Paul Callaway et al.

Patent Trials and Appeals Board

Oct 1, 2019

14644525 - (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.
14/644,525 03/11/2015 Paul Callaway 4672-14003CUS 3291
12684 7590 10/01/2019
Lempia Summerfield Katz LLC/CME
20 South Clark Street
Suite 600
Chicago, IL 60603
EXAMINER
BRIDGES, CHRISTOPHER
ART UNIT PAPER NUMBER
3695
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):
docket-us@lsk-iplaw.com
mail@lsk-iplaw.com
pair_lsk@firsttofile.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
________________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
________________

Ex parte PAUL CALLAWAY, SEAN CASTETTE,
KIREETI REDDY, AKIRA YAMAGUCHI,
JOSE ANTONIO ACUÑA-ROHTER,
PEARCE PECK-WALDEN, and ZACHARY BONIG1
________________

Appeal 2018-008946
Application 14/644,525
Technology Center 3600
________________

Before BRADLEY W. BAUMEISTER, JON M. JURGOVAN, and
RUSSELL E. CASS, Administrative Patent Judges.

BAUMEISTER, Administrative Patent Judge.

DECISION ON APPEAL
Appellant appeals under 35 U.S.C. § 134(a) from the Examiner’s
Final Rejection of claims 1–28, which constitute all of the pending claims.
Appeal Br. 5. Claims 1–28 stand rejected under 35 U.S.C. § 101 as being
directed to patent-ineligible subject matter. Final Action mailed Oct. 25,
2017 (“Final Act.”) 2. We have jurisdiction under 35 U.S.C. § 6(b).
We affirm.

1 We use the word “Appellant” to refer to “applicant” as defined in
37 C.F.R. § 1.42. Appellant identifies the real party in interest as Chicago
Mercantile Exchange Inc. Appeal Brief filed Mar. 26, 2018 (“Appeal
Br.”) 2.
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CLAIMED SUBJECT MATTER
Appellant describes the present invention as follows:
The disclosed embodiments relate to regulation of a rate
of incoming orders by buffering or otherwise batching orders
together as they are received and subsequently forwarding
batches of orders to a match engine for processing thereby in a
manner [that] may equalize orders from traders having varying
abilities to rapid submit orders or otherwise capitalize on market
events. The disclosed embodiments further relate to prioritizing
the matching of resting orders against an incoming order. In
particular, the disclosed embodiments alter the priority of a given
resting order to match against an incoming order, relative to other
suitably matching resting orders, as a function of how long the
orders have been resting on the order book.
Abstract.
Independent claim 1 is representative of the appealed claims.2 It is
reproduced below with formatting modified for clarity and emphasis added
to the claim language that recites an abstract idea:
1. A system for determining, by an electronic trading system,
an allocation of an incoming order for a transaction of a quantity
of a financial instrument at an order price among a plurality of
previously received but unsatisfied orders, stored in a first
memory, for a transaction counter thereto at the order price for a
total quantity of the financial instrument that is less than the
quantity of the incoming order, wherein each of the plurality of
previously received but unsatisfied orders is characterized by a
time of receipt at which the previously received but unsatisfied
order was received by the electronic trading system, the system
comprising:

2 Appellant argues all of the claims together as a group. See Appeal Br. 5–
28. Accordingly, we select independent claim 1 as representative. See
37 C.F.R. § 41.37(c)(1)(iv).
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[i] first logic stored in a second memory and executable by a
first processor coupled therewith to cause the first processor to
receive the incoming order;
[ii] second logic stored in the second memory and executable
by the first processor to cause the first processor to automatically
determine an elapse of time and based on the magnitude thereof,
divide the plurality of previously received but unsatisfied orders
into at least one non-overlapping subset thereof, each
comprising at least one of the plurality of previously received but
unsatisfied orders, as a function of the time of receipt thereof;
and
[iii] third logic stored in the second memory and executable by
the first processor to cause the first processor to automatically
allocate the quantity of the incoming order to each of the at least
one subset of previously received but unsatisfied orders
according to a first allocation algorithm and subsequently
thereto, allocate the quantity allocated to each subset of
previously received but unsatisfied orders among the previously
received but unsatisfied orders thereof according to a second
allocation algorithm different from the first allocation algorithm.

