Burkhardt, Roger et al.

Patent Trials and Appeals Board

Jan 17, 2020

11182982 - (D) (P.T.A.B. Jan. 17, 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.
11/182,982 07/15/2005 Roger Burkhardt NSL-14-1131R3 9048
35811 7590 01/17/2020
IP GROUP OF DLA PIPER LLP (US)
ONE LIBERTY PLACE
1650 MARKET ST, SUITE 5000
PHILADELPHIA, PA 19103
EXAMINER
BORLINGHAUS, JASON M
ART UNIT PAPER NUMBER
3693
NOTIFICATION DATE DELIVERY MODE
01/17/2020 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):
pto.phil@us.dlapiper.com
PTOL-90A (Rev. 04/07)
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE PATENT TRIAL AND APPEAL BOARD
Ex parte ROGER BURKHARDT, ANNE E. ALLEN,
ROBERT J. McSWEENEY, and LOUIS G. PASTINA
Appeal 2019-002064
Application 11/182,982
Technology Center 3600

Before MURRIEL E. CRAWFORD, PHILIP J. HOFFMANN, and
BRADLEY B. BAYAT, Administrative Patent Judges.

BAYAT, 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 1–4, 6–9, and 16–25, which are all the
claims pending in the application. We have jurisdiction under
35 U.S.C. § 6(b).
We REVERSE.

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 NYSE Merger Sub
LLC. Appeal Br. 1.
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Application 11/182,982

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CLAIMED SUBJECT MATTER
The claims are related “to systems and methods for automatic order
processing and execution in conjunction with a live floor auction market.”
Spec. 1:10–12. Claim 1, reproduced below, is illustrative of the claimed
subject matter:
1. A method for integrating automatic and at least partially non-
automatic trading systems, the method comprising:
receiving, by an order processing system, order flow
information, the order processing system in communication with
a programmed computer and a specialist model computer, the
specialist model computer communicatively coupled to the
programmed computer via an application program interface
(API), the programmed computer configured to automatically
process securities orders in an auction market with a published
best bid and a published best offer, the specialist model computer
comprising a non-transitory memory storing computer-readable
instructions and at least one processor executing said computer-
readable instructions, the specialist model computer configured
to automatically generate and transmit electronic messages to the
programmed computer;
automatically directing, by the order processing system,
the order flow information along a first order flow pathway to
the specialist model computer and separately directing the same
order flow information along a second order flow pathway to the
programmed computer such that the order flow information is
received by the specialist model computer prior to the
programmed computer, the order flow information defining a
first auction limit buy order with a limit price that is above the
published best offer;
defining, by the specialist model computer, responsive to
receiving the first auction limit buy order via the first order flow
pathway, instructions associated with the first auction limit buy
order, said instructions comprising price improvement data and
specialist interest data other than the price improvement data;
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automatically generating and transmitting, by the
specialist model computer, to the programmed computer, an
electronic message comprising said instructions;
automatically determining, by the programmed computer,
a spread between the published best bid and the published best
offer, responsive to receiving the first auction limit buy order via
the second order flow pathway;
automatically determining, by the programmed computer,
whether the spread is or is not equal to a minimum variation, the
minimum variation comprising a minimum difference in price
between the published best bid and the published best offer;
modifying, by the programmed computer, responsive to
automatically determining that the spread is equal to the
minimum variation, the first auction limit buy order according to
the price improvement data of the instructions in the electronic
message received from the specialist model computer, the
programmed computer immediately executing the first auction
limit buy order modified according to the price improvement
data; and
responsive to automatically determining, by the
programmed computer, that the spread is not equal to the
minimum variation:
automatically quoting, by the programmed
computer, the first auction limit buy order by modifying
the limit price to the minimum variation that is higher than
the published best bid, such that the modified limit price
of the quoted first auction limit buy order becomes a new
published best bid that is displayed on the order book, and
performing a further action, by the programmed
computer, after the first auction limit buy order is
automatically quoted, according to the specialist interest
data of the instructions in the electronic message received
from the specialist model computer, said further action
comprising at least one of trading or quoting with at least
one of the first auction limit buy order, one or more orders
in the order book and orders at a remote exchange.

Appeal 2019-002064
Application 11/182,982

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REJECTION
The Examiner rejects claims 1–4, 6–9, and 16–25 under 35 U.S.C.
§ 101 as directed to a judicial exception without significantly more.
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.
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. Pty. Ltd. 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,
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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
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
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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:
(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) (9th Ed. 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 Guidance.
Appellant does not argue error as to the Examiner’s determination that
the claims are “directed to processing and executing auction limit buy
orders,”2 which the Examiner characterizes as a fundamental economic

