McConaughy, Jon et al.

Patent Trials and Appeals Board

Dec 11, 2019

12356671 - (D) (P.T.A.B. Dec. 11, 2019)

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.
12/356,671 01/21/2009 Jon McConaughy 18034-044USC1/1000346764 9297
54205 7590 12/11/2019
NORTON ROSE FULBRIGHT US LLP
98 San Jacinto Blvd, Suite 1100
Austin, TX 78701
EXAMINER
OYEBISI, OJO O
ART UNIT PAPER NUMBER
3697
NOTIFICATION DATE DELIVERY MODE
12/11/2019 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):
aoipdocket@nortonrosefulbright.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
____________________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________________

Ex parte JON McCONAUGHY, JOSH STAR, ZACK LING,
LIGUO SONG, and TONY HSU1
____________________

Appeal 2019-000522
Application 12/356,671
Technology Center 3600
____________________

Before JOSEPH L. DIXON, ROBERT E. NAPPI, and JOHN A. EVANS,
Administrative Patent Judges.

NAPPI, Administrative Patent Judge.

DECISION ON APPEAL
Appellant appeals under 35 U.S.C. § 134(a) from the Examiner’s
rejection of claim 1. We have jurisdiction under 35 U.S.C. § 6(b).
We AFFIRM.

1 We use the word Appellant to refer to “applicant” as defined in 37 C.F.R.
§ 1.42(a). According to Appellant, Credit Suisse Securities (USA) LLC. is
the real party in interest. Appeal Br. 2.
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INVENTION
The invention is directed to a method for providing replicable
financial instrument orders, and establishing a fill price that is better than the
theoretical upper limit of the industries’ best order execution. Spec.,
Abstract. Claim 1 is reproduced below.
1. A processor-implemented method for filling at least
one financial instrument order with a replicable product in the
liquidity format of the at least one financial instrument and at a
price equivalent to the replicable product, the method
comprising:
receiving an order for a financial instrument, having a
particular market exposure risk profile, at a liquidity
transformer system;
accessing a product database using the liquidity
transformer system;
establishing a liquidity universe of financial instrument
baskets, using the liquidity transformer system, by determining
all possible formats of liquidity based on the ordered financial
instrument and information contained in the product database;
analyzing the liquidity universe using legal and
compliance information accessed from a legal-and-compliance
database to determine which financial instrument baskets are
available to fill the financial instrument order;
determining an equivalent book for each format of
liquidity in the universe of financial instrument baskets
available to fill the financial instrument order by determining an
average depth value including price and size, in terms of the
instruments under execution for each one of a plurality of
formats of liquidity using real-time market data consisting of
market liquidity data, real-time price and size data for related
instruments, and dynamic information;
reorganizing the equivalent book for each format of
liquidity from equivalent price terms to equivalent size terms;
determining a tradeable book for each format of liquidity
by adjusting the financial instrument baskets using dynamic
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microstructure and cross order feedback to determine a mean
depth price;
selecting an optimum combination of the tradeable books
for the formats of liquidity to create an alternative financial
instrument to fill the order, the combination having: (1) a
market exposure risk profile that is similar to the particular
market exposure risk profile of the ordered financial instrument
and (2) an advantageous price relative to the price of the
ordered financial instrument; and
placing orders for the tradeable books to create a
replicable product consisting of a plurality of replicable
financial instrument orders that achieves optimal execution for
each individual format of liquidity such that the financial
instrument order is filled in the liquidity format of the ordered
financial instrument and at the price or equivalent price of the
optimum combination of formats of liquidity;
distributing the replicable financial instrument orders
across different trading venues, including exchanges and
electronic communication networks;
posting the filled replicable financial instrument orders to
a trading account; and converting the formats of the filled
replicable financial instrument orders into the format of the
financial instrument ordered, but at the price of the replicable
product.

EXAMINER’S REJECTION2
The Examiner rejected claim 1 under 35 U.S.C. § 101 for being
directed to patent-ineligible subject matter. Non-Final Act. 3.

2 Throughout this Decision we refer to the Appeal Brief filed April 16, 2018
(“Appeal Br.”); Reply Brief filed October 29, 2018 (“Reply Br.”); Non-Final
Office Action mailed April 11, 2017 (“Non-Final Act.”); and the Examiner’s
Answer mailed August 27, 2018 (“Ans.”)
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ANALYSIS
We have reviewed Appellant’s arguments in the Briefs, the
Examiner’s rejections, and the Examiner’s response to Appellant’s
arguments. Appellant’s arguments have not persuaded us of error in the
Examiner’s rejection the claim under 35 U.S.C. § 101. Patent eligibility
under § 101 is a question of law that may contain underlying issues of fact.
Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335, 1342 (Fed. Cir. 2018)
(citing Berkheimer v. HP Inc., 881 F.3d 1360, 1365 (Fed. Cir. 2018)). “We
review the district court’s ultimate conclusion on patent eligibility de novo.”
Id.; SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1331 (Fed. Cir.
2010) (“Whether a claim is drawn to patent-eligible subject matter is an
issue of law that we review de novo.”)

35 U.S.C. § 101 Rejection
PRINCIPLES OF LAW
Patent-eligible subject matter is defined in 35 U.S.C. § 101 of the
Patent Act, which recites:
Whoever invents or discovers any new and useful process,
machine, manufacture, or composition of matter, or any new
and useful improvement thereof, may obtain a patent therefor,
subject to the conditions and requirements of this title.

There are, however, three judicially created exceptions to the broad
categories of patent-eligible subject matter in 35 U.S.C. § 101: “[l]aws of
nature, natural phenomena, and abstract ideas.” Alice Corp. v. CLS Bank
Int’l, 573 U.S. 208, 216 (2014); Mayo Collaborative Servs. v. Prometheus
Labs., Inc., 566 U.S. 66, 70 (2012).
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In determining whether a claim falls within an excluded category, we
are guided by the Supreme Court’s two-step framework, described in Mayo
and Alice. Alice, 573 U.S. at 217–18 (citing Mayo, 566 U.S. at 75–77). 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, 69 (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.
(15 How.) 252, 267–68 (1854))); 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
Supreme 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
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said that, the Supreme Court also indicated that a claim “seeking patent
protection for that formula in the abstract . . . is not accorded the protection
of our patent laws, . . . and this principle cannot be circumvented by
attempting to limit the use of the formula to a particular technological
environment.” Id. (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
step 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 (citation 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. (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.
The United States Patent and Trademark Office “USPTO” published
revised guidance on the application of § 101. USPTO’s 2019 Revised Patent
Subject Matter Eligibility Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019)
(“Memorandum”). Under that guidance, we first determine whether the
claim recites:
(1) any judicial exceptions, including certain groupings of
abstract ideas (i.e., mathematical concepts, certain methods of
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organizing human activity such as a fundamental economic
practice, or mental processes); and
(2) additional elements that integrate the judicial exception into
a practical application (see MANUAL OF PATENT EXAMINING
PROCEDURE (“MPEP”) § 2106.05(a)–(c), (e)–(h) (9th Ed., Rev.
08.2017, Jan. 2018)).
Only if a claim (1) recites a judicial exception and (2) does not
integrate that exception into a practical application, do we then look to
whether the claim:
(3) adds a specific limitation beyond the judicial exception that
is not “well-understood, routine, conventional” in the field (see
MPEP § 2106.05(d)); or
(4) simply appends well-understood, routine, conventional
activities previously known to the industry, specified at a high
level of generality, to the judicial exception.
See Memorandum.
DISCUSSION
The Judicial Exception
The Examiner determines the claim is not patent eligible because they
are directed to a judicial exception without reciting significantly more. Non-
Non-Final Act. 3–5. Specifically, the Examiner determines the claim is
directed at least one financial instrument order at a price, which is similar to
a concept found abstract by the Supreme Court. Non-Final Act. 3–4 (citing
Alice).
Appellant argues the Examiner has paraphrased the claim and as such
oversimplified and mischaracterized the claim as a fundamental economic
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practice. Appeal Br. 8. Specifically, Appellant asserts the Examiner has
paraphrased the limitations of “receiving an order for a financial
instrument”; “determining an equivalent book for each format of liquidity”;
“determining a tradeable book for each format of liquidity”; and
“distributing the replicable financial instrument orders” and oversimplified
them as receiving specific data, determining data elements and distributing
data. Appeal Br. 9.
We concur with the Examiner that representative claim 1 sets forth an
abstract concept, fundamental economic process. We also consider claim 1
to set forth a mental process of collecting information, analyzing it and
displaying the results.
Claim 1 recites a “method for filling at least one financial instrument
order” and that includes steps of receiving an order, accessing a database to
establish liquidity and determine a book (depth value including price and
size), determining a tradeable book, placing orders for the book, distributing
financial instruments and posting orders to a trading account. The invention
is described in the Specification as directed to a method “of order execution
for providing replicable financial instrument orders, known as a replicable
product” to “reduce the market impact of executed orders” and to “provide
measurable savings substantially equivalent to the bid-ask spread on small
orders.” Specification ¶¶ 5, 8, 9. Thus, the claim recites a business process
or receiving an order, valuing the order, placing a trade and posting the
orders in a trading account which is a fundamental economic activity. This
is similar to other “fundamental economic concepts” found to be abstract
ideas by the Supreme Court and this court. See, e.g., Alice, 573 U.S. at 220
(intermediated settlement); Bilski v. Kappos, 561 U.S. 593, 611 (2010) (risk
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hedging); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 715 (Fed. Cir.
2014) (using advertising as an exchange or currency); Content Extraction &
Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343, 1347
(Fed. Cir. 2014) (data collection); Accenture Glob. Servs., GmbH v.
Guidewire Software, Inc., 728 F.3d 1336, 1346 (Fed. Cir. 2013) (generating
tasks in an insurance organization).
Further, the claim also recites a mental process of collecting
information, analyzing it and displaying the results. Claim 1 recites a
“receiving an order” (a data gathering or observation element); “accessing a
product database” (a data gathering or observation element); “establishing a
liquidity universe . . . analyzing the liquidity. . . determining an equivalent
book . . . reorganizing the equivalent book . . . selecting an optimum
combination . . . distributing the replicable financial instrument . . .
converting the formats of the filled replicable financial instrument” (are data
analysis/organization or evaluation element); and “placing orders for the
tradeable books . . . posting the filled replicable financial instrument orders,”
(a means of communicating the result of the analysis). We consider these
limitations to recite an abstract mental process.
The claims at issue in Electric Power Group recited several steps of
receiving data from various sources, detecting and analyzing the data and
displaying the data. Elec. Power Grp., 830 F.3d at 1351–52. The court
stated “we have treated collecting information, including when limited to
particular content (which does not change its character as information), as
within the realm of abstract ideas.” Id. at 1353.
Thus, we conclude representative claim 1 recites an abstract idea.

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Integration of the Judicial Exception into a Practical Application
The Examiner finds that the additional claim limitations do not recite
an improvement to a technical field or a technology. Non-Final Act. 4.
Further, the Examiner finds that the claim recites a processor “at a high level
of generality to simply perform the generic computer functions of
generating, receiving, processing, calculating, storing, displaying and
transmitting data.” Non-Final Act. 4–5.
Appellant argues that the claim improves a technological filed as the
claim is rooted in computer technology. Appeal Br. 14–17 (citing DDR
Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), Enfish,
LLC v Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016) and McRO, Inc. v.
Bandai Namco Games Am. Inc., 837 F.3d 1299 (Fed. Cir. 2016), Reply Br.
7–10. Further, Appellant argues that the claim recite meaningful limitations
beyond generating linking the abstract idea to a particular technology,
Appeal Br. 16 (citing Alice). Appellant cites the claim 1 limitations of
determining book value, reorganizing book value, determining a tradeable
book and selecting the optimum combination as a “detailed recitation of
specific steps taken by the liquidity transformer system provide meaningful
limitations that go beyond generally linking the use of an abstract idea.”
Appeal Br. 17. Additionally, Appellant argues that the claim does not
automate a conventional process. Appeal Br. 17–19 (citing McRO).
Appellant also asserts the claimed “combination of specific steps taken by
the liquidity transformer system, when considered as a whole, amounts to
significantly more than filling at least one financial instrument order at a
price.” Appeal Br. 19–20; Reply Br. 2–5. Finally, Appellant argues the
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claim does not tie up the judicial exception. Appeal Br. 20–21; Reply Br. 5–
6.
We are not persuaded of error by Appellant’s arguments. As
discussed above, we concur with the Examiner that the claim recites an
abstract idea. Further, we do not consider the claim to be drawn to a
practical application of the abstract idea as we do not find that the claim
recites an improvement to the functioning of the computer or other
technology or otherwise tied to technology.
We are not persuaded of error by Appellant’s argument, which relies
upon Enfish and asserts the claim is directed to improving computer
technology or other technology. As discussed above, Appellant’s
Specification identifies that the invention is to “order execution for
providing replicable financial instrument orders, known as a replicable
product” to “reduce the market impact of executed orders” and to “provide
measurable savings substantially equivalent to the bid-ask spread on small
orders.” Spec. ¶ 5, 8, 9. The Specification does not identify that the method
changes the operation of a computer to improve the function of the
computer, but rather to improve the economic process of receiving an order,
performing analysis to value the order, placing a trade and posting the orders
in a trading account. Thus, the claim, when interpreted in light of the
Specification, merely recites use of a computer as a tool to implement a
method of organizing human activity involving a fundamental economic
principle (an abstract idea). See, e.g., RecogniCorp, 855 F.3d at 1327
(“Unlike Enfish, [the claim] does not claim a software method that improves
the functioning of a computer . . . [but] claims a ‘process that qualifies as an
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‘abstract idea’ for which computers are invoked merely as a tool.’”)
(Citation omitted).
Further, we do not find that the claim is necessarily rooted in
computer technology as were the claims in DDR Holdings. In DDR
Holdings, the claimed invention created a hybrid web page that combined
advantageous elements from two web pages, bypassing the expected manner
of sending a visitor to another party’s web page, in order to solve the
internet-centric problem of retaining website visitors. DDR Holdings, 773
F.3d at 1257–1259. Unlike DDR Holdings, the claim does not overcome a
problem specifically arising in the realm of computer networks. We
disagree with Appellant’s argument that the “the present application is
directed to an improvement of a problem arising from existing computer
technology” as the problems solved from the invention “stem from the fact
that computers, computer networks, and the Internet have enabled market
conditions to change faster than a human being can respond and the fact that
purchases are completed via computer networks (i.e., the Internet).” Appeal
Br. 15–16. Claim 1 does not recite limitations directed to the speed of
performing the computations nor does the claim discuss the calculations are
based upon the trades/purchase being based upon the computer. Rather,
claim 1 states the computer implemented method places an order but not that
the purchase is completed by a computer. Further, as discussed above, the
Specification discloses the invention reduces market impact of executed
order and produce measurable savings, because the markets change faster
than a human can respond. We, additionally note, that Appellant’s
Specification identified the claimed financial instruments are known and that
the analysis of liquidity is performed using known techniques. Specification
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¶¶ 15 and 32. Thus, the problem addressed in claim 1 is not related to a
computer or to another technology, but instead to “the performance of some
business practice known from the pre-Internet world along with the
requirement to perform it” via computer and Internet which the DDR court
distinguished as not involving solutions necessarily rooted in computer
technology. DDR Holdings, 773 F.3d at 1257.
Thus, we conclude representative claim 1 does not recite a practical
application of the judicial exception.

Significantly More than the Abstract Idea
Under the Memorandum, only if a claim: (1) recites a judicial
exception, and (2) does not integrate that exception into a practical
application, do we then look to whether the claim adds a specific limitation
beyond the judicial exception that is not “well-understood, routine,
conventional” in the field (see MPEP § 2106.05(d)); or, simply appends
well-understood, routine, conventional activities previously known to the
industry, specified at a high level of generality, to the judicial exception.
Representative claim 1 recites the additional element that the method
is processor implemented. Appellant’s Specification does not identify any
processor or computer, let alone any specific processor.3 Thus, we concur

3 We note that the term processor broadly construed could be a job
description, person performing, e.g. a loan processor, or trade processor.
Although our decision does not rely upon such a broad interpretation as even
if it construed as a computer processor, the recitation would be insufficient
as “[M]erely requir[ing] generic computer implementation[] fail[s] to
transform that abstract idea into a patent-eligible invention.” Alice, 573 U.S.
at 221.
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with the Examiner that the additional elements recite wellknown elements.
Appellant’s arguments, on page 17 of the Appeal Brief, that the limitations
of determining book value, reorganizing book value, determining a tradeable
book and selecting the optimum combination are, meaningful limitations
that go beyond generally linking the use of an abstract idea, are not
persuasive as under the above analysis these limitations are part of the
abstract idea, and not the additional elements.
Further, we are not persuaded by Appellant’s arguments that the claim
recites an ordered combination of elements and as such is patent eligible. In
McRO, the court reviewed claims which use “a combined order of specific
rules that renders information into a specific format that is then used and
applied to create desired results: a sequence of synchronized, animated
characters” McRO, 837 F.3d at 1315. The court found that the claims did
not “simply use a computer as a tool to automate conventional activity,” but
instead used the computer to “perform a distinct process” that is carried out
in a different way than the prior non-computer method to improve the
technology of (3-D animation techniques). See McRO, 837 F.3d at 1314–16.
Claim 1 recites a “receiving an order” (a step of data input which is
conventional in computer technology MPEP § 2106.05(d) II (i)); “accessing
a product database” (a step of accessing data which is also conventional to
computer technology MPEP § 2106.05(d) II (iv)); “establishing a liquidity
universe . . . analyzing the liquidity . . . determining an equivalent book . . .
reorganizing the equivalent book . . . selecting an optimum combination . . .
distributing the replicable financial instrument . . . converting the formats of
the filled replicable financial instrument” (these are data analysis steps, as
discussed above, the Appellant’s Specification identifies that the financial
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instruments and the analysis of liquidity is performed using known
techniques, see also MPEP 2106.05 § (d) II (ii)-(iii)); and “placing orders for
the tradeable books . . . posting the filled replicable financial instrument
orders,” (these are data output steps which are conventional to computer
technology). Thus, the claim recites using conventional steps to perform the
abstract idea and the claim is unlike those at issue in McRO as there is no
evidence that the claim perform a distinct process that is carried out in a
different way than the prior non-computer method.
Further, with regard to Appellant’s preemption argument, our
reviewing court has said “[w]here 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, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015).
Thus, Appellant’s arguments are not persuasive of error in the Examiner’s
determination that the claims do not recite significantly more than the
abstract idea.
In summary, Appellant’s arguments have not persuaded us of error
in the Examiner’s determination that representative claim 1 is directed to an
abstract idea; both a method of fundamental economic process and a method
of collecting/gathering information and analyzing it (mental processes).
Further, Appellant’s arguments have not persuaded us that the Examiner
erred in finding that the claim is not: directed to an improvement in the
functioning of the computer or to other technology or other technical field;
directed to a particular machine; directed to performing or affecting a
transformation of an article to a different state or thing; directed to using a
judicial exception in some meaningful way beyond linking the exception to a
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particular technological environment such that the claim as a whole is more
than a drafting effort to monopolize the judicial exception. For these
reasons, we are unpersuaded that the claim recites additional elements that
integrate the judicial exception into a practical application. See
Memorandum, 84 Fed. Reg. at 54. Accordingly, we sustain the Examiner’s
rejection of claim 1.
Accordingly, we sustain the Examiner’s rejection of claim 1 under
35 U.S.C. § 101 as being directed to a patent-ineligible abstract idea, that is
not integrated into a practical application, and does not include an inventive
concept.

CONCLUSION
We affirm the Examiner’s rejection of claim 1, under 35 U.S.C. § 101.
In summary:
Claim
Rejected
35 U.S.C § Reference(s)/Basis Affirmed Reversed
1 101 Eligibility 1

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