International Securities Exchange, LLCv.Chicago Board Options Exchange, Incorporated

Patent Trial and Appeal Board

Mar 2, 2015

12035996 (P.T.A.B. Mar. 2, 2015)

Trials@uspto.gov Paper 44
571-272-7822 Date: March 2, 2015

UNITED STATES PATENT AND TRADEMARK OFFICE
_____________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________

INTERNATIONAL SECURITIES EXCHANGE, LLC,
Petitioner,

v.

CHICAGO BOARD OPTIONS EXCHANGE, INC.,
Patent Owner.
____________

Case IPR2014-00098
Patent 7,980,457 B2
____________

Before JUSTIN T. ARBES, RAMA G. ELLURU, and JAMES B. ARPIN,
Administrative Patent Judges.

ELLURU, Administrative Patent Judge.

FINAL WRITTEN DECISION
35 U.S.C. § 318(a) and 37 C.F.R. § 42.73

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I. BACKGROUND
Petitioner, International Securities Exchange, LLC, filed a Petition (Paper 1,
“Pet.”) requesting inter partes review of claims 1–7 of U.S. Patent No. 7,980,457
B2 (Ex. 1001; “the ’457 patent”). Patent Owner, Chicago Board Options
Exchange, Inc., filed a Preliminary Response opposing institution of review (Paper
9; “Prelim. Resp.”). On May 22, 2014, we instituted an inter partes review of
claim 1 of the ’457 patent (Paper 12; “Dec. on Inst.”).
Subsequent to institution, Patent Owner filed a Patent Owner Response
(Paper 26; “PO Resp.”), a Motion to Amend Claims (Paper 28, “Mot.”), and a
Reply to Petitioner’s Opposition to the Motion to Amend Claims (Paper 35, “PO
Reply”). Petitioner filed a Reply to Patent Owner’s Response (Paper 34; “Pet.
Reply”) and an Opposition to Patent Owner’s Motion to Amend Claims (Paper 32;
“Opp.”).
We held an oral hearing on January 21, 2014, and a transcript of the hearing
is included in the record (Paper 43; “Tr.”).
We have jurisdiction under 35 U.S.C. § 6(c). This Final Written Decision is
issued pursuant to 35 U.S.C. § 318(a) and 37 C.F.R. § 42.73.
For the reasons that follow, we determine that Petitioner has not shown by a
preponderance of the evidence that claim 1 of the ’457 patent is unpatentable based
on the instituted ground in this inter partes review.
A. The ʼ457 Patent
The ’457 patent, titled “Automated Trading Exchange System Having
Integrated Quote Risk Monitoring and Integrated Quote Modification Services,”
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issued on July 19, 2011, based on U.S. Patent Application 12/035,996 (“the ’966
application”), filed February 22, 2008.1
The ’457 patent relates to automated trading systems for option contracts
(“options”). Ex. 1001, 1:15–19, Abstract. Specifically, the claimed invention is
directed to systems for managing the risk of a maker of an options market in an
automated trading system. Id. at 1:15–19.
Options are traded publicly on exchanges. Id. at 1:24. Each option covers
certain rights to buy or sell an underlying security at a fixed price for a specified
period of time. Id. at 1:25–28. The potential loss to the buyer of an option is no
greater than the initial premium paid for the option, regardless of the performance
of the underlying security. Id. at 1:34–36. On the contrary, in exchange for the
premium, the seller of the option (“the market-maker”) assumes the risk of being
assigned the obligation to buy or sell the underlying security, according to the
option terms, if the contract is exercised. Id. at 1:37–41. Thus, writing options
may entail large risks to the market-maker. Id. at 1:41–42.
Many option trading systems utilize an “open outcry” method. Id. at 1:50–
51. In such systems, market-makers are required to make a two-sided market by
providing an order and offer quote. Id. at 1:51–53. In a non-automated open
outcry system, a market-maker communicates verbally with traders indicating their
willingness to buy and sell various quantities of securities. Id. at 1:53–56.

