Court Opinion

ID: 4293159
Source: CourtListenerOpinion
Date Created: 2018-07-11 15:01:14.383242+00
Date Added: 2024-06-11T14:39:21.450558
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

            APPLE INC., GOOGLE LLC,
                   Appellants

                           v.

       CONTENTGUARD HOLDINGS, INC.,
              Cross-Appellant

                           v.

    ANDREI IANCU, UNDER SECRETARY OF
  COMMERCE FOR INTELLECTUAL PROPERTY
   AND DIRECTOR OF THE UNITED STATES
     PATENT AND TRADEMARK OFFICE,
                  Intervenor
            ______________________

      2016-2548, 2016-2557, 2016-2559, 2016-2629
               ______________________

   Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in Nos.
CBM2015-00040, CBM2015-00160.
               ______________________

                Decided: July 11, 2018
                ______________________

   ROBERT UNIKEL, Paul Hastings LLP, Chicago, IL,
argued for all appellants. Appellant Google Inc. also
2                APPLE INC.   v. CONTENTGUARD HOLDINGS, INC.

represented by ROBERT R. LAURENZI, Arnold & Porter
Kaye Scholer LLP, New York, NY.

    JEFFREY PAUL KUSHAN, Sidley Austin LLP, Washing-
ton, DC, for appellant Apple Inc. Also represented by
THOMAS ANTHONY BROUGHAN, III, MICHAEL R.
FRANZINGER; NATHANIEL C. LOVE, Chicago, IL.

    TIMOTHY P. MALONEY, Fitch, Even, Tabin & Flannery,
Chicago, IL, argued for cross-appellant. Also represented
by PAUL HENKELMANN.

    WILLIAM LAMARCA, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA,
argued for intervenor. Also represented by NATHAN K.
KELLEY, THOMAS W. KRAUSE, FARHEENA YASMEEN
RASHEED.
                ______________________

    Before REYNA, BRYSON, and HUGHES, Circuit Judges.
HUGHES, Circuit Judge.
    Apple Inc. and Google LLC appeal from the Patent
Trial and Appeal Board’s decision to grant ContentGuard
Holdings, Inc.’s motion to amend in a covered business
method review of U.S. Patent 7,774,280. Because the
Board applied the wrong legal standard to determine
whether the ’280 patent qualified as a covered business
method, we vacate and remand for further proceedings.
                               I
    The ’280 patent relates to digital rights management
(DRM) systems. DRM systems allow content owners to
control how their digital works are subsequently used.
For example, a DRM system might prevent downstream
users from making unauthorized copies of digital works or
require users to pay a fee before the system grants access
to the content.
APPLE INC.   v. CONTENTGUARD HOLDINGS, INC.                3

    According to the ’280 patent, one drawback of prior
DRM systems is that content owners cannot control how
their digital works are distributed unless the content
owner remains a party to a transaction. For example, a
publisher might authorize a distributor to provide digital
content to an online retailer, who in turn sells the content
to end-users. ’280 patent, col. 2, ll. 26–29. In prior art
systems, once the publisher gives the content to the
distributor, the publisher cannot control what rights the
distributor grants to parties further downstream, such as
the online retailer or the end-user. Id. col. 2, ll. 34–42.
     The ’280 patent purports to solve this problem by cre-
ating a DRM with “usage rights,” “meta-rights” and “state
variables.” According to the ’280 patent, “[u]sage rights
define one or more manners of use of the associated
document content.” Id. col. 2, ll. 14–16. Examples of
usage rights include the right to view, use, or distribute a
digital work. Id. col. 2, ll. 16–18. By contrast, “[m]eta-
rights are the rights that one has to generate, manipu-
late, modify, dispose of or otherwise derive other rights.
Meta-rights can be thought of as usage rights to usage
rights (or other meta-rights).” Id. col. 5, ll. 47–49. Final-
ly, “[s]tate variables” represent the status of rights, such
as how many copies of a digital work have been distribut-
ed or viewed. Id. col. 7, l. 66–col. 8, l. 16.
    Using the ’280 patent’s DRM system, a publisher can
grant meta-rights that specify what usage rights its
distributor can grant to downstream parties like the
online retailer or the end-user. Id. col. 6, ll. 36–60. For
example, a publisher might specify that its distributor can
allow the online retailer to sell only five copies of each
digital work. Id. col. 6, ll. 47–60. Similarly, the publisher
might also specify that the online retailer can only allow
end-users to view the content or to print it once. Id. In
the disclosed system, the online retailer can only grant
rights to end users that have been “predetermined and
4                  APPLE INC.   v. CONTENTGUARD HOLDINGS, INC.

authorized” by upstream parties like the distributor or
publisher. Id. col. 6, ll. 36–48.
    Claim 1 of the ’280 patent recites:
    1. A computer-implemented method for transfer-
    ring rights adapted to be associated with items
    from a rights supplier to a rights consumer, the
    method comprising:
    obtaining a set of rights associated with an item,
    the set of rights including a meta-right specifying
    a right that can be created when the meta-right is
    exercised, wherein the meta-right is provided in
    digital form and is enforceable by a repository;
    determining, by a repository, whether the rights
    consumer is entitled to the right specified by the
    meta-right; and
    exercising the meta-right to create the right speci-
    fied by the meta-right if the rights consumer is
    entitled to the right specified by the meta-right,
    wherein the created right includes at least one
    state variable based on the set of rights and used
    for determining a state of the created right.
Id. col. 15, ll. 7–22.
    Petitioners Apple Inc. and Google LLC requested cov-
ered business method (CBM) review of the ’280 patent,
which the Board instituted. In its institution decision, the
Board determined that the ’280 patent qualified as a CBM
patent. After institution, ContentGuard moved to amend
the ’280 patent. In its final written decision, the Board
cancelled original claims 1, 5, and 11 of the ’280 patent,
but granted ContentGuard’s motion to amend by adding
substitute independent claim 37. Petitioners appeal from
the Board’s decision to grant ContentGuard’s motion to
amend. ContentGuard cross-appealed and argued that
APPLE INC.   v. CONTENTGUARD HOLDINGS, INC.              5

