Axioma, Inc.

Patent Trials and Appeals Board

Apr 28, 2020

15979162 - (D) (P.T.A.B. Apr. 28, 2020)

UNITED STATES PATENT AND TRADEMARK OFFICE
UNITED STATES DEPARTMENT OF COMMERCE
United States Patent and Trademark Office
Address: COMMISSIONER FOR PATENTS
P.O. Box 1450
Alexandria, Virginia 22313-1450
www.uspto.gov
APPLICATION NO. FILING DATE FIRST NAMED INVENTOR ATTORNEY DOCKET NO. CONFIRMATION NO.
15/979,162 05/14/2018 Anthony A. RENSHAW 166.0012-CON 4454
23448 7590 04/28/2020
HULTQUIST IP
P.O. BOX 14329
RESEARCH TRIANGLE PARK, NC 27709
EXAMINER
MAGUIRE, LINDSAY M
ART UNIT PAPER NUMBER
3693
NOTIFICATION DATE DELIVERY MODE
04/28/2020 ELECTRONIC
Please find below and/or attached an Office communication concerning this application or proceeding.
The time period for reply, if any, is set in the attached communication.
Notice of the Office communication was sent electronically on above-indicated "Notification Date" to the
following e-mail address(es):
hip@hultquistip.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
________________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
________________

Ex parte ANTHONY A. RENSHAW
________________

Appeal 2019-006197
Application 15/979,162
Technology Center 3600
________________

Before JOHNNY A. KUMAR, SCOTT B. HOWARD, and
JOYCE CRAIG, Administrative Patent Judges.

KUMAR, Administrative Patent Judge.

DECISION ON APPEAL

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STATEMENT OF CASE
Introduction
Pursuant to 35 U.S.C. § 134(a), Appellant1 appeals the Final Rejection
of claims 1–20. We have jurisdiction under 35 U.S.C. § 6(b).
We AFFIRM.

Invention
The invention relates to the construction of indexes wherein a
portfolio of securities such as stocks, bonds, or the like and their associated
investment weights, allocations, or shares are determined. Spec. 1:9–11.
Independent claims 1, 8, and 14 are reproduced below:
1. A computer based method of constructing a factor index of
portfolio weights that replicate returns associated with a target factor
by constraining tracking error while simultaneously reducing
implementation costs flowing from a large number of names and
unintended bets on other factors by constraining turnover comprising:

selecting a set comprising a plurality of possible investments;

defining a benchmark portfolio of weights comprising a subset
of the set comprising a plurality of possible investments and a weight
for each member of the subset;

selecting a first factor risk model defined for the set comprising
a plurality of possible investments, said first factor risk model
defining a first matrix of factor exposures which gives a numerical
exposure value for every possible investment for a set of factors;

selecting a target factor for one of the factors defined by the
first factor risk model;

1 We use the word “Appellant” to refer to “applicant” as defined in
37 C.F.R. § 1.42. According to Appellant, Axioma, Inc. is the real party in
interest. Appeal Br. 1.
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constructing a target factor portfolio of weights for the target
factor for the set comprising a plurality of possible investments, the
benchmark portfolio of weights, and the first factor risk model, and
whose weighted average exposure to the target factor is different than
the weighted average exposure of the benchmark portfolio to the
target factor;

selecting a second factor risk model defined for the set
comprising a plurality of possible investments, said second factor risk
model defining a second matrix of factor exposures, wherein at least
one factor exposure in the second matrix of factor exposures of the
second factor risk model is different than all the factor exposures of
the first matrix of factor exposures of the first factor risk model;

performing a first optimization by determining weights of each
of the plurality of possible investments for a factor index so that a
tracking error between the factor index and the target factor portfolio
of weights as predicted by the second factor risk model is constrained
to be less than or equal to 5% and a one-way turnover is constrained
to be less than 7.5%; and

outputting the factor index weights as an electronic output
displayed on a display.

