 

business method review, selected claim 17 for closer 

analysis. (Claim 17 is set out in extenso in the ‘Background’ section, supra.) Versata, in its effort to avoid 

CBM review of the ’350 patent, argued that claim 17, like 

all the claims in the patent, recited a novel and nonobvious technological feature. This was described as a “hierarchical data structure” used in combination with a 

software-implemented pricing procedure. Versata further 

contended that the claims all require the use of a computer and the use of “denormalized” numbers that are to be 

determined in “run time.” SAP responded that claim 17 

lacked a novel and nonobvious technological feature as 

the claim was merely directed to a business process of 

determining product prices that lack even minimal computer-related recitations. The PTAB concluded that claim 

17 did not recite a technological invention.

We accept the PTAB’s use of claim 17 as representative. As the PTAB correctly noted, even if the invention 

required the use of a computer, the claim did not constitute a technological invention. As we are now instructed, 

the presence of a general purpose computer to facilitate 

operations through uninventive steps does not change the 

fundamental character of an invention. See Alice Corp. 

Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

The PTAB viewed the invention typified by claim 17 

as basically a method of determining a price. This was a 

determination that could be achieved “in any type of 

computer system or programming or processing environment,” and accordingly “no specific, unconventional 

software, computer equipment, tools or processing capabilities are required.” J.A. 28 (citing Dealertrack, Inc. v. 

Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012)).

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We agree with the PTAB’s determination that claim 

17 does not solve a technical problem using a technical 

solution. Indeed, contrary to Versata’s argument that the 

invention “‘leveraged the hierarchal data structures used 

by large companies to organize pricing information,’” we 

agree with the PTAB that this is not a technical solution 

but more akin to creating organizational management 

charts. Id. (citation omitted). Like the PTAB, and for 

many of the same reasons, we conclude that whatever 

may be the full sweep of the term “technological invention,” the invention that comprises the ’350 patent is 

essentially not a technological one as that term ordinarily 

would be understood.

Accordingly, we affirm the PTAB’s conclusion that 

Versata’s ’350 patent is a covered business method patent, 

and that it does not fall within the exception for technological inventions, whatever that exception may otherwise 

mean.15

Issue Number 3—Claim Construction Standards

When addressing the ultimate merits in this case—

the question of compliance by the patent with the requirements of § 101—the PTAB faced an issue of claim 

construction. The PTAB applied its “broadest reasonable 

interpretation” (“BRI”) standard to the issue, the standard adopted in 2012 by the USPTO for AIA post-grant 

proceedings, and generally used in USPTO office actions. 

Versata challenges application of that standard to its 

claims in this case.16

15 See also Brief of The Internet Association as Amicus Curiae in Support of Appellees.

16 See also Amici Curiae Brief of 3M Company et al. 

in Support of Neither Party. But see Brief of Dell Inc. et 

al. as Amici Curiae in Support of Appellees and Interve-

 

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The PTAB, in its final written decision, construed four 

claim terms of which the parties sought construction. On 

appeal, Versata points out, correctly, that the PTAB

applied the BRI standard to each of its claim constructions. Versata consequently challenges generally the 

PTAB’s use of the BRI standard, and in particular its 

effect on the meaning of the term “pricing information,” 

and whether that term should be construed to require 

“denormalized numbers.”17

According to Versata, both Versata and SAP agreed at 

the outset of the proceedings that the term did require 

denormalized numbers. The PTAB declined to so construe the term, and, based on application of the BRI 

standard, decided that the invention in the ’350 patent 

did not require denormalized numbers.

Versata argues that such a claim construction is not 

permissible for a number of reasons, and that its use 

adversely impacted the validity determination of the ’350 

patent under the PTAB’s § 101 analysis. Accordingly, 

argues Versata, on appeal one alternative for the court is 

to reverse and remand for a new § 101 analysis under a 

proper claim construction.

SAP, whatever its position in the earlier litigation 

may have been, takes the position in this appeal that the 

PTAB, applying BRI, properly construed the claims 

broadly as not limited to “denormalized numbers.” SAP 

points to the fact that the dependent claims recite 

nor; Brief of Amici Curiae Intel Corp. et al. Supporting 

Intervenors and Affirmance of the Agency’s Decision.

17 Denormalized numbers, according to Versata, do 

not have fixed units and may assume a different meaning 

and different units, determined by the software during 

run time and depending on the pricing operation that is 

being performed.

 

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“denormalized numbers” and the independent claims do 

not, and the written description describes this feature as 

only “‘[o]ne aspect’ of the purported invention.” Appellees’ 

Br. at 57–58 (quoting ’350 patent, col. 8, l. 39). Further, 

argues SAP, even if the PTAB erred in its construction, 

the error is harmless because its correction would not 

change the result.

On the basic question of the propriety of the PTAB 

applying the BRI standard in its decision-making, this is 

an issue on which we need not elaborate here. In Cuozzo,

a case that issued after argument in this case, the majority approved the USPTO’s use of the BRI in PTAB claim 

construction. Slip op. at 10–19. As a general rule, we are 

bound by our own prior precedents, and, though the rules 

governing IPR matters at issue in Cuozzo will not necessarily govern all PGR/CBM matters, we see no basis for 

distinguishing between the two proceedings for purposes 

of the PTAB’s use of BRI in claim construction here. 

Furthermore, on careful review of the record in light 

of the parties’ arguments, it is less than clear that the 

outcome in this case would be different under a different 

claim construction regime. This is because, even applying 

the usual court-utilized “one correct construction” formula, we conclude that the PTAB’s interpretation of the 

claims, for the same reasons given by the PTAB after 

careful consideration, is correct. This is particularly the 

case regarding claim 17, which, in light of the principles 

of claim differentiation and the understandings derived 

from the written description, as described above, is not 

limited to denormalized numbers.

Thus, even without the guidance provided by Cuozzo, 

under either formulation of the claim construction standard the result is likely the same in this case. The PTAB’s 

claim constructions are affirmed.

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42 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

Issue Number 4—The Merits Determination

In its final written decision, the PTAB held that 

claims 17 and 26–29 of the ’350 patent were unpatentable 

under 35 U.S.C. § 101 as “abstract ideas.” In response, 

Versata first challenges whether, under the governing 

statutes, it is within the authority of the PTAB to invoke 

§ 101 as a test of validity. In Versata’s view, the statutes 

authorize the PTAB to test the validity of challenged 

claims in a CBM review on the basis of the requirements 

set forth in §§ 102, 103 and 112, but not on the basis of 

the requirements set forth in § 101. Second, even if § 101 

is a permissible test, Versata argues that the PTAB erred 

in finding these claims nothing more than an “abstract 

idea,” as that is understood in § 101 jurisprudence. 

Is Section 101 of the Patent Act a Proper Referent in CBM 

Cases, and Is That Question Open to Judicial Review?

