Ex Parte Faust,

Patent Trial and Appeal Board

Sep 24, 2018

12545953 (P.T.A.B. Sep. 24, 2018)

UNITED STA TES p A TENT AND TRADEMARK OFFICE
APPLICATION NO. FILING DATE
12/545,953 08/24/2009
25779 7590 09/26/2018
Davis Malm & D"Agostine P.C.
Richard L. Sampson
One Boston Place
BOSTON, MA 02108
FIRST NAMED INVENTOR
Thomas E. Faust, JR.
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.
1216.009 2513
EXAMINER
LIU, CHIA-YI
ART UNIT PAPER NUMBER
3695
NOTIFICATION DATE DELIVERY MODE
09/26/2018 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.
Appeal2017-004352
Application 12/545,953
Technology Center 3600
Before ELENI MANTIS MERCADER, ERIC S. FRAHM, and
JASON M. REPKO, Administrative Patent Judges.
MANTIS MERCADER, Administrative Patent Judge.
DECISION ON APPEAL
STATEMENT OF THE CASE
Appellant1 appeals under 35 U.S.C. § 134 from a rejection of claims
1-33. We have jurisdiction under 35 U.S.C. § 6(b).
We affirm.
1 The real party in interest Eaton Vance Management. App. Br. 1.
Appeal2017-004352
Application 12/545,953
CLAIMED SUBJECT MATTER
The claims are directed to a closed-end fund with a hedging portfolio.
Claim 1, reproduced below, is illustrative of the claimed subject matter:
1. A computer implemented method of administering a closed-
end-fund (CEF), the method comprising:
(a) Configuring, by a computer, the CEF:
to have a plurality of units available for sale, the plurality of units
being configured for trading on one or more secondary markets;
to be capable of holding derivatives;
to have a fund maturity date;
to redeem the plurality of units, wherein the CEF is configured
to redeem the plurality of units at the fund maturity date while
not being required to allow for redemptions on a daily basis;
(b) Identifying, by a computer, a fund portfolio of assets,
wherein the assets are liquidatable at a time coinciding with the
fund maturity date, and wherein the fund portfolio of assets has
a portfolio monetary value;
( c) Purchasing and holding within the fund the fund portfolio
of assets, by a computer;
( d) Identifying, by a computer, a hedge portfolio configured
to offset financial risk associated with the fund; and
( e) Publishing, by a computer, the hedge portfolio.
REFERENCES
The prior art relied upon by the Examiner in rejecting the claims on
appeal is:
Roberts us 4,839,804 June 13, 1989
Nations US 2002/0138299 Al Sept. 26, 2002
Feldman US 2005/0216407 Al Sept. 29, 2005
Tull US 2005/0262010 Al Nov. 24, 2005
Huber US 2007/0112657 Al May 17, 2007
Hawkes US 2007/0118450 Al May 24, 2007
Present US 2009/0063363 Al Mar. 5, 2009
2
Appeal2017-004352
Application 12/545,953
REJECTIONS
Claims 1-33 stand rejected under 35 U.S.C. § 112 second paragraph
as being indefinite.
Claims 1-33 stand rejected under 35 U.S.C. § 101 as being directed to
non-statutory subject matter.
Claims 1, 9-12, 16, 17, and 25-28 stand rejected under 35 U.S.C.
§ 103(a) as being unpatentable over Tull, in view of Huber, Present, and
Feldman and further in view of Official Notice.
OPINION
Claims 1-3 3 re} ected under 3 5 US. C. § 112 second paragraph
The Examiner rejected claims 1-33 under 35 U.S.C. § 112 second
paragraph as being indefinite for reciting the term "redeem" which
contradicts with how a CEF works (by definition, a Closed-End Fund (CEF)
does not issue redeemable shares and that is why it is called a closed-end
fund and not open-end fund). Final Act. 3.
