Matthew Arnold. O'Hara et al.

Patent Trials and Appeals Board

Oct 1, 2019

14455309 - (D) (P.T.A.B. Oct. 1, 2019)

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.
14/455,309 08/08/2014 Matthew Arnold O'Hara 22869-27369/US 1777
758 7590 10/01/2019
FENWICK & WEST LLP
SILICON VALLEY CENTER
801 CALIFORNIA STREET
MOUNTAIN VIEW, CA 94041
EXAMINER
ORTIZ ROMAN, DENISSE Y
ART UNIT PAPER NUMBER
3687
NOTIFICATION DATE DELIVERY MODE
10/01/2019 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):
PTOC@Fenwick.com
PTOL-90A (Rev. 04/07)

UNITED STATES PATENT AND TRADEMARK OFFICE
____________________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________________

Ex parte MATTHEW ARNOLD O’HARA and WEI LI1
____________________

Appeal 2018-004834
Application 14/455,309
Technology Center 3600
____________________

Before ELENI MANTIS MERCADER, ERIC S. FRAHM, and MICHAEL
T. CYGAN, Administrative Patent Judges.

MANTIS MERCADER, Administrative Patent Judge.

DECISION ON APPEAL
This is a decision on appeal under 35 U.S.C. § 134(a) of the final
rejection of claims 1 and 5–23, which are all of the claims pending in the
application. We have jurisdiction under 35 U.S.C. § 6(b).
We affirm.

1 According to Appellants, the real party in interest is BlackRock Index
Services, LLC of San Francisco, California. App. Br. 2.
Appeal 2018-004834
Application 14/455,309

2
The Invention
Appellants’ claimed invention relate to a system and method for
managing a target outcome fund. The relative amount of the risky asset and
the low risk asset held by the fund is rebalanced based on a comparison of a
current target return and a current actual return of the fund. If the fund over-
performs, the target outcome is increased accordingly to prevent the fund
becoming overly invested in the risky asset, thereby protecting gains made.
Abstract.
Exemplary Claim
Claim 1, reproduced below is representative of the subject matter on
appeal:
1. A method for managing a target outcome fund, the method
comprising:
calculating a delta of an option for a risky asset, the risky
asset having a high volatility relative to a low-risk asset,
wherein the calculated delta is a measure of a change in value
of the option relative to a change in value of the risky asset;
determining, by a process executed by a computer processor, a
balance between a quantity of the risky asset and a quantity of
the low-risk asset, wherein the balance is determined based on
the calculated delta to cause a performance of the target
outcome fund to approximate a performance of the option for
the risky asset;
initiating one or more transactions automatically using a
trading system to gain exposure to the risky and low-risk assets
by the target outcome fund according to the determined balance
between the quantity of the risky asset and the quantity of the
low-risk asset; and
performing a plurality of rebalancings on the target
outcome fund, each rebalancing occurring at a fixed periodic
basis and including one or more transactions using the trading
system that automatically update the balance between the
Appeal 2018-004834
Application 14/455,309

3
quantity of the risky asset and the quantity of the low-risk asset,
the updated balance based on a current performance of the fund.

App. Br. 21 (Claims App’x).
Rejection on Appeal
Claims 1 and 5–23 stand rejected under 35 U.S.C. § 101 as directed to
patent-ineligible subject matter. Final Act. 3–5.
ANALYSIS
We adopt the Examiner’s findings in the Answer and Final Office
Action except as otherwise noted below.
Section 101 of the Patent Act provides that “any new and useful
process, machine, manufacture, or composition of matter, or any new and
useful improvement thereof” is patent eligible. 35 U.S.C. § 101. But the
Supreme Court has long recognized an implicit exception to this section:
“Laws of nature, natural phenomena, and abstract ideas are not patentable.”
Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 216 (2014) (quoting Ass’n for
Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013)).
To determine whether a claim falls within one of these excluded categories,
the Court has set out a two-part framework. The framework requires us first
to consider whether the claim is “directed to one of those patent-ineligible
concepts.” Alice, 573 U.S. at 217. If so, we then examine “the elements of
[the] 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.” Alice, 573 U.S. at 217 (quoting Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 78, 79 (2012)).
That is, we examine the claim for an “inventive concept,” “an element or
Appeal 2018-004834
Application 14/455,309