As a preliminary matter, we address the question of 

whether we can review, as a matter of law, whether the 

PTAB is authorized to invoke § 101 as a test of validity in 

CBM cases. It was at the decision to institute stage when 

the PTAB determined there was a § 101 issue. All the 

same arguments for and against judicial review of an 

issue first decided at the institution stage presumably are 

available. The question again is whether we can reach 

this issue now on appeal of the final written decision. The 

answer is yes, and for essentially the same reasons. 

First, on an appeal of the PTAB’s final written decision, all questions that relate to the ultimate merits of the 

case are before us. Since the merits of this case turn on 

an application of § 101 law, a first step in deciding those 

merits is necessarily satisfying ourselves that the PTAB’s 

merits decision was based on a correct understanding of 

the law. Thus we must assure ourselves that compliance 

with § 101 is the applicable test for the PTAB to have 

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used in judging the validity of the claims in the ’350 

patent. 

Second, for all the same reasons we discussed earlier, 

§ 324(e) does not bar this court from reviewing and deciding this predicate issue when raised. The authority of the 

PTAB under the relevant statutes to apply § 101 law to 

the claims under review goes to the power of the PTAB to 

decide the case presented to it. Thus, like the issue we 

discussed in Issue Number 1, supra, it engages the same 

analysis as did that issue. And for the same reasons set 

forth there, the answer must be the same. We have 

jurisdiction to decide the question even though it is decided, as it was in this case, initially by the PTAB at the 

decision to institute stage. 

We turn then to the more challenging question of 

whether the PTAB was within its statutory invalidation 

authority when it chose to apply § 101 jurisprudence in 

determining the validity of the challenged claims. Admittedly, the statutory text is subject to competing understandings. Under chapter 32, governing post-grant 

review and § 18 cases, the PTAB “shall issue a final 

written decision with respect to the patentability of any 

patent claim challenged . . . .” § 328(a) (emphasis added). 

At the same time, § 321(b), entitled “Scope,” states that a 

petitioner in a PGR review “may request to cancel as 

unpatentable 1 or more claims of a patent on any ground 

that could be raised under paragraph (2) or (3) of section 

282(b) (relating to invalidity of the patent or any claim).” 

(Emphasis added.) 

Section 282(b) in turn specifies the defenses that may 

be raised in an action involving the validity or infringement of a patent. Among the defenses listed are: 

(b)(2)—invalidity of the patent or any claim on 

any ground “specified in part II as a condition for 

patentability”; 

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44 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

(b)(3)—invalidity of the patent or any claim for 

failure to comply with any requirement of § 112 

(except best mode) or § 251. 

Versata argues that a CBM post-grant review must be 

limited to a ground that could be raised under paragraph 

(2) or (3) of section 282(b). Versata then reasons that 

§ 282(b)(2) authorizes defenses on any ground “specified 

in part II as a condition for patentability,” and that the 

part II reference includes under the headings in the 

compiled statutes only “conditions for patentability,” i.e.,

§§ 102 and 103, but not § 101. Based on the headings in

part II of the statutes, Versata draws a distinction between the heading under which § 101 appears, “inventions patentable,” and “conditions of patentability” under 

which §§ 102 and 103 are listed.

SAP counters that it is generally understood that 

§ 101 is an invalidity defense under § 282, and that Versata’s reliance on the headings is improper. SAP also 

argues that the legislative history suggests that any 

ground of validity may be raised, including § 101. 

The USPTO echoes these arguments, and cites to 

Graham v. John Deere Co., 383 U.S. 1, 12 (1966), for the 

statement that the Patent Act “sets out the conditions of 

patentability in three sections,” 101, 102, and 103. The 

USPTO adds that this court rejected Versata’s argument 

regarding § 101 in Dealertrack, Inc., 674 F.3d at 1330 n.3, 

and adds that it would be particularly anomalous to 

conclude that Congress foreclosed consideration of § 101 

issues in CBM reviews since the very purpose of the 

special CBM process was to permit the USPTO to reconsider the validity of a salient category of business method 

patents.

Versata is correct that a strict adherence to the section titles can support an argument that § 101 is not 

listed as a “condition of patentability,” but rather has the 

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heading of “inventions patentable.” However, as noted by 

the USPTO, both our opinions and the Supreme Court’s 

opinions over the years have established that § 101 challenges constitute validity and patentability challenges. 

See also Standard Oil Co. v. Am. Cyanamid Co., 774 F.2d 

448, 453 (Fed. Cir. 1985); Aristocrat Techs. Austl. Pty. Ltd. 

v. Int’l Game Tech., 543 F.3d 657, 661 n.3 (Fed. Cir. 2008).

It would require a hyper-technical adherence to form 

rather than an understanding of substance to arrive at a 

conclusion that § 101 is not a ground available to test 

patents under either the PGR or § 18 processes. Section 

101 validity challenges today are a major industry, and 

they appear in case after case in our court and in Supreme Court cases, not to mention now in final written 

decisions in reviews under the AIA. The numerous cases 

in our court and in the Supreme Court need no citation;

for a sample of PTAB cases, see, e.g., Search America, Inc. 

v. Transunion Intelligence, LLC, CBM2013-00037 (Feb. 3, 

2015); U.S. Bancorp v. Retirement Capital Access Management Co., CBM2013-00014 (Aug. 22, 2014).

It is often said, whether accurate or not, that Congress is presumed to know the background against which 

it is legislating. Excluding § 101 considerations from the 

ameliorative processes in the AIA would be a substantial 

change in the law as it is understood, and requires something more than some inconsistent section headings in a 

statute’s codification. We agree with the USPTO and SAP 

and we so hold that, looking at the entirety of the statutory framework and considering the basic purpose of CBM 

reviews, the PTAB acted within the scope of its authority 

delineated by Congress in permitting a § 101 challenge 

under AIA § 18. 

Finally, the Merits of the PTAB Decision

Having determined that the PTAB had authority to 

test the validity of the challenged claims under § 101, we 

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46 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

turn now to the question of whether the conclusion 

reached with regard to that test was correct: that the 

challenged claims were invalid as constituting an “abstract idea” as that term is understood. The PTAB determined that “each of the challenged claims involves the 

use of an abstract idea: determining a price using organization and product group hierarchies, which are akin to 

management organizational charts.” J.A. 72. According 

to the PTAB, Versata’s concept of organizational hierarchies for products and customers is abstract because it 

represents a disembodied concept, a basic building block 

of human ingenuity—it is little more than determining a 

price, essentially a method of calculating.

The PTAB further analyzed whether the claims incorporated “sufficient meaningful limitations” to ensure that 

they recited more than an abstract idea, and determined 

that the claims did not add meaningful limitations beyond 

the abstract idea. As part of this analysis, the PTAB 

concluded that, although the claims were drafted to 

include computer hardware limitations, the underlying 

process “could also be performed via pen and paper.” J.A. 