We do not agree with the Examiner's finding because as discussed
infra with respect to the Examiner's obviousness rejection, the prior art of
Tull teaches an example of a modified CEF with allows for redemption of
shares. In other words, one skilled in the art would be able to understand
that a modified CEF allowing for redeemable shares does not contradict the
definition of CEF.
The Examiner made a§ 112 second paragraph rejection regarding the
limitation of "'redeem the plurality of units at the fund maturity date while
not being required to allow for redemptions on a daily basis"' because "[i]t
is unclear whether 1) it is not required to allow redemption on a daily basis
3
Appeal2017-004352
Application 12/545,953
including fund maturity date 2) it is not required to allow for redemption on
the days other than fund maturity date." (Ans. 21).
We agree with the Examiner that this limitation is confusing because
it is not clear whether the redemptions are at maturity or also on a daily
basis. Where, as here, a claim is "amenable to two or more plausible claim
constructions, the [Examiner] is justified in requiring the applicant to more
precisely define the metes and bounds of the claimed invention by holding
the claim unpatentable under 35 U.S.C. § 112, second paragraph, as
indefinite." Ex parte Miyazaki, 89 USPQ2d 1207, 1211-12 (BPAI 2008)
(precedential); see also In re Morris, 127 F.3d 1048, 1056 (Fed. Cir. 1997)
(it "is the applicants' burden to precisely define the invention, not the
PTO's"). Accordingly, we sustain the Examiner's rejection of independent
claims 1-33 under 35 U.S.C. § 112, second paragraph as indefinite.
Claims 1-33 rejected under 35 US.C. § 101
Appellant argues that the claims are not directed to an abstract idea,
nor are they attempting to preempt all forms of configuring a fund,
identifying fund portfolio of assets, purchasing and holding assets and
identifying and publishing portfolio and data. App. Br. 12-14. Appellant
argues that the instant claims are similar to PNC Bank et al. v. Secure
Axcess, LLC., CBM 2014-00100, slip op. at 23 (PTAB Sept. 9, 2014) (Paper
10)), because when viewed as a whole, relate to a computer-implemented
method to transform data in a particular manner-in this case to configure
and administer a new type of closed-end-fund (CEF). App. Br. 14.
Appellant asserts that the instant claims as a whole are not directed to any
4
Appeal2017-004352
Application 12/545,953
fundamental economic practice long prevalent in our system of commerce.
Id.
Appellant directs us to the claims reciting the elements or functions
including:
the fund and its assets having maturity dates that
substantially coincide with one another;
publishing ... the hedge portfolio;
the CEF being configured to redeem the plurality of units
at the fund maturity date while not being required to allow for
redemptions on a daily basis;
and
- the CEF being capable of holding derivatives.
App. Br. 16-17.
Appellant asserts that "[b ]ecause these additional 'elements or
functions' may be viewed as the points of novelty relative to any analog or
digital art, they must be 'beyond those recognized in the art or by the courts
as being well-understood, routine or conventional."' Id. at 17. Appellant
further asserts that these elements or functions amount to significantly more
than an abstract idea itself. Id. at 18-19. Appellant further asserts that the
Examiner's cited prior art are also more than an abstract idea itself and since
the claimed invention distinguishes over the prior art then it is "significantly
more" than the abstract idea. Id. Appellant also asserts that Alice does not
impose a new technical test, and thus, does not bar non-technical disciplines.
Id. at 19-20.
We are not persuaded by Appellant's argument. While we adopt the
Examiner's findings in the Answer (Ans. 19-20) we also add the following
for emphasis. Whether an invention is patent-eligible is an issue of law,
which we also review de nova. An invention is patent-eligible if it claims a
5
Appeal2017-004352
Application 12/545,953
"new and useful process, machine, manufacture, or composition of matter."
