filed: january 14, 2015 filed on behalf of: chicago mercantile … · 2020-03-13 · u.s. patent...

Paper No. __ Filed: January 14, 2015

Filed on behalf of: Chicago Mercantile Exchange, Inc. By: Erika H. Arner Timothy P. McAnulty FINNEGAN, HENDERSON, FARABOW,

GARRETT & DUNNER, L.L.P. Telephone: 202-408-4000

Facsimile: 202-408-4400 E-mail: [email protected] [email protected]

UNITED STATES PATENT AND TRADEMARK OFFICE

______________________

BEFORE THE PATENT TRIAL AND APPEAL BOARD

______________________

CHICAGO MERCANTILE EXCHANGE, INC.

Petitioner

v.

FIFTH MARKET INC.

Patent Owner ______________________

CASE UNASSIGNED Patent No. 7,024,387

______________________

PETITION FOR COVERED BUSINESS METHOD REVIEW

U.S. Patent No. 7,024,387 Petition for Covered Business Method Review

TABLE OF CONTENTS

List of Exhibits ......................................................................................................... vi

I. Introduction ...................................................................................................... 1

II. Mandatory Notices ........................................................................................... 2

III. Payment of Fees ............................................................................................... 3

IV. Grounds for Standing ....................................................................................... 3

A. At Least One Challenged Claim is Unpatentable ................................. 3

B. The ’387 Patent is a Covered Business Method Patent ........................ 3

1. The ’387 patent claims cover financial products or services. ....................................................................................... 4

2. Claims 1 and 2 are not directed to a “Technological Invention.” ................................................................................... 5

C. CME has been Sued for Infringement of the ’387 Patent and is not Estopped .......................................................................................... 6

V. Statement of Precise Relief Requested for Each Claim Challenged ............... 6

VI. The ’387 Patent ................................................................................................ 8

A. Background of the Technology ............................................................. 8

B. Ex Parte Reexamination History of the ’419 Patent ........................... 11

C. Inter Partes Reexamination of the ’387 Patent ................................... 12

D. Covered Business Method Review History of the ’387 Patent ........... 13

VII. Claim Construction ........................................................................................ 14

A. One of Ordinary Skill in the Art.......................................................... 14

B. Claim Terms ........................................................................................ 15

1. “means for matching” ............................................................... 16


ii

2. “means for matching or comparing” ......................................... 18

VIII. Claims 1 and 2 of the ’387 Patent are Unpatentable ..................................... 20

A. Claims 1 and 2 are Unpatentable under 35 U.S.C. § 101 ................... 20

1. Claims 1 and 2 of the ’387 patent recite an abstract idea ......... 21

2. Because the ’387 patent does not add “significantly more,” the abstract idea recited in claims 1 and 2 is not patent-eligible ............................................................................ 23

3. Because the Supreme Court vacated Ultramercial, the Board’s previous reliance on Ultramercial to deny institution of the § 101 grounds in the covered business method review of the related ’419 patent no longer applies ....................................................................................... 25

B. Claims 1 and 2 are Indefinite under 35 U.S.C. § 112, Second Paragraph because they Fail to Disclose an Algorithm Corresponding to either the “Means for Matching” or the “Means for Matching or Comparing” Limitations .............................. 26

1. The ’387 patent does not disclose any structure for the claimed “means for matching” .................................................. 27

2. The ’387 patent does not disclose any structure for matching or comparing orders .................................................. 36

C. CFTC Anticipates Claim 1 under 35 U.S.C. § 102 ............................. 41

D. CFTC and Lupien Render Claim 2 Unpatentable as Obvious under 35 U.S.C. § 103(a) ..................................................................... 47

E. Clemons and CFTC Render Claim 1 Unpatentable under 35 U.S.C. § 103(a) .................................................................................... 54

F. Clemons, CFTC, and Lupien Render Claim 2 Unpatentable under 35 U.S.C. § 103(a) ..................................................................... 60

IX. Conclusion ..................................................................................................... 66


iii

TABLE OF AUTHORITIES

Page(s) CASES

Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014) ........................................................................... 20-22, 25 Bilski v. Kappos, 130 S.Ct. 3218 (2010) ........................................................................................ 21 KSR Int’l Co. v. Teleflex Inc.,

127 S. Ct. 1727 (2007) ............................................................................ 51, 56, 62 Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012) ..................................................................... 20, 21, 23-26 Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014) ....................................................................................... 26 Wildtangent, Inc. v. Ultramercial, LLC, 134 S. Ct. 2870 (2014) ....................................................................................... 25 Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013), cert. denied, 134 S. Ct. 2871 (2014) ............... 23 Aristocrat Techs. Australia Pty Ltd. v. Int'l Game Tech., 521 F.3d 1328 (Fed. Cir. 2008) .................................................................... 19, 27 Augme Techs., Inc. v. Yahoo! Inc., 755 F.3d 1326 (Fed. Cir. 2014) .................................................................... 29, 30 Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Canada (U.S.), 687 F.3d 1266 (Fed. Cir. 2012) .......................................................................... 22 Default Proof Credit Card Sys., Inc. v. Home Depot U.S.A., Inc., 412 F.3d 1291 (Fed. Cir. 2005) .................................................................... 34, 39 ePlus, Inc. v. Lawson Software, Inc., 700 F.3d 509 (Fed. Cir. 2012) ............................................................................ 29


iv

Ergo Licensing LLC v. Carefusion 303, Inc., 673 F.3d 1361 (Fed. Cir. 2012) .......................................................................... 27 Finisar Corp. v. DirecTV Grp., Inc., 523 F.3d 1323 (Fed. Cir. 2008) .......................................................................... 30 Ibormeith IP, LLC v. Mercedes-Benz USA, LLC, 732 F.3d 1376 (Fed. Cir. 2013) .......................................................................... 27 In re Donaldson Co., 16 F.3d 1189 (Fed. Cir. 1994) ............................................................................ 16 Medtronic, Inc. v. Advanced Cardiovascular Sys., Inc., 248 F.3d 1303 (Fed. Cir. 2001) .................................................................... 34, 39 Noah Sys. Inc. v. Intuit Inc., 675 F.3d 1302 (Fed. Cir. 2012) .................................................................... 16, 17 Phillips v. AWH Corp.,

415 F.3d 1303 (Fed. Cir. 2005) (en banc) .......................................................... 14 Triton Tech of Texas, LLC v. Nintendo of Am., Inc., 753 F.3d 1375 (Fed. Cir. 2014) ........................................................ 27, 31, 36, 41 Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, vacated, 134 S. Ct. 2870 (2014) ................................................ 25 Ultramercial, Inc. v. Hulu, LLC,

No. 2010-1544 (Fed. Cir. Nov. 14, 2014) .................................................... 25-26 WMS Gaming, Inc. v. Int'l Game Tech., 184 F.3d 1339 (Fed. Cir. 1999) .................................................................... 19, 27 MotionPoint Corp. v. TransPerfect Global, Inc., CBM2014-00060, Paper 8 (July 23, 2014) ................................................... 30, 31 SAP Am., Inc. v. Versata Dev. Grp., Inc., CBM2012-00001, Paper 70 (June 11, 2013) ................................................ 21, 24


v

STATUTES

35 U.S.C. § 101 .................................................................................................passim

35 U.S.C. § 102 .................................................................................................passim

35 U.S.C. § 103 .................................................................................................passim

35 U.S.C. § 112 .................................................................................................passim

35 U.S.C. § 321 .......................................................................................................... 6

35 U.S.C. §§ 321-329 ................................................................................................ 1

OTHER AUTHORITIES

37 C.F.R. § 42.15 ....................................................................................................... 3

37 C.F.R. § 42.203 ..................................................................................................... 3

37 C.F.R. § 42.300 ......................................................................................... 1, 14, 15

37 C.F.R. § 42.301 ................................................................................................. 4, 5

37 C.F.R. § 42.302 ..................................................................................................... 6

37 C.F.R. § 42.304 ............................................................................... 3, 4, 15, 17, 20

Office Patent Trial Practice Guide, 77 Fed. Reg. 48756 (August 14, 2012) ........... 15


vi

List of Exhibits

Exhibit 1001. U.S. Patent No. 7,024,387 to Nieboer et al.

Exhibit 1002. Declaration of Craig Pirrong, Ph.D.

Exhibit 1003. CFTC Report on NYMEX’s Proposal to Implement the Access Trading System (Dec. 7, 1992) (“CFTC”)

Exhibit 1004. U.S. Patent No. 5,101,353, issued March 31, 1992 to Lupien et al. (“Lupien”)

Exhibit 1005. Institution Decision dated October 9, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1006. Declaration of Craig Pirrong, Ph.D. dated June 18, 2013, in CBM2013-00027, U.S. Patent No. 6,418,419

Exhibit 1007. Declaration of Craig Pirrong, Ph.D. dated April 3, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1008. Petition dated June 18, 2013, in CBM2013-00027, U.S. Patent No. 6,418,419

Exhibit 1009. Institution Decision dated December 18, 2013, in CBM2013-00027, U.S. Patent No. 6,418,419

Exhibit 1010. U.S. Patent No. 6,418,419 to Nieboer et al.

