TriOptima AB

Patent Trials and Appeals Board

Sep 17, 2021

CBM2020-00011 (P.T.A.B. Sep. 17, 2021)

Trials@uspto.gov Paper 61
571-272-7822 Entered: September 17, 2021

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

QUANTILE TECHNOLOGIES LIMITED,
Petitioner,
v.
TRIOPTIMA AB,
Patent Owner.

CBM2020-00011
Patent 7,613,649 B2

Before JOSIAH C. COCKS, MEREDITH C. PETRAVICK, and
KEVIN W. CHERRY, Administrative Patent Judges.

CHERRY, Administrative Patent Judge.
JUDGMENT
Final Written Decision
Determining All Challenged Claims Unpatentable
Denying Patent Owner’s Contingent Motion to Amend
35 U.S.C. § 328(a)
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I. INTRODUCTION
A. BACKGROUND
Quantile Technologies Limited (“Petitioner”) filed a petition (Paper 2,
“Pet.”) to institute an covered business method patent review of claims 1–22
of U.S. Patent No. 7,613,649 B2 (Ex. 1001, “the ’649 patent”) under section
18 of the Leahy-Smith America Invents Act, Pub. L. No. 112–29, 125 Stat.
284, 331 (2011) (“AIA”). Petitioner supports its Petition with the
Declaration of Andrew Shaw, dated March 17, 2020. Ex. 1002.
TriOptima AB (“Patent Owner”) timely filed a Preliminary Response.
Paper 7. Patent Owner supported its Preliminary Response with the
Declaration of Dr. Craig Pirrong dated June 26, 2020. On July 27, 2020,
pursuant to our authorization (Paper 8), Petitioner filed a Reply Brief on the
limited issue of whether we should exercise our discretion and deny the
Petition. Paper 9.
On September 23, 2020, based on the record before us at the time, we
instituted a covered business method patent review of all challenged claims
on all grounds alleged. Paper 12 (“Institution Decision” or “Dec.”). The
claims and ground in this proceeding are indicated in the table below.
Claims Challenged 35 U.S.C. § Reference(s)/Basis
1–22 101 Eligibility
Patent Owner filed a Response in opposition to the Petition (Paper 25,
“PO Resp.”). Patent Owner supported its Patent Owner Response with the
Declaration of Dr. Craig Pirrong, dated December 30, 2020 (Ex. 2012).
Patent Owner also filed a contingent Motion to Amend. Paper 26.
Petitioner filed a Reply in support of the Petition (Paper 33, “Pet. Reply”)
and an Opposition to the Contingent Motion to Amend (Paper 32).
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Petitioner supported the Reply with a second Declaration of Andrew Shaw
(Ex. 1039). Patent Owner also filed a Sur-Reply in response to Petitioner’s
Reply. Paper 36 (“PO Sur-Reply”).
On April 27, 2021, we offered our Preliminary Guidance on Patent
Owner’s Contingent Motion to Amend. Paper 35 (“Prelim. Guid.” or
“Preliminary Guidance”). Patent Owner then filed a Revised Contingent
Motion to Amend (Paper 38, “Rev. Mot.”) proposing to substitute claims
23–28 (“proposed substitute claims”) for claims 1, 2, 9, 14, 16, and 17.
Patent Owner supported its Revised Contingent Motion to Amend with a
Declaration of Craig Pirrong, Ph.D., dated May 5, 2021 (Ex. 2019).
Petitioner filed an Opposition to Patent Owner’s Revised Contingent Motion
to Amend (Paper 44, “Opp.”). Petitioner supported its Opposition with the
Declaration of Andrew Shaw in Support of Petitioner’s Opposition, dated
June 2, 2021 (Ex. 1043). Patent Owner filed a Reply in Support of its
Contingent Motion to Amend (Paper 50, “PO Reply”). Patent Owner
supported its Reply in support of its Revised Contingent Motion to Amend
with a Declaration of Craig Pirrong, Ph.D., dated June 23, 2021 (Ex. 2021).
Petitioner also filed a Sur-Reply in Opposition to Patent Owner’s Revised
Contingent Motion to Amend (Paper 56, “Pet. Sur-Reply”).
Both parties requested an Oral Hearing. See Paper 43. A transcript of
the Oral Hearing is entered in the record. Paper 60 (“Tr.”).
We have jurisdiction under 35 U.S.C. § 6. The evidentiary standard is
a preponderance of the evidence. See 35 U.S.C. § 326(e) (2018); 37 C.F.R.
§ 42.1(d) (2019). This Final Written Decision is issued pursuant to
35 U.S.C. § 328(a) and 37 C.F.R. § 42.73.
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For the reasons expressed below, we conclude that Petitioner has
demonstrated by a preponderance of evidence that claims 1–22 are
unpatentable as being directed to ineligible subject matter. We also deny
Patent Owner’s Revised Contingent Motion to Amend.
B. RELATED PROCEEDINGS
Patent Owner represents that Petitioner has filed one other covered
business method patent review, CBM2020-00012, against a related patent,
U.S. Patent No. 8,010,441 B2. Paper 5, 2. The ’649 patent has been
asserted against Petitioner in TriOptima AB v. Quantile Techs. Ltd., No.
2:19-cv-00390-JRG (E.D. Tex. Nov. 26, 2019). Pet. 11; Paper 5, 2.
C. THE ’649 PATENT
The ’649 patent, titled “System and Method of Implementing Massive
Early Terminations of Long Term Financial Contracts,” describes systems
and methods for implementing massive early termination of long-term
financial contracts, such as OTC (Over the Counter) derivative contracts.
Ex. 1001, (54), 1:19–22. In particular, the invention relates to a system “for
a network based, automated process to decrease the number of outstanding
financial derivative transactions between counterparties with the aim of
lowering the gross and net credit exposures between counterparties and/or to
enhance risk-control and/or lower operational costs and/or risks for each
counterparty.” Id. at 1:22–28. The ’649 patent issued November 3, 2009,
and claims priority through a PCT application to a foreign application filed
in the Netherlands on November 24, 1999. Id. at (45), (63), (30).
The ’649 patent explains that financial derivatives are “contracts of
which the price/value of the contract varies with the value of an underlying
instrument.” Id. at 1:32–34. The underlying instrument may be a bond, an
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equity, an interest rate, a currency exchange rate, commodity price or, in a
recent development, even a credit risk. Id. at 1:34–36. Some of these
contracts are standardized and traded on an exchange. Id. at 1:37–40. Other
derivatives “are individually negotiated and tailor-made between two
counterparties (so called ‘over the counter (OTC) transactions’).” Id. at
1:53–55. The ’649 patent states that “[s]ince the OTC contracts are
individually negotiated, no objective market price exists,” and “[t]he parties
need to do their own valuation of the contracts both when dealing as well as
later on when establishing the market value of their contracts during their
life.” Id. at 1:63–67. The valuation of OTC derivatives is normally “based
on pricing formulas using so called valuation parameters for input,” although
the models used may vary by party. Id. at 1:67–2:9. The ’649 patent
explains that active players in the market can have tens of thousands of
individual transactions and “[t]he management of these positions is no
longer possible on the level of the individual transactions, but only on an
aggregated level,” such as by sorting transactions “by underlying instrument,
and then express the market value and some risk-characteristics in time-
buckets.” Id. at 2:10–18.
The ’649 patent explains that the institutions active in the OTC
markets “use computer systems for storing the details of the transactions
they have done,” and that “[t]hese systems normally have the capability to
revalue all transactions and calculate [risk parameters] of all transactions on
a unilateral basis.” Id. at 2:50–54. The ’649 patent explains that “[a] normal
procedure is also to do a daily mark-to-market, which means re-valuation of
all transactions according to the prevailing market conditions,” and “[t]he
mark-to-market values as of close of business are stored in databases for
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calculating profit and loss, risk exposure, credit exposure etc.” Id. at 2:54–
59.
The ’649 patent describes that, although parties enter into OTC
derivative transactions for the purpose of transferring market risk, an
“unavoidable consequence” of these transactions is that “the parties are
getting a new exposure to two different risk categories, credit risk and
operational risk.” Id. at 3:55–61. Credit risk results because “in each
bilateral relationship a bank will have either a net claim or a net debt,” and
“[a] claim is a credit exposure and as such is subject to capital sufficiency
requirements imposed by the regulators.” Id. at 3:46–50. Bank supervisors
require banks to hold capital against both market risk and credit risk,
because capital is scarce, banks try to reduce the capital tied up by the
unintentionally acquired credit risk in OTC derivatives. Id. at 4:5–19.
Operational risk “can be defined as all risks an institution is exposed to,
other than the intentionally accepted market and credit risk within the
allowed limits of the bank,” and
includes, among others, unwanted market or credit risk as a
consequence of staff errors (on purpose or by accident) or errors
in the risk management systems, fraud by staff, customers or
third parties, wrong valuation of transactions based on wrong
parameter input, or mistakes in the maintenance of outstanding
contracts during their lifetime (so called fixings, settlements,
assignments, exercises or payments).”
Id. at 6:9–18.
The ’649 patent explains that it was already known that the “sum of
all transactions between two counterparties was much less dependent on
market changes than the sum of the individual transactions,” so
“sophisticated institutions are now calculating the credit exposure based on
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the sum of all transactions with each counterparty.” Id. at 4:20–29.
According to the ’649 patent, this summing of transactions with a particular
counterparty is known as “netting,” and is possible because of the
development of standardized agreements “whereby all individual trades are
deemed to be one Agreement, and many countries around the world changed
their bankruptcy laws to accommodate this development.” Id. at 4:30–41.
However, the credit exposure can never be netted between counterparties,
i.e., a claim on party X cannot be offset by a debt to party Y. Id. at 4:42–49.
Another method developed to limit risk is the inclusion of “break-
clauses” in agreements that allow parties to terminate the transaction at
specified points in time at the prevailing market price. Id. at 4:50–55. “A
party may also choose to assign his part of a deal to a new party.” Id. at
4:56–57. Assignments allow parties to get reduced or increased exposure
towards the other parties, but assignment requires the consent of all parties.
Id. at 4:59–62. Other known methods include “credit mitigation” and
“clearing.” Id. at 4:63–66, 5:20–44. The ’649 patent discloses that both of
these processes can be done through a central service.
The ’649 patent asserts that “there is therefore an incentive for banks
to try to reduce the costs and risks associated with the OTC derivatives
portfolios they have buil[t] up,” and one “apparent way of achieving this
would be to terminate OTC transactions before their designated maturity,
preferably in a way that reduces the bilateral credit exposure.” Id. at 6:60–
65. The ’649 patent identifies a number issues that must be addressed to
allow early termination: (1) both the original counterparties need to agree to
the early termination; (2) the parties need to establish they are talking about
the same trade, because the parties each assign their own identifier to the
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trade and there is generally no common identifier or central registry for the
trade; (3) the parties need to agree on the value of the trade; (4) the bank
may not want to change its market risk position; (5) the bank does not want
to make a large cash payment, which may be required to terminate; and (6)
the first-mover in an early termination is at a disadvantage because the price
must be negotiated and other party can then require a valuation in their
favor. Id. at 7:1–44. The ’649 patent states that the objective of the
invention is to overcome at least these problems. Id. at 7:54–55.
An embodiment of the system proposed by the ’649 patent to
overcome these problems is shown schematically in Figure 2, reproduced
below.

Figure 2 is a schematic block diagram of an embodiment of the ’649 patent’s
system. Id. at 11:22–24. System 20 is implemented as a network service in
that system 20 provides communications network 22 (the Internet in this
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embodiment) connecting institutions 24 trading OTC derivatives with
central site 26 where a secure transfer of data can take place. Id. at 11:56–
61. At central site 26, central computer 28 is provided with central database
30 for storing transaction data during the mass termination process and
performs most of the processing to implement the desired mass early
terminations. Id. at 11:61–65.
Figure 3, reproduced below, illustrates the basic process of the system
of the preferred embodiment

Figure 3 is a schematic drawing of the local and central processing stations
of Figure 2. Id. at 11:25–26. As illustrated in Figure 3, system 20 acts to
connect together lists 18, of apparently disparate transactions received from
each of the different institutions 24 at central site 26 using trade attributes 14
and market data 16. Id. at 12:7–11; 20:26–22:51 (describing the linking
process as determining whether “major attributes” of database records of the
trades match). System 20 generates lists 54 of linked trades 50 for each
institution 24. Id. at 12:11–13. Thereafter, system 20 processes linked
trades 50 such as to effect proposals for mass terminations, which meet the
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institutions’ specified tolerances 52 and on acceptance by the involved
parties, to execute those proposals for early mass terminations of OTC
contracts. Id. at 12:13–15; see also Fig. 4 (flowchart of process), 12:18–53
(describing process steps shown in Figure 4).
The dataflow between the various components of the system is
illustrated schematically in Figure 5, reproduced below.

