Ex Parte Guler et al

Board of Patent Appeals and Interferences

Apr 23, 2010

10279307 (B.P.A.I. Apr. 23, 2010)

UNITED STATES PATENT AND TRADEMARK OFFICE
____________

BEFORE THE BOARD OF PATENT APPEALS
AND INTERFERENCES
____________

Ex parte KEMAL GULER and
BIN ZHANG
____________

Appeal 2009-008225
Application 10/279,307
Technology Center 3600
____________

Decided: April 23, 2010
____________

Before MURRIEL E. CRAWFORD, HUBERT C. LORIN, and
BIBHU R. MOHANTY, Administrative Patent Judges.

LORIN, Administrative Patent Judge.

DECISION ON APPEAL
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STATEMENT OF THE CASE
Kemal Guler, et al. (Appellants) seek our review under 35 U.S.C.
§ 134 (2002) of the rejection of claims 1-22. We have jurisdiction under 35
U.S.C. § 6(b) (2002).

SUMMARY OF DECISION
We AFFIRM.1

THE INVENTION
The invention is related to auction decision analysis.
Claim 1, reproduced below, is illustrative of the subject matter on
appeal.
1. A computer-implemented method for determining a bid for an
auction, said method comprising:
receiving a valuation for said auction, a risk preference, and a
rate of change of said risk preference;
determining a joint distribution based on historical auction
information and at least one updated valuation for an historical
auction;
determining a density of said joint distribution; and
determining said bid based on said risk preference, said rate of
change of said risk preference, said valuation, said joint distribution,
and said density of said joint distribution.

1 Our decision will make reference to the Appellants’ Appeal Brief (“App.
Br.,” filed Jun. 25, 2008) and Reply Brief (“Reply Br.,” filed Dec. 8, 2008),
and the Examiner’s Answer (“Answer,” mailed Oct. 8, 2008).
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THE REJECTIONS
The Examiner relies upon the following as evidence of
unpatentability:
Messmer US 7,096,197 B2 Aug. 22, 2006
Guler US 2002/0174052 A1 Nov. 21, 2002
The following rejections are before us for review:
1. Claims 1-22 are rejected under 35 U.S.C. §101 as being directed to
non-statutory subject matter.
2. Claims 1-5, 7-12, and 14-21 are rejected under 35 U.S.C. §102(e) as
being anticipated by Messmer.

ISSUES
The issue with respect to the rejection of claims 1-22 under 35 U.S.C.
§101 as being directed to non-statutory subject matter is whether the phrases
“computer-implemented” and “computer-readable medium having
computer-readable program code embodied therein for causing a computer
system to perform” in the preambles of claims 1-8 and 17-22, and claims 9-
16 tie the methods claimed to a particular machine.
The issue with respect to the rejection of claims 1-5, 7-12, and 14-21
under 35 U.S.C. §102(e) as being anticipated by Messmer is whether it
describes, expressly or inherently, the limitation “receiving a valuation for
said auction, a risk preference, and a rate of change of said risk preference”.
Claim 1.

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FINDINGS OF FACT
We rely on the Examiner’s factual findings stated in the Answer (Ans.
2-5).

PRINCIPLES OF LAW
§ 101 - Patentable Subject Matter - Process
[T]he proper inquiry under § 101 is not whether the process
claim recites sufficient “physical steps,” but rather whether the
claim meets the machine-or-transformation test. [fn]25 As a
result, even a claim that recites “physical steps” but neither
recites a particular machine or apparatus, nor transforms any
article into a different state or thing, is not drawn to patent-
eligible subject matter. Conversely, a claim that purportedly
lacks any “physical steps” but is still tied to a machine or
achieves an eligible transformation passes muster under § 101.
In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), petition for cert. filed,
77 USLW 3442 (U.S. Jan. 28, 2009) (No. 08-964).

Anticipation
“A claim is anticipated only if each and every element as set forth in
the claim is found, either expressly or inherently described, in a single prior
art reference.” Verdegaal Bros., Inc. v. Union Oil Co. of Cal., 814 F.2d 628,
631 (Fed. Cir. 1987).