Exhibit 1011. Petition dated April 3, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1012. Patent Owner Preliminary Response dated July 11, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1013 Petitioner’s Request for Rehearing, dated October 23, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1014. Right of Appeal Notice dated August 26, 2013, in Inter Partes Reexamination Control No. 95/002,032, U.S. Patent No. 7,024,387 as obtained from PAIR


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Exhibit 1015. Appeal Brief dated November 25, 2013, in Inter Partes Reexamination Control No. 95/002,032, as obtained from PAIR

Exhibit 1016. Non-Final Office action dated March 27, 2012, in merged Ex Parte Reexamination Control Nos. 90/011,603 and 90/011,618, U.S. Patent No. 6,408,419 as obtained from PAIR

Exhibit 1017. Third Amended Complaint filed in Fifth Market, Inc. v. CME Group Inc. et al., Civil Action No. 08-0520 GMS, United States District Court for the District of Delaware dated August 15, 2008

Exhibit 1018. Clemons, E. and Bruce W. Weber, Restructuring Institutional Block Trading: An Overview of the OptiMark System, Working Paper Series S-97-21, N.Y. Univ. Salomon Center (Oct. 1997) (“Clemons”)

Exhibit 1019. Final Written Decision dated December 17, 2014, in CBM2013-00027, U.S. Patent No. 6,418,419

Exhibit 1020. Decision on Petitioner’s Request for Rehearing dated November 18, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1021 Petitioner’s Motion to Stay Inter Partes Reexamination of U.S. Patent No. 7,024,387, dated November 5, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1022 Patent Owner’s Opposition to Motion to Stay Inter Partes Reexamination of U.S. Patent No. 7,024,387, dated November 12, 2014, in CBM2014-00114, U.S. Patent No. 7,024,387

Exhibit 1023 Decision Denying Petitioner’s Motion to Stay Inter Partes Reexamination of U.S. Patent No. 7,024,387, dated January 9, 2015, in CBM2014-00114, U.S. Patent No. 7,024,387


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I. Introduction

Chicago Mercantile Exchange, Inc. (“CME” or “Petitioner”) requests that

covered business method review be instituted for claims 1 and 2 of the ’387 patent

per 35 U.S.C. §§ 321-329 and 37 C.F.R. § 42.300 et seq. The ’387 patent is

directed to an electronic trading system for the conditional trading of items such as

securities. In general, the ’387 patent describes a system and method for the

conditional trading of items over one or more electronic networks. Ex. 1001 at

1:10-12. It describes “the buying and selling of securities or contracts where the

offer to purchase or sell the property may be conditioned upon factors such as the

ability to purchase or sell other property or the actual purchase or sale of other

property.” Id. at Abstract.

“Conditional” trading has long been known in the financial services

industry, with systems implementing so-called conditional trades well before the

earliest possible effective filing date of the ’387 patent. For example, the CFTC

prior art reference (Ex. 1003) describes the NYMEX ACCESS electronic trading

system that implemented conditional trades such as contingent orders and spread

orders at least as early as 1993. The Office likewise found that the CFTC reference

disclosed conditional trading when instituting post-grant review of claims 4, 6-8,

and 10 of the ’387 patent in CBM2014-00114. Ex. 1005 at 29. And the Office

similarly found that the CFTC reference discloses conditional trading when


2

holding claims 1-23 and 41-49 of U.S. Patent No. 6,418,419 patent (“the ’419

patent”) unpatentable in view of CFTC and Lupien in its Final Written Decision in

CBM2013-00027. Ex. 1019 at 27, 55-56.

As discussed in more detail below, claims 1 and 2 of the ’387 patent are

unpatentable under §§ 101, 102, 103, and 112, and the Board should institute this

Petition for Covered Business Method Patent Review of the ’387 patent.

II. Mandatory Notices

Real Parties-in-Interest: Chicago Mercantile Exchange, Inc.

Related Matters: Fifth Market, Inc. v. CME Group Inc. et al., Civil Action

No. 08-0520 GMS (D. Del. August 15, 2008), pending; Ex parte Reexamination

Control Nos. 90/011,603 and 90/011,618 for U.S. Patent No. 6,418,419,

concluded; Inter partes Reexamination Control No. 95/002,032 for the ’387 patent,

pending; Covered Business Method Patent Review Case No. CBM2013-00027 for

U.S. Patent No. 6,418,419, concluded; and Covered Business Method Patent

Review Case No. CBM2014-00114 for U.S. Patent No. 7,024,387, pending.

Lead Counsel: Erika A. Arner, Reg. No. 57,540; telephone: 571.203.2754;

[email protected].

Back-up Counsel: Timothy P. McAnulty; Reg. No. 56,939; telephone

202.408.4348; [email protected].

Service Information: Please send all correspondence to the lead counsel at:


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Finnegan, Henderson, Farabow, Garrett & Dunner, LLP; 11955 Freedom Drive

Reston, VA 20190-5675. CME consents to service by e-mail at the following

addresses: [email protected], [email protected],

[email protected].

III. Payment of Fees

The required fees are submitted herewith in accordance with 37 C.F.R.

§§ 42.203(a) and 42.15(b). If any additional fees are due during this proceeding,

the Office is authorized to charge such fees to Deposit Account No. 06-0916.

IV. Grounds for Standing

Pursuant to 37 C.F.R. § 42.304(a), CME certifies that the ’387 patent is

available for covered business method review and that CME is not barred or

estopped from requesting covered business method review of the ’387 patent

challenging the patent claims on the grounds identified in this petition.

A. At Least One Challenged Claim is Unpatentable

As further detailed below, claims 1 and 2 of the ’387 patent are not patent

eligible under § 101. In addition, claims 1 and 2 are each unpatentable under one or

more of 35 U.S.C. §§ 102, 103, and 112. Thus, it is “more likely than not that at

least one of the claims of the ’387 patent is unpatentable.” 35 U.S.C. § 324(a).

B. The ’387 Patent is a Covered Business Method Patent

The Board has already determined that “the ’387 patent is a covered business


4

method patent eligible for a covered business method patent review.” Ex. 1005 at

12. And the ’387 patent has very similar claims to its parent, the ’419 patent, which

the Board also found to be eligible for a covered business method patent review.

Ex. 1009 at 10. However, in accordance with § 18(d)(1) of the AIA and 37 C.F.R.

§ 42.304(a), CME provides the following details showing that the Board correctly

determined that the ’387 patent is a covered business method patent.

1. The ’387 patent claims cover financial products or services.

The ’387 patent “claims a method or corresponding apparatus for performing

data processing or other operations used in the practice, administration, or

management of a financial product or service . . . .” Leahy-Smith America Invents

Act, Pub. L. 112-29 (“AIA”) § 18(d)(1); see also 37 C.F.R. § 42.301. For example,

the claims of the ’387 patent recite subject matter that is financial in nature, such as

an “order transaction network that matches or compares buy and sell orders for a

plurality of items based upon conditions set forth within the order” and “one of the

conditions being the requirement that two or more securities are tradable

contemporaneously as a contingent trade of those respective securities.” Ex. 1001

at 27:14-16, 34-37.

Additionally, both the ’387 and ’419 patents are directed to electronic

trading systems and describe financial activities such as “contingency trading of

securities such as convertible bond ‘swaps,’ risk arbitrage, and pairs in both listed


5

and over-the-counter markets.” Ex. 1001 at 1:14-16; Ex. 1010 at 1:10-14. Thus, the

’387 patent, like its parent the ’419 patent, discloses and claims the administration

or management of financial products or services, and is a covered business method

patent-eligible for review under § 18 of the AIA.

2. Claims 1 and 2 are not directed to a “Technological Invention.”

Claims 1 and 2 of the ’387 patent are not directed to a technological

invention as defined in AIA § 18(d)(2) and 37 C.F.R. § 42.301(b). In particular, the

’387 patent claims fail to recite any technological feature that is novel and

unobvious over the prior art as required by Rule 301(b). And they do not solve a

technical problem using a technical solution. Accordingly, covered business

method review is appropriate for the ’387 patent.

The few claimed features that might be considered “technical,” e.g.,

“network,” “display device,” “trader terminals” and “trader workstations” were

well-known in 1999. See, e.g., Ex. 1002 at ¶ 71. Even if they are technological,

these features are not novel or nonobvious, and do not introduce a technical

solution to a technical problem in the context of the ’387 patent claims. Further,

the ’387 patent admits that electronic trading networks were well known before the

’387 patent. Ex. 1001 at 1:43-49. Thus, the alleged invention of the ’387 patent, as

claimed, is at most directed to solving a financial problem―a conditional order

transaction network allowing traders to execute conditional trade orders. It is not a


6

technical solution.

In addition, the Board already determined that the ’387 patent and its parent,

the ’419 patent, are not “technological invention[s],” in related matters CBM2014-

00114 and CBM2013-00027. Ex. 1005 at 11-12; Ex. 1009 at 9-10; Ex. 1019 at 10-

11. The Board specifically explained that the electronic trading system of the ’387

and ’419 patents purport to solve a financial problem rather than a technical

problem. Id.

C. CME has been Sued for Infringement of the ’387 Patent and is not Estopped

The ’387 patent is one of two patents in the litigation Fifth Market, Inc. v.

CME Group Inc. et al., Civil Action No. 08-0520 GMS, in the United States

District Court for the District of Delaware. Ex. 1017. The other patent asserted in

the Fifth Market suit is the ’419 patent. CME is not estopped from challenging the

claims on the grounds identified in the petition. 37 C.F.R. § 42.302(b).