73. The PTAB determined that the recitation of generic 

general purpose computer hardware in the claims represented routine, well-understood conventional hardware 

that failed to narrow the claims relative to the abstract 

idea. The PTAB also credited the testimony of SAP’s 

expert, Dr. Siegel, over that of Versata’s expert, Dr. 

Liebich, and found that the additionally claimed steps of 

storing, retrieving, sorting, eliminating, and receiving 

were “well-known, routine, and conventional steps.” J.A. 

75–77.

We review questions concerning compliance with the 

doctrinal requirements of § 101 of the Patent Act (and its 

constructions) as questions of law, without deference to 

the trial forum. Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 

709, 713 (Fed. Cir. 2014). As a necessary predicate to our 

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conclusions, we must briefly summarize the applicable 

law.

Section 101 of the Patent Act defines patent-eligible 

subject matter: “Whoever invents or discovers any new 

and useful process, machine, manufacture, or composition 

of matter, or any new and useful improvement thereof, 

may obtain a patent therefor, subject to the conditions 

and requirements of this title.” 35 U.S.C. § 101. The 

Supreme Court has found in § 101 an implicit exception 

for laws of nature, natural phenomena, and abstract 

ideas.18 Alice, 134 S. Ct. at 2354 (citing cases dating to 

1853).

Generally, the courts have found that the task of applying the first two of these judicially-crafted exceptions—

laws of nature and natural phenomena—not particularly 

difficult;19 there are a number of cases providing more or 

less clear guidance on how to apply these concepts. The 

third exception—abstract ideas—is more of a problem, a 

problem inherent in the search for a definition of an 

“abstract idea” that is not itself abstract.

Under current thinking about how to understand an

“abstract idea,” inventions that are thought to be based on 

an abstract idea as such are not per se unpatentable. All 

inventions, at some level, “embody, use, reflect, rest upon, 

or apply laws of nature, natural phenomena, or abstract 

18 The Supreme Court has alternately referred to 

the “three specific exceptions” to section 101, see Bilski v. 

Kappos, 561 U.S. 593, 601 (2010), or to “the [single] § 101 

exception” encompassing all three exceptions together, see 

Alice, 134 S. Ct. at 2354.

19 But see Ass’n for Molecular Pathology v. Myriad 

Genetics, Inc., 133 S. Ct. 2107 (2013) (naturally occurring 

DNA segment is not patentable, but not naturally occurring DNA segment is patentable).

 

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ideas.” Id. (citation and quotation marks omitted). 

Consequently, determining whether the section 101 

exception for abstract ideas applies involves distinguishing between patents that claim the building blocks of 

human ingenuity—and therefore risk broad pre-emption 

of basic ideas—and patents that integrate those building 

blocks into something more, enough to transform them 

into specific patent-eligible inventions. Id. at 2354–55.

Thus the Supreme Court has identified a two-step 

framework. First, determine whether the claims at issue 

are directed to one of the patent-ineligible concepts. Id. at 

2355; see also Mayo Collaborative Servs. v. Prometheus 

Labs., Inc., 132 S. Ct. 1289, 1296–97 (2012) (setting forth 

the same two-step framework). Second, if the claims are 

directed to patent-ineligible subject matter, ask “‘[w]hat 

else is there in the claims before us?’” Alice, 134 S. Ct. at 

2355 (quoting Mayo, 132 S. Ct. at 1297).

To answer the second question, we consider the limitations of each claim both individually and as an ordered 

combination to determine whether the additional limitations transform the nature of the claim into a patenteligible application of a patent-ineligible concept. Id. The 

Supreme Court has described this second step as a search 

for an inventive concept—a limitation or combination of 

limitations that is sufficient to ensure that the patent in 

practice amounts to significantly more than a patent upon 

an ineligible concept itself. Id.

In other words, a claim reciting an abstract idea must 

include additional features to ensure that the claim is 

more than a drafting effort designed to monopolize an 

abstract idea. Id. at 2357. This requires more than 

simply stating an abstract idea while adding the words 

“apply it” or “apply it with a computer.” See id. at 2358. 

Similarly, the prohibition on patenting an ineligible 

concept cannot be circumvented by limiting the use of an 

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ineligible concept to a particular technological environment. Id. 

This court in its efforts to make an “abstract idea” less 

abstract developed the machine-or-transformation test. 

The Supreme Court has said the test can serve as a useful 

clue for determining whether some inventions are eligible 

processes under section 101, but that this test is not the 

sole test for deciding whether an invention is a patenteligible process. Bilski, 561 U.S. at 604.

In recent years the Supreme Court and this court 

have examined claims directed to abstract ideas on a 

number of occasions. Extensive discussion of these cases 

appears in many opinions, and we do not repeat that 

litany here. It may be helpful, nevertheless, to highlight 

briefly a few salient points as a means of comparison to 

the invention and claims in the ’350 patent.

In Alice, the Court held that claims directed to the abstract idea of intermediated settlement were unpatentable, even though some of the claims required generic 

computer implementation. In Bilski, the Court held that 

claims directed to the abstract idea of risk hedging were 

unpatentable. In Parker v. Flook, 437 U.S. 584 (1978), 

the Court held that a mathematical formula for computer 

alarm limits in a catalytic conversion process was a 

patent-ineligible abstract idea. In Gottschalk v. Benson, 

409 U.S. 63 (1972), the Court held that claims involving 

an algorithm for converting binary-coded decimal numerals into pure binary form were unpatentable since the 

patent was, in practical effect, a patent on the algorithm 

itself.

These cases may be contrasted with Diamond v. 

Diehr, 450 U.S. 175 (1981), in which the Court held that a 

computer-implemented process for curing rubber was 

patent eligible even though it employed a well-known 

mathematical equation. It used the equation in a process 

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50 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

to solve a technological problem in conventional industry 

practice.

Our court on numerous occasions has examined 

claims directed to abstract ideas. In Content Extraction & 

Transmission LLC v. Wells Fargo Bank, National Ass’n, 

776 F.3d 1343 (Fed. Cir. 2014), we found that claims 

directed to the abstract idea of collecting data from hardcopy documents, recognizing certain information within 

the collected data, and storing that information in 

memory were ineligible. This was true despite noting 

that, if the claims were construed in the most favorable 

manner to the appellants, the claims would require scanning and processing technology. 

In Ultramercial, we found that claims directed to the 

abstract idea of using an advertisement as an exchange or 

currency were ineligible even though the claims were tied 

to a general purpose computer and invoked the Internet. 

In buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 

2014), we found that claims directed to the abstract idea 

of creating a contractual relationship—a transaction 

performance guaranty—were ineligible despite the recitation of a computer that received and sent information over 

a network.

In Bancorp Services, L.L.C. v. Sun Life Assurance Co. 

of Canada (U.S.), 687 F.3d 1266 (Fed. Cir. 2012), we 

found ineligible claims directed to the abstract idea of 

managing a stable value life insurance policy. And in 

CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 

(Fed. Cir. 2011), we found that a broadly worded method 

claim and a claim reciting a computer readable medium 

for executing the method claim were ineligible. We concluded the claims were drawn to a method of verifying the 

validity of credit card transactions over the Internet, and 

the steps in the method could be performed in the human 

mind or by a human using a pen and paper.

