Ex Parte Kaya

Patent Trial and Appeal Board

Sep 21, 2018

14532065 (P.T.A.B. Sep. 21, 2018)

UNITED STA TES p A TENT AND TRADEMARK OFFICE
APPLICATION NO.
14/532,065
119514 7590
Mehmet Alpay Kaya
20002 Gulf Blvd
Apt 2906
FILING DATE
11/04/2014
09/24/2018
Indian Shores, FL 33785
FIRST NAMED INVENTOR
Mehmet Alpay Kaya
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.
8837
EXAMINER
SHAIKH, MOHAMMAD Z
ART UNIT PAPER NUMBER
3694
MAIL DATE DELIVERY MODE
09/24/2018 PAPER
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.
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE PATENT TRIAL AND APPEAL BOARD
Ex parte MEHMET ALP A Y KAY A
Appeal2016-007308 1
Application 14/532,0652
Technology Center 3600
Before JAMES A. WORTH, BRADLEY B. BAY AT, and
TARA L. HUTCHINGS, Administrative Patent Judges.
WORTH, Administrative Patent Judge.
DECISION ON APPEAL
STATEMENT OF THE CASE
Appellant appeals under 35 U.S.C. § 134(a) from the Examiner's final
rejection of claims 1-27, which constitute all the claims pending in this
application. We have jurisdiction under 35 U.S.C. §§ 134 and 6(b ).
1 Our Decision refers to the Appellant's Appeal Brief ("Appeal Br.," filed
Nov. 21, 2015) and Reply Brief ("Reply Br.," filed July 15, 2016), and the
Examiner's Final Office Action ("Final Act.," mailed June 26, 2015) and
Answer ("Ans.," mailed May 26, 2016). The Final Office Action
incorporates by reference reasoning given for the rejection in the Non-Final
Office Action of February 20, 2015 ("Previous Off. Act."). See Final Act.
11.
2 According to Appellant, the real party in interest is Mehmet Alpay Kaya.
(Appeal Br. 2).
Appeal2016-007308
Application 14/532,065
We AFFIRM.
Introduction
Appellant's application relates to "a computer-implemented method
for structuring and maintaining an LIIP [leveraged indexed investment
product] compris[ing] determining a leverage regulator, monitoring the
value of an index, monitoring the value of an investment with exposure to
the index, calculating a leverage ratio of the investment to the index,
calculating a leverage ratio adjustment in accordance with the leverage
regulator, and calculating a rebalancing action to adjust the leverage ratio of
the investment to a target leverage ratio." Spec. ,r 41.
Claims 1, 10, and 19 are the independent claims on appeal. Claim 1 is
illustrative and is reproduced below:
1. A method implemented by a computer for
determining a leverage regulator governing a leveraged indexed
investment product tracking an underlying index, comprising:
a. specifying a candidate leverage regulator in terms of a
parameter vector; and
b. substantially minimizing, by modifying said
parameter vector, pairwise return differences between a
candidate leveraged indexed investment product and a
logarithmic return leveraged system as both are simulated, with
said computer, to track a set of sample index trajectories;
c. wherein said candidate leveraged indexed investment
product is governed by said candidate leverage regulator;
d. wherein said logarithmic return leveraged system
effects nominal leverage;
e. wherein said sample index trajectories span a selected
time interval;
2
Appeal2016-007308
Application 14/532,065
f. wherein the sample index trajectories are drawn, with
the computer, from a selected sample index statistical
distribution;
g. wherein said pairwise return differences are measured
by evaluating, with the computer, a selected mathematical norm
function;
h. wherein said mathematical norm function effects
selected positive weightings on each of mean average return
and mode return of the sample index trajectories;
i. wherein said leverage regulator is the candidate
leverage regulator specified by the parameter vector that
substantially minimized the pairwise return differences over
said time interval; and
j. wherein the computer comprises a non-transitory,
computer-readable storage medium having computer-
executable instructions recorded thereon that, when executed on
the computer, configure the computer to perform said method.
Appeal Br., Claims App.
Rejection on Appeal
The Examiner maintains, and Appellant appeals, the following
rejection:
Claims 1-27 stand rejected under 35 U.S.C. § 101 as being
directed to ineligible subject matter. 3
ANALYSIS
Independent claims 1, 10, and 19 and dependent claims 2, 3, 11, 12, 20 and
21
Appellant argues independent claims 1, 10, and 19 ( which Appellant
refers to as Subgroup A), and dependent claims 2, 3, 11, 12, 20 and 21
3 All other rejections have been withdrawn.
3
Appeal2016-007308
Application 14/532,065
(which Appellant refers to as Subgroup Al) together as a group. See Appeal
Br. 10-11. We select claim 1 as representative such that claims 2, 3, 10, 11,
12, 19, 20, and 21 stand or fall therewith. See 37 C.F.R. § 4I.37(c)(l)(iv).