ANALYSIS
The rejection of claims 1-22 under 35 U.S.C. §101 as being directed to non-
statutory subject matter.
Claims 1-8 and 17-22 are directed to a “computer-implemented
method.” Claims 9-16 are directed to a “computer-readable medium.”
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The Examiner rejected all the claims as being directed to nonstatutory
subject matter under §101 because they are not directed to subject matter
tied to a particular apparatus or transforms underlying subject matter.
Answer 3. The Examiner’s reasoning follows the Bilski machine-or-
transformation test (see supra) for determining patent-eligibility of processes
under 35 U.S.C. §101. See Answer 3-4 and 7-8.
The method claims 1-8 and 17-22
The Appellants argue that claims 1-8 and 17-22 recite the phrase
“computer-implemented method” and therefore the processes of claims 1-8
and 17-22 are tied to a particular machine, that is, a computer (Reply Br. 7).
The use of the phrase “computer-implemented” in the preamble of
claims 1-8 and 17-22 is a nominal recitation of structure which does not tie
the claimed process to a particular apparatus.
Taking claim 1 as representative, it recites no other structure in the
body of the claim. Accordingly, the phrase “computer-implemented” in the
preamble of claim 1 is a nominal recitation of structure. Albeit the phrase
ties the claimed process to a computer per se, it does not tie the process to
any particular computer. By this phrase, the claim covers tying the process
to any general-purpose computer. The same can be said for the other
independent claim, claim 17.
We note that claim 6 provides for determining a bid in accordance
with an equation. But the claim covers implementing the equation or
mathematical algorithm in a general purpose computer for the determining
the bid.
Algorithms per se are not patentable under §101.
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Mathematical algorithms have, in other cases, been identified
instead as abstract ideas rather than laws of nature. See, e.g.,
State St., 149 F.3d at 1373. Whether either or both views are
correct is immaterial since both laws of nature and abstract
ideas are unpatentable under § 101. Diehr, 450 U.S. at 185,
101 S.Ct. 1048.
Bilski, 545 F.3d at 953, n. 6.
Also, the processes described in the body of claim 6, as with claims 1
and 17, is drawn to determining a bid for an auction. Such a process per se
is not patentable subject matter under § 101 because the determination does
not transform any thing in any physical way. Rather, it attaches a value and
risk preference to a bid which may affect the bid in the auction. The
attachment of a value or preference is an abstraction. Cf. Bilski, 545 F.3d at
943:
Purported transformations or manipulations simply of public or
private legal obligations or relationships, business risks, or
other such abstractions cannot meet the machine-or-
transformation test to determine patent-eligibility of process
claims, because they are not physical objects or substances, and
they are not representative of physical objects or substances.
Given that the processes in the body of claims 1, 6 , and 17 are not
patent-eligible, we consider the addition of nominal recitations of a
computer in the preamble of the claims to be token recitations. To elevate
such a token recitation of a computer to that of a “particular” machine that
would satisfy the machine prong of the Bilski machine-or-transformation test
would be to permit clever drafting of process subject matter not
contemplated by the case law and to exalt form over substance in
determining whether the claimed process passes §101 muster. Cf. Ex parte
Langemyr, 89 USPQ2d 1988 (BPAI 2008) (informative):
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Nominal recitations of structure in an otherwise ineligible
method fail to make the method a statutory process. See
Benson, 409 U.S. at 71-72. As Comiskey recognized, “the mere
use of the machine to collect data necessary for application of
the mental process may not make the claim patentable subject
matter.” Comiskey, 499 F.3d at 1380 (citing In re Grams, 888
F.2d 835, 839-40 (Fed. Cir. 1989)). Incidental physical
limitations, such as data gathering, field of use limitations, and
post-solution activity are not enough to convert an abstract idea
into a statutory process. In other words, nominal or token
recitations of structure in a method claim do not convert an
otherwise ineligible claim into an eligible one. To permit such a
practice would exalt form over substance and permit claim
drafters to file the sort of process claims not contemplated by
the case law. Cf., Flook, 437 U.S. at 593 (rejecting the
respondent's assumption that “if a process application
implements a principle in some specific fashion, it
automatically falls within the patentable subject matter of §
101,” because allowing such a result “would make the
determination of patentable subject matter depend simply on
the draftsman's art and would ill serve the principles underlying
the prohibition against patents for ‘ideas' or phenomena of
nature.”). In this case, we decline to allow clever claim drafting
to circumvent the principles underlying the Supreme Court's
interpretation for “process.” The only recitation of structure is
in the nominal recitation in the preamble citing a “method
executed in a computer apparatus.” This recitation is so generic
as to encompass any computing system, such that anyone who
performed this method in practice would fall within the scope
of these claims. Thus, the recitation of a computer apparatus in
the preamble is not, in fact, a limitation at all to the scope of the
claim, and the claim is directed, in essence, to the method
performed by any means. As such, we fail to find that this
recitation alone requires the claimed method to include a
particular machine such that the method qualifies as a “process”
under § 101. We will not allow such a nominal recitation in the
preamble to convert an otherwise ineligible claim into an
eligible one.
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For the foregoing reasons, we find that a prima facie case of
nonstatutory subject matter under 35 U.S.C. § 101 has been established for
claims 1-8 and 17-22 and that the Appellants’ arguments to the contrary are
not persuasive.
The computer-readable medium claims 9-16
The computer-readable medium claims 9-16 parallel the process
claims. These claims are nominally directed to a computer readable medium
but which embod[y] computer-readable code for causing a computer system
to perform certain steps (see claim 9). These claims are not directed to
statutory subject matter.
The Appellants argue that “it is clear that the process recited is tied to
a specific machine or apparatus, in this case a computer-readable medium in
a computer system.” Reply Br. 6.
First, the claims broadly cover transient, propagating signals. The
Specification is silent as to what the claimed “computer readable medium”
covers. Since a claim to a “computer readable medium” reasonably broadly
covers both forms of non-transitory tangible media and transient,
propagating signals, it necessarily covers non-statutory subject matter. This
is so because transient, propagating signals are not patentable subject matter.
See In re Nuijten, 500 F.3d 1346, 1356 (Fed. Cir. 2007).
The four categories together describe the exclusive reach of
patentable subject matter. If a claim covers material not found
in any of the four statutory categories, that claim falls outside
the plainly expressed scope of § 101 even if the subject matter
is otherwise new and useful. We must therefore determine
whether any of the four categories encompass the claims on
appeal, and it is appropriate to consider each of the categories in
turn.

