Co, Richard et al.

Patent Trials and Appeals Board

Oct 2, 2019

12827426 - (D) (P.T.A.B. Oct. 2, 2019)

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.
12/827,426 06/30/2010 Richard Co 004672-10455Z-US 5074
12684 7590 10/02/2019
Lempia Summerfield Katz LLC/CME
20 South Clark Street
Suite 600
Chicago, IL 60603
EXAMINER
GOTTSCHALK, MARTIN A
ART UNIT PAPER NUMBER
3697
NOTIFICATION DATE DELIVERY MODE
10/02/2019 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):
docket-us@lsk-iplaw.com
mail@lsk-iplaw.com
pair_lsk@firsttofile.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
____________________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________

Ex parte RICHARD CO, BRETT VIETMEIER, and
JOHN LABUSZEWSKI
____________

Appeal 2018-007489
Application 12/827,426
Technology Center 3600
____________

Before KRISTEN L. DROESCH, JENNIFER L. McKEOWN, and
SCOTT B. HOWARD, Administrative Patent Judges.

DROESCH, Administrative Patent Judge.

DECISION ON APPEAL

STATEMENT OF THE CASE
Appellant1 seeks review under 35 U.S.C. § 134(a) from the
Examiner’s Final Rejection of claims 39–45, all of the pending claims.2 We
have jurisdiction under 35 U.S.C. § 6(b).
We AFFIRM.

1 We use the word “Appellant” to refer to “applicant” as defined in
37 C.F.R. § 1.42. Appellant indicates the real party-in-interest is Chicago
Mercantile Exchange, Inc. App. Br. 1.
2 Claims 1–38 have been cancelled.
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BACKGROUND
The disclosed invention relates to a system and method for
implementing and managing trading of basis futures contracts that are
reflective of a perceived fair value. Spec. ¶ 2, Abstract.
CLAIMED SUBJECT MATTER
Independent claim 39, which is representative of the subject matter of
the appeal and is reproduced from the Claims Appendix of the Appeal Brief,
reads as follows:
39. A system comprising:
an all trades database that contains records of trades for
basis futures contracts that are each based on a spot index
contract and a futures index contract;
a computer device that executes a clearing application
configured to receive and trade records from the all trades
database,
a first match server at a first geographic location that
includes:
a match module configured to match orders;
a cache configured to store previous trades of basis future
contracts;
an aging queue configured to store unmatched orders for
a predetermined time period;
a second match server at a second geographic location
geographically distributed from the first geographic location
that includes:
a match module configured to match orders;
a cache configured to store previous trades of basis future
contracts;
an aging queue configured to store unmatched orders for
a predetermined time period;
a hub connected to the first and second match servers and
that allows communication between the first and second match
servers; and
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a computer device that executes a match client that facilitate
communications between the clearing application and the first
and second match servers.

