Ex Parte Deputy et al

Board of Patent Appeals and Interferences

Jul 12, 2012

11421746 (B.P.A.I. Jul. 12, 2012)

UNITED STATES PATENT AND TRADEMARK OFFICE 1
___________ 2
3
BEFORE THE BOARD OF PATENT APPEALS 4
AND INTERFERENCES 5
___________ 6
7
Ex parte DAVID L. DEPUTY and RICARDO G. SAMANIEGO 8
___________ 9
10
Appeal 2011-001995 11
Application 11/421,746 12
Technology Center 3600 13
___________ 14
15
16
Before MURRIEL E. CRAWFORD, ANTON W. FETTING, and 17
MEREDITH C. PETRAVICK, Administrative Patent Judges. 18
FETTING, Administrative Patent Judge. 19
DECISION ON APPEAL 20

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STATEMENT OF THE CASE1 1
David L. Deputy and Ricardo G. Samaniego (Appellants) seek review 2
under 35 U.S.C. § 134 (2002) of a final rejection of claims 1-25, the only 3
claims pending in the application on appeal. We have jurisdiction over the 4
appeal pursuant to 35 U.S.C. § 6(b) (2002). 5
The Appellants invented a way to calculate the US tax liability 6
associated with a foreign entity by calculating a first and second set of tax 7
data associated with making an election to change the foreign entity's 8
business form for US tax entity characterization (Specification ¶ 0001). 9
An understanding of the invention can be derived from a reading of 10
exemplary claim 1, which is reproduced below [bracketed matter and some 11
paragraphing added]. 12
1. A computer-implemented method, including: 13
[1] electronically receiving 14
by a computer 15
business data 16
pertaining to a first entity, 17
the first entity being associated with a 18
second entity; 19

1 Our decision will make reference to the Appellants’ Appeal Brief (“App.
Br.,” filed March 10, 2010) and Reply Brief (“Reply Br.,” filed September 2,
2010), and the Examiner’s Answer (“Ans.,” mailed May 26, 2010).
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[2] creating first tax data 1
associated with the second entity 2
by the computer processing the business data, 3
the first tax data being based on 4
the business data 5
and 6
a first business form2 of the first entity; 7
[3] creating second tax data 8
associated with the second entity 9
by the computer processing the business data, 10
the second tax data being based on 11
the business data 12
and 13
a second business form of the first entity; 14
[4] storing 15
by the computer in a memory 16
the first tax data and the second tax data; 17
and 18
[5] selecting a preferred business form 19
for the first entity 20
from among the first business form and the second 21
business form 22
based on a comparison of the first tax data and the second 23
tax data 24

2 The phrase “business form”, as used in both the Specification and claims,
refers to the legal, financial, and operating structure of a business, i.e. the
form of doing business, and not to a piece of paper or computer screen used
in business with fields to be filled in. This construction, although not
defined as such in the Specification, is consistently adhered to by both the
Examiner and Appellants.
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and 1
[6] storing the preferred business form in the memory. 2
The Examiner relies upon the following prior art:3 3
Arora US 2003/0195780 A1 Oct. 16, 2003
Claims 10-12, 15, 18, and 22-25 stand rejected under 35 U.S.C. § 102(b) 4
as anticipated by Arora.4 5
Claims 1-4, 6-9, 13, 16-17, and 19-21 stand rejected under 35 U.S.C. 6
§ 103(a) as unpatentable over Arora. 7
Claims 5 and 14 stand rejected under 35 U.S.C. § 103(a) as unpatentable 8
over Arora and Admitted Prior Art. 9
ISSUES 10
The issues of anticipation turn primarily on whether claims 10 and 22 11
recite a step of selecting a business form. The issues of obviousness turn 12
primarily on whether it was predictable for one of ordinary skill to select a 13
business form based on tax liability. 14
FACTS PERTINENT TO THE ISSUES 15
The following enumerated Findings of Fact (FF) are believed to be 16
supported by a preponderance of the evidence. 17

