Ex Parte Jones et alDownload PDFPatent Trial and Appeal BoardSep 26, 201310707491 (P.T.A.B. Sep. 26, 2013) Copy Citation UNITED STA 1ES p A 1ENT AND TRADEMARK OFFICE APPLICATION NO. FILING DATE FIRST NAMED INVENTOR 101707,491 12/17/2003 Emerson P. Jones 98783 7590 09/30/2013 Perkins Coie LLP - DEN General P.O. Box 1247 Seattle, WA 98111-1247 UNITED STA TES 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. 081786-8455.USOO 1490 EXAMINER CHENCINSKI, SIEGFRIED E ART UNIT PAPER NUMBER 3695 NOTIFICATION DATE DELIVERY MODE 09/30/2013 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): patentprocurement@perkinscoie.com PTOL-90A (Rev. 04/07) 2 UNITED STATES PATENT AND TRADEMARK OFFICE 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 BEFORE THE PATENT TRIAL AND APPEAL BOARD Ex parte EMERSON P. JONES, KAREN SCHOEN, and IVAN ROSS Appeal2012-010566 Application 10/707,491 Technology Center 3600 19 Before l'viURRIEL E. CRAWFORD, ANTON W. FETTTI-.JG, and 20 JOSEPH A. FISCHETTI, Administrative Patent Judges. 21 PETTING, Administrative Patent Judge. 22 DECISION ON APPEAL Appeal2012-010566 Application 10/707,491 STATEMENT OF THE CASE1 2 Emerson P. Jones, Karen Schoen, and Ivan Ross (Appellants) seek 3 review under 35 U.S.C. § 134 of a final rejection of claims 32 and 34-47, the 4 only claims pending in the application on appeal. We have jurisdiction over 5 the appeal pursuant to 35 U.S.C. § 6(b). 6 The Appellants invented a method and apparatus for conducting 7 financial transactions (Spec. i-f 0002). 8 An understanding of the invention can be derived from a reading of 9 exemplary claim 32, which is reproduced below [bracketed matter and some 10 paragraphing added]. 11 32. A unit pricing device, comprising: 12 [ 1 a] a processor; 13 [1 b] a communication device in communication with said 14 processor and coupled to receive information from one or more 15 data sources; 16 and 17 [ 1 c] a storage device in communication with said processor and 18 storing data structures and instructions to be executed by said 19 processor to: 20 [2] receive an issuer identifier 21 identifying an issuer of a unit; 1 Our decision will make reference to the Appellants' Appeal Brief ("App. Br.," filed March 19, 2012) and Reply Brief ("Reply Br.," filed July 2, 2012), and the Examiner's Answer ("Ans.," mailed May 2, 2012). 2 Appeal2012-010566 Application 10/707,491 [3] receive an equity security identifier 2 of an equity security 3 associated with the issuer identifier; 4 [ 4] populate a first data structure with forward information, 5 including 6 a forward settlement date 7 and 8 a forward settlement price, 9 describing a forward transaction 10 that obligates a holder 11 to purchase a number of shares of the equity 12 security associated with the issuer 13 at the forward settlement date 14 for the forward settlement price; 15 [5] populate a second data structure with convertible note 16 information, 17 including 18 a convertible note maturity date, 19 a convertible note interest rate, 20 a conversion ratio, 21 a convertible note issue price 22 and 23 a convertible note principal amount, 24 describing a convertible note 25 that is convertible to the equity security associated 26 with the issuer 21 according to a specified conversion formula; 3 Appeal2012-010566 Application 10/707,491 [ 6] populate a third data structure with financial information 2 associated with the equity security identifier 3 from a data source; 4 [7] populate a fourth data structure with financial information 5 associated with the issuer identifier 6 from a data source; 7 and 8 [8] calculate, 9 based on 1 o forward information in the first data structure, 11 convertible note information in the second data 12 structure, 13 equity security financial information in the third 14 data structure, 15 and 16 issuer identifier financial information in the fourth 17 data structure, 18 pricing data 19 associated with the unit 20 compnsmg 21 the forward transaction 22 and 23 the convertible note. 24 The Examiner relies upon the following prior art: Green US 2003/0093375 Al Birle, Jr. US 2003/0130941 Al Zivan US 2003/0144943 Al 4 May 15, 2003 Jul. 10, 2003 Jul. 31, 2003 Appeal2012-010566 Application 10/707,491 Gaiant US 6,839 ,686 B 1 Jan.4,2005 Claim 32 stands rejected under 35 U.S.C. § 103(a) as unpatentable over 2 Galant, Birle, and Green. 