Figure 5 is a block diagram showing the data and workflow of the
process of Figure 4 implemented by the system shown in Figure 2. Id. at
12:54–61. The data provided to the central site are initially analyzed using
conventional software and filtered to provide a list of potential trades, which
is stored in a conventional position keeping system (92, 94, and 96 in Fig.
5). Id. at 12:62–13:27. The data are then extracted using conventional
encryption and compression software and then sent using conventional
communications equipment via a wide area network, such as the Internet, to
the central site. Id. at 13:28–44. The decrypted and decompressed data is
stored in central database 30 and is accessible to processing function 102
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present on central computer 28 to implement the steps of the process of the
linking of trades, analyzing potential trades, generating proposals of trades,
and transmitting proposals. Id. at 13:45–50. Application server 104
inclusive of a plug-in, is provided on central computer 28, and securely
communicates any proposal over Internet 22 to the respective institution 24
for consideration and approval. Id. at 13:50–58.
Figure 6, reproduced below, is a schematic block diagram of the
functional modules of the central computer as shown in Figure 2. Id. at
11:32–33.

Figure 6 is a block diagram illustrating the functional modules on the
central computer. Id. at 14:12–13. Processing function 102 comprises a
core processing module 110 and a reporting module 112. Id. at 14:13–14.
Both processing module 110 and the reporting module 112 interface to
central database 30 to retrieve and store data in order to implement their
respective functions. Id. at 14:15–18. The function of reporting module 112
is two-fold, firstly to generate a linking report 114 for sending out to
institutions for verification, and secondly to generate an unwind proposal
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report 116 for each institution 24 for their approval. Link function 124
implements the linking (matching) of trades. Id. at 14:36–38. The ’649
patent explains that
An early termination of an OTC derivative trade requires
the consent of both parties in the trade. It is therefore required
that both parties have submitted their version of the trade to the
central computer 28 for unwind processing. The central
computer 28 establishes that this is the case by finding and
linking the trades that both parties have submitted. Since there is
in general no common identifier, the central computer 28 uses
the other attributes 14, 16 of the trades 12 in order to see if both
parties have sent in their version of the same trade 12. This is
done in a process called trade linking.
Id. at 20:27–36. The Specification explains that “[i]n the trade linking
process the key financial terms of the deals is used to identify the trade,” and
that “[t]he key financial terms are different for different types of OTC
derivatives.” Id. at 20:64–67. The patent describes key characteristics that
are used for swap transactions. Id. at 21:1–6. It explains that these key
attributes are usually sufficient, but that if there is an ambiguity, it can be
reported to the financial institutions, who have to confirm the transactions, in
any event. Id. at 21:8–23:9.
The ’649 patent notes that
Matching services are known that provide matching and
linking of deals at the moment they are done. SWIFT Accord for
example, provides such a matching service. For matched trades
there is a common identifier and in that case this common
identifier is used for the linking of trades.
Id. at 20:37–41.
Claims analysis function 126 controls the finding of groups of
potential parties to the unwind proposal of the linked trades. Id. at 14:38–
40. The ’649 patent explains that:
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The purpose with the claims analysis is to find groups of
banks for which an unwind proposal should be calculated. The
selection criteria is that the banks in such a group should have
both claims and debts towards each other, and ideally the sum of
the claims should equal the sum of the debts for each bank. If that
is the case, the potential for credit exposure reduction is
maximised.
Id. at 23:11–18. The Specification also provides a “non-limiting example”
of the algorithm used to do this claims analysis. Id. at 25:16–26:41.
Proposal calculation function 128 analyses the results of claims
analysis function 126 and selects the most suitable group of potential
unwinds given the benefit to all parties concerned and taking into account
specified tolerances 52. Id. at 14:41–45. The processing module also
comprises data manager 130 that manages the many data interactions
between these functions and central database 30. Id. at 14:45–48.
The ’649 patent explains that
Since unwinding is done using linked trades, the package
of transactions in the unwind proposal must simultaneously
fulfill all involved parties’ specified tolerances. This also means
that the unwind proposal must be accepted by all parties
simultaneously and in full. If one party rejects the proposal, the
whole proposal is rejected. If one trade in the package is
removed, the proposal will (most likely) no longer fulfill all
tolerances. Hence, there is no possibility to alter the proposal by
removing individual trades. The proposal also contains a net
close out amount to be paid or received by each party. This close
out amount is a part of the proposal and cannot be negotiated.
Id. at 26:47–58.
The ’649 patent further explains that the goal is “to find a package of
trades that fulfills all involved parties’ tolerances simultaneously,” where the
package has as many full trades as possible are terminated. Id. at 26:59–63.
The ’649 patent states that this problem “is of the nature [of] ‘constrained
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optimisation’” and because the “constraints and the optimisation goal
function are linear which means that a standard method for linear
programming can be used.” Id. at 27:7–13. The ’649 patent states that:
There is a vast literature and a number of standard software
packages available for the solution of linear programming (LP)
problems. A detailed description of a solution method for linear
programming problems can be found in “Dahlquist, Björck,
Anderson (1974) Numerical Methods Prentice Hall, Englewood
Cliffs, N.J.”.
Id. at 27:26–31. The ’649 patent does provide an “exemplary description is
only intended to show how the unwind proposal calculation problem is
formulated as a standard LP problem.” Id. at 27:31–33; see also id. at
27:34–30:59 (describing exemplary solution for LP problem).
Once these calculations are complete the proposal is sent out to the
financial institutions for their confirmation. Id. at 13:51–59.
Petitioner challenges all twenty-two claims of the challenged patent.
Claims 1, 17, 19, and 21 are independent claims. Claim 1 is illustrative of
the claimed subject matter:
1. A system for exchanging OTC (Over the Counter) derivatives
related data comprising:
a plurality of data input/output and processing stations, an
optional central station and a network interconnecting all
stations, wherein the data input/output and processing
stations are operable by parties participating in OTC
derivatives related contracts for transmitting and
receiving, through the network, trade details for existing
OTC derivative transactions carried out with other parties,
wherein the optional central station is for receiving the
trade details over the network from the data input/ output
and processing stations, wherein the existing OTC
derivative transactions include linked OTC derivative
transactions for which the trade details are available for
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both of the parties to the respective existing OTC
derivative transaction;
wherein at least one of the data input/output and processing
stations or optional central station includes a processor,
wherein the processor is operable for generating, using the
existing linked OTC derivative transactions, premature
termination and assignment proposals consisting of
packages of a plurality of linked OTC derivative
transactions having designated maturity dates, wherein
each of the proposals includes at least three involved
parties, and wherein the proposals are for premature
termination or assignment of the linked OTC derivative
transactions of the packages at a date at which there is no
prescribed value and no prescribed method of determining
a value at which the termination or assignment of the
linked OTC derivative transactions of the packages should
take place, and at which there is no obligation for the
involved parties to make premature terminations or
premature assignments of the linked OTC derivative
transactions of the packages, wherein there is substantially
no financial loss to all of the involved parties to terminate
or assign prematurely before their respective designated
maturity dates, according to parameters set by the involved
parties;
wherein the at least one station provides the premature
termination and assignment proposal packages to the
involved parties for their approval.
Ex. 1001, 32:42–33:15.

II. ANALYSIS
A. CLAIM INTERPRETATION
We interpret claims in the same manner used in a civil action under
35 U.S.C. § 282(b) “including construing the claim in accordance with the
ordinary and customary meaning of such claim as understood by one of
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ordinary skill in the art and the prosecution history pertaining to the patent.”
37 C.F.R. § 42.200(b) (2019). When applying that standard, we interpret the
claim language as it would be understood by one of ordinary skill in the art
in light of the specification. In re Suitco Surface, Inc., 603 F.3d 1255, 1260
(Fed. Cir. 2010). Thus, we give claim terms their ordinary and customary
meaning as they would be understood by an ordinarily skilled artisan. See In
re Translogic Tech., Inc., 504 F.3d 1249, 1257 (Fed. Cir. 2007) (“The
ordinary and customary meaning ‘is the meaning that the term would have to
a person of ordinary skill in the art in question.’” (quoting Phillips v. AWH
Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005)). Only terms that are in
controversy need to be construed, and then only to the extent necessary to
resolve the controversy. Nidec Motor Corp. v. Zhongshan Broad Ocean
Motor Co., 868 F.3d 1013, 1017 (Fed. Cir. 2017).
We discern no terms in need of express interpretation. Accordingly,
we apply the legal standards set forth above when reading the claims.
B. CBM PATENT REVIEW ELIGIBILITY
In our Institution Decision, we found that Petitioner had standing to
file the Petition, had shown that the claims of the ’649 patent were directed
to a financial product or service, and had shown that the claims did not cover
“technological inventions.” Dec. 20–28. Patent Owner does not contest
these findings in its Patent Owner Response. See generally PO Resp.; PO
Sur-Reply. We previously instructed Patent Owner that “any arguments not
raised in the [Patent Owner Response] may be deemed waived.” Paper 13,
8; see also In re Nuvasive, Inc., 842 F.3d 1376, 1381 (Fed. Cir. 2016)
(holding that patent owner’s failure to proffer argument at trial as instructed
in scheduling order constitutes waiver). Accordingly, for reasons stated in
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detail in our Institution Decision, we determine that Petitioner had standing
to file the Petition, had shown that the claims of the ’649 patent were
directed to a financial product or service, and had shown that the claims did
not cover “technological inventions.” Dec. 20–28.
C. LEGAL STANDARD POST INSTITUTION
In our Institution Decision, we concluded that the argument and
evidence adduced by Petitioner demonstrated that it was more likely than not
that claims 1–22 were unpatentable as directed to ineligible subject matter
under 35 U.S.C. § 101. Dec. 41. We must now determine whether
Petitioner has established by a preponderance of the evidence that the
specified claims are unpatentable. 35 U.S.C. § 326(e) (2018). Additionally,
the Board’s Trial Practice Guide states that the Patent Owner Response
“should identify all the involved claims that are believed to be patentable
and state the basis for that belief.” Office Patent Trial Practice Guide, 77
Fed. Reg. 48,756, 48,766 (Aug. 14, 2012).

D. PATENT ELIGIBILITY
1. Overview
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-part framework, described in Mayo and Alice.
Id. at 217–18 (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
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566 U.S. 66, 75–77 (2012)). 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 (1853))); 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. (citation omitted)
(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 part
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. at 212.
2. USPTO Section 101 Guidance
In January 2019, the U.S. Patent and Trademark Office (USPTO)
published revised guidance on the application of § 101.1 The Manual of
Patent Examining Procedure (“MPEP”) now incorporates this revised

1 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg. 50
(Jan. 7, 2019) (“2019 Revised Guidance”). In response to received public
comments, the Office issued further guidance on October 17, 2019,
clarifying the 2019 Revised Guidance. USPTO, October 2019 Update:
Subject Matter Eligibility (the “October 2019 Update”). “All USPTO
personnel are, as a matter of internal agency management, expected to
follow the guidance.” 84 Fed. Reg. at 51; see also October 2019 Update
at 1.
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guidance and subsequent updates at § 2106 (9th ed. Rev. 10.2019, rev. June
2020).2
Under MPEP § 2106, we first look 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) (“Step 2A, Prong One”); and
(2) additional elements that integrate the judicial exception into
a practical application (“Step 2A, Prong Two”).3
MPEP § 2106.04(a), (d).
Only if a claim (1) recites a judicial exception and (2) does not
integrate that exception into a practical application,4 do we then look, under
Step 2B, to whether the claim:
(3) adds a specific limitation beyond the judicial exception that
is not “well-understood, routine, conventional activity” in the
field; or

2 All references to the MPEP are to the Ninth Edition, Revision 10.2019
(Last Revised June 2020), unless otherwise indicated.
3 “Examiners evaluate integration into a practical application by:
(1) identifying whether there are any additional elements recited in the claim
beyond the judicial exception(s); and (2) evaluating those additional
elements individually and in combination to determine whether they
integrate the exception into a practical application.” MPEP § 2106.04(d)(II).
4 This corresponds to Alice part one where it is determined whether the claim
is “directed to” an abstract idea. See Alice, 573 U.S. at 219. If a claim is
“not directed to an abstract idea under step one of the Alice analysis, we do
not need to proceed to step two.” Enfish, LLC v. Microsoft Corp., 822 F.3d
1327, 1339 (Fed. Cir. 2016).
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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.5
MPEP § 2106.05(d). Our reviewing court has warned that “the Office
Guidance is not, itself, the law of patent eligibility” and “does not carry the
force of law.” In re Rudy, 956 F.3d 1379, 1382 (Fed. Cir. 2020); see also
cxLoyalty, Inc. v. Maritz Holdings Inc., 986 F.3d 1367, 1375 n.1 (Fed. Cir.
2021); Cleveland Clinic Found. v. True Health Diagnostics LLC, 760 F.
App’x 1013, 1020 (Fed. Cir. 2019). Rather, “it is our [reviewing court’s]
caselaw, and the Supreme Court precedent it is based upon, that must
control.” Rudy, 956 F.3d at 1383 (citation omitted). Thus, although our
analysis may be framed in terms of the 2019 Revised Guidance, our decision
is based upon governing precedent of the United States Supreme Court and
our reviewing court’s interpretation and application thereof.
3. Whether the Claims Recite a Judicial Exception
Petitioner contends, “[t]he Claims fail under Step One of the Alice
framework for claiming the abstract idea of simplifying a trade portfolio
through premature termination of certain transactions.” Pet. 25. Petitioner
argues that this concept has “long been used in the financial industry,
including with respect to OTC derivatives, to reduce risk between parties,”
and “is a fundamental economic practice for efficiently managing trade
portfolios.” Id. Petitioner also contends that “the Claims merely recite
mental steps that are foundational in the financial industry for simplifying
trade portfolios through premature termination.” Id. Petitioner states:

5 This corresponds to Alice part two where it is determined whether the
claim “contains an ‘inventive concept’ sufficient to ‘transform’ the claimed
abstract idea into a patent-eligible application.” Alice, 573 U.S. at 221.
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Fundamentally, the claim features are (i) “transmitting and
receiving . . . trade details for existing OTC derivative
transactions,” (ii) “generating, using linked OTC derivative
transactions, premature termination and assignment proposals,”
and (iii) “provid[ing] the premature termination and assignment
proposals to the parties for approval.” Exh. 1001, Claim 1. Put
another way, the Claims simply require identifying transactions
between involved parties, including transactions from original
counterparties representing the same trades (i.e., linked
transactions) and selecting transactions from those linked
transactions premature termination, and proposing those trades
for premature termination to the parties, all in an effort to reduce
risk. See Exh. 1001, Claim 1.
Id. at 26 (alterations in original).
Petitioner submits that:
The idea at the heart of the ’649 Patent is efficient management
of bank portfolios with its different counterparties. As
Petitioner’s expert points out, simplifying trade portfolios is a
“fundamental economic practice[,]” as “[f]inancial institutions
have long known that reducing the number of trades on their
books decreases their operational expenses and can also reduce
market and credit risks.” Exh. 1002, ¶ 33; . . . Exh. 1008, p. 33;
Exh. 1007, p. 13; Exh. 1032, p. 13; Exh. 1006, p. 2 at ¶ 3; Exh.
1015, pp. 8-9 at ¶¶ 6-7; Exh. 1012, p. 3. Many ways of
simplifying a trade portfolio have been used for generations prior
to the filing of the ’649 Patent. Exh. 1002, ¶ 34; . . . Exh. 1011,
pp. 11-15, 17-25; Exh. 1014, p. 12-13; Exh. 1025; Exh. 1032;
Exh. 1033, pp. 31-33.
Id. at 26–27.

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We begin with claim 1.6 Claim 1 recites “[a] system for exchanging
OTC (Over the Counter) derivatives related data.” Ex. 1001, 32:42–43. The
system comprises:
a plurality of data input/output and processing stations, an
optional central station and a network interconnecting all
stations, wherein the data input/output and processing stations
are operable by parties participating in OTC derivatives related
contracts for transmitting and receiving, through the network,
trade details for existing OTC derivative transactions carried out
with other parties, wherein the optional central station is for
receiving the trade details over the network from the data input/
output and processing stations, wherein the existing OTC
derivative transactions include linked OTC derivative
transactions for which the trade details are available for both of
the parties to the respective existing OTC derivative transaction;
wherein at least one of the data input/output and
processing stations or optional central station includes a
processor, wherein the processor is operable for generating,
using the existing linked OTC derivative transactions, premature
termination and assignment proposals consisting of packages of
a plurality of linked OTC derivative transactions having
designated maturity dates, wherein each of the proposals
includes at least three involved parties, and wherein the
proposals are for premature termination or assignment of the
linked OTC derivative transactions of the packages at a date at
which there is no prescribed value and no prescribed method of
determining a value at which the termination or assignment of
the linked OTC derivative transactions of the packages should
take place, and at which there is no obligation for the involved
parties to make premature terminations or premature
assignments of the linked OTC derivative transactions of the
packages, wherein there is substantially no financial loss to all
of the involved parties to terminate or assign prematurely before