V. Statement of Precise Relief Requested for Each Claim Challenged

CME respectfully requests review under 35 U.S.C. § 321 of claims 1 and 2

of the ’387 patent, and cancellation of these claims as unpatentable.

Claims 1 and 2 of the ’387 patent are unpatentable in view of the following

prior art references and unpatentability grounds:

Reference 1: CFTC Report on NYMEX’s Proposal to Implement the Access

Trading System (Dec. 7, 1992) (“CFTC” Ex. 1003), prior art to the ’387 patent


7

under 35 U.S.C. § 102(b).

Reference 2: U.S. Patent No. 5,101,353, issued March 31, 1992 to Lupien et

al. (“Lupien” Ex. 1004), prior art to the ’387 patent under 35 U.S.C. § 102(b).

Reference 3: Clemons, E. and Bruce W. Weber, Restructuring Institutional

Block Trading: An Overview of the Optimark System, Working Paper Series S-97-

21, N.Y. Univ. Salomon Center (Oct. 1997) (“Clemons” Ex. 1018), prior art to the

’387 patent under 35 U.S.C. § 102(b).

Ground 1: Claims 1 and 2 are unpatentable under 35 U.S.C. § 101.

Ground 2: Claims 1 and 2 are unpatentable under 35 U.S.C. § 112, second

paragraph, as being indefinite.

Ground 3: Claim 1 is anticipated under 35 U.S.C. § 102(b) by CFTC.

Ground 4: Claim 2 is unpatentable under 35 U.S.C. § 103(a) as being

obvious over CFTC in view of Lupien.


obvious over Clemons in view of CFTC.


obvious over Clemons in view of CFTC and further in view of Lupien.

CME’s proposed grounds for institution are not redundant because they

present different statutory bases of unpatentability. The prior art grounds, in

addition to presenting different statutory bases of unpatentability, are based on


8

different prior art references and propose different combinations of known

references according to different rationales.

In addition, differences exist between the applied prior art. For example,

while CFTC and Clemons each describe electronic trading systems for trading

algorithmic orders, they separately disclose different types of trading platforms that

enable different types of trading strategies. In particular, CFTC discloses

algorithmic and conditional trading where two items are traded contemporaneously

as part of a spread trade. On the other hand, Clemons discloses algorithmic and

conditional trading but does not necessarily disclose contemporaneously trading

two items. To the extent that CFTC or Clemons may not explicitly disclose a

display device for displaying selected parameters of buy and sell orders in a

prioritized sequence in a descending order of favorability across a display field,

with the most favorable order at one distal end and the least favorable at the other

distal end, Lupien discloses a variety of user display screens and teaches that users

are enabled to change the way data is displayed and ranked.

VI. The ’387 Patent

A. Background of the Technology

The ’387 patent is generally directed to an electronic trading system for the

conditional trading of items, e.g., securities. In particular, the ’387 patent discloses

an electronic order system for matching “algorithmic order[s].” Ex. 1001 at 7:40-


9

43; 17:39-47. According to the ’387 patent, an algorithmic order is an order that

links the price of the order with a changing price of another item with constraints

and conditions in the general form of y = mx + b. See id. at 7:49-56. In a preferred

embodiment, the items are security instruments, such as stocks, bonds, options,

futures, and forward contracts or swap contracts. Id. at 2:53-56.

The types of trades described in the ’387 patent are not new. Ex. 1002 at

¶ 56. They are well-known, conventional transactions that were executed in trading

pits and electronic exchanges and described in the prior art long before the ’387

patent was filed. Id. For example, CFTC describes a variety of well-known order

types that include various constraints and conditions, including limit orders,

contingent orders (such as market-if-touched orders and stop limit orders), and

spread orders. See, e.g., Ex. 1003 at 19.

CFTC and the ’387 patent both discuss spread orders. See, e.g., Ex. 1003 at

27-34; Ex. 1001 at 25:39-55. Spread orders are executed by the simultaneous

purchase of one item and sale of another item in a single order. See, e.g., Ex. 1003

at 27-34. Each component of a spread order is called a “leg.” Ex. 1002 at ¶ 57. The

price of a spread order is the differential (or mathematical difference) between the

prices of the legs. Id. A generic spread order can be written as

Porder ≥ Q1·P1 - Q2·P2 (1)

where Porder is a constant representing the price of the entire order; Q1 and Q2 are


10

the quantities of the two legs; and P1 and P2 are the prices of the two legs. Id. The

price of the order (Porder) is also dependent on the changing prices of the two legs

(P1 and P2). Id. A generic spread order can also be written as

P2 ≥ (1/ Q2)*(Qi1·P1 - Porder) (2)

where the price of one of the legs (P2) is dependent (a dependent variable) on the

price of the other leg (P1) (an independent variable) and the price of the order

(Porder). Id.

The ’387 patent explains that the conditional order transaction network may

interface with multiple external exchanges outside the trading system, and orders

may be conditioned on data received from the external exchanges. Ex. 1001 at 2:13-

17; 2:49-53; 2:61-67; 5:53-59; 21:1-26. For example, the ’387 patent explains that

“[t]he number of items and the amount of cash that exchanges hands is determined

programmatically in accordance with predefined constraints specified when orders

are made and as a product of data originating outside of the system, i.e., external data

sources, and provided to it by external agents.” Id. at 2:61-67 (emphasis added).

This feature was also well known in the art before the filing of the ’387

patent. Ex. 1002 at ¶ 59. For example, Lupien discloses an electronic trading

system that includes an external price feed for making external market data, e.g.,

quotes, trades, and other data, from securities information vendors available to

clients. Ex. 1004 at 6:20-22; Ex. 1002 at ¶ 59. Lupien also discloses that its trading


11

system provides users the opportunity to execute sales and purchases that are

external to its system. Ex. 1004 at 6:66-7:2.

Claim 1 of the ’387 patent requires an algorithmic order that “can be

represented as a line in two dimensional space with constraints having the price of

one security as one axis and the price of another security as its other axis.”

Ex. 1001 at 27:44-47. This is a natural and inherent property of every conditional

trade involving multiple items, such as spread orders. Ex. 1002 at ¶ 60. Formula

(2) reflects the inherent linear relationship between the prices of the legs in a

spread order, much like the well-known linear formula y = mx + b, which is

routinely represented in two dimensional space. Id.

B. Ex Parte Reexamination History of the ’419 Patent

The ’419 patent was the subject of merged ex parte reexamination

proceeding nos. 90/011,603 and 90/011,618.

During the reexamination of the ’419 patent, the Office acknowledged the

disclosure in CFTC of an algorithmic spread order and the relationship between the

legs and the order price of such an order that can be represented as a line in two-

dimensional space. Ex. 1016 at 21. In particular, claim 8 of the ’419 patent requires

that “the algorithm of the order can be represented as a line in two dimensional

space” and the Office explained, when rejecting claim 8, that

[t]he order algorithms as set forth by CFTC can indeed be represented


12

as a line on such a 2D graph. The relationship between two securities

in the spread order (a linear price difference) has an inherent ability to

be represented graphically.

Id. Said another way, as the price of one leg increases (or decreases) a

corresponding change in the price of the other leg must decrease (or increase) a

corresponding amount based on the given spread order. See Ex. 1002 at ¶ 97. The

Office confirmed this understanding of the disclosure of CFTC in the Final Written

Decision of the ’419 patent when it held that claim 8 is unpatentable. See Ex. 1019

at 55-56. In the ’387 patent, claim 1 similarly recites that “the order algorithm can

be represented as a line in two dimensional space.” Ex. 1001 at 27:44-45.

C. Inter Partes Reexamination of the ’387 Patent

The ’387 patent is the subject of a pending inter partes reexamination

proceeding no. 95/002,032. On November 5, 2014, CME filed a Motion to Stay the

inter partes reexamination, and on November 12, 2014, Fifth Market filed an

Opposition to CME’s Motion to Stay. See Exs. 1021, 1022. On January 9, 2015,

the Board denied CME’s Motion to Stay. See Ex. 1023.

During inter partes reexamination of the ’387 patent, the Office rejected

claims 3, 5, 9, 11, and 12 under various §§ 102 and 103 grounds based primarily

on CFTC. Ex. 1014 at 3-5; Ex. 1015 at 2. The Patent Owner did not argue against

or appeal any of these rejections.

In particular, the Office rejected independent claim 3, among other grounds,


13

as anticipated by CFTC. Ex. 1014 at 3. Independent claim 3 is substantially similar

to independent claim 1 and the Office already rejected independent claim 3 as

anticipated by CFTC. Id. at 3. Although claim 3 does not require an order

algorithm that “can be represented as a line in two dimensional space . . .,” CFTC

discloses such a feature, see Part(VI)(A), supra; see Part(VIII)(C), infra, and the

Office has already acknowledged this disclosure in CFTC, see Part(VI)(B), supra.

