Michelle Harnick et al.

Patent Trials and Appeals Board

Aug 21, 2019

14051042 - (D) (P.T.A.B. Aug. 21, 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.
14/051,042 10/10/2013 Michelle HARNICK 40191/00602 1074
30636 7590 08/21/2019
FAY KAPLUN & MARCIN, LLP
150 BROADWAY, SUITE 702
NEW YORK, NY 10038
EXAMINER
FU, HAO
ART UNIT PAPER NUMBER
3697
MAIL DATE DELIVERY MODE
08/21/2019 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 MICHELLE HARNICK, JOSE R. COURET,
and PRIYANTHA L. PERERA
_ _ _____ _____
Appeal 2018-0060471
Application 14/051,042
Technology Center 3600
____________

Before CAROLYN D. THOMAS, ERIC B. CHEN, and
SCOTT RAEVSKY, Administrative Patent Judges.

THOMAS, Administrative Patent Judge.

DECISION ON APPEAL

Appellants seek our review under 35 U.S.C. § 134(a) of the
Examiner’s Final Rejection of claims 25–41, all the pending claims in the
present application. Claims 1–24 are canceled (see Claims Appendix). We
have jurisdiction over the appeal under 35 U.S.C. § 6(b).
We AFFIRM.

The present invention relates generally to calculating industry index
amounts (see Abstract).

1 Appellants name Guy Carpenter & Company, LLC as the real party in
interest (App. Br. 2).
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Independent claim 25, reproduced below, is representative of the
appealed claims:
25. A method, comprising:
first calculating, by a processor, a first industry
index value at an index year based on (i) selected actual loss
values for the index year for a plurality of companies in a
defined line of business, (ii) selected actual loss values for a
predetermined number of years preceding the index year for
the plurality of companies in the defined line of business,
and (iii) loss estimates for a number of years subsequent to
the index year corresponding to a predetermined term of a
systemic risk product for the plurality of companies in the
defined line of business;
second calculating, by the processor, a second
industry index value based on (i) the selected actual loss
values for the index year for the plurality of companies in
the defined line of business, (ii) the selected actual loss
values for the predetermined number of years preceding the
index year for the plurality of companies in the defined line
of business, and (iii) selected actual loss values for at least
one year subsequent to the index year for the plurality of
companies in the
defined line of business, wherein the at least one year
subsequent to the index year is equal to the predetermined
term of the systemic risk product;
third calculating, by the processor, a third
industry index value based on the first and second industry
index values; and
fourth calculating a settlement amount based
on the third industry index value, an index trigger and an
index limit,
wherein the first, second, third, and fourth
calculating are implemented using one or more computer
programs executed on a computer system comprising the
processor, a non-transitory storage medium, and one or
more user interface devices,
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wherein the settlement amount calculated by
the computer programs are directed to determining a
systemic risk in the defined line of business.

Appellants appeal the following rejection:
Claims 25–41 are rejected under 35 U.S.C. § 101 because the claimed
invention is directed to patent-ineligible subject matter (Final Act. 8–12);
We review the appealed rejections for error based upon the issues
identified by Appellants, and in light of the arguments and evidence
produced thereon. Ex parte Frye, 94 USPQ2d 1072, 1075 (BPAI 2010)
(precedential).

ANALYSIS
Rejection under 35 U.S.C. § 101
An invention is patent-eligible if it claims a “new and useful process,
machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
However, the Supreme Court has long interpreted 35 U.S.C. § 101 to include
implicit exceptions: “[l]aws of nature, natural phenomena, and abstract
ideas” are not patentable. E.g., Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573
U.S. 208, 216 (2014).
In determining whether a claim falls within an excluded category, we
are guided by the Supreme Court’s two-step framework, described in Mayo
and Alice. See Alice, 573 U.S. at 217–18 (citing Mayo Collaborative Servs.
v. Prometheus Labs., Inc., 566 U.S. 66, 75–77 (2012)). In accordance with
the framework, we first determine what concept the claim is “directed to.”
See Alice, 573 U.S. at 219 (“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.”); see also Bilski v. Kappos, 561 U.S. 593, 611
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(2010) (“Claims 1 and 4 in petitioners’ application explain the basic concept
of hedging, or protecting against risk.”). For example, concepts determined
to be abstract ideas, and thus patent ineligible, include certain methods of
organizing human activity, such as fundamental economic practices (Alice,
573 U.S. at 219–20; Bilski, 561 U.S. at 611); mathematical formulas (Parker
v. Flook, 437 U.S. 584, 594–95 (1978)); and mental processes (Gottschalk v.
Benson, 409 U.S. 63, 69 (1972)).
Recently, the USPTO published revised guidance on the application
of 35 U.S.C. § 101. USPTO’s 2019 Revised Patent Subject Matter
Eligibility Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019) (“Revised Guidance”).
Under the Revised Guidance “Step 2A,” the office first looks to whether the
claim recites:
(1) any judicial exceptions, including certain groupings of abstract
ideas (i.e., mathematical concepts, certain methods of organizing human
activity such as a fundamental economic practice, or mental processes); and
(2) additional elements that integrate the judicial exception into a
practical application (see MPEP § 2106.05(a)-(c), (e)-(h)). 84 Fed. Reg. 51–
52, and 55.
Only if a claim (1) recites a judicial exception and (2) does not
integrate that exception into a practical application, does the Office then
(pursuant to the Revised Guidance “Step 2B”) look to whether the claim:
(3) adds a specific limitation beyond the judicial exception that is not
“well-understood, routine, conventional” in the field (see MPEP
§ 2106.05(d)); or
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(4) simply appends well-understood, routine, conventional activities
previously known to the industry, specified at a high level of generality, to
the judicial exception. 84 Fed. Reg. 56.