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These cases may be contrasted with instances in 

which we have found patents directed to patent-eligible 

subject matter. For example, in DDR Holdings, LLC v. 

Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), we found 

that claims reciting a solution that was necessarily rooted 

in computer technology to overcome a problem specifically 

arising in the realm of computer networks were eligible. 

We drew a distinction between the patent-eligible claims 

at issue and patent-ineligible claims in the past that had 

merely recited commonplace business methods aimed at 

processing business information, applying known business processes to particular technological environments. 

Id. at 1259. 

Applying the first step of the Alice/Mayo framework, 

we agree with the PTAB’s analyses of the claims at issue. 

Claims 17 and 26–29 of the ’350 patent are directed to the 

abstract idea of determining a price, using organizational 

and product group hierarchies, in the same way that the 

claims in Alice were directed to the abstract idea of intermediated settlement, and the claims in Bilski were 

directed to the abstract idea of risk hedging. More specifically, claim 17 is directed to a method of determining a 

price. Claim 27 is directed to a computer-implemented 

method of determining a price, and claims 26 and 28 are 

directed to computer-readable storage media comprising 

computer instructions to implement the methods of claims 

17 and 28. Claim 29 is directed to an apparatus for 

determining a price that includes computer program 

instructions capable of performing the same method steps 

recited in claim 27. Using organizational and product 

group hierarchies to determine a price is an abstract idea 

that has no particular concrete or tangible form or application. It is a building block, a basic conceptual framework for organizing information, similar to the claims 

involving collecting, recognizing, and storing data in 

Content Extraction and the claims in CyberSource. 

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52 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

Applying the second step of the Alice/Mayo framework, we agree with the PTAB that, after considering the 

limitations of each claim individually and as an ordered 

combination, none of the claims have sufficient additional 

limitations to transform the nature of any claim into a 

patent-eligible application of an abstract idea. Taking the 

claim limitations separately, the function performed by 

the computer at each step is purely conventional. For 

example, the limitations of claim 17 involve arranging a 

hierarchy of organizational and product groups, storing 

pricing information, retrieving applicable pricing information, sorting pricing information, eliminating less 

restrictive pricing information, and determining the price. 

All of these limitations are well-understood, routine, 

conventional activities previously known to the industry.

The same is true of the limitations in claims 26–29. 

The limitations are either inherent in the abstract idea of 

determining a price using organization and product group 

hierarchies—e.g., arranging the hierarchies—or conventional and well-known limitations involving a computer—

e.g., storing pricing information. The PTAB specifically 

examined this issue and credited the testimony of SAP’s 

expert over Versata’s expert to determine that the additionally claimed steps of storing, retrieving, sorting, 

eliminating and receiving were “well-known, routine, and 

conventional steps.” J.A. 77.

Similarly, when considered as an ordered combination, the components of each claim add nothing that is not 

already present when the steps are considered separately. 

Viewed as a whole, the claims simply recite the concept of 

price determination by using organizational and product 

group hierarchies as performed by a generic computer. 

This court found similar claims to be ineligible despite 

the recitation of a general purpose computer or the Internet in Content Extraction, Ultramercial, buySAFE, BanCase: 14-1194 Document: 133-2 Page: 52 Filed: 07/09/2015
VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 53

corp, and CyberSource. See also Intellectual Ventures I 

LLC v. Capital One Bank (USA), Nat’l Ass’n, No. 14-1506, 

2015 WL 4068798 (Fed. Cir. July 6, 2015); OIP Techs., 

Inc. v. Amazon.com, Inc., No. 12-1696, 2015 WL 3622181 

(Fed. Cir. June 11, 2015). The Supreme Court found 

similar claims to be ineligible despite recitation of a 

general purpose computer in Alice, Flook, and Benson. 

Moreover, the claims at issue are not sufficiently similar 

to the claims in Diehr and DDR Holdings to demonstrate 

that Versata’s claims are patent eligible.

Unlike Diehr, the claims at issue do not improve some 

existing technological process or solve some technological 

problem in conventional industry practice. Unlike DDR 

Holdings, the claims at issue are not rooted in computer 

technology to solve a problem specifically arising in some 

aspect of computer technology. Instead, the claims at 

issue are more like the claims we summarized in DDR 

Holdings as insufficient to reach eligibility—claims reciting a commonplace business method aimed at processing 

business information despite being applied on a general 

purpose computer.

Versata raises several arguments to support its position that its claims are patent eligible under section 101, 

but these arguments are not persuasive and are effectively countered by the USPTO and SAP. First, Versata 

argues that the PTAB erred by improperly dissecting the 

claims and by failing to consider the claims as a whole. 

The record reflects that this is not so. The PTAB in its

analysis followed the dictates of the Supreme Court in 

Alice and Mayo by examining the claims as a whole and in 

terms of each claim’s limitations. 

Versata argues that its claims recite “a specific approach to determining the price of a product on a computer, using hierarchies so as to enable the desired benefit for 

the computing environment: fewer software tables and 

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54 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

searches, leading to improvements in computer performance and ease of maintenance.” Appellant’s Br. at 43–

44. However, all of the parties—including Versata—

recognize that these supposed benefits are not recited in 

the claims at issue. Versata contends that the benefits 

are relevant under Genetics Inst., LLC v. Novartis Vaccines & Diagnostics, Inc., 655 F.3d 1291 (Fed. Cir. 2011), 

but this case is inapposite since it does not concern section 

101.

Examination of the claims—as a whole and in terms 

of each claim’s limitations—reveals that the claims are 

not directed to improving computer performance and do 

not recite any such benefit. The claims are directed to 

price determination and merely use a computer to improve the performance of that determination—not the 

performance of a computer.

Versata argues that its claims are tied to a machine 

and that this favors patent eligibility. As we previously 

noted, the machine-or-transformation test can be a useful 

clue in determining the eligibility of method claims. 

However, the claims at issue do not transform a general 

purpose computer into a specific machine. The steps in 

Versata’s claims (e.g., arranging, storing, retrieving, 

sorting, eliminating, determining) are conventional, 

routine, and well-known. They involve the normal, basic 

functions of a computer. “In order for the addition of a 

machine to impose a meaningful limit on the scope of a 

claim, it must play a significant part in permitting the 

claimed method to be performed, rather than function 

solely as an obvious mechanism for permitting a solution 

to be achieved more quickly, i.e., through the utilization of 

a computer for performing calculations.” SiRF Tech., Inc. 

v. Int’l Trade Comm’n, 601 F.3d 1319, 1333 (Fed Cir. 