Claims App. 1 (emphasis added to indicate additional, i.e., non-abstract,
element).
8. A computer system for constructing a factor index of portfolio
weights that replicate returns associated with a target factor by
constraining tracking error while simultaneously reducing
implementation costs flowing from a large number of names and
unintended bets on other factors by constraining turnover comprising:

a programmed processor for selecting a set comprising a
plurality of possible investments;

the programmed processor selecting a benchmark portfolio
comprising a subset of holdings from the set comprising a plurality of
possible investments;
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the programmed processor selecting a first factor risk model
defined for the set comprising a plurality of possible investments, said
first factor risk model defining a first matrix of factor exposures;

the programmed processor selecting a target factor which is
one of the factors defined by the first factor risk model;

the programmed processor constructing a target factor portfolio
for the target factor whose holdings are fully determined by the set
comprising a plurality of possible investments, the benchmark
portfolio, and the first factor risk model, and whose exposure to the
target factor is different than the exposure of the benchmark portfolio
to the target factor;

the programmed processor selecting a second factor risk model
defined for the set comprising a plurality of possible investments, said
second factor risk model defining a second matrix of factor exposures,
wherein at least one factor exposure in the second matrix of factor
exposures of the second factor risk model is different than all the
factor exposures of the first matrix of factor exposures of the first
factor risk model;

the programmed processor performing a first optimization by
determining weights of each of the plurality of possible investments
for a factor index so that a tracking error between the factor index and
the target factor portfolio as predicted by the second factor risk model
is constrained to be less than or equal to 5% and a one-way turnover is
constrained to be less than 7.5%; and

the programmed processor outputting the factor index weights
as an electronic output.

Claims App. 2–3 (emphases added to indicate additional, i.e., non-abstract,
element).
14. A computer system for constructing a factor index of portfolio
weights that replicate returns associated with a target factor by
constraining tracking error while simultaneously reducing
implementation costs flowing from a large number of names and
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unintended bets on other factors by controlling turnover comprising:

a first and a second factor risk selecting programmed processor
for selecting a set comprising a plurality of possible investments;

the first and a second factor risk selecting programmed
processor selecting a benchmark portfolio comprising a subset of
holdings from the set comprising a plurality of possible investments;

the first and a second factor risk selecting programmed
processor selecting a first factor risk model defined for the set
comprising a plurality of possible investments, said first factor risk
model comprising a first matrix of factor exposures, a first matrix of
factor covariances, and a first matrix of specific risk variances;

the first and a second factor risk selecting programmed
processor selecting a target factor which is one of the factors defined
by the first factor risk model;

the first and a second factor risk selecting programmed
processor constructing a target factor portfolio for the target factor
whose holdings are fully determined by the set comprising a plurality
of possible investments, the benchmark portfolio, and the first factor
risk model, and whose exposure to the target factor is different than
the exposure of the benchmark portfolio to the target factor;

the first and a second factor risk selecting programmed
processor selecting a second factor risk model defined for the set
comprising a plurality of possible investments, said second factor risk
model comprising a second matrix of factor exposures, a second
matrix of factor covariances, and a second matrix of specific risk
variances wherein at least one factor exposure in the second matrix of
factor exposures of the second factor risk model is different than all
the factor exposures of the first matrix of factor exposures of the first
factor risk model;

the first and a second factor risk selecting programmed
processor performing a first optimization by determining weights of
each of the plurality of possible investments for a factor index so that
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a tracking error between the factor index and the target factor
portfolio as predicted by the second factor risk model is constrained to
be less than or equal to 5% and a one-way turnover is constrained to
be less than 7.5%; and

the first and a second factor risk selecting programmed
processor outputting the factor index weights as an electronic output.

Claims App. 4–5 (emphases added to indicate additional, i.e., non-abstract,
element).

REJECTION
Claims 1–20 stand rejected under 35 U.S.C. § 101 as being directed to
patent ineligible subject matter. Final Act. 2–4.

ANALYSIS
We have only considered those arguments that Appellant actually
raised in the Briefs2. Arguments Appellant could have made, but chose not
to make, in the Briefs have not been considered and are deemed to be
waived. See 37 C.F.R. § 41.37(c)(1)(iv) (2019).