6 Claim 17 is a “computer implemented method” essentially the same as
claim 1. Patent Owner does not argue claim 17 separately, so this analysis
of claim 1 applies equally to claim 17.
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their respective designated maturity dates, according to
parameters set by the involved parties;
wherein the at least one station provides the premature
termination and assignment proposal packages to the involved
parties for their approval.
Id. at 32:41–33:15 (emphasis added). The combination of the elements
italicized above recites the concept of simplifying a trade portfolio through
premature termination of certain transactions. The claimed system
accomplishes this through collecting information, linking related
information together, and then using mathematical techniques on the
information to generate a “proposal package” of transactions for
“termination and assignment.” This is all a mental process, an example of
an abstract idea.
The Federal Circuit has “treated analyzing information by steps
people go through in their minds, or by mathematical algorithms, without
more, as essentially mental processes within the abstract-idea category.”
Electric Power Group, LLP v. Alstom S.A., 830 F.3d 1350, 1354 (Fed. Cir.
2016). The Federal Circuit has explained that “claims focused on ‘collecting
information, analyzing it, and displaying certain results of the collection and
analysis’ are directed to an abstract idea.” SAP Am., Inc. v. InvestPic, LLC,
898 F.3d 1161, 1167 (Fed. Cir. 2018) (quoting Elec. Power, 830 F.3d at
1353). “Information as such is an intangible,” hence abstract, and “collecting
information, including when limited to particular content (which does not
change its character as information), [i]s within the realm of abstract ideas.”
Elec. Power, 830 F.3d at 1353 (citing cases). So, too, is “analyzing
information . . . by mathematical algorithms, without more.” Id. at 1354.
And “merely presenting the results of abstract processes of collecting and
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analyzing information, without more (such as identifying a particular tool for
presentation), is abstract as an ancillary part of such collection and analysis.”
Id.; see also PO Resp. 28 (explaining “[t]he claims then provide the
generated proposals and/or their aggregated value to the involved parties for
approval (e.g., through a web site).”).
Nor does it matter to this conclusion whether the information here is
information about standard or non-standard OTC derivatives. PO Resp. 1,
5–8. As many cases make clear, even if a process of collecting and
analyzing information is “limited to particular content” or a particular
“source,” that limitation does not make the collection and analysis other than
abstract. Elec. Power, 830 F.3d at 1353, 1355 (citing cases). Moreover, the
“OTC derivative” character of this information simply invokes a separate
category of abstract ideas involved in Alice and many other cases, a certain
method of organizing human activity—“the creation and manipulation of
legal obligations such as contracts involved in fundamental economic
practices.” Id. at 1354; SAP, 898 F.3d at 1168 (system for performing
statistical analysis on investment information and generating a report based
on the analysis is abstract); OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d
1359, 1363 (Fed. Cir. 2015) (“At best, the claims describe the automation of
the fundamental economic concept of offer based price optimization through
the use of generic-computer functions.”).
The Federal Circuit has found claims that recite similar concepts akin
to the concept of simplifying trade portfolios through the premature
termination ineligible. See MPEP 2106.04(a)(2). For example, in Credit
Acceptance Corp. v. Westlake, a system for generating financing packages
for each product in a dealer’s inventory and transmitting financing terms for
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each financing package to a user terminal via the network for presentation to
the user for immediate purchase, wherein the server is further configured
such that the financing terms of each financing package include an advance
amount to be paid to the dealer by said financing party if the customer
purchases the product associated with the financing package, was
determined to be drawn to processing an application for financing a
purchase. Credit Acceptance Corp. v. Westlake, 859 F.3d 1044, 1054–55
(Fed. Cir. 2018). The Federal Circuit explained it saw “no meaningful
distinction between this type of financial industry practice and ‘the concept
of intermediated settlement’ held to be abstract in Alice, 134 S. Ct. at 2356,
or the ‘basic concept of hedging’ held to be abstract in Bilski v. Kappos.” Id.
at 1054.
Importantly, none of the claims recites “linking.” They simply recite
“linked OTC derivative transactions,” without claiming how the linking
occurs. See Ex. 1042, 60:17–61:1 (admitting “linking” is not claimed).
Thus, the “linking” process cannot serve as a basis for patentability. See
Synopsis, 839 F.3d at 1149. Yet even if it was claimed, “linking” is a mental
process or a certain method of organizing human activity (a commercial or
legal interaction) and, thus, an abstract idea. Indeed, humans have been
matching—i.e., linking—similar—although not identical items for a long
time by comparing different attributes of the two items to determine whether
they are the same or not. See CyberSource Corp. v. Retail Decisions, Inc.,
654 F.3d 1366, 1372–73 (Fed. Cir. 2011) (obtaining information about
Internet credit card transactions, making a map of the credit card numbers,
and using the map to determine if a transaction is valid can be performed
entirely in the human mind including logical reasoning steps by writing a list
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of credit card transactions from a particular IP address and observing
transactions to see if they use different credit cards and user names at the
same IP address).
The same is true with realizing that aggregating transactions together
can be used to sell groups of items that otherwise would be difficult to sell
individually.
Second, Patent Owner argues Petitioner “oversimplif[ies]” the claims
“stripp[ing] the claim of detail.” PO Resp. 2, 16–20, 34. In particular,
Patent Owner contends that Petitioner “boil[s]” the claims down to three
steps:
(1) identifying transactions between the involved parties; (2)
selecting those trades which represent the same trades of the
original counterparties; and (3) selecting certain transactions
from step (2) which can be used to simplify a trade portfolio and
providing them to the involved parties for approval.
PO Resp. 16 (quoting Pet. 32–33, 48). For example, Patent Owner argues
that “Petitioner’s ‘three steps’ do not even include termination.” PO
Resp. 17. We disagree that Petitioner has improperly over-simplified the
claims. For example, Patent Owner’s argument ignores that claim 1 does
not even require any termination take place—it merely requires the
generation of a proposal of transactions for “termination or assignment.”
Ex. 1001, 32:59–33:11. Even if more granular details of claim 1 are
incorporated into the three steps, we find it does not change the abstract
nature of the claims, because “a claim is not patent eligible merely because it
applies an abstract idea in a narrow way.” BSG Tech LLC v. Buyseasons,
Inc., 899 F.3d 1281, 1287 (Fed. Cir. 2018).
In addition, contrary to Patent Owner’s apparent contentions, we do
not agree that claim 1 is limited to specific rules, let alone the specific rules
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disclosed in columns 26 to 30 of the ’649 patent. Instead, we agree with
Petitioner that the claims of the ’649 patent, and claim 1 in particular, are
written in broad results-oriented language, not limited to a particular rule set,
as was the case in McRO. See McRO, 837 F.3d at 1311; Ex. 1001, 25:16–17
(stating algorithm described for the branching process to identify potential
transactions is “[a] non-limiting example”), 27:7–33 (describing the package
calculation process as a “constrained optimization” problem that can be
solved using “a standard method for linear programming” where there is “a
vast literature and a number of standard software packages available for the
solution”). The relevant portion of claim 1 recites:
generating, using the existing linked OTC derivative
transactions, premature termination and assignment proposals
consisting of packages of a plurality of linked OTC derivative
transactions having designated maturity dates, wherein each of
the proposals includes at least three involved parties, and wherein
the proposals are for premature termination or assignment of the
linked OTC derivative transactions of the packages at a date at
which there is no prescribed value and no prescribed method of
determining a value at which the termination or assignment of
the linked OTC derivative transactions of the packages should
take place, and at which there is no obligation for the involved
parties to make premature terminations or premature
assignments of the linked OTC derivative transactions of the
packages, wherein there is substantially no financial loss to all of
the involved parties to terminate or assign prematurely before
their respective designated maturity dates, according to
parameters set by the involved parties
Ex. 1001, 32:60–33:12. Although this limitation sets certain requirements
that the proposal must meet, it sets no condition on how a proposal meeting
those conditions can be generated. Thus, Patent Owner’s arguments about
the allegedly novel “compression” method are not commensurate with the
scope of the claims. See PO Resp. 29 (explaining “the problem can be
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solved using a linear programming solution method” and explaining the
explanation in the ’649 patent is “exemplary”).
Accordingly, Petitioner has shown that the claims recite a concept that
falls within the categories of abstract ideas—specifically, certain methods of
organizing human activity (commercial or legal interactions, such as
business relations) and mental processes (observation and evaluation).
4. Additional Elements that Integrate the Judicial Exception
We consider whether the claims integrate the judicial exception into a
practical application “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.”
2019 Revised Guidance, 84 Fed. Reg. at 55. Some exemplary
considerations include whether the additional elements reflect an
improvement to the functioning of a computer or use the judicial exception
in some other meaningful way beyond generally linking the use of the
judicial exception to a particular technological environment. The term
“additional elements” refers to features, limitations, or steps that the claim
recites beyond the abstract idea itself. Id.
Petitioner contends that the claims do not integrate the abstract idea
into a practical application of the abstract idea because the claims merely
apply the abstract idea using generic computers and do not recite an
improvement to technology. Pet. 38–43.
In addition to the abstract idea, claim 1 recites: “a plurality of data
input/output and processing stations, an optional central station,” “a
network,” and “a processor.” Ex. 1001, 32:41–33:15. These additional
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elements, considered individually and as a whole, do not integrate the
abstract idea into a practical application. Specifically, we are persuaded by
Petitioner that the additional elements merely invoke computers as a tool and
do not reflect an improvement to the functioning of a computer or an
improvement other technology or technical field. See 2019 Revised
Guidance, 84 Fed. Reg. at 55.
Patent Owner argues:
The invention of the ’649 patent overcame these technical
problems with a technical solution that integrated several
technological advances: (1) an OTC derivative compression
process using particular constrained optimization problems; (2)
an OTC derivative trade linking process; and (3) a centralized
processor, performing compression and linking, that receives
trade data from multiple parties. These technological advances
illustrate that the claims are not “a drafting effort designed to
monopolize [a] judicial exception.”
PO Resp. 56 (citing Ex Parte Smith, Appeal No. 2018-000064, 2019 WL
764497, at *5 (PTAB Jan. 31, 2019) (informative)).
We disagree with Patent Owner that the claims are integrated into a
practical application in the manner Patent Owner suggests. Petitioner’s
evidence and analysis persuade us that the additional elements of the claims,
both individually and as an ordered combination, do not transform the nature
of the claims into a patent-eligible application.
Patent Owner’s arguments concerning derivative compression process
using particular constrained optimization problems are not persuasive
because, as discussed above with respect to step 1, prong 1, the claims do
not require such. See PO Resp. 57–59. “The § 101 inquiry must focus on
the language of the Asserted Claims themselves.” Synopsys, Inc. v. Mentor
Graphics Corp., 839 F.3d 1138, 1149 (Fed. Cir. 2016); see Accenture
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Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1345
(Fed. Cir. 2013) (admonishing that “the important inquiry for a § 101
analysis is to look to the claim”); see also Content Extraction and
Transmission LLC v. Wells Fargo Bank, Nat. Ass’n, 776 F.3d 1343, 1346
(Fed. Cir. 2014) (“We focus here on whether the claims of the asserted
patents fall within the excluded category of abstract ideas.”); October 2019
Update, 12 (“[I]f the specification sets forth an improvement in technology,
the claim must be evaluated to ensure that the claim itself reflects the
disclosed improvement. That is, the claim includes the components or steps
of the invention that provide the improvement described in the
specification.”). There are no “particular constrained optimization
problems” required in claim 1. Claim 1 simply claims a result, not a
particular way of accomplishing that result.
Patent Owner argues that the claims also “require trade linking (e.g.,
reciting the use of ‘linked OTC derivative transactions’ or ‘linked pairs of
OTC derivative transactions’).” Id. at 63. Patent Owner contends that
“because OTC derivative transactions, i.e. OTC derivative contracts, are
individually negotiated and lack a centralized authority or exchange, the two
sides of a trade can record the details of the same transaction in different
ways.” Id. Patent Owner asserts that “[t]rade linking is a specific technical
process involving the post hoc matching of attributes and market data, which
were recorded differently and often using different conventions, to uniquely
identify two versions of the same trade.” Id. Patent Owner also contends
that “[e]ach independent claim recites a processor, performing compression,
that receives trade data from multiple parties.” Id. at 65. Patent Owner
argues that “[t]his centralized processor may be a standalone processor or
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may be integrated in a processor at a financial institution and replaced what
was a local process of manually negotiating the termination of non-
standardized instruments. The consolidation of compression and linking at a
centralized processor greatly increased the quality of potential termination
proposals.” Id.
We are not persuaded that the claimed “trade linking” or “centralized
processor” are recited at a level of particularity or improvement to integrate
the abstract idea recited in claim 1 into a practical application. See
MPEP 2106.04(d).
In claim 1, the “at least one processor” is
operable for generating, using the existing linked OTC derivative
transactions, premature termination and assignment proposals
consisting of packages of a plurality of linked OTC derivative
transactions having designated maturity dates, wherein each of
the proposals includes at least three involved parties, and wherein
the proposals are for premature termination or assignment of the
linked OTC derivative transactions of the packages at a date at
which there is no prescribed value and no prescribed method of
determining a value at which the termination or assignment of
the linked OTC derivative transactions of the packages should
take place, and at which there is no obligation for the involved
parties to make premature terminations or premature
assignments of the linked OTC derivative transactions of the
packages, wherein there is substantially no financial loss to all of
the involved parties to terminate or assign prematurely before
their respective designated maturity dates, according to
parameters set by the involved parties.
Ex. 1001, 32:60–33:12.
These steps recite generic computer functions of a processor. The
Specification describes “central computer” as being “provided together with
a central database 30 for storing transaction data during the mass termination
process,” performing “most of the processing to implement the desired mass
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early terminations as is described in detail hereinafter.” Id. at 11:64–67. As
illustrated in Figures 2, 3, 4, 5, and 6, the central processor is part of a
generic computer or “application server” interacting with a standard
database. Id. at 13:39–58, 14:13–18.
Thus, the central processor is claimed and described as a generic
computer component that performs generic functions of receiving data and
then performing operations and calculations, then communicating proposals
of transactions to terminate with the local computers using, for example,
email. The “central processor” is not claimed or described as an
improvement to computers or another technical field. It is not a particular
machine or manufacture integral to claim 1 given its generic description and
functionality. It does not transform an article to a different state or thing or
otherwise apply the abstract idea in a meaningful way. See
MPEP 2106.04(d).
The fact that the “central processor” is used and claimed to perform
steps of the recited abstract idea does not integrate the abstract idea into a
practical application or otherwise make the abstract idea patent-eligible, at
least not on that basis. “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.” BSG Tech, 899 F.3d at 1290; see id. at 1291 (“As a
matter of law, narrowing or reformulating an abstract idea does not add
‘significantly more’ to it.”); RecogniCorp, LLC v. Nintendo Co., 855 F.3d
1322, 1327 (Fed. Cir. 2017) (“Adding one abstract idea (math) to another
abstract idea (encoding and decoding) does not render the claim non-
abstract.”); Synopsys, 839 F.3d at 1151 (“[A] claim for a new abstract idea is
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still an abstract idea.”); Versata, 793 F.3d at 1335 (claims that improved an
abstract idea, but not a computer’s performance, were held unpatentable).
Mere recitation of concrete, tangible components such as a processor
is not sufficient to make abstract ideas performed on or with that processor
patent-eligible. Alice, 573 U.S. at 223 (“[T]he mere recitation of a generic
computer cannot transform a patent-ineligible abstract idea into a patent-
eligible invention. . . . [I]if a patent’s recitation of a computer amounts to a
mere instruction to ‘implemen[t]’ an abstract ‘on . . . a computer,’ . . . that
addition cannot impart patent eligibility.”) (citation omitted).
Here, the focus of any of the claims is not on a technical advance in
processors. Rather, the focus is on performance of an abstract idea for
which a processor is invoked merely as a tool. See Enfish LLC v. Microsoft
Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016).
So too, “trade linking” is recited as generic data processing performed
by a database. The Specification repeatedly describes “linking” of trade as
“matching” Ex. 1001, 14:36–37. The Specification explains “the key
financial terms of the deals is used to identify the trade data” and proceeds
by finding matches by comparing the key financial terms of each trade
record. Id. at 20:27–22:54. Although the Specification does describe some
additional features of rating the relative strength of the match, none of those
specific features are recited in the claim. Simply matching various key
fields of database records is just a generic database function. Indeed, the
Specification explains that
Matching services are known that provide matching and linking
of deals at the moment they are done. SWIFT Accord for
example, provides such a matching service. For matched trades
there is a common identifier and in that case this common
identifier is used for the linking of trades.
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Id. at 20:37–41. Patent Owner argues that the matching used for SWIFT
was something less than what their system performs (PO Resp. 64), but none
of that is reflected in the claims. The claims merely require “linking.”
Patent Owner offers no construction or narrowing of the claims, or
contention that “linking” has some special meaning in the art. Thus, Patent
Owner’s arguments are not persuasive.