D. Covered Business Method Review History of the ’387 Patent

The ’387 patent is the subject of covered business method review proceeding

no. CBM2014-00114. In its petition for covered business method review of the

’387 patent, CME asserted that CFTC anticipated claim 1; that CFTC and Lupien

rendered obvious claims 2, 4, 6-8, and 10; that Clemons and CFTC rendered

obvious claims 1, 4, 7, 8, and 10; and that Clemons, CFTC, and Lupien rendered

obvious claims 2 and 6. See Ex. 1011 at 18, 23, 52, 72. Patent Owner Fifth Market

filed a Preliminary Response on July 11, 2014, contending that the Board should

reject CME’s petition and deny institution of trial. See Ex. 1012 at 5, 16. On

October 9, 2014, the Board issued its Institution Decision, instituting covered

business method review of claims 4, 6-8, and 10 under 35 U.S.C. § 103(a) based

on CFTC and Lupien. Ex. 1005 at 29.

The Board did not institute review of claims 1 and 2 in CBM2014-00114

because CME did not explicitly propose a claim construction for the terms “means


14

for matching” and “means for matching or comparing” recited in independent

claim 1. Id. at 16-17. CME filed a request for rehearing of the Board’s denial to

institute review of claims 1 and 2. See Ex. 1013 at 1, 15. The Board denied CME’s

request. Ex. 1020 at 11. This Petition specifically addresses the deficiency the

Board identified with respect to independent claim 1 (and dependent claim 2). See

Part (VII)(B)(i), infra.

VII. Claim Construction

A claim in an unexpired patent subject to covered business method review

“shall be given its broadest reasonable construction in light of the specification of

the patent in which it appears.” 37 C.F.R. § 42.300(b). Claim terms are given their

ordinary and accustomed meaning as understood by one of ordinary skill in the art.

Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005) (en banc).

A. One of Ordinary Skill in the Art

A person of ordinary skill in the art at the time of the alleged invention of

the ’387 patent would have at least a Bachelor’s degree in, for example, computer

science, mathematics, statistics, business, economics, or finance, and 2-5 years of

work experience, such as trading experience, in one or more of those fields. Ex.

1002 at ¶ 52. This level of skill is consistent with the level Fifth Market suggested

in the related litigation, and the level specified in the covered business method

reviews of the ’419 and ’387 patents. Id.; Ex. 1006 at ¶ 44; Ex. 1007 at ¶ 48.


15

B. Claim Terms

Independent claim 1 of the ’387 patent recites a conditional order transaction

network. Ex. 1001 at 27:14-48. Claim 2 depends from claim 1. The discussion

below, as supported by the Declaration of Dr. Craig Pirrong (Ex. 1002), provides

construction of two means-plus-function terms solely for the purpose of this

covered business method review proceeding in accordance with 37 C.F.R.

§ 42.304(b)(3). In construing the means plus function terms recited in claim 1,

CME has attempted to identify the specific portions of the specification that

describes the structure, material, or acts corresponding to each claimed function.

However, as set forth in Part(VII)(B), infra, the specification does not disclose any

corresponding structure for the claimed functions, and claims 1 and 2 are

unpatentable under § 112, second paragraph. The remaining terms of the claims

should be given their plain and ordinary meaning under the broadest reasonable

interpretation (“BRI”) standard solely for the purposes of this proceeding. 37

C.F.R. § 42.300(b); Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48764

(August 14, 2012). Because claim terms are construed according to different

standards in different proceedings, CME reserves its right to present different

constructions depending on the applicable standard and proceeding, should it be

necessary.


16

There is a rebuttable presumption that a claim invokes 35 U.S.C. § 112, ¶ 6,

when the phrase “means” is used. Kemco Sales, Inc. v. Control Papers Co., 208

F.3d 1352, 1361 (Fed. Cir. 2000). A claim limitation expressed in means-plus-

function language “shall be construed to cover the corresponding structure . . .

described in the specification and equivalents thereof.” 35 U.S.C. § 112, ¶ 6. If one

employs means-plus-function language in a claim, one must set forth in the

specification an adequate disclosure showing what is meant by that language and

“[i]f an applicant fails to set forth an adequate disclosure, the applicant has in

effect failed to particularly point out and distinctly claim the invention as required

by the second paragraph of section 112.” Noah Sys. Inc. v. Intuit Inc., 675 F.3d

1302, 1311-12 (Fed. Cir. 2012) (quoting In re Donaldson Co., 16 F.3d 1189, 1195

(Fed. Cir. 1994) (en banc)).

1. “means for matching”

The conditional order transaction network of claim 1 includes “means for

matching,” where the recited function is matching “algorithmic buy orders with

algorithmic sell orders.” Ex. 1001 at 27:32-34. Claim 2 includes this limitation

because it depends from claim 1. The specification of the ’387 patent indicates that a

trade engine is a “component” (i.e. a computer) that could perform the matching

function. See Ex. 1001 at 7:13-14, 17:39-44 (“The Trade Engine is the server-side

system component ultimately charged with . . . matching open orders when


17

circumstances . . . so dictate . . . .”). However, structure for performing a function of

a means-plus-function limitation must be more than simply a general purpose

computer to avoid pure functional claiming in patents involving computer-

implemented inventions. Noah, 675 F.3d at 1312 (citation omitted).

But, there is no disclosure in the ’387 patent of any structure explaining how

orders are matched. At most, the ’387 patent explains how orders are routed, i.e.,

how to “Monitor Security,” “Place a Bid Order,” and “Place an Ask Order.” See Ex.

1001 at 6:41-7:36. These steps do not disclose or explain how bid and ask orders are

actually matched. Step (9)—“Crossed Orders are Matched”—is the recited step that

best corresponds to the function of matching bid and ask orders. Although step (9) is

mentioned in the specification of the ’387 patent, there is no description of what

structure or algorithm corresponds to it.

Based on the lack of structure disclosed in the specification, CME must

speculate as to how to construe the “means for matching.” For purposes of this

covered business method review only, as required by 37 C.F.R. § 42.304(b)(3),

Petitioner proposes that the recited “means for matching” be construed as

hardware, software, or a hardware-software combination. See Ex. 1001 at 7:13-14,

17:39-43; Ex. 1002 at ¶¶ 61, 63. Nevertheless, as a matter of law this construction

does not overcome the grounds of unpatentability discussed in Part(VII)(B)(i),


18

infra, resulting from the failure of the ’387 patent to disclose an algorithm for

performing the claimed “matching” function.

2. “means for matching or comparing”

The conditional order transaction network of claim 1 also includes “means for

matching or comparing,” where the recited function is matching or comparing

“algorithmic buy/sell orders with non-algorithmic sell/buy orders.” Ex. 1001 at

27:38-40. Claim 2 includes this limitation because it depends from claim 1. As

discussed in Part(VII)(B)(1), supra, the specification of the ’387 patent indicates that

a trade engine is a “component” (i.e. a computer) that could perform the matching

function. See Ex. 1001 at 7:13-14, 17:39-43 (“The Trade Engine is the server-side

system component ultimately charged with . . . matching open orders when

circumstances . . . so dictate . . .”).

But again, there is no disclosure in the ’387 patent of any structure explaining

how orders are matched. At most, the ’387 patent explains how orders are routed,

i.e., how to “Monitor Security,” “Place a Bid Order,” and “Place an Ask Order.” See

Ex. 1001 at 6:41-7:36. These steps do not disclose or explain how bid and ask

orders are actually matched. Step (9)—“Crossed Orders are Matched”—is the

recited step that best corresponds to the function of matching bid and ask orders.

Although step (9) is mentioned in the specification of the ’387 patent, there is no

description of what structure or algorithm corresponds to it.


19

And the ’387 patent does not disclose any structure for performing the

comparing function. At most the ’387 patent discloses an example of a “matrix logic

for seven separate and distinct orders for the same security,” id. at 12:59-60, and

explains that

[a] method involves the comparison of each buy order

against each sell order and compares the requirements for

a trade with the requirements for each other trade to

ascertain the events most likely to occur and thus the most

likely trades to occur first.

Id. at 13:50-54. Where “‘the disclosed structure is a computer . . . programmed to

carry out an algorithm, the disclosed structure is not the general purpose computer,

but rather the special purpose computer programmed to perform the disclosed

algorithm.’” Aristocrat Techs. Australia Pty Ltd. v. Int'l Game Tech., 521 F.3d

1328, 1333 (Fed. Cir. 2008) (quoting WMS Gaming, Inc. v. Int'l Game Tech., 184

F.3d 1339, 1349 (Fed. Cir. 1999)). However, where the specification merely

discloses results that are to be obtained, and does not disclose how to achieve those

results, it fails to disclose sufficient structure for the claimed function. In re

Aoyama, 656 F.3d 1293, 1298 (Fed. Cir. 2011).

Based on the lack of structure disclosed in the specification, Petitioner must

speculate as to how to construe the “means for matching or comparing.” For

purposes of this covered business method review only, as required by 37 C.F.R. §


20

42.304(b)(3), Petitioner proposes that the recited “means for matching or

comparing” be construed as hardware, software, or a hardware-software

combination. See Ex. 1001 at 7:13-14, 17:39-44; Ex. 1002 at ¶¶ 64, 67.

Nevertheless, as a matter of law this construction does not overcome the grounds

of unpatentability discussed in Part(VII)(B)(2), infra, resulting from the failure of

the ’387 patent to disclose an algorithm for performing the claimed “matching or

comparing” function.