1 The ’996 application is a continuation of U.S. Patent Application No. 09/475,534
(“the ’534 application), which issued as U.S. Patent No. 7,356,498 B2 (“the ’498
patent”). U.S. Patent Application No. 13/178,289 (“the ’289 application”) is a
continuation of the ’996 application and issued as U.S. Patent No. 8,266,044 B2
(“the ’044 patent”). The ’457 patent is also the subject of CBM2013-00050. The
’498 patent is the subject of CBM2013-00049 and IPR2014-00097. The ’044
patent is the subject of CBM2013-00051. Final Written Decisions are entered in
these cases concurrently with this Decision.
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Because a market-maker in such systems has personal control over the types and
number of options traded, the market-maker can manage risk associated with his or
her options portfolio. Id. at 1:56–58. A market-maker manages risk by modifying
quotes for options to favor trades that tend to hedge against unwanted risk. Id. at
1:58–62.
The ’457 patent Specification states that an automated trading environment
already was known in the art. Id. at 1:63–65, 2:1–2. An automated computer-
based trading system typically records quotes and automatically matches them with
orders that enter the system. Id. at 1:65–2:1. One disadvantage of known
automated trading systems is that the systems execute trades so rapidly that a
market-maker may be unable to withdraw or modify his quotes in a timely manner.
Id. at 2:7–12. Software tools that assess trading option portfolio risk and
recommend quote modifications also were known. Id. at 2:13–18. An automated
trading system, however, processes transactions in the order received. Id. at 2:23–
25. Thus, even if a market-maker uses such software tools to modify quotes, those
tools may be unable to act in time, given the speed at which the automated trading
exchange system executes orders. Id. at 2:18–23. For example, an automated
trading exchange may have a message queue containing additional orders that must
be processed before the automated exchange receives and processes the market-
maker’s quote modification request. Id. at 2:25–30. These known automated
trading exchange systems, therefore, limit a market-maker’s ability to manage risk.
Id. at 2:31–39. The ’457 patent Specification recognizes the need for a method
that automatically modifies quotes under certain trading conditions in an
automated trading exchange system. Id. at 2:40–42.
The invention of the ’457 patent is directed to systems for an automated
trading exchange that modify quotes, where the system provides integrated quote
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risk monitoring and quote modification services. Id. at 2:46–48. Thus, one aspect
of the invention is an apparatus that implements the method using a computer,
having memory, a processor, and a communication port. Id. at 2:48–51.
The computer receives orders and quotes, wherein a quote has associated trading
parameters, such as a risk threshold. Id. at 2:51–54. The computer then may
generate a trade by matching the received orders and quotes to previously received
orders and quotes. Id. at 2:61–63. If a trade is not generated, the computer stores
each of the received orders and quotes. Id. at 2:63–64. The computer determines
whether a market-maker’s quote has been filled as a result of the generated trade,
and, if so, determines a risk level and aggregate risk level associated with the trade.
Id. at 2:64–3:1. The computer then compares the aggregate risk level with the
market-maker’s risk threshold for a quote; if the threshold is exceeded, the
computer automatically modifies at least one of the market-maker’s remaining
quotes. Id. at 3:1–4.
B. Illustrative Claim
Claim 1 is an independent claim and is reproduced below:
1. A system for processing trades of securitized instruments
based on security orders and quotes received from client computers,
comprising:
at least one server computer comprising a memory, and a
processor, said server computer configured to perform the steps of:
receiving orders and quotes, wherein specified ones of
said quotes belong to a quote group, and wherein said specified ones
of said quotes have associated trading parameters comprising a risk
threshold;
generating a trade by matching said received orders and
quotes to previously received orders and quotes;
storing each of said orders and quotes when a trade is not
generated;
determining whether a quote having associated trading
parameters has been filled as a result of the generated trade, and if so,
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determining a risk level and an aggregate risk level associated with
said trade;
comparing said aggregate risk level with said risk
threshold; and,
automatically modifying at least one of the remaining
specified ones of said quotes in the quote group if said threshold is
exceeded.

C. Prior Art
The pending ground of unpatentability in this inter partes review is based on
the following prior art.
Patent/Publication No. Date of Issuance or
Publication
Exhibit No.
U.S. Patent No. 6,405,180 B2
(“Tilfors”)
June 11, 2002 Ex. 1002
Petitioner also relies upon the Declaration of Dr. Maureen O’Hara. Ex. 1004.
D. Pending Ground of Unpatentability
We instituted an inter partes review of the ’457 patent based on the
following ground:
Claim 1 is anticipated under 35 U.S.C. § 102(e) by Tilfors.
Dec. on Inst. 18.
II. ANALYSIS
A. Claim Construction
Consistent with the statute and the legislative history of the AIA,2 the Board
will interpret claims using the broadest reasonable construction in light of the
specification of the challenged patent. See Office Patent Trial Practice Guide, 77
Fed. Reg. 48,756, 48,766 (Aug. 14, 2012); 37 C.F.R. § 42.100(b); In re Cuozzo