As the Supreme Court held in Alice, “[n]early every computer will
include a ‘communications controller’ and a ‘data storage unit’ capable of
performing the basic calculation, storage, and transmission functions
required by the method claims.” Alice, 573 U.S. at 226. It also has been
held that generic computer components such as an “interface,” “network,”
and “database” fail to integrate an abstract idea into a practical application.
Mortg. Grader, Inc. v. First Choice Loan Serv. Inc., 811 F.3d 1314, 1324–
25 (Fed. Cir. 2016) (holding that claims reciting an “interface,” “network,”
and a “database” are nevertheless directed to an abstract idea); see also
Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363,
1368 (Fed. Cir. 2015) (holding that a “database” and “a communication
medium” “are all generic computer elements”); buySAFE, 765 F.3d at 1355
(“That a computer receives and sends the information over a network—with
no further specification—is not even arguably inventive.”).
Accordingly, and for the foregoing reasons, we determine that claim 1
does not include any additional elements that integrate the abstract idea into
a practical application.
The decision Ex Parte Smith, Appeal No. 2018-000064, 2019 WL
764497 (PTAB Jan. 31, 2019) (Informative) is not to the contrary. Smith
found an integration because the claims recited “a specific timing
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mechanism in which the execution of a matching order is delayed for a
specific period of time” to allow for other matching orders to be received
from in-market participants. Id. at *5. The use of timing mechanisms and
temporary restraints on trade execution improved trading technology. Id.
Here, claim 1 lacks any kind of timing mechanism or similar delay in
trading of derivatives or other financial instruments. Instead, the system
collects information, matches information together, and then generates a
proposal of possible trades that can be terminated or assigned. As we
explained above, this is abstract, and combining or narrowing an abstract
idea is still an abstract idea. See RecogniCorp, 855 F.3d at 1327.
Accordingly, we conclude that claim 1 fails to integrate the abstract
idea into a practical application.
5. Whether Any Additional Elements Recite Significantly More
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.” Alice,
573 U.S. at 217 (quoting Mayo, 566 U.S. at 78–79). To determine whether
claim 1 provides an inventive concept, we consider the additional elements,
individually and in combination, to determine whether they (1) add a
specific limitation beyond the judicial exception that is not “well-
understood, routine, conventional” activity in the field or (2) simply append
well-understood, routine, conventional activities previously known to the
industry, specified at a high level of generality, to the judicial exception.
See MPEP 2106.05.
Petitioner contends that the combination of additional elements of
claim 1 recite only conventional human activities and do not provide any
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improvements in computer technology. Pet. 37–43. Petitioner provides a
detailed explanation, supported by evidence, that the combination of
additional elements was well-known and conventional. Id. Petitioner
further argues that the claims are directed to result-oriented functionalities,
such as “generating . . . premature termination and assignment proposals”
and “provid[ing] the premature termination and assignment proposal
packages to the parties” without reciting any specific technical solutions as
to how those steps are carried out. Id. at 37–38, 43–48. Moreover,
Petitioner contends that none of the claims viewed as an ordered
combination transforms the abstract idea into patent-eligible subject matter.
Id. at 37, 48–50.
Patent Owner contends that “[t]he claims of the ’649 patent provide
an inventive concept because they recite ‘a specific limitation or
combination of limitations that are not well-understood, routine,
conventional activity in the field.’” PO Resp. 71 (quoting 84 Fed. Reg. at
56). Patent Owner argues that “none of the independent claims merely states
a conventional or generic computer implementation of any known
procedures for generating premature termination proposals.” Id. at 72.
Patent Owner asserts that “Petitioner has not established that the overall
process was known (much less conventional) or that the computer
implementation or arrangement (using specifically-formulated constrained
optimization problems, trade linking, and central processing capability) was
generic or conventional.” Id.; PO Sur-Reply 22–24.
Patent Owner contends that Petitioner “merely identified other
practices that do not contain the features of the claimed system and do not
produce the same quality of output.” Id. Patent Owner submits that “[w]hile
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there were known techniques for solving constrained optimization problems,
as discussed, there is no evidence that they were conventionally used to
generate premature termination proposals of OTC derivative transactions
among three or more parties with central processing capability, much less
with the specific formulations recited in various claims.” Id. at 73; PO Sur-
Reply 19–22.
Patent Owner argues that this case is similar to Bascom Global
Internet Services, Inc. v. AT&T Mobility LLC, 827 F.3d 1341 (Fed. Cir.
2016). Id. at 75. Patent Owner contends that, like Bascom, “known
solutions were either centralized but inflexible (netting of standardized
instruments) or dependent on distributed, local negotiation (break clauses,
bilateral restructuring, and lifting out), whereas the patented system is
flexible enough to handle non-standardized instruments yet installable at a
central location.” Id.; PO Sur-Reply 24–26. Patent Owner argues that “the
claims do not rely on the mere recitation of a computer or the internet itself
to provide an inventive concept because, as discussed, they do not claim the
generic automation of a known process.” Id. at 76. Instead, “the inventive
concept lies in the improved method, not the use of a computer to perform a
known method.” Id. Patent Owner contends that the claims are not “results-
oriented” because “it does matter by what process or machinery the result is
accomplished.” Id. at 79. Further, Patent Owner asserts that the claims do
not preempt the field because “numerous techniques, manual or
computerized, fall outside their ambit.” Id. at 80; PO Sur-Reply 26.
To qualify as an inventive concept, the implementation of the abstract
idea must involve “more than performance of ‘well-understood, routine,
[and] conventional activities previously known to the industry.”’ Content
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Extraction, 716 F.3d at 1347–48 (alteration in original) (quoting Alice, 573
U.S. at 225).
Claim 1 uses a generic processor to perform well-understood, routine,
conventional activities previously known to the industry, such as receiving
and analyzing data and performing mathematical calculations. See Bancorp
Servs., L.L.C v. Sun Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 1278
(Fed. Cir. 2012) (“[T]he use of a computer in an otherwise patent-ineligible
process for no more than its most basic function--making calculations or
computations-- fails to circumvent the prohibition against patenting abstract
ideas and mental processes.”). We do not discern any claimed element for
accomplishing the claimed solution that is other than what was generically
known for performing those conventional functions. See Credit Acceptance,
859 F.3d at 1057 (“[T]he claims do not provide details as to any non-
conventional software for enhancing the financing process.”); see
Intellectual Ventures I LLC v. Capital One Fin. Corp., 850 F.3d 1332, 1342
(Fed. Cir. 2017) (“Our law demands more” than claim language that
“provides only a result-oriented solution, with insufficient detail for how a
computer accomplishes it.”); Elec. Power, 830 F.3d at 1354 (explaining that
claims are directed to an abstract idea where they do not recite “any
particular assertedly inventive technology for performing [conventional]
functions”). Despite Patent Owner’s assertions that the claim steps add
enough to make the claims patentable, we find the bare recitation of the
steps performed by a generic processor at a high level of generality is
insufficient to supply an inventive concept.
We agree with Petitioner that none of the claims recites a “constrained
optimization” problem or “formulating” a constrained optimization problem.
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Pet. Reply 18 (citing Ex. 2012 ¶ 85). We further agree with Petitioner that
optimization and linear programming are known mathematical concepts.
See id. 18–19 (citing Ex. 1002 ¶¶ 58–63; Ex. 1040, at 222; Ex. 1042, 46:14–
48:16 Ex. 1039 ¶¶ 22–23; Ex. 1001, 26:42–27:28). Thus, even if it where
recited, it could not provide “inventive concept.”
In addition, as discussed above, Patent Owner’s reliance on “linking”
is unpersuasive because it is not even recited in the claims. And even if it
was recited, the record contains more than sufficient evidence to show it was
known. See Ex. 1002 ¶ 57; Ex. 1011, 17–25; Ex. 1039 ¶¶ 17, 18.
Patent Owner’s argument that the ’649 patent’s claims are similar to
the claims in BASCOM is not persuasive. In that case (and also Enfish),
claims were patent-eligible because they were directed to improvements in
the way computers and networks carry out their basic functions. Enfish, 822
F.3d at 1335–36; BASCOM, 827 F.3d at 1348–49; see Elec. Power, 830 F.3d
at 1354. Here, the focus of the claims is not any improved computer or
network, but the improved mathematical analysis; and indeed, the
specification makes clear that off-the-shelf computer technology is usable to
carry out the analysis. See, e.g., Ex. 1001, Abstract, Fig. 2, 11:56–61,
12:57–64, 13:31–41, 14:6–8, 15:8–8, 20:26–41, 26:42–27:31; Ex. 1002,
¶¶ 23, 43, 55, 56, 58, 62. The claims of the ’649 patent thus fit into the
familiar class of claims that do not “focus . . . on [ ] an improvement in
computers as tools, but on certain independently abstract ideas that use
computers as tools.” Elec. Power, 830 F.3d at 1354.
In In re Board of Trustees of the Leland Stanford Jr. University, 989
F.3d 1367 (Fed. Cir. 2021) (“Stanford”), the Federal Circuit found claims
directed to method and computing systems for determining haplotype
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phase—the process for determining the parent from whom different versions
of a gene are inherited—were ineligible. The Federal Circuit explained that
“mathematical algorithms for performing calculations, without more, are
patent ineligible under § 101.” Id. at 1372. The court explained that it did
not matter whether the “the specific application of the steps is novel and
enables scientists to ascertain more haplotype information than was
previously possible.” Id. at 1373 (citing 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.”); SAP, 898 F.3d at 1170 (“[P]atent law does not
protect such claims, without more, no matter how groundbreaking the
advance.”). The court examined “whether the claimed advance
demonstrates an improvement on a technological process or merely
enhances an ineligible concept.” Id. The court found that the “claimed
advance proffered by Stanford, that the process yields a greater number of
haplotype phase predictions, may constitute a new or different use of a
mathematical process, but we are not persuaded that the process is an
improved technological process.” Id. The court concluded that the claims
were directed to an abstract idea. The same analysis applies here.
Patent Owner raises a number of arguments why the claims are not
directed to an abstract idea. None of them is persuasive. First, Patent
Owner argues about the novelty of its method of terminating derivatives
versus the numerous existing techniques. PO Resp. 8–16, 35–49; PO Sur-
Reply 2–18. Patent Owner asserts that prior art methods were lacking
because of difficulties in matching transactions. and they failed to realize
that differences in subjective valuations of individual transactions could be
overcome by “aggregation of different valuations . . . which averages out
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such differences” as well as “the risks of change in valuation.” PO Resp. 10;
id. at 12–13 (explaining “linking” uses “a technique that analyzes the
attributes of each transaction to find and link the two versions of the same
transaction”). This insufficient to make the claim patent eligible. See
Content Extraction & Transmission LLC v. Wells Fargo N.A., 776 F.3d
1343, 1347 (Fed. Cir. 2014) (finding “1) collecting data, 2) recognizing
certain data within the collected data set, and 3) storing that recognized data
in a memory” abstract); Digitech Image Tech., LLC v. Elecs. for Imaging,
Inc., 758 F.3d 1344, 1351 (Fed. Cir. 2014) (claim that “recites a process of
taking two data sets and combining them into a single data set” simply by
organizing existing data into a new form is abstract); OIP Tech., Inc. v.
Amazon.com, Inc., 788 F.3d 1359, 1362–63 (Fed. Cir. 2015) (using
aggregated data to calculate prices is abstract).
And even accepting Patent Owner’s view that these particular ideas in
the OTC derivative are not well-known, routine, or conventional, “[a] claim
for a new abstract idea is still an abstract idea,” SAP, 898 F.3d at 1163
(quoting Synopsys, 839 F.3d at 1151), and “[a]dding one abstract idea (math)
to another abstract idea . . . does not render the claim non-abstract.”
RecogniCorp, LLC v. Nintendo Co., Ltd., 855 F.3d 1322, 1327 (Fed. Cir.
2017).
Moreover, Petitioner persuasively shows that the premature
termination of derivatives has existed for decades and relies heavily on
complex contractual relationships and clauses that were developed decades
ago. See Ex. 1002 ¶¶ 35–52 (describing various prior art methods of
mitigating derivative risks). Patent Owner’s efforts to distinguish these
methods simply reinforces the abstract character of these claims. PO
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Resp. 35–49. The alleged problems Patent Owner identifies in each of the
prior art methods are economic, business, and legal hurdles, not
technological challenges. See id. Patent Owner asserts that Petitioner
misconstrues and misrepresents the Specification. PO Resp. 49–52. The
alleged misrepresentations do not affect our analysis. For example, Patent
Owner argues that Petitioner misconstrues the Specification’s statements
regarding linking to assert that linking is conventional and known. Id. at 49–
51. Patent Owner also contends that Petitioner misconstrues the ’649 patent
regarding the “claimed ‘generating’ step.” Id. at 51–52. Patent Owner
argues that the claimed “generating” “refers to formulating and solving a
constrained optimization problems according to the constraints specified.”
Id. at 51. Patent Owner asserts that while the linear programming necessary
to solve the problem was known, the way to “formulate” the problem was
not. Id. at 51–52. Again, Patent Owner’s arguments are beside the point.
The question is not whether these precise techniques of “linking” or
“generating” are novel, but whether they are abstract. As Patent Owner’s
own arguments regarding the alleged mischaracterizations make clear, the
“linking” is matching data records between data sets (id. at 49–51
(explaining linking)), and “generating” is setting up and solving a math
problem (id. at 28–29 (explaining “the ‘generating’ step to refer[s] to
formulating and solving a constrained optimization problem according to the
constraints specified” and “‘Formulating’ a linear constrained optimization
problem (i.e., a linear program) refers to ‘expressing a real problem or
phenomenon in terms of linear inequalities.’”; 51–52 (explaining
generating)), both of which are abstract (a mental process and a
mathematical concept, respectively).
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Patent Owner repeatedly contends the claims here are similar to the
claims determined to be patent eligible in McRO, Inc. v. Bandai Namco
Games America Inc., 837 F.3d 1299 (Fed. Cir. 2016). PO Resp. 20–26, 31–
34, 52–55. There are several problems with this contention. The claims in
McRO were directed to the creation of something physical—namely, the
display of “lip synchronization and facial expressions” of animated
characters on screens. Id. at 1313. The claimed improvement was to how
the physical display operated (to produce better quality images), unlike
(what is present here) a claimed improvement in a mathematical and data
processing technique to generate more data—a proposal of particular
transactions to terminate. The claims in McRO thus were not abstract in the
sense that is dispositive here. And those claims also avoided being
“abstract” in another sense reflected repeatedly in our reviewing court’s
cases (based on a contrast not with “physical” but with “concrete”): they had
the specificity required to transform a claim from one claiming only a result
to one claiming a way of achieving it. Id. at 1314; see Finjan, Inc. v. Blue
Coat Sys., Inc., 879 F.3d 1299, 1305–06 (Fed. Cir. 2018); Apple, Inc. v.
Ameranth, Inc., 842 F.3d 1229, 1241 (Fed. Cir. 2016); Affinity Labs of
Texas, LLC v. DIRECTV, LLC, 838 F.3d 1253, 1265 (Fed. Cir. 2016).
We are persuaded by Petitioner that the additional elements of the
claims do not “‘transform the nature of the claim’ into a patent-eligible
application.” Alice, 573 U.S. at 217 (quoting Mayo, 566 U.S. at 78–79).
The additional elements must be more than “well-understood, routine,
conventional activity.” Mayo, 566 at 1298. Thus, as in SAP America,
“There is, in short, nothing ‘inventive’ about any claim details, individually
or in combination, that are not themselves in the realm of abstract ideas.”
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SAP Am., 898 F.3d at 1170. In the absence of the required ‘inventive
concept’ in application, the claims here are legally equivalent to claims
simply to the asserted advance in the realm of abstract ideas—an advance in
mathematical techniques in finance—i.e., certain methods of organizing
human activity (commercial or legal interactions, such as business relations)
and mental processes (observation and evaluation). Accordingly, Petitioner
has shown by a preponderance of the evidence that claims 1 and 17 of the
’649 patent are unpatentable under 35 U.S.C. § 101.
Patent Owner does not argue claims 2, 3, 8, 12, and 13 separately.
We agree with Petitioner that these claims do not add anything more that
would render these claims patent eligible. Ex. 1002 ¶¶ 67, 69, 71. In sum,
we also find Petitioner has shown these claims of the ’649 patent are
unpatentable under 35 U.S.C. § 101.
6. Representativeness of Claim 1
Patent Owner argues that claim 1 is not representative of the claims.
PO Resp. 30, 59–61, 63, 80–83. For example, Patent Owner notes that claim
4 recites “the processor, based on tolerance-limits entered by the involved
parties on net present values, maturity dates and/or one or more of the
Greeks to identify intervals they consider to be risk-neutral, generates the
packages having the linked OTC derivative transactions that aggregated
together can be considered to be riskneutral.” Id. at 30; see also id. at 59–
61, 63, 80–81. Similarly, Patent Owner notes that claims 5–7, 10, and 14,
recite other constrained optimization problems and corresponding rules. Id.
at 30; see also id. at 60, 63, 81–83.
Patent Owner also argues that claims 9 and 16 recite bilateral “sub-
proposals” that are produced from a matching process between three or more
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parties. Id. at 81–82. Patent Owner asserts that claims 19 and 22 recite an
alternate technique and corresponding rules in which the generating step is
split into two “determining” steps.7 Id. at 30; see also id. at 83. Patent
Owner contends that “[o]ne of ordinary skill in the art reading these claims
in light of the specification would understand the first ‘determining’ step to
refer to a branching process described in the ’649 patent to identify potential
transactions that are particularly promising from the larger built-up web of
transactions.” Id. at 31. Patent Owner also argues that “[a] person skilled in
the art would understand the second ‘determining’ step to refer to
formulating and solving a constrained optimization problem using as
constraints, or rules, the promising transactions and ‘party-specified
tolerance limits’ for the ‘aggregated value’ of the proposal (the proposal
being the “second set of linked pairs”).” Id. Patent Owner asserts that
“[o]ther claims (e.g., claims 15, 18, 20, and 22) recite creating linked OTC
derivative transactions.” Id.; see also id. at 83.
We agree with Petitioner that the remaining claims contain no
limitations that, when considered individually or as an ordered combination,
transform them into patent eligible applications, and therefore, Petitioner has
met its burden of proof. See Pet. Reply 25–26. The recitations in these
claims are simply more specific versions of calculations performed in