REJECTIONS ON APPEAL AND APPLIED PRIOR ART
Claims 39–45 stand rejected under 35 U.S.C. § 101 as directed to
patent ineligible subject matter.
Claims 39–45 stand rejected under 35 U.S.C. § 103 as unpatentable
over Seidel et al. (US 2009/0254471 A1, pub. Oct. 8, 2009, “Seidel”),
Labuszewski & Lucy Wang (UNDERSTANDING EOM FAIR VALUE
SETTLEMENTS, CME Group, March 11, 2009, “Labuszewski”), and
Van Roon (US 7,194,481 B1, March 20, 2007).
ANALYSIS
We have reviewed Appellant’s arguments in the Briefs, the
Examiner’s rejection, and the Examiner’s response to Appellant’s
arguments. Appellant’s arguments have persuaded us of error in the
Examiner’s rejection of claims 39–45 under 35 U.S.C. § 101. Appellant’s
arguments, however, have not persuaded us of error in the Examiner’s
rejection of claims 39–45 under 35 U.S.C. § 103.
REJECTION UNDER 35 U.S.C. § 101
Standard for Patent Eligibility under § 101
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 Supreme Court has long interpreted 35 U.S.C. § 101 to include
implicit exceptions: “[l]aws of nature, natural phenomena, and abstract
ideas” are not patentable. E.g., Alice Corp. v. CLS Bank Int’l, 573 U.S. 208,
216 (2014).
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In determining whether a claim falls within an excluded category, we
are guided by the Supreme Court’s two-step 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 id. 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, 67–68 (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 water-proof cloth, vulcanizing
India rubber, smelting ores” (id. at 182 n.7 (quoting Corning v. Burden, 56
U.S. (15 How.) 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
Supreme Court held that “a claim drawn to subject matter otherwise
statutory does not become nonstatutory simply because it uses a
mathematical formula.” Diehr, 450 U.S. at 187; see also id. at 191 (“We
view respondents’ claims as nothing more than a process for molding rubber
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products and not as an attempt to patent a mathematical formula.”). Having
said that, the Supreme 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. (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 (citation 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.
The PTO recently published revised guidance on the application of
§ 101. See 2019 Revised Patent Subject Matter Eligibility Guidance, 84
Fed. Reg. 50 (USPTO Jan. 7, 2019) (“Guidance”). Under that guidance, 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
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human activities such as a fundamental economic practice, or
mental processes); 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)).
Only if a claim (1) recites a judicial exception and (2) does not integrate that
exception into a practical application, do we then look to whether the claim:
(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.
See Guidance, 84 Fed. Reg. at 56.
Examiner’s Findings and Conclusion
In the first step of the Alice inquiry, the Examiner determines
independent claim 39 is directed to “the abstract idea of matching orders.”
Final Act. 2. The Examiner further determines the claims are directed to “an
abstract idea because it is a concept relating to the economy and commerce
such as agreements between people in the form of contracts, legal
obligations, and business relations.” Id. The Examiner points out that the
courts have found such agreements between people to be examples of
abstract ideas “because they are a fundamental economic practice (e.g.
matching orders in the trading of securities is a longstanding commercial
practice).” Id. According to the Examiner, the claims are similar to the
claims at issue in buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir.
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2014) (creating a contractual relationship), Bilski v. Kappos, 561 U.S. 593
(2010) (hedging), and Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014)
(managing settlement risk). See id. at 2–3. The Examiner further finds that
the claims are directed to an abstract idea because they “recite a concept
relating to interpersonal activities, such as managing transactions between
people. . . . methods of organizing human activities.” Id. at 3.
In the second step of the Alice inquiry, the Examiner finds that two
servers located geographically apart performing similar functions are routine
and conventional in both the computer and trading industries. See Final Act.
4–5. The Examiner further finds:
It is well-understood that any set of servers located apart from
each other would allow a plurality of transactions to be “be
handled” more efficiently (e.g. faster) by the different servers, if
for no other reason than two computers of the same type can
perform more work than just one. Whether the servers are in the
same rack or on different continents does not change this.
Neither does the fact that the information being handled by the
servers comprises “. . . basis futures related to individual stock
indexes . . .” alter this point.
Ans. 4.
The Examiner further determines that “[v]iewed as a whole, these
additional claim elements . . . do not provide meaningful limitations to
transform the abstract idea into a patent eligible application of the abstract
idea such that the claims amount to significantly more than the abstract idea
itself.” Final Act. 4. The Examiner asserts that unlike BASCOM Glob.
Internet Servs. Inc. v. AT&T Mobility, LLC, 827 F.3d 1341 (Fed. Cir. 2016),
there is no inventive step involved which overcomes an unsolved problem.
See id. at 5. The Examiner also points out that the Specification at
paragraph 40 teaches that the match servers may be in the same location or
