Ex Parte Faust

Patent Trial and Appeal Board

Jan 29, 2018

13538150 (P.T.A.B. Jan. 29, 2018)

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.
13/538,150 06/29/2012 Thomas E. Faust JR. 1216.021 5837
25779 7590 01/31/2018
Davis Malm & D"Agostine P.C.
Richard L. Sampson
One Boston Place
BOSTON, MA 02108
EXAMINER
SHARVIN, DAVID P
ART UNIT PAPER NUMBER
3692
NOTIFICATION DATE DELIVERY MODE
01/31/2018 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):
rsampson @ davismalm. com
edonovan@davismalm.com
docketing @ davismalm.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE PATENT TRIAL AND APPEAL BOARD
Ex parte THOMAS E. FAUST JR.
Appeal 2016-007075
Application 13/538,1501
Technology Center 3600
Before HUNG H. BUI, NABEEL U. KHAN, and KARA L.
SZPONDOWSKI Administrative Patent Judges.
KHAN, Administrative Patent Judge.
DECISION ON APPEAL
Appellant appeals under 35 U.S.C. § 134(a) from the Final Rejection
of claims 1—36. We have jurisdiction under 35 U.S.C. § 6(b).
We affirm.
1 Appellant identifies Eaton Vance Management as the real party in interest.
App. Br. 1.
Appeal 2016-007075
Application 13/538,150
BACKGROUND
The Invention
According to Appellant, “[t]his invention relates to asset management
and administration, and more particularly to an automated system and
method for efficiently combining mutual fund and exchange-traded fund
(ETF) assets into a single portfolio.” Spec. 1:18—20.
Exemplary independent claim 1 is reproduced below.
1. A computer-implemented method for combining the
management and administration of mutual fund and Exchange-
Traded Fund assets using a master-feeder arrangement, the
method comprising:
(a) associating a mutual fund module implemented with a
computer, with a feeder mutual fund that issues and redeems
mutual fund shares with mutual fund investors primarily for
cash;
(b) associating an Exchange Traded Fund (ETF) module
implemented with a computer, with a feeder ETF that issues and
redeems ETF shares with Authorized Participants through one or
more of in kind transfers of first securities and cash;
(c) associating a master portfolio module implemented
with a computer, with a master portfolio of investments that
issues and redeems interests in the master portfolio in one or
more of in-kind and cash transactions with the mutual fund and
the ETF;
(d) communicably coupling the master portfolio module
implemented with a computer, in a master-feeder arrangement
with the mutual fund module and the ETF module;
(e) directing, with the master portfolio module, the mutual
fund module to apply cash invested by the mutual fund investors
to purchase second securities in accordance with an asset
configuration communicated by the master portfolio module;
(f) directing, with the master portfolio module, the ETF
module to conform the composition of the first securities and
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Application 13/538,150
cash received in the in-kind transfers of first securities and cash,
with said asset configuration; and
(g) directing, with the master portfolio module, the mutual
fund module and the ETF module to effect increases in interests
in the master portfolio by contributing said asset configuration to
effect purchases, wherein cash purchases and sales to
accommodate feeder fund inflows occur outside of the master
portfolio;
wherein both the feeder mutual fund and the feeder ETF
hold indirect interests in the first securities and second securities
of the master portfolio, as well as transitory direct investments in
the first securities and second securities in connection with
shareholder purchases and redemptions.
Rejection
Claims 1—36 stand rejected under 35 U.S.C. § 101 as directed to a
judicial exception to statutory subject matter. Final Act. 4—5.
DISCUSSION
A patent may be obtained for “any new and useful process, machine,
manufacture, or composition of matter, or any new and useful improvement
thereof.” 35 U.S.C. § 101. The Supreme Court has held that this provision
contains an important implicit exception for certain patent ineligible
concepts: laws of nature, natural phenomena, and abstract ideas. Alice
Corp. Pty. Ltd. v. CLSBankInt’l, 134 S. Ct. 2347, 2354 (2014); see also
Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293
(2012). To determine patentable subject matter, the Supreme Court has set
forth a two part test: (1) whether the claims are directed to a patent-
ineligible concept and, if so, (2) whether, when the claim elements are
considered “individually and ‘as an ordered combination,’” there is an
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Application 13/538,150
inventive concept present, i.e., an element or combination of elements that is
“sufficient to ensure that the patent in practice amounts to significantly more
than a patent upon the [ineligible concept] itself.” Alice, 134 S. Ct. at 2355
(brackets in original) (quoting Mayo, 132 S. Ct. at 1294).
Step One of Alice/Mayo Test
Under the first step of the Alice/Mayo two-part test, the Examiner
finds
[CJlaims 1—36 are directed to administrating mutual fund and
exchange-traded fund assets using a master-feeder arrangement,
which is an abstract idea. It is similar to the abstract idea
examples identified by the courts of comparing new and stored
information and using rules to identity options (buying and
selling shares based on asset configurations), mitigating
settlement risk and hedging in that they are fundamental
economic practices and the buying and selling of shares of
financial instruments according to a portfolio direction is also a
fundamental economic practice.
Final Act. 4.
Appellant argues “the Office has failed to show that the asserted
‘abstract idea’ is in fact a fundamental principle/truth, building block of
human ingenuity, and basic tool of scientific and technological work” (App.
Br. 11) or a fundamental economic practice (App. Br. 12). Appellant further
argues the claims do not “preempt all forms of administrating mutual fund
and exchange-traded fund assets using a master-feeder arrangement.”
App. Br. 10, 12.
We are unpersuaded by Appellant’s arguments. Claim 1 is directed to
