Renshaw, Anthony A.

Patent Trials and Appeals Board

Dec 31, 2019

14482685 - (D) (P.T.A.B. Dec. 31, 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.
14/482,685 09/10/2014 Anthony A. Renshaw 166.0018 3423
27997 7590 12/31/2019
Hultquist IP
P.O. Box 14329
Research Triangle Park, NC 27709
EXAMINER
JOHNSON, CHRISTINE
ART UNIT PAPER NUMBER
3697
NOTIFICATION DATE DELIVERY MODE
12/31/2019 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):
hip@hultquistip.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE PATENT TRIAL AND APPEAL BOARD
Ex parte ANTHONY A. RENSHAW
Appeal 2019-000412
Application 14/482,685
Technology Center 3600

Before J. JOHN LEE, DANIEL J. GALLIGAN, and
DAVID J. CUTITTA II, Administrative Patent Judges.
LEE, Administrative Patent Judge.
DECISION ON APPEAL
Pursuant to 35 U.S.C. § 134(a), Appellant1 appeals from the
Examiner’s decision to reject claims 1–22. 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). Appellant identifies the real party in interest as Axioma, Inc.
Appeal Br. 1.
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CLAIMED SUBJECT MATTER
The present invention relates generally to calculating factor risk
models to analyze the risk of a portfolio of financial investments. Abstract.
Independent claim 1 is illustrative of the claims on appeal and is reproduced
below with bracketed lettering added for discussion purposes:
1. A non-transitory computer-readable medium having
stored thereon computer-executable instructions which when
executed by a programmed computer perform a method for
modifying an original factor-factor covariance matrix of an
original factor risk model, comprising:
[a] electronically receiving by the programmed computer
the original factor risk model, said original factor risk model
comprising a set of factors, a matrix of factor exposures, the
original matrix of factor-factor covariances, and a matrix of
specific covariances;
[b] partitioning by the programmed computer the set of
factors of the original factor risk model into three or more groups
of factors, three of which are a dominant first group, and a
subordinate second group, and a subordinate third group;
[c] determining a new estimate for a submatrix of the
original matrix of factor-factor covariance matrix between the
second and third groups that depends only on submatrices of the
original factor-factor covariance matrix of the first group with
itself, the first group with the second group, and the first group
with the third group;
[d] determining a modified factor-factor covariance matrix
m which the new estimate replaces the submatrix of the original
factor-factor covariance matrix between the second and third
groups;
[e] determining a modified factor risk model that uses the
matrix of factor exposures and matrix of specific covariances of
the original factor risk model and the modified factor-factor
covariance matrix; and
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[f] electronically outputting the modified factor risk model
using an output device.
REJECTIONS ON APPEAL
Claims 1–22 stand rejected under 35 U.S.C. § 101 as being directed to
patent-ineligible subject matter. Final Act. 8–13.
Claims 1–22 stand rejected under 35 U.S.C. § 102(a)(1) as being
anticipated by Madhavan.2 Id. at 14–23.
Our review in this appeal is limited only to the above rejections and
the issues raised by Appellant. Arguments not made are waived. See
37 C.F.R. §§ 41.37(c)(1)(iv), 41.39(a)(1); MPEP § 1205.02.
ANALYSIS
A. Rejection Under § 101 for Patent-Ineligible Subject Matter
Appellant appeals the Examiner’s rejection of claims 1–22 as
ineligible subject matter under § 101. Appeal Br. 19–25. The majority of
Appellant’s arguments are directed to limitations recited in claim 1. See
Appeal Br. 19–22. Appellant also discusses limitations specific to claims
13, 15, and 19–22. See id. at 23–25. We select independent claim 1 as
representative of Appellant’s § 101 arguments for all claims and discuss the
additional limitations recited in claims 13, 15, and 19–22 as appropriate. See
37 C.F.R. § 41.37(c)(1)(iv).
An invention is patent-eligible if it claims a “new and useful process,
machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
However, the Supreme Court has held that § 101 includes implicit
exceptions—laws of nature, natural phenomena, and abstract ideas—which

