TriOptima AB

Patent Trials and Appeals Board

Oct 1, 2021

CBM2020-00012 (P.T.A.B. Oct. 1, 2021)

Trials@uspto.gov Paper 47
Tel: 571-272-7822 Date: October 1, 2021
UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

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

CBM2020-00012
Patent 8,010,441 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
35 U.S.C. § 328(a)
I. INTRODUCTION
A. BACKGROUND
Quantile Technologies Limited (“Petitioner”) filed a petition (Paper 2,
“Pet.”) to institute a covered business method patent review of claims 1–46
of U.S. Patent No. 8,010,441 B2 (Ex. 1001, “the ’441 patent”) under section
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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 30, 2020. Ex. 1002.
TriOptima AB (“Patent Owner”) timely filed a Preliminary Response.
Paper 6. Patent Owner supported its Preliminary Response with the
Declaration of Dr. Craig Pirrong dated July 9, 2020. Ex. 2001. 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 8.
On October 6, 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 11 (“Institution Decision” or “Dec.”). The
claims and ground in this proceeding are indicated in the table below.
Claim(s) Challenged 35 U.S.C. § Reference(s)/Basis
1–46 101 Eligibility
Patent Owner filed a Response in opposition to the Petition (Paper 24,
“PO Resp.”). Patent Owner supported its Patent Owner Response with the
Declaration of Dr. Craig Pirrong, dated January 11, 2021 (Ex. 2008).
Petitioner filed a Reply in support of the Petition (Paper 29, “Pet. Reply”).
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 32 (“PO Sur-Reply”).
Both parties requested an Oral Hearing. See Paper 35. A transcript of
the Oral Hearing is entered in the record. Paper 46 (“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.
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§ 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.
For the reasons expressed below, we conclude that Petitioner has
demonstrated by a preponderance of evidence that claims 1–46 are
unpatentable as being directed to ineligible subject matter.
B. RELATED PROCEEDINGS
Patent Owner represents that Petitioner has filed one other covered
business method patent review, CBM2020-00011, against a related patent,
U.S. Patent No. 7,613,649 B2. Paper 4, 2. The ’441 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 4, 2.
C. THE ’441 PATENT
The ’441 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), 1:21–24. 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 1:24–30. The ’441 patent issued August 30, 2011, and
claims priority through U.S. Application Serial Number 10/154,689—issued
as U.S. Patent No. 7,613,649, to a PCT application to a foreign application
filed in the Netherlands on November 24, 1999. Id. at (45), (63), (30).
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The ’441 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 1:34–36. The underlying instrument may be a bond, an
equity, an interest rate, a currency exchange rate, commodity price or, in a
recent development, even a credit risk. Id. at 1:36–38. Some of these
contracts are standardized and traded on an exchange. Id. at 1:39–42. Other
derivatives “are individually negotiated and tailor-made between two
counterparties (so called ‘over the counter (OTC) transactions’).” Id. at
1:55–57. The ’441 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 1:65–2:2. 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 2:2–11. The ’441 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 2:12–
20.
The ’441 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 2:52–56. The ’441 patent explains that “[a] normal
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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
calculating profit and loss, risk exposure, credit exposure etc.” Id. at 2:56–
61.
The ’441 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 3:54–60. 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 3:48–52. 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 4:7–21.
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.
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The ’441 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
the sum of all transactions with each counterparty.” Id. at 4:19–28.
According to the ’441 patent, this summing of transactions with a particular
counterparties 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 4:29–40.
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 4:41–48.
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 4:49–54. “A
party may also choose to assign his part of a deal to a new party.” Id. at
4:55–56. Assignments allow parties to get reduced or increased exposure
towards the other parties, but assignment requires the consent of all parties.
Id. at 4:57–61. Other known methods include “credit mitigation” and
“clearing.” Id. at 4:62–65, 5:19–43. The ’441 patent discloses that both of
these processes can be done through a central service.
The ’441 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–
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65. The ’441 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
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 the other party can then require a valuation in their
favor. Id. at 7:1–44. The ’441 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 ’441 patent to
overcome these problems is shown schematically in Figure 2, reproduced
below.