Related Appeal
This appeal is related to PTAB 2017-000123, stemming from co-
pending application 13/965,621. Appeal Br. 2. The instant appeal and

2 Claims 2–7 and 15–20 are not argued separately from claim 1 in either of
Appellant’s briefs (Appeal Br. 8–15; Reply Br. 2–3); and claims 9–13 are
not argued separately from claim 8 in either of Appellant’s briefs (Appeal
Br. 8–15; Reply Br. 2–3). Therefore, claims 2–7, 9–13, and 15–20 will not
be separately addressed.
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Appeal 2017-000123 have the same assignee (Axioma, Inc.), and are filed
by the same inventive entity (Renshaw).

A. The Examiner’s Rejections and Appellant’s Arguments
The Examiner concludes that the present claims recite an abstract
idea. Final Act. 3; Ans. 3–4. The Examiner further concludes that the
abstract idea is not integrated into a practical application, because the
display of claim 1 and the programmed processor of claims 8 and 14 are
“recited at a high-level of generality (i.e., as a generic processor performing
a generic computer function) such that [they] amount[] [to] no more than
mere instructions to apply the exception using a generic computer
component” and “do not impose any meaningful limits on practicing the
abstract idea.” Ans. 4; see also Final Act. 4. The Examiner also determines
that the claims do not recite additional elements that amount to significantly
more than the judicial exception, because “the additional element of using a
computer hardware amounts to no more than mere instructions to apply the
exception using a generic computer component. Mere instructions to apply
an exception using a generic computer component cannot provide an
inventive concept.” Ans. 5–6 (citing Spec. 10:12–18, 17:1–18:21; MPEP
2106.05(f)).
Appellant argues that the claimed invention is not directed to an
abstract idea. Appeal Br. 9–11; Reply Br. 2. Appellant further argues that
the claims do not preempt “use of the abstract idea of ‘constructing a factor
for portfolio weights.’” Appeal Br. 10; see also Appeal Br. 11 (“The current
claims clearly do not attempt to tie up an entire abstract idea.”). Appellant
contends that the claimed invention provides a technological advantage that
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is described in Appellant’s Specification, similar to in Visual Memory LLC
v. NVIDIA Corp., 867 F.3d 1253 (Fed. Cir. 2017). Id. at 9. Appellant
contends that, analogous to DDR Holdings, LLC v. Hotels.com, L.P., 773
F.3d 1245 (Fed. Cir. 2014), the claims recite limitations that, when taken in
an ordered combination, provide unconventional steps for a particular useful
application. Id. at 12–13. Appellant further argues that, unlike in the related
appeal (PTAB 2017-000123), the instant claims recite the technological
improvement, similar to in McRO3. Appeal Br. 2. Appellant argues that
novelty and non-obviousness have not been established in this case. Id. at
14; Reply Br. 3. Additionally, Appellant argues that a non-precedential
Federal Circuit case, similar to Appellant’s application, held as patent
eligible, “‘a method and system for electronic trading of stocks, bonds,
futures, option and similar products.’” Appeal Br. 14 (quoting Trading
Tech. Int’l., Inc. v. CQG, INC., 675 Fed. Appx. 1001 (Fed. Cir. 2017).
Appellant avers that the Examiner’s Step 2B analysis is deficient, and
further contends that the instant claims are not well-understood, routine, or
conventional and present an inventive concept. Reply Br. 3.

B. Principles of Law
An invention is patent-eligible if it claims a “new and useful process,
machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
However, the U.S. Supreme Court has long interpreted 35 U.S.C. § 101 to
include implicit exceptions: “[l]aws of nature, natural phenomena, and