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geographically distributed with no apparent advantage to either
configuration other than the well-understood advantage of distributed
computing which is employed so that the workload is distributed across
servers. See id. (quoting Spec. ¶ 44; citing Spec. ¶ 40).
Appellant’s Arguments
Referencing the holding of Berkheimer v. HP Inc., 881 F.3d 1360
(Fed. Cir. 2018), Appellant argues that the Examiner does not provide
sufficient evidence to support the Examiner’s assertion that “the current
invention appears to be nothing more than conventional architecture of
conventional components arranged to trade a particular type of security.”
See Reply Br. 4 (quoting Ans. 5). According to Appellant, “the initial
burden is on the Office to showcase evidence to prove that the claimed
features are ‘well-known, routine, and conventional’ with clear and
convincing evidence.” Id. (citing Berkheimer, Aatrix Software, Inc. v. Green
Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018), Berkheimer v. HP
Inc., 890 F.3d 1369 (Fed. Cir. 2018) (rehearing en banc denied)).
Our Review
The principal issue raised by Appellant’s arguments is: whether the
Examiner has sufficiently supported the determination that “a first match
server at a first geographic location . . .” and “a second match server at a
second geographic location geographically distributed from the first
geographic location . . . ,” recited in claim 39 is “well-understood, routine,
conventional” in the field.
After the Final Office Action was mailed and the Appeal Brief was
filed, the Federal Circuit, addressing step two of the Mayo/Alice framework
in Berkheimer, held that the question of whether a claim element or
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combination of elements is well-understood, routine, and conventional to a
skilled artisan in the relevant field is a question of fact. Berkheimer, 881
F.3d at 1368. Shortly after the Federal Circuit issued its decision in
Berkheimer, and before the Examiner’s Answer was mailed, the USPTO
issued an April 19, 2018 Memorandum to the Patent Examining Corps
entitled, “Changes in Examination Procedure Pertaining to Subject Matter
Eligibility, Recent Subject Matter Eligibility Decision (Berkheimer v. HP,
Inc.)” (“Berkheimer Memorandum”), in which the Office revised the
procedures set forth in the Manual of Patent Examining Procedure
(“MPEP”) § 2106.07(a) (Formulating a Rejection For Lack of Subject
Matter Eligibility) and MPEP § 2106.07(b) (Evaluating Applicant’s
Response). Berkheimer Memorandum 3–4. According to the Berkheimer
Memorandum, examiners must provide specific types of evidence to support
a finding that an additional element of a claim is well-understood, routine,
and conventional. Id. To this end, examiners must provide one or more of
the following: (1) a citation to the specification or statement made by
applicant during prosecution that demonstrates the well-understood, routine,
conventional nature of the additional element; (2) a citation to court
decisions discussed in MPEP § 2106.05(d)(II) as noting the well-understood,
routine, conventional nature of the additional element; (3) a citation to a
publication that demonstrates the well-understood, routine, conventional
nature of the additional element; and (4) a statement that an examiner is
taking official notice of the well-understood, routine, conventional nature of
the additional element. Id.
Appellant’s argument that the Examiner’s Answer fails to provide any
factual support for its position that a first match server at a first location and
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a second match server at a second location geographically distributed from
the first location is well-understood, routine, and conventional (Reply Br. 4),
has persuaded us of error in the Examiner’s rejection. In the case before us,
even if the Examiner’s determination that claim 39 is directed to an abstract
idea of matching orders akin to a fundamental economic practice, we agree
that the Examiner erred by failing to offer evidence, as set forth in the
Berkheimer Memorandum, to support the assertions that “a first match
server at a first location” and “a second match server at a second location
geographically distributed from the first location” is well-understood,
routine, and conventional in the field (e.g., computer trading industries). See
Ans. 4; Final Act. 4–5. Moreover, contrary to the Examiner’s finding that
the Specification discloses the match servers may be in the same location or
geographically distributed (see Final Act. 5), “[a] finding that an element is
well-understood, routine, or conventional cannot be based only on the fact
that the specification is silent with respect to describing such element.”
Berkheimer Memorandum 3–4.
Accordingly, based on the record before us, we are constrained to
reverse the Examiner’s rejection of claim 39, and claims 40–45 dependent
therefrom, under 35 U.S.C. § 101 as being directed to patent-ineligible
subject matter.
Request for Additional Briefing
Appellants requests, for the first time in the Reply Brief, that we enter
an order under 37 C.F.R. § 41.50(d) to permit additional briefing closer to
the time when we consider the substance of the appeal, but before our
decision. Reply Br. 1. Appellant’s request for additional briefing appears to
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be moot in view of the reversal of the Examiner’s rejection of claims 39–45
under 35 U.S.C. § 101.
REJECTION UNDER 35 U.S.C. § 103
The Examiner finds that the combination Seidel, Labuszewski, and
Van Roon teach each of the limitations of claim 39. See Final Act. 5–10. In
particular, addressing the first and second match servers, the Examiner finds
that Seidel teaches a trading and matching system that may comprise one or