VIII. Claims 1 and 2 of the ’387 Patent are Unpatentable

Claims 1 and 2 are unpatentable based on six separate grounds: (1) claims 1

and 2 are not patent-eligible under 35 U.S.C. § 101; (2) claims 1 and 2 are

indefinite under 35 U.S.C. § 112, second paragraph; (3) CFTC renders claim 1 of

the ’387 patent unpatentable under 35 U.S.C. § 102; (4) CFTC in view of Lupien

renders claim 2 unpatentable under 35 U.S.C. § 103(a); (5) Clemons in view of

CFTC renders claim 1 of the ’387 patent unpatentable under 35 U.S.C. § 103(a);

and (6) Clemons in view of CFTC and Lupien renders claim 2 of the ’387 patent

unpatentable under 35 U.S.C. § 103(a).

A. Claims 1 and 2 are Unpatentable under 35 U.S.C. § 101

Laws of nature, abstract ideas, and natural phenomena cannot be patented.

Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2354 (2014). The Supreme

Court affirmed the two-step process set forth in Mayo Collaborative Servs. v.


21

Prometheus Labs., Inc., 132 S. Ct. 1289 (2012) for evaluating claims under § 101:

the court “determine[s] whether the claims at issue are directed to one of those

patent-ineligible concepts,” and if so, the court searches for “an element or

combination of elements that is ‘sufficient to ensure that the patent in practice

amounts to significantly more than a patent upon the [ineligible concept] itself.’”

Alice, 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct. at 1294).

It is not sufficient to apply the abstract idea with a computer. Alice, 134 S.

Ct. at 2359-60. Instead, a claim involving an unpatentable concept must contain

“other elements or a combination of elements, sometimes referred to as an

‘inventive concept,’” sufficient to prevent patenting the underlying concept itself.

Mayo, 132 S. Ct. at 1294; see also SAP Am., Inc. v. Versata Dev. Grp., Inc.,

CBM2012-00001, Paper 70 at 29-30 (June 11, 2013). Another way a claim may

recite “significantly more” than an abstract idea is to be “tied to a particular

machine or apparatus” or “transform[] a particular article into a different state or

thing.” Bilski v. Kappos, 130 S. Ct. 3218, 3225-27, 3230 (2010).

Under any of these analyses, claims 1 and 2 of the ’387 patent fail to satisfy

§ 101.

1. Claims 1 and 2 of the ’387 patent recite an abstract idea

Claim 1 is directed to the abstract idea of matching algorithmic orders in a

trading system where the orders include constraints and dynamically changing


22

prices for multiple items. See, e.g., Ex. 1001 at 27:14-48. The computer performs

the functions of matching algorithmic buy orders with algorithmic sell orders, and

matching or comparing algorithmic buy/sell orders with non-algorithmic sell/buy

orders. Id. The ’387 patent asserts the primary improvement over the prior art as

the implementation of the alleged invention through a “global computer network”

that “has the advantage of increasing the efficiencies in the marketplace,

substantially reducing transaction costs, and providing equal opportunities to all

users.” Ex. 1001 at 3:1-8. However, a claim embodying an otherwise patent-

ineligible abstract idea cannot be salvaged by including a computer that merely

performs the task more quickly than a human could. See Bancorp Servs., L.L.C. v.

Sun Life Assurance Co. of Canada (U.S.), 687 F.3d 1266, 1279 (Fed. Cir. 2012)

(citations omitted). And the abstract idea of the ’387 patent—matching algorithmic

orders in a trading system where the orders include constraints and dynamically

changing prices for multiple items—is both a “fundamental economic practice”

and a method of “organizing human activity,” which are patent-ineligible abstract

ideas beyond the scope of § 101. See Alice, 134 S. Ct. at 2356; see also Ex. 1002 at

¶ 69.


23

2. Because the ’387 patent does not add “significantly more,” the abstract idea recited in claims 1 and 2 is not patent-eligible

In addition to claiming the abstract idea of matching algorithmic orders in a

trading system where the orders include constraints and dynamically changing

prices for multiple items, the ’387 patent fails to add “significantly more” to the

abstract idea, and is thus not patent-eligible. See Mayo, 132 S. Ct. at 1294. The

Federal Circuit recently held that claims to a computer system for generating tasks

to be performed in an insurance organization were not eligible for patenting under

§ 101. Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d

1336, 1342 (Fed. Cir. 2013), cert. denied, 134 S. Ct. 2871 (2014). The court ruled

that the claims included an abstract idea: “generating tasks [based on] rules . . . to

be completed upon the occurrence of an event,” id. at 1344, and found that the

claims did not add “meaningful limitations” despite including features such as an

insurance transaction database, a task library database, a client component, and a

server component. Instead, the court found the claims invalid because they

“contain[ed] only generalized steps of generating a task in response to events.” Id.

at 1346.

Claim 1 of the ’387 patent includes “trader terminals” and “a

communications network.” Ex. 1001 at 27:19, 29. Claim 2 further defines the

conditional order transaction network of claim 1 to include “trader workstations,”


24

“a display device,” “an input device,” and “a computer” including “a comparator”

and “a sorter.” Id. at 27:49-28:1. These features, however, do not impart

meaningful limitations or add “significantly more” to the abstract idea of matching

algorithmic orders in a trading system where the orders include constraints and

dynamically changing prices for multiple items. Claims 1 and 2 of the ’387 patent

do not add anything to this abstract idea beyond “well-understood, routine,

conventional activity.” Mayo, 132 S. Ct. at 1294; see also Ex. 1002 at ¶ 70. The

fact that the ’387 patent claims may be implemented on hardware does not change

this result. “[C]laims do not become patentable under § 101 simply for reciting a

computer element.” SAP, CBM2012-00001, Paper 70 at 29 (citing Gottschalk v.

Benson, 93 S. Ct. 253, 255-26 (1972)).

The ’387 patent also lacks specificity as to the hardware aspects of the

computer-implemented invention, suggesting that the type of computer used is not

the contribution of the ’387 patent. See SAP, CBM2012-00001, Paper 70 at 30.

Claim 1 of the ’387 patent recites a “controller computer means” that receives as

its inputs an algorithm with corresponding constraints. Ex. 1001 at 27:28-31.

Receiving data as inputs is a routine computer function. Ex. 1002 at ¶ 71. The ’387

patent admits that electronic trading networks were well known before the ’387

patent. Ex. 1001 at 1:43-49. And the ’387 patent requires no more than a generic

computer hardware (e.g., “network,” “display device,” “trader terminals” and


25

“trader workstations”) that are “‘well-understood, routine, conventional

activit[ies]’ previously known to the industry,” and thus do not reach the threshold

needed for patent-eligibility under § 101. Alice, 134 S. Ct. at 2359 (quoting Mayo,

132 S. Ct. at 1294.); see also Ex. 1002 at ¶ 71.

3. Because the Supreme Court vacated Ultramercial, the Board’s previous reliance on Ultramercial to deny institution of the § 101 grounds in the covered business method review of the related ’419 patent no longer applies

The issue of patent-eligibility under § 101 was also raised in the related

covered business method review of the ’419 patent. See Ex. 1009 at 2, 35-41. The

Board relied heavily on Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, vacated,

134 S. Ct. 2870 (2014) to deny institution under § 101 for any of the claims in the

’419 patent. See Ex. 1009 at 39 (“The relevant inquiry here is ‘whether a claim, as

a whole, includes meaningful limitations restricting it to an application, rather than

merely an abstract idea.’. . . We agree with Patent Owner that Ultramercial is

helpful in determining whether independent claims 1, 41, and 43 include

meaningful limitations.”) The Board then analogized independent claims 1, 41, and

43 of the ’419 patent to the claims at issue in Ultramercial. Id. at 40-41. However,

the Supreme Court vacated and remanded Ultramercial in light of Alice. See

Wildtangent, Inc. v. Ultramercial, LLC, 134 S. Ct. 2870 (2014). In view of the

Supreme Court’s guidance in Alice, the Federal Circuit on remand held the claims

in Ultramercial to be patent ineligible. Ultramercial, Inc. v. Hulu, LLC, No. 2010-


26

1544, slip op. at *9 (Fed. Cir. Nov. 14, 2014). Thus, the Board’s reasoning as to

why CME did not show that claims in the ’419 patent are more likely than not

unpatentable under § 101 is no longer valid, and cannot be applied to address

claims 1 and 2 of the ’387 patent in this proceeding.

For the foregoing reasons, claims 1 and 2 are directed to an abstract idea,

and they lack any significant or meaningful limitations that confer patent

eligibility. The ’387 patent claims are therefore not patent-eligible because they

cover an abstract idea without adding “significantly more.” See Mayo, 132 S. Ct. at

1294. Accordingly, it is more likely than not that claims 1 and 2 of the ’387 patent

are unpatentable under § 101.

