35 U.S.C. § 101 – If At First You Don’t Succeed, Try, Try Again

As most practitioners know, even a duly issued patent can be invalidated under 35 U.S.C. § 101 if the patent’s claims are directed to a “patent-ineligible concept,” such as an abstract idea.  Yet, trying to anticipate whether a patent claim will actually be invalidated under § 101 remains as difficult as ever.  The dispute between Global Cash Access, Inc. (“Global Cash”) and NRT Technology Corp. (“NRT”) involving U.S. Patent No. 6,081,792 (the “’792 Patent”) is illustrative.

First, some background information as explained in the ’792 Patent.  As most people know through experience, bank customers can use ATMs to withdraw cash from their accounts using a debit card.  These withdrawal requests are typically processed using a bank’s ATM network.  One downside of using an ATM is that banks impose a daily limit on ATM cash withdrawals.  Thus, a customer may not be able to withdraw the desired amount of cash from his or her account, even though the customer has enough money in the account to cover the withdrawal.  At the same time, bank customers can use their debit cards to buy items directly without any pre-set limits.  These transactions do not have any pre-set limits since they are processed via point-of-sale (“POS”) networks, as opposed to ATM networks, which lack any daily limit restrictions.

Global Cash owns the ’792 Patent, which relates to methods of processing a request for cash at an ATM.  Using claim 1 of the ’792 Patent as a representative example, that claim generally covers a method that allows a customer to withdraw cash in excess of the pre-set limit by allowing the ATM to process cash requests using two different types of networks.  Specifically, a user can initially request cash at an ATM using a first network (e.g., an ATM network).  If the user’s request exceeds the pre-set limit, the ATM will ask the user if he or she wants to use a second network to withdraw cash.  If the answer is yes, the ATM will then use a second network (e.g., a POS network) to withdraw cash.  This allows the customer to bypass a typical ATM’s pre-set cash withdrawal limit when desired.

On May 1, 2015, Global Cash sued NRT in federal district court in Nevada for allegedly infringing the ’792 Patent.  On July 23, 2015, NRT countered by filing a petition with the United States Patent and Trademark Office requesting a covered business method patent (“CBM patent”) review of the ’792 Patent.  A CBM patent review is one of three relatively new procedures enacted as part of the America Invents Act, which can be used to challenge the validity of a duly issued patent directly at the patent office.  In its petition for CBM patent review, NRT argued, in relevant part, that the ’792 Patent claims are invalid under § 101 since they are directed to the abstract idea of providing money to an account holder or using trial-and-error until success is achieved.

On January 22, 2016, a Patent and Trial Board (“PTAB”) panel, comprised of three technically-savvy administrative patent judges, issued a decision denying NRT’s request for CBM patent review.  According to the panel, NRT oversimplified the nature of the challenged patent claims in its petition, and found that the ’792 Patent claims are actually “directed to particular methods of providing money to an account holder using an ATM via a POS transaction after an ATM transaction has failed.”  The PTAB panel ultimately concluded that NRT failed to show that the claims are more likely than not patent-ineligible, which is the relevant standard used by the PTAB in deciding whether to institute a CBM patent review.

Undeterred, NRT filed an early motion to dismiss in federal district court on the same § 101 invalidity ground that was raised, and rejected, by the PTAB panel.  But this time NRT found a sympathetic ear, and the Nevada judge found the ’792 Patent to be patent-ineligible under § 101 for being directed to the abstract idea of using an alternative transaction to obtain cash or another item of value from a bank account after a first transaction fails.  See Global Cash Access, Inc. v. NRT Tech. Corp., No. 2:15-cv-00822-MMD-GWF, 2016 WL 1181669 (D. Nev. Mar. 25, 2016).  The Nevada judge did acknowledge the PTAB’s prior decision, but simply stated that she disagreed with the PTAB’s threshold analysis.  Thus, the ’792 Patent is now invalid.  Notably, the Nevada judge lacks any technical background, and practiced employment law prior to becoming a judge.

Now, to be clear, I am in no way criticizing the Nevada judge’s decision, or trying to suggest that the Nevada judge is not capable of handling patent matters.  In fact, I personally think the Nevada judge got it right.  But, objectively, Global Cash does present a real-world example where a panel of three technically-savvy judges that specialize in patent law thought that an invention was likely patent-eligible, and one judge, who lacks any technical training and does not specialize in patent law, thought that an invention should be patent-ineligible, which ultimately resulted in the patent for the invention being invalidated.  If I was Global Cash, this probably would not sit too well with me.  Regardless, the Global Cash decision, if nothing else, demonstrates how difficult it is to predict the outcome of any § 101 dispute, which is something that all practitioners and clients must continue to be mindful of.

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Posted By:
Rex Hwang

Rex Hwang

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