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Figure 2 is a schematic block diagram of an embodiment of the ’441 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
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 provided. Id. at 12:7–11; 20:60–23:12 (describing the
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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 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
12:62–13:36. The data are then extracted using conventional encryption and
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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 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 of 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 core
processing module 110 and reporting module 112. Id. at 14:13–14. Both
processing module 110 and reporting module 112 interface to central
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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 linking report 114 for sending out to institutions for
verification, and secondly to generate an unwind proposal report 116 for
each institution 24 for their approval. Link function 124 implements the
linking (matching) of trades. Id. at 14:36–38. The ’441 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 20:60–21:2. 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 21:30–34. The patent describes key characteristics that
are used for swap transactions. Id. at 21:34–39. 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 21:40–24:32.
The ’441 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 21:3–7.
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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 ’441 patent explains that
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 23:33–39. The Specification also provides a “non-limiting example”
of the algorithm used to do this claims analysis. Id. at 25:33–26:56.
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 ’441 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 26:62–27:6.
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The ’441 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 terminated. Id. at 27:7–12. The
’441 patent states that this problem “is of the nature [of] ‘constrained
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 27:23–26. The ’441 patent states that
[t]here 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 27:41–46. The ’441 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 27:46–48; see also id. at
27:49–31:12 (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 12:33–37.
Petitioner challenges all twenty-two claims of the challenged patent.
Claims 1, 3, 4, 5, 21, 23, 40, 41, 43, and 46 are independent claims. Claims
4 and 5 are illustrative of the claimed subject matter:
4. A method of massive early unwind of OTC derivatives
contracts in order to achieve an objective of significantly
decreasing a number of overall outstanding OTC
derivative transactions or a total outstanding notional
amount of outstanding OTC derivative transactions
between counter-parties with an aim of lowering gross and
net credit exposure between the counterparties, lowering
operational costs and/or risks and/or enhancing risk-
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control for each of the counterparties, the method
comprising:
collecting OTC derivative trade data originating from the
counterparties;
grouping together potential combinations of existing OTC
transactions and optionally at least one newly suggested
OTC transaction where the potential combinations have
nominal or zero risk;
calculating, by a processor, an aggregated value for each of the
groups of transactions; and
selecting for execution a group from the groups having the
aggregated value best satisfying party-specified or pre-
agreed tolerances for the early unwind where the unwind
includes termination of existing trades and optionally
creating at least one new trade in order to achieve the
objective.
Ex. 1001, 33:57–34:12.
5. A system for creating proposals for prematurely terminating
outstanding OTC (Over The Counter) derivative
transactions between a plurality of parties comprising:
a plurality of data input/output and processing stations for
transmitting a transaction record of an OTC derivative
transaction and operable by the parties, wherein the OTC
derivative transaction is between two parties and is
described by a plurality of transaction records including a
transaction record from each of the plurality of parties to
the OTC derivative transaction providing each party’s
record of the OTC derivative transaction, wherein the
transaction record includes trade details identifying the
OTC derivative transaction, wherein the trade details at
least specify the two parties to the OTC derivative
transaction, wherein the transaction record includes a
designated maturity date of the OTC derivative
transaction;
a central processing station, wherein the plurality of data
input/output and processing stations and the central
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processing station are for connecting to a communications
network operatively interconnecting all of the stations;
wherein the central processing station comprises:
linking unit to link together two transaction records from two
different parties relating to a same OTC derivative
transaction, wherein the linking unit is arranged to use a
plurality of items of the transaction record to determine
records from different parties corresponding to the same
OTC derivative transaction; and
combining unit to combine together a plurality of linked
transaction records to determine a premature termination
proposal for terminating a plurality of linked OTC
derivative transactions prior to their respective designated
maturity dates, wherein the proposal is for premature
termination at a date at which there is no prescribed value
and no prescribed method of determining a value at which
the termination should take place, and at which there is no
obligation for the parties involved to make a premature
termination,
the central processing station being arranged to transmit the
premature termination proposal to the data input/output
and processing stations of the respective involved parties
in the proposal.
Ex. 1001, 34:14–55.