4
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, 573 U.S. at 217–18 (alteration in original) (quoting
Mayo, 566 U.S. at 72–73).
The Patent Office recently revised its guidance about this framework.
See 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg.
50 (Jan. 7, 2019) (“Revised Guidance”). Under the Revised Guidance, to
decide whether a claim is directed to an abstract idea, we evaluate whether
the claim (1) recites subject matter that falls within one of the abstract idea
groupings identified in the Revised Guidance and (2) fails to integrate the
recited abstract idea into a practical application. See Revised Guidance, 84
Fed. Reg. at 51, 54. If the claim is directed to an abstract idea, as noted
above, we then determine whether the claim has an inventive concept. The
Revised Guidance explains that when making this determination, we should
consider whether the additional claim elements add “a specific limitation or
combination of limitations that are not well-understood, routine,
conventional activity in the field” or “simply append[] well-understood,
routine, conventional activities previously known to the industry, specified
at a high level of generality.” Revised Guidance, 84 Fed. Reg. at 56.

Step 2A(i): Does the Claim Recite a Judicial Exception?
The Examiner determined that claim 1 is directed to “to a
mathematical algorithm for trading assets, which is considered an abstract
idea.” Ans. 3. We agree with the Examiner that the claim recites a
mathematical relationship but we further find that the mathematical formula
Appeal 2018-004834
Application 14/455,309

5
is applied as a fundamental economic practice. The mathematical
relationship and the fundamental economic practice constitute abstract ideas.
Claim 1, as drafted, is a system that, under its broadest reasonable
interpretation, is a fundamental economic practice similar to risk the
intermediated settlement in Alice (see Alice, 573 U.S. at 218–19), verifying
credit card transactions in CyberSource Corp. v. Retail Decisions, Inc., 654
F.3d 1366, 1370 (Fed. Cir. 2011), and guaranteeing transactions in
buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354 (Fed. Cir. 2014). The
Specification describes that “financial services and products, and more
particularly to funds that are managed with a goal of achieving a predefined
dollar amount at a future date.” Spec. ¶ 1. As such, claim 1 recites a
fundamental economic practice—i.e., a certain method of organizing human
activity—which is an abstract idea. See Revised Guidance, 84 Fed. Reg. at
54–55.
Claim 1 recites, in pertinent part:
[C]alculating a delta of an option for a risky asset, the risky
asset having a high volatility relative to a low-risk asset,
wherein the calculated delta is a measure of a change in value
of the option relative to a change in value of the risky asset;
determining . . . a balance between a quantity of the risky asset
and a quantity of the low-risk asset, wherein the balance is
determined based on the calculated delta to cause a
performance of the target outcome fund to approximate a
performance of the option for the risky asset;
initiating one or more transactions . . . to gain exposure to the
risky and low-risk assets by the target outcome fund according
to the determined balance between the quantity of the risky
asset and the quantity of the low-risk asset; and
performing a plurality of rebalancings on the target outcome
fund, each rebalancing occurring at a fixed periodic basis and
including one or more transactions . . . [to] update the balance
Appeal 2018-004834
Application 14/455,309

6
between the quantity of the risky asset and the quantity of the
low-risk asset, the updated balance based on a current
performance of the fund.

Claims App’x.
Under the broadest reasonable interpretation standard,2 we conclude
that the above limitations recite steps in a fundamental economic practice
using a mathematical relationship to manage the performance of a fund to
target a specific outcome. See Spec. ¶¶ 4–6. Further the fundamental
economic practice using the delta of an option is well known in the art by
using the Black-Scholes formula and the modification of the claimed
invention lies in rebalancing periodically instead of continuously and using a
low-risk asset in place of the risk-free asset. See Spec. ¶¶ 11, 12.
Thus, under Step 2A(i), we agree with the Examiner that claim 1
recites a judicial exception. Specifically, we conclude claim 1, as a whole,
under our Revised Guidance, recites a fundamental economic practice, i.e., a
certain method of organizing human activity that uses a mathematical
formula, and thus an abstract idea.