3 Claims 34-47 stand rejected under 35 U.S.C. § 103(a) as unpatentable 4 over Galant, Birle, Green, Zivan, AAP A, and Barron's Financial Dictionary. s ISSUES 6 The issues of obviousness tum primarily on whether the art describes 7 pricing financial instruments, or whether it was otherwise predictable to do 8 so; whether the art describes a convertible note, or whether such a 9 convertible note was a predictable form of a financial instrument; whether 10 the four sets of data were predictable inputs to pricing a convertible 11 instrument; and whether aggregating the data in the recited four sets was 12 predictable. 13 FACTS PERTINENT TO THE ISSUES 14 The following enumerated Findings of Fact (FF) are believed to be 15 supported by a preponderance of the evidence. 16 Facts Related to the Prior Art 17 Galant 18 01. Galant is directed to investment information to assist in the 19 20 evaluation of securities and ways for analyzing a variety of debt and equity instruments. Galant 1:8-14. 5 Appeal2012-010566 Application 10/707,491 02. In the past, bond-pricing and rating information on a specific 2 bond issue was obtained through personal contacts and various 3 services. This process is cumbersome and time intensive as no 4 single contact could provide comprehensive information, thus a 5 complete market evaluation was impossible to achieve. Galant 6 1:15-21. 7 03. Galant facilitates the identification of arbitrage opportunities. 8 The method and apparatus additionally provide for the analysis of 9 a group of securities regarding intrinsic and incremental value, 10 average portfolio coupon, average portfolio maturity, portfolio 11 option value, theoretical portfolio value, and portfolio efficiency. 12 Galant 2:4-10. 13 Green 14 15 16 17 18 19 20 21 22 23 24 25 04. Green is directed to systems and methods for creating, issuing, servicing, or maintaining convertible and exchangeable financial instruments and computer-based user interfaces thereof. Green para 0002. 05. Green creates (including testing and evaluating), issues (including offering and selling, and services or maintains convertible or exchangeable financial instruments. These financial instruments are created by a "building block approach", which allows a user to build a financial instrument by selecting specific objects and features, and then providing the specific inputs for each selected feature. Green provides a user with the abilitv to experiment by selecting and re-selecting desired objects and/or 6 2 3 4 5 6 7 8 9 10 11 12 Appeal2012-010566 Application 10/707,491 features of a new financial instruments. Specifically the model/calculator allows flexibility by providing a user the opportunity to select the desired objects and state the features of each desired object. The benefit of the flexible model/calculator and associated system is that a user can simulate, generate and evaluate new financial instruments without creating a new model/ computer and system for each new financial instrument. Green allows capital markets to experiment with new product ideas in an affordable and time-effective manner and minimize time period between the creation of a new financial instrument and the marketing of the new financial instrument. Green para 0008. 13 06. FIG. 3 illustrates some preferred embodiments to issue or 14 15 pricing a convertible or exchangeable financial instrument. Green para 0014. 16 07. Objects are used to compartmentalize inputs. Examples of 17 18 19 20 21 22 23 24 objects include: Redemption (i.e., expiration and return of principal), Cash Flow (i.e., coupons or dividends), Conversion (i.e., Holder's option to convert or exchange the instrument into an underlying asset), Issuer Call Terms (i.e., Issuer's option for an early redemption), Holder's Put (i.e., Holder's option for an early redemption), Credit, Issue Terms, Bankruptcy, Accretion, Contingent Payment ("CoPa"), Contingent Conversion ("CoCo"), and Model Parameters. Green para 0034. 