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
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
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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).
Patent Owner seeks construction of the terms “linking unit” and
“combining unit” from claims 5 and 23, and “converting unit” from claim 6.
Pet. 14–18. However, because we determine that even under Patent
Owner’s constructions, the claims would be ineligible as discussed below,
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 ’441 patent were directed
to a financial product or service, and had shown that the claims did not cover
“technological inventions.” Dec. 19–28. 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 12,
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
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in scheduling order constitutes waiver). Accordingly, for reasons stated in
detail in our Institution Decision, we determine that Petitioner had standing
to file the Petition, had shown that the claims of the ’441 patent were
directed to a financial product or service, and had shown that the claims did
not cover “technological inventions.” Dec. 19–28.
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 1–46 were unpatentable as directed to ineligible subject matter
under 35 U.S.C. § 101. Dec. 48. 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.
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Id. at 217–18 (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
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
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abstract . . . is not accorded the protection of our patent laws, and this
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. 29. 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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In particular, all the Claims merely recite routine features for
simplifying a trade portfolio and rely on the same three
foundational steps required for determining any premature
termination, namely, (1) identifying the transactions, (2)
selecting the transactions of the same trades, and (3) choosing
the selected trades which are favorable for premature
termination. Exh. 1002, ¶ 40; see, e.g., Exh. 1011, pp. 17-25.
Id. at 29–30.
Petitioner submits that:
The idea at the heart of the ’441 Patent is the 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 reduce
market and credit risks.” Exh. 1002, ¶ 38; see, e.g., Exh. 1032,
p. 13; Exh. 1006, p. 2 at ¶ 3; Exh. 1015, pp. 8–9 at ¶¶ 6–7; Exh.
1007, p. 13; Exh. 1008, p. 33; Exh. 1012, p. 3. Many ways of
simplifying a trade portfolio have been used prior to the filing of
the ’441 Patent. Exh. 1002, ¶ 39; see, e.g., Exh. 1014, p. 12; Exh.
1011, pp. 17–25; Exh. 1033, pp. 32–33.
Id. at 31.
We begin with claims 4 and 5. Claim 4 recites
A method of massive early unwind of OTC derivatives contracts
in order to achieve an objective of significantly decreasing a
number of overall outstanding OTC derivative transactions or a
total outstanding notional amount of outstanding OTC derivative
transactions between counter-parties with an aim of lowering
gross and net credit exposure between the counterparties,
lowering operational costs and/or risks and/or enhancing risk-
control for each of the counterparties
Ex. 1001, 33:57–65 (emphasis added). The method comprises:

collecting OTC derivative trade data originating from the
counterparties;
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grouping together potential combinations of existing OTC
transactions and optionally at least one newly suggested
OTC transaction where the potential combinations have
nominal or zero risk;
calculating, by a processor, an aggregated value for each of the
groups of transactions; and
selecting for execution a group from the groups having the
aggregated value best satisfying party-specified or pre-
agreed tolerances for the early unwind where the unwind
includes termination of existing trades and optionally
creating at least one new trade in order to achieve the
objective.
Id. at 33:66–34:12 (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 method
accomplishes this through collecting information, grouping related
information together, and then using mathematical techniques on the
information, calculating a total value of the group, and selecting a certain
group that meets certain criteria. This is all a mental process, an example of
an abstract idea.
Claim 5 similarly recites “A system for creating proposals for
prematurely terminating outstanding OTC (Over The Counter) derivative
transactions between a plurality of parties.” The system comprises
a plurality of data input/output and processing stations for
transmitting a transaction record of an OTC derivative
transaction and operable by the parties, wherein the OTC
derivative transaction is between two parties and is
described by a plurality of transaction records including
a transaction record from each of the plurality of parties
to the OTC derivative transaction providing each party's
record of the OTC derivative transaction, wherein the
transaction record includes trade details identifying the
OTC derivative transaction, wherein the trade details at
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least specify the two parties to the OTC derivative
transaction, wherein the transaction record includes a
designated maturity date of the OTC derivative
transaction;
a central processing station, wherein the plurality of data
input/output and processing stations and the central
processing station are for connecting to a communications
network operatively interconnecting all of the stations;
wherein the central processing station comprises:
linking unit to link together two transaction records from two
different parties relating to a same OTC derivative
transaction, wherein the linking unit is arranged to use a
plurality of items of the transaction record to determine
records from different parties corresponding to the same
OTC derivative transaction; and
combining unit to combine together a plurality of linked
transaction records to determine a premature termination
proposal for terminating a plurality of linked OTC
derivative transactions prior to their respective
designated maturity dates, wherein the proposal is for
premature termination at a date at which there is no
prescribed value and no prescribed method of determining
a value at which the termination should take place, and at
which there is no obligation for the parties involved to
make a premature termination,
the central processing station being arranged to transmit the
premature termination proposal to the data input/output
and processing stations of the respective involved parties
in the proposal.
Ex. 1001, 34:14–55 (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, and combining some of the linked transactions together to
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create a “proposal,” and then transmitting the proposal. 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.”
Elec. Power Grp., 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
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. 30 (explaining the claimed central processing station
“then provide the generated proposals 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,
6–7. 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
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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.”); 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”).
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
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
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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.
Patent Owner’s reliance on “linking” to argue that the claims are not
directed to abstract ideas is unpersuasive. PO Resp. 10, 14–15, 29–31. We
agree with Petitioner that “linking” is a mental process or a certain method
of organizing human activity (a commercial or legal interaction) and, thus,
an abstract idea. Ex. 1002 ¶ 66; Ex. 1011, 17–25; Ex. 1039 ¶¶ 17–18;
Ex. 1042, 53:15–55:8. 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 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).
Second, Patent Owner argues Petitioner “oversimplif[ies]” the claim.
PO Resp. 2, 36. 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
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from step (2) which can be used to simplify a trade portfolio and
providing them to the involved parties for approval.
PO Resp. 18 (quoting Pet. 4–5, 38). For example, Patent Owner argues that
“Petitioner’s ‘three steps’ do not even include termination.” PO Resp. 19.
We disagree that Petitioner has improperly over-simplified the claims. For
example, Patent Owner’s argument ignores that claim 4 does not even
require any termination take place—it merely requires the “selecting for
execution” a group of transactions that meet certain criteria. Ex. 1001, 34:7–
12. Similarly, claim 5 only requires “determin[ing] a premature
termination,” not actually terminating anything. Ex. 1001, 34:43–51. Even
if more granular details of claims 4 and 5 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 4 is limited to specific rules. Instead, we agree with
Petitioner that claim 4 in particular, is 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 4 recites:
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grouping together potential combinations of existing OTC
transactions and optionally at least one newly suggested OTC
transaction where the potential combinations have nominal or
zero risk;
calculating, by a processor, an aggregated value for each of the
groups of transactions; and
selecting for execution a group from the groups having the
aggregated value best satisfying party-specified or pre-agreed
tolerances for the early unwind where the unwind includes
termination of existing trades and optionally creating at least one
new trade in order to achieve the objective.
Ex. 1001, 34:1–34:12. 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. 31 (explaining “the problem can be