2 Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011)
(“AIA”).
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Speed Techs., LLC, No. 2014-1301, 2015 WL 448667, at *5–8 (Fed. Cir. Feb. 4,
2015). There is a “‘heavy presumption’ that a claim term carries its ordinary and
customary meaning.” CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366
(Fed. Cir. 2002) (internal citation omitted).
In our Decision on Institution, we construed certain claim terms as follows:
Claim Term Construction
“risk level . . .
associated with said
trade”
“a calculated, measured, or otherwise obtained
value of exposure to the possibility of loss related
to said trade”
“aggregate risk level
associated with said
trade”
“a calculated, measured, or otherwise obtained
aggregate value (e.g., combination, sum, weighed
sum, difference) of exposure to the possibility of
loss related to such trade”
“automatically
modifying at least one
of the remaining
specified ones of said
quotes in the quote
group if said threshold
is exceeded”
“automatically cancelling or revising a price or
quantity of at least one of the received specified
quotes still available for execution”

Dec. on Inst. 8–11. Petitioner does not challenge these constructions (Tr. 6:18–
7:2), nor does Patent Owner (id. at 39:14–15, 40:1–3). We discern no reason to
deviate from our constructions in our Decision on Institution for purposes of this
Final Written Decision.
B. Anticipation of Claim 1 by Tilfors
With respect to Petitioner’s contention that claim 1 is anticipated by Tilfors,
we have reviewed Petitioner’s arguments and the evidence relied upon by
Petitioner, and conclude that Petitioner has not established by a preponderance of
the evidence that claim 1 is anticipated by Tilfors. Specifically, Petitioner has not
established by a preponderance of the evidence that Tilfors discloses “determining
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a risk level and an aggregate risk level associated with said trade,” as recited by
claim 1.
Petitioner refers predominantly to one passage in Tilfors as disclosing the
limitations of claim 1. See Pet. 26, 28–29, 33, 35 (citing Ex. 1002, 4:46–62); Pet.
Reply 2 (citing Ex. 1002, 4:46–62); Tr. 8:4–22, 18:19–25. The relied-upon
passage provides the following:
However, in a preferred embodiment, the step 211 can be
executed in the following manner (not shown). If the total volume is
only a little smaller than the volume required by the exchange, the
step up parameter is used to automatically generate more volume at
the current price. If, on the other hand, a larger volume needs to be
generated in order to obtain the volume X, the one tick worse
parameter is used to generate the requested volume at a worse price.
Also, if in the step 211, the step up parameter has been used to
generate more volume a number of consecutive times at the same
price, the one tick worse parameter can be used, even though the step-
up parameter normally should have been used. This will prevent that
a customer enters a large number of small orders and that the system
then generates more volume at the current price instead of offering a
worse price as would have been the case if the customer had entered
one large order.
Ex. 1002, 4:46–62. Petitioner explains that Tilfors’s “step up functionality allows
a partially filled quote to be automatically modified by increasing the volume in
the quote to a predetermined level set by the market maker or the exchange.” Pet.
23. Petitioner provides the following example—if the market-maker’s original
quote was for 50 option contracts, and the market-maker trades against an order for
20 contracts, 30 contracts remain in the quote. Id. The step-up function
automatically modifies the quote to increase the volume back up to the
predetermined level (“X”), which could be, for example, 50 contracts. Id.; see Ex.
1002, 4:37–41 (“X is a parameter predefined by the exchange”).
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Petitioner maintains that when Tilfors executes trades, risk level and
aggregate risk level are tracked. Pet. 26. According to Petitioner, “[e]ach trade