PRINCIPLES OF LAW
A. SECTION 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 U.S. 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. 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 Court’s two-step framework, described in Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012), and
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Alice. Alice, 573 U.S. at 217–18 (citing Mayo, 566 U.S. at 75–77). In
accordance with that 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 (2010) (“Claims 1 and 4 in petitioners’ application explain the
basic concept of hedging, or protecting against risk.”).
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, 67 (1972)). Concepts
determined to be patent eligible include physical and chemical processes,
such as “molding rubber products” (Diamond v. Diehr, 450 U.S. 175, 191
(1981)); “tanning, dyeing, making water-proof cloth, vulcanizing India
rubber, smelting ores” (id. at 182 n.7 (quoting Corning v. Burden, 56 U.S.
252, 267–68 (1854))); and manufacturing flour (Benson, 409 U.S. at 69
(citing Cochrane v. Deener, 94 U.S. 780, 785 (1876))).
In Diehr, the claim at issue recited a mathematical formula, but the
Court held that “a claim drawn to subject matter otherwise statutory does not
become nonstatutory simply because it uses a mathematical formula.”
Diehr, 450 U.S. at 187; see also id. at 191 (“We view respondents’ claims as
nothing more than a process for molding rubber products and not as an
attempt to patent a mathematical formula.”). Having said that, the Court
also indicated that a claim “seeking patent protection for that formula in the
abstract . . . is not accorded the protection of our patent laws, and this
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principle cannot be circumvented by attempting to limit the use of the
formula to a particular technological environment.” Id. (citing Benson and
Flook); see, e.g., id. at 187 (“It is now commonplace that an application of a
law of nature or mathematical formula to a known structure or process may
well be deserving of patent protection.”).
If the claim is “directed to” an abstract idea, we turn to the second
step of the Alice and Mayo framework, where “we must examine the
elements of the claim to determine whether it contains an ‘inventive
concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-
eligible application.” Alice, 573 U.S. at 221 (quotation marks omitted).
“A claim that recites an abstract idea must include ‘additional features’ to
ensure ‘that the [claim] is more than a drafting effort designed to
monopolize the [abstract idea].’” Id. (alterations in original) (quoting Mayo,
566 U.S. at 77). “[M]erely requir[ing] generic computer implementation[]
fail[s] to transform that abstract idea into a patent-eligible invention.” Id.
B. USPTO SECTION 101 GUIDANCE
In January 2019, the United States Patent and Trademark Office
(“USPTO”) published revised guidance on the application of 35 U.S.C.
§ 101. USPTO, 2019 Revised Patent Subject Matter Eligibility Guidance,
84 Fed. Reg. 50 (Jan. 7, 2019) (“2019 Guidance”). Under the 2019
Guidance, we first look to whether the claim recites the following:
(1) any judicial exceptions, including certain groupings of
abstract ideas (i.e., mathematical concepts, certain methods of
organizing human activities such as a fundamental economic
practice, or mental processes); and
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(2) additional elements that integrate the judicial exception into
a practical application (see MPEP § 2106.05(a)–(c), (e)–(h)).
2019 Guidance, 84 Fed. Reg. 52–55.
Only if a claim (1) recites a judicial exception and (2) does not
integrate that exception into a practical application, do we then 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
(4) simply appends well-understood, routine, conventional
activities previously known to the industry, specified at a high
level of generality, to the judicial exception.
2019 Guidance, 84 Fed. Reg. 56.

ANALYSIS
Step 2A, Prong 1
Under step 2A, prong 1, of the 2019 Guidance, we first look to
whether the claim recites any judicial exceptions, including certain
groupings of abstract ideas (i.e., mathematical concepts, certain methods of
organizing human activities such as a fundamental economic practice, or
mental processes). 84 Fed. Reg. 52–55.
Claim 1’s limitation [i] recites “first logic . . . to receive the incoming
order.”3 The act of receiving an order reasonably can be characterized as