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In re Nuijten, 500 F.3d at 1354 (Fed. Cir. 2007). Because the scope of the
claims is such that they include subject matter not patent-eligible under
§101, the claims must be rejected under §101 as covering nonstatutory
subject matter. See also “Subject Matter Eligibility of Computer Readable
Media,” Notice of the Director, Jan. 26, 2010;
http://www.uspto.gov/patents/law/notices/101_crm_20100127.pdf .
Second, it is notable that, the Appellants argue (see supra) that “the
process recited in claim 9 [is directed to patentable subject matter] and that
in challenging the prior art rejection of claims 9-12 and 14-16, the
Appellants relied on the same reasons used to challenge the rejection of the
method claims. App. Br. 4-10. These are indicative of the Appellants’
viewing of the “computer readable medium” claims 9-16 and the process
claims 1-8 and 17-22 as substantively indistinguishable. We agree with that
assessment. Method claim 1 and claim 9, the sole independent “medium”
claim, for example, provide identical steps. They distinguish only in that the
former is drawn to a “method” while the latter is drawn to a “computer-
readable medium having computer-readable program code embodied therein
for causing a computer system to perform [the] method [of claim 1].” Like
the steps of method claim 1, the steps in claim 9 are not tied to a particular
machine or apparatus, nor do they transform any article into a different state
or thing. Setting aside that the claimed “medium” covers patent-ineligible
transient signals (see supra), even if for the sake of argument the “computer-
readable medium having computer-readable program code embodied
therein” of the claims covered only patentable manufactures, such a
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recitation would amount to a field-of-use limitation to the scope of the
claim.2 We note that the Appellants have construed the “computer-readable
medium having computer-readable program code embodied therein” not as a
manufacture but as an apparatus or machine. See Reply Br. 6. It is does not
appear to be a “machine” as that term has been legally defined in the context
of determining patent-eligibility for claimed subject matter under §101 and
the Appellants have not explained in what way it is. The Supreme Court has
defined the term “machine [as] a concrete thing, consisting of parts or of
certain devices and combinations of devices.” Burr v. Duryee, 68 U.S. (1
Wall.) 531, 570 (1863). This “includes every mechanical device or
combination of mechanical powers and devices to perform some function
and produce a certain effect or result.” Corning v. Burden, 56 U.S. 252, 267
(1854).”
Accordingly, we see no reason to treat these claims differently from
the method claims in determining their patent eligibility under §101. See
AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352, 1357 (Fed. Cir.
1999) (abrogated by Bilski, 545 F.3d at 995) (“Whether stated implicitly or