against a quote, and implementation of the step up function, carries with it an
inherent risk level as volume is added.” Id. (citing Ex. 1004 ¶ 50). Petitioner
further contends that “Tilfors counts the number of step ups applied against a
quote, thus determining an ‘aggregate risk level.’” Id. at 26–27 (citing Ex. 1002,
4:46–62, 6:45–53). Petitioner argues that the recited “risk threshold” “reads
directly on the programmed number of times the step up parameter is permitted to
generate more volume at the same prices before invoking tick worse.” Id. at 27
(citations omitted; emphasis added). With respect to the “modifying” limitation of
claim 1, Petitioner asserts that “[w]hen the step up count threshold is exceeded,
tick worse is invoked, which regenerates the quote at a worse price,” which
according to Petitioner, is “something the ’457 patent makes clear is one of the
ways a quote can be modified in response to exceeding a risk threshold.” Id.
(citations omitted).
In our Decision on Institution, based on the record then before us, we
instituted a review based on the following determinations.
[W]hether or not a trade triggers a step-up in volume is a
calculation of the market maker’s exposure to the possibility of loss
related to a trade, i.e., the claimed “risk level.” Ex. 1004 ¶ 51.
Dec. on Inst. 14. We further agreed with Petitioner that the number of step-
ups, i.e., volume increases, applied against a quote, satisfies the recited
“aggregate risk level.” Id. We also determined that because a tick worse
parameter is applied if a step-up has been triggered a pre-defined number of
times, Petitioner had made a sufficient showing that Tilfors discloses
“automatically modifying at least one of the remaining specified ones of said
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quotes in the quote group if said threshold is exceeded,” as recited by claim
1. Id.
Patent Owner disagrees that Tilfors discloses “determining a risk level
. . . associated with said trade.” PO Resp. 27–32. Specifically, Patent
Owner argues that “whether or not a trade triggers a step-up” does not
satisfy the recited “risk level . . . associated with said trade,” which we
interpreted as “a calculated, measured, or otherwise obtained value of
exposure to the possibility of loss related to said trade.” Id. at 28 (emphasis
added); see Dec. on Inst. 8–9. According to Patent Owner, whether or not a
trade triggers a step-up is merely a decision to maintain the exchange-
required minimum volume and “is clearly not a value of anything.” PO
Resp. 28. Patent Owner asserts that “whether or not a step-up is triggered is
merely a yes-or-no question about exchange volume with only a yes-or-no
answer.” Id. Thus, argues Patent Owner, the decision to step-up is not “a
calculated, measured, or otherwise obtained value of exposure, but rather a
determination to fulfill an exchange requirement.” Id. (emphasis in
original).
In its Reply, with respect to the recited “risk level . . . associated with
said trade,” Petitioner argues that “[e]ach step-up represents the addition of
volume to a quote, and volume is a risk level.” Pet. Reply 7. Thus,
according to Petitioner, because each step-up represents the addition of
volume—volume which could be bought by a trade—the “risk level” is
increased. Tr. 20:20–21, 21:14–17, 21:18–22, 22:3–8; see Pet. Reply 10–12
(Petitioner’s hypothetical presented to Patent Owner’s witness, Dr. Benn
Steil). Petitioner states that “counting step-ups effectively counts risk levels
and creates an aggregate risk level.” Pet. Reply 12. Petitioner further argues
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that Tilfors discloses the recited “aggregate risk level” because it keeps track
of the number of times volume is added in the step-up procedure. Id. at 7.
In support of its argument, at the oral hearing, Petitioner provided the
following example of Tilfors’s embodiment.

Ex. 1010, Slide 14 (citing Pet. Reply 13); see Tr. 19:6–20:21.3
Petitioner confirms that it is relying on the aspect of the embodiment
illustrated in Figure 2A, in which less than the full volume of the market-