the ’280 patent did not qualify as a CBM patent. We have
jurisdiction under 28 U.S.C. § 1295(a)(4)(A).
                              II
    Our jurisdiction allows us to review whether the ’280
patent qualifies as a CBM patent. Versata Dev. Grp., Inc.
v. SAP Am., Inc., 793 F.3d 1306, 1323 (Fed. Cir. 2015).
Whether a patent qualifies as a CBM patent is a question
of law that we review de novo. Unwired Planet, LLC v.
Google Inc., 841 F.3d 1376, 1379 (Fed. Cir. 2016). The
Board concluded that the ’280 patent qualified as a CBM
patent because it claimed an invention that is “incidental
to” or “complementary to” financial activity. Since the
Board’s decision, we expressly rejected this standard in
Unwired Planet. Id. at 1382. Because the Board relied on
an incorrect legal standard, we vacate the Board’s deci-
sion. 1
    Unwired Planet held that “the Board’s reliance on
whether the patent claims activities ‘incidental to’ or
‘complementary to’ a financial activity as the legal stand-
ard to determine whether a patent is a CBM patent was
not in accordance with law.” Id. We explained that “it
cannot be the case that a patent covering a method and
corresponding apparatuses becomes a CBM patent be-
cause its practice could involve a potential sale of a good
or service.” Id. Moreover “[i]t is not enough that a sale
has occurred or may occur, or even that the specification

   1    In Secure Axcess, LLC v. PNC Bank National
Ass’n, we held that “the statutory definition of a CBM
patent requires that the patent have a claim that con-
tains, however phrased, a financial activity element.” 848
F.3d 1370, 1381 (Fed. Cir. 2017). That decision, however,
has since been vacated as moot by the Supreme Court.
PNC Bank Nat. Ass’n v. Secure Axcess, LLC, 138 S. Ct.
1982 (2018).
6                APPLE INC.   v. CONTENTGUARD HOLDINGS, INC.

speculates such a potential sale might occur.” Id. In-
stead, “CBM patents are limited to those with claims that
are directed to methods and apparatuses of particular
types and with particular uses ‘in the practice, admin-
istration, or management of a financial product or ser-
vice.’” Id. (quoting Leahy–Smith America Invents Act,
Pub. L. No. 112–29, § 18(d), 125 Stat. 284, 331 (2011)).
    Here, the Board applied the improper “incidental or
complementary” standard to find that the ’280 patent is a
CBM patent. For instance, the Board observed that
claim 1 recited a method for “transferring rights adapted
to be associated with items from a rights supplier to a
rights consumer.” J.A. 11. According to the Board, the
transfer of rights from a supplier to a consumer “is an
activity that, at the very least, is incidental or comple-
mentary to a financial activity.” Id. Further, the Board
also relied on portions of the specification that disclose
how the transfer of rights “may require the payment of a
fee or processing by a clearinghouse.” Id. (emphasis
added). From this description, the Board reasoned that
the patent is “at the very least, incidental or complemen-
tary to a financial activity.” Id. 12.
     As we explained in Unwired Planet, the mere possibil-
ity that a patent can be used in financial transactions is
not enough to make it a CBM patent. 841 F.3d at 1382.
Although the ’280 patent describes embodiments where
the claimed DRM system is used to monetize digital
works, it also explains how the claimed invention can be
used in ways that do not involve financial transactions.
For instance, the specification describes how the claimed
invention can manage healthcare records. ’280 patent,
col. 7, ll. 6–17. In one embodiment, patients can grant
“meta-rights” to their hospitals, which allow their hospital
to transfer specific access rights to a second hospital
where the patient might need treatment. Id. We need
not decide whether such embodiments preclude the ’280
patent from qualifying as a CBM patent. Instead, we hold
APPLE INC.   v. CONTENTGUARD HOLDINGS, INC.               7

only that it is not enough for the specification to describe
how the invention could, in some instances, be used to
facilitate financial transactions.
    Petitioners and the Patent and Trademark Office, as
intervenors, argue that the Board also determined the
claims are “financial in nature” in its final written deci-
sion. Accordingly, petitioners and the Patent and Trade-
mark Office maintain that we can sustain the Board’s
determination on that alternative ground. However,
references to the “incidental to” or “complementary to”
standard appear throughout the Board’s final written
decision. See, e.g., J.A. 7–8, 11, 12. On the record before
us, we are unable to discern whether the Board would
have concluded that the ’280 patent qualifies as a CBM
patent had it not applied this standard. On remand, the
Board must determine whether the ’280 patent qualifies
as a CBM patent in the first instance without relying on
the “incidental to” or “complementary to” standard.
                             III
    Because the Board applied an erroneous legal stand-
ard, we vacate the Board’s determination that the ’280
patent qualifies as a CBM patent and remand for further
proceedings.
               VACATED AND REMANDED