3 Appellant argues claims 2–28 together as a group. See Appeal Br. 5–20.
Accordingly, we select independent claim 1 as representative. 37 C.F.R.
§ 41.37(c)(1)(iv).
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reciting an observation that can be performed in the human mind. The
2019 Guidance expressly recognizes such mental observations as mental
processes that constitute an abstract idea. 84 Fed. Reg. 52. As such,
limitation [i] reasonably can be characterized as reciting a patent-ineligible
abstract idea.
Limitation [ii] recites the following language:
second logic . . . to automatically determine an elapse of
time and based on the magnitude thereof, divide the plurality of
previously received but unsatisfied orders into at least one non-
overlapping subset thereof, each comprising at least one of the
plurality of previously received but unsatisfied orders, as a
function of the time of receipt thereof.
The acts of determining an elapse of time based upon various factors
and dividing orders into subsets reasonably can be characterized as reciting
mental evaluations, judgments, or opinions that can be performed in the
human mind. The 2019 Guidance expressly recognizes such mental
evaluations, judgments, and opinions as mental processes that constitute
abstract ideas. 84 Fed. Reg. 52. As such, limitation [ii] reasonably can be
characterized as reciting a patent-ineligible abstract idea.
Limitation [iii] recites the following language:
third logic . . . to automatically allocate the quantity of the
incoming order to each of the at least one subset of previously
received but unsatisfied orders according to a first allocation
algorithm and subsequently thereto, allocate the quantity
allocated to each subset of previously received but unsatisfied
orders among the previously received but unsatisfied orders
thereof according to a second allocation algorithm different
from the first allocation algorithm.
Like limitation [ii], limitation [iii]’s act of allocating quantities of
incoming orders to subsets of received orders also reasonably can be
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characterized as reciting a mental evaluation, judgment, or opinion. As
such, limitation [iii] also reasonably can be characterized as reciting a
patent-ineligible abstract idea. 84 Fed. Reg. 52.
Moreover, limitations [i]–[iii], in combination, recite steps that
purportedly improve upon the manner in which financial instruments are
traded. As Appellant explains:
[T]he presently claimed invention is directed to a specific
improvement to the way computers operate as the claimed
system and method for determining, by an electronic trading
system, an allocation of an incoming order for a transaction of a
quantity of a financial instrument at an order price among a
plurality of previously received but unsatisfied orders, stored in
a first memory, for a transaction counter thereto at the order price
for a total quantity of the financial instrument that is less than the
quantity of the incoming order are directed to a specific
implementation of a solution to a problem in the software arts.
Appeal Br. 14.
As such, these limitations, in combination, additionally can be
characterized reasonably as reciting methods of organizing human activities.
More specifically, the limitations reasonably can be characterized as reciting
fundamental economic practices associated with securities trading. The
2019 Guidance expressly recognizes fundamental economic practices as a
method of organizing human activity that constitutes an abstract idea. For
these reasons, each of limitations [i]–[iii], individually, and in combination,
reasonably can be characterized as reciting patent-ineligible subject matter.
Step 2A, Prong 2
Under step 2A, prong 2, of the 2019 Guidance, we next analyze
whether claim 1 recites additional elements that integrate the judicial
exception into a practical application. 84 Fed. Reg. 52–55.
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Claim 1’s first limitation of “receiv[ing an] incoming order”
alternatively can be characterized reasonably as merely constituting
insignificant pre-solution activity:
An example of pre-solution activity is a step of gathering data for
use in a claimed process, e.g., a step of obtaining information
about credit card transactions, which is recited as part of a
claimed process of analyzing and manipulating the gathered
information by a series of steps in order to detect whether the
transactions were fraudulent.
MPEP § 2106.05(g). As such, limitation [i] does not add any meaningful
limitations to the abstract idea.
Appellant argues that “the claims are directed to a specific, novel and
non-preemptive application [that] improves a system for managing
processing of incoming transactions.” Appeal Br. 5. Appellant’s argument
regarding preemption is unpersuasive.
We recognize that the Supreme Court has described “the concern that
drives this exclusionary principle [i.e., the exclusion of abstract ideas from
patent eligible subject matter] as one of pre-emption.” Alice, 573 U.S. at
216. However, characterizing preemption as a driving concern for patent
eligibility is not the same as characterizing preemption as the sole test for
patent eligibility. As our reviewing court has explained: “The Supreme
Court has made clear that the principle of preemption is the basis for the
judicial exceptions to patentability” and “[f]or this reason, questions on
preemption are inherent in and resolved by the § 101 analysis.” Ariosa
Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015)
(citing Alice, 573 U.S. at 216). Although “preemption may signal patent
