Ex Parte KayaDownload PDFPatent Trial and Appeal BoardSep 21, 201814532065 (P.T.A.B. Sep. 21, 2018) Copy Citation 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 Copy with citationCopy as parenthetical citation