3 For purposes of explaining the parties’ positions, and ease of reference, we
address herein the parties’ arguments in the context of the examples discussed at
the hearing. The parties’ substantive arguments, on which those examples are
based, however, are reflected in the parties’ papers. See, e.g., Pet. 21–35;
PO Resp. 27–32; Pet. Reply 7–14.
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maker’s quote is traded consecutively (i.e., the answer is “no” at step 203
and “yes” at step 209) and more volume is generated in the market-maker’s
existing quote at the same price (step 211). Tr. 18:19–19:2, 26:11–16,
63:20–25; see Ex. 1002, 4:37–43. Thus, at least “1” contract remains in the
market-maker’s quote. The other aspect of Tilfors’s embodiment provides
that if the full volume in the market-maker’s quote is traded at Tilfors’s step
203 in Figure 2A, the next step is step 205. Petitioner, however, is not
relying on this aspect of the embodiment. Tr. 63:17–64:6.
In the hypothetical presented by Petitioner, “X,” the minimum volume
required by the electronic exchange, is “2” contracts (id. at 19:24–25), the
predefined number of step-ups (i.e., what we determined at institution is the
claimed “risk threshold”) is “2” (id. at 19:11–15), the market-maker’s initial
quote is for “2” contracts, and there is a matching order for “1” contract (id.
at 19:16–17, 20:1–2). According to Petitioner, after the first trade, because
the “full volume” of the market-maker’s quote was not traded according to
step 203 (i.e., one contract still remains in the market-maker’s quote), the
process proceeds to step 207. Id. at 20:5–10. At step 207, the process
checks whether the total volume remaining in the market-maker’s quote, “1”
contract, is less than the “2” contract minimum required by the exchange.
Id. at 20:10–12. Because the remaining volume in the market-maker’s quote
is less than X, the minimum required by the exchange, a step-up application
is triggered (step 211), whereby volume (“1” contract) is added to the
market-maker’s quote to satisfy X, at the market-maker’s current price. Ex.
1010, Slide 14; Tr. 19:20–20:2; Ex. 1002, 4:47–50. According to Petitioner,
“one step-up equals a risk level of one,” so the market-maker’s risk level
after the first trade in the hypothetical is “1” and the claimed “aggregate risk
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level” is “1.” Tr. 20:13–21, 22:16–19. Petitioner further contends that the
claimed “risk level” does not depend on the price of the contract traded. Id.
at 21:18–22:8. Petitioner further argues that the “risk level” is “1” each time
a step-up is applied, and that after applying the step-up functionality twice,
the “aggregate risk level” is “2.” Ex. 1010, Slide 14.
Petitioner acknowledges that, based on the relied-upon Tilfors
embodiment, the volume added to a market-maker’s quote during a step-up
can be more than “1” contract. Tr. 23:16–24. For example, Petitioner
explains that if X is equal to “11,” a market-maker knows that every time
Tilfors’s step-up is applied, the volume added to his quote could be “1”
contract “up to 10 contracts.” Id. at 27:5–10. Petitioner, however, maintains
that although any time a trade triggers a step-up, the volume of contracts that
can be added could be a range, the “risk level” is “1” “because that
represents one increase in volume” and “[h]ow many times you’ve increased
that volume is your aggregate risk value.” Id. at 28:11–16, 29:6–25. Thus,
according to Petitioner, Tilfors discloses that the “risk level” is “1”
whenever an executed trade triggers a step-up, regardless of any other
information, including the volume of the executed trade and the volume that
is added when the step-up is applied to the market-maker’s quote. Id. at
30:6–24.
JUDGE ELLURU: So, you’re saying the risk value is the same
regardless of the number of contracts you’re increasing?
Mr. MURRAY: That’s right. That’s exactly right.
Id. at 31:1–3; 32:19–25, 34:12–16. Although Tilfors’s step-up functionality
may indicate an increase in risk because it is an indication that volume needs
to be added to a market maker’s quote, Petitioner has not persuaded us that
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Tilfors discloses the claimed “risk level”—which the parties do not contest
means “a calculated, measured, or otherwise obtained value of exposure to
the possibility of loss related to said trade.” See supra Sec. II.A.
Foremost, Petitioner has not shown sufficiently that Tilfors expressly
discloses “determining” a “risk level . . . associated with said trade.” See Tr.
22:20–23:2. Based on our review of the record, Petitioner has not shown
sufficiently that Tilfors describes determining a specific “risk level” value,
“1,” as asserted by Petitioner. Although Tilfors keeps track of the number of
times a market-maker has stepped up (id.), we are not persuaded that that
disclosure describes determining a “risk level” of “1” for each “such trade.”
Furthermore, we are not persuaded that under our construction, a “risk level”
for a particular trade can be calculated without taking into account critical
information, such as volume traded, volume remaining in the market-
maker’s quote, price of the trade, etc. See id. at 40:18–21. As Patent Owner
contends, the recited “risk level” is for each “such trade,” i.e., “[a] trade that
has already taken place.” Id. at 37:6–9; see id. at 40:4–5. Petitioner argues
that any trade that triggers a step-up in the relied upon embodiment in
Tilfors has a “risk level” of “1.” A “risk level” of “1,” however, does not
take into account the volume that was traded in the executed trade, nor does
“1” reflect the amount of volume that may be added by Tilfors’s step-up
function. Even accepting Petitioner’s assertion that Tilfors’s step-up is an