7 Appeal2012-010566 Application 10/707,491 08. The convertible or exchangeable bond object simply passes as 2 an argument to the convertible or exchangeable model/calculator 3 along with the other convertible or exchangeable model/calculator 4 inputs. Green para 0037. 5 09. A rules engine maintains objects and inputs of newly created 6 convertible or exchangeable financial instruments, allowing a user 7 an opportunity to evaluate and manage a new financial instrument 8 in the after market. In some embodiments, a rules engine utilizes 9 financial instrument features from several sources (i.e., internal 10 or external financial sources). Green para 0043. 11 Birle 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10. Birle is directed to convertible and exchangeable financial instruments and methods and systems for offering and servicing the same, and relates more particularly to debit instruments which are convertible into equity instruments. Birle para 0002. 11. Birle describes that a bond is a common financial instrument having language indicative of a principle amount, and having further language indicative of a borrower's obligation to repay the principal at some future time. Birle para 0003. Bonds can further specify the borrower's obligation to make interest payments at specific times or not specify any obligation to interest payments prior to maturity. Birle para 0003. 12. Convertible bonds are instruments which have some qualities of bonds as well as some of the qualities of stock, where the bond can be converted by the holder into a number of shares of equity. 8 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Appeal2012-010566 Application 10/707,491 13. Birle para's 0005 and 0009. The number of shares can be a fixed number or determined by a formula. Birle para 0005. A contingent payment financial instrument may be a convertible debt instrument. If the instrument is callable, the issuer may have the right to redeem the instruments at their accreted value. Holders may also have the right to require the issuer to redeem the instruments at their accreted value specified dates, and upon a change in control of the issuer. The difference between the issue price and principal amount of the contingent payment debt instrument will accrue by a specified percentage. A three-percent yield, for example, may be a reasonable rate under some market conditions. Beginning at a pre-determined period of time after issuance of the contingent payment instruments the issuer may pay contingent interest if the trading value of the instrument exceeds a snecified nercenta!rn of the accreted value of each '" '" .__, instrument for some pre-determined number of consecutive days (or any other suitable period) immediately preceding the first day of the interest accrual period. In some embodiments, the specified percentage of the accreted value may change, for example, by a predetermined percentage on a periodic basis. Also, in some embodiments, the amount of the contingent payment may change with multiple triggers that may be triggered at specified pre- determined times. Other embodiments may have multiple triggers that may be triggered at any time. In some embodiments, contingent payments may be triggered by only one trigger or by more than one trigger. In some embodiments, a trigger may be any 9 2 3 Appeal2012-010566 Application 10/707,491 event and may or may not be associated with the financial instrument paying such contingent payments. Birle para 0039. 14. From the point of view of the holder, after the non-call period 4 the holder may value the debt instrument, as an economic matter, 5 as a right to convert the debt instrument into issuer stock coupled 6 with a right to receive cash which, if the issuer's stock drops in 7 value, is equal to the accreted value of the instrument. That is, the 8 pure bond features of a contingent payment debt instrument may 9 be valued at that point as a form of "insurance" or put option. 