B. Claims 1 and 2 are Indefinite under 35 U.S.C. § 112, Second Paragraph because they Fail to Disclose an Algorithm Corresponding to either the “Means for Matching” or the “Means for Matching or Comparing” Limitations

A patent must “conclude with one or more claims particularly pointing out

and distinctly claiming the subject matter which the applicant regards as [the]

invention.” 35 U.S.C. § 112, ¶ 2 (2006). If the language of a patent claim, when

“read in light of the specification delineating the patent and the prosecution history,

fails to inform, with reasonable certainty, those skilled in the art about the scope of

the invention,” the claim is indefinite. Nautilus, Inc. v. Biosig Instruments, Inc.,

134 S. Ct. 2120, 2124 (2014).


27

Claim elements may be expressed in means-plus-function form under § 112,

¶ 6, but in such cases the “specification must disclose with sufficient particularity

the corresponding structure for performing the claimed function and clearly link

that structure to the function.” Triton Tech of Texas, LLC v. Nintendo of Am., Inc.,

753 F.3d 1375, 1378 (Fed. Cir. 2014) (citing Ibormeith IP, LLC v. Mercedes-Benz

USA, LLC, 732 F.3d 1376, 1379 (Fed. Cir. 2013)). Where “‘the disclosed structure

is a computer . . . programmed to carry out an algorithm, the disclosed structure is

not the general purpose computer, but rather the special purpose computer

programmed to perform the disclosed algorithm.’” Aristocrat, 521 F.3d at 1333

(quoting WMS Gaming, 184 F.3d at 1349). “Failure to disclose the corresponding

algorithm for a computer-implemented means-plus-function term renders the claim

indefinite.” Triton Tech, 753 F.3d at 1378 (citing Ergo Licensing LLC v.

Carefusion 303, Inc., 673 F.3d 1361, 1363 (Fed. Cir. 2012)).

For the following reasons, a person of ordinary skill in the art could not have

ascertained the scope of claims 1 and 2 of the ’387 patent with reasonable

certainty, and therefore the claims are indefinite.

1. The ’387 patent does not disclose any structure for the claimed “means for matching”

Claim 1 recites a “means for matching . . . algorithmic buy orders with

algorithmic sell orders.” Ex. 1001 at 27:32-34. However, the specification of the

’387 patent fails to disclose an algorithm for performing the claimed “matching”


28

function. According to the specification of the ’387 patent, a trade engine is a

“component” that could perform the matching function. See id. at 7:13-14, 17:39-44

(“The Trade Engine is the server-side system component ultimately charged with . . .

matching open orders when circumstances . . . so dictate . . . .”). But the ’387 patent

does not disclose the structure , i.e., the algorithm, of the trade engine.

Figure 2 of the ’387 patent depicts a schematic block diagram showing the

processing of an input order to the system, but fails to show any additional

structure other than merely identifying a “black box” that apparently corresponds

to step 9, “Match Orders.” Id. at 4:39-41; FIG. 2. The portion of Figure 2

reproduced below shows an external price feed input into a Price Feed Gateway of

the CORE central system 10 and shows bid and ask orders input into trade engine

TE. But Figure 2 merely identifies the line connecting the trade engine TE with

element S (not identified in the ’387 patent) as the so-called “Match Orders” step

(step 9). There is nothing more in the ’387 patent regarding how the orders are

actually matched to one another, nor is there any disclosure regarding the structure

or algorithm of step 8 “Markets Cross,” which is a precursor to step 9.


29

(Reproduced Portion of Figure 2 of the ’387 patent)

The inadequate disclosure in the ’387 patent is similar to the disclosure the

Federal Circuit found to be inadequate in ePlus, Inc. v. Lawson Software, Inc., 700

F.3d 509, 518-20 (Fed. Cir. 2012). The disputed limitation in Lawson was “means

for processing” and the specification of the patent at issue there, like here, failed to

explain any details regarding the structure or algorithm for performing that step.

Lawson, 700 F.3d at 518. The Federal Circuit explained that merely identifying a

“black box” in a flow chart that represents the “function without any mention of

corresponding structure” is not sufficient to satisfy the requirements of 35 U.S.C.

§ 112, ¶ 6. Id. at 518-19 (emphasis in original); see also Augme Techs., Inc. v.

Yahoo! Inc., 755 F.3d 1326, 1337 (Fed. Cir. 2014) (explaining that although an

algorithm can be expressed in various ways, including, e.g., a mathematical

formula, prose, or a flow chart, the patent “must disclose some algorithm; it cannot


30

merely restate the function recited in the claim”) (citing Finisar Corp. v. DirecTV

Grp., Inc., 523 F.3d 1323, 1340 (Fed. Cir. 2008)) (emphasis in original). Similar to

the question at issue in Lawson, all that the ’387 patent discloses is the function of

matching orders; it does not disclose any structure to do so.

In Augme Techs., the court determined that Figure 5 of the patent at issue in

that case merely restated the recited function “[a]ssemble second code module,”

and found that this was not an “algorithm for how the second code module is

actually assembled.” Augme Techs., 755 F.3d at 1338. Similarly here, the

schematic block diagram of Figure 2 of the ’387 patent depicts a trade engine TE

block, with a line extending from the TE block labeled “9 Match Orders” to an

unidentified element “S.” Ex. 1001 at FIG. 2. Thus, Figure 2 merely identifies a

“black box” that apparently corresponds to step 9, “Match Orders,” and fails to

show any additional structure. See also MotionPoint Corp. v. TransPerfect Global,

Inc., CBM2014-00060, Paper 8 at 29 (July 23, 2014) (deciding that the database

boxes in Figure 11 of a patent more likely than not provided insufficient structure

for performing the claimed functions of means-plus-function terms). Like the

question at issue in Augme Techs., the ’387 patent merely discloses the function of

matching orders, but fails to disclose any structure to accomplish the function.

To the extent that the trade engine TE of the ’387 patent is the “structure”

corresponding to the claimed matching function, the ’387 patent does not disclose


31

a structure or algorithm for matching algorithmic buy orders with algorithmic sell

orders. At best, the ’387 patent simply restates the function recited in the claim by

disclosing that “[c]rossed orders are matched,” Ex. 1001 at 6:53, FIG. 2, and the

trade engine TE is the component for “matching open orders.” Id. at 17:39-42; see

also MotionPoint, CBM2014-00060, Paper 8 at 26, 33 (July 23, 2014) (finding a

claim more likely than not indefinite where the patent merely restated the claimed

function of “receiving an electronic communication . . .”). Using the term

“matching” (or “comparing,” as discussed in Part(VIII)(B)(2), infra) to simply

restate the function itself is not sufficient. See Triton Tech, 753 F.3d at 1378-79

(Fed. Cir. 2014) (explaining that “merely using the term ‘numerical integration’

does not disclose an algorithm—i.e., a step-by-step procedure—for performing the

claimed function”).

In the covered business method review of the ’419 patent, the Board decided

that Figure 3, which corresponds to Figure 2 of the ’387 patent, discloses an

algorithm for performing the “matching” function. Ex. 1019 at 14; see also Ex.

1005 at 25. Specifically, the Board identified purported corresponding structure for

performing the recited function of “matching” to be “a computer programmed to

perform the ten processing steps illustrated in Figure 3 of the ’419 patent.” Ex.

1019 at 14; see also Ex. 1005 at 15, 24. The ten processing steps illustrated in

Figure 3 are: (1) Monitor Security, (2) Return Latest Data, (3) Input Bid Order, (4)


32

Distribute Bid Order, (5) Distribute Ticker Data, (6) Input Ask Order, (7)

Distribute Ask Order (also Distribute Ticker Data), (8) External prices converge

making orders cross, (9) Crossed orders are matched, and (10) Distribute Trade

Detail. Ex. 1019 at 6; see also Ex. 1005 at 6.

But these disclosed steps are not an algorithm for matching orders; they

merely explain how orders are routed, i.e., how to “Monitor Security,” “Place a

Bid Order,” and “Place an Ask Order.” See Ex. 1001 at 6:41-7:36. These steps may

correspond to steps (1)-(7) of the ten steps that the Board identified as

corresponding to the claimed “means for matching,” but they do not disclose or

explain how bid and ask orders are actually matched. Step (9)—“Crossed Orders

are Matched”—is the recited step that best corresponds to the function of matching

bid and ask orders. Although step (9) is mentioned in the specification of the ’387

patent, there is no description of what structure or algorithm corresponds to it. Id.

at 6:53. The ’387 patent merely states that “[a] server-side component charged with

routing and matching orders TE receives the message and makes the proper

changes to its active order lists.” Id. at 6:26-29.

The ’387 patent is a continuation-in-part of the ’419 patent, and includes

additional disclosure not in the ’419 patent. Compare Ex. 1001, with Ex. 1010; Ex.

1005 at 17-18. But the additional disclosure in the ’387 patent does not disclose an

algorithm corresponding to the claimed “means for matching” and thus fails to


33

disclose a special purpose computer for carrying out an algorithm for matching

algorithmic buy and algorithmic sell orders.

Column 7, line 37 to column 17, line 48, along with Figure 17 of the ’387

patent is not included in the ’419 patent. Compare Ex. 1001, with Ex. 1010; see

Ex. 1005 at 17-18. The additional disclosure describes the “Distribution of

Algorithmic Orders, or Attributes of Algorithms as Orders, Instead of Distribution

of Prices Generated from Algorithms.” Ex. 1001 at 7:37-39. But the ’387 patent

does not describe a separate algorithm to perform the “matching” function. Ex.

1002 at ¶ 80. The additional disclosure merely describes that the algorithmic order

disclosed in the ’387 patent is a straight line, Ex. 1001 at 7:49-56, provides

different exemplary types of algorithmic orders, and depicts one such order in Fig.

17, see 9:46-12:29. Indeed, the price algorithms described in the added disclosure

in the ’387 patent are algorithms for the orders themselves, they are not algorithms

that match orders with one another. See, e.g., Ex. 1001 at 12:30-31, 52-53.