Step 2A, Prong 1 (Does the Claim Recite a Judicial Exception?)
With respect to independent method claim 25, and similarly, system
claim 32 and non-transitory computer readable storage medium claim 39, the
Examiner determines that the claims are directed to “calculating a settlement
amount based on industry index values” (Final Act. 8 and 10), which we
conclude are mental processes and/or certain methods of organizing human
activity, which are types of abstract ideas.
For example, the Specification discloses:
A customer of an insurance company or a reinsurance company
pays the (re) insurance company a premium to bind a (re)
insurance policy for the customer. The (re) insurance policy
allows the customer to make a claim against the (re) insurance
company for a covered amount when the customer suffers a loss
covered by the (re) insurance policy. The (re) insurance
company is generally required by law or insurance regulation to
keep a certain amount of the premium payment available to pay
anticipated losses. These funds that are set aside to pay later
losses are referred to as loss reserves.

Spec. ¶ 1.

(Re) insurance companies may also hedge their risk on a (re)
insurance policy by using other financial instruments related to
the entire (re) insurance industry, such as CAT bonds or
industry loss warranties (“ILWs”). These industry-based or
index-based securities generally use industry losses as a trigger
mechanism for payout of a specified amount of money to a (re)
insurance company or other insured entity.

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Id. ¶ 2.
Throughout this description it will be described that an
insurance company will be the purchaser of the systemic risk
product to hedge its risk against systemic risk. However, those
skilled in the art will recognize that other entities may also be
the purchaser of the systemic risk product. For example, as
described above, reinsurers may have the same issues as
insurance companies, thus, a reinsurer may be the purchaser of
the systemic risk product.