35 U.S.C. § 101. The Supreme Court, however, has long interpreted§ 101
to include implicit exceptions: "[l]aws of nature, natural phenomena, and
abstract ideas" are not patentable. See Alice Corp. Pty. Ltd. v. CLS Bank
Int'!, 134 S. Ct. 2347, 2354 (2014).
In determining whether a claim falls within the excluded category of
abstract ideas, we are guided in our analysis by the Supreme Court's two-
step framework, described in Mayo and Alice. Id. at 2355 (citing Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 75-79 (2012)).
We must first determine whether claim 1 is "directed to" a patent-ineligible
abstract idea. See Alice, 134 S. Ct. at 2356 ("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."); Bilski v. Kappas, 561 U.S. 593, 611
(2010) ("Claims 1 and 4 in petitioners' application explain the basic concept
of hedging, or protecting against risk."); Parker v. Flook, 437 U.S. 584,
594--595 (1978) ("Respondent's application simply provides a new and
presumably better method for calculating alarm limit values").
Examples of patent-ineligible subject matter include fundamental
economic practices (Alice, 134 S. Ct. at 2357; Bilski, 561 U.S. at 611),
mathematical formulas (Flook, 437 U.S. at 594--95) and basic tools of
scientific and technological work (Gottschalkv. Benson, 409 U.S. 63, 69
(1972)).
Appellant's claim 1 is directed to a computer-implemented process for
administering a closed-end-fund (CEF). With regard to the first step in
Alice, Appellant's elements or functions of the fund and its assets having
maturity dates that substantially coincide with one another; publishing the
6
Appeal2017-004352
Application 12/545,953
hedge portfolio; the CEF being configured to redeem the plurality of units at
the fund maturity date while not being required to allow for redemptions on
a daily basis; and the CEF being capable of holding derivatives
(App. Br. 16-17), amount to nothing more than a computer implemented
fundamental economic practice similar to Bilski pertaining to protecting
against risk. See Bilski, 561 U.S. at 611. Alternatively, the computer
implemented method substitutes for the mental processes of managing a
closed-end-fund.
Therefore, since claim 1 is "directed to" a patent-ineligible abstract
idea, we then consider the elements of the claim-both individually and as
an ordered combination-to assess whether the additional elements
transform the nature of the claim into a patent-eligible application of the
abstract idea as required by step two of Alice. Alice, 134 S. Ct. at 2355.
This is a search for an "inventive concept"-an element or combination of
elements sufficient to ensure that the claim amounts to "significantly more"
than the abstract idea itself. Id. "[T]he relevant question is whether the
claims here do more than simply instruct the practitioner to implement the
abstract idea ... on a generic computer." Alice, 134 S. Ct. at 2359. We
conclude that they do not.
When considering claims purportedly directed to an improvement of
computer functionality, the inquiry becomes "whether the focus of the
claims is on the specific asserted improvement in computer capabilities ...
or, instead, on a process that qualifies as an 'abstract idea' for which
computers are invoked merely as a tool." Enfzsh, LLC v. Microsoft Corp.,
822 F.3d 1327, 1335-36 (Fed. Cir. 2016). In the instant claim 1, the
7
Appeal2017-004352
Application 12/545,953
computer implemented method is merely used as a tool to execute a
fundamental economic practice.
With regard to Appellant's argument that the pending claims are
patent eligible because there are novel (see App. Br. 17-20), 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." Diamondv. Diehr, 450 U.S. 175, 188-89 (1981); see also Genetic
Techs. Ltd. v. Merial L.L.C., 818 F.3d 1369, 1376 (Fed. Cir. 2016) (stating
that, "under the Mayol 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").
Finally, Appellant's assertion regarding pre-emption is unpersuasive,
because "[ w]hile preemption may signal patent ineligible subject matter, the
absence of complete preemption does not demonstrate patent eligibility ....
\\'here a patent's claims are deemed only to disclose patent ineligible subject
matter under the Afayo framework, as they are in this case, preemption
concerns are fully addressed and made moot" Ariosa Diagnostics, Inc. v.
Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015); see also OIP Techs.,
Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362-63 (Fed. Cir. 2015) (holding
"that the claims do not preempt all price optimization or may be limited to
price optimization in the e-commerce setting do not make them any less
abstract").
8
Appeal2017-004352
Application 12/545,953
Accordingly, we affirm the Examiner's rejection of claim 1 and for
the same reasons the rejections of claims 2-33 under 35 U.S.C. § 101 as
being directed to patent-ineligible subject matter.
Claims 1-33 rejected under 35 USC§ 103(a)
Appellant argues that, contrary to the Examiner's finding, the ability
to redeem a closed-end fund (CEF) does not somehow disqualify it from
being a closed-end fund. See App. Br. 22. Rather, Appellant asserts that
CEFs, as understood by those skilled in the art and as defined by the
applicable regulatory framework, are not prohibited from redeeming their
shares, but are simply not "required" to redeem. Id. According to Appellant
this realization led to counter-intuitively provide a CEF that not only
redeems it shares, but does so at a particular time ( e.g., at a maturity date).
Id. at 23. Furthermore, Appellant configured the CEF to hold a portfolio of
assets that are specifically selected to be liquidatable at a particular time, i.e.,
coinciding with the maturity date. Id.
Appellant further argues that the combination of Tull and Present does
not teach or suggest a Hedging Portfolio for a CEF nor does it teach
publishing a Hedging Portfolio. App. Br. 27. Appellant further traverses the
official notice regarding CEF being able to redeem funds upon maturity. Id.
at 30. Appellant further asserts that Huber teaches an open-end ETF
wherein funds are liquidatable upon maturity, not a closed-end. Id. at 31.
We are not persuaded by Appellant's argument. The Examiner
clarifies that the disputed limitation recited from the claim is "'identifying a
hedge portfolio configured to offset financial risk associated with the fund
and publishing the hedge portfolio."' Ans. 22. The Examiner relies on Tull
9
Appeal2017-004352
Application 12/545,953
for teaching a CEF and information comprising hedging portfolio provided
to facilitate trading. Id. citing para. 30 also see Final Act. 5 citing paras. 9
and 19. The Examiner then relies on Present for teaching publishing a hedge
portfolio "(hedge funds that publish ... a periodic net asset value or total
return, such as a daily or monthly net asset values)." Ans. 22 citing para. 25.
We note in passing that Tull in essence teaches a modified CEF (see at least
paras. 16-17) to have certain exchange-traded funds ETF attributes and this
supports the Examiner's position that a CEF could be modified consistent
with Appellant's own invention.
With respect to Appellant's argument regarding official notice, the
Examiner explains that Tull teaches configuring a fund to selectively redeem
the plurality of units, (see at least para. 38 (a portion of the CEF shares have
been converted to AMETF shares; redeeming the AMETF shares)), but fails
explicitly to disclose wherein the CEF is configured to redeem the plurality
of units at the fund maturity date while not being required to allow for
redemptions on a daily basis. Ans. 23.
The Official Notice was provided to show that it was old and
well known to configure a fund to redeem units at fund maturity
date and refuse redemption at dates prior to fund maturity date
(as evidenced by Mercier US 2008/0301035 Al, see at least
[para. 363] "the participant may have to wait until the holder
fund's maturity date to collect own shares; and Starr (US
2006/0080205 Al, see at least [para. 26] (fund ... shares would
be redeemed by the trust itself, and only at maturity and para.
36 not typically redeem investor shares prior to maturity).
Id. ( emphasis added). The Examiner concluded that since
10
Appeal2017-004352
Application 12/545,953
it is old and well known to configure a fund to redeem units at
fund maturity date and refuse redemption at dates prior to fund
maturity date and that the primary reference teaches a fund
( close-end fund), it would have been obvious to configure
Tull's fund to redeem units at fund maturity date and refuse
redemption at dates prior to fund maturity date.
