Ex Parte Kaestel

Patent Trial and Appeal BoardFeb 25, 2019

13649081 (P.T.A.B. Feb. 25, 2019)

UNITED STA TES p A TENT AND TRADEMARK OFFICE APPLICATION NO. FILING DATE 13/649,081 10/10/2012 128144 RimonPC 7590 One Embarcadero Center Suite 400 San Francisco, CA 94111 02/27/2019 FIRST NAMED INVENTOR Peter Kaestel 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 ATTORNEY DOCKET NO. CONFIRMATION NO. 10-593-US-D 1086 EXAMINER GOTTSCHALK, MARTIN A ART UNIT PAPER NUMBER 3697 NOTIFICATION DATE DELIVERY MODE 02/27/2019 ELECTRONIC Please find below and/or attached an Office communication concerning this application or proceeding. The time period for reply, if any, is set in the attached communication. Notice of the Office communication was sent electronically on above-indicated "Notification Date" to the following e-mail address(es): eofficeaction@appcoll.com docketing.rimonlaw@clarivate.com PTOL-90A (Rev. 04/07) UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE PATENT TRIAL AND APPEAL BOARD Ex parte PETER KAESTEL Appeal2017-004506 Application 13/649 ,081 Technology Center 3600 Before JOSEPH A. FISCHETTI, BIBHU R. MOHANTY, and CYNTHIA L. MURPHY, Administrative Patent Judges. MURPHY, Administrative Patent Judge. DECISION ON APPEAL The Appellant1 appeals under 35 U.S.C. Â§ 134 from the Examiner's rejection of claims 1, 3-8, 10-15, and 17-21 under 35 U.S.C. Â§ 101.2 We have jurisdiction over this appeal under 35 U.S.C. Â§ 6(b). We AFFIRM. 1 "The real party in interest is Deutsche Borse AG." (Appeal Br. 1.) 2 The Examiner's rejection under 35 U.S.C. Â§ 112 (see Final Action 5---6) has been withdrawn (see Advisory Action 2); and the Examiner's rejection under 35 U.S.C. Â§ 103 (see Final Action 6-7) has been withdrawn (see Answer 2). Appeal2017-004506 Application 13/649,081 BACKGROUND The Appellant's invention relates to systems and methods "for valuing a bundle of constructs." (Spec. ,r 2.) A disclosed example of a "bundle of constructs" is a "futures contract[]" that is based on a "basket" (i.e., bundle) of "credit default swaps" (i.e., constructs). (Id. ,r 5.) "A 'futures contract' is an agreement to buy or sell a financial instrument on a future date at a price that is fixed today." (Id. ,r 112.) Thus, in the context of the Appellant's systems/methods, a "bundle of constructs," can reside solely within a financial arrangement defined by contractual terms agreed upon between the parties. 3 The Appellant is particularly concerned with "a separation event" that "caus[ es] a bundle of constructs to separate a failing construct from the bundle." (Spec. ,r 2.) "A 'separation event' may be any event of some influence on a resource amount update for counterbalancing a transfer of a failure risk pertaining to a bundle of constructs," and can lead to "a decision" to "separate" an individual construct out of the bundle of constructs. (Id. ,r 141.) When the "bundle of constructs" is a basket of credit default swaps, "[ s ]eparation events" are "defined by the futures contract." (Id. ,r 48.) For example, per the terms of a particular futures contract, a "separation event" could correspond to "a serious degradation of the 3 "A 'credit default swap' is a contract where [a] protection seller agrees to purchase from [a] protection buyer an obligation issued by a reference entity for its par value after the occurrence of a credit event," and, "[i]n return, the protection buyer agrees to pay a premium to the protection seller until the earlier of the maturity of the credit default swap and the date of a credit event." (Spec. ,r 95.) 2 Appeal2017-004506 Application 13/649,081 creditworthiness of an obligor," and "[t ]he occurrence of a separation event" could cause "the futures contract to separate, into two separately traded future contracts." (Spec. ,r 141.) Put another way, upon occurrence of a separation event, "the credit default swap having failed may be removed from the basket." (Id. ,r 6.) According to the Appellant, "separating a credit default swap from a basket will lead to price swings" (Spec. ,r 8); and "[ s ]uch unsteadiness" is undesirable when the "value of the bundle of constructs is monitored over time" (id. ,r 9). And, according to the Appellant, "[i]t is therefore found desirable to achieve a valuation technique for a bundle of constructs where the observable influence of a separation event is reduced." (Id.) ILLUSTRATIVE CLAIM (with bracketed text added) 1. A system for valuing a bundle of constructs