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In the first ruling of its kind since the America Invents Act established a new system for reviewing patents, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) ruled Tuesday that a key patent used in a case brought by Versata Inc. against SAP America Inc. is too abstract and therefore invalid [PDF].

The dispute revolves around a business method patent related to dynamic pricing technology, which Versata alleged SAP infringed. In 2007, Versata sued, claiming SAP stole its patented technology, and said that demand for its product dropped precipitously after SAP started offering the same software.

But in the first case to be tried under the covered business method (CBM) post-grant review proceedings initiated under the under Leahy-Smith America Invents Act of 2011, the PTAB ruled that the patent, known as the ‘350 patent,’ is invalid. “Specifically, the claims recite unpatentable abstract ideas and the claims do not provide enough significant meaningful limitations to transform these abstract ideas into patent-eligible applications of these abstractions,” the written decision said.

The case had followed a parallel track in federal court, and in May, the U.S. court of Appeals for the Federal Circuit affirmed a lower court decision ordering SAP to pay Versata $345 million in damages for infringing Versata’s patent. SAP has petitioned the appellate court for a rehearing and that request is pending. The PTAB decision, however, means SAP may have a chance to get the infringement ruling overturned.

“We’re pleased with the decision and pleased for our client,” said Erika Arner, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner, and one of the attorneys who represented SAP at the PTAB trial.

Versata will appeal the PTAB ruling to the Federal Circuit, said Scott Cole, a partner at McKool Smith who represents Versata. The company has also challenged the notion that the PTAB had authority in this proceeding on two separate grounds, Cole said. “We think the decision is completely off base, and we are confident that on review it will be flipped,” he said.

But the PTAB ruling, which was issued only 9 months after the case was first filed, could lead other companies to use this new system to challenge patents based on business methods, said Steven Baughman, a partner at Ropes & Gray who also represented SAP before the PTAB. Baughman, who is counsel on 15 of the 28 petitions that have been filed so far before the PTAB, said the speed with which such cases can be resolved, as well as the broad view of what qualifies as a business method patent, could encourage others to consider such a proceeding. “It’s a good alternative to district court, and we were pleased with the process and the way the board viewed the evidence,” he said. “I think others who were hesitant to go to the PTAB before will now begin to see its benefits.”

Senator Charles Schumer (D-NY) has introduced legislation that would allow other types of patent challenges to be heard by the PTAB—an effort to discourage patent assertion entities, or patent trolls, that use broad patents to sue.

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