The additional disclosure also provides an example of “Trade Execution and

the Tapping of External Liquidity Pools.” Id. at 12:57-58. But the discussion of the

“matrix logic” in columns 12-14 of the ’387 patent does not provide a structure to

perform the claimed function of “matching.” Structure disclosed in the

specification can satisfy the requirements of § 112, second and sixth paragraphs,

“only if the specification or prosecution history clearly links or associates that


34

structure to the function recited in the claim.” Default Proof Credit Card Sys., Inc.

v. Home Depot U.S.A., Inc., 412 F.3d 1291, 1298 (Fed. Cir. 2005) (citation

omitted). “This duty to link or associate structure to function is the quid pro quo

for the convenience of employing § 112, ¶ 6.” Id. (citation omitted); see also

Medtronic, Inc. v. Advanced Cardiovascular Sys., Inc., 248 F.3d 1303, 1313 (Fed.

Cir. 2001) (“one skilled in the art would not perceive any clear link or association

between these structures and the [claimed] function . . .”).

The ’387 patent merely explains a single example showing distinct orders

for one security and provides hypothetical scenarios where buyers could trade with

sellers. Id. at 12:59-13:5. The ’387 patent explains that the “matrix logic” of Table

4 can be used to calculate crossing points at which a trade is possible between two

different orders. Ex. 1001 at 12:59-13:5; Table 4. But the “matrix logic” itself is

not disclosed. Ex. 1002 at ¶ 81. There is no disclosure of an algorithm that actually

matches orders. Id. Additionally, the specification fails to provide any clear link or

association between the “matrix logic” discussion in columns 12-14, or in any

other portion of the specification of the patent, and the function of “matching.”

Neither Table 4, nor the remainder of the ’387 patent, explains how different

orders are actually traded. Indeed, Table 4 only shows possible “crossing points”

where trades are possible; it does not show or explain how trades are actually

matched. Ex. 1002 at ¶ 82. For example, Table 4 includes buyer B1 willing to buy


35

500 items at a price of 102 (with no other contingencies) and buyer B3 willing to

buy 100 items at a price of 102 (pegged to the price of another item). Ex. 1001 at

Table 4. Table 4 also includes seller S1 willing to sell 500 items at a price of 103¼

(with no other contingencies) and seller S3 willing to sell 100 items at a price of

103 (pegged to the price of another item). Id. Table 4, however, does not show,

explain, or otherwise disclose how any of these orders are actually matched. Ex.

1002 at ¶ 82. None of the prices actually cross (e.g., buyers are only willing to pay

102 whereas sellers are only willing to accept 103).

Moreover, the ’387 patent explicitly states that

[t]he matrix identifies the optimal buy/sell pair for potential events

and calculates the price and quantities of securities for which an

external liquidity source must be tapped and the prices of the

underlying security which will trigger a trade. In this case, trade

triggering events are 1) new orders entered into the system which

would satisfy the requirements of an opposite-side order at the current

underlying stock price, 2) a movement in the underlying common

stock price, or 3) the execution or partial execution of an order which

has been sent to an external exchange by the system in its attempt to

help effect a trade . . . .

Ex. 1001 at 13:49-65 (emphasis added). This merely discloses that trades might

occur but other events must occur first; it does not explain how trades are actually


36

matched. Ex. 1002 at ¶ 83. And it does not explain what buyer and what seller will

actually be “matched” even if one of the “triggering events” occurs. Id.

The ’387 patent discloses no algorithm whatsoever “for matching . . .

algorithmic buy orders with algorithmic sell orders,” as recited in claim 1. Id. at

27:32-34 (emphasis added); see also Triton Tech, 753 F.3d at 1379 (affirming the

district court’s conclusion of invalidity under § 112, second paragraph, where the

patent disclosed “no algorithm at all” for numerical integration to provide structure

for the claimed “integrator means”). For the foregoing reasons, the ’387 patent

fails to disclose a special purpose computer programmed to perform a disclosed

algorithm for performing the “matching” function of claim 1. Accordingly, claims

1 and 2 are unpatentable as being indefinite under 35 U.S.C. § 112, ¶ 2.

2. The ’387 patent does not disclose any structure for matching or comparing orders

Claim 1 also recites a “means for matching or comparing . . . algorithmic

buy/sell orders with non-algorithmic sell/buy orders.” Ex. 1001 at 27:38-41. Here

again, the ’387 patent does not disclose an algorithm for performing the claimed

“matching or comparing” function. Although the ’387 patent suggests that the trade

engine disclosed as a server-side “component” could perform the matching function,

see id. at 7:13-14, 17:39-44, the ’387 patent does not disclose or describe the trade

engine actually performing the comparing function. Even if a trade engine could

perform a comparing function, which CME does not admit, the ’387 patent itself


37

would still fail to disclose sufficient structure of an algorithm for the claimed

“matching or comparing algorithmic buy/sell orders with non-algorithmic sell/buy

orders.”

In the covered business method review of the ’419 patent, the Board held

that “the Specification of the ’419 patent fails to disclose sufficient structure for

performing the recited function of ‘comparing.’” Ex. 1019 at 20-21; Ex. 1009 at

26. Thus, the disclosure in the ’387 patent that is also in the ’419 patent likewise

fails to disclose sufficient structure for performing the recited function of

“comparing.” The additional disclosure in the ’387 patent fails to add sufficient

structure to cure this situation.

Outside of the claims and the “Summary of the Invention” section, which

parrots the original claim language, the ’387 patent only once uses the words

“compare” or “comparing.” See Ex. 1001, 13:49-53 (“This method involves the

comparison of each buy order against each sell order and compares the requirements

for a trade with the requirements for each other trade to ascertain the events most

likely to occur and thus the most likely trades to occur first.”). But the ’387 patent

does not disclose an algorithm for performing the comparing function. Indeed, as

explained in Part(VIII)(B)(1), supra, with respect to the “means for matching”

limitation of claim 1, the price algorithms described in the ’387 patent are

algorithms for the orders themselves. See, e.g., Ex. 1001 at 12:30-31, 52-53. They


38

are not for “matching or comparing . . . algorithmic buy/sell orders with non-

algorithmic sell/buy orders,” as recited in claim 1. Id. at 27:38-40 (emphasis

added).

Column 7, line 37 to column 17, line 48, along with Figure 17 of the ’387

patent is not included in the ’419 patent. Compare Ex. 1001, with Ex. 1010; see

Ex. 1005 at 17-18. The additional disclosure describes the “Distribution of

Algorithmic Orders, or Attributes of Algorithms as Orders, Instead of Distribution

of Prices Generated from Algorithms.” Ex. 1001 at 7:37-39. But the ’387 patent

does not describe a separate algorithm to perform the “matching or comparing”

function. Ex. 1002 at ¶ 88. The additional disclosure merely describes that the

algorithmic order disclosed in the ’387 patent is a straight line, Ex. 1001 at 7:49-

56, provides different exemplary types of algorithmic orders, and depicts one such

order in Fig. 17, see 9:46-12:29. Indeed, the price algorithms described in the ’387

patent are algorithms for the orders themselves, they are not algorithms that match

and compare orders with one another. See, e.g., Ex. 1001 at 12:30-31, 52-53.

The additional disclosure also provides an example of “Trade Execution and

the Tapping of External Liquidity Pools.” Id. at 12:57-58. But the discussion of the

“matrix logic” in columns 12-14 of the ’387 patent does not provide a structure to

perform the claimed function of “matching or comparing.” Structure disclosed in

the specification can satisfy the requirements of § 112, second and sixth


39

paragraphs, “only if the specification or prosecution history clearly links or

associates that structure to the function recited in the claim.” Default Proof Credit

Card Sys., 412 F.3d at 1298 (citation omitted). “This duty to link or associate

structure to function is the quid pro quo for the convenience of employing § 112,

¶ 6.” Id. (citation omitted); see also Medtronic, 248 F.3d at 1313 (“one skilled in

the art would not perceive any clear link or association between these structures

and the [claimed] function . . .”).

The ’387 patent merely explains a single example showing distinct orders

for one security and provides hypothetical scenarios where buyers could trade with

sellers. Id. at 12:59-13:5. The ’387 patent explains that the “matrix logic” of Table

4 can be used to calculate crossing points at which a trade is possible between two

different orders. Ex. 1001 at 12:59-13:5; Table 4. But the “matrix logic” itself is

not disclosed. There is no disclosure of an algorithm that actually matches and

compares orders. Additionally, the specification fails to provide any clear link or

association between the “matrix logic” discussion in columns 12-14, or in any

other portion of the specification of the patent, and the function of “matching or

comparing.”

Neither Table 4, nor the remainder of the ’387 patent, explains how different

orders are actually traded. Indeed, Table 4 only shows possible “crossing points”

where trades are possible; it does not show or explain how trades are actually


40

matched or compared. Ex. 1002 at ¶ 90. For example, Table 4 includes buyer B1

willing to buy 500 items at a price of 102 (with no other contingencies) and buyer

B3 willing to buy 100 items at a price of 102 (pegged to the price of another item).

Ex. 1001 at Table 4. Table 4 also includes seller S1 willing to sell 500 items at a

price of 103¼ (with no other contingencies) and seller S3 willing to sell 100 items

at a price of 103 (pegged to the price of another item). Id. Table 4, however, does

not show, explain, or otherwise disclose how any of these orders are actually

matched or compared. Ex. 1002 at ¶ 90. None of the orders match (e.g., buyers are

only willing to pay 102 whereas sellers are only willing to accept 103).