in case of a separation event, the system comprising: one or more processors; and one or more memories operatively coupled to at least one of the one or more processors and having instructions stored thereon that, when executed by at least one of the one or more processors, cause at least one of the one or more processors to: [ (a)] separate a failing construct from the bundle of constructs, wherein the bundle of constructs prior to separation correspond to a plurality of obligors and wherein the bundle of constructs after separation correspond to a plurality of surviving obligors excluding an obligor of the failing construct; [ (b)] determine a new nominal value for the bundle of constructs by reducing a previous nominal value corresponding to the bundle of constructs prior to separation of the failing construct by an amount corresponding to a weight of the failing construct, wherein the new nominal value of the bundle of contracts represents the nominal of the surviving obligors; 3 Appeal2017-004506 Application 13/649,081 [(c)] determine a present value of the bundle of constructs based at least in part on a mark to market value of an equivalent futures contract having a nominal value equal to the new nominal value; and [(d)] calculate a futures price of the bundle of constructs based at least in part on the determined present value and the new nominal value, wherein calculating the futures price of the bundle of constructs comprises calculating a sum of at least the determined present value and the new nominal value. REJECTION The Examiner rejects claims 1, 3-8, 10-15, and 17-21 under 35 U.S.C. Â§ 101 as not "amount[ing] to significantly more than an abstract idea." (Final Action 3.) JUDICIAL EXCEPTIONS Section 101 of the Patent Act defines subject matter eligible for patent protection as "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 35 U.S.C. Â§ 101. But the Supreme Court has "long held" that this provision contains an important implicit exception: "Laws of nature, natural phenomena, and abstract ideas are not patentable." Ass 'nfor Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013). These three listed categories are 'judicially created exceptions toÂ§ 101," or more concisely, "judicial exceptions." AfcRO. Inc. v. Bandai _Namco Games Anz. Inc., 837 F.3d 1299, 1311 (Fed. Cir. 2016). Thus, "abstract ideas" are considered a judicial exception to what would otherwise be considered patent eligible under 35 U.S.C. Â§ 101 (e.g., a process/method or a machine/system). 4 Appeal2017-004506 Application 13/649,081 THE ALICE TEST In Alice C01p. v. C2S Bank Int 'l, 573 U.S. 208 (2014), the Supreme Court provided a two-step test to guard against an attempt to patent an abstract idea, as opposed to "patent-eligible application" involving an abstract idea. (Id. at 217-18.) In Alice step one, a determination is made as to whether the claim at issue is "directed to" an abstract idea. (Id. at 218.) If not, it can be concluded that no attempt is being made to patent an abstract idea, and the Alice test is complete. If the claim at issue is ''directed to" an abstract idea, Alice step two must be performed. (Id.) In this second step of the Alice test consideration is given to the additional elements in the claim ' ....., (both individually and as an ordered combination) to determine whether they transform the nature of the claim into "a patent-eligible application" that "amounts to significantly more" than the abstract idea itself. (Id.) 2019 GUIDANCE The USPTO recently published revised guidance on the application of Â§ 101, in accordance withjudicial precedent. 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg. 50, 52 (Jan. 7, 2019) ("2019 Guidance"). Under the 2019 Guidance, a claim is "directed to" an abstract idea 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. A claim so "directed to" an abstract idea constitutes ineligible 5 Appeal2017-004506 Application 13/649,081 subject matter, unless it recites an additional element ( or combination of elements) amounting to significantly more than the abstract idea. Id. at 56. ANALYSIS Independent claim 1 sets forth "[a] system" comprising "one or more processors," and "one or more memories operatively coupled to at least one of the one or more processors and having instructions stored thereon." (Appeal Br., Claims App.) Independent claim 1 also requires the stored instructions, when "executed by" the processor(s), to "cause" the processor(s) to perform