BlackRock Index Services, LLC

Patent Trials and Appeals Board

Mar 14, 2022

2021003768 (P.T.A.B. Mar. 14, 2022)

UNITED STATES PATENT AND TRADEMARK OFFICE UNITED STATES DEPARTMENT OF COMMERCE United States Patent and Trademark Office Address: COMMISSIONER FOR PATENTS P.O. Box 1450 Alexandria, Virginia 22313-1450 www.uspto.gov APPLICATION NO. FILING DATE FIRST NAMED INVENTOR ATTORNEY DOCKET NO. CONFIRMATION NO. 14/053,036 10/14/2013 Matthew Arnold O'Hara 59103.5US01 4997 27683 7590 03/14/2022 HAYNES AND BOONE, LLP IP Section 2323 Victory Avenue Suite 700 Dallas, TX 75219 EXAMINER BRIDGES, CHRISTOPHER ART UNIT PAPER NUMBER 3695 NOTIFICATION DATE DELIVERY MODE 03/14/2022 ELECTRONIC Please find below and/or attached an Office communication concerning this application or proceeding. The time period for reply, if any, is set in the attached communication. Notice of the Office communication was sent electronically on above-indicated "Notification Date" to the following e-mail address(es): ipdocketing@haynesboone.com PTOL-90A (Rev. 04/07) UNITED STATES PATENT AND TRADEMARK OFFICE ____________ BEFORE THE PATENT TRIAL AND APPEAL BOARD ____________ Ex parte MATTHEW ARNOLD O’HARA and CHARLES A. CASTILLE III Appeal 2021-003768 Application 14/053,036 Technology Center 3600 ____________ Before BRADLEY B. BAYAT, TARA L. HUTCHINGS, and ROBERT J. SILVERMAN, Administrative Patent Judges. SILVERMAN, Administrative Patent Judge. DECISION ON APPEAL STATEMENT OF THE CASE Pursuant to 35 U.S.C. § 134(a), the Appellant1 appeals from the Examiner’s decision rejecting claims 1, 2, 4, 6, and 8-22. We have jurisdiction under 35 U.S.C. § 6(b). An oral hearing in this matter was held on January 31, 2022. We AFFIRM. 1 The word “Appellant” refers to “applicant” as defined in 37 C.F.R. § 1.42. The Appellant identifies the real party in interest as BlackRock Index Services, LLC. Appeal Br. 3. Appeal 2021-003768 Application 14/053,036 2 ILLUSTRATIVE CLAIM The Appellant’s Specification “relates generally to financial services and financial products, and more particularly to the development of an index based on a future cost of a defined income stream and financial products (such as collective trust funds, mutual funds, exchange-traded funds, and separately managed accounts) that are based on that index.” Spec. ¶ 2. Claims 1, 11, and 16 are the independent claims in the Appeal. Claim 1 illustrates the subject matter at issue: 1. A method for determining a future cost of retirement fund from an index level of a future cost of a retirement index that tracks a present value of a future cost of a retirement cash flow, the method comprising: determining, by a processor, a set of periodic cash flows from a plurality of securities over an investment period beginning on an investment date when the future cost of retirement fund shares are purchased and ending on a redemption date when shares in the future cost of retirement fund are converted to an annuity, the set of periodic cash flows providing a periodic income comprising a plurality of payments starting from a future investment date and continuing until an end date, the end date determined according to a mortality rate; determining, by the processor, a yield curve that models growth in a value of at least one security in the plurality of securities from the investment date to the redemption date; determining, by the processor, a discount function based on the determined yield curve by applying a risk charge corresponding to a shift in the mortality rate; applying, by the processor, the discount function to the set of periodic cash flows to determine a net present value of the set of periodic cash flows Appeal 2021-003768 Application 14/053,036 3 setting, by the processor, the index level of the future cost of the retirement index based on the determined net present value of the set of periodic cash flows; determining, using the processor, a second plurality of securities and corresponding weight of each security in the second plurality of securities for inclusion in the future cost of the retirement index, wherein the second plurality of securities achieve the index level of the future cost of the retirement index; and generating, using the processor, the future cost of retirement fund that includes a third plurality of securities that have characteristics of the second plurality of securities in the future cost of the retirement index and an approximate investment return of the second plurality of securities. REJECTION Claims 1, 2, 4, 6, and 8-22 are rejected under 35 U.S.C. § 101 as ineligible subject matter. FINDINGS OF FACT The findings of fact relied upon, which are supported by a preponderance of the evidence, appear in the following Analysis. ANALYSIS Under 35 U.S.C. § 101, an invention is patent eligible if it claims a “new and useful process, machine, manufacture, or composition of matter.” 35 U.S.C. § 101. Yet, subject matter belonging to any of the statutory categories may, nevertheless, be ineligible for patenting. The Supreme Court has interpreted 35 U.S.C. § 101 to exclude laws of nature, natural phenomena, and abstract ideas, because they are regarded as the basic tools Appeal 2021-003768 Application 14/053,036 4 of scientific and technological work, such that including them within the domain of patent protection would risk inhibiting future innovation premised upon them. Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013) (“Myriad”). Of course, “[a]t some level, ‘all inventions . . . embody, use, reflect, rest upon, or apply’” these basic tools of scientific and technological work. Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 217 (2014). Accordingly, evaluating ineligible subject matter, under these judicial exclusions, involves a two-step framework for “distinguish[ing] between patents that claim the buildin[g] block[s] of human ingenuity and those that integrate the building blocks into something more, thereby transform[ing] them into a patent- eligible invention.” Id. (alterations in original) (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 88-89 (2012) (internal citation and quotation marks omitted)). The first step determines whether the claim is directed to judicially excluded subject matter (such as a so- called “abstract idea”); the second step determines whether there are any “additional elements” recited in the claim that (either individually or as an “ordered combination”) amount to “significantly more” than the identified judicially excepted subject matter itself. Id. at 217-18. In 2019, the Office published revised guidance on the application of § 101, in accordance with judicial precedent. See 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg. 50, 52 (Jan. 7, 2019) (“2019 Revised Guidance”).2 Under the 2019 Revised Guidance, a claim is 2 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”) (available at https://www.uspto.gov/sites/default/files/ Appeal 2021-003768 Application 14/053,036 5 “directed to” an abstract idea, only if the claim recites any of (1) mathematical concepts, (2) certain methods of organizing human activity, and (3) mental processes - without integrating such abstract idea into a “practical application,” i.e., without “apply[ing], rely[ing] on, or us[ing] the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception.” Id. at 52-55. The considerations articulated in MPEP § 2106.05(a)-(c) and (e)-(h) bear upon whether a claim element (or combination of elements) integrates an abstract idea into a practical application. Id. at 55 (referring to MPEP 9th ed. Rev. 08.2017, rev. Jan. 2018). A claim that is “directed to” an abstract idea constitutes ineligible subject matter, unless the claim recites an additional element (or combination of elements) amounting to significantly more than the abstract idea. Id. at 56. Although created “[i]n accordance with judicial precedent,” the 2019 Revised Guidance enumerates the analytical steps differently than the Supreme Court’s Alice opinion. 2019 Revised Guidance, 84 Fed. Reg. at 52. Step 1 of the 2019 Revised Guidance addresses whether the claimed subject matter falls within any of the statutory categories of 35 U.S.C. § 101. Id. at 53-54. Step 2A, Prong One, concerns whether the claim at issue recites ineligible subject matter; if an abstract idea is recited, Step 2A, Prong Two, addresses whether the recited abstract idea is integrated into a practical application. Id. at 54-55. Unless such integration exists, the analysis documents/peg_oct_2019_update.pdf). The Manual of Patent Examining Procedure (“MPEP”) incorporates the revised guidance and subsequent updates at § 2106 (9th ed. Rev. 10.2019, rev. June 2020). Appeal 2021-003768 Application 14/053,036 6 proceeds to Step 2B, in order to determine whether any additional element (or combination of elements) amounts to significantly more than the identified abstract idea, which would render a claim patent eligible, even though it is directed to judicially excepted subject matter. Id. at 56. Challenging the rejection at issue in this Appeal, the Appellant argues all the appealed claims together as a group. Appeal Br. 6-17. Claim 1 is selected for analysis herein. See 37 C.F.R. § 41.37(c)(1)(iv) . With regard to Step 1 of the 2019 Revised Guidance, the Examiner regards claim 1 as being within the statutory categories of § 101. Final Act. 2. The Appellant does not dispute this point. The Examiner identifies the following italicized language of claim 1 as reciting a judicial exception: 1. A method for determining a future cost of retirement fund from an index level of a future cost of a retirement index that tracks a present value of a future cost of a retirement cash flow, the method comprising: determining, by a processor, a set of periodic cash flows from a plurality of securities over an investment period beginning on an investment date when the future cost of retirement fund shares are purchased and ending on a redemption