3 The Talker, Glanz, and Litle references cited in the Answer at 2 as
Evidence Relied Upon are unused in the rejections.
4 The Examiner withdrew a rejection under 35 U.S.C. § 112, second
paragraph. Ans. 2.
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Facts Related to the Prior Art 1
Arora 2
01. Arora is directed to analyzing and optimizing the allocation of 3
factors among different business entities, optimizing the 4
structuring of divisions or operations that roll up to business 5
entities, or optimizing the structuring of entities themselves. 6
Arora provides identification and optimization of financial 7
decisions for global enterprises operating in many business 8
jurisdictions. Arora provides a model that identifies sub-optimal 9
business and incentive conditions, automates iterative model 10
building and calculates optimal scenarios. Arora enables tax, 11
finance, treasury, and business unit managers to access a common 12
set of models to evaluate the overall enterprise-wide tax impact of 13
critical business decisions, including entity restructuring, mergers, 14
acquisitions and business condition changes. Users can create or 15
select a variety of methods by which to measure success and then 16
optimize based on those metrics such as tax liability, earnings per 17
share or cash flow. Arora ¶ 0008. 18
02. With the present invention, users can evaluate proposed planning 19
scenarios and pending legislation strategies and create unlimited 20
"what-if" planning scenarios across multiple time periods, starting 21
with specific facts and circumstances. Users can also quantify 22
financial metrics using the calculation engine based on actual and 23
forecasted transaction data from enterprise source systems. 24
Optimization of entity structures, allocations and transaction 25
pricing allows the user to measure metrics such as tax liability 26
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over time. Advantageously, users can collaborate with analysts 1
and planners in departments for tax compliance, finance, treasury, 2
and business units. Arora ¶ 0033. 3
03. The system planning model is used to analyze factor allocations, 4
business entity structures and transaction pricing developed within 5
the framework of external constraints, such as economic and 6
regulatory feeds. Arora ¶ 0035. 7
04. The system planning model uses objectives to quantify and 8
compare strategies. Business objectives may include aligning 9
legal entity structures closely with management structures, 10
resolving internal conflicts arising from inefficient operations or 11
misaligned incentives, responding to external business, economic 12
or regulatory changes, and/or reducing audit risk exposure from 13
particular legal structures which are no longer defensible. 14
Financial performance objectives for tax liability, cash flow, EPS, 15
return on assets, and profitability may also be included as part of 16
the objectives setting. Arora ¶ 0036. 17
05. The optimization engine can calculate optimal entity structures, 18
optimal transfer prices, and optimal allocation rules from a set of 19
often almost uncountable possibilities. Arora ¶ 0041. 20
06. Outputs of the planning model 120 consist of: computations of 21
resulting financial metrics 122, new business entity structures 124, 22
and revised factors 126 (financial allocations and transaction 23
pricing). Arora ¶ 0044. 24
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07. New business entities can be evaluated along legal, management 1
or financial structures. Factors such as revenues, expense, income 2
and transaction pricing are re-evaluated and automatically 3
computed under the resulting business entity structure. All of 4
these outputs provide visibility as assumptions and inputs for 5
iteratively building scenario variations or even new scenarios as 6
part of the financial performance management process. Arora ¶ 7
0046. 8
08. The Multi-State Tax Planning module can be used to identify 9
business objectives, review current operational and legal 10
structures, and analyze and quantify changes such as splitting a 11
legal entity into various operations within the scenario framework. 12
Arora ¶ 0050. 13
09. "Data elements" describes things like legal entities, tax rules, and 14
jurisdictions that are to be modeled. The flexible data model 15
allows for entities and tax reporting structures to be independently 16
modeled. Each data model includes data elements comprising 17
data objects having associated attributes and values. Arora ¶ 18
0051. 19
10. Each scenario represents a complete set of tax plans for a 20
corporation, including legal entity structures, jurisdictions, tax 21
rates, and tax return information. Arora ¶ 0059. 22
11. Arora enables flexible treatment of a legal entity, which represents 23
business organization that is legally responsible for paying taxes. 24
A legal entity may be partially or wholly owned subsidiary of a 25
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larger corporation. Legal entities may be treated as separately 1
taxed entities, or they may be grouped for combined tax returns. A 2
sub-entity represents a portion of a parent legal entity that has 3
been "carved out" for modeling purposes. For example, it may be 4
desirable to model a sales division separately, in order to 5
determine whether that division should be moved under a different 6
parent entity, or perhaps made into its own legal entity for tax 7
purposes. Arora ¶ 0063. 8
12. Powerful entity structuring and inter-company transactions 9
wizards save planners long hours by rapidly modeling structure 10
changes, automatically moving inter-company relationships, and 11
recalculating tax data. Further, the system utilizes active/inactive 12
flags that allow planners to instantly model the presence/absence 13
of entities, groups, factors and jurisdictions. The system also 14
allows planners to create custom structures to model special 15
circumstances such as negotiated tax positions, or extend the 16
system to include special types of taxes. Arora ¶ 0084. 17
13. The optimizer searches for possible entity combinations from a 18
range of selected legal entities. Arora ¶ 0093. 19
14. The model includes an operation that enables the representation of 20
a single-location operation such as a manufacturing plant or 21
customer service center and allows the user to determine the most 22
tax-advantageous combination of legal entity structure and state 23
location for a previously defined operation. Arora ¶ 0096. 24
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ANALYSIS 1
Claims 10-12, 15, 18, and 22-25 rejected under 35 U.S.C. § 102(b) as 2