Ans. 23.
The test for obviousness is not whether the claimed invention is
expressly suggested in any one or all of the references, but whether the
claimed subject matter would have been obvious to those of ordinary skill in
the art in light of the combined teachings of those references. See In re
Keller, 642 F.2d413, 425 (CCPA 1981). Nonobviousness cannot be
established by attacking the references individually when the rejection is
predicated upon a combination of prior art disclosures. See In re Merck &
Co., 800 F.2d 1091, 1097 (Fed. Cir. 1986). While Appellant argues that the
cited references of Mercier and Starr do not address a CEF (App. Br. 28), we
note that the Examiner relied on Tull for a CEF configured for redeeming
funds and while Tull stops short of stating when those funds could be
redeemed the Examiner relied on official notice that is old and well known
that funds can be redeemed at maturity. See Ans. 23. Furthermore, when
there is a finite or limited number of solutions, such as redeeming at various
times or at a predetermined time such as maturity, ordinary artisans would
have had good reason to pursue all these options within their technical grasp.
See KSR Int'! Co. v. Teleflex Inc., 550 U.S. 398,421 (2007)). Additionally,
to adequately traverse the Examiner's reliance on Official Notice, Appellant
must specifically point out the supposed errors in the Examiner's action,
which would include stating why the noticed fact is not considered to be
11
Appeal2017-004352
Application 12/545,953
common knowledge or well-known in the art. See MPEP § 2144.03. Here,
Appellant has not stated in the record why the noticed fact of redeeming
funds upon maturity is not considered to be common knowledge or well-
known in the art.
Appellant further argues that the combination of Tull and Feldman
does not teach or suggest a CEF which is either configured to hold, or which
actually holds derivatives. App. Br. 31-32.
We are not persuaded by Appellant's argument. We agree with the
Examiner's finding that Feldman
teaches a CEF capable of holding derivatives, see at least
Claims 66 of Feldman (a closed end fund; the distribution of
shares of the fund ... wherein the shares of the fund
have a net asset value based on a combination of prices of the
one or more currencies from a plurality of sources) and claim
69 ( closed end fund wherein one or more of the sources is a
derivative price) and claim 70 ( closed end fund of claim 69
wherein the derivative price is a futures price).
Final Act. 7. Thus, we agree with the Examiner's assertion that it would
have been obvious for one of ordinary skill in the art at the time the
invention was made to modify Tull's teachings with a CEF capable of
holding derivatives for the benefit of allowing the fund to base its total value
on derivative prices. Id.
Accordingly, we affirm the Examiner's rejections of claims 1-33. 2
2 The Leahy-Smith America Invents Act (AIA), Public Law 112-29, sec. 14,
125 Stat. 284 (Sept. 16, 2011) ("AIA § 14") states that "For purposes of
evaluating an invention under section 102 or 103 of title 35, United States
Code, any strategy for reducing, avoiding, or deferring tax liability, whether
known or unknown at the time of the invention or application for patent,
12
Appeal2017-004352
Application 12/545,953
DECISION
The Examiner's rejection of claims 1-33 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.
§ 1.136(a)(l )(iv).
AFFIRMED
shall be deemed insufficient to differentiate a claimed invention from the
prior art."
Here, we note that the Specification explains that the disclosed embodiment
"provides tax efficiency/tax deferral by helping to ensure that in various
embodiments there is little or no income to pass through to investors prior to
the fund maturity date." Spec. 17: 16-19. Furthermore, claim 13 recites
"[t]he method of claim 2, wherein said configuring (g) comprises
configuring the plurality of derivatives to qualify for at least one of long
term capital gain and long term capital loss under US. Federal income tax
laws."
We leave to the Examiner to determine whether and to what extent AIA § 14
applies here. See MPEP 2124.01 ("Tax Strategies Deemed Within the Prior
Art.").
13