BORKOVEC, Milan et al.

Patent Trials and Appeals Board

Jan 27, 2020

14160212 - (D) (P.T.A.B. Jan. 27, 2020)

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.
14/160,212 01/21/2014 Milan BORKOVEC 107945.000045 7590
145584 7590 01/27/2020
Prince Lobel Tye LLP
One International Place
Suite 3700
Boston, MA 02110
EXAMINER
NIQUETTE, ROBERT R
ART UNIT PAPER NUMBER
3696
NOTIFICATION DATE DELIVERY MODE
01/27/2020 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):
docketing@princelobel.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE PATENT TRIAL AND APPEAL BOARD
Ex parte MILAN BORKOVEC, ANANTH MADHAVAN, and
HANS HEIDLE
Appeal 2019-002101
Application 14/160,212
Technology Center 3600
Before MURRIEL E. CRAWFORD, PHILIP J. HOFFMANN, and
BRADLEY B. BAYAT, Administrative Patent Judges.
CRAWFORD, Administrative Patent Judge.
DECISION ON APPEAL
STATEMENT OF THE CASE
Pursuant to 35 U.S.C. § 134(a), Appellant1 appeals from the
Examiner’s decision to reject claims 1 and 3–11. 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. Appellant identifies the real party in interest as ITG SOFTWARE
SOLUTIONS, INC. Appeal Br. 2.
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CLAIMED SUBJECT MATTER
The claims are directed to a method for agency cost estimation. Spec.
¶ 2. Claim 1, reproduced below, is illustrative of the claimed subject matter:
1. A computer-implemented method for computing estimated
transaction costs of a security trade execution according to a
specified automated trading strategy and for generating and
displaying recommendations for optimizing the trading
automated strategy, comprising the steps of:
by one or more trading servers in electronic
communication with one or more electronic market places and
one or more trading client terminals, receiving electronic data
defining parameters of a proposed trade, said data specifying an
automated trading strategy among a plurality of predefined
automated trading styles defining how share quantities of
securities to be electronically traded are to be electronically
traded over a specified trading time period;
by said one or more trading servers, computing estimated
first and second transaction costs for the received proposed trade
based on the specified automated trading strategy and market
data, wherein said first transaction costs are based on
discretionary trades and said second transaction costs are based
on non-discretionary trades;
by said one or more trading servers, generating
recommendations for optimizing the automated trading strategy
based on at least one of the first and second transaction costs; and
by said one or more trading servers, outputting said
recommendations to be displayed on said one or more trading
client terminals.
REJECTION
Claims 1 and 3–11 are rejected under 35 U.S.C. § 101 as directed to
ineligible subject matter in the form of abstract ideas. Final Act. 3.
OPINION
An invention is patent-eligible if it claims a “new and useful process,
machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
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However, the Supreme Court has long interpreted 35 U.S.C. § 101 to include
implicit exceptions: “[l]aws of nature, natural phenomena, and abstract
ideas” are not patentable. E.g., Alice Corp. v. CLS Bank Int’l, 573 U.S. 208,
216 (2014).
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. Id. at 217–18 (citing Mayo Collaborative Servs. v. Prometheus
Labs., Inc., 566 U.S. 66, 75–77 (2012)). 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.
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
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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
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 (quotation marks 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 PTO recently published revised guidance on the application of
§ 101. 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed.
Reg. 50 (Jan. 7, 2019) (“Guidance”). Under the Guidance, we first look to
whether the claim recites:
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(1) any judicial exceptions, including certain groupings of
abstract ideas (i.e., mathematical concepts, certain methods of
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)).
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 Guidance.
The Examiner determines the claims are directed to “a method for
estimating costs of trading,” which “is abstract because it is a fundamental
economic practice.” Final Act. 4. The Examiner finds:
Although a computer acts as the intermediary in the claimed
method, the claims do no more than implement the abstract idea
of receiving information related to parameters of a proposed
trade, estimating the costs of the trade and outputting the
results. All of these computer functions are “well understood,
routine, conventional activities” previously known to the
industry.
Id. at 5.
The Appellant argues all claims together, using claim 1 as an
example. Appeal Br. 8. We select claim 1 as representative. See 37 C.F.R.
§ 41.37(c)(1)(iv).
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We are unpersuaded by the Appellant’s argument that the “invention
[] is not directed to a fundamental economic practice, but rather a new
trading tool that works with other tools and solves technical problems with
the modem electronic trading paradigm.” Appeal Br. 9–10; see also id. at 8
(“the claims are directed to technical improvement in the modern, electronic
trading paradigm.”).
Claim 1 recites:
computing estimated first and second transaction costs for the
received proposed trade based on the specified automated trading
strategy and market data, wherein said first transaction costs are
based on discretionary trades and said second transaction costs