ineligible subject matter, the absence of complete preemption does not
demonstrate patent eligibility.” Id.
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Turning to the remaining arguments, Appellant further asserts that the
invention
thereby improv[es] or facilitat[es] market liquidity and
balanc[es] a market implemented by an electronic trading system
by altering the priority and timing of incoming transactions to
transact in the system by altering the priority of a given
previously received transaction to transact against a newly
received transaction, relative to other suitably matching
previously received transactions, as a function of the age of the
previously received transactions. The claimed invention directly
addresses an issue in, and improves upon the technical field of,
electronic transaction processing systems [that] are not able to
directly control the submission of transaction requests from
independent sources, i.e. the rate at, or timing of, which
transaction are submitted by those independent sources of
transactions. So, for a given set of unfilled electronic order
transactions awaiting an incoming electronic order transaction,
an electronic order transaction received at time t1 may be treated
differently by the system if instead this same order was received
at a later time t2, despite no other electronic order transactions
being received in the interim time period.
Appeal Br. 5 (emphasis added).
Appellant continues,
the claimed invention addresses the technical problems created
by independently managed multipath computer networks, i.e.
that some network paths leading to same end point, i.e. the
electronic trading system, may be faster than others, which may
convey an inequitable advantage to some messages
communicated over that network vs. others. The disclosed
embodiments normalize incoming orders to equalize disparities
in the network communication paths leading to the electronic
trading system.
Appeal Br. 10 (citing Spec. ¶¶ 62, 106–09).
These arguments are unpersuasive. Improving upon how orders for
securities are filled by taking into account the timing at which orders are
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received was relevant to the trading of securities long before the advent of
computers or the Internet. That is, Appellant’s invention would have
provided comparable improvements for historical trading systems that
alternatively received orders through the mail, via the telephone, or in
person. As such, Appellant’s invention, as claimed is better characterized as
being directed to an improvement in a method of organizing commercial or
economic human activities—not to an improvement to computer technology.
See BSG Tech LLC v. BuySeasons, Inc., 899 F.3d 1281, 1290 (Fed. Cir.
2018) (“It has been clear since Alice that a claimed invention’s use of the
ineligible concept to which it is directed cannot supply the inventive concept
that renders the invention ‘significantly more’ than that ineligible concept.”);
Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir.
2016) (“[A] claim for a new abstract idea is still an abstract idea.” (emphasis
omitted)); SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1168
(Fed. Cir. 2018) (“What is needed is an inventive concept in the non-abstract
application realm.”).
Restated, the use of computers for practicing Appellant’s claimed
trading process merely makes that trading process more efficient. Our
reviewing court held that where an “invention makes the trader faster and
more efficient, not the computer . . . [, it] is not a technical solution to a
technical problem.” Trading Techs. Int’l v. IBG LLC, 921 F.3d 1084, 1090
(Fed. Cir. 2019); see also id. at 1093 (claims are abstract where “they recite
a purportedly new arrangement of generic information that assists traders in
processing information more quickly”); Bancorp Servs., L.L.C. v. Sun Life
Assurance Co. of Can. (U.S.), 687 F.3d 1266, 1278 (Fed. Cir. 2012) (“[T]he
fact that the required calculations could be performed more efficiently via a
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computer does not materially alter the patent eligibility of the claimed
subject matter.”); OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359,
1363 (Fed. Cir. 2015) ([R]elying on a computer to “perform routine tasks
more quickly or more accurately is insufficient to render a claim patent
eligible.”); DDR Holdings, LLC v. Hotels.com., L.P., 773 F.3d 1245, 1257
(Fed. Cir. 2014) (distinguishing a claimed solution necessarily rooted in
computer technology in order to overcome a problem specifically arising in
the realm of computer networks from claims that “merely recite the
performance of some business practice known from the pre-Internet world
along with the requirement to perform it on the Internet”).
For these reasons, Appellant does not persuade us that claim 1 is
directed to an improvement in the function of a computer or to any other
technology or technical field. MPEP § 2106.05(a). Nor is claim 1 directed
to a particular machine or transformation. MPEP §§ 2106.05(b), (c). Nor
has Appellant persuasively demonstrated that claim 1 adds any other
meaningful limitations. MPEP § 2106.05(e). Accordingly, Appellant has
not persuaded us that claim 1 integrates the recited abstract ideas into a
practical application within the meaning of the 2019 Guidance. 84 Fed.
Reg. 52–55.
Step 2B
Under step 2B of the 2019 Guidance, we next analyze whether
claim 1 adds any specific limitation beyond the judicial exception that is not
“well-understood, routine, conventional” in the field. 84 Fed. Reg. 56;