more servers. See id. at 8 (citing Seidel ¶ 17); id. at 9 (citing Seidel ¶ 17,
Fig. 1:105). The Examiner also finds that Van Roon teaches a trading and
matching system connected to multi-jurisdictional partners that may run
their own web site allowing use by trading customers to access the
invention. See id. at 8 (citing Van Roon ¶¶ 37, 49, 52, Figs. 3A–3B). The
Examiner concludes that it would have been obvious to one of ordinary skill
in the art at the time of the invention to include one of the multiple servers
disclosed by Seidel at any of the jurisdiction partners running their own web
site to facilitate matching and clearing of customer orders and trades across
borders. See id. at 9 (citing Van Roon ¶¶ 49–50).
Appellant contends that a person of ordinary skill in the art would not
have modified Seidel and Labuszewski in view of Van Roon to obtain the
claimed “first match server at a first geographic location” and “second match
server at a second geographic location geographically distributed from the
first geographic location,” because Van Roon shows a single “match server
cluster” in Figure 3A and does not indicate that the match server cluster of
Fig. 3A or the matching system server 9 of Fig. 3B includes a first match at
a first location and a second match server at a second location
geographically distributed from the first location. See id. at 8–9
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(reproducing Van Roon Figs. 3A, 3B). Appellant further argues the web
sites and web site servers of Van Roon, on which the Final Office Action
relies, are different from the match server cluster of Figure 3A and the
matching system server of Figure 3B. App. Br. 9. According to Appellant,
“[a] person of ordinary skill in the art would not have placed servers from
Seidel at Van Roon’s ‘jurisdiction partners.’” Id. at 9–10. Appellant asserts
that there is no apparent advantage or other motivation to modify Van Roon
by substituting Seidel’s servers for Van Roon’s match server cluster of
Figure 3A and matching system server of Figure 3B that already provide
matching. See id. at 10. Finally, Appellant contends that placing Seidel’s
servers at Van Roon’s jurisdiction partners would not facilitate matching and
clearing of customer orders and trades across borders because trades across
borders would already be facilitated by Van Roon’s system without further
modification. See id.
In the Answer, the Examiner asserts that the broadest reasonable
interpretation of “geographically distributed” could include any servers that
are not the same server; might comprise two servers located in the same
server room in a single building; two servers on different floors of the
building, two servers in different buildings of the same corporate complex,
etc. See Ans. 6. The Examiner notes that “geographically distributed” has
not been clearly defined by Appellant. See id.; see also Spec. ¶ 40 (brief
description of geographically distributed match servers). Utilizing this
interpretation, the Examiner finds that Seidel’s disclosure of the trading
system comprising one or more servers meets the limitations of the claims
because one of ordinary skill in the art would have recognized that more
than one server, as broadly and reasonably interpreted, could be
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geographically distributed. See id. at 6. Appellant does not provide a reply
to the Examiner’s additional findings in the Answer. See Reply Br. 1–5.
We agree with the Examiner’s broadest reasonable interpretation for
“geographically distributed.” Appellant’s Specification does not provide
any enlightenment regarding the meaning for “geographically distributed.”
See Spec. ¶ 40. Dictionary definitions also fail to provide meaningful
enlightenment regarding the meaning for “geographically distributed.” For
example, “geographic” is defined as (1) “of or relating to geography”; (2)
“belonging to or characteristic of a particular region.” MERRIAM WEBSTER
ONLINE DICTIONARY, https://www.merriam-
webster.com/dictionary/geographically (based on the print edition of the
Merriam-Webster’s Collegiate Dictionary, Eleventh ed. (2003); last accessed
Sept. 9, 2019). And “distributed” is defined as “characterized by a statistical
distribution of a particular kind.” MERRIAM WEBSTER ONLINE DICTIONARY,
http://www.merriam-webster.com/dictionary/distributed (based on the print
edition of the Merriam-Webster’s Collegiate Dictionary, Eleventh ed.
(2003); last accessed Sept. 9, 2019). With the Examiner’s broadest
reasonable interpretation in mind, we agree with the Examiner’s finding that
Seidel discloses, teaches, or suggests a first match server at a first location
and a second match server at a second location geographically distributed
from the first location based on Seidel’s matching system that may comprise
one or more servers. Appellant does not address the Examiner’s updated
position set forth in the Answer. See Reply Br. 1–5. Arguments not made in
the briefs are deemed to be waived. See 37 C.F.R. § 41.37(c)(1)(iv).
For the foregoing reasons, we are not persuaded of error in the
rejection of claim 39 under 35 U.S.C. § 103. Appellant does not present
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separate substantive arguments addressing dependent claims 40–45. See
App. Br. 6–10. Accordingly, for the same reasons as those explained above
with respect to claim 39, we are not persuaded of error in the rejection of
claims 40–45 under 35 U.S.C. § 103.
DECISION
We REVERSE the rejection of claims 39–45 under 35 U.S.C. § 101.
We AFFIRM the rejection of claims 39–45 under 35 U.S.C. § 103.
Claims
Rejected Basis Affirmed Reversed
39–45 § 101 39–45
39–45 § 103 Seidel, Labuszewski, and
Van Roon
39–45
Outcome 39–45
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).

AFFIRMED