2010); see also Bancorp, 687 F.3d at 1277–78. Versata’s 

claims do not meet this test, and instead function solely 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 55

as a mechanism for permitting the price determination to 

be performed more quickly.

Versata asserts that the PTAB construed the claim 

term “data source” in claim 17—and found in claims 17, 

27, and 29—as a “computer storage medium” and that 

this is inconsistent with the PTAB’s finding that the 

underlying process could be performed via pen and paper. 

However, there is no inconsistency. Courts have examined claims that required the use of a computer and still 

found that the underlying, patent-ineligible invention 

could be performed via pen and paper or in a person’s 

mind. See, e.g., Benson; CyberSource, 654 F.3d at 1373 

(noting, in the context of the claims in that case, that “a 

method that can be performed by human thought alone is 

merely an abstract idea and is not patent-eligible under 

§ 101.”).

Versata’s other arguments are similarly unavailing. 

The PTAB did not shift SAP’s burden of proof onto Versata. The PTAB did not conflate the inquiries of §§ 102 and

103 with the inquiry of § 101, and the PTAB did not err 

by failing to consider any alleged commercial success of 

Versata’s invention. Versata improperly conflates improvements to technologies with commercial success. 

Commercial success is not necessarily a proxy for an 

improvement in a technology nor does it necessarily 

indicate that claims were drawn to patent eligible subject 

matter.

Finally, both Versata and SAP cite Ultramercial to 

support their respective positions. Versata argues that its 

claims are not directed to an “entrepreneurial objective” 

and are instead “technological” because they use fewer 

tables and searches than prior-art software thereby, in 

Versata’s words, “‘offer[ing] dramatic improvements in 

[computer] performance.’” Appellant’s Citation of Supplemental Authority at 2 (citation omitted). The language 

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56 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

Versata cites is from Versata Software, 717 F.3d at 1259; 

however, as Versata knows, the word “computer” is not in 

the original quotation, and we did not address section 101 

in that opinion. As we have already noted, the claims at 

issue do not recite any improvement in computer technology.

After weighing the arguments and evidence submitted 

by the parties, and following an oral hearing, the PTAB 

issued its final written decision on patentability. In its 

decision, the PTAB correctly applied the Supreme Court’s 

test in Alice and Mayo. Versata identifies no persuasive 

basis for disturbing the PTAB’s determination, which was 

amply supported by the record before it. The section 101 

analysis applied by the PTAB was not legally erroneous 

under Mayo and Alice. And its underlying fact findings 

and credibility determinations are supported by substantial evidence in the record. See Microsoft Corp. v. Proxyconn, Inc., Nos. 14-1542, -1543, 2015 WL 3747257, at *2

(Fed. Cir. June 16, 2015) (noting that as a general matter, 

we review the PTAB’s findings of fact for substantial 

supporting evidence in the record). 

We recognize that any given analysis in a § 101 “abstract idea” case is hardly a clear guidepost for future 

cases arising under § 101—each case stands on its own, 

and requires separate analysis by the judges who must 

make the decision. Taking that into account, and for the 

reasons we have explained, we affirm the decision of the 

PTAB that claims 17 and 26–29 of the ’350 patent were 

unpatentable as abstract ideas under 35 U.S.C. § 101.

Additional arguments were raised by the parties regarding waiver and claim preclusion, potential issues 

arising in the long course of their litigation. We have 

examined these issues, and find nothing in them to persuade us that we should reach different conclusions than 

those expressed herein.

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 57

SUMMARY

With regard to the issues in the case, we conclude:

• On appeal in a § 18 case to this court of a 

final written decision by the PTAB, as a 

general principle we may review issues decided during the PTAB review process, regardless of when they first arose in the 

process, if they are part of or a predicate to 

the ultimate merits. 

• The invention claimed in the ’350 patent is 

a covered business method patent as that 

term is understood, and it does not fall 

within the meaning of a “technological invention.”

• The PTAB’s claim constructions are affirmed. 

• The requirements of § 101 of the Patent Act 

apply in a § 18 review.

• The ’350 patent claims at issue were 

properly held invalid under § 101.

CONCLUSION

For the reasons set forth herein, the decision of the 

PTAB in its final written decision is affirmed.

AFFIRMED

Case: 14-1194 Document: 133-2 Page: 57 Filed: 07/09/2015
United States Court of Appeals 

for the Federal Circuit ______________________ 

VERSATA DEVELOPMENT GROUP, INC.,

Appellant

v.

SAP AMERICA, INC., SAP AG,

Appellees

UNDER SECRETARY OF COMMERCE FOR 

INTELLECTUAL PROPERTY, DIRECTOR OF THE 

UNITED STATES PATENT AND TRADEMARK 

OFFICE,

Intervenor

______________________ 

2014-1194

______________________ 

Appeal from the United States Patent and Trademark 

Office, Patent Trial and Appeal Board, in No. CBM2012-

00001.

______________________ 

HUGHES, Circuit Judge, concurring-in-part, dissenting-inpart. 

I agree with the majority that the Patent Trial and 

Appeal Board properly held that the ’350 patent claims at 

issue were invalid under § 101. I also agree that, in this 

case, we need not reach whether the Board is authorized 

to apply its “broadest reasonable interpretation” rule in a 

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2 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

post-grant review. Thus, I agree that we should affirm 

the Board’s decision on the merits. 

In reaching that conclusion, however, the majority 

impermissibly expands this court’s jurisdiction and our 

scope of review to second-guess the Board’s initial determination that the patent at issue is a “covered business 

method patent.” Our review of that question is barred by 

the plain language, structure, and purpose of the postgrant review provisions; and by our recent precedent 

interpreting an identical statutory bar on review in the 

inter partes review provisions. I cannot agree with the

majority’s evasion of the statutory bar by its mere reframing of the issue for review as a question of the Board’s

“ultimate authority to invalidate,” rather than the Board’s 

authority to institute. That approach defeats Congress’s 

clearly expressed intent. And the majority offers no 

compelling reason why its approach is desirable, other 

than its appetite for arrogating to the court the Board’s

statutory authority to finally decide which patents are 

“covered business method patent[s]” suitable for review. 

Because the statute precludes review of the Board’s 

institution decision that Versata’s patent is a “covered 

business method patent,” I respectfully dissent-in-part.

I 

At the outset, it is important to note that this is not a 

case about whether Congress has precluded “judicial 

review of government actions that alter the legal rights of 

an affected person.” Maj. Op. at 24. To the contrary, the 

statute clearly provides for review of the Board’s invalidity decision, which is the government action that alters the 

legal right of the patent holder. See 35 U.S.C. § 329. 

Rather, this case is about whether Congress can, and did, 

preclude review of whether the Board rightfully undertook that review in the first place. Our authority to 

review that type of decision, whether framed in terms of 

the Board’s institution authority or its ultimately authoriCase: 14-1194 Document: 133-2 Page: 59 Filed: 07/09/2015
VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 3

ty to invalidate, is separate and distinct from our authority to review the invalidation itself. 