MPEP § 2106.05(d).
Claim 1’s additional elements beyond the recited abstract ideas
include “an electronic trading system,” “a first memory,” “a first processor,”
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and “a second memory.” The Examiner determines that “[t]he process steps
of the claim are performed by a generic computing device comprising a
generic processor(s) suitably programmed to execute the claimed steps.”
Final Act. 5. According to the Examiner, “[t]he elements together execute in
routinely and conventionally accepted coordinated manners and interact with
their partner elements to achieve an overall outcome which, similarly, is
merely the combined and coordinated execution of generic computer
functionalities which are well-understood, routine and conventional
activities previously known to the industry.” Id. at 6.
Appellant argues, inter alia,
determining of “an elapse of time and based on the magnitude
thereof, divide the plurality of previously received but
unsatisfied orders into at least one non-overlapping subset
thereof, each comprising at least one of the plurality of
previously received but unsatisfied orders, as a function of the
time of receipt thereof” and allocating of “the quantity of the
incoming order to each of the at least one subset of previously
received but unsatisfied orders according to a first allocation
algorithm and subsequently thereto, allocate the quantity
allocated to each subset of previously received but unsatisfied
orders among the previously received but unsatisfied orders
thereof according to a second allocation algorithm different from
the first allocation algorithm”, form a specific
solution/application which have NOT been used before and
therefore are not well understood, routine or conventional in the
art, as evidenced by the absence of an art-based rejection in the
Office Action.
Appeal Br. 16–17.
Appellant’s arguments are unpersuasive. To the extent that Appellant
is arguing that the algorithms and protocols have not been used before, we
note that “[t]he ‘novelty’ of any element or steps in a process, or even of the
process itself, is of no relevance in determining whether the subject matter of
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a claim falls within the § 101 categories of possibly patentable subject
matter.” Diehr, 450 U.S. at 188–89. A novel and nonobvious claim directed
to a purely abstract idea is, nonetheless, patent ineligible. See Mayo, 566
U.S. at 90.
More generally, though, Appellant is again arguing the abstract ideas
that are performed by the additional elements of the claims. Appellant does
not provide persuasive argument for why the additional elements constitute
an improvement to the technology or otherwise add any meaningful
limitations beyond the abstract idea.
Furthermore, Appellant’s Specification supports the Examiner’s
determination that the additionally recited claim elements are conventional:
It will be appreciated that the types of computer devices deployed
by traders and the methods and media by which they
communicate with the electronic trading system 100 is
implementation dependent and may vary and that not all of the
depicted computer devices and/or means/media of
communication may be used and that other computer devices
and/or means/media of communications, now available or later
developed may be used.
Spec. ¶ 50.
Appellant’s Specification further explains,
the computer system 400 may include a processor 402, e.g., a
central processing unit (CPU), a graphics processing unit (GPU),
or both. The processor 402 may be a component in a variety of
systems. For example, the processor 402 may be part of a
standard personal computer or a workstation. The processor
402 may be one or more general processors, digital signal
processors, application specific integrated circuits, field
programmable gate arrays, servers, networks, digital circuits,
analog circuits, combinations thereof, or other now known or
later developed devices for analyzing and processing data.
Id. ¶ 156 (emphasis added).
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Appellant’s Specification further explains,
[a]lthough the present specification describes components and
functions that may be implemented in particular embodiments
with reference to particular standards and protocols, the
invention is not limited to such standards and protocols. For
example, standards for Internet and other packet switched
network transmission (e.g., TCP/IP, UDP/IP, HTML, HTTP,
HTTPS) represent examples of the state of the art. Such
standards are periodically superseded by faster or more efficient
equivalents having essentially the same functions. Accordingly,
replacement standards and protocols having the same or similar
functions as those disclosed herein are considered equivalents
thereof.
Id. ¶ 167 (emphasis added).
For these reasons, we determine that claim 1 does not recite additional
elements that amount to significantly more than the judicial exception within
the meaning of the 2019 Guidance. 84 Fed. Reg. 52–55; MPEP
§ 2106.05(d).
Accordingly, we sustain the Examiner’s rejection of claim 1 under
35 U.S.C. § 101 as being directed to patent-ineligible subject matter. We,
likewise, sustain the 101 rejection of claims 2–28, which Appellant does not
argue separately. Appeal Br. 5–20.

CONCLUSION
In summary:
Claims
Rejected
Basis  Affirmed Reversed
1–28 § 101  1–28

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TIME PERIOD FOR RESPONSE
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). See 37 C.F.R.
§ 1.136(a)(1)(iv).

AFFIRMED