2 Cf. Ex parte Cornea-Hasegan, 89 USPQ2d 1557, 1562-1563 (Bd. Pat.
App. & Int. 2009) (nonprecedential):
Limiting the claim to computer readable media does not add any
practical limitation to the scope of the claim. Such a field-of-use
limitation is insufficient to render an otherwise ineligible claim patent
eligible. See id. (citing Diehr, 450 U.S. at 191-92 (noting that
eligibility under § 101 “cannot be circumvented by attempting to limit
the use of the formula to a particular technological environment.”)).
To permit such a practice would exalt form over substance and permit
Appellant to circumvent the limitations contemplated by § 101.
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explicitly, ‘we consider the scope of §101 to be the same regardless of the
form-machine or process-in which a particular claim is drafted.’”) In that
regard, for the reasons already discussed, the subject matter of claims 9-16
are not tied to a particular machine or apparatus, nor do they transform any
article into a different state or thing. Accordingly, they are directed to
nonstatutory subject matter.
For the foregoing reasons, we find that a prima facie case of
nonstatutory subject matter under 35 U.S.C. § 101 has been established for
claims 9-16 and that the Appellants’ arguments to the contrary are not
persuasive.

The rejection of claims 1-5, 7-12, and 14-21 under 35 U.S.C. §102(e) as
being anticipated by Messmer
The issue is whether Messmer describes, expressly or inherently, the
claim limitation “receiving a valuation for said auction, a risk preference,
and a rate of change of said risk preference” (claim 1; see also claim 9).
The Examiner cited col. 1, l.67 - col. 2, l. 5. Answer 5. The
Appellants disagreed that that disclosure describes the limitation at issue.
Col. 1, l.67 - col. 2, l. 5 reads: “The third valuation type is subjected to
statistically inferred valuation using underwriting values and variances of the
first and second portions and applying statistical inference to individually
value each asset in the third portion.” We do not see in this disclosure an
express description of the claim limitation. Nor has the Examiner explained
in what way this disclosure inherently describes the limitation at issue.
In responding to the Appellants’ argument, the Examiner additionally
cited col. 3, ll. 23-31 which the Examiner explained “details a risk
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preference and rate of change (See Col. 3 ll. 46-55), examiner notes that that
the HELTR score contains both a risk component and a timing component
that is interpreted as a rate of change parameter.” Answer 8-9. The
Appellants replied that the “timing aspect of the HELTR score [ ] relates to
the timing of cash flow, and has nothing to do with rate of change of risk
preference.” Reply Br. 7.
Col. 3, ll. 23-31 reads:
valuating asset portfolio 12. System 28 individually evaluates
("touches") every asset, except for a very small quantity 30 of
untouched assets considered statistically insignificant or
financially immaterial. Specifically, all assets in portfolio 12
other than quantity 30 undergo an iterative and adaptive
valuation 32 in which the assets in portfolio 12 are individually
valued, listed individually in tables and then selected from the
tables and grouped into any desired or required groups or
tranches for bidding purposes (as described below.) As in
diagram 10, underwriters begin a