3 McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299 (Fed. Cir.
2016)
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abstract ideas” are not patentable. E.g., Alice Corp. v. CLS Bank Int’l, 573
U.S. 208, 216 (2014).
In determining whether a claim falls within an excluded category, we
are guided by the Court’s two-part framework, described in Mayo and Alice.
Id. at 217–18 (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
566 U.S. 66, 75–77 (2012)). In accordance with that framework, we first
determine what concept the claim is “directed to.” See Alice, 573 U.S. at
219 (“On their face, the claims before us are drawn to the concept of
intermediated settlement, i.e., the use of a third party to mitigate settlement
risk.”); see also Bilski v. Kappos, 561 U.S. 593, 611 (2010) (“Claims 1 and 4
in petitioners’ application explain the basic concept of hedging, or protecting
against risk.”).
Concepts determined to be abstract ideas, and thus patent ineligible,
include certain methods of organizing human activity, such as fundamental
economic practices (Alice, 573 U.S. at 219–20; Bilski, 561 U.S. at 611);
mathematical formulas (Parker v. Flook, 437 U.S. 584, 594–95 (1978)); and
mental processes (Gottschalk v. Benson, 409 U.S. 63, 67 (1972)). Concepts
determined to be patent eligible include physical and chemical processes,
such as “molding rubber products” (Diamond v. Diehr, 450 U.S. 175, 191
(1981)); “tanning, dyeing, making waterproof cloth, vulcanizing India
rubber, smelting ores” (id. at 182 n.7 (quoting Corning v. Burden, 56 U.S.
252, 267–68 (1853))); and manufacturing flour (Benson, 409 U.S. at 69
(citing Cochrane v. Deener, 94 U.S. 780, 785 (1876))).
In Diehr, the claim at issue recited a mathematical formula, but the
Court held that “a claim drawn to subject matter otherwise statutory does not
become nonstatutory simply because it uses a mathematical formula.”
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Diehr, 450 U.S. at 187; see also id. at 191 (“We view respondents’ claims as
nothing more than a process for molding rubber products and not as an
attempt to patent a mathematical formula.”). Having said that, the Court
also indicated that a claim “seeking patent protection for that formula in the
abstract . . . is not accorded the protection of our patent laws, and this
principle cannot be circumvented by attempting to limit the use of the
formula to a particular technological environment.” Id. (citation omitted)
(citing Benson and Flook); see, e.g., id. at 187 (“It is now commonplace that
an application of a law of nature or mathematical formula to a known
structure or process may well be deserving of patent protection.”).
If the claim is “directed to” an abstract idea, we turn to the second
step of the Alice and Mayo framework, where “we must examine the
elements of the claim to determine whether it contains an ‘inventive
concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-
eligible application.” Alice, 573 U.S. at 221 (quotation marks omitted).
“A claim that recites an abstract idea must include ‘additional features’ to
ensure ‘that the [claim] is more than a drafting effort designed to
monopolize the [abstract idea].’” Id. (alterations in original) (quoting Mayo,
566 U.S. at 77). “[M]erely requir[ing] generic computer implementation[]
fail[s] to transform that abstract idea into a patent-eligible invention.” Id.

C. USPTO Section 101 Guidance
In January 2019, the USPTO published revised guidance on the
application of § 101. 2019 Revised Patent Subject Matter Eligibility
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Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019) (“2019 Revised Guidance”).4 “All
USPTO personnel are, as a matter of internal agency management, expected
to follow the guidance.” Id. at 51; see also October 2019 Update at 1.
Under the 2019 Revised Guidance and the October 2019 Update, we
first look to whether the claim recites:
(1) any judicial exceptions, including certain groupings of abstract
ideas (i.e., mathematical concepts, certain methods of organizing
human activity such as a fundamental economic practice, or mental
processes) (“Step 2A, Prong One”); and
(2) additional elements that integrate the judicial exception into a
practical application (see MPEP § 2106.05(a)–(c), (e)–(h) (9th ed.
Rev. 08.2017, Jan. 2018)) (“Step 2A, Prong Two”).5
2019 Revised Guidance, 84 Fed. Reg. at 52–55.
Only if a claim (1) recites a judicial exception and (2) does not
integrate that exception into a practical application, do we then look, under
Step 2B, to whether the claim:

4 In response to received public comments, the Office issued further
guidance on October 17, 2019, clarifying the 2019 Revised Guidance.
USPTO, October 2019 Update: Subject Matter Eligibility (the “October
2019 Update”) (available at
https://www.uspto.gov/sites/default/files/documents/peg_oct_2019_update.p
df).
5 This evaluation is performed by (a) identifying whether there are any
additional elements recited in the claim beyond the judicial exception, and
(b) evaluating those additional elements individually and in combination to
determine whether the claim as a whole integrates the exception into a
practical application. See 2019 Revised Guidance - Section III(A)(2), 84
Fed. Reg. 54–55.
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(3) adds a specific limitation beyond the judicial exception that is not
“well-understood, routine, conventional” in the field (see MPEP
§ 2106.05(d)); or
(4) simply appends well-understood, routine, conventional activities
previously known to the industry, specified at a high level of
generality, to the judicial exception.
2019 Revised Guidance, 84 Fed. Reg. at 52–56.