are based on non-discretionary trades; . . . [and]
generating recommendations for optimizing the automated
trading strategy based on at least one of the first and second
transaction costs.
The Specification describes that the method “includes: a first part that
comprises computer-based models that allow a user to obtain price impact
cost estimates for any pre-specified strategy, and a second part that
comprises computer-executed mathematical models that generate an optimal
trading strategy subject to certain assumptions about the user's ultimate
objectives.” Spec. ¶ 7. The claimed method “estimates the expected costs
and the standard deviation of the costs of the agency trading strategy that
optimally balances the trade-off between paying price impact costs and
incurring opportunity costs for a given level of risk aversion and trading
horizon.” Id. ¶ 48. Specifically, the method involves “computing a cost of a
pre-specified trading strategy, equations (2) and (3) are used to generate a
predicted cost. . . . A proprietary daily risk model is used to get a forward
looking estimate of the variance of cost, allowing for the possibility of price
movements across bins.” Id. ¶ 65. Then, “the optimal trading strategy,
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denoted by {n*}, is computed by solving a particular optimization problem
that balances expected cost against variance of cost.” Id. ¶ 66.
The method, of computing estimated costs and optimizing a strategy
based on costs, is thus directed to “estimating and optimizing trading
transaction costs,” as is recited in the preamble of claim 1. We agree with
the Examiner that estimating and selecting a least-cost approach to
conducting business is a fundamental economic practice, as businesses
manage themselves by optimizing income and costs. See Guidance at 52;
see also MPEP § 2106.04(a)(2)(I)(A).
We also discern that the abstract idea of computing estimated costs,
and optimizing trading transaction costs, as claimed, involves performing
computations, and can be performed in the human mind, using mental
thought and pen and paper for performing the mathematical operations
employed in estimating and optimizing these costs. Id. This is consistent
with the Specification, which states that “[b]y providing such servers, a
significant advantage over the prior art system (where analyses are executed
manually by human traders or by computer using outdated information) is
achieved. The server 11 can handle much more complex trades including
trades involving large volumes and many more different equities.” Spec.
¶ 54.
This means the method can be performed manually, but is sped up by
using computers. As such, the manual mental implementation of the method
is an abstract idea because it involves work that can be done mentally by a
human. Guidance, 52, fn. 14; see also MPEP § 2106.04(a)(2)(III)(A-B).
We thus agree with the Examiner that the method recites an abstract
idea, under Prong One of Step 2A of the Guidance. As a result, we disagree
with the Appellant that the claimed method is not a fundamental economic
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practice. We also note that the argued “technical improvement in the
modern, electronic trading paradigm” (Appeal Br. 8), is an improvement in
an abstract idea, which remains an abstract idea after improvement. “What
is needed is an inventive concept in the non-abstract application realm.”
SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1168 (Fed. Cir. 2018). “[A]
claim for a new abstract idea is still an abstract idea.” Synopsys, Inc. v.
Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016) (emphasis
omitted).
We are also unpersuaded by the Appellant’s argument that “[l]ike the
claims in Trading Technologies, the claims at issue solve problems of prior
specialized computer systems in the context of computerized trading,
relating to the estimation of transaction costs.” Appeal Br. 11. The above
citation to paragraph 54 of the Specification establishes that the
improvement uses computers to calculate cost estimates faster than was able
to be done with prior art manual processes. The improvement is thus not in
the computer, as was the case with the user interface improvements in
Trading Techs. Int'l Inc. v. CQG, Inc., 675 F. App’x 1001 (Fed. Cir. 2017).
The distinguishing feature for the claims in Trading Technologies was an
advance in efficiency provided by an improved graphical user interface as
compared to other computer processes. Id. at 1004. In contrast to Trading
Technologies, no such distinguishing features are recited in claim 1, and the
method before us does not concern an improvement to a technology, but
merely the use of general-purpose computer technology to speed up a
manual process.
Finally, Appellant argues because claim 1 “recites ‘a computer
implemented method,’ ‘a specified automated trading strategy,’
‘electronically traded,’ etc. . . . claim 1 includes a specific, tangible
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structure that is integral to the operation of the claim as a whole, [and] is not
directed to a judicial exception under Step 2A.” Reply Br. 5–6.
We are not persuaded by the Appellant’s argument, because merely
automating a manual process by using a computer does not represent eligible
subject matter. See Credit Acceptance, 859 F.3d 1044, 1055 (Fed. Cir.
2017) (“Our prior cases have made clear that mere automation of manual
processes using generic computers does not constitute a patentable
improvement in computer technology.”); see also Bancorp Services, L.L.C.
v. Sun Life Assurance Co. of Canada (U.S.), 687 F.3d 1266, 1278 (Fed. Cir.
2012) (A computer “employed only for its most basic function . . . does not
impose meaningful limits on the scope of those claims.”). Further, because