Id. ¶ 20.
Specifically, claim 25 recites at least the following limitations:
(1) “first calculating . . . a first industry index value,” (2) “second calculating
. . . a second industry index value,” (3) “third calculating . . . a third industry
index value based on the first and second industry index values,” and (4)
“fourth calculating a settlement amount based on the third industry index
value, an index trigger, and an index limit.”
These limitations, under their broadest reasonable interpretation,
recite mental processes because the limitations all encompass mental
processes, which are acts, i.e., calculations, people can perform using their
minds or pen and paper. See, e.g., CyberSource Corp. v. Retail Decisions,
Inc., 654 F.3d 1366, 1372-73 (Fed. Cir. 2011) (determining that a claim
whose “steps can be performed in the human mind, or by a human using a
pen and paper” is directed to an unpatentable mental process). This is true
even if the claim recites that a generic computer component performs the
acts. See, e.g., Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306,
1335 (Fed. Cir. 2015) (“Courts have examined claims that required the use
of a computer and still found that the underlying, patent-ineligible invention
could be performed via pen and paper or in a person's mind.”); see also
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Revised Guidance, 84 Fed. Reg. 52 n.14 (“If a claim, under its broadest
reasonable interpretation, covers performance in the mind but for the
recitation of generic computer components, then it is still in the mental
processes category unless the claim cannot practically be performed in the
mind.”).
For instance, under their broadest reasonable interpretation, people
can practically perform all of the “calculating” steps by observing and
evaluating actual losses suffered in previous years and estimating loss using
actuarial techniques to calculate the industry index values (see Spec. ¶ 21).
Although the Specification describes exemplary methods of calculating the
industry index values using computer components (see id. ¶ 28), we agree
with the Examiner that such functions “are done by the generically recited
computer device” (see Final Act. 9).
Additionally, the aforementioned limitations in claim 25, under their
broadest reasonable interpretation, also recite a fundamental economic
practice akin to hedging, insurance, and mitigating risk because the
limitations all recite operations that would ordinarily take place in a
commercial environment. Alice, 573 U.S. at 219–20 (concluding that use of
a third party to mediate settlement risk is a “fundamental economic practice”
and thus an abstract idea); id. (describing the concept of risk hedging
identified as an abstract idea in Bilski as “a method of organizing human
activity”); Bilski, 561 U.S. at 611–612 (concluding that hedging is a
“fundamental economic practice” and therefore an abstract idea); Bancorp,
687 F.3d at 1280 (concluding that “managing a stable value protected life
insurance policy by performing calculations and manipulating the results” is
an abstract idea).
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Appellants challenge the Examiner’s determinations on the ground
that “the Examiner is describing the claims at issue here in an overly high
level of abstraction and overgeneralizing them” (App. Br. 7). However, we
determine that claim 25 recites “mental processes” and/or “certain methods
of organizing human activity,” which are types of abstract ideas. The
Examiner condensed claim 25 to “calculating a settlement amount based on
industry index values” (Final Act. 8), but this is simply a higher level of
abstraction. Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229, 1240–41 (Fed.
Cir. 2016) (“An abstract idea can generally be described at different levels of
abstraction. As the Board has done, the claimed abstract idea could be
described as generating menus on a computer, or generating a second menu
from a first menu and sending the second menu to another location. It could
be described in other ways, including, as indicated in the Specification,
taking orders from restaurant customers on a computer.”). Whichever way
the concept is described, we do not see that Appellants have adequately
shown that claim 25 does not recite an abstract idea. Just because claim 25
includes more words than the phrase the Examiner uses as an articulation of
the abstract idea to which he/she found the claim to recite, this is an
insufficient reason to persuasively argue that claim 25 does not recite an
abstract idea. Furthermore, the identified abstract idea need not encompass
every claim limitation. Otherwise, there would be no need for step two of
the Alice inquiry. Alice, 573 U.S. at 216.
Therefore, for at least the aforementioned reasons, we agree with the
Examiner that representative claim 25 recites an abstract idea, which we
conclude is “mental processes” and/or “certain methods of organizing
human activity.”
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Step 2A—Prong 2 (integration into Practical Application)2
Under the Revised Guidance, we now must determine if additional
elements in the claims integrate the judicial exception into a practical
application (see MPEP § 2106.05(a)–(c), (e)–(h)).
We discern no additional element (or combination of elements)
recited in Appellants’ representative claim 25 that integrates the judicial
exception into a practical application. See Revised Guidance, 84 Fed. Reg.
54–55 (“Prong 2”). For example, Appellants’ claimed additional elements
(e.g., “processor,” “computer programs,” “computer system,” “non-
transitory storage medium,” and “user interface devices”) do not: (1)
improve the functioning of a computer or other technology; (2) are not
applied with any particular machine (except for a generic computer); (3) do
not effect a transformation of a particular article to a different state; and (4)
are not applied in any meaningful way beyond generally linking the use of
the judicial exception to a particular technological environment, such that
the claim as a whole is more than a drafting effort designed to monopolize
the exception. See MPEP §§ 2106.05(a)–(c), (e)–(h).
Appellants contend that similar to the claims of Enfish, “[t]he
Specification explicitly provides an improvement to traditional approaches.
. . . all of the recited calculations are based on rules regarding selection of
values . . . [and] [t]hese rules establish the mechanism by which the
calculations are to be processed” (App. Br. 6). We disagree with Appellants.

2 We acknowledge that some of the considerations at Step 2A, Prong 2,
properly may be evaluated under Step 2 of Alice (Step 2B of the Office
Revised Guidance). For purposes of maintaining consistent treatment within
the Office, we evaluate them under Step 1 of Alice (Step 2A of the Office
Revised Guidance). See Revised Guidance, 84 Fed. Reg. 55 n.25, 27–32.