the functions specified in limitations (a)- ( d). (Id.) The Examiner determines that independent claim 1 is "directed to" an abstract idea, namely "a fundamental economic practice" and/or "mathematical relationships." (Final Action 3.) The Examiner also determines that "[ t ]he additional elements or combination of elements" in independent claim 1 do not transform the claimed system into "significantly more than the abstract idea itself." (Id.) More succinctly, the Examiner concludes that independent claim 1 does not pass the Alice test for patent eligibility. We have carefully considered the Appellant's arguments that the Examiner's conclusion of patent ineligibility is erroneous (see Appeal Br. 4--13; see also Reply Br. 1--4), but, for the reasons explained below, we are unpersuaded by these arguments. The system set forth in independent claim 1 is "for valuing a bundle of constructs in case of a separation event." (Appeal Br., Claims App.) A "bundle of constructs," can be a "futures contract[]" based on a "basket of credit default swaps," and "[a] 'futures contract' is an agreement to buy or 6 Appeal2017-004506 Application 13/649,081 sell a financial instrument on a future date at a price that is fixed today." (Spec. ,r,r 5, 112.) Thus, in the context of independent claim 1, the "bundle of constructs" can reside solely within a "futures contract" which is a financial arrangement that exists only by virtue of contractual clauses agreed upon by the parties. We consider a futures contract, especially one that is based upon a basket of credit default swaps, to be a fundamental economic principle/ practice akin to hedging, insurance, and mitigating risk, and, therefore, an abstract idea. 4 And we identify limitations (a) - ( d) as the limitations in independent claim 1 reciting this abstract idea. Limitation (a) in independent claim 1 requires the separation of "a failing construct" from the bundle of constructs. (Appeal Br., Claims App.) As a separation event is "defined by the futures contract" (see Spec. ,r 48, emphasis added), limitation (a) simply specifies that, per an agreed-upon clause in the futures contract, a failed credit default swap is removed from the basket. Limitation (a), therefore, recites only an abstract consequence of a contractual clause of the futures contract. 5 4 "[F]undamental economic principles or practices," including "hedging, insurance, mitigating risk," are listed under the grouping of"[ c ]ertain methods of organizing human activity" in the 2019 Guidance. (84 Fed. Reg. at 52.) We further note that, according to the Appellant, "[c]redit default swaps are the most commonly traded credit derivatives." (Spec. ,r 5.) 5 As noted by the Examiner, "agreements between people in the form of contracts and legal obligations" (i.e., "creating a contractual relationship") are also court-recognized abstract ideas. (Answer 4.) "[C]ommercial or legal interactions," including "agreements in the form of contracts," are listed under the grouping of"[ c ]ertain methods of organizing human activity" in the 2019 Guidance. (84 Fed. Reg. at 52.) 7 Appeal2017-004506 Application 13/649,081 Limitations (b) - ( d) in independent claim 1 do nothing more than make financial-value-based determinations (i.e., a "new nominal value" and a "present value") in order to calculate a "futures price" for the post- separation-event basket. As "[a] 'futures contract' is an agreement to buy or sell a financial instrument on a future date at a price that is fixed today" (Spec. ,r 112, emphasis added), limitations relating to the calculation of this price do not subsist outside the agreed-upon clauses in the futures contract. Limitations (b) - ( d), therefore, recite only abstract financial variables seated strictly in the contractual clauses of the futures contract. 6 The remaining limitations in independent claim 1 pertain to computing devices (i.e., "one or more processors" and "one or more memories") that are used as a tool to apply the abstract-idea-imbedded functions set forth in limitations (a)- (d). In other words, insofar as these limitations create additional elements, these additional elements do not, individually and collectively, integrate the economic fundamentals of a futures contract into a practical application of this abstract idea. Thus, independent claim 1 is "directed to" an abstract idea, as required by Alice step one, and we proceed to Alice step two. In Alice step two, we reconsider the computing devices listed in independent claim 1, and look at whether they simply append well- understood, routine, conventional activities, at high a level of generality, to the abstract idea. In this regard, the Specification discloses "a data 6 As noted by the Examiner, "mathematical concepts such as mathematical algorithms and calculations" are also court-recognized abstract ideas. ( Answer 4.) "Mathematical concepts-mathematical relationships, mathematical formulas or equations, mathematical calculations" are an enumerated "grouping" of abstract-idea exceptions. (84 Fed. Reg. at 52.) 