2 Independent claims 1, 16, and 17 are directed to buy orders, but
independent claim 6 is directed to sell orders.
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practice. See Ans. 3. Appellant also does not argue Examiner error with
respect to the Examiner’s additional determination that the claimed method
can be performed by human thought, as it “is directed toward receiving an
order, defining instructions by which to process the order, determining a
spread, determining whether a spread is or is not equal to a minimum
variation, and, based upon the determination, modifying and executing the
order.” Id.
Appellant instead advances arguments that the claimed methods and
systems improve computers, and are unconventional, thus providing
“significantly more” than abstract ideas. Appeal Br. 10–29; see also Reply
Br. 1–8. Specifically, for example, Appellant argues, generally citing
Berkheimer v. HP, Inc., 890 F.3d 1369 (Fed. Cir. 2018), “there is nothing
conventional about modifying incoming orders in an automated trading
system.” Appeal Br. 25.
We agree with Appellant, because the Examiner has oversimplified
the nature of the “additional elements,” and has not addressed them in a
manner consistent with the Office Guidance. See Guidance, 84 Fed. Reg.
at 56.
As to “additional limitations” beyond the abstract idea, the Examiner
first finds only “additional limitations pertaining to computer system
components,” which “are recited at a high level of generality and are recited
as performing generic computer functions routinely used in computer
applications.” Ans. 4. We disagree with the Examiner’s assertion that the
“additional elements” are limited to computer system components.
Later, in response to Appellant’s arguments, as to the claimed
“defining . . . instructions” limitation, found recited in some form in every
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independent claim, the Examiner finds “‘defining’ is merely the retrieval of
information (i.e. price improvement data and specialist interest data, referred
to as an instruction when aggregated) from memory. Retrieving information
from memory is a well-understood, routine and conventional computer
activity.” Ans. 18.
Here, however, the claim recites that the instructions comprise “price
improvement data and specialist interest data.” The Specification describes
that “the specialist algorithm (5802) receives order flow information prior to
the order display book (5804). This allows the specialist algorithm to decide
whether to send specialist interest to the order display book, which could
interact with that incoming order.” Spec. 44:6–9 (cited at Appeal Br. 2–3).
The Specification further describes that the instructions may contain content
such as:
Quoting messages: supplement the size of the existing
Exchange published best bid or offer; place within the order
display book specialist reserve interest at the Exchange
published best bid and offer; layer within the order display book
specialist interest at varying prices outside the published
Exchange quotation; establish the Exchange best bid and offer;
and withdraw previously established specialist interest at the
Exchange best bid and offer.
Trading messages: provide additional specialist volume to
partially or completely fill an order at the Exchange published
best bid or offer; match better bids and offers published by other
market centers where automatic executions are immediately
available; provide price improvement to an order; and trade with
the Exchange published quotation.
Spec. 17:13–22.
The “defining” of “instruction” messages involve more than “retrieval
of information,” as asserted by the Examiner, because it involves decisions
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made by a Specialist, by way of the algorithms programmed into the claimed
specialist model computer.
As a further example, the independent claims recite conditional
language, for either “modifying . . . the first auction limit buy order
according to the price improvement data of the instructions in the electronic
message received from the specialist model computer [and] executing the
first auction limit buy [or sell] order modified according to the price
improvement data,” or “automatically quoting . . . the first auction limit buy
[or sell] order by modifying the limit price to the minimum variation that is
higher [or lower] than the published best bid.” The Specification provides
an example of this modifying, as follows:
[T]he Exchange quote is 20.15 bid, offered at 20.20. Another
market is posting the national best offer of 20.18. An AL order
to sell, limited to a price of 20.10 arrives. This AL order is
automatically offered at 20.19, one penny better than the
Exchange best offer existing at the time the AL order arrived.
The Exchange quote is now 20.15 bid, offered at 20.19. An order
arrives on the Exchange to buy at a limit of 20.19. The order
automatically executes against the AL order at a price of 20.18,
providing price improvement to the limit order and avoiding
trading through the better offer away.
Spec. 7:21–8:5.
As to these limitations, the Examiner finds “‘modifying’ is merely a
mathematical calculation (e.g.[,] add three cents to the ask price).
Performing a repetitive calculation is a well-understood, routine and
conventional computer activity,” and “[t]ransmitting data (i.e. quoting the
first auction limit buy order) over a network is a well-understood, routine
and conventional computer activity.” Ans. 19.
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As to the “modifying” limitations, the Examiner does not address that
the modifying is done by a specialist’s algorithm, to effect a change in an
order directed to an automated matching system (“the programmed computer
configured to automatically process securities orders in an auction market
with a published best bid and a published best offer”). More specifically,
considering the combination of the “defining” of “instructions” along with
the conditional steps that modify an incoming order to an automated system,
the Examiner has not provided evidence that it is well-understood, routine,
and conventional for a specialist (a type of “market maker” in an open-call
auction market) to be able to provide instructions, for an automated auction
market, to modify orders, placed by entities other than the specialist and
copied to the specialist before arriving at an automated auction market. This
is a requirement, because a specialist modifying orders to an automated
auction system is beyond the scope of either the abstract idea of “processing
and executing auction limit buy orders,” or the abstract idea of “receiving an
order, defining instructions by which to process the order, determining a
spread, determining whether a spread is or is not equal to a minimum
variation, and, based upon the determination, modifying and executing the
order.” Ans. 3.
The Examiner has thus failed to properly identify and analyze the
combination of “additional elements” to determine whether they provide
“significantly more” than the identified judicial exception. On this record,
we do not sustain the rejection of claims 1–4, 6–9, and 16–25 under
35 U.S.C. § 101 as directed to abstract ideas.

Appeal 2019-002064
Application 11/182,982

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CONCLUSION
The Examiner’s rejection is REVERSED.

DECISION SUMMARY

REVERSED

Claims
Rejected
35 U.S.C. § Reference(s)/Basis Affirmed Reversed
1–4, 6–9,
16–25
101 Eligibility 1–4, 6–9,
16–25