the Specification describes speeding up and expanding the volume of data
(Spec. ¶ 54), the computer does not render the method to become eligible
subject matter. See Intellectual Ventures ILLC v. Capital One Bank, 792
F.3d 1363, 1370 (“[M]erely adding computer functionality to increase the
speed or efficiency of the process does not confer patent eligibility on an
otherwise abstract idea.”).
Under Prong Two of Revised Step 2A, we evaluate whether the
judicial exception is integrated into a practical application. Guidance, 54.
Here, claim 1 recites steps for “receiving electronic data defining parameters
of a proposed trade,” and “outputting said recommendations to be displayed”
on a terminal, in addition to computing estimated costs and optimizing a
strategy based on the costs. The method does not improve the underlying
“trading server” or “client terminals” recited as performing the limitations of
claim 1, because any computer can be used to execute the claimed method.
See Spec. ¶¶ 51–52. In addition,
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the invention relates to systems, methods and computer
program products for creating and implementing
mathematical/econometric models that provide pre-trade
estimates of the price impact costs of a given order to trade a
number of shares of one or more tradable assets, such as
securities, as well as optimization techniques utilizing the cost
estimates.
(Spec. ¶ 2). As such, the claimed method does not improve another
technology, because the method computes and optimizes transaction costs.
Guidance, 55; see also MPEP § 2106.05(a). Because a particular computer
is not required, the claim also does not define or rely on a “particular
machine.” Id.; see also MPEP § 2106.05(b). Further, the method does not
transform matter. Id.; see also MPEP § 2106.05(c). Instead, the claim
receives data, computes estimated costs, selects optimized costs, and
provides the optimized strategy selected as output.
The receiving of data and providing results as output, which are
recited in the two limitations not considered to be part of the abstract idea,
are merely steps that represent insignificant extra-solution activity. Id. at 55,
fn. 31; see also MPEP § 2106.05(g). As such, the method has no other
meaningful limitations (MPEP § 2106.05(e)), and thus merely recites
instructions to execute the abstract idea on a computer (MPEP § 2106.05(f)).
Therefore, we determine that claim 1 does not integrate the judicial
exception into a practical application. In addition, because of this
determination, we are unpersuaded by the Appellant’s argument that the
claims are “directed to an improvement in another technology or technical
field -- computer tools for trade cost estimation so as to enable the display of
estimated post trade transaction costs on a remote trading device.” Appeal
Br. 11. This is because the claimed invention is directed to trade cost
estimation, which thus is not another field.
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In Step 2B of the Guidance, we are directed to evaluate whether the
claim provides an inventive concept, which adds “a specific limitation or
combination of limitations that are not well-understood, routine,
conventional activity.” Guidance, 56. The Examiner finds:
Although a computer acts as the intermediary in the claimed
method, the claims do no more than implement the abstract idea
of receiving information related to parameters of a proposed
trade, estimating the costs of the trade and outputting the
results. All of these computer functions are “well understood,
routine, conventional activities” previously known to the
industry.
Final Act. 5.
We are not persuaded by the Appellant’s argument that the “claims
recite a technological improvement to electronic, automated trading systems
that was not a well-understood, routine, and conventional.” Appeal Br. 12.
The issue is not whether the method itself is well-understood, routine, and
conventional, it is whether there are additional elements, alone or in
combination, beyond the abstract idea, that are well understood, routine, and
conventional. The Examiner has identified only the computer on which the
claimed method executes as an additional element. The Appellant identifies
as additional elements “computer servers coupled with markets and trading
terminals, configured, inter alia, to fine-tune an automated trading strategy
and to recommend an optimal trading strategy to a client by displaying
recommendations on a trading client computer.” Appeal Br. 12. Thus, we
discern no element other than the trading server computer is asserted as
being an additional element, along with the other computers to which it is
connected. In this system of computers, which receive data, make
calculations, and present output, no operation of the computers performs any
computer function except those that are well understood, routine, and
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conventional. See In re Katz Interactive Call Processing Patent Litig., 639
F.3d 1303, 1316 (Fed. Cir. 2011) (“Absent a possible narrower construction
of the terms ‘processing,’ ‘receiving,’ and ‘storing,’ discussed below, those
functions can be achieved by any general purpose computer without special
programming.”).
Because the Appellant has failed to identify error in the Examiner’s
rejection of claims, we sustain the rejection under 35 U.S.C. § 101.
CONCLUSION
The Examiner’s rejection is AFFIRMED.
DECISION SUMMARY
Claims
Rejected
35 U.S.C. § Reference(s)/Basis Affirmed Reversed
1, 3–11 101 Ineligible 1, 3–11

TIME PERIOD FOR RESPONSE
No time period for taking any subsequent action in connection with
this appeal may be extended under 37 C.F.R. § 1.136(a). See 37 C.F.R.
§ 1.136(a)(1)(iv).
AFFIRMED