anticipated by Arora. 3
Independent claims 10 and 22 are the only claims argued. Method claim 4
22 receives data about two business entities, one the parent of the other, and 5
creates two data representations of each, one representing the current child 6
business form and the other a prospective form, each form presenting a 7
different parent tax scenario. System claim 10 has code to receive data 8
about two associated business entities, create two items of second entity tax 9
data based on the received data and each of two business structures for the 10
first entity, and code for storing the two items of tax data and a selected 11
business structure. Unlike independent claims 1, 19, and 21, neither claim 12
recites a step of or code for selecting a business form, and so does not 13
describe any steps performed in such selection. 14
Initially, we are not persuaded by the Appellants’ argument in all of the 15
argued claims that 16
Arora et al. discloses a system for optimizing allocation and 17
apportionment of tax related factors among entities. The present 18
claims do not relate directly to allocation or apportionment or to 19
optimizing allocation of factors across entities; rather, they 20
relate to considering the effects of business forms of foreign 21
entities on a parent entity and selecting prospectively a business 22
form for the child entity by calculating and considering the tax 23
effect and potential benefit. 24
Appeal Br. 7. This argument is not commensurate with the scope of the 25
claims. Not all of the claims even recite a selection step, and those that do 26
would encompass even selection for the purpose of allocating and 27
apportioning tax related factors. It is equally true that Arora does more than 28
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merely allocate and apportion among existing forms, as Arora also optimizes 1
by choosing among alternative business forms for child business forms. FF 2
11. 3
We are not persuaded by the Appellants’ claim 10 argument that “none 4
of these sections suggest selecting a preferred business form based on a 5
comparison of the first tax data and the second tax data.” Appeal Br. 8. 6
Again, claim 10 is not a method claim and recites no steps, and its code 7
recites only storing a selected form, which may have been separately entered 8
and still be within the scope of the claim. 9
In any event, Arora explicitly describes modeling a sales division 10
separately, in order to determine whether that division should be moved 11
under a different parent entity, or perhaps made into its own legal entity for 12
tax purposes. FF 11. As the modeling necessarily provides data 13
representing the solution to the modeling, both the selection via modeling 14
and the storage inherently provided for the solution set are described by 15
Arora. 16
We are not persuaded by the Appellants’ claim 22 argument that 17
none of the passages cited by the Office Action disclose, or 18
even suggest, "processing by the computer the first business 19
data and the second business data to generate a first 20
representation and a second representation of the parent entity 21
and child entity, respectively, the first and second 22
representations representing, respectively, an existing business 23
form of the child entity and a prospective business form of the 24
child entity, wherein the existing and prospective business 25
forms represent differing tax scenarios for the parent entity" as 26
recited in claim 22. [] However, none of these sections suggest 27
selecting a preferred business form based on a comparison of 28
the first tax data and the second tax data. 29
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Appeal Br. 9-10. Again, Arora describes an explicit example of 1
modeling two alternative child business forms (FF 11) and claim 22 does not 2
recite a selecting step. 3
Claims 1-4, 6-9, 13, 16-17, and 19-21 rejected under 35 U.S.C. § 103(a) as 4
unpatentable over Arora. 5
Although each of independent claims 1, 19, and 21 are nominally argued 6
separately, claims 19 and 21 are system and machine readable variants of 7
method claim 1, and the arguments for each are accordingly similar. These 8
claims recite selecting a business form and doing so by comparing the two 9
pieces of tax data created as in claim 10. 10
The Examiner found that although Arora clearly describes optimizing, 11
and thus selecting, business forms as part of its overall optimization process, 12
Arora did not explicitly recite how this optimization was performed. The 13
Examiner then found it was predictable to one of ordinary skill to do so by 14
comparing the tax liability of the parent in each of the alternate child 15
business forms. Thus, as all of the elements in claim 1 have already been 16
shown but for this manner of selection, the sole issue before us is whether 17
this manner of selection was predictable. This forms the crux of Appellants’ 18
argument. Appeal Br. 11-12. 19
The easy answer to this question is the profit motive requires an 20
affirmative answer. Any expense is legitimately within the scope of the 21
factors used in managing a business, as maximization of profit is a known 22
key driver of business operations. Thus, any factor affecting tax expense, 23
including the business form adopted by child entities, would be within the 24
scope of what would be modeled in Arora. So, for example, selecting a 25
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child business form based on comparing the parent’s tax liability under each 1
of differing child business forms would be within the scope of claim 1. 2
Beyond this, Arora explicitly models different business structures for its 3
various business component entities and includes tax considerations in 4
modeling different scenarios. FF 02-14. 5
Claims 5 and 14 rejected under 35 U.S.C. § 103(a) as unpatentable over 6
Arora and Admitted Prior Art. 7
The arguments for these claims depend on the arguments for their parent 8
claims. 9
CONCLUSIONS OF LAW 10
The rejection of claims 10-12, 15, 18, and 22-25 under 35 U.S.C. 11
§ 102(b) as anticipated by Arora is proper. 12
The rejection of claims 1-4, 6-9, 13, 16-17, and 19-21 under 35 U.S.C. 13
§ 103(a) as unpatentable over Arora is proper. 14
The rejection of claims 5 and 14 under 35 U.S.C. § 103(a) as 15
unpatentable over Arora and Admitted Prior Art is proper. 16
DECISION 17
The rejection of claims 1-25 is affirmed. 18
No time period for taking any subsequent action in connection with this 19
appeal may be extended under 37 C.F.R. § 1.136(a). See 37 C.F.R. 20
§ 1.136(a)(1)(iv). 21
22
AFFIRMED 23
24
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