solved using a linear programming solution method” and explaining the
explanation in the ’441 patent is “exemplary”).
We find similar problems for claim 5, even under Patent Owner’s
construction for “combining unit.” Patent Owner contends that “the
‘combine’ function refers to formulating and solving a linear constrained
optimization problem according to the constraints specified including the
‘linked transaction records’ and ‘party-specified tolerances.’” PO Resp. 30.
However, a constrained optimization problem, even if limited to solving a
financial problem, is simply a mathematical operation, which can either be
considered a mathematical concept or a mental process, both examples of an
abstract idea. See Mayo, 566 U.S. at 88–89 (stating that narrow
embodiments of ineligible matter, citing mathematical ideas as an example,
are still ineligible); SAP Am., 898 F.3d at 1169 (“Because bootstrap,
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jackknife, and cross-validation methods are all ‘particular methods of
resampling,’ those features simply provide further narrowing of what are
still mathematical operations. They add nothing outside the abstract
realm.”); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1353 (Fed. Cir.
2014) (same). To the extent the constrained optimization problem is limited
to calculating packages of OTC derivatives, we find that it relates to certain
methods of organizing human activity (commercial or legal interactions,
such as business relations).
In sum, we find that 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.
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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. 43–50.
In addition to the abstract idea, claim 4 recites “a processor.”
Ex. 1001, 34:5. Claim 5 recites: “a plurality of data input/output processing
stations,” and “a central processing station.” Id. at 34:13–55. These
additional 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 ’441 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. 58–59 (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,
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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, claim 4 does 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
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 &
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 4. Claim 4 simply claims a result, not a
particular way of accomplishing that result.
In claim 5, the “combining unit” of the “central processing station”
[c]ombine[s] together a plurality of linked transaction records to
determine a premature termination proposal for terminating a
plurality of linked OTC derivative transactions prior to their
respective designated maturity dates, wherein the proposal is for
premature termination at a date at which there is no prescribed
value and no prescribed method of determining a value at which
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the termination should take place, and at which there is no
obligation for the parties involved to make a premature
termination,
Ex. 1001, 34:42–51.
Even under Patent Owner’s means-plus-function construction 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
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. Even the mathematics they are
allegedly performing as part of the algorithm add nothing new. See
Ex. 1002 ¶¶ 61, 62, 89; Ex. 1039 ¶¶ 22–25; Ex. 1040, 222. Merely adding
one abstract idea (math) to another abstract idea does not render the claim
non-abstract. RecogniCorp, LLC v. Nintendo Co., 855 F.3d 1322, 1328
(Fed. Cir. 2017).
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’).” PO Resp. 66. 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, with ‘no common identifier or any central register of the trade.” Id.
Patent Owner asserts that “[t]rade linking is a specific technical process
involving the matching of attributes and market data from trades that were
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originally recorded differently and/or using different conventions, to
uniquely identify two sides of the same trade.” Id. Patent Owner also
contends that “[e]ach allegedly representative claim recites a processor,
performing compression, that receives trade data from multiple parties.” Id.
at 68. Patent Owner argues that “this centralized processor may be a
standalone processor (e.g., the ‘central processing station’ of claim 5) or
may be integrated in a processor at a financial institution. Regardless of
where it is located, it replaced what was a local process of manually
negotiating the termination of non-standardized instruments. The
consolidation of compression 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 claims 4 and 5 into a practical application. See
MPEP 2106.04(d).
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 claims 4 or 5 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).
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The fact that the “central processing station” 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, 855 F.3d at 1327
(“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 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).
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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. 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.
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
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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 claims
4 and 5 do 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
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, claims 4 and 5 lack 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 claims 4 and 5 fail 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
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‘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
improvements in computer technology. Pet. 43–50. 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 43–44, 50–55. Moreover,
Petitioner contends that none of the claims viewed as an ordered
combination transforms the abstract idea into patent-eligible subject matter.
Id. at 43–50.
Patent Owner contends that “[t]he challenged claims 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. 73 (quoting 84 Fed. Reg. at 56). Patent Owner argues
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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 74. 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/or central processing capability) was generic or conventional.”
Id.; PO Sur-Reply 20–27.
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.” PO Resp. 74. Patent Owner submits
that “[w]hile 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 75; PO Sur-Reply 21–23.
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 77. 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. at 77–78; PO Sur-Reply 25. Patent Owner argues that
“the claims do not rely on the mere recitation of a computer or the internet
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itself to provide an inventive concept because, as discussed, they do not
claim the generic automation of a known process.” Id. at 78. 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 fall outside
thee claims. Id. at 71–73, 83; PO Sur-Reply 27.
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
Extraction, 716 F.3d at 1347–48 (alteration in original) (quoting Alice, 573
U.S. at 225).
Claims 4 and 5 use 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
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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 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 optimization and linear programming
are known mathematical concepts. See Pet. Reply 20–21 (citing Ex. 1002
¶¶ 61, 62, 89; Ex. 1040, at 222; Ex. 1042, 46:14–48:16; Ex. 1039 ¶¶ 22–23;
Ex. 1001, 26:57–27:29).
In addition, as discussed above, Patent Owner’s reliance on “linking”
fails to impart inventive concept because the record contains more than
sufficient evidence to show “linking” financial transactions was known. See
Ex. 1002 ¶ 66; Ex. 1011, 17–25; Ex. 1039 ¶¶ 17, 18.
Patent Owner’s argument that the ’441 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, 11:56–12:5,
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12:38–61, 13:19–58, 14:6–8, 15:12–22, 20:60–21:7, 27:23–29:11; Ex. 1002
¶¶ 22, 23, 61, 65, 69–73. The claims of the ’441 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
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
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were directed to an abstract idea and lacked inventive concept. The same
analysis applies here.
Patent Owner repeatedly argues about the alleged novelty of its
method of terminating derivatives versus the numerous existing techniques.
PO Resp. 8–13, 35–51; PO Sur-Reply 6–15. 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 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 is insufficient to make the
claim patent eligible. See Content Extraction, 776 F.3d at 1347 (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., 788 F.3d at 1362–63 (using aggregated data to
calculate prices is abstract).
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 ¶¶ 35–60 (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. 35–51. 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. 52–54. 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 52–
53. Patent Owner also contends that Petitioner misconstrues the ’441 patent
regarding the “claimed proposal generation process.” Id. at 53–54. Patent
Owner argues that the claimed generation processes “refer to formulating
and solving a constrained optimization problem[] according to the
constraints specified.” Id. at 54. 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 54. Again, Patent Owner’s
arguments are beside the point. The question is not whether these precise
techniques of “linking” or proposal generation 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 53 (explaining linking)), and “generating” is setting
up and solving a math problem (id. at 30 (explaining “the ‘combine’
function [of claim 5] refers to formulating and solving a linear constrained
optimization problem according to the constraints specified including the
‘linked transaction records’ and ‘party-specified tolerances’”); 53–54
(explaining proposal generation and the combine function)), both of which
are abstract (a mental process and a mathematical concept, respectively).
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As for the use of parameters, such as tolerance limits and the Greeks,
Petitioner has shown that those were well-known. See Pet. Reply 24–25.
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. 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. The Specification acknowledges that the Greeks
were well-known, and the evidence of record shows that the Greeks and
other tolerances were routinely used to manage the market risks of OTC
derivatives. Ex. 1017, 50–56; Ex. 1039 ¶¶ 27–30; Ex. 1042, 190:18–24.
Petitioner has also shown that generating termination proposals was
known. Specifically, 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 ¶¶ 38, 39, 61, 63, 66, 67; Ex. 1010, 41; Ex.
1011, 11–15, 17–25; Ex. 1008, 25. Regardless, generating 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).
And even accepting Patent Owner’s view that these particular ideas in
the OTC derivative are not well-known, routine, or conventional, “[a] claim
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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).
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. 22–27, 33–
36, 55–57. 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).
Here, the problems at issue are business problems, not technical
problems. See Ex. 1001, 7:1–60 (summarizing the problems in the art
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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
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.”).
Patent Owner argues that the claims do not preempt other approaches.
PO Resp. 25–26, 71–73. While pre-emption “might tend to impede
innovation more than it would tend to promote it, ‘thereby thwarting the
primary object of the patent laws”’ (Alice, 573 U.S. at 216), “the absence of
complete preemption does not demonstrate patent eligibility” (Ariosa
Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015)).
Patent Owner argues that there is no preemption because “the claims here
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recite specific constraints used to formulate inputs to constrained
optimization problems,” and “[t]hese constraints constitute rules of a
particular type, and in some cases, specific rules, for the generation of
compression proposals.” PO Resp. 26. But that does little to ensure that the
claimed subject matter as a whole amounts to significantly more than the
abstract idea itself. While this specific approach may prevent pre-emption
of all types of derivative termination proposal generating, it does not make
the claimed subject matter any less directed to an abstract idea. See OIP
Techs., 788 F.3d at 1362-63 (“[T]hat the claims do not preempt all price
optimization or may be limited to price optimization in the e-commerce
setting do not make them any less abstract.”). Moreover, because we find
the claimed subject matter covers patent-ineligible subject matter, the pre-
emption concern is necessarily addressed. “Where a patent’s claims are
deemed only to disclose patent ineligible subject matter under the Mayo
framework, [] preemption concerns are fully addressed and made moot.”
Ariosa Diagnostics, 788 F.3d at 1379.
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.”
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
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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 4 and 5 of the
’441 patent are unpatentable under 35 U.S.C. § 101.
6. Remaining Claims
Patent Owner argues that claims 4 and 5 are not representative of the
claims. PO Resp. 29, 31–32, 62–63, 65, 83–86. For example, Patent Owner
notes that claim 7 recites “tolerance limits on the net present value, the
maturity dates and/or the at least one risk characteristic parameter,” which
“the combining unit is arranged to utilize . . . in determining an acceptable
combination of linked transaction records which is risk neutral or as
determined by risk thresholds defined by the tolerance limits of the at least
one risk characteristic parameter and within the tolerance limits of the net
present values and maturity dates for the OTC derivative transactions
specified by both parties.” Id. at 31–32; see also id. at 62–63, 63, 80–81.
Similarly, Patent Owner notes that claims 8–13, 16–18, 26–29, 30, 34–36
recite other constrained optimization problems and corresponding rules. Id.
at 31–32; see also id. at 62–63, 65, 83–86.
Patent Owner argues that Petitioner’s contentions that these
constraints for generated proposals were known in the field is not supported
by the evidence Petitioner cites. Id. at 84–85.
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 26–27. The recitations in these
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claims are simply more specific versions of calculations performed in
claims 4 and 5. See SAP Am., 898 F.3d at 1169.
For example, claim 7 recites using “tolerance limits on the net present
value, the maturity dates and/or the at least one risk characteristic
parameter,” which are used to determine “an acceptable combination of
linked transaction records which is risk neutral or as determined by risk
thresholds defined by the tolerance limits of the at least one risk
characteristic parameter and within the tolerance limits of the net present
values and maturity dates for the OTC derivative transactions specified by
both parties.” Claim 8 depends from claim 7 and adds further constraints on
the constrained optimization problem, namely, “both party’s valuations of
the net present value are within both party’s tolerance limits.” Claim 25 is
similar. Claims 9–12 simply add further specificity to the conditions in
claim 5—namely, that the “target” and “minimal” values for the “net present
values” or “risk characteristic parameter[s]” of a proposal. Claims 27 and 28
are similar. Claim 13 depends from claim 5 and recites that the allowability
of partial terminations (a tolerance for partial unwinds . . . ). Claim 30 is
similar to claim 13. Claims 9 and 16 recite producing bi-lateral “sub-
proposals.” Claim 16 recites that the combining unit “produce[s] a
multilateral premature termination proposal from a combination process
using linked OTC derivative transactions between three or more parties.”
Claim 34 is similar to claim 16. Claim 17 depends from claim 16 and recites
that “target values and tolerance limits for one party are applied to a sum of
all OTC derivative transactions of all the premature termination proposals
with other parties” — which specifies a particular way in which constraints
are applied to a multilateral optimization problem. PO Resp. 85. All these
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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).
Claim 18 recites that the central processing station “select[s] three or
more parties having circular claims” and “construct[s] the proposal with
claims and debts reduced by same amounts for each party such that none of
the parties is required to make a net payment exceeding a cash payment
tolerance set by that party” — which, according to Patent Owner, “specifies
a particular way in which the optimization goal is applied to a multilateral
optimization problem and adds additional rules regarding claims and debts
(which must be ‘reduced by the same amounts for each party’) and a ‘cash
payment tolerance’ (constraint).” PO Resp. 86. Claim 36 is similar to
claim 18. These two steps simply are specific constraints on the
optimization problem (as in claims 7–13, 16–18, 26–29, and 34–36) as well
as an additional step related to identifying certain transactions with
particular characteristics (“three or more parties having circular claims”).
As discussed above, the constraints on the optimization problem are simply
abstract mathematical and economic operations. The identification of
transactions with particular characteristics—three or more parties having
circular claims—is simply an abstract mental process. See Content
Extraction, 776 F.3d at 1347. A process stringing two abstract ideas
together, remains abstract. See RecogniCorp, 855 F.3d at 1327.
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Thus, reviewing these limitations, we find that Petitioner has shown
that these claims remain directed to the realm of abstract ideas, are not
integrated into a practical application, and lack inventive concept.
Patent Owner does not argue claims 1–3, 6, 14, 15, 19–25, 30–33, and
37–46 separately. We agree with Petitioner that these claims do not add
anything more that would render these claims patent eligible. Ex. 1002
¶¶ 74–89. In sum, we also find Petitioner has shown these claims of the
’441 patent are unpatentable under 35 U.S.C. § 101.
7. Conclusion for Subject Matter Eligibility
Petitioner has shown by a preponderance of the evidence that claims
1–46 of the ’441 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 1–46 of the ’441 patent are unpatentable under
35 U.S.C. § 101.

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III. CONCLUSION6
In summary,
Claim(s)
35
U.S.C. § Reference(s)/Basis
Claim(s)
Shown
Unpatentable
Claim(s) Not
Shown
Unpatentable
1–46 101 Eligibility 1–46
Overall Outcome 1–46

IV. ORDER
For the reasons given, it is:
ORDERED, that Petitioner has shown based on a preponderance of
evidence, that claims 1–46 of U.S. Patent 8,010,441 B2 are unpatentable;
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.

6 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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PETITIONER:
Dorothy Auth
Dina Halajian
Danielle V. Tully
Howard Wizenfeld
CADWALADER, WICKERSHAM & TAFT LLP
dorothy.auth@cwt.com
dina.halajian@cwt.com
danielle.tully@cwt.com
howard.wizenfeld@cwt.com

PATENT OWNER:
Brent Ray
Dara Kurlancheek
Peter Schmidt
KING & SPALDING LLP
bray@kslaw.com
dkurlancheek@kslaw.com
pschmidt@kslaw.com