2 Madhavan, US 2004/0078319 A1, published Apr. 22, 2004.
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are not patent-eligible. See Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 216
(2014). In January 2019, the Office issued the 2019 Revised Patent Subject
Matter Eligibility Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019) (“January 2019
Guidance”), which addresses the manner in which § 101 case law is to be
applied by the Office. More recently, the Office issued an update to the
2019 Guidance to explain further the manner in which the January 2019
Guidance should be implemented. See October 2019 Patent Eligibility
Guidance Update, 84 Fed. Reg. 55,942 (Oct. 18, 2019); October 2019
Update: Subject Matter Eligibility, available at https://www.uspto.gov/sites/
default/files/documents/peg_oct_2019_update.pdf (“October 2019 Update”).
The Board is required to adhere to the January 2019 Guidance as a matter of
Office policy. See January 2019 Guidance 51.3 The January 2019 Guidance
sets forth a four-part analysis for determining whether a claim is eligible
subject matter under § 101; the four parts are denominated Step 1, Step 2A
Prong 1, Step 2A Prong 2, and Step 2B. See id. at 53–56.
1. January 2019 Guidance Step 1
First, under “Step 1,” we consider whether the claimed subject matter
falls within the four statutory categories set forth in § 101, namely
“[p]rocess, machine, manufacture, or composition of matter.” January 2019
Guidance 53–54; see 35 U.S.C. § 101. Each of the relevant claims recites
“[a] non-transitory computer-readable medium” or “[a] system.” As such,
the claims are each directed to a statutory class of invention within

3 Although the Office Action at issue, as well as all the briefing for this
appeal, was completed before the 2019 Guidance was issued, the 2019
Guidance “applies to all applications . . . filed before, on, or after January 7,
2019.” 2019 Guidance 50.
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35 U.S.C. § 101, i.e., manufactures or machines. Consequently, we proceed
to the next step of the analysis.
2. January 2019 Guidance Step 2A Prong 1
Second, under “Step 2A Prong 1,” we evaluate “whether the claim
recites a judicial exception, i.e., an abstract idea, a law of nature, or a natural
phenomenon.” 2019 Guidance 54; see Alice Corp. v. CLS Bank Int’l, 573
U.S. 208, 216–17 (2014). The Examiner determined the claims describe an
abstract idea because the claims recite “mathematical algorithms to be
carried out on mathematical descriptions of mathematical relationships.”
Final Act. 8, 11. We agree with the Examiner’s determination because such
mathematical algorithms, descriptions, and relationships are “mathematical
concepts,” as described in the January 2019 Guidance and October 2019
Update. October 2019 Update 3–4.
Appellant argues, “the present invention relates to a particular
approach that can be utilized to improve the factor-factor covariance
estimates of a factor risk model,” and “[s]uch approaches are not abstract at
all as they are implemented in systems employed around the world which
are advantageously employed in the management of billions of dollars of
investments.” Appeal Br. 21. Still further, Appellant argues the Examiner
read “large numbers of words out of claims” and did not consider the claims
as a whole. Id. at 20.
We are not persuaded. Our reviewing court, addressing similar claims
reciting systems and methods for performing certain mathematical analyses
of investment information, has stated that “selecting certain information,
analyzing it using mathematical techniques, and reporting or displaying the
results of the analysis” is an ineligible concept. See SAP Am., Inc. v.
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InvestPic, LLC, 898 F.3d 1161, 1167 (Fed. Cir. 2018). Here, like SAP, even
assuming “the present invention relates to a particular approach that can be
utilized to improve the factor-factor covariance estimates of a factor risk
model” to manage investments (Appeal Br. 21), the claimed approach recites
mathematical concepts and, so, recites an abstract idea. Indeed, the
Specification supports the determination that the claimed approach to
improving factor-factor covariance estimates of a factor risk model is a
process reflecting mathematical concepts. The exemplary factor risk model
disclosed by the Specification is a mathematical equation (equation 6)
representing a collection of matrices, i.e., an array of mathematical objects:

Spec. 16:3–4. The Specification goes on to describe a series of
mathematical equations, i.e., equations 7–23, resulting in a modified factor-
factor covariance matrix, i.e., equation 24:

Id. at 17:10–19:14. As such, the Specification supports the Examiner’s
determination that the claims recite mathematical concepts.
Turning to the claims, and representative claim 1 in particular, we
disagree with Appellant that the Examiner read words out of the claim and
“fail[ed] to consider the actual words of the claims as a whole.” Appeal
Br. 20. The Examiner addressed the claim’s limitations sufficiently, in the
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context of the whole claim, and explained cogently why the claim recites
mathematical concepts. See Final Act. 8–12.
For example, the Examiner described limitation [a] as “receiv[ing]
mathematical descriptions of mathematical relationships,” reflecting “a
speculation, i.e., a theory, based on influences on the stock market derived
from events past, present and even anticipated.” Final Act. 8, 10. Indeed,
limitation [a] recites receiving an “original factor risk model,” which, as
discussed above, is a mathematical concept. That risk model comprises “a
set of factors” that are variables in the model and certain matrices, again
describing mathematical concepts. Further, the Examiner described
limitations [b]–[e] as “apply[ing] mathematical algorithms to the
mathematical descriptions,” which, in particular, “apply mathematics and
probability laws” and “use the result of the applied mathematics and
probability laws to improve the original speculation,” i.e., the original risk
model. Id. at 8–9, 11. These limitations recite, for example, an “estimate
for a submatrix,” “a modified factor-factor covariance matrix,” and “a
modified factor risk model.” Still further, the Examiner described limitation
[f] as presenting the resultant application of mathematical concepts. Final
Act. 9, 11. This is consistent with the language of limitation [f], which
recites “outputting” the “modified factor risk model” that was the result of
the mathematical concepts applied in the prior limitations. After examining
the limitations in the claim, the Examiner determined that the collection of
limitations recited in the claim as a whole recites a process for “applying
mathematics and probability laws.” Final Act. 10–11. We agree with the
Examiner’s analysis, as discussed above, as well as her conclusion that the
claim recites mathematical concepts.
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The Examiner’s description of the claim’s application of mathematical
concepts also indicates a mental process, an additional category of abstract
idea. See January 2019 Guidance 52. Specifically, limitation [b], reciting
“partitioning . . . the set of factors” into a “dominant first group, a
subordinate second group, and a subordinate third group,” describes a
process of prioritizing risk factors, i.e., market, country, local, and industry
risk factors. See Spec. 9:24–10:1 (“[I]dentify the dominant factors in a
factor-factor covariance matrix that best describe the sources of return and
risk.”), 20:6–7. Prioritizing which factors are considered to manage risk in
an investment is an evaluation or judgement a human can practically
perform in the mind. In fact, the Specification describes that “in one aspect
of the present invention, the user must determine the factor groups.” Spec.
11:1–3; see id. at 20:10–11 (“[R]esearchers have been focused on the
performance of the industry and country factors.”). “If a claim, under its
broadest reasonable interpretation, covers performance in the mind but for
the recitation of generic computer components, then it is still in the mental
processes category unless the claim cannot practically be performed in the
mind.” January 2019 Guidance 52 n.14.
Accordingly, the claims recite multiple categories of abstract ideas,
i.e., mathematical concepts and a mental process, which are designated as
meeting the abstract idea exception under the January 2019 Guidance and
the October 2019 Update. Rather than considering those categories as a
plurality of separate abstract ideas, we consider those related multiple
categories together as one abstract idea for purposes of our analysis, as
provided by the October 2019 Guidance. October 2019 Guidance at 2.
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3. January 2019 Guidance Step 2A Prong 2
Having determined that the claims recite an abstract idea, we proceed
to “Step 2A Prong 2” of the January 2019 Guidance, which requires that we
evaluate whether “the claim as a whole integrates the recited judicial
exception into a practical application of the exception.” January 2019
Guidance 54. “A claim that integrates a judicial exception into a practical
application will apply, rely on, or use 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.; see Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66,
78 (2012).
The January 2019 Guidance specifies that this evaluation is conducted
by first “[i]dentifying whether there are any additional elements recited in
the claim beyond the judicial exception(s),” then “evaluating those
additional elements individually and in combination to determine whether
they integrate the exception into a practical application.” January 2019
Guidance 54–55. Appellant argues “the present claims address new and
improved tools not found in the prior art.” Appeal Br. 20, 23–24; see Reply
Br. 2. Additionally, Appellant asserts that “the present invention is
necessarily rooted in computer technology” and, so, “an asserted
technological improvement is achieved.” Appeal Br. 24; see id. at 28.
According to the Examiner, however, the “claims do not offer any
‘technological improvement’” that would integrate the recited abstract ideas
into a practical application. See Ans. 5. We agree with the Examiner.
We are not persuaded that the claims integrate the abstract idea into a
practical application by providing “new and improved tools.” Appeal
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Br. 20, 23–24. Turning to representative claim 1, the “tool” recited in the
claim is “a programmed computer” performing “computer-executable
instructions.” But the improvement recited in the claim does not improve
the programmed computer itself. Instead, the alleged improvement recited
in the claim is an improvement to the abstract idea, i.e., mental processes
and mathematical concepts used to analyze investment risk. Although the
computer is programmed to execute steps to perform the abstract idea
discussed above, the execution of programming is simply the generic