“To determine whether a particular statute precludes 

judicial review, we look to its express language, the 

structure of the statutory scheme, its legislative history 

and purpose, and the nature of the administrative action 

involved.” Pregis Corp. v. Kappos, 700 F.3d 1348, 1357–

58 (Fed. Cir. 2012) (citing Block v. Cmty. Nutrition Inst., 

467 U.S. 340, 345 (1984)). 

The presumption of judicial review noted by the majority is not insurmountable. “Congress can, of course, 

make exceptions to the historic practice whereby courts 

review agency action.” Bowen v. Mich. Acad. of Family 

Physicians, 476 U.S. 667, 672–73 (1984); see also 5 U.S.C. 

§ 701 (“This chapter applies . . . except to the extent that 

. . . statutes preclude judicial review . . . .”). To overcome 

the presumption of review, we must find “clear and convincing evidence” of legislative intent to preclude review. 

Abbott Labs. v. Gardner, 387 U.S. 136, 141 (1967). For 

example, the presumption may be overcome by “specific 

language or specific legislative history that is a reliable 

indicator of congressional intent, or a specific congressional intent to preclude judicial review that is fairly 

discernible in the detail of the legislative scheme.” Bowen, 476 U.S. at 673 (internal quotation marks omitted); 

see, e.g., Lindhal v. Office of Pers. Mgmt., 470 U.S. 768, 

779–80 n.13 (1985) (recognizing that 5 U.S.C. § 8128(b) 

precludes all review of the Secretary of Labor’s compensation decision under the Federal Employee Compensation 

Act); Collins v. United States, 67 F.3d 284, 287–88 (Fed. 

Cir. 1995) (finding that the plain language of the Military 

Claims Act, which states that “the settlement of a claim 

under [the Act] is final and conclusive,” provides clear and 

convincing evidence of legislative intent to preclude 

judicial review). Further, reviewability is not an all or 

nothing question: Congress may allow review of some 

issues underlying a decision, but prohibit review of others. 

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4 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

See, e.g., Lindhal, 470 U.S. at 779–80 (holding 5 U.S.C. 

§ 8347(c) bars review of agency’s factual determinations, 

but not questions of law and procedure); Harris v. 

Shinseki, 704 F.3d 946, 948 (Fed. Cir. 2013) (noting that 

38 U.S.C. § 7292 precludes review of the Veterans Court’s 

factual determinations or applications of law to fact, but 

allows review of questions of law). 

Whether the presumption of review is overcome in 

this case depends on two issues. The first is whether the 

bar on judicial review of the Board’s institution decisions

in 35 U.S.C. § 324(e) is limited to interlocutory appeals, as 

Versata argues, or whether it also applies to appeals from 

the Board’s final written decision on the merits. The 

answer to that question should end the inquiry. But the 

majority has decided that some statutory requirements 

for instituting review can be reframed, which raises a 

second issue: whether an institution decision that falls 

within the scope of § 324(e) is nonetheless reviewable as a 

“predicate question” regarding the Board’s ultimate 

authority to determine validity. 

A 

The plain language of § 324(e) unambiguously bars 

judicial review—at any time—of the Board’s decision to 

institute post-grant review. Section 324(e) states, “The 

determination by the Director whether to institute a postgrant review under this section shall be final and nonappealable.” 35 U.S.C. § 324(e). Nothing in this language 

suggests the bar is limited to interlocutory appeals. 

There is no temporal limitation. Nor is there an exception

for appeals from a final written decision. In other contexts, when Congress desired to prohibit only interlocutory appeals, it included express language to that effect. 

See, e.g., 8 U.S.C. § 1160(e) (“There shall be no . . . judicial 

review of a determination respecting an application of 

special status under this section except . . . in the judicial 

review of an order of exclusion of deportation . . . .”); 12

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 5

U.S.C. § 1818(i)(1) (barring review of the Federal Reserve’s decision to proceed with an administrative enforcement action “except as otherwise provided in this 

section,” including on review of a final cease-and-desist 

order). 

The plain language of related provisions in §§ 329 and 

328 supports this interpretation. Those provisions authorize a party to appeal the Board’s final written decision to this court, but only refer to issues addressed 

exclusively during the merits phase of a post-grant review. Section 329 states, “A party dissatisfied with the 

final written decision of the [Board] under section 328(a) 

may appeal the decision [to the Federal Circuit].” 35 

U.S.C. § 329 (emphasis added). Section 328 defines the 

“final written decision” as “a final written decision with 

respect to the patentability of any patent claim challenged 

. . . .” Id. § 328(a) (emphasis added). This language 

reinforces Congress’s desire for this court to review the 

substantive issues of patentability addressed by the 

Board in a final written decision, not the various issues 

decided during the decision to institute—which § 324(e) 

deems “final and nonappealable.” 

The structure of the post-grant review process further 

clarifies the duration of the bar in § 324(e). Post-grant 

reviews are divided into two distinct phases. First, the 

Board determines whether to institute review, based on 

the information in the petition for review and any response by the patent owner. See id. § 324. Second, if the 

Board grants review, the Board considers the merits of 

the petitioner’s challenge and issues a final written decision on the validity of the challenged claims. Under this 

divided structure, the requirements for instituting review 

are not revisited during the merits phase of review. 

Section 324(e) confirms that the decision to institute is 

“final.” Id. § 324(e). In the same breath, § 324(e) states

that the decision is “nonappealable.” Id. To be consistent 

with the clear division between the two phases Congress 

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6 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

imprinted into the statute, “nonappealable” is best interpreted to maintain this division at the appellate level by 

insulating the various institution decisions from review, 

even on appeal from the separate and distinct merits 

phase. 

This interpretation is also supported by the purpose of 

post-grant reviews. Congress intended post-grant reviews 

to provide a “quick and cost effective alternative[ ] to 

litigation.” H.R. Rep. No. 112-98, pt. 1, at 47–48 (2011). 

If we interpret § 324(e) to allow this court to second-guess 

the Board’s institution decisions on appeal from a final 

written decision, however, we will create the kind of 

“unnecessary and counterproductive litigation costs” that 

Congress intended these proceedings to avoid. Id. at 40 

(2011). By the time the Board’s final written decision 

reaches this court, the parties and the Board will have 

devoted considerable resources to resolving the validity 

issues in question. And district courts will often have 

stayed related proceedings, in anticipation of a simplification of the issues for trial. If this court has authority to 

reverse the Board’s institution decision, thereby vacating 

its final written decision on validity, all of this time and 

expense will be wasted. The parties will have to return to 

district court to litigate the same validity issues that the 

Board decided—even if this court agrees with the Board’s 

ultimate validity determination. Congress could not have 

intended this result. To avoid creating a more costly and 

less efficient process, we must interpret § 324(e) according 

to its plain language to bar review of the decision to 

institute even after a final written decision on the merits.