“indication” of risk because it tells a market-maker that volume has been
added to the quote (id. at 31:11–14, 65:18–23), and the market-maker is
aware of the range of volume that has been added to his quote, (i.e., 1 to X,
the minimum number of contracts that must be quoted by the market-
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maker), that range, calculated mentally by the market-maker, would not be
represented by a “risk level” of “1.” See id. at 31:3–14, 37:19–21, 65:13–24.
The absence of a correlation between whether a step-up has been
triggered in the relied upon embodiment in Tilfors and our uncontested
interpretation of “risk level” of an executed trade is illustrated by specific
examples. Applying the embodiment in Tilfors relied upon by Petitioner, if
“X” is “100,” and a market-maker has “101” contracts outstanding in the
exchange’s order book, and “2” contracts are traded, the market-maker’s
available quote drops to “99” contracts (step 209). Id. at 37:22–24.
Pursuant to the embodiment described in Tilfors, a step-up function (step
211) would be applied to increase the market-maker’s available quote by “1”
contract to reach “X.” Id. at 37:24–35:1; Ex. 1002, Fig. 2A (steps 209 and
211). According to Petitioner’s argument, “2” contracts have been traded,
and the “risk level” is “1” because one step-up has been triggered. Tr. 38:1–
2.
In another example, if “X” is “100,” and a market-maker has “200”
contracts outstanding in the exchange’s order book, and “101” contracts are
traded, the market-maker’s available quote drops to “99” contracts (step
209). As in the example above, a step-up function (step 211) would be
applied to increase the market-maker’s available quote by “1” contract to
reach “X.” Pursuant to Petitioner’s argument, “101” contracts have been
traded, and the “risk level” is “1” (the same “risk level” as in the preceding
example in which “2” contracts were traded) because one step-up has been
triggered. This example demonstrates that a “risk level” of “1” does not take
into account the volume of the executed trade (i.e., the recited “said trade” in
claim 1). In yet another example, if “X” remains “100,” and a market-maker
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has “101” contracts outstanding in the exchange’s order book, and “100”
contracts are traded, the market-maker’s available quote drops to “1”
contract (step 209). Pursuant to the embodiment described in Tilfors, a step-
up function (step 211) would be applied to increase the market-maker’s
available quote by “99” contracts to reach “X.” According to Petitioner’s
argument, “99” contracts have been added to the market-maker’s quote and
the “risk level” is “1” (the same “risk level” as in the first example in which
“1” contract was added to the market-maker’s quote) because one step-up
has been triggered. This example demonstrates that a “risk level” of “1”
does not take into account the volume added to a market-maker’s quote
when a step-up is triggered by an executed trade (i.e., the recited “said trade”
in claim 1). In sum, these examples demonstrate to us the indefensible
nature of Petitioner’s argument.
We also do not find the testimony provided by Petitioner’s witness,
Dr. Maureen O’Hara, in support of Petitioner’s argument to be persuasive.
Dr. O’Hara states, for example, “Tilfors/Katz examines the risk level by
looking at whether or not a trade triggers a step up.” Ex. 1004 ¶ 48
(emphasis added); see Ex. 2012 ¶ 52 (Patent Owner’s witness testifies that
“no risk level (i.e., value) is ever determined in Tilfors”). Dr. O’Hara also
testified as follows:
Q: So the risk level is the fact that we’re stepping up?
A: That is kind of strange; right?
Ex. 2013, 187:5–7. Dr. O’Hara did not provide a satisfactory explanation as
to how Tilfors discloses the recited step of “determining a risk level . . .
associated with said trade.”
Q: I'm just talking about the decision whether or not to step up.
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A: So the decision to step up is related to the market maker’s risk.
Id. at 93:16–19 (emphasis added). In addition, Dr. O’Hara testified that not
stepping-up, i.e., not increasing the volume in a market-maker’s quote, also
represents risk.
Q: So the measure of risk was what?
A: It was the fact that I had to step up, it was the trade.
. . .
Q: And the [market-maker’s] risk is not being in the market?
A: The risk is not having a quote that can be hit by people who want
to trade.
Id. at 203:22–24, 93:21–23. As Patent Owner notes (PO Resp. 30 n.4),
however, when a trade triggers a step-up in volume, which Petitioner
contends has a risk level of “1,” Tilfors does not keep track of the risk to
which Dr. O’Hara refers, i.e., not increasing the volume in a market-maker’s
quote so that it “can be hit by people who want to trade.” Ex. 2013 93:16–
23. Thus, we are not persuaded that Dr. O’Hara’s testimony supports
Petitioner’s position that whether an executed trade triggers the application
of a step-up in volume in a market-maker’s quote discloses the recited
“determining a risk level . . . associated with said trade.”
In sum, we determine that Petitioner has not demonstrated by a
preponderance of the evidence that Tilfors discloses the recited step of
“determining a risk level . . . associated with said trade.”
Using the same reasoning, Patent Owner also argues that Tilfors fails
to disclose the recited step of “determining . . . an aggregate risk level
associated with said trade.” PO Resp. 31–32. We construed “aggregate risk
level associated with said trade” as “a calculated, measured, or otherwise
obtained aggregate value (e.g., combination, sum, weighed sum, difference)
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Patent 7,980,457 B2

18

of exposure to the possibility of loss related to such trade.” See supra Sec.
II.A. Specifically, Patent Owner contends that “[b]ecause Tilfors does not
disclose determining a calculated, measured, or otherwise obtained value of
exposure to the possibility of loss related to said trade, Tilfors . . . does not
disclose determining a calculated, measured, or otherwise obtained
aggregate value of exposure to the possibility of loss related to such trade.”
PO Resp. 31 (citing Ex. 2012 ¶¶ 55–60) (emphasis in original). We agree
that Petitioner has not shown sufficiently that Tilfors discloses the step of
“determining . . . an aggregate risk level associated with said trade.”
We further agree with Patent Owner (id. at 31–32) that Dr. O’Hara,
Petitioner’s witness, does not provide persuasive testimony that Tilfors
discloses the recited step of “determining . . . an aggregate risk level
associated with said trade.” For example, Dr. O’Hara testified as follows.
Q: Where in Tilfors does it expressly describe the aggregate risk
level?
A: I’m not sure that it does. I could go through and see if it uses the
word “aggregate,” but I think Tilfors, Tilfors is just giving you a
broad measure of risk, it just -- this is your -- a broad exposure to
what's happening to you in your trading, it’s -- like I said, it’s a broad
measure.

Ex. 2013, 162:11–19. Dr. O’Hara also testified as follows.

Q: Has your opinion been based on your understanding that the risk
level and the aggregate risk level can be the same?
A: They can be. I don’t know that they have to be, but they can be the
same.
Id. at 179:13–17. Thus, we likewise determine that Petitioner has not
demonstrated by a preponderance of the evidence that Tilfors discloses the
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Patent 7,980,457 B2

19

recited step of “determining . . . an aggregate risk level associated with said
trade.”
III. MOTION TO AMEND CLAIMS
Patent Owner moves to amend claim 1, “contingent upon claim 1
being held [unpatentable].” Mot. 1. Because we have not determined that
claim 1 is unpatentable, we need not address Patent Owner’s Motion to
Amend Claims.
IV. CONCLUSION
Based on the foregoing, we determine that Petitioner has not
established by a preponderance of the evidence that independent claim 1 is
unpatentable as anticipated by Tilfors pursuant to 35 U.S.C. § 102(e).
We further do not address Patent Owner’s Motion to Amend Claims.
This Decision constitutes a Final Written Decision under 35 U.S.C. § 318(a).
V. ORDER
In consideration of the foregoing, it is
ORDERED that claim 1 of the ’457 patent has not been shown to be
unpatentable based on the instituted ground in this inter partes review;
FURTHER ORDERED that Patent Owner’s Motion to Amend Claims is
dismissed as moot; and
FURTHER ORDERED that either party to this proceeding seeking judicial
review of the Decision must comply with the notice and service requirements of
37 C.F.R. § 90.2.
IPR2014-00098
Patent 7,980,457 B2

20

PETITIONER:

Michael M. Murray
mmurray@winston.com

Bryan DeMatteo
bdematteo@winston.com

Michael Scheer
mscheer@winston.com

PATENT OWNER:

Joseph A. Hynds
jhynds@rfem.com

Steven Lieberman
cboeipr@rfem.com

Jason M. Shapiro
jshapiro@rfem.com

Brian A. Tollefson
btollefson@rfem.com