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The claims at issue in Enfish were directed to a specific type of data
structure, i.e., a self-referential table for a computer database, designed to
improve the way a computer carries out its basic functions of storing and
retrieving data. See Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335-36
(Fed. Cir. 2016). In rejecting a § 101 challenge, the court in Enfish held that
“the plain focus of the claims is on an improvement to computer
functionality itself, not on economic or other tasks for which a computer is
used in its ordinary capacity.” See Enfish, 822 F.3d id. at 1336.
Here, Appellants do not point to anything in the claim that resembles
the inventive self-referential data structure at issue in Enfish. The
Appellants also do not persuasively direct our attention to anything in the
Specification to indicate that the invention provides an improvement in the
computer’s technical functionality. Instead, the claimed “industry index
values” and “settlement amount” improves economic tasks, i.e., hedging an
insurance company’s risk (see Spec. ¶ 3). That is, here the arguably
innovative technique of the appealed claims is inextricably a part of the
mental process and/or method of organizing human activity, i.e.,
“calculating a settlement amount based on industry index values.”
Moreover, nothing in the claims, understood in light of the Specification,
requires anything other than an off-the-shelf, conventional computer used
for calculating values. Therefore, unlike Enfish, the claims are directed not
to improvement in computer capabilities, but to the results of applying an
abstract idea.
Appellants further contend that “the holding in McRO further supports
the Appellants’ position” (App. Br. 8), in that “the result of the settlement
amount in claim 25 improves technology in computer-based approaches to
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determining systemic risk” (id. at 10), and “the specific structure of the
claimed rules would prevent broad preemption . . . because the limits of the
rules themselves are specific” (id.). We disagree with Appellants.
In McRO, the Federal Circuit concluded that the claim, when
considered as a whole, was directed to a “technological improvement over
the existing, manual 3-D animation techniques” through the “use of limited
rules specifically designed to achieve an improved technological result in
conventional industry practice.” McRO, Inc. v. Bandai Namco Games Am.
Inc., 837 F.3d 1299, 1316 (Fed. Cir. 2016). Specifically, the Federal Circuit
found that the claimed rules allowed computers to produce accurate and
realistic lip synchronization and facial expressions in animated characters
that previously could only be produced by human animators; and the rules
were limiting because they defined morph weight sets as a function of
phoneme sub-sequences. See id. at 1313 (citations omitted). In contrast,
here, Appellants have not identified any analogous improvement attributable
to the claimed invention. Although calculating industry values may improve
a business process, i.e., calculating a settlement amount, it does not achieve
an improved technological result. We see no parallel between the limiting
rules described in McRO and the results-based method recited in Appellants’
claims.
Moreover, because we find the claimed subject matter covers patent-
ineligible subject matter, the pre-emption concern raised by Appellants is
necessarily addressed. “Where a patent’s claims are deemed only to disclose
patent ineligible subject matter under the Mayo framework, [] preemption
concerns are fully addressed and made moot.” See Ariosa Diagnostics, Inc.
v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015).
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Finally, Appellants contend that “[t]he output of the settlement risk is
a tangible result based on a transformation of various inputs” (App. Br. 11).
However, data management has been a function of computers for as long as
computers have existed and will not transform an abstract concept into a
patentable invention. Alice, 573 U.S. at 216.
For at least the reason noted supra, we determine that representative
claim 25 (1) recites a judicial exception and (2) does not integrate that
exception into a practical application. Thus, representative claim 25 is
directed to the aforementioned abstract idea.
Alice/Mayo—Step 2 (Inventive Concept)
Step 2B identified in the Revised Guidance
Turning to the second step of the Alice inquiry, we now look to
whether claim 1 contains any “inventive concept” or adds anything
“significantly more” to transform the abstract concept into a patent-eligible
application. Alice, 573 U.S. at 216. As recognized by the Revised
Guidance, an “inventive concept” under Alice step 2 can be evaluated based
on whether an additional element or combination of elements:
(1) “adds a specific limitation or combination of limitations that
are not well-understood, routine, conventional activity in the
field, which is indicative that an inventive concept may be
present;” or
(2) “simply appends well-understood, routine, conventional
activities previously known to the industry, specified at a
high level of generality, to the judicial exception, which is
indicative that an inventive concept may not be present.”

See Revised Guidance, 84 Fed. Reg. 56; see also MPEP § 2106.05(d).
Appellants make no explicit argument regarding whether any specific
limitations are well-understood, routine, or conventional, and we find no
element or combination of elements recited in Appellants’ claim 25 that
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contains any “inventive concept” or adds anything “significantly more” to
transform the abstract concept into a patent-eligible application. For
instance, Appellants have not adequately explained how claim 25 is
performed such that it is not a routine and conventional function of a generic
computer, given that Appellants’ Specification merely describes the
exemplary methods being performed by generic components (see Spec.
¶ 28). See Berkheimer v. HP Inc., 881 F.3d 1360, 1369 (Fed. Cir. 2018)
(“Whether something is well-understood, routine, and conventional to a
skilled artisan at the time of the patent is a factual determination.”).
Because Appellants’ independent claim 25 is directed to a patent-
ineligible abstract concept, does not include additional elements that
integrate the judicial exception into a practical application, and does not add
a specific limitation beyond the judicial exception that is not “well-
understood, routine, and conventional,” we sustain the Examiner’s rejection
of the claims 24–41 under 35 U.S.C. § 101 as being directed to non-statutory
subject matter in light of Alice, its’ progeny, and the Revised Guidance.

DECISION
We affirm the Examiner’s § 101 rejection.
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).

AFFIRMED