2 During prosecution, claims must be given their broadest reasonable
interpretation when reading claim language in light of the specification as it
would be interpreted by one of ordinary skill in the art. In re Am. Acad. of
Sci. Tech. Ctr., 367 F.3d 1359, 1364 (Fed. Cir. 2004). Under this standard,
we interpret claim terms using “the broadest reasonable meaning of the
words in their ordinary usage as they would be understood by one of
ordinary skill in the art, taking into account whatever enlightenment by way
of definitions or otherwise that may be afforded by the written description
contained in the applicant’s specification.” In re Morris, 127 F.3d 1048,
1054 (Fed. Cir. 1997).
Appeal 2018-004834
Application 14/455,309

7
Step 2A(ii): Judicial Exception Integrated into a Practical Application?
If the claims recite a patent-ineligible concept, as we conclude above,
we proceed to the “practical application” Step 2A(ii) in which we determine
whether the recited judicial exception is integrated into a practical
application of that exception by: (a) identifying whether there are any
additional elements recited in the claim beyond the judicial exception(s); and
(b) evaluating those additional elements individually and in combination to
determine whether they integrate the exception into a practical application.
Claim 1 recites an abstract idea as identified in Step 2A(i), supra, and
none of the additional elements integrates the judicial exception of a
fundamental economic practice into a practical application. Here, the
additional elements, which are not part of the abstract idea, are the recited
“by a computer processor” and “trading system” performing each of the
functions that comprise the abstract idea.
We note that Appellants’ Specification describes the computer as a
“desktop PC” or a “portable device.” See Spec. ¶ 30. The trading system is
described as “trading system 250 to buy and sell assets.” See Spec. ¶ 24.
Thus, claim 1 as a whole merely uses instructions and a generic processor to
implement the abstract idea on a computer or, alternatively, merely uses a
computer as a tool to perform the abstract idea.
Appellants contend the claimed invention is patent eligible because it
solves the technical problem because it allows investors “to target a
particular outcome, unlike the conventional methods.” App. Br. 13.
Appellants argue the claimed invention is similar to McRO citing “by
incorporating the specific features of the rules as claim limitations, claim 1 is
Appeal 2018-004834
Application 14/455,309

8
limited to a specific process for automatically animating characters using
particular information and techniques.”3 Id. at 12 (emphasis added).
We are not persuaded by Appellants’ arguments. In McRO, the
claims were not held to be abstract because they recited a “specific . . .
improvement in computer animation” using “unconventional rules that
relate[d] sub sequences of phonemes, timings, and morph weight sets.”
McRO, 837 F.3d at 1302–03, 1307–08, 1314–15. In McRO, “the
incorporation of the claimed rules, not the use of the computer,” improved
an existing technological process. Id. at 1314. The claims in McRO,
however, recited a “specific . . . improvement in computer animation” using
“unconventional rules that relate[d] sub sequences of phonemes, timings,
and morph weight sets.” McRO, 837 F.3d at 1302–03, 1307–08, 1314–15
(emphasis added). Appellants do not, however, identify how claim 1
improves an existing technological process. See Alice, 134 S. Ct. at 2358
(explaining that “the claims in Diehr were patent eligible because they
improved an existing technological process”). Rather, claim 1 concerns
“managing a target outcome.” See claim 1.
Furthermore, the recitation to “automatically” performing certain
steps do not transform the abstract idea discussed above. “Automation” or
any increase in processing speed in the claimed method (as compared to
without using computers) comes from the capabilities of the generic
computer components, and not the recited process itself. See FairWarning
IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089, 1095 (Fed. Cir. 2016) (citing
Bancorp Servs., LLC v. Sun Life Assurance Co., 687 F.3d 1266, 1278 (Fed.