In sum, the plain language, structure, and purpose of 

the post-grant review provisions provide clear and convincing evidence that Congress did not intend to limit

§ 324(e) to interlocutory appeals. Congress intended 

§ 324(e) to bar review of the Board’s institution decisions

at any time, even on appeal from the final written decision. One such decision is whether the patent challenged 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 7

is a “covered business method patent.” America Invents 

Act (AIA), Pub. L. No. 112-29, § 18(a)(1)(E), 125 Stat. 284, 

330 (2011) (“The Director may institute a transitional 

proceeding only for a patent that is a covered business 

method patent.”). The Board makes this determination as 

part of its decision to institute, and does not revisit the 

issue during the merits phase. Thus, § 324(e) precludes 

review of the Board’s covered-business-method determination in this appeal.

B 

The majority agrees that § 324(e) bars review of the 

Board’s decision to institute even after a final written 

decision. Maj. Op. at 13 (“[T]he statute expressly instructs that we may not [review the decision to institute].”). But the majority refuses to end the inquiry with 

Congress’s plainly expressed intent. To keep the final say 

over the meaning of “covered business method patent,” 

the majority reframes the issue as a “limit on [the 

Board’s] invalidation authority under § 18,” which falls 

outside the scope of § 324(e). Maj. Op. at 25. I cannot 

agree with this approach. 

The statute describes the “covered business method 

patent” requirement (CBM requirement) as a limit on the 

Board’s authority to institute review. Section 18 states 

that “[t]he Director may institute a transitional proceeding only for a patent that is a covered business method 

patent.” AIA § 18(a)(1)(E). The statute then expressly 

bars our review of the institution decision: “The determination by the Director whether to institute a post-grant 

review under this section shall be final and nonappealable.” 35 U.S.C. § 324(e). Thus, under the plain language 

of the statute, the Board has unreviewable authority to 

decide whether a patent is a “covered business method 

patent.” 

The majority proposes that if we call the CBM requirement something else—not only a limit on the Board’s 

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8 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

authority to institute review, as the statute says, but also 

a limit on the Board’s ultimate authority to invalidate the 

patent—then we can review the issue. But our task is to 

apply the language of the statute, not to rewrite it. And 

the language of the statute expressly ties the CBM requirement to the Board’s unreviewable decision to institute, not the Board’s ultimate authority to invalidate. By 

using different language than that which Congress employed, the majority expands the scope of our review to 

include the same substantive issue—whether a patent is a 

“covered business method patent”—that Congress barred 

from review in § 324(e). 

The majority fails to identify a statutory basis for its 

proposed reframing of the issue. It summarily declares, 

without any supporting citation, that the CBM requirement should be treated as a limit on the Board’s authority 

to invalidate because it “defines the PTAB’s authority to 

invalidate under § 18.” Maj. Op. at 25. But nowhere does 

the statute describe the CBM requirement as a limit on 

the Board’s authority to invalidate. Cf. Timken U.S. 

Corp. v. United States, 421 F.3d 1350, 1357 (Fed. Cir. 

2005) (“Not every agency violation of a statutory command results in the sanction of invalidating the agency 

action taken pursuant to the statute.”). To the extent 

that statement is accurate, it is only because the statute

provides that the Board “may institute a transitional 

proceeding only for a patent that is a covered business 

method patent.” AIA § 18(a)(1)(E). And any limit on the 

Board’s authority to institute review is indirectly a limit 

on its authority to invalidate a patent: If the Board cannot 

institute review in the first place, it cannot issue a final 

written decision. 

This indirect relationship, however, cannot be enough

to find that Congress intended this court to review an 

institution requirement as a limit on the Board’s ultimate 

authority to invalidate. Taken to its logical conclusion, 

this approach would eviscerate § 324(e) in the context of 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 9

an appeal from a final written decision. All aspects of the 

Board’s decision to institute would be fair game for review, because all statutory limits on the institution decision are also indirect limits on the Board’s final authority 

to invalidate. As a result, § 324(e) would only bar review 

of the Board’s decision to institute in an interlocutory 

appeal, before the final decision has issued. The majority 

agrees that § 324(e) is not so limited. Thus, the majority 

cannot justify treating the CBM requirement as a limit on 

the Board’s ultimate authority to invalidate solely because that requirement limits the Board’s authority to 

institute.1 

The requirement of a “covered business method patent” is a limit on the Board’s institution decision. That is 

how the plain language of the statute frames the CBM 

requirement, not as a limit on the Board’s ultimate authority to invalidate. The majority’s reframing of the 

issue, while perhaps an interesting academic exercise, is 

plainly inconsistent with congressional intent. There is 

clear and convincing evidence that Congress intended 

§ 324(e) to bar review of the Board’s institution decisions 

at all times. And there is no evidence that Congress 

intended to exclude from this provision the institution 

decision of whether the patent is a “covered business 

method patent.” Accordingly, I conclude that § 324(e) 

precludes our review of whether Versata’s patent is a 

“covered business method patent.” 

1 Indeed, Congress likely intended the term “covered business method patent” not as a limitation on the 

Board’s invalidation authority, but as a means of focusing 

the Board’s resources on “low-quality business[-]method 

patents,” which were of central concern in passing the 

AIA. 157 Cong. Rec. 9952 (2011) (remarks of Rep. 

Grimm).

 

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10 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

II

The majority’s interpretation of § 324(e) to permit review of whether Versata’s patent is a “covered business 

method patent” directly conflicts with our precedential

decision in In re Cuozzo Speed Technologies, LLC, No. 14-

1301, slip op. at 5–10 (Fed. Cir. July 8, 2015). In that 

case, we addressed the scope of the statutory bar on 

judicial review in § 314(d), which provides that “[t]he 

determination by the Director whether to institute an 

inter partes review under this section shall be final and 

nonappealable.” 35 U.S.C. § 314(d). We held that this 

provision “bar[s] review of all institution decisions, even 

after the Board issues a final decision.” Cuozzo, slip op. at 

7. That holding controls our interpretation of the analogous bar on review in § 324(e), which states, “The determination by the Director whether to institute a post-grant 

review under this section shall be final and nonappealable.” 35 U.S.C. § 324(e).

To avoid the holding in Cuozzo, the majority continues

to rely on its reframing of the CBM requirement as a limit 

on the Board’s authority to invalidate. But even if that 

reframing were appropriate, the holding in Cuozzo still

could not be distinguished. The relevant provision in 

Cuozzo states that the Board may only institute an inter

partes review if “the information presented in the petition 

. . . and any response . . . shows that there is a reasonable 

likelihood that the petition would prevail.” Cuozzo, slip 

op. at 5 (quoting 35 U.S.C. § 314(a)). The appellant 

argued that the Board violated this provision by instituting review on the basis of prior art not “presented in the 

petition.” Id. If the appellant was correct, then the Board 

exceeded its statutory authority to conduct an inter partes 

review and issue a final written decision, because it 

violated a statutory limit on instituting review in the first 

place. Thus, Cuozzo addressed just as much a predicate 

question of authority to invalidate as we are presented 

with here. 