10 Because it may be more valuable, for holders, to have a right to 11 convert the contingent payment debt instrument into the issuer's 12 stock coupled with this bond element than to simply hold the 13 issuer's stock, the trading value of the instrument may exceed the 14 value of the issuer stock into which it is convertible. If the issuer's 15 stock rises enom.!h that the "insurance" or nut characteristics of the ~ ~ 16 pure bond elements of the contingent payment debt instrument are 17 reduced in value, however, the trading value of the contingent 18 interest debt instrument may tend to approximate the fair market 19 value of issuer stock. Birle para 0040. 20 Barron's 21 22 23 24 25 15. Barron's is directed to a dictionary of finance and investment terms. Barron's Title. 16. Barron's provides that the definition of a unit, in the context of securities, is more than one class of securities traded together. Barron's 677: Unit definition 3. For example, a common share 10 2 3 4 5 6 7 8 9 Appeal2012-010566 Application 10/707,491 and a subscription warrant might sell as a unit. Barron's 677: Unit definition 3. Barron's further defines a unit in primary and secondary distributions of securities, one share of stock or one bond. Barron's 677: Unit definition 4. 17. Barron's provides that the definition of a convertible is a corporate security, such as preferred shares or bonds, that are exchangeable for a set number of another form at a pre-stated price. Barron's 120: Convertibles. 18. Barron's provides that the definition of a subscription warrant is 10 a type of security, usually issued together with a bond or preferred 11 stock, which entitles the holder to buy a proportionate amount of 12 common stock at a specified price. Barron's 607: Subscription 13 Warrant. 14 ANALYSIS 15 Claim 32 rejected under 35 U.S.C. § 103(a) as unpatentable over Galant, 16 Birle, and Green. 17 We are not persuaded by the Appellants' argument that 18 [t]he assertion that "it would have been obvious to the ordinary 19 practitioner that Galant suggests calculating every kind of 20 price" is conclusory and unsupported, and, as such, should not 21 be used to render obvious calculate, based on forward 22 information in the first data structure, convertible note 23 information in the second data structure, equity security 24 financial information in the third data structure, and issuer 25 identifier financial information in the fourth data structure, 26 pricing data associated with the unit comprising the forward 27 transaction and the convertible note. 11 Appeal2012-010566 Application 10/707,491 App. Br. 6. Claim 32 simply aggregates four sets of data and somehow 2 calculates something referred to as pricing data. The pricing data is not the 3 issue price per se, as that is one of the elements of the recited convertible 4 note information. Thus, pricing data is data that is in some manner related to 5 pricing, such as an analysis of arbitrage opportunities. 6 The claim does not specify or narrow the particular manner of 7 calculation, but instead only recites that the calculation is in some 8 unspecified manner based on the four sets of data. Thus, there are four 9 issues. The first is whether the art describes pricing financial instruments, or 10 whether it was otherwise predictable to do so. The second issue is whether 11 the art describes a convertible note, or whether such a convertible note was a 12 predictable form of a financial instrument. The third issue is whether the 13 four sets of data were predictable inputs to pricing a convertible instrument. 14 And the fourth issue is whether aggregating the data in the recited four sets 15 was predictable. 16 As to the first issue, Gallant recites bond pricing as a problem to be 17 solved. FF 01-02. As financial instrument pricing is simply the value at 18 which no arbitrage opportunity exists, Gallant implicitly finds prices by 19 looking for such arbitrage opportunities. FF 03. An arbitrage opportunity is 20 simply the difference between an existing price and an arbitrage neutral 21 price. Also, Green's Fig. 3 shows pricing a convertible instrument. FF 06. 22 As to the second issue, both Green and Birle describe the ubiquity of 23 convertible instruments such as bonds. FF 04 and 10. 