D. Step 2A, Prong 1
Because claims 1, 8, and 14 require constructing a factor index of
portfolio weights for a plurality of possible investments by selecting first and
second risk factor models, we conclude the non-emphasized portions of
claims 1, 8, and 14 reproduced above (see supra at 2–6), recite fundamental
economic principles or practices. Thus, the present claims describe subject
matter relating to the economy and commerce, specifically hedging and
mitigating risk. According to the Memorandum, fundamental economic
principles or practices fall into the category of certain methods of organizing
human activity. See Memorandum, 84 Fed. Reg. at 52. Moreover, those
certain methods of organizing human activity are a type of abstract idea. See
id.
The present claims recite fundamental economic principles or
practices, which fall into the category of certain methods of organizing
human activity (i.e., an abstract idea). Namely, the claims require features
such as, “selecting a set comprising a plurality of possible investments,”6

6 This limitation is in each of claims 1, 8, and 14. See Claims App.
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“defining a benchmark portfolio of weights,”7 “selecting a first factor risk
model,”8 and “selecting a second factor risk model,”9 which are all features
directed to mitigating risk in an investment portfolio, and therefore fall
under fundamental economic principles or practices. Nevertheless, we must
still determine whether the abstract idea is integrated into a practical
application, namely whether the claim applies, relies on, or uses the abstract
idea in a manner that imposes a meaningful limit on the abstract idea, such
that the claim is more than a drafting effort designed to monopolize the
abstract idea. See Guidance, 84 Fed. Reg. at 54–55. We therefore (1)
identify whether there are any additional recited elements beyond the
abstract idea, and (2) evaluate those elements both individually and
collectively to determine whether they integrate the exception into a
practical application. See id.
Accordingly, we proceed to prong 2.

E. Step 2A, Prong 2
Here, the only elements in the claims beyond the abstract idea are “a
display” in claim 1; “[a] computer system” and “a programmed processor”
in claim 8; and “[a] computer system” and “a…programmed processor” in
claim 14. See 2019 Revised Guidance, 84 Fed. Reg. at 52. The additional
elements of the present claims do not integrate the abstract idea into a
practical application because they do not impose any meaningful limits on

