Takeaway: A claim will not be found to be patent-eligible under 35 U.S.C. § 101 if it is directed to unpatentable abstract ideas but does not also provide sufficient meaningful limitations to transform the abstract ideas into patent-eligible applications of the abstractions.

In its Final Written Decision, the Board found that Petitioner had shown by a preponderance of the evidence in CBM2013-00049 that claims 1-28 of the ’498 patent are unpatentable under 35 U.S.C. § 101; but that Petitioner had not shown in IPR2014-00097 that claims 1, 8, 9, 11, 14, 15, and 23 of the ’498 patent are unpatentable in view of the asserted prior art.

In CBM2013-00049, Petitioner had challenged claims 1-28 of the ’498 patent under 35 U.S.C. § 101, alleging that these claims were patent-ineligible in view of legal precedent including the U.S. Supreme Court ruling in Alice Corp. Pty. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014). Among the various papers filed by Patent Owner subsequent to the Petition was a contingent Motion to Amend.

In related IPR2014-00097, Petitioner had challenged claims 1, 8, 9, 11, 14, 15, and 23 in view of the prior art. In particular, the Board had instituted inter partes review of these claims based on the following grounds: anticipation of claims 1 and 8 under 35 U.S.C. § 102(e) in view of Tilfors; and obviousness of claims 9, 11, 14, 15, and 23 in view of Tilfors taken in combination with Baird.

The ’498 patent is directed to “automated trading systems for option contracts” (also known as “options”). As characterized by the Board, “the claimed invention is directed to methods for managing the risk of a maker of an options market in an automated trading system.” Among the challenged claims, claims 1 and 8 are independent claims, and the remaining claims are dependent claims.

In CBM2013-00049, after addressing claim construction, the Board considered Petitioner’s patent-ineligibility arguments. The Board also considered Patent Owner’s response to such arguments, namely, “that its claims are directed to patent-eligible processes because, for example, the claims include specific meaningful limitations that must be performed on programmed computers, electronic exchanges that incorporate the claimed features were an improvement over systems without them, the claimed steps cannot be performed manually, the claims are not directed to similar or substantially similar methods of managing risk marketmakers previously used, and the claims do not preempt hedging risk management techniques.” Applying the framework from Mayo Collaborative Servs. v. Prometheus Labs., Inc. framework emphasized by the Supreme Court in Alice Corp., the Board then analyzed the claims to ascertain whether they embodied “a patent-eligible application of an abstract idea or are directed merely to nothing more than the abstract idea itself.”

As for the first prong of this two-step test, the Board concluded that Patent Owner had not disputed that the claims are directed to an abstract idea (i.e., the abstract concept of “managing trading risk”). As for the second prong, the Board held that the challenged claims did not “incorporate sufficient meaningful limitations to ensure that the claims are more than just an abstract idea.”

Among the reasons given by the Board in support of its reaching this conclusion were that: (1) “the claims do not require any specialized hardware;” (2) “the ’498 patent Specification discloses that the claimed methods can be performed by a generic purpose computer in a generic programming and processing environment;” (3) “the Specification explains that the claimed methods can be performed using known off-the-shelf computer hardware;” (4) the testimony of Dr. Sandholm relied on by Patent Owner was not found by the Board to be persuasive, “because it generally relates to commercial embodiments and is not supported by the ’498 patent Specification;” (5) “the claims amount to nothing more than instructions to apply previously known methods of electronic trading and trade risk management using a generic computer to perform generic computer functions—calculating a risk and determining if that risk exceeds a threshold, and, if so, automatically modifying a quote;” and (6) the challenged claims “do nothing more than automate an abstract and mental risk management technique used by market makers in open outcry exchanges for decades.”

The Board concluded its analysis in CBM2013-00049 by rejecting Patent Owner’s argument that “35 U.S.C. § 101 is not a proper ground for covered business method patent review.” According to the Board, both the Supreme Court and the U.S. Court of Appeals for the Federal Circuit have recognized that compliance with 35 U.S.C. § 101 is a condition for patentability, and the legislative history of the AIA (America Invents Act) supports this view as well.

Finally, the Board denied Patent Owner’s contingent Motion to Amend because it was the Board’s view that the addition of recitations “regarding generic computer devices” did not sufficiently limit the claims “or add concrete ties to make the claims less abstract.” Thus, the Board concluded that the claims as proposed to be amended did not recite patent eligible subject matter for essentially the same reasons as raised with respect to the original claims and, consequently, denied the contingent Motion to Amend.

In IPR2014-00097, the Board found that Petitioner had not established by a preponderance of the evidence that the primary reference to Tilfors teaches the step of “determining a risk level and an aggregate risk level associated with said trade” as recited in each of independent claims 1 and 8. In particular, the Board found that Petitioner had not sufficiently established that Tilfors taught either “determining a risk level . . . associated with said trade” or “determining . . . an aggregate risk level associated with said trade.” Since all of the proposed grounds were based on Tilfors, the Board concluded that Petitioner had not shown that claims 1, 8, 9, 11, 14, 15, and 23 of the ’498 patent were unpatentable in view of the asserted prior art.

International Securities Exchange, LLC v. Chicago Board Options Exchange, Inc., CBM2013-00049, IPR2014-00097
Paper 53: Final Written Decision
Dated: March 2, 2015
Patent: 7,356,498 B2
Before: Justin T. Arbes, Rama G. Elluru, and James B. Arpin
Written by: Elluru
Related Proceedings: CBM2013-00049 and IPR2014-00097 each challenge the patentability of claims of the subject‘498 patent; other related proceedings include CBM2013-00050 and IPR2014-00098 (each directed to U.S. Patent No. 7,980,457, a continuation of the subject ‘798 patent); and CBM2013-00051 (directed to U.S. Patent No. 8,266,044, a continuation of the ‘457 patent)