date when shares in the future cost of retirement fund are converted to an annuity, the set of periodic cash flows providing a periodic income comprising a plurality of payments starting from a future investment date and continuing until an end date, the end date determined according to a mortality rate; determining, by the processor, a yield curve that models growth in a value of at least one security in the plurality of securities from the investment date to the redemption date; Appeal 2021-003768 Application 14/053,036 7 determining, by the processor, a discount function based on the determined yield curve by applying a risk charge corresponding to a shift in the mortality rate; applying, by the processor, the discount function to the set of periodic cash flows to determine a net present value of the set of periodic cash flows setting, by the processor, the index level of the future cost of the retirement index based on the determined net present value of the set of periodic cash flows; determining, using the processor, a second plurality of securities and corresponding weight of each security in the second plurality of securities for inclusion in the future cost of the retirement index, wherein the second plurality of securities achieve the index level of the future cost of the retirement index; and generating, using the processor, the future cost of retirement fund that includes a third plurality of securities that have characteristics of the second plurality of securities in the future cost of the retirement index and an approximate investment return of the second plurality of securities. See Answer 3-4. The Examiner maintains that the identified features of claim 1 recite a process for “determining a present value of a future cost of retirement which is financial risk management and planning and therefore a fundamental economic practice falling under the enumerated abstract idea grouping of ‘Certain Methods of Human Activity.’” Id. at 3. The Appellant contends that the Examiner has not properly identified a judicial exception recited in claim 1; hence, “the Office’s entire patent eligibility analysis is based on the wrong abstract idea.” Appeal Br. 7. According to the Appellant, the claims “do not recite ‘determining a present value of a future cost of retirement’ or ‘determining a future cash flow.’” Id. Appeal 2021-003768 Application 14/053,036 8 Although the Appellant is correct, as a literal matter, the Examiner’s identified limitations of claim 1 recite a process for identifying securities having a present value of a future periodic cash flow. Courts have determined that such practices are within a judicial exception to patent protection. See Bilski v. Kappos, 561 U.S. 593, 611-12 (2010) (claimed technique of risk hedging is a patent-ineligible fundamental economic practice); Bancorp Servs., LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1280 (Fed. Cir. 2012) (claimed technique for “managing a stable value protected life insurance policy” constitutes ineligible subject matter). Therefore, the Appellant does not persuade us of error in the Examiner’s application of Step 2A, Prong One. Turning Step 2A, Prong Two, unless a claim that recites a judicial exception (such as an abstract idea) “integrates the recited judicial exception into a practical application of that exception,” the claim is “directed to” the judicial exception. 2019 Revised Guidance, 84 Fed. Reg. at 53. The analysis of such an “integration into a practical application” involves “[i]dentifying . . . any additional elements recited in the claim beyond the judicial exception(s)” and “evaluating those additional elements individually and in combination to determine whether they integrate the exception into a practical application.” Id. at 54-55. Among the considerations “indicative that an additional element (or combination of elements) may have integrated the exception into a practical application” is whether “[a]n additional element reflects an improvement in the functioning of a computer, or an improvement to other technology or technical field.” Id. at 55 (footnote omitted). “[W]hether an additional element or combination of elements Appeal 2021-003768 Application 14/053,036 9 integrate[s] the exception into a practical application should be evaluated on the claim as a whole.” Id. at 55 n.24. The Examiner maintains that the recited “processor” and its operations are the only additional-element subject matter in claim 1. Answer 6. Rather than integrating the judicial exception into a practical application, the “processor” features are merely tools for implementing the judicial exception. Id. The Appellant argues that claim 1 achieves “an improvement to data- based predictions in financial technology and specifically an improved technique for using data to unconventionally predict a future monetary need by ‘generating . . . the future cost of retirement fund.’” Appeal Br. 8. According to the Appellant, the limitations of claim 1 that accomplish the improvement are: determining the “index level of the future cost of retirement index”; “determining . . . securities for inclusion in the future cost of the retirement index”; and “generating . . . the future cost of retirement fund that includes a third plurality of securities that have characteristics of the second plurality of securities in the future cost of the retirement index.” Id. at 8-9. This argument is not persuasive, because the Appellant bases the purported improvement upon claim limitations that recite the judicial exception, per the Examiner’s determination. See Answer 3-4. The Appellant’s position does not identify a role for the additional elements. The Appellant also argues that the additional elements of claim 1 integrate the judicial exception into a practical application thereof, because the claim “transform[s] a set of periodic cash flows from a plurality of Appeal 2021-003768 Application 14/053,036 10 securities into a future cost of retirement fund that includes different securities.” Appeal Br. 11 (emphasis omitted). See also id. at 14. The Appellant, in this regard, relies upon the so-called “machine-or- transformation” test of patent-eligibility that the Federal Circuit had articulated - whereby a patent-eligible “process” must either be “tied to a particular machine or apparatus,” or “transform[ ] a particular article into a different state or thing” - but which has been sharply curtailed by the Supreme Court in Bilski, 561 U.S. at 602-04. Indeed, the Supreme Court “clarified that the ‘machine-or-transformation test’ is not a definitive test of patent eligibility, but only an important and useful clue.” Mayo, 566 U.S. at 76. Yet, even if relied upon as a clue - as the 2019 Revised Guidance, 84 Fed. Reg. at 55, would permit - we are not persuaded that the additional elements of claim 1 effect such a transformation. The Examiner questions whether “[m]anipulating data, i.e. a plurality of cash flows, into a ‘retirement fund’ that includes different ‘securities’” constitutes a transformation cognizable under the machine or transformation test, because the claimed “securities” “are merely well-known financial products which are intangible agreements in the form of contracts.” Answer 6 (citing Spec. ¶¶ 45, 50). Similarly, the Federal Circuit has stated that “[t]he mere manipulation or reorganization of data . . . does not satisfy the transformation prong.” CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1375 (Fed. Cir. 2011). In any event, we are not persuaded that the Appellant’s identified operations of claim 1 constitute any sort of transformation. Claim 1’s “set of periodic cash flows from a plurality of securities” are not transformed into “the future cost of retirement index” with the “second plurality of Appeal 2021-003768 Application 14/053,036 11 securities,” as the Appellant contends. See Appeal Br. 11. Rather, claim 1 states that the “processor” “set[s] . . . the index level of the future cost of the retirement index based on the determined net present value of the set of periodic cash flows” and the “processor” “determin[es] . . . a second plurality of securities and corresponding weight of each security in the second plurality of securities for inclusion in the future cost of the retirement index, wherein the second plurality of securities achieve the index level of the future cost of the retirement index.” Nor are we persuaded that claim 1’s “the future cost of retirement index” is transformed into “the future cost of retirement fund” with “a third plurality of securities,” as the Appellant contends. Appeal Br. 11. Instead, claim 1 states that the “processor” “generat[es] . . . the future cost of retirement fund that includes a third plurality of securities that have characteristics of the second plurality of securities in the future cost of the retirement index and an approximate investment return of the second plurality of securities.” Therefore, both of the alleged transformations are, instead, determinations of the characteristics of securities for meeting certain defined investment parameters. See Spec. ¶ 9 (“Upon establishing an index that quantifies this present value, one or more funds may be created to track the index (individually, a ‘Fund,’ collectively ‘Funds’). Embodiments of these Funds permit an investor to accumulate funds that approximate an amount needed to purchase, at a future time, a defined income stream for life.”) The Appellant also argues that the limitations for “generating . . . the future cost of retirement fund” from “the future cost of the retirement index” Appeal 2021-003768 Application 14/053,036 12 “meaningfully limit” the judicial exception, so as to render claim 1 patent- eligible, under Step 2A, Prong Two. Appeal Br. 12. The Appellant states: [T]he claims are limited to financial technology and even more specifically to retirement funds. The claims are further limited from general economic concepts such as an index, a fund, or trading. For example, the claims, wherein viewed as an ordered combination, are limited to a specific implementation for generating a “future cost of retirement fund” from a “future cost of retirement index” where the “future cost of retirement index” is generated first. Id. In a similar vein, the Appellant contends that “the claims do not preempt all ways of generating a retirement income or the future cost of retirement funds”; instead, “the claims provide a specific, discrete implementation of the alleged abstract idea.” Id. at 15. As discussed above, this argument relies upon claim limitations that the Examiner identifies as reciting aspects of the judicial exception. See Answer 3-4. In any event, the Appellant’s position that claim 1 is limited to a particular field of use does not render the claim patent-eligible. See Parker v. Flook, 437 U.S. 584, 593 (1978) (“[R]espondent incorrectly assumes that if a process application implements a principle in some specific fashion, it automatically falls within the patentable subject matter of § 101.”) The possibility that a patent claim would not foreclose some applications of judicially excepted subject matter does not avoid ineligibility. Even though “[t]he Supreme Court has made clear that the principle of preemption is the basis for the judicial exceptions to patentability,” and “preemption may signal patent ineligible subject matter, the absence of complete preemption does not demonstrate patent eligibility.” Ariosa Diagnostics, Inc. v. Appeal 2021-003768 Application 14/053,036 13 Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015) (internal citation omitted). Rather, “questions on preemption are inherent in and resolved by the § 101 analysis.” Id. In view of the foregoing, we are not persuaded of error in the Examiner’s application of Step 2A, Prong Two. Under Step 2B of the 2019 Revised Guidance, 84 Fed. Reg. at 56, a claim that recites a judicial exception (such as an abstract idea) might, nevertheless, be patent-eligible, if the claim contains “additional elements amount[ing] to significantly more than the exception itself” - i.e., “a specific limitation or combination of limitations that [is] not well- understood, routine, conventional activity in the field, which is indicative that an inventive concept may be present.” See 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.”) As discussed above, the Examiner determines the additional elements of claim 1 to be the recited “processor” and its operations. See Answer 6. The Specification indicates that these limitations may be satisfied by conventional equipment: “a general-purpose computing device.” Spec. ¶ 63. The Appellant argues: The inventive concept described in the claims, when taken as an ordered combination of the claim limitations, is directed to a specific technique for determining a “future cost of retirement fund” from the “future cost of the retirement index” where the “future cost of the retirement index” is determined first. This inventive concept harnesses data prediction in financial technology and generates a “future cost of retirement fund” that permits “an investor to accumulate funds that approximate an Appeal 2021-003768 Application 14/053,036 14 amount needed to purchase, at a future time, a defined income stream for life.” Specification at ¶ 9. Appeal Br. 14. This argument is not persuasive of error in the rejection of claim 1. Notably, the argument relies upon the claim limitations that the Examiner identifies as reciting the judicially excepted subject matter - rather than the additional elements. See Answer 3-4. As the Federal Circuit has explained, “[i]t 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 LLC v. BuySeasons, Inc., 899 F.3d 1281, 1290 (Fed. Cir. 2018). Accordingly, the Appellant’s reliance on BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC, 827 F.2d 1341 (Fed. Cir. 2016), is inapposite. See Appeal Br. 16-17. Although, as the Appellant correctly points out (id. at 16-17), BASCOM, 827 F.2d at 1350, explains that “an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces,” the Appellant does not identify any such conventional elements that accomplish significantly more than the identified judicial exception. Therefore, we are not persuaded of error in the Examiner’s application of Step 2B. Accordingly, we sustain the rejection of claim 1 and, per 37 C.F.R. § 41.37(c)(1)(iv), claims 2, 4, 6, and 8-22 under 35 U.S.C. § 101. CONCLUSION The Examiner’s rejection of claims 1, 2, 4, 6, and 8-22 under 35 U.S.C. § 101 is affirmed. Appeal 2021-003768 Application 14/053,036 15 DECISION SUMMARY In summary: Claim(s) Rejected 35 U.S.C. § Reference(s)/Basis Affirmed Reversed 1, 2, 4, 6, 8-22 101 Ineligibility 1, 2, 4, 6, 8-22 TIME PERIOD FOR RESPONSE No time period for taking any subsequent action in connection with this appeal may be extended under 37 C.F.R. § 1.136(a). See 37 C.F.R. § 1.136(a)(1)(iv). AFFIRMED