7 Claim 1 recites this limitation. Claims 8 and 14 each recite a similar
“selecting a benchmark portfolio.” See Claims App.
8 This limitation is in each of claims 1, 8, and 14. See Claims App.
9 This limitation is in each of claims 1, 8, and 14. See Claims App.
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practicing the abstract idea for the following reasons.
Appellant does not identify persuasively how the Specification sets
forth an improvement in technology. The USPTO October 2019 Patent
Eligibility Guidance Update (“Update”) addresses how we consider
evidence of improvement that is presented to us. The Update states:
the evaluation of Prong Two requires the use of the
considerations (e.g. improving technology, effecting a
particular change treatment or prophylaxis, implementing with
a particular machine, etc.) identified by the Supreme Court and
the Federal Circuit, to ensure that the claim as a whole
“integrates [the] judicial exception into a practical application
[that] will apply, rely on, or use the judicial exception in a
manner that imposes a meaningful limit on the judicial
exception, such that the claim is more than a drafting effort
designed to monopolize the judicial exception.
Update, 11 (emphases added). The Update further states:
[d]uring examination, the examiner should analyze the
“improvements” consideration by evaluating the specification
and the claims to ensure that a technical explanation of the
asserted improvement is present in the specification, and that
the claim reflects the asserted improvement. Generally,
examiners are not expected to make a qualitative judgment on
the merits of the asserted improvement. If the examiner
concludes the disclosed invention does not improve technology,
the burden shifts to applicant to provide persuasive arguments
supported by any necessary evidence to demonstrate that one of
ordinary skill in the art would understand that the disclosed
invention improves technology. Any such evidence submitted
under 37 C.F.R. § 1.132 must establish what the specification
would convey to one of ordinary skill in the art and cannot be
used to supplement the specification. For example, in response
to a rejection under 35 U.S.C. § 101, an applicant could submit
a declaration under § 1.132 providing testimony on how one of
ordinary skill in the art would interpret the disclosed invention
as improving technology and the underlying factual basis for
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that conclusion.
Id. at 13 (emphasis added).
We disagree with Appellant’s argument that the present claims are
directed to a technological innovation. Appeal Br. 2, 9, 11–14 (citing
McRO; Visual Memory; DDR Holdings; Trading Techs.). In this case, the
Examiner concludes that the present claims do not recite an improvement to
technology, but rather amount simply to instructions for using generic
computer components. Final Act. 4; Ans. 4. See Affinity Labs of Tex. v.
DirecTV, LLC, 838 F.3d 1253, 1264––65 (Fed. Cir. 2016); TLI
Communications LLC v. AV Auto. LLC, 823 F.3d 607, 612-13 (Fed. Cir.
2016) (a claim must include more than conventional implementation on
generic components or machinery to qualify as an improvement to an
existing technology). Consequently, we focus on any evidence Appellant
cites as discussed in the Update.
Here, Appellant argues that the present claims provide technological
improvements that include reducing a tracking error between a factor index
and a target factor portfolio (Appeal Br. 11); and reducing turnover, number
of items, and underperformance of factor indexes. Id. at 12, 14. However,
this alleged improvement is an improvement in performance of factor
indexes, which falls within the category of an abstract idea, as discussed
supra, not an improvement to technology. “A claim for a new abstract idea
is still an abstract idea.” Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d
1138, 1151 (Fed. Cir. 2016) (emphasis added). “[U]nder the Mayo/Alice
framework, a claim directed to a newly discovered law of nature (or natural
phenomenon or abstract idea) cannot rely on the novelty of that discovery
for the inventive concept necessary for patent eligibility . . . .” Genetic
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Techs. Ltd. v. Merial L.L.C., 818 F.3d 1369, 1376 (Fed. Cir. 2016) (citations
omitted).
Furthermore, the additional elements in the claims, namely a display,
a computer system, and a programmed processor, do not, either individually
or in combination, integrate the abstract idea into a practical application.
Appellant’s Specification discloses that these elements encompass generic
components, such as a generic monitor or computer screen (Spec. 19:8–14),
and a generic personal computer, workstation, or server (Spec. 17:5–18:6).
Merely adding generic hardware and computer components to perform
abstract ideas does not integrate those ideas into a practical application. See
Guidance, 84 Fed. Reg. at 55 (identifying “merely includ[ing] instructions to
implement an abstract idea on a computer” as an example of when an
abstract idea has not been integrated into a practical application).
We find Appellant’s argument that the present claims overcome the
failure of the claims in the previous related appeal with respect to McRO
unpersuasive. See Appeal Br. 2. The subject claim considered by the McRO
court concerned a method for automatically animating lip synchronization
and facial expressions. McRO, 837 F.3d at 1303. The McRO court
concluded the subject claims did not recite an abstract idea because the
computer animation used a structure of limited rules that reflected a specific
implementation which an animator would not likely have utilized. Id. at
1316. Thus, the claimed invention in McRO used “limited rules in a process
specifically designed to achieve an improved technological result” over
“existing, manual 3-D animation techniques.” Id. Unlike the claims of
McRO, the present claims do not recite a specific implementation of rules
that a human performing risk assessment for a factor index would not have
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utilized, and the present claims instead focus on an improvement to the
abstract idea itself.
We are not persuaded by Appellant’s citation to Visual Memory to
demonstrate that the present claims set forth an improvement in
technology. Appeal Br. 9. The invention considered by the Visual Memory
court was directed to an enhanced computer memory that could be
programmed to work with different types of processors. Visual Memory,
867 F.3d at 1259–60. The Federal Circuit determined that Visual Memory’s
claims were not directed to “the abstract idea of categorical data storage.”
Visual Memory, 867 F.3d at 1259. The court determined that Visual
Memory’s claims were directed to a technological improvement, i.e., an
enhanced computer memory system because: (1) the claimed
“programmable operational characteristics” were configurable based upon
the type of processor, instead of “on a process that qualifies as an ‘abstract
idea’ for which computers are invoked merely as a tool”; and, (2) Visual
Memory’s “specification discusses the advantages offered by the
technological improvement.” Id. at 1259–60. As such, the Federal Circuit
concluded that Visual Memory’s claims were not directed to an abstract idea
under Alice, step one. Id.
Here, although Appellant’s Specification discusses advantages offered
by the present invention, in contrast to the claim at issue in Visual Memory,
Appellant’s claims recite an improved method and system for constructing a
factor index of portfolio weights. See claims 1, 8, 14. Therefore, the focus
of Appellant’s claims is on an improved method for fundamental economic
practices, namely hedging and mitigating risk, i.e., an abstract idea.
However, an improved abstract idea is still an abstract idea. See Mayo, 566
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U.S. at 90 (holding that a novel and nonobvious claim directed to a purely
abstract idea is, nonetheless patent-ineligible). Additionally, “a claim for a
new abstract idea is still an abstract idea.” Synopsys, Inc. v. Mentor
Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016) (emphasis added).
“[U]nder the Mayo/Alice framework, a claim directed to a newly discovered
law of nature (or natural phenomenon or abstract idea) cannot rely on the
novelty of that discovery for the inventive concept necessary for patent
eligibility . . . .” Genetic Techs. Ltd. v. Merial L.L.C., 818 F.3d 1369, 1376
(Fed. Cir. 2016) (citations omitted).
We further disagree with Appellant’s argument that, similar to DDR
Holdings, the present claims are patent eligible because they are necessarily
rooted in computer technology to solve problems specifically arising in that
realm because the present claim limitations, when taken as an ordered
combination, provide steps to overcome shortcomings in factor indexes of
the prior art. Appeal Br. 12–14. The subject claim considered by the DDR
court pertained to a visitor of a host’s website clicking on an advertisement
for a third-party product displayed on the host’s website, whereby the visitor
is no longer being transported to the third party’s website. DDR Holdings,
773 F.3d at 1257. In DDR, instead of losing visitors to the third-party’s
website, the host website can send its visitors to a web page on an outsource
provider’s server that (1) incorporates “look and feel” elements from the
host website and (2) provides visitors with the opportunity to purchase
products from the third-party merchant without actually entering that
merchant’s website. Id. at 1257–58.
Here, in contrast to the claims of DDR, the present claims are not
necessarily rooted in computer technology to overcome a problem
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specifically arising in computer networks. See id. at 1257. Unlike DDR,
Appellant’s system and method for “constructing a factor index of portfolio
weights that replicate returns associated with a target factor by constraining
tracking error while simultaneously reducing implementation costs flowing
from a large number of names and unintended bets on other factors by
controlling turnover,” (Claims 1, 8, 14) is not claimed as solving or
otherwise addressing a problem arising in computer networks.
We furthermore disagree with Appellant’s argument that the present
claims are patent eligible because they are similar to those in Trading
Technologies, “describing and claiming ‘a method and system for electronic
trading of stocks, bonds, futures, option and similar products.’” Appeal Br.
14. The court in Trading Technologies determined that the claimed method
constituted more than merely displaying information on a graphical user
interface. Trading Techs., 675 Fed.Appx. at 1004. Instead, the court
determined that “[t]he claims require a specific, structured graphical user
interface paired with a prescribed functionality directly related to the
graphical user interface’s structure that is addressed to and resolves a
specifically identified problem in the prior state of the art.” Id. (emphases
added). Therefore, the court identified as patent-eligible a claimed
combination of (1) a specific, structured graphical user interface, and (2) a
functionality directly related to the structure of the graphical user interface.
Here, unlike the claims considered by the court in Trading
Technologies, the claims do not require either a specific, structured
computer component, or a prescribed functionality directly related to the
structure of the computer component. Therefore, the court’s determinations
in Trading Technologies are not applicable in this case.
Appeal 2019-006197
Application 15/979,162