Col. 3, ll. 46-55 reads:
For example, and still referring to FIG. 2, an unsampled and
non-underwritten portion 46 of a third portion 42 of portfolio
12 is subjected to a statistical inference procedure 40 using
fuzzy-C means clustering ("FCM") and a composite
High/Expected/Low/Timing/Risk ("HELTR") score to generate
two categories 48 and 50. HELTR is defined as H--High cash
flow, E--Expected cash flow, L--Low cash flow, T--Timing of
cash flow (for example in months: 0 6, 7 18, 19 36, 37 60), and
R--Risk assessment of borrower (9--boxer used by credit
analysts). Category 48 is deemed

We agree with the Appellants. We do not see in the passages supra relied
upon by the Examiner as a description, expressly or inherently, of “receiving
a valuation for said auction, a risk preference, and a rate of change of said
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risk preference” (claim 1; see also claim 9). As the Appellants have pointed
out, the HELTR score is defined by cash flow and risk assessment variables.
We do not see in what way the HELTR score, albeit it arguably includes
both a risk and a timing component, describes “a rate of change of said risk
preference” (claims 1 and 9).
Accordingly, we do not find that a prima facie case of anticipation has
been established in the first instance for the subject matter of claims 1 and 9
and the claims that depend from them over Messmer.
As for the remaining independent claim, claim 17, the issue is whether
Messmer describes, expressly or inherently, “determining a joint distribution
based on historical auction information and at least one updated valuation
for an historical auction,” “determining a density of said joint distribution,”
and “determining said risk preference based on ... said density of said joint
distribution.”
The Examiner initially grouped claim 17 with claims 1 and 9 and thus
argued for the rejection of claim 17 for the same reasons used to reject the
other two independent claims 1 and 9. Answer 7. After the Appellants
pointed out that claim 17’s claimed subject matter is different from claims 1
and 9 (App. Br. 9), the Examiner responded by citing Messmer col. 9, ll. 46-
61 and Messmer col. 4, ll. 60-63. Answer 10-11. Referring to claims 5 and
12 which include limitations akin to that of claim 17, the Appellants
responded to the (Messmer col. 4, ll. 60-63) citation by arguing that
“[n]owhere in these passages of Messmer is there any hint of determining
the density of a joint distribution . . . .”

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Col. 9, ll. 46-61 reads:
bution of outcomes. The distribution of outcomes include a
probability of winning the auction item(s) and the value gain.
By varying the value of ones own bid, a probability of winning
the auction against ones own bid price can be determined.
The following core elements are used to simulate a
competitive bidding yield, codification of market rules and
contracts into computerized business rules, codification of
potential competition/market forces, forecasted budgets and
priorities into a preference matrix, one's own bidding capacity,
preferences, risk/return tradeoffs agreed to codified into a
preference matrix, and a computerized stochastic optimization.
Analysis 160 simulates a competitive environment with
other companies having various financial capabilities bidding
against the bids calculated by system 28. In one

Col. 4, ll. 60-63 reads:
Sampling underwriting 34 is accomplished using two
procedures, a full sampling 106 procedure and a partial
sampling 108 procedure. Full sampling 106 is utilized for

We have reviewed the passages supra but the Examiner does not
explain and we do not see where in these passages Messmer expressly or
inherently describes “determining a joint distribution based on historical
auction information and at least one updated valuation for an historical
auction,” “determining a density of said joint distribution,” and “determining
said risk preference based on ... said density of said joint distribution.”
Although the disclosure of the “distribution of outcomes include a
probability of winning the auction [and] varying the value of one’s bid, a
probability of winning the auction ... can be determined” (Messmer col. 9, ll.
46-50) arguably describes determining a distribution based on historical
auction information and at least one updated valuation for an historical
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auction, there is no description, expressly or inherently, of “determining a
density of said joint distribution” and “determining said risk preference
based on ... said density of said joint distribution,” as claim 17 requires.
Accordingly, we do not find that a prima facie case of anticipation has
been established in the first instance for the subject matter of claim 17 and
the claims that depend from it over Messmer.

CONCLUSIONS
The rejection of claims 1-22 under 35 U.S.C. §101 as being directed
to non-statutory subject matter is affirmed.
The rejection of claims 1-5, 7-12, and 14-21 under 35 U.S.C. §102(e)
as being anticipated by Messmer is reversed.

DECISION
The decision of the Examiner to reject claims 1-22 is affirmed.

AFFIRMED

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