24 As to the third issue, Green and Birle describe the inputs to analyzing a 25 convertible instrument, such as a bond. These include the note's maturity 12 Appeal2012-010566 Application 10/707,491 date, interest rate, conversion ratio, issue price, and principal amount. Each 2 of these is necessary to computing a discounted cash flow valuation typically 3 used for analyzing pricing. Birle also describes the dates and prices that 4 may be used in settling prior to maturity (FF 13), thus at least making 5 predictable the use of such dates and prices in the analysis. We find that 6 limitation [ 4] only requires a date and price, as the nature of the price and 7 any obligations described in limitation [ 4] are perceptible only to the human 8 mind and are therefore deserving of no patentable weight. 9 In a recent non-precedential decision, our reviewing court reminded 10 us of the applicability of the precedential In re Gulack, 703 F.2d 1381 (Fed. 11 Cir. 1983), In re Bernhart, 417 F.2d 1395 (CCPA 1969) and In re Lowry, 32 12 F.3d 1579 (Fed. Cir. 1994) decisions. 13 We have held that patent applicants cannot rely on printed 14 matter to distinguish a claim unless "there exists [a] new and 15 unobvious functional relationship between the printed matter 16 and the substrate." In re Gulack, 703 F.2d 1381, 1386 17 (Fed.Cir.1983) .... 18 19 20 [T]he Board did not create a new "mental 21 distinctions" rule in denying patentable weight . . . . On the 22 contrary, the Board simply expressed the above-described 23 functional relationship standard in an alternative formulation- 24 consistent with our precedents-when it concluded that any 25 given position label's function ... is a distinction "discemable 26 only to the human mind." ... ; see In re Lowry, 32 F.3d 1579, 21 1583 (Fed.Cir.1994) (describing printed matter as "useful and 28 intelligible only to the human mind") (quoting In re Bernhart, 29 ... 417 F.2d 1395, 1399 (CCPA 1969)). 30 13 Appeal2012-010566 Application 10/707,491 In re Xiao, 2011-1195 WL 4821929, at *3-4 (Fed. Cir. 2011) (Non- 2 precedential). Thus non-functional descriptive material, being useful and 3 intelligible only to the human mind, is given no patentable weight. See also 4 In re Ngai, 367 F.3d 1336, 1339 (Fed. Cir. 2004). 5 The third and fourth data structures in limitations [ 6] and [7] simply 6 identify the equity instruments and issuer data, such as issuer's credit rating, 7 a necessary step to any analysis of the instruments. 8 As to the fourth issue, Green explicitly describes the advantages of using 9 objects that inherently compartmentalize the data as recited in the claim. 10 Thus, the claim is to no more than an arbitrage analysis for a convertible 11 bond, without even specifying or even narrowing the algorithm employed 12 for analysis. All of the references show that such analysis is in general 13 regularly employed, and all of the inputs are predictable to a financial 14 analysis of ordinary skill. 15 Claims 34-47 rejected under 35 U.S.C. § 103(a) as unpatentable over 16 Gal ant, Birle, Green, Zivan, AAP A, and Barron's Financial Dictionary. 17 Appellants do not contend the Examiner's fact finding is in error, but 18 only that it is inappropriate to rely on administrative notice to the degree 19 Examiner does. While this may be subject to review by petition to the 20 Director to exercise supervisory review, absent specific contentions of 21 factual error, we have nothing before us in the way of rebuttal to Examiner's 22 prima facie case. 23 As to claims 46 and 4 7, Examiner cites to Green pares 0008-0011. Fin. 24 Rej. 7. Appellants do not rebut this finding or its relevance. 14 Appeal2012-010566 Application 10/707,491 CONCLUSIONS OF LAW 2 The rejection of claim 32 under 35 U.S.C. § 103(a) as unpatentable over 3 Galant, Birle, and Green is proper. 4 The rejection of claims 34-47 under 35 U.S.C. § 103(a) as unpatentable 5 over Galant, Birle, Green, Zivan, AAP A, and Barron's Financial Dictionary 6 1s proper. 1 DECISION 8 The rejection of claims 32 and 34-47 is affirmed. 9 No time period for taking any subsequent action in connection with this 10 appeal may be extended under 37 C.F.R. § 1.136(a). See 37 C.F.R. 11 § 1.136(a)(l)(iv) (2011). 12 13 14 15 16 17 JRG 18 AFFIR~vfED 15 Copy with citationCopy as parenthetical citation