20
Appellant’s argument that the present claims do not preempt any
abstract idea does not persuade us that the claims are eligible. Appeal Br.
11. Although preemption may denote patent ineligibility, its absence does
not demonstrate patent eligibility. See FairWarning, IP, LLC v. Iatric Sys.,
Inc., 839 F.3d 1089, 1098 (Fed. Cir. 2016). For claims covering a patent-
ineligible concept, preemption concerns “are fully addressed and made
moot” by an analysis under the Mayo/Alice framework. Ariosa Diagnostics,
Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015).
With regard to Appellant’s argument that the present claims recite
features that are novel and nonobvious (Appeal Br. 14; Reply Br. 3),
Appellant improperly conflates the requirements for eligible subject matter
(§ 101) with the independent requirements of novelty (§ 102) and non-
obviousness (§ 103). “The ‘novelty’ of any element or steps in a process, or
even of the process itself, is of no relevance in determining whether the
subject matter of a claim falls within the § 101 categories of possibly
patentable subject matter.” Diehr, 450 U.S. at 188–89; see also Genetic
Techs. Ltd. v. Merial L.L.C., 818 F.3d 1369, 1376 (Fed. Cir. 2016) (stating
that, “under the Mayo/Alice framework, a claim directed to a newly
discovered law of nature (or natural phenomenon or abstract idea) cannot
rely on the novelty of that discovery for the inventive concept necessary for
patent eligibility”).
Appellant does not make any other arguments pertaining to step 2A,
prong 2. Because the present claims recite an abstract idea that is not
integrated into a practical application, we proceed to Step 2B.