7 Claim 19 recites in relevant part: “determining a first set of linked pairs
. . . wherein each transaction party . . . has both debts and claims towards
other parties in the first set” and then “determining, using the first set of
linked pairs, a second set of linked pairs . . . involving at least three parties
and . . . wherein the second set . . . has “an aggregated value calculated by
the processor within party-specified tolerance limits.” Claim 22 has similar
limitations.
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claim 1. See SAP Am., 898 F.3d at 1169. For example, claim 4 recites using
“tolerance limits entered by the parties” including “net present values,
maturity dates and/or one or more Greeks to identify intervals they consider
to be risk-neutral” and then using these conditions to generate a package of
derivative transactions that “aggregated together can be considered risk-
neutral.” Claim 14 depends from claim 1 and adds further constraints on the
constrained optimization problem. Claims 5–7 simply add further
specificity to the conditions in claim 4. Claims 9 and 16 recite producing bi-
lateral “subproposals.” Claims 10 and 11 depend from claim 9 and recite “a
particular way in which constraints are applied to a multilateral optimization
problem.” PO Resp. 82.
These limitations simply provide further narrowing of what are still
mathematical and fundamental economic operations. They add nothing
outside the abstract realm. See Mayo, 566 U.S. at 88–89 (stating that narrow
embodiments of ineligible matter, citing mathematical ideas as an example,
are still ineligible); buySAFE, 765 F.3d at 1353 (same).
Claims 19 and 21 recite the two steps detailed above of specific
constraints on the optimization problem (as in claims 4–7, 9–11, and 16) as
well as an additional step related to identifying certain transactions with
particular characteristics (“wherein each transaction party . . . has both debts
and claims towards other parties in the first set”). As discussed above, the
constraints on the optimization problem are simply abstract mathematical
and economic operations. The identification of transactions with particular
characteristics—transactions with parties with debts and claims against each
other—is simply an abstract mental process. See Content Extraction, 776
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F.3d at 1347. A process stringing two abstract ideas together, remains
abstract. See RecogniCorp, 855 F.3d at 1327.
Finally, claims 15, 18, 20, and 22 add that the “generating” (claims 1,
17) or “determining” (claims 19, 21) steps use a linked pair of OTC
derivative transaction records “created” by the centralized processor. PO
Resp. 83. “As many cases make clear, even if a process of collecting and
analyzing information is ‘limited to particular content’ or a particular
‘source,’ that limitation does not make the collection and analysis other than
abstract. SAP Am., 898 F.3d at 1168 (citing Elec. Power, 830 F.3d at 1353,
1355 (citing cases)). Such is the case here with respect to the content added
by each of claims 15, 18, 20, and 22.
Accordingly, we agree with Petitioner that claim 1 is representative of
the challenged claims.
7. Conclusion for Subject Matter Eligibility
Petitioner has shown by a preponderance of the evidence that claims
1–22 of the ’649 patent recite an abstract idea, do not integrate the abstract
idea into a practical application, and the generic computer components
recited in those claims do not transform the claims into patent-eligible
applications of that idea. Petitioner has shown by a preponderance of the
evidence that claims 1–22 of the ’649 patent are unpatentable under
35 U.S.C. § 101.
E. MOTION TO AMEND
1. Principles of Law
In a covered business method patent review, amended claims are not
added to a patent as of right, but rather must be proposed as a part of a
motion to amend. 35 U.S.C. § 326(d) (2018). The Board must assess the
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patentability of proposed substitute claims “without placing the burden of
persuasion on the patent owner.” Aqua Prods., Inc. v. Matal, 872 F.3d 1290,
1328 (Fed. Cir. 2017) (en banc); see also Lectrosonics, Inc. v. Zaxcom, Inc.,
IPR2018-001129, Paper 15 at 3–4 (PTAB Feb. 25, 2019) (precedential).
Subsequent to the issuance of Aqua Products, the Federal Circuit issued a
decision in Bosch Automotive Service Solutions, LLC v. Matal, 878 F.3d
1027 (Fed. Cir. 2017) (“Bosch”), as well as a follow-up Order amending that
decision on rehearing. See Bosch Auto. Serv. Sols., LLC v. Iancu, No. 2015-
1928 (Fed. Cir. Mar. 15, 2018) (Order on Petition for Panel Rehearing).
In accordance with Aqua Products, Bosch, and Lectrosonics, a patent
owner does not bear the burden of persuasion to demonstrate the
patentability of the substitute claims presented in the motion to amend.
Rather, ordinarily, “the petitioner bears the burden of proving that the
proposed amended claims are unpatentable by a preponderance of the
evidence.” Bosch, 878 F.3d at 1040 (as amended on rehearing); see
Lectrosonics, Paper 15 at 3–4; Rules of Practice to Allocate the Burden of
Persuasion on Motions to Amend in Trial Proceedings Before the Patent
Trial and Appeal Board, 85 Fed. Reg. 82,923 (Dec. 21, 2020). In
determining whether a petitioner has proven unpatentability of the substitute
claims, the Board focuses on “arguments and theories raised by the
petitioner in its petition or opposition to the motion to amend.” Nike, Inc. v.
Adidas AG, 955 F.3d 45, 51 (Fed. Cir. 2020).
Patent Owner’s proposed substitute claims, however, must meet the
statutory requirements of 35 U.S.C. § 326(d) and the procedural
requirements of 37 C.F.R. § 42.221. Lectrosonics, Paper 15 at 4–8.
Accordingly, Patent Owner must demonstrate: (1) the amendment proposes
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a reasonable number of substitute claims; (2) the proposed claims are
supported in the original disclosure (and any earlier filed disclosure for
which the benefit of filing date is sought); (3) the amendment responds to a
ground of unpatentability involved in the trial; and (4) the amendment does
not seek to enlarge the scope of the claims of the patent or introduce new
subject matter. See 35 U.S.C. § 326(d); 37 C.F.R. § 42.221.
2. Proposed Substitute Claims
Patent Owner provides a listing of its proposed substitute claims its
Revised Contingent Motion to Amend (Paper 38), pages 2–10. They are
reproduced in their entirety below.
Claim 23 (proposed for claim 1). [a1] A system for exchanging
OTC (Over the Counter) derivatives related data
comprising:
[a2] a plurality of data input/output and processing stations, an
optional central station and a network interconnecting all
stations, wherein the data input/output and processing
stations are operable by parties participating in OTC
derivatives related contracts for transmitting and
receiving, through the network, trade details for
nonstandardized existing OTC derivative transactions
carried out with other parties, wherein the optional central
station is for receiving the trade details over the network
from the data input/output and processing stations,
wherein the existing OTC derivative transactions include
linked OTC derivative transactions for which the trade
details are available for both of the parties to the respective
existing OTC derivative transaction;
[a3] wherein at least one of the data input/output and processing
stations or optional central station includes a processor,
wherein the processor is operable for generating, using the
existing linked OTC derivative transactions, premature
termination and assignment proposals consisting of
packages of a plurality of linked OTC derivative
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transactions having designated maturity dates, wherein
each of the proposals includes at least three involved
parties, and wherein the proposals are for premature
termination or assignment of the linked OTC derivative
transactions of the packages at a date at which there is no
prescribed value and no prescribed method of determining
a value at which the termination or assignment of the
linked OTC derivative transactions of the packages should
take place, and at which there is no obligation for the
involved parties to make premature terminations or
premature assignments of the linked OTC derivative
transactions of the packages, wherein there is substantially
no financial loss to all of the involved parties to terminate
or assign prematurely before their respective designated
maturity dates, according to parameters set by the involved
parties;
[a4] wherein the at least one station provides the premature
termination and assignment proposal packages to the
involved parties for their approval.
Claim 24 (proposed for claim 2). [a] The system of claim 123,
wherein the trade details transmitted via the data
input/output and processing stations include designated
maturity dates, mark-to-market values and risk
characteristics.
Claim 25 (proposed for claim 9). [a] The system of claim 224,
wherein several bilateral sub-proposals are produced from
a matching process between three or more of the involved
parties;
[b1] wherein said parameters are set by three or more involved
parties and comprise:
[b2] a first set of rules that define intervals which are risk-neutral
for a particular party as a function of differences in that
party’s aggregated net exposure to one or more of the
Greeks for a particular plurality of said existing OTC
derivative transactions; and
[b3] a second set of rules that define intervals which are risk-
neutral for a particular party as a function of differences in
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that party’s aggregated mark-to market valuation for a
particular plurality of said existing OTC derivative
transactions; and
[c] wherein said generating of said proposals is at least by
evaluating a plurality of said existing linked OTC
derivative transactions against said first and second sets of
rules to generate a package, of a plurality of linked OTC
derivative transactions, where the premature termination
or assignment of the transactions of the package in total is
risk-neutral to each of the involved parties according to the
rules.
Claim 26 (proposed for claim 14). [a] The system of claim 123,
arranged to produce a list of all OTC derivative
transactions wherein said parameters are set by three or
more involved parties and comprise a set of rules that
define intervals wherein there is substantially no financial
loss for a particular party as a function of differences in
that party’s the individual or aggregated mark-to-market
valuation of trades are such, that there is substantially no
financial loss to both of the involved parties to terminate
the OTC derivative transactions, which happens then both
of the parties′ valuations are within both of the parties′
tolerance ranges for a particular plurality of said existing
OTC derivative transactions; and
[b] wherein said generating of said proposals is at least by
evaluating a plurality of said existing linked OTC
derivative transactions against said set of rules to generate
a package, of a plurality of linked OTC derivative
transactions, where the premature termination or
assignment of the transactions of the package in total
results in substantially no financial loss to each of the
involved parties according to the rules.
Claim 27 (proposed for claim 16). [a] The system of claim 123,
wherein several bilateral sub-proposals are produced from
a matching process between three or more of the involved
parties;
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[b] wherein said parameters are set by three or more involved
parties and comprise a set of rules that define intervals
which are risk-neutral for a particular party as a function
of differences in that party’s aggregated net exposure to
one or more of the Greeks for a particular plurality of said
existing OTC derivative transactions, each interval also
corresponding to a time bucket; and
[c] wherein said generating of said proposals is at least by
evaluating a plurality of said existing linked OTC
derivative transactions against said set of rules to generate
a package, of a plurality of linked OTC derivative
transactions, where the premature termination or
assignment of the transactions of the package in total is
risk-neutral to each of the involved parties according to the
rules.
Claim 28 (proposed for claim 17). [a1] A computer-
implemented method for exchanging OTC (Over the
Counter) derivatives related data, wherein the OTC
derivatives related data describe OTC derivative
transactions having designated maturity dates, the method
comprising:
[a2] transmitting trade details by parties involved in OTC
derivatives related contracts using at least one of a
plurality of data input/output and processing stations,
wherein a network interconnects the data input/output and
processing stations and a n optional central station,
wherein the transmitting of the trade details by the parties
is through the network to each other or the central station
for OTC derivative transactions done with other parties,
and wherein each party's transmitted trade details are for
non-standardized existing OTC derivative transactions
carried out with other parties, wherein the existing OTC
derivative transactions include linked OTC derivative
transactions for which the trade details are available for
both of the parties to the respective existing OTC
derivative transaction;
[a3] generating, by a processor of at least one of the data
input/output and processing stations or the central station,
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using the existing linked OTC derivative transactions,
premature termination and assignment proposals
consisting of packages of a plurality of linked OTC
derivative transactions involving at least three parties and
having designated maturity dates, wherein the proposals
are for premature termination or assignment of the linked
OTC derivative transactions of the packages at a date at
which there is no prescribed value and no prescribed
method of determining a value at which the termination or
assignment of the linked OTC derivative transactions of
the packages should take place, and at which there is no
obligation for the involved parties to make premature
terminations or premature assignments of the linked OTC
derivative transactions of the packages, wherein there is
substantially no financial loss to all of the involved parties
to terminate or assign prematurely before their respective
designated maturity dates, according to parameters set by
the involved parties; and
[a4] providing, by the at least one station, the premature
termination and assignment proposal packages to the
involved parties for their approval;
[b1] wherein said parameters are set by three or more involved
parties and comprise:
[b2] a first set of rules that define intervals which are risk-neutral
for a particular party as a function of differences in that
party’s aggregated net exposure to one or more of the
Greeks for a particular plurality of said existing OTC
derivative transactions; and
[b3] a second set of rules that define intervals wherein there is
substantially no financial loss for a particular party as a
function of differences in that party’s aggregated mark-to-
market valuation for a particular plurality of said existing
OTC derivative transactions; and
[c] wherein said generating of said proposals comprises
evaluating a plurality of said existing linked OTC
derivative transactions against said first and second sets of
rules to generate a package, of a plurality of linked OTC
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derivative transactions, where the premature termination
or assignment of the transactions of the package in total is
risk-neutral to, and results in substantially no financial loss
to, each of the involved parties according to the rules.
3. Statutory and Regulatory Requirements
As noted above, Patent Owner’s proposed substitute claims must meet
the statutory requirements of 35 U.S.C. § 326(d) and the procedural
requirements of 37 C.F.R. § 42.221. We address each of these requirements
in turn.
a. Reasonable Number of Substitute Claims
A motion to amend must “propose a reasonable number of substitute
claims.” 35 U.S.C. § 326(d)(1)(B); see 37 C.F.R. § 42.221(a)(3) (“A motion
to amend may cancel a challenged claim or propose a reasonable number of
substitute claims.”). Petitioner challenges claims 1–22 of the ’649 patent,
and Patent Owner proposes substitute claims 23–28 to replace original
claims 1, 2, 9, 14, 16, and 17. Revised Mot. 2–8. Patent Owner proposes no
more than one substitute claim for each challenged claim. “There is a
rebuttable presumption that a reasonable number of substitute claims per
challenged claim is one (1) substitute claim.” Lectrosonics, Paper 15 at 4;
see 37 C.F.R. § 42.221(a)(3). Petitioner does not argue otherwise. See
generally Opp. Therefore, we determine that Patent Owner proposes a
reasonable number of substitute claims.
b. Respond to a Ground of Unpatentability
“A motion to amend may be denied where . . . [t]he amendment does
not respond to a ground of unpatentability involved in the trial.” 37 C.F.R.
§ 42.221(a)(2)(i). Patent Owner responds to the ground of unpatentability
from the Institution Decision, arguing that proposed substitute claims 23–28
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recite patent-eligible subject matter under 35 U.S.C. § 101. Rev. Mot. 14–
25. Petitioner’s argument that the amendment does not respond to the
ground of unpatentability (Opp. 4–25) is really that the proposed
amendments are insufficient to overcome the § 101 ground. We consider
that argument in the Section II.E.3.e below. Thus, we determine that the
Revised Motion responds to a ground of unpatentability.
c. Scope of the Claims
Patent Owner asserts that the substitute claims are each narrower than
the corresponding original claim. Revised Mot. 8–10. Petitioner does not
dispute this. See generally Opp. We determine that the proposed substitute
claims do not attempt to expand the scope of the challenged claims.
d. Support in the Original Disclosure
A motion to amend may not present substitute claims that introduce
new subject matter. 35 U.S.C. § 326(d); 37 C.F.R. § 41.221(a)(2)(ii). New
matter is any addition to the claims without support in the original
disclosure. See TurboCare Div. of Demag Delaval Turbomach. v. Gen. Elec.
Co., 264 F.3d 1111, 1118 (Fed. Cir. 2001) (“When [an] applicant adds a
claim . . . the new claim[] . . . must find support in the original
specification.”); see also Lectrosonics, Paper 15 at 7 (“the Board requires
that a motion to amend set forth written description support in the originally
filed disclosure of the subject patent for each proposed substitute claim”).
Petitioner argues that Patent Owner has failed to show adequate
support in the original application for the new limitations of “non-
standardized,” “substantially no financial loss,” and “intervals.” Opp. 2–4
Because we determine that the proposed substitute claims are directed
to patent-ineligible subject matter (see Section II.E.4 infra), we need not
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determine whether there is adequate support for “non-standardized,”
“substantially no financial loss,” or “intervals.” Cf. Boston Sci. Scimed, Inc.
v. Cook Grp. Inc., 809 F. App’x 984, 990 (Fed. Cir. Apr. 30, 2020) (non-
precedential) (recognizing that the “Board need not address issues that are
not necessary to the resolution of the proceeding” and, thus, agreeing that
the Board has “discretion to decline to decide additional instituted grounds
once the petitioner has prevailed on all its challenged claims”).
Accordingly, we decline to determine whether the amendment adds
new matter to the ’649 patent.
4. Patent Eligibility
We determine that Patent Owner’s Motion to Amend should be denied
because Petitioner has shown by a preponderance of the evidence that the
proposed amended claims are unpatentable as directed to patent-ineligible
subject matter under § 101.
a. Whether the Claims Recite a Judicial Exception
We agree with Petitioner that the proposed substitute claims remain
directed to the abstract idea of a mental process, in particular “simplifying a
portfolio through premature termination of certain OTC derivatives.” Opp.
5. We further agree with Petitioner that the concept of simplifying an OTC
derivatives portfolio through premature termination falls within the category
of abstract ideas, in particular, methods of organizing human activity
(fundamental economic practices and commercial or legal interactions, such
as business relations) and mental processes (observation and evaluation). Id.
For example, proposed substitute claim 23 only adds the limitation that the
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transaction data processed by the system be for “non-standardized”8
derivatives. PO Reply 4. Limiting the claims to processing a particular type
of data does not render them less abstract. See SAP Am., 898 F.3d at 1168;
see also In re Chorna, 656 F. App’x 1016, 1020 (Fed. Cir. 2016) (affirming
that “financial instrument[s]” are abstract because “at its source, [it] is an
agreement—a meeting of the minds, between the parties each having an
interest in monetary value being traded”). Moreover, as for Patent Owner’s
contention that the amendment to proposed substitute claim 23 makes “the
‘central station’ not optional and the centralized ‘processor’ at the ‘central
station,’” this does not change our analysis. Rev. Mot. 14–15. The
centralized processor does not change the result under Step 2A, prong 1. See
Bascom, 827 F.3d at 1348–49 (finding claims were still directed to the
abstract idea under Step 1 of the Alice framework). Proposed substitute