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 11

The majority makes too much of a note in Cuozzo that 

the alleged defect in that case could have been cured with 

proper pleading. See Maj. Op. at 29. For the purpose of 

determining whether Cuozzo involved a limit on the 

Board’s authority to invalidate, it is irrelevant whether 

the alleged defect could have been cured. The fact remains that the pleading was actually defective and therefore the Board exceeded its statutory authority to 

institute review. Thus, under the majority’s preferred 

framing, the Board violated an indirect limit on its ultimate authority to invalidate, at least to the same extent 

that the Board allegedly did so here. 

More importantly, the potential for a proper pleading

did not limit the holding in Cuozzo that the plain language of § 314(d) bars review of the Board’s institution 

decisions. It only noted this fact to establish an alternative ground for declining to review the Board’s decision to 

institute, specifically by aligning that case with In re 

Hiniker Co., 150 F.3d 1362 (Fed. Cir. 1998). In Hiniker, 

the appellant alleged that the PTO violated a statutory 

limit on its authority to institute ex parte reexamination. 

Id. at 1367. This court found that the PTO corrected the 

alleged error during the merits phase of review, and 

therefore “[a]ny error in [the institution] decision was 

washed clean during the reexamination proceeding.” Id.

at 1367. Accordingly, though no statutory provision 

expressly barred review, the Court declined to review the 

PTO’s institution decision. Id. The Cuozzo majority 

suggested that the same was true on the facts there, 

where “a proper petition could have been drafted.” Cuozzo, slip op. at 8. But this comparison with Hiniker merely 

“confirm[ed] the correctness” that the Court could not 

review the Board’s institution decision in that case. Id. at 

7. It did not limit its prior interpretation of § 314(d) to 

bar review of all institution decisions. Thus, although the

Board’s error in assessing the CBM requirement may not

be “washed clean” in the merits decision—and therefore 

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12 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

may have been reviewable absent the express bar on 

review in § 324(e)—that does not distinguish this case 

from the unqualified holding in Cuozzo that the express 

bar in § 314(d) “bar[s] review of all institution decisions, 

even after the Board issues a final decision.” Id. at 7. 

In light of Cuozzo, we are bound to interpret § 324(e) 

to preclude review of the Board’s assessment of the CBM 

requirement, even if we label that requirement a limit on 

the Board’s ultimate authority to invalidate. 

III

The bar on judicial review of institution decisions in 

§ 324(e) does not mean that patent owners are without 

recourse in the extreme case. Even when a statute clearly 

demonstrates Congress intended to bar judicial review of 

agency action generally, courts have recognized an “implicit and narrow” exception for agency action that plainly 

violates an unambiguous statutory mandate. Hanauer v. 

Reich, 82 F.3d 1304, 1307 (4th Cir. 1996); see, e.g.,

Leedom v. Klyne, 358 U.S. 184 (1958); Key Med. Supply, 

Inc. v. Burwell, 764 F.3d 955, 962–65 (8th Cir. 2011); Am. 

Soc’y of Cataract & Refractive Surgery v. Thompson, 279 

F.3d 447, 456 (7th Cir. 2002); Am. Airlines, Inc. v. Herman, 176 F.3d 283, 293–94 (5th Cir. 1999); Staacke v. 

U.S. Sec’y of Labor, 841 F.2d 278, 281–82 (9th Cir. 1988); 

Dart v. United States, 848 F.2d 217, 221–27 (D.C. Cir. 

1988). In this case, however, the Board’s finding that 

Versata’s patent constitutes a “covered business method 

patent” does not violate an unambiguous mandate. The 

Board reasonably interpreted an unclear statutory term 

and properly applied its interpretation to Versata’s patent. See Hanauer, 82 F.3d at 1311 (“Because the [agency’s] interpretation of the statute is plausible, it does not 

violate a clear statutory mandate.”). Accordingly, the 

clear statutory mandate exception does not apply. We do 

not have jurisdiction to review the Board’s determination 

under 35 U.S.C. § 324(e).

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VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 13

IV

At the end of the day, the majority does a lot of hand 

waving about the presumption of judicial review and an 

agency’s authority to take action. But nowhere does the 

majority actually suggest that it would be inappropriate 

for Congress to remove the CBM decision from our review. 

Nor could it, since courts have approved far more drastic 

limitations on our judicial review. See supra Part I. 

But even if we could reasonably make the technical 

distinction the majority proposes and therefore preserve a 

narrow reading of the statutory bar, I cannot fathom why 

we would want to do so. Surely the concern is not to 

prevent the Board from instituting review of a patent so 

far outside the meaning of “covered business method 

patent” that it exceeds any reasonable interpretation of 

that term. As discussed in Part III, supra, courts have 

long recognized an exception to statutory bars on review 

when an agency plainly violates an unambiguous statutory mandate. And in any event, that is not even remotely 

the case here, where all three judges agree that the Board 

properly exercised its discretion to institute review of this 

CBM patent. 

Rather, I fear the point of the majority’s position is to 

wrest from the PTO the final authority to decide which

patents are “covered business method patent[s]” appropriate for § 18 review. But that is not how Congress 

designed the AIA to work. Congress gave this court the 

authority to review the merits of the Board’s validity 

determinations and to ensure those decisions are correct 

under prevailing law. And it gave the PTO authority to 

decide which patents merit review in the first place, and 

insulated that decision from our review. 

The majority’s desire to revisit the CBM requirement 

detracts from this statutory scheme and the intended 

benefits of § 18 reviews. As Congress recognized, § 18 

was intended to “provide a cheaper, faster administrative 

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14 VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC. 

alternative for reviewing business method patents.” 

Intellectual Ventures II LLC v. JP Morgan Chase & Co., 

781 F.3d 1372, 1380 (Fed. Cir. 2015) (Hughes, J. dissenting). If this court may vacate the Board’s invalidity 

decision on the basis of a threshold decision, the time and 

resources spent by the parties and the Board in the administrative proceedings will have been squandered, and 

the parties will likely be forced to needlessly expend even 

more resources re-litigating the validity issue in district 

court. And that is true even if the Board’s ultimate 

invalidity decision was correct. 

Congress intended § 324(e) to apply at all times to 

avoid these consequences. That is why when addressing 

the issue, Congress plainly said that the Board’s determination was “final” and “nonappealable.” And nothing in 

the statute suggests § 324(e) applies with less force to the 

CBM requirement than any other institution requirements for § 18 reviews. We should not, therefore, employ 

an unwarranted technical distinction to find authority to 

review the Board’s initial assessment that a patent is a 

“covered business method patent.”

Because we do not have jurisdiction to review the 

Board’s determination that Versata’s patent is a “covered 

business method patent,” AIA § 18(d), I respectfully 

dissent-in-part. 

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