F. Step 2B
Appeal 2019-006197
Application 15/979,162

21
We agree with the Examiner that the claims do not recite
“significantly more” than the abstract idea, or an “inventive concept.” Ans.
5–6.
We disagree with Appellant’s argument that, “[t]his Step 2B
conclusion and analysis [by the Examiner] effectively eliminates Step 2B as
the Answer merely repeats what it has said before with respect to Step 2A.”
Reply Br. 3. Notably, the Examiner finds, and we agree, that “[m]ere
instructions to apply an exception using a generic computer component
cannot provide an inventive concept.” Ans. 5–6 (citing Spec. 10:12–18,
17:1–18:21; MPEP 2106.05(f) (mere instructions to apply an exception do
not amount to “significantly more,” per step 2B)).
We further disagree with Appellant’s unsupported contention that the
combination of claim limitations are not well-understood, routine, or
conventional. Reply Br. 3. In particular, we determine that the additional
elements recited in the claims, namely the display of claim 1, and the
computer and processor of claims 8 and 14, whether considered alone or as
an ordered combination, are well-understood, routine, or conventional. See
Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can. (U.S.), 687 F.3d
1266, 1278 (Fed. Cir. 2012) (generic computer performing basic functions
such as making calculations or computations); Parker v. Flook, 437 U.S.
584, 594 (generic computer performing mathematical algorithms); Versata
Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306, 1331, 1134 (Fed. Cir.
2015) (generic computer arranging a hierarchy of product groups, sorting
information); OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1361–63
(Fed. Cir. 2015) (gathering statistics, using data to estimate outcomes,
automatically selecting based on the estimated outcomes).
Appeal 2019-006197
Application 15/979,162

22
For at least the above reasons, we conclude, under the 2019
Memorandum, that each of Appellant’s claims 1–20, considered as a whole,
is directed to a patent-ineligible abstract idea that is not integrated into a
practical application, and does not include an inventive concept. We
therefore sustain the Examiner’s rejection of claims 1–20 under 35 U.S.C.
§ 101.
CONCLUSION
In summary:

No time period for taking any subsequent action in connection with
this appeal may be extended under 37 C.F.R. § 1.136(a)(1)(iv). See
37 C.F.R. § 1.136(a)(1)(iv).

AFFIRMED

Claim(s)
Rejected
35 U.S.C.
§
Reference(s)/Basis Affirmed Reversed
1–20 101 1–20