3 Referring to McRO, Inc. v. Bandai Namco Games America Inc., 837 F.3d
1299, 1314 (Fed. Cir. 2016).
Appeal 2018-004834
Application 14/455,309

9
Cir. 2012) (“[T]he fact that the required calculations could be performed
more efficiently via a computer does not materially alter the patent eligibility
of the claimed subject matter.”)); see also Intellectual Ventures I LLC v. Erie
Indemnity Co., 711 F. App’x 1012, 1017 (Fed. Cir. 2017) (unpublished)
(“Though the claims purport to accelerate the process of finding errant files
and to reduce error, we have held that speed and accuracy increases
stemming from the ordinary capabilities of a general-purpose computer ‘do[
] not materially alter the patent eligibility of the claimed subject matter.’”).
Therefore, we conclude the abstract idea is not integrated into a
practical application, and thus the claim is directed to the judicial exception.

Step 2B – “Inventive Concept” or “Significantly More”
If the claims are directed to a patent-ineligible concept, as we
conclude above, we proceed to the “inventive concept” step. For Step 2B we
must “look with more specificity at what the claim elements add, in order to
determine ‘whether they identify an “inventive concept” in the application of
the ineligible subject matter’ to which the claim is directed.” Affinity Labs
of Texas, LLC v. DIRECTV, LLC, 838 F.3d 1253, 1258 (Fed. Cir. 2016)
(quoting Elec. Power Grp., 830 F.3d at 1353).
In applying step two of the Alice analysis, our reviewing court guides
that we must “determine whether the claims do significantly more than
simply describe [the] abstract method” and thus transform the abstract idea
into patentable subject matter. Ultramercial, Inc. v. Hulu, LLC, 772 F.3d
709, 715 (Fed. Cir. 2014). We look to see whether there are any “additional
features” in the claims that constitute an “inventive concept,” thereby
rendering the claims eligible for patenting even if they are directed to an
Appeal 2018-004834
Application 14/455,309

10
abstract idea. Alice, 573 U.S. at 221. Those “additional features” must be
more than “well-understood, routine, conventional activity.” Mayo, 566
U.S. at 79.
Evaluating representative claim 1 under Step 2B, we conclude it lacks
an inventive concept that transforms the abstract idea of managing a target
outcome fund into a patent-eligible application of that abstract idea.
As evidence of the conventional nature of the “computer” and the
“trading system” recited in claim 1, we again refer to paragraphs 24 and 30
of the Specification, which describes a computer software program, stored in
memory and executed by the processor(s) of the computer, to perform the
disclosed functions. Spec. ¶¶ 24, 30. Furthermore, electronic recordkeeping
and receiving or transmitting data over a network have been found to be
well-understood, routine, conventional computer functions. Alice Corp., 573
U.S. at 225 (electronic recordkeeping); OIP Techs., Inc., v. Amazon.com,
Inc., 788 F.3d 1359, 1363 (Fed. Cir. 2015) (sending messages over a
network); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir.
2014) (computer receives and sends information over a network).
We conclude the claims fail the Step 2B analysis. As discussed for
Step 2A(ii), the additional limitations of claim 1merely recite a generic
computer and trading system along with no more than mere instructions to
implement the identified abstract idea using the computer-based elements.
Reevaluating these limitations under Step 2B, we are not persuaded that the
combination of steps incorporate the additional elements to perform
financial computations in an unconventional way so as to include an
inventive concept that would render the claim eligible.
Appeal 2018-004834
Application 14/455,309

11
Therefore, because the claims fail under both the Step 2A and Step 2B
analyses, we sustain the Examiner’s § 101 rejection of independent claims 1
and 5–23.

DECISION
We affirm the Examiner’s decision rejecting claims 1 and 5–23.
No time period for taking any subsequent action in connection with
this appeal may be extended under 37 C.F.R. § 1.136(a)(1)(iv). See
37 C.F.R. § 41.50(f).
AFFIRMED