a “method for combining the management and administration of mutual fund
and Exchange-Traded Fund assets using a master-feeder arrangement.”
App. Br. 21 (Claims Appx.). The steps of the claim require associating
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software modules with a feeder mutual fund, a feeder ETF, and a master
portfolio, coupling the master portfolio module with the mutual fund module
and the ETF module, directing the mutual fund module and ETF module to
purchase or conform securities in accordance with an asset configuration,
directing the mutual fund module and ETF module to effect increases in
interests in the master portfolio where purchases occur outside the master
portfolio. In other words, the claim is directed to a particular type of
investment product structured in a master-feeder arrangement with a feeder
mutual fund and a feeder ETF fund that invest into a master portfolio fund.
The Specification explains that such an arrangement leads to operating
efficiencies and economies of scale. Spec. 6:7—11.
We agree with the Examiner that such a claim is directed to an
abstract idea. In particular, the claims here are similar to those in Fort
Properties v. American Master Lease, 671 F.3d 1317, 1322 (Fed. Cir 2012),
which involved “aggregating real property into a real estate portfolio,
dividing the interests in the portfolio into a number of deedshares, and
subjecting those shares to a master agreement.” The aggregated investment
arrangement involving a master agreement and deedshares allowed for
flexibility to deedshare holders and certain tax benefits. Fort Properties,
671 F.3dat 1319. The Federal Circuit held that such claims are directed to
“a real estate investment tool designed to enable tax-free exchanges of
property . . . [and are] an abstract concept.” Id. at 1322. The claims here,
just as in Fort Properties, are directed to a financial product arranged to
aggregate investments into a master portfolio for the sake of efficiencies and
tax benefits. See Spec. 6:13—20.
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Accordingly, we are unpersuaded of error in the Examiner’s finding
that the claims are directed to an abstract idea.
Step Two of Alice/Mayo Test
Turning to the second step of the two-part Alice/Mayo test, the
Examiner finds:
The claims do not include additional elements that are sufficient
to amount to significantly more than the judicial exception
because the additional elements such as the mutual fund, ETF,
and master portfolio modules are implemented with a computer,
which is the equivalent of apply it to a computer environment.
Additionally, directing computer modules to complete purchases
or sales as a result of a logic function is a generic computer
function that is well-understood, routine, and conventional
activity previously known to the computer trading industry.
Final Act. 4.
Appellant argues the claims include additional elements or functions
that are significantly more than the abstract idea of administering a mutual
fund and exchange traded fund assets using a master-feeder arrangement.
App. Br. 14, 16. According to Appellant
[Tjhese additional “elements and functions” include: “a master
portfolio . . . that issues and redeems interests . . . in . . . in-kind
. . . transactions with the mutual fund and the ETF” feeders; in
which the feeders apply cash inflows “to purchase . . . securities
in accordance with the [master’s] asset configuration”; so that
“cash purchases and sales ... occur outside of the master
portfolio”.
App. Br. 16.
Appellant additionally argues “The claims include ‘significantly more ’
than the abstract idea by virtue of the lack of applicable Section 102 and
103 art.'” App. Br. 16. Further, Appellant once again contends the claims
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do not preempt all forms of the alleged abstract idea and therefore contain
significantly more than the abstract idea.
These arguments are unpersuasive. Rather than show that the claims
include significantly more than the abstract idea of administering mutual
fund and exchange traded fund assets structured in a master-feeder
arrangement, the “additional elements or functions” quoted above are related
directly to describing the financial product and its master-feeder
arrangement.
As to Appellant’s argument that the lack of a prior art rejection
indicates the claims include significantly more, we disagree. First we do not
agree that a lack of a prior art rejection necessarily means a lack of prior art.
Second, even if Appellant’s claimed invention is distinguished from the
prior art, a novel and nonobvious claim directed to a purely abstract idea is,
nonetheless, patent-ineligible. See Mayo, 132 S. Ct. at 1304. Indeed,
“Groundbreaking, innovative, or even brilliant discovery does not by itself
satisfy the § 101 inquiry” (Ass ’n for Molecular Pathology v. Myriad
Genetics, Inc., 133 S. Ct. 2107, 2117 (2013)).
Appellant’s argument the claims include significantly more because
they do not preempt all forms of the alleged abstract idea is also
unpersuasive. “While preemption may signal patent ineligible subject
matter, the absence of complete preemption does not demonstrate patent
eligibility.” Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371,
1379 (Fed. Cir. 2015). Moreover, “[wjhere a patent’s claims are deemed
only to disclose patent ineligible subject matter under the Mayo framework,
as they are in this case, preemption concerns are fully addressed and made
moot.” Id.
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Accordingly, we are not persuaded of Examiner error under step 2 of
the Alice/Mayo test.
CONCLUSION
For the aforementioned reasons, we sustain the Examiner’s rejection
of claims 1—36 as directed to a patent-ineligible abstract idea.
DECISION
The Examiner’s rejection of claims 1—36 is affirmed.
No time period for taking any subsequent action in connection with
this appeal may be extended under 37 C.F.R. § 1.136(a). See 37 C.F.R.
§ 41.50(f).
AFFIRMED
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