Moreover, the ’387 patent explicitly states that

[t]he matrix identifies the optimal buy/sell pair for potential events

and calculates the price and quantities of securities for which an

external liquidity source must be tapped and the prices of the

underlying security which will trigger a trade. In this case, trade

triggering events are 1) new orders entered into the system which

would satisfy the requirements of an opposite-side order at the current

underlying stock price, 2) a movement in the underlying common

stock price, or 3) the execution or partial execution of an order which

has been sent to an external exchange by the system in its attempt to

help effect a trade . . . .

Ex. 1001 at 13:49-65 (emphasis added). This merely discloses that trades might

occur but other events must occur first; it does not explain how trades are actually


41

matched or compared. Ex. 1002 at ¶ 91. And does not explain what buyer and what

seller will actually be “matched or compared” even if one of the “triggering

events” occurs. Id.

The ’387 patent discloses no algorithm whatsoever “for matching or

comparing . . . algorithmic buy/sell orders with non-algorithmic sell/buy orders,”

as recited in claim 1. Id. at 27:38-40 (emphasis added); see also Triton Tech, 753

F.3d at 1379 (affirming the district court’s conclusion of invalidity under § 112,

second paragraph, where the patent disclosed “no algorithm at all” for numerical

integration to provide structure for the claimed “integrator means”). For the

foregoing reasons, the ’387 patent fails to disclose a special purpose computer

programmed to perform a disclosed algorithm for performing the “matching or

comparing” function of claim 1. Accordingly, claims 1 and 2 are unpatentable as

being indefinite under 35 U.S.C. § 112, ¶ 2.

C. CFTC Anticipates Claim 1 under 35 U.S.C. § 102

CFTC, which predates the ’387 patent, discloses an automated trading

system. See Ex. 1003 at 1. The trading system described in CFTC includes all of

the elements recited in claim 1 of the ’387 patent. Claim 1 of the ’419 patent

recites limitations similar to those recited in claim 1 of the ’387 patent, except that

claim 1 of the ’419 patent requires an additional element: an “external price feed.”

When instituting covered business method review of the ’419 patent, the Board


42

agreed with CME’s explanation that CFTC discloses every element of claim 1 of

the ’419 patent except for the external price feed. Ex. 1009 at 31, 33-34. And the

Board held that CFTC discloses all of the elements of claim 1 of the ’419 patent

except for the “external price feed.” Ex. 1019 at 29-32.

For example, CFTC details the structure and operation of the NYMEX

ACCESS system for trading of commodity futures contracts, option contracts, and

spread orders (e.g., a conditional order transaction network). Ex. 1003 at 1-2.

According to CFTC, operators enter the orders at Trader Work Stations (trader

terminals). Id. at 4, 9. The orders can include constraints like quantity, limit price,

strike price, and “any precondition for entry into the matching system” (constraints

and conditions). Id. at 20-22. And a spread order is inherently algorithmic. See,

e.g., Ex. 1002 at ¶¶ 60, 94, 114, 120. Thus, as disclosed in CFTC, when a trader

enters a spread order into the system, the price of the spread order is represented as

an algorithm based on the prices, and price difference, between the separate legs.

Ex. 1003. at 27-28.

The orders are then routed to a trade matching host (controller computer) for

execution. Id. at 4, 19, 27-31. A spread order could be matched and executed

against another express spread order (algorithmic to algorithmic match) or the

spread order could be matched and executed against an implied spread order

represented by separate orders for the underlying futures contracts (algorithmic to


43

non-algorithmic match). Id. at 28-29. When a match is made, CFTC explains that

the system immediately buys or sells (trades contemporaneously) the underlying

futures contracts for the legs of the spread order. Id. at 28-31.

The only other difference between claim 1 of the ’387 patent and claim 1 of

the ’419 patent is that claim 1 of the ’387 patent requires the order algorithm “be

represented as a line in two dimensional space.” Ex. 1001 at 27:44-47. CFTC

discloses this feature as well. In fact, any of the spread orders entered into the

system described in CFTC can be represented as a line in two dimensional space

with constraints having the price of one security (January futures or crude futures)

as one axis and the price of another security (February futures or gasoline futures)

as its other axis. Ex. 1002 at ¶ 96. Such a spread order may be written as follows:

(3)

where QO is the quantity of the spread order, PO is the price of the spread order, Q1

is the quantity of the first leg security, P1 is the price of the first leg security, Q2 is

the quantity of the second leg security, and P2 is the price of the second leg

security. Id. In some spread orders, like a calendar spread order (intra-commodity),

QO, Q1, and Q2 can all be equal and the spread order may be rewritten as follows:

(4)

Id. The following chart illustrates how an algorithmic spread order algorithm (like

the January/February crude spread described in CFTC) can be represented as a line


44

in two dimensional space with constraints having the price of January crude futures

as the Y axis and the price of February crude futures as the X axis:

Id.; see also Ex. 1003 at 29-30. For example, the spread order price of $10

represents the difference in price between the January crude futures and the

February crude futures. Ex. 1002 at ¶ 96. As the January (or February) crude

futures price changes, the February (or January) crude futures price must likewise

change to match the $10 spread order price. Id.

Similar to claim 1 of the ’387 patent, claim 8 of the ’419 patent recites “the

algorithm of the order can be represented as a line in two dimensional space with

constraints having the price of one security as one axis and the price of another

security as its other axis.” Ex. 1010 at 2:8-12 of the Reexamination Certificate.

Indeed, the Office expressly acknowledged that CFTC discloses algorithmic orders

that can be represented as a line on a two-dimensional graph during reexamination

of the parent ’419 patent:

1800

1820

1840

1860

1880

1900

1920

1800 1820 1840 1860 1880 1900

Price of January crude futures (P1)to be bought in $

Price of February crude futures (P2) to be sold in $

A January/February Spread Order of 10Represented as a 2‐D Line


45

[t]he order algorithms as set forth by CFTC can indeed be represented

as a line on such a 2D graph. The relationship between the two

securities in the spread order (a linear price difference) has an inherent

ability to be represented graphically.

Ex. 1016 at 21; see supra Part VI(B). The Office also held that claim 8 of the ’419

patent was unpatentable based on CFTC and Lupien, Ex. 1019 at 56, where CME

relied on CFTC for the disclosure that “[t]he relationship between the two

securities in [a] spread order (a linear price difference) can inherently be

represented graphically.” See Ex. 1008 at 32. The claim chart below identifies

exemplary portions of CFTC that disclose the elements of claim 1.

’387 Patent Claims CFTC (Ex. 1003) Claim 1. A conditional order transaction network that matches or compares buy and sell orders for a plurality of items based upon conditions set forth within the order, including a price represented as an algorithm with constraints thereon, the conditional order transaction network comprising:

CFTC describes the NYMEX ACCESS, an electronic order matching system: “The NYMEX ACCESS trade matching host is designed to accept limit orders, i.e., orders to buy and sell a particular number of futures or option contracts in a given commodity and month at a specified price, and spread orders entered at a differential.” Ex. 1003 at 19. The system generates “implied spread bids and offers by calculating spread differentials based on the current best underlying futures market prices.” Id. at 27-29. The order price of one item in each spread order is inherently conditioned on the price of the other item. Ex. 1002 at Appendix C, Claim 1.

a variable number of trader terminals for entering an order for an item in the form of an algorithm with constraints thereon that represent a willingness to transact,

CFTC discloses that orders are entered at a Trader Work Station (trader terminal) by terminal operators. Ex. 1003 at 4, 9. The order is in the form of an algorithm with constraints representing a willingness to transact. Id. at 4, 19, 27-31. The constraints include quantity, limit price, strike price and put or call, and “any precondition for entry into the matching system


46

’387 Patent Claims CFTC (Ex. 1003) where the price is the dependent variable of the algorithm within the constraints and dynamically changing price of another item is an independent variable, the price as the dependent variable being continuously changeable responsive to changes in price of the independent variable, the algorithm representing a buy or sell order;

(e.g., stop, market discretion, MIT or stop limit).” Id. at 20-21. The price of at least one security is dependent on the price of another security being traded in that the disclosed system would “generate implied spread bids and offers by calculating spread differentials based on the current best . . . prices . . .” in the market for each item (leg of the order). Id. at 28. CFTC also discloses that “the contingent bid or offer [for one item] would move correspondingly” if the price of the other item in the order changes. Id.at 31. CFTC also discloses “chaining” spread orders together to create a larger synthetic spread order equal in magnitude to the sum of the combined orders. Id. The price of the synthetic spread (also called a synthetic security) is a dependent variable based on the price of the individual “chained” spread orders, which are independent variables. Id. at 32.

controller computer means coupled to each of the trader terminals over a communications network and receiving as inputs, each algorithm with its corresponding constraints;

CFTC discloses that a trade matching host (controller computer) is coupled to the Trader Work Stations (trader terminals) over a communications network, wherein the trade matching host receives inputs from the orders entered at a Trader Work Station by terminal operators. Ex. 1003 at 4, 9, 22, 40. The order is in the form of an algorithm including constraints such as quantity, limit price, strike price and put or call, and “any precondