Ex Parte Cavatoni et al

Patent Trial and Appeal Board

Sep 25, 2018

14141719 (P.T.A.B. Sep. 25, 2018)

UNITED STA TES p A TENT AND TRADEMARK OFFICE
APPLICATION NO. FILING DATE
14/141,719 12/27/2013
758 7590 09/27/2018
FENWICK & WEST LLP
SILICON VALLEY CENTER
801 CALIFORNIA STREET
MOUNTAIN VIEW, CA 94041
UNITED ST A TES OF AMERICA
FIRST NAMED INVENTOR
Joseph Cavatoni
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
ATTORNEY DOCKET NO. CONFIRMATION NO.
30431-24452/US 3774
EXAMINER
OYEBISI, OJO 0
ART UNIT PAPER NUMBER
3697
NOTIFICATION DATE DELIVERY MODE
09/27/2018 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):
PTOC@Fenwick.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE PATENT TRIAL AND APPEAL BOARD
Ex parte JOSEPH CA VATONI, ANANTH NARA YAN MADHAVAN, and
ELYA SCHWARTZMAN]
Appeal2017---008268
Application 14/141, 719 1
Technology Center 3600
Before MARC S. HOFF, CATHERINE SHIANG, and
SCOTT B. HOWARD, Administrative Patent Judges.
HOFF, Administrative Patent Judge.
DECISION ON APPEAL
STATEMENT OF THE CASE
Appellants appeal under 35 U.S.C. § 134 from a Final Rejection of
claims 1--4 and 6-13. 2 We have jurisdiction under 35 U.S.C. § 6(b ).
We affirm.
Appellants' invention is a fund management system. The system
receives an available basket of securities from an investor and a fund
designated for share creation. The fund management system filters the
available securities to determine securities eligible for inclusion. An
1 The real party in interest is BlackRock Fund Advisors.
2 Claim 5 has been cancelled.
Appeal2017---008268
Application No. 14/141,719
optimization algorithm determines a quantity of securities that maximizes
the utility of adding the securities to the fund, resulting in a custom creation
basket. The system may receive available baskets from multiple investors,
and a designation of multiple funds. See Abstract.
Claim 1 is reproduced below:
1. A method for generating a customized basket for an
exchange traded fund (ETF), the method comprising:
receiving, from an investor, an available inventory of
securities designating securities and quantities of the securities
available for use in creation of shares of the ETF;
selecting, by a fund management system, a set of eligible
securities from the available inventory based on whether the
available securities match securities in a benchmark or strategy
associated with the ETF;
generating, by a fund management system, a set of
candidate baskets, the candidate baskets comprising quantities
of securities from the set of eligible securities;
calculating, by the fund management system, a utility of
each candidate basket in the set of candidate baskets using a
utility function, the utility function calculating the utility of the
candidate basket relative to current assets of the ETF and the
benchmark of the ETF, the utility function positively measuring
value to the ETF and negatively measuring risk to the ETF;
selecting, by the fund management system, a custom
creation basket from the set of candidate baskets based on the
calculated utilities for the candidate baskets;
transmitting the custom creation basket to the investor;
and
responsive to receiving the quantities of securities in the customized basket
from the authorized participant, creating shares of the ETF and transmitting
the shares of the ETF to the investor.
Claims 1--4 and 6-13 stand rejected under 35 U.S.C. § 101 as being
drawn to patent-ineligible subject matter.
2
Appeal2017---008268
Application No. 14/141,719
Throughout this decision, we make reference to the Appeal Brief
("App. Br.," filed Aug. 30, 2016) and the Examiner's Answer ("Ans.,"
mailed Dec. 30, 2016) for their respective details.
ISSUES
1. Does Appellants' claimed invention recite an abstract idea?
2. Do the elements of Appellants' claimed invention, considered
individually and as an ordered combination, recite significantly more than an
abstract idea so as to transform the nature of the claim into a patent-eligible
application?
PRINCIPLES OF LAW
Under 35 U.S.C. § 101, a patent may be obtained for "any new and
useful process, machine, manufacture, or composition of matter, or any new
and useful improvement thereof." The Supreme Court has "long held that
this provision contains an important implicit exception: Laws of nature,
natural phenomena, and abstract ideas are not patentable." Alice Corp. Pty.
Ltd. v. CLS Bank Int 'l, 134 S. Ct. 2347, 2354 (2014) (quoting Ass 'nfor
Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013)).
The Supreme Court in Alice reiterated the two-step framework previously
set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc.,
566 U.S. 66, 82-84 (2012), "for distinguishing patents that claim laws of
nature, natural phenomena, and abstract ideas from those that claim patent-
eligible applications of those concepts." Alice, 134 S. Ct. at 2355.
The first step in that analysis is to determine whether the claims at
issue are directed to one of those patent-ineligible concepts, such as an
abstract idea. Abstract ideas may include, but are not limited to,
3
Appeal2017---008268
Application No. 14/141,719
fundamental economic practices, methods of organizing human activities, an
idea of itself, and mathematical formulas or relationships. Id. at 2355-57.
If the claims are not directed to a patent-ineligible concept, the inquiry
ends. See Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253, 1262 (Fed.
Cir. 2017). Otherwise, the inquiry proceeds to the second step in which the
elements of the claims are considered "individually and 'as an ordered
combination' to determine whether the additional elements 'transform the
nature of the claim' into a patent-eligible application." Alice, 134 S. Ct. at
2355 ( quoting Mayo, 566 U.S. at 79, 78).
ANALYSIS
Appellants present a unitary argument directed to all the claims. We
will address Appellants' arguments with reference to independent claim 1.
ALICE STEP 2A - ABSTRACT IDEA
Appellants argue that the Examiner erred in finding that the claims are
directed to the abstract idea of "generating a customized basket for an
exchange traded fund." App. Br. 4. Appellants contend that the Examiner
has not shown that this idea is similar to basic economic principles that have
been found to constitute ineligible abstract ideas. Id. Appellants contest the
Examiner's characterization of the claimed invention as a "fundamental
economic practice, arguing that "generating a customized basket for an
exchange traded fund" encompasses a specific type of investment product,
and that ETF have only been offered starting in 1989. App. Br. 7-8.
Appellants have not persuaded us that the claimed invention is not
directed to an abstract idea, or that the Examiner's characterization of the
abstract idea fails to correspond to the claims. App. Br. 8-10.
4
Appeal2017---008268
Application No. 14/141,719
First, we find that the Examiner's response that the limitations that set
forth the abstract idea are "a method generating a customized basket for an
exchange traded fund; generating certain data elements; calculating certain
data element; selecting certain data elements; transmitting the data elements"
is an accurate summary of the abstract idea set forth in the claim. Ans. 2.
Second, the Examiner correctly finds the claims to be directed to a
fundamental economic practice. Appellants' independent claim 1 recites
generating a "customized basket" (i.e., a grouping) for an "exchange traded
fund" ( essentially, an investment vehicle that gains or loses value based on
the underlying values of its component securities - very similar to a mutual
fund); receiving an available inventory of securities and quantities (i.e., data
is gathered for possible inclusion in the basket/grouping); selecting a set of
securities (selecting certain items from the data based on certain criteria);
generating a set of candidate baskets ( selecting various
groupings/permutations from the available choices); calculating a utility of
each candidate basket ... the utility function positively measuring value to
the ETF and negatively measuring risk to the ETF (i.e., evaluating groups of
securities, trying to maximize value and minimize risk); selecting a custom
creation basket based on the calculated utilities (picking a particular group of
securities that is perceived as "best" at value relative to risk); transmitting
the custom creation basket (outputting a result); and creating shares of the
ETF and transmitting (investing money based on the results of the method).
The processing done to determine the "custom creation basket"
constitutes evaluating investment options in order to identify the option with
the best value relative to risk. We find that such evaluation of investment
options does constitute a fundamental economic practice. The concept of
5
Appeal2017---008268
Application No. 14/141,719
pursuing an investment strategy that results in the optimal amount of value
relative to risk is an economic concept that has been pursued by investors for
a very long time. 3 Appellants' argument that the claimed invention cannot
be characterized as a "fundamental economic practice," simply because
exchange traded funds have only been offered since 1989, is not persuasive.
Appellants cannot avoid characterization of an invention as a fundamental
economic practice simply by adapting a long-standing practice to a relatively
new investment product offering.
Appellants' argument that the concept of a customized creation basket
renders the claimed invention non-abstract (App. Br. 11) is unpersuasive.
As stated supra, we regard the claimed "basket" as a mere logical or mental
construct to describe a plurality of securities.
We agree with the Examiner that the claims recite an abstract idea.
ALICE STEP 2B - SIGNIFICANTLY MORE
Having determined that the claimed invention is directed to a judicial
exception, i.e., an abstract idea, we next inquire whether the elements of the
claims, considered individually and as an ordered combination, recite
significantly more such that the additional elements transform the nature of
the claim into a patent-eligible application. Alice, 134 S. Ct. at 2355.
We do not agree with Appellants that "selecting a set of eligible
securities" and "calculating a utility of each candidate basket" constitute
limitations that amount to significantly more than the abstract idea. App. Br.
12. We agree with the Examiner that such limitations are a part of the
abstract idea itself. Ans. 2.
3 See, e.g., Bilski v. Kappas, 561 U.S. 593 (2010).
6
Appeal2017---008268
Application No. 14/141,719
We do not agree with Appellants that the invention recites a non-
conventional and non-generic arrangement of known, conventional pieces as
in BASCOM. 4 App. Br. 13. The "non-conventional" elements mentioned by
Appellants have to do with what securities are considered for inclusion in a
"creation basket," i.e., an investment product, i.e., merely the particular data
to be processed. Appellants have not identified any non-conventional and
non-generic arrangement of actual processing elements, as opposed to the
data processed by them. See Ans. 2-3.
We agree with the Examiner that the claims do not recite significantly
more than an abstract idea, such that the claimed invention is transformed
into a patent-eligible application of that abstract idea. We find that the
Examiner did not err in rejecting the claims as patent-ineligible under§ 101.
We sustain the Examiner's rejection of claims 1--4 and 6-13.
CONCLUSIONS
1. Appellants' claimed invention recites an abstract idea.
2. The elements of Appellants' claimed invention, considered
individually and as an ordered combination, do not recite significantly more
than an abstract idea so as to transform the nature of the claim into a patent-
eligible application.
ORDER
The Examiner's decision to reject claims 1--4 and 6-13 is affirmed.
4 BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d
1341 (Fed. Cir. 2016).
7
Appeal2017---008268
Application No. 14/141,719
No time period for taking any sequent action in connection with this
appeal may be extended under 37 C.F.R. § 1.136(a).
AFFIRMED
8