8 We note that Patent Owner has not provided a consistent or clear definition
or even a way to determine the metes and bounds of the term “non-
standardized . . . OTC derivative transactions.” Compare PO Sur-Reply 3
with id. at 7 (contending that FX-Forwards can be “standardized” and “non-
standardized,” but providing no explanation how to tell the difference). At
the hearing, Patent Owner offered a definition for non-standardized of
“individually negotiated and tailor made.” Tr. 93:21–94:1. Patent Owner
then proceeded to carve out various contract terms that it contended could be
individually negotiated, but apparently fall outside this definition. See
Tr. 95:5–96:1. Although there may be support for “individually negotiated
and tailor made,” we have difficulty seeing any support for Patent Owner’s
various seemingly ad hoc carve-outs for contract terms that can be different
and individually negotiated, but fall outside of its definition. Id. We do not
determine whether Patent Owner’s construction (and its addenda) is the
correct construction. Instead, we determine that for purposes of this
Decision, applying any of Patent Owner’s various definitions will arrive at
the same result, so we do not need to resolve the precise definition of the
term or whether such a definite construction of the term is possible.
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Claim 24 depends from claim 23 and is similar to claim 2, which we found
ineligible above.
Proposed substitute claim 25 depends from proposed substitute claim
24 and recites “parameters are set by three or more involved parties,” and
Patent Owner argues that the parameters “comprise not one but two specific
sets of rules: one set of rules ‘that define intervals which are risk-neutral for
a particular party as a function of differences in that party’s aggregated net
exposure to one or more of the Greeks for a particular plurality of said
existing OTC derivative transactions’ and one set of rules ‘that define
intervals which are risk-neutral for a particular party as a function of
differences in that party’s aggregated mark-to-market valuation for a
particular plurality of said existing OTC derivative transactions.’” Rev.
Mot. 16. Patent Owner also notes that the “claim generates proposals by
‘evaluating a plurality of said existing linked OTC derivative transactions
against said first and second sets of rules to generate a package, of a plurality
of linked OTC derivative transactions, where the premature termination or
assignment of the transactions of the package in total is risk-neutral to each
of the involved parties according to the rules.’” Id. Patent Owner argues
that “[t]he claim language here tracks the language in the McRO claims,
which the Federal Circuit found recite patent-eligible subject matter….” Id.
at 16–17.
Patent Owner contends that:
The rules of Substitute Claim 25, in the overall structure of the
claim, improve computers as tools for generating premature
termination and assignment proposals for OTC (non-
standardized) derivatives. For example, prior art commercially-
available computerized systems such as FXNET and ECHO only
worked on standardized derivatives and generally attempted to
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reduce risk by netting payments owed under such standardized
derivatives as opposed to prematurely terminating the derivatives
themselves, as noted.
Id. at 17.
Proposed substitute claim 26 as amended recites rules and the use of
rules “similar to Claim 25.” Rev. Mot. 23. However, in proposed substitute
claim 26, there is only one set of rules: a “set of rules that define intervals
wherein there is substantially no financial loss for a particular party as a
function of differences in that party’s aggregated mark-to-market valuation
for a particular plurality of said existing OTC derivative transactions.” Id.
This set of rules is similar to the second set of rules in proposed substitute
claim 25, but in proposed substitute claim 25, the rules “define intervals
which are risk-neutral for a particular party,” whereas in proposed substitute
claim 26, they “define intervals wherein there is substantially no financial
loss for a particular party.” Id. at 23–24.
Proposed substitute claim 27 as amended recites rules and the use of
rules similar to proposed substitute claim 25. Id. at 24–25. However,
proposed substitute claim 27 only uses the first set of rules from proposed
substitute claim 25 but adds that “each interval also correspond[s] to a time
bucket.” Id. at 25. Proposed substitute claim 28 as amended combines the
amendments of proposed substitute claim 23 with the first set of rules from
proposed substitute claim 25 and the set of rules from proposed substitute
claim 26. Id.
We determine that proposed substitute claim 25 is representative.
The system of claim 224, wherein several bilateral sub-
proposals are produced from a matching process between
three or more of the involved parties;
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[b1] wherein said parameters are set by three or more involved
parties and comprise:
[b2] a first set of rules that define intervals which are risk-neutral
for a particular party as a function of differences in that
party’s aggregated net exposure to one or more of the
Greeks for a particular plurality of said existing OTC
derivative transactions; and
[b3] a second set of rules that define intervals which are risk-
neutral for a particular party as a function of differences
in that party’s aggregated mark-to market valuation for a
particular plurality of said existing OTC derivative
transactions; and
[c] wherein said generating of said proposals is at least by
evaluating a plurality of said existing linked OTC
derivative transactions against said first and second sets
of rules to generate a package, of a plurality of linked OTC
derivative transactions, where the premature termination
or assignment of the transactions of the package in total is
risk-neutral to each of the involved parties according to
the rules.
Rev. Mot. 4 (emphasis added).
The combination of the elements italicized above recites the concept
of simplifying a trade portfolio through premature termination of certain
transactions. The claimed system accomplishes this through collecting
information, linking related information together, and then using
mathematical techniques on the information to generate a “proposal
package” of transactions for “termination and assignment.” This is all a
mental process, an example of an abstract idea.
Patent Owner’s efforts to mimic the claim language in McRO does not
change the result here. To begin with, the Supreme Court has cautioned
against patent eligibility turning on the claim drafter’s art. See Flook, 437
U.S. at 593 (stating that patent eligibility does not turn “on the draftsman’s
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art”). Thus, merely parroting some language of an eligible claim of a
completely different invention does not make the claims for this invention
any less abstract. More importantly, the fact that the language is similar
does not change the fundamental differences between the claimed invention
here and the invention that was claimed in McRO.
Proposed substitute claims 26, 27, and 28 are similar to proposed
substitute claim 25 and add similar limitations that do not take the claim
outside the realm of abstract ideas for Step 1 of the Alice inquiry.
Accordingly, Petitioner has shown that the proposed substitute claims
recite a concept that falls within the categories of abstract ideas—
specifically, certain methods of organizing human activity (commercial or
legal interactions, such as business relations) and mental processes
(observation and evaluation).
b. Additional Elements that Integrate the Judicial Exception
Patent Owner does not contend that there are additional elements that
integrate the judicial exception into a practical application beyond those
arguments considered above. As we explain in detail above, we determine
that Petitioner has shown that the claims do not integrate the judicial
exception into a practical application. See MPEP 2106.04(d).
c. Whether Any Additional Elements Recite Significantly More
Petitioner argues “the substitute claims simply recite commonly
known mathematical elements or generic computer components to an
abstract idea.” Opp. 10. Petitioner asserts “[t]hese elements therefore do not
add significantly more to the claimed abstract idea, as Alice demands.” Id.
Patent Owner relies on Bascom in support of its argument that “[t]he Federal
Circuit has held that where prior systems were either local and flexible, or
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centralized but inflexible, a centralized yet flexible implementation can
impart an inventive concept.” Rev. Mot. 15. We agree with Petitioner,
however, that “Bascom relates to an improvement of the computer itself
where the claims are directed to a filtering tool ‘at a specific location’ that
was not technically achievable prior to the invention. Bascom, 827 F.3d at
1350. As Petitioner explains, “[i]t is this specific claimed implementation
that improved the computerized system thereby overcoming the technical
problems in the prior art. Opp. 11 (citing Bascom, 827 F.3d at 1350). We
agree with Petitioner that, in contrast, the proposed substitute claims 23–28
do not improve the computer, but rather recite the abstract idea of
simplifying a portfolio by prematurely terminating trades (i.e. an economic
principle) and performing them on a generic computer using the Internet. Id.
Patent Owner’s contentions that the claims improve the functioning of
a computer have no support in the record. As we explained above, the only
improvement described in the ’649 patent is an improved mathematical
algorithm. We agree with Petitioner that these claims are, therefore, more
like the claims in OIP Technology, where the claims were found patent
ineligible for utilizing a centralized system to implement “the abstract idea
of offer-based price optimization on generic computer components using
conventional computer activities.” Bascom, 827 F.3d at 1351 (citing OIP
Tech., 788 F.3d at 1363); see also In re Chorna, 656 F. App’x at 1021
(finding claims ineligible as “nothing significantly more than the terms of a
contract.”).
For example, proposed substitute claim 23 adds only a “centralized”
processor and transaction data for “non-standardized” OTC derivatives.
Neither feature includes an inventive concept. A central station is simply a
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generic computer function that merely invokes a computer as a tool which
cannot elevate the claim to one that is patent eligible. “[T]he mere recitation
of a generic computer cannot transform a patent-ineligible abstract idea into
a patent-eligible invention.” Alice, 573 U.S. at 223 (internal citations
omitted). Petitioner has further demonstrated that the prior art Multinet and
ECHO systems were centralized systems, making this feature routine and
common. Ex. 1039 ¶¶ 20–21.
Second, requiring the OTC derivatives to be “non-standardized” does
not include an inventive concept. See Rev. Mot. 8–10. We agree with
Petitioner that terminating derivatives that fit within Patent Owner’s
definition of “non-standardized” was routine and conventional at the time of
the filing. See Ex. 1043 ¶¶ 8–10; Ex. 1039 ¶¶ 11, 12, 15, 16; Ex. 1032, 27–
28; Ex. 1007, 13 n.9 (noting FX-Forwards were OTC derivatives); Ex. 1017,
54–55. We find persuasive the testimony of Mr. Shaw that the FX rate and
collateralization terms would be non-identical and individually negotiated
and tailor made. Ex. 1043 ¶¶ 8–10. Thus, we conclude Petitioner has shown
by a preponderance of the evidence that proposed substitute claim 23 lacks
an inventive concept. The same analysis applies to proposed substitute
claim 24.
With respect to proposed substitute claim 25, Petitioner argues that
the new features of proposed substitute claim 25 “lack an inventive concept
because they are: i) mathematical concepts; ii) routinely and universally
used prior to the patent’s filing; and iii) preempt the entire field.” Opp. 15.
We agree with Petitioner that the newly-recited terms in proposed substitute
claim 25 “rules that define intervals which are risk-neutral for a particular
party,” “time bucket,” “parameters,” “aggregated net exposure to one or
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more of the Greeks,” and “aggregated mark-to-market valuation,” are
universal to every premature termination process carried out long before the
patent’s filing date, and therefore do not add an inventive step.
RecogniCorp, 855 F.3d at 1327. As Petitioner’s persuasive evidence
demonstrates, parties using either ECHO or Multinet considered parameters
such as credit risks of a party, and limits on market risk (e.g., “NPV sub
limit” in ECHO), in view of that party’s acceptable parameters for premature
termination of OTC derivatives (e.g., FX-Forwards). Ex. 1032, 12–13, 43–
47; Ex. 1007, 13, n. 9; Ex. 1039 ¶ 29; Ex. 1043 ¶ 11.
As for the limitations relating to the “Greeks,” the Specification
acknowledges that the Greeks were well-known, and the evidence of record
shows that the Greeks were routinely used to manage the market risks of
OTC derivatives. Ex. 1017, 50–56; Ex. 1039 ¶ 27; Ex. 1043 ¶¶ 11–13;
Ex. 1042, 190:18–24. We agree with Petitioner and Mr. Shaw that Patent
Owner’s efforts to limit the ECHO and Multinet to “credit risks” and not
“market risks” is incorrect because “credit risk” necessarily includes an
evaluation of both mark-to-market risks and aggregated net exposures to
Greeks that one counterparty holds with respect to another. Ex. 1017, 54–
56; Ex. 1043 ¶ 11; Ex. 1001, 2:54–63, 5:66–6:8 (linking market and credit
risks).
Regarding generating a proposal, Petitioner has shown that Exhibit
1032 demonstrates that the commercially-available SWIFT Advisory
Netting service prepared a proposal listing trades eligible for netting and sent
this proposal to the involved parties for their review and approval. Ex. 1032,
17, 39, 41, 45–47; Ex. 1039 ¶¶ 17–21; Ex. 1002 ¶¶ 34, 35, 37, 44, 71;
Ex. 1010, 41; Ex. 1011, 11–15, 17–25; Ex. 1008, 25. Regardless, generating
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a “proposal” is simply a generic computer function of displaying
information that does not add an inventive concept. See Elec. Power, 830
F.3d 1353–54; see also Mortg. Grader, Inc. v. First Choice Loan Servs. Inc.,
811 F.3d 1314, 1324 (Fed. Cir. 2016).
Patent Owner argues that the rules of proposed substitute claim 25
“improve computers as tools for generating premature termination and
assignment proposals for OTC (non-standardized) derivatives” and “the
claim and corresponding rules set forth a particular, specific way to generate
premature termination proposals for OTC derivatives and the rule capture
how the embodiment generates high quality proposals. Rev. Mot. 17–20.
Patent Owner’s argument fails because, unlike cases where the claims
involve practical, technological improvements, proposed substitute claim 25
does not extend beyond improving mathematically generated termination
proposals for financial derivative transactions. See, e.g., McRO, 837 F.3d at
1315 (“The claimed process uses a combined order of specific rules that
renders information into a specific format that is then used and applied to
create desired results: a sequence of synchronized, animated characters.”);
Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1304 (Fed. Cir. 2018)
(finding patent eligible a claim drawn to a behavior-based virus scan that
protects against viruses that have been “cosmetically modified to avoid
detection by code-matching virus scans”); Enfish, 822 F.3d at 1330, 1333
(discussing patent eligible claims directed to “an innovative logical model
for a computer database” that included a self-referential table allowing for
greater flexibility in configuring databases, faster searching, and more
effective storage); CardioNet, LLC v. InfoBionic, Inc., 955 F.3d 1358, 1368
(Fed. Cir. 2020) (explaining that the claims at issue focus on a specific
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means for improving cardiac monitoring technology; they are not “directed
to a result or effect that itself is the abstract idea and merely invoke generic
processes and machinery” (quoting McRO, 837 F.3d at 1314)); Koninklijke
KPN N.V. v. Gemalto M2M GmbH, 942 F.3d 1143, 1150–51 (Fed. Cir.
2019) (claims were step-one eligible given their “specific implementation of
varying the way check data is generated,” which was a technological
improvement—indeed, an undisputed one—over the prior art’s ability to
detect systematic errors).
Here, the problems at issue are business problems, not technical
problems. See Ex. 1001, 7:1–60 (summarizing the problems in the art
including: (1) “Both the original counterparties need to agree to early
termination”; (2) “The counterparties need to establish they are talking about
the same trade”’ (3) “The counterparties need to agree on the value of the
trade”; (4) “A bank does not want to change its market position”; (5) “A
bank does not want to make a large cash payment”; and (6) “A bank does
not want to take the initiative for an early termination, since the value of the
contract needs to be negotiated in an early termination. . .”). Unlike the
technological improvements made in the cases found patent eligible, the
improvement in derivative termination or assignment proposals alleged here
does not qualify as an improvement to a technological process; rather, it is
merely an enhancement to abstract fundamental economic principles and
abstract mathematical calculations. See Synopsys, 839 F.3d at 1151 (“[A]
claim for a new abstract idea is still an abstract idea.”). The different use of
a mathematical calculation or fundamental economic process, even one that
yields different or better results, does not render patent eligible subject
matter. See In re Board of Trustees of Leland Stanford Jr. Univ., 991 F.3d
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1245, 1251 (Fed. Cir. 2021) (“The different use of a mathematical
calculation, even one that yields different or better results, does not render
patent eligible subject matter.”). The rephrasing of the claims to mimic the
claims in McRO does not make them less directed to an abstract idea—
specifically, certain methods of organizing human activity (commercial or
legal interactions, such as business relations) and mental processes
(observation and evaluation).
Finally, we note that proposed substitute claim 25 recites
“parameters” and first and second “rules that define intervals which are risk-
neutral for a particular party.” We agree with Petitioner that these recited
“rules” are universal to all premature terminations thereby preempting the
entire field. Ex. 1043 ¶ 11; McRO, 837 F.3d at 1314.
Accordingly, we determine that Petitioner has shown by a
preponderance of the evidence that proposed substitute claim 25 lacks
inventive concept.
Proposed substitute claim 26 presents a subset of the limitations
already discussed above with respect to proposed substitute claim 25. For
the reasons discussed above with respect to proposed substitute claim 25,
Petitioner has shown that claim 26 lacks inventive concept.
Petitioner argues that proposed substitute claim 27 includes a
limitation from instituted claim 16 requiring “several bilateral subproposals
. . . produced from a matching process between three or more of the involved
parties,” which is an abstract mental process of collecting and presenting
information that are treated as mental processes. Opp. 24. We agree with
Petitioner that this does not add inventive concept as we found above with
respect to claim 16. Petitioner asserts that other than the addition of “time
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bucket[s],” this substitute claim is substantially identical to proposed
substitute claim 25 and should be rejected for the same reasons discussed
above with respect to proposed substitute claim 25. Id. Petitioner argues
that time buckets do not add an inventive concept because, by themselves,
they represent mathematical manipulations, i.e., simply separating risks
associated with different time intervals over the life of the transactions. Id.
(citing Ex. 1039 ¶¶ 31–33). We agree with Petitioner that such a calculation
is certainly an abstract concept (a mental step) that can be done in the user’s
mind or with pen and paper, i.e., creating virtual buckets for risks associated
with particular time periods during the life of the transaction. See Ex. 1039
¶¶ 31–33. Moreover, using time buckets was routinely practiced in the
industry and, Petitioner’s expert testified to routinely using this process. Id.
Incorporating this feature into the rules articulated in proposed substitute
claim 25 is not sufficient to transform proposed substitute claim 27 into
patent eligible subject matter. As with proposed substitute claim 25,
proposed substitute claim simply seeks to use computers as tools to solve
particular mathematics problems related to the fundamental economic
concept of early derivative termination. Therefore, for these reasons and the
reasons stated above with respect to proposed substitute claim 25, Petitioner
has shown sufficiently that proposed substitute claim 27 taken as a whole
lacks inventive concept.
Proposed substitute claim 28 “simply combine[s] the ‘aggregated net
exposure to one or more of the Greeks’ rules of [proposed] substitute claim
25 and the ‘aggregated mark-to-market valuation’ rules of
[proposed]substitute claim 26” (Ex. 2019 ¶ 45) and, therefore, is not
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inventive for the same reasons described above for proposed substitute
claims 25 and 26.
d. Conclusion as to Patent Eligibility for the Amended Claims
In summary, we determine that proposed substitute claims 23–28
recite an abstract idea, do not integrate the abstract idea into a practical
application, and the generic computer components recited in those claims do
not transform the claims into patent-eligible applications of that idea.
Petitioner has shown by a preponderance of the evidence that proposed
substitute claims 23–28 are unpatentable under 35 U.S.C. § 101.
Accordingly, we deny Patent Owner’s Revised Contingent Motion to
Amend.