8 Appeal2017-004506 Application 13/649,081 processing system [ 100] that may be used in conjunction with the invention." (Spec. ,r 28.) The data processing system 100 is described as comprising "data storage 110- 130" and "a calculation unit 140" (id.); and is depicted only schematically in the drawings (see id. at Fig. 1 ). The only other mentions of computing devices in the Specification indicate that "[s]oftware can deal with equal and non-equal weighted baskets." (Id. ,r 59.)7 As such, the Specification conveys that the computing devices listed in independent claim 1, individually and collectively, constitute "generic computer structure that serves to perform generic computer functions." (Final Action 3; see also Answer 6.) Thus, independent claim 1 does not survive Alice step two, and, therefore, does not pass the Alice test for patent eligibility. The Appellant contends that the record lacks support for a determination that independent claim 1 is "directed to" an abstract idea. (See Appeal Br. 5-8.) Specifically, the Appellant challenges the exact words used by the Examiner ( e.g., "portfolio," "managing," "securities," etc.) to describe the fundamental-economic focus of independent claim 1. (Id. at 8.) Yet, the Appellant acknowledges that the claims "involve the calculation of futures price for a bundle of constructs in the event that a construct in the bundle of constructs fails." (Id., underlining omitted.) And, when the bundle of constructs is a "futures contract" that is based on a 7 The Specification does discuss that, rather than the constructs being credit default swaps, "[ c ]onstructs may be hardware arrangements in computer systems or other automated systems, or may be software routines." (Spec. ,r 3, see also id. ,r,r 4---6, 25, 26.) However, this discussed hardware/software differs from that used to perform the separating/ determining/ calculating functions (i.e., limitations (a)- (d)) set forth in independent claim 1. 9 Appeal2017-004506 Application 13/649,081 basket of credit default swaps" (Spec. ,r 5), "portfolio value" (id. ,r 65; see also id. ,r,r 66-77), "managing futures contracts" (id. ,r 61 ), and "derivatives" (i.e., securities) (id. ,r 5) are part of the conversation. Along this same line, the Appellant implies that a determination that independent claim 1 is "directed to" an abstract idea is not aligned with controlling case law. (See Appeal Br. 9.) However, both the Supreme Court and the Federal Circuit provide us with ample precedent that fundamental economic practices, principles, and concepts constitute abstract ideas. 8 As for the computing devices listed in independent claim 1 (i.e., "one or more processors" and "one or more memories"), the Appellant contends that they were inadequately addressed by the Examiner during Alice step two. Specifically, the Appellant contends that the Examiner's finding that these computing devices perform generic functions "is completely without 8 Alice, 573 U.S. at 219-20 (concluding that use of a third party to mediate settlement risk is a "fundamental economic practice" and thus an abstract idea); Bilski v. Kappas, 561 U.S. 593, 611---612 (2010) (concluding that hedging is a "fundamental economic practice" and therefore an abstract idea); Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can. (US.), 687 F.3d 1266, 1280 (Fed. Cir. 2012) (concluding that "managing a stable value protected life insurance policy by performing calculations and manipulating the results" is an abstract idea); Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., 876 F.3d 1372, 1378-79 (Fed. Cir. 2017) (holding that concept of"' local processing of payments for remotely purchased goods"' is a "fundamental economic practice, which Alice made clear is, without more, outside the patent system."); OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362---63 (Fed. Cir. 2015) (concluding that claimed concept of "offer- based price optimization" is an abstract idea "similar to other 'fundamental economic concepts' found to be abstract ideas by the Supreme Court and this court"); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014) (holding that concept of "creating a contractual relationship----a 'transaction performance guaranty"' is an abstract idea). 