Final Written Decision CBM2013-00027

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Takeaway: Patent Owner cannot incorporate its arguments in its Response regarding patentability of patent claims into its Motion to Amend to address how proposed substitute claims are patentably distinct from the prior art of record.

In its Final Written Decision, the Board found that Petitioner had demonstrated by a preponderance of the evidence that claims 1-23 of the ’419 Patent are indefinite under 35 U.S.C. § 112 ¶ 2, and that claims 1-4, 6-23, and 41-49 are unpatentable under 35 U.S.C. § 103(a). The Board found that Petitioner had not demonstrated by a preponderance of the evidence that claim 5 is unpatentable under 35 U.S.C. § 103(a). The Board denied Patent Owner’s Motion to Amend. The ’419 Patent generally relates to the conditional trading of securities, such as convertible bond swaps, risk arbitrage, and combinations thereof, in both listed and over-the-counter markets via one or more electronic networks.

The Board first discussed whether the ’419 Patent is eligible for covered business method review. In the Decision on Institution, the Board already concluded it was. In its Response, Patent Owner argued that a review of the ’419 Patent was improperly instituted as to claims 1-23 on the basis of 35 U.S.C. § 112 ¶ 2, because questions of unpatentability under that section are ineligible for review under the transitional program for covered business method patents. However, the Board explained that section 18(a)(1) of the AIA provides that the transitional program for covered business method patents will be regarded as a post-grant review, which allows a petitioner to challenge the unpatentability of the patent for failure to many any requirement of section 112, except best mode. In its Response, Patent Owner also argued that the ’419 Patent falls within the purview of the technological invention exclusion set forth in 37 C.F.R. § 42.301(b). Specifically, Patent Owner appears to contend that the patent involves “novel software tools and graphical user interfaces that are used by the electronic trading industry workers to implement trading or asset allocations strategies,” which was an example given in the legislative history for subject matter that should be subject to the transitional program for covered business method patents. However, Patent Owner failed to explain adequately how the ’419 Patent includes novel software tools and graphical user interfaces.

The Board then turned to claim construction, noting that terms should be given their broadest reasonable construction in light of the specification. The Board first examined the meaning of certain claim terms in its decision to institute. Patent Owner only proposed an alternative claim construction to the constructions in the Decision to Institute in for two terms “external price feed” and “means for comparing.” Petitioner did not propose alternative claim interpretations in its Reply. Thus, the Board maintained its constructions in the Decision to Institute, and only further discussed the two terms mentioned above.

In the Decision to Institute, the Board construed the claim phrase “external price feed” as “price data received from outside of the conditional order transaction network.” In its Response, Patent Owner asserted that “outside” the network means either a marketplace trading, but not aggregating orders for, the same securities or items as the originating CORE trading engine, or a diverse marketplace. To support this assertion, Petitioner relies upon testimony of its expert witness as well as the district court’s claim construction of the term “external.” The Board was not persuaded, and maintained its original construction, because Patent Owner’s proposed claim construction was overly narrow because the proposed additional features are not necessary to give meaning to what the inventor means by the claim term.

In the Decision to Institute, the Board construed the claim phrase “means for matching or comparing” to include two alternative functions that should be addressed separately. The parties did not dispute the Board’s initial construction of the claim phrase “means for matching,” but did dispute the initial construction of the claim phrase “means for comparing.” Patent Owner asserted that certain portions of the Specification of the ’419 Patent provided corresponding structure that performs the recited function of “comparing.” However, the Board did not find that the Specification provided sufficient structure, and thus construed “means for comparing” as simply a computer programmed to compare data. Patent Owner argued that the CORE trading engine disclosed in Figure 1 of the ’419 Patent corresponds to a general purpose computer and that Table 1 of the ’419 Patent discloses conditions that collectively define an algorithm that compares orders. Petitioner, in its Reply, argued that the Specification fails to disclose an algorithm for performing the recited function of “comparing,” because the Table merely discloses types of orders that may be handled by the CORE trading engine, without more. The Board agreed with Petitioner that the disclosure of the conditions in Table 1 was insufficient because it did not explain how the conditions are used to compare orders, such as the sequence of steps that uses these conditions to compare orders. Because there is insufficient structure in the Specification for the term “means for comparing,” the claims were found to be indefinite.

Next, the Board discussed Petitioner’s first ground of unpatentability, that the challenged claims are obvious over combinations of CFTC and Lupien; CFTC, Lupien, and Wilson, CFTC, Lupien, and Grody; CFTC, Lupien, and Dictionary; and CFTC, Lupien, and Globex User Guide. All of the grounds were instituted by the Board. In its Response, Patent Owner argued that (1) the combination of CFTC and Lupien does not teach using an external price feed; (2) Petitioner fails to provide a proper reason for combining the teachings of CFTC and Lupien; (3) modifying CFTC’s automated order matching system as proposed would render it inoperable for its intended purpose; (4) the combination of CFTC, Lupien, and Wilson fails to teach yield spreads as required by dependent claim 5; (5) the combination of CFTC and Lupien does not teach options required by dependent claim 15; and (6) the combination of CFTC and Lupien does not teach using at least one price from an external price feed as an independent variable of an algorithm, as required by dependent claims 44, 46, and 48, and an input to the constant variable, as required by dependent claims 45, 47, and 49. The Board was not persuaded by Patent Owner’s arguments, except for the argument regarding dependent claim 5. For example, the Board found that Patent Owner’s arguments were not commensurate in scope with the claim limitations at issue, and that Petitioner provided an adequate reason to combine the references.

The Board then turned to Patent Owner’s Motion to Amend. Patent Owner moved to substitute claims 50-72 for challenged claims 1-23 if it is determined that claims 1-23 were indefinite. Proposed substitute claim 50 is an independent claim that is identical to claim 1, except that the phrase “or comparing” has been removed. The Board noted that Patent Owner bears the burden of proof in demonstrating the patentability of proposed substitute claims 50-72 over the prior art of record, as well as the prior art in general. Patent Owner argued that its arguments in the Patent Owner Response with regard to patentability of claim 1 should suffice for showing that substitute claim 50 was not obvious over the cited references, because substitute claim 50 only has the same scope, except for eliminating the optional “means for comparing.” The Board explained that because it found claim 1 to be obvious over the proposed combination of references it would find that substitute claim 50 was also obvious. Further, the Board explained that 37 C.F.R. § 42.6(a)(3) prohibits incorporating arguments by reference, and thus Patent Owner is precluded from incorporating arguments regarding the patentability of independent claim 1 from its Patent Owner Response into its Motion to Amend to address how proposed substitute claim 50 is patentably distinct from the prior art of record.

Chicago Mercantile Exchange, Inc. v. 5th Market, Inc., CBM2013-00027
Paper 33: Final Written Decision
Dated: December 17, 2014
Patent: 6,418,419 B1
Before: Jameson Lee, Joni Y. Chang, and Michael R. Zecher
Written by: Zecher

Related Proceedings: CBM2014-00114 (7,024,387); Reexam Control Nos. 90/011,603 and 90/011,618; Fifth Market, Inc. v. CME Group Inc., No. 08-0520 GMS (D. Del.)