function of a computer. Similarly, while Appellant argues that claims 13,
15, and 19–22 also “provide a user with an improved” or “advantageous
tool,” the “programmed computer” recited by those claims also is not
improved. Id. at 23. Appellant again points out additional improvements to
the abstract idea, i.e., “testing partitioning[] under selected market
conditions” or selecting “factors.” Id. As in claim 1, however,
improvements to the abstract idea that a computer merely executes are not
improvements to the computer itself. As such, we are not persuaded the
claims recite an improvement to the “tool” recited in the claims, i.e., a
“programmed computer.” Like SAP, the present “subject is nothing but a
series of mathematical calculations based on selected information and the
presentation of the results of those calculations . . . . No matter how much of
an advance in the finance field the claims recite, the advance lies entirely in
the realm of abstract ideas” and does not confer subject matter eligibility.
898 F.3d at 1163.
We also are not persuaded the claims are rooted in computer
technology. Appeal Br. 24. As discussed above, the claims recite mental
processes and mathematical concepts. Those mental processes and
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mathematical concepts are used to “analyz[e] the risk of a portfolio of
financial investments,” and, in particular, to “calculat[e] factor risk models
that predict the risk and tracking error of portfolios.” Spec. 1:6–9, 9:10–13.
Analyzing and predicting investment risk is a financial problem, not a
computer problem. Thus, Appellant does not persuade us that the claims are
rooted in computer technology.
Additionally, none of the remaining indicia of integration listed by the
January 2019 Guidance are present in the claims. January 2019 Guidance
55; see MPEP § 2106.05(a)–(c), (e). For example, the claims do not recite a
particular machine and, instead, generically recites “a programmed
computer.” Nor do the claims recite the “[t]ransformation and reduction of
an article ‘to a different state or thing.’” Bilski, 561 U.S. 593, 604 (2010);
MPEP § 2106.05(c).
Therefore, we determine the claims are not directed to a specific
asserted improvement in computer technology or otherwise integrated into a
practical application. Consequently, we conclude the claims are “directed
to” a judicial exception. January 2019 Guidance 54.
4. 2019 Guidance Step 2B
Having concluded that the claims recite judicial exceptions but do not
integrate them into a practical application, we finally turn to whether the
claim provides an “inventive concept,” i.e., whether the additional elements
beyond the exceptions, individually and as an ordered combination, amount
to “significantly more” than the exceptions themselves. Id. at 56.
The Examiner determined the “claims do not include additional
elements amounting to significantly more than the judicial exception”
because any additionally recited elements are “generic computer
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components . . . described at a high level of generality” that “provide only
conventional and routine computer functions previously known in the
industry.” Final Act. 12. We agree with the Examiner.
Appellant argues “the claims should be addressed consistent with
Berkheimer v. HP Inc., 881 [F.3d] 1360 (Fed Cir 2018) which addressed
whether certain claim limitations represent well-understood, routine
conventional activity or not.” Reply Br. 1–2; see Appeal Br. 24. While the
fact that Berkheimer is applicable precedent cannot be disputed, Appellant
fails to point out which “certain claim limitations” are not well-understood,
routine, or conventional, whether under Berkheimer or any other authority.
See Reply Br. 1–2; see also Appeal Br. 24. We decline to speculate as to
which “certain claim limitations” Appellant refers to.
Further, other than the recited abstract ideas discussed above, the
claims recite a “non-transitory computer-readable medium having stored
thereon computer-executable instructions which when executed by a
programmed computer perform a method” and steps performed “by the
programmed computer.” See Final Act. 10–11. As the Examiner finds, that
language recites “generic computer components” that, considered alone or as
an ordered combination, “provide only conventional and routine computer
functions previously known in the industry.” Final Act. 12. In particular,
the Examiner relies on Alice to support the finding that the computing
components recited in the claims, i.e., “a programmed computer,” a
“programmed processor,” and “memory,” are generic components that do
not transform the claim into a patent-eligible invention. Id. at 9. Moreover,
the Specification supports the Examiner’s finding. In particular, the
Specification states that the claimed invention is performed by common, off-
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the-shelf computing equipment, e.g., “personal computers, workstations,
computer servers or mobile devices such as cell phones, tablets, IPadsTM,
IPodsTM and the like.” Spec. 13:15–17; see id. 13:18–14:24. Thus, we
conclude that the claims do not provide an inventive concept because the
additional elements recited in the claims do not provide significantly more
than the recited judicial exception, whether the claims’ limitations are
considered individually or as an ordered combination.
Further, Appellant argues that “the claimed approaches to solving the
prior art problems do not preempt other and different strategies.” Appeal
Br. 21, 23–25. Although “preemption may signal patent ineligible subject
matter, the absence of complete preemption does not demonstrate patent
eligibility.” Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371,
1379 (Fed. Cir. 2015). Where claims are deemed to recite only patent-
ineligible subject matter, as they are here, “preemption concerns are fully
addressed and made moot.” Id.
Accordingly, we are not persuaded that the claims recite patent-
eligible subject matter. Further, Appellant has not proffered sufficient
evidence or argument to persuade us that any of the limitations in the
remaining claims provide a meaningful limitation that transforms the claims
into a patent-eligible application. See Appeal Br. 19–25. Therefore, we
sustain the rejection of claims 1–22 under 35 U.S.C. § 101 as being directed
to patent-ineligible subject matter.