10 Appeal2017-004506 Application 13/649,081 support in the record or in the art" (Appeal Br. 10) and that no thought was given to the "arrangement" of these computing devices (Reply Br. 2). But we see no assertions, much less arguments, by the Appellant that the computing devices listed in independent claim 1 have a non-conventional structure, perform a non-conventional purpose, and/or collectively form a non-conventional arrangement. The Appellant additionally contends that the non-computer-centric limitations in independent claim 1 somehow create "elements and combination of elements such that the claims are directed to 'significantly more' than the abstract idea." (Appeal Br. 12.) The Appellant particularly directs our attention to limitation (b ), in which the "new nominal value" is determined, and to limitation ( c ), in which the "present value" is determined "at least in part on a mark to market value of an equivalent futures contract having a nominal value equal to the new nominal value." (Id.; italicizing omitted.) However, inasmuch as these value-determining details innovatively improve the futures-price calculation of a post-separation-event basket, any innovation/improvement lies entirely in the demesne of the agreed-upon clauses of the futures contract, and thus within the realm of the abstract idea. 9 The Appellant further argues that independent claim 1 recites "limitations which are necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks." 9 See SAP America, Inc. v. InvestPic LLC, 898 F.3d 1161, 1163 (Fed. Cir. 2018) ("No matter how much of an advance in the finance field the claims recite, the advance lies entirely in the realm of abstract ideas, with no plausibly alleged innovation in the non-abstract application realm"). 11 Appeal2017-004506 Application 13/649,081 (Appeal Br. 13.) But, "[t]he problem" that is overcome by the Appellant's claimed system is steadying "price fluctuations" that "may not be reflective of the actual futures value of the remaining constructs but rather a reaction to the separation event." (Id. at 11.) And this problem arises only in the financial world of buying and selling futures contracts, irrespective of the computer technology used as a tool in this intangible setting. Thus, after careful consideration of the Appellant's arguments that the Examiner's conclusion of patent ineligibility is erroneous, we sustain the Examiner's rejection of independent claim 1 under 35 U.S.C. Â§ 101. Independent claim 8 sets forth "[a] method executed by one or more computing devices" comprising steps to perform the functions recited in limitations (a}-(d) of independent claim 1. (Appeal Br., Claims App.) Independent claim 15 similarly sets forth "instructions that, when executed by one or more computing devices," cause the computing device(s) to perform these functions. (Id.) To the extent that the independent claims on appeal are not argued as a group, the Appellant presents no arguments for independent claims 8 and 15 beyond the unpersuasive ones discussed above. (See id. at 4--13; see also Reply Br. 1--4.) Thus, we sustain the Examiner's rejection of independent claims 8 and 15 under 35 U.S.C. Â§ 101. As for the dependent claims, they introduce a "premium value" into the calculation of the futures price (claims 3, 6, 10, 13, 17, 20), and they specify "premium subvalues for predefined time intervals" for determining this premium value ( claims 4, 5, 11, 12, 18, 19). (Appeal Br., Claims App.) As such, these dependent claims, like limitations (b) - ( d) in independent 12 Appeal2017-004506 Application 13/649,081 claim 1, merely set forth further details of abstract financial variables seated only in the contractual clauses of the futures contract. Thus, we sustain the Examiner's rejection of dependent claims 3-7, 10-14, and 17-21 under 35 U.S.C. Â§ 101. DECISION We AFFIRM the Examiner's rejection of claims 1, 3-8, 10-15, and 17-21 under 35 U.S.C. Â§ 101. No time period for taking any subsequent action in connection with this appeal may be extended under 37 C.F.R. Â§ 1.136(a)(l )(iv). AFFIRMED 13