III. CONCLUSION9
In summary,
Claim(s)
35
U.S.C. § Reference(s)/Basis
Claim(s)
Shown
Unpatentable
Claim(s) Not
Shown
Unpatentable
1–22 101 Eligibility 1–22
Overall Outcome 1–22

9 Should Patent Owner wish to pursue amendment of the challenged claims
in a reissue or reexamination proceeding subsequent to the issuance of this
decision, we draw Patent Owner’s attention to the April 2019 Notice
Regarding Options for Amendments by Patent Owner Through Reissue or
Reexamination During a Pending AIA Trial Proceeding. See 84 Fed. Reg.
16,654 (Apr. 22, 2019). If Patent Owner chooses to file a reissue application
or a request for reexamination of the challenged patent, we remind Patent
Owner of its continuing obligation to notify the Board of any such related
matters in updated mandatory notices. See 37 C.F.R. §§ 42.8(a)(3), (b)(2).
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Motion to Amend Outcome Claims
Substitute Claims Proposed in the Amendment 23–28
Substitute Claims: Motion to Amend Granted
Substitute Claims: Motion to Amend Denied 23–28
Substitute Claims: Not Reached

IV. ORDER
For the reasons given, it is:
ORDERED, that Petitioner has shown based on a preponderance of
evidence, that claims 1–22 of U.S. Patent 7,613,649 B2 are unpatentable;
FURTHER ORDERED that Patent Owner’s Revised Contingent
Motion to Amend is denied; and
FURTHER ORDERED because this is a final written decision, the
parties to this proceeding seeking judicial review of our Decision must
comply with the notice and service requirements of 37 C.F.R. § 90.2.
CBM2020-00011
Patent 7,613,649 B2
72
PETITIONER:
PATENT OWNER: