Unlike other types of post-grant challenges, in order to invoke a covered business method challenge, a petitioner must establish that it has been sued or threatened with a charge of infringement. A petitioner will have standing to file a petition for covered business method review if it has been sued already or if it "has been charged with infringement." So exactly what does the phrase, "has been charged with infringement" mean? Is it enough to have been charged with infringement, even if the threat has passed? Or must there be an active, ongoing threat of an infringement action? In Carfax v. Red Mountain Technologies (CBM2015-00115, institution decision), a panel of the Board held that the phrase "has been charged with infringement" requires an active, ongoing threat of bringing an infringement action.
In Carfax, Red Mountain allegedly threatened an action for infringement of a patent on a method for determining "vehicle risk" against a potential client of Carfax (i.e., a "privy" of Carfax). Carfax filed a declaratory judgment action of non-infringement. Red Mountain then extended broadly worded covenants not to sue to both Carfax and the client. A few days after Red Mountain extended the covenants not to sue, Carfax filed the petition for CBM review, seeking invalidity of all claims on the basis of 35 U.S.C. § 101.
Focusing on the timing of the covenants not to sue, the panel refused to institute the petition on the basis of standing. It held that the "has been charged with infringement" requirement in section 302 requires the threat to be an active, ongoing one. It referred to the definition in 37 C.F.R. 42.302, which states, "Charged with infringement means a real and substantial controversy regarding infringement of a covered business method patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal Court." The panel found the covenants not to sue were broad enough to extinguish any threat of an infringement action, and it agreed with Red Mountain that a controversy must "exist" in the present, and not merely "have existed" in the past. The panel found this to be true even though the declaratory judgment proceedings had not been dismissed at the time of the petition.
Practice pointer: Removing the threat of suit will divest the would-be infringer of standing to bring a covered business method review petition. The actions of the panel here are akin to a district court dismissing a case on mootness grounds because there was no longer a case or controversy. The action of the patent owner here to extend covenants not to sue just prior to the petition being filed succeeded in forestalling review of the patent.
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