The Court in Alice emphasized the use of a two-step framework for
analysis ofpatentability under 35 U.S.C. § 101:
First, we determine whether the claims at issue are directed to
one of those patent-ineligible concepts. If so, we then ask,
"[ w ]hat else is there in the claims before us?" To answer that
question, we consider the elements of each claim both
individually and "as an ordered combination" to determine
whether the additional elements "transform the nature of the
claim" into a patent-eligible application.
See Alice Corp. Pty. Ltd. v CLS Bank Intl, 134 S. Ct. 2347, 2355 (2014)
(citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66
(2012)).
The Examiner determines that the independent claims are directed to
"monitoring a leverage exchange traded fund by rebalancing the
securities in the fund, which is a fundamental economic practice" and an
abstract idea. Previous Off. Act. 4. We note that the Examiner subdivides
Appellant's arguments into at least 13 arguments. See Ans. 3-21. We adopt
the Examiner's reasoning and conclusions and add the following for
emphasis.
We agree with the Examiner that the claims are directed to the trading
of securities, which is a fundamental economic idea. Appellant asserts that
the claimed method determines the input-output relationship specifying the
target leverage adjustment given the nominal leverage deviation, and that the
claimed invention is neither monitoring, rebalancing, nor risk management.
Appeal Br. 9-10. Appellant states with respect to independent claim 1: "The
4
Appeal2016-007308
Application 14/532,065
current listing of claims discloses a method that applies a fundamental
economic practice with, or by use of, a particular machine." Appeal Br. 14.
Appellant thus appears to concede that independent claim 1 is directed to a
fundamental economic principle, and argues for patentability based on the
nature of the application "with, or by use of, a particular machine." For
these reasons, we determine that step one of the Alice inquiry is satisfied
by the presence of a fundamental economic practice, i.e., the trading of
securities, and proceed to step two of the Alice inquiry.
The Examiner determines that independent claim 1 does not recite a
technological improvement and instead uses only a general purpose
computer to perform a mathematical function:
The claims do not recite an improvement in another technology
or technical field, nor do they purport to perform the functioning
of the computer itself. The specification in paragraphs [0073],
[0099], [0094 ], [0095], disclose a general purpose computer.
The computer is used to simulate "Monte Carlo simulations",
which are old and well known in the field of portfolio
rebalancing. Furthermore "a norm function", is a mathematical
function that is widely used in the field of portfolio rebalancing .
. . . Therefore the claims requires no more than a general purpose
computer to perform generic functions that are well-understood,
routine, and conventional activities previously known in the
industry.
Previous Off. Act. at 4.
Appellant argues that the invention applies a mathematical tool
without attempting to patent a mathematical formula or law of nature.
Appeal Br. 12. We are unpersuaded. Appellant states that "[t]he
Specification presents a novel framework for specifying leverage regulators
in terms of mathematical functions (see Specification, at least [0067]-[0072]
and at least Figures 1, 2, and 7). The claimed method determines the input-
5
Appeal2016-007308
Application 14/532,065
output relationship specifying the target leverage adjustment given the
nominal leverage deviation." Appeal Br. 10. As such, Appellant admits that
the claimed invention determines a mathematical relationship, and is based
on mathematical functions provided in the Specification.
Appellant asserts that the method results in improved performance,
and that the Specification presents a novel framework for specifying
leverage regulators. Appeal Br. 10, 12 ( citing "at least" Spec. ,r,r 67-72,
Figs. 1, 2, and 7). However, novelty is insufficient for proving non-
abstractness. See SAP America, Inc. v. InvestPic, LLC, 898 F .3d 1161, 1163
(Fed. Cir. 2018) ("We may assume that the techniques claimed are
'[g]roundbreaking, innovative, or even brilliant,' but that is not enough for
eligibility. Nor is it enough for subject-matter eligibility that claimed
techniques be novel and nonobvious in light of prior art, passing muster
under 35 U.S.C. §§ 102 and 103.") (citations omitted).
Referring to the "determining" limitation (i.e., "determining a
leverage regulator governing a leveraged indexed investment product") of
independent claims 1, 10, and 19, Appellant argues that the claimed method
is "for structuring a leveraged indexed investment product (LIIP)" where the
structure of an LIIP "is specified by its leverage regulator." Appeal Br. 9-
10. We are unpersuaded that the claimed invention is structural inasmuch as
the claim language at issue relates to "determining," and is therefore directed
to mathematical calculations themselves.
Appellant asserts that the invention is an improvement to "Portfolio
Management technology" (App. Br. 12 (citing Spec. ,r,r 105-114, Figs. 3---6);
see also Reply Br. 4), that using dynamic models, e.g., hysteresis, and norm
functions is established in the physical sciences (id. (citing Spec. ,r,r 92-95)),
6
Appeal2016-007308
Application 14/532,065
and that the invention results in a self-evident technological improvement
(id. at 13 ). Yet, using mathematical models is the type of information
processing that the courts have repeatedly held to be abstract. See, e.g.,
Cleveland Clinic Foundation v. True Health Diagnostics LLC, 859 F.3d
1352 (Fed. Cir. 2017) ( concluding that use of statistical models did not
transform an invention into patent-eligible subject matter); see also Bilski v.
Kappas, 561 U.S. 593, 599 (2010) ("Some of these claims also suggest
familiar statistical approaches to determine the inputs to use in claim 4' s
equation. For example, claim 7 advises using well-known random analysis
techniques to determine how much a seller will gain 'from each transaction
under each historical weather pattern."').
Appellant also asserts that "the use of a computer for structuring an
LIIP per the Application requires establishing circuitry unique to the
computer" and argues a contrast with the generic computers used in portfolio
management which "are not programmed to determine the structure of an
LIIP." Appeal Br. 13 (citing Spec. ,r,r 26-40, 60-72, Fig. 1). In DDR
Holdings, LLC. v. Hotels.Com, L.P., the Federal Circuit concluded that the
invention was necessarily rooted in computer technology in order to
overcome a problem specifically arising in the realm of computer networks.
DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014).
We agree with the Examiner that the claim does not amount to an
improvement to the functioning of a computer itself but rather represents an
improvement in mathematical modeling, which is not patentable subject
matter in itself. Although the use of a computer may require "circuitry
unique to the computer," as argued, as opposed to calculations performed
7
Appeal2016-007308
Application 14/532,065
mentally, the Specification's use of computers is simply to perform
mathematical calculations and to display output. See, e.g., Spec. ,r 99.
Appellant further argues that the independent claims add specific
limitations other than what is well-understood, routine, and conventional in
the field of portfolio management, e.g., minimizing return differences with a
theoretically ideal LRLS (log return leveraged system) over a time interval
in accordance with the statistical characteristics of an underlying index and
determining leverage adjustment functions. Appeal Br. 13-14; Reply Br. 5;
see Spec. ,r 23 ( discussing LRLS). Appellant argues that there is not token
post-solution activity. Appeal Br. 19; Reply Br. 5-6.
As above, we agree with the Examiner's findings that the claimed
invention uses generic computer structures to perform mathematical
calculations. Such use of computers to perform mathematical calculations
for the claimed invention is "well-understood, routine, [and] conventional."
See SAP America, Inc., 898 F.3d 1161, 1170. To the extent there is an
improvement, it lies in the field of mathematics. However, an
unconventional limitation must be in the realm of the non-abstract in order
to create patentable subject matter. See Berkheimer v. HP, Inc., 890 F .3d
1369, 1373 (Fed. Cir. 2018) (denying rehearing en bane) ("Patent law does
not protect claims to an "asserted advance in the realm of abstract ideas ... no
matter how groundbreaking the advance.").
Appellant asserts that the claimed invention does not preempt the field
of portfolio management. Appeal Br. 15-21. However, a showing of pre-
emption is not required for a determination that an idea is directed to non-
patentable subject matter. Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788
F.3d 1371, 1379 (Fed. Cir. 2015) ("Where a patent's claims are deemed only
8
Appeal2016-007308
Application 14/532,065
to disclose patent ineligible subject matter under the Mayo framework, as
they are in this case, preemption concerns are fully addressed and made
moot."). We conclude that the claimed subject matter is abstract for the
reasons set forth above.
We, therefore, sustain the Examiner's rejection under§ 101 of claim
1, and claims 2, 3, 10, 11, 12, and 19--21, which fall together with claim 1.
Dependent claims 4-9, 13-18, and 22-27
Appellant argues that dependent claims 4--9, 13-18, and 22-27, which
Appellant refers to as Subgroups B, C, B 1, and C 1, contain the limitations of
the independent claims and further recite certain additional limitations, e.g.,
of hysteresis and the diametric cone. Appeal Br. 10-11. These are
mathematical functions and we determine that they do not transform the
invention into patentable subject matter for similar reasons as for
independent claims 1, 10, and 19, from which they depend. See Spec.
,r,r 60-97. We, therefore, sustain the Examiner's rejection under§ 101 of
dependent claims 4--9, 13-18, and 22-27.
DECISION
The Examiner's decision to reject claims 1-27 under 35 U.S.C. § 101
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
9