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A. Rejection Under § 102
The Examiner rejected all claims as anticipated by Madhavan. Final
Act. 14–23. Appellant argues all the rejected claims together. See Appeal
Br. 25–27. As explained below, we are persuaded the Examiner erred.
Appellant argues that the Examiner erred in finding Madhavan recites
“an original factor-factor covariance matrix of an original factor risk model,”
“partitioning . . . the set of factors of the original factor risk model into three
or more groups of factors, three of which are a dominant first group,”
“determining a modified factor-factor covariance matrix,” and “determining
a modified factor risk model,” as recited in claim 1 and similarly recited in
claims 5, 9, 13, 15, and 17. Appeal Br. 26–27. Specifically, Appellant
argues that Madhavan does not describe “factors can or should be
advantageously partitioned into groups” where “one group is dominant while
the others are subordinate.” Id. at 27. Appellant further argues that
Madhavan “describe[s] a procedure for producing one and only one best
factor risk model.” Id.
We are persuaded the Examiner erred. According to the Examiner,
Madhavan’s size, growth, and market factors are “orthogonalized” to one
another, and such an orthogonalization discloses “partitioning . . . the set of
factors of the original factor risk model into three or more groups of factors,
three of which are a dominant first group.” Ans. 9; Final Act. 2. Although
Madhavan discloses that “size and growth factors are orthogonalized to the
market factor; and industry factors are orthogonalized to the sector factor to
which the industry belongs and to size, growth, and market factors”
(Madhavan ¶¶ 27–28), it is unclear how orthogonalizing factors partitions
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those factors into dominant and subordinate groups. Nor has the Examiner
explained adequately how orthogonalizing factors does so. See Ans. 9.
Further, the Examiner found that “orthogonaliz[ing] the factors
discloses ‘before’ and ‘after’, i.e., an unmodified matrix and a modified
matrix.” Ans. 9–10; see Final Act. 14–15. However, the Examiner did not
explain what “unmodified matrix” she refers to. See Ans. 9–10. The matrix
the Examiner identifies in paragraph 30 of Madhavan is formed after the
factor orthogonalization, and so appears to be the “modified matrix” the
Examiner references, but it is unclear what previous, unmodified matrix that
modified matrix is constructed from, if any. See also Madhavan Fig. 1.
Accordingly, based on the record before us, we determine the
Examiner erred in finding that Madhavan describes “an original matrix of
factor-factor covariance matrix of an original factor risk model,”
“partitioning . . . the set of factors of the original factor risk model into three
or more groups of factors, three of which are a dominant first group,”
“determining a modified factor-factor covariance matrix,” and “determining
a modified factor risk model,” as recited in claim 1 and similarly recited in
claims 5, 9, 13, 15, and 17. Dependent claims 2–4, 6–8, 10–12, 14, 16, and
18–22 fall with their respective independent claims. Therefore, we do not
sustain the rejections of claims 1–22 under 35 U.S.C. § 102.

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CONCLUSION
In Summary:
Claims
Rejected
35 U.S.C.
§
References/Basis Affirmed Reversed
1–22 101 Eligibility 1–22
1–22 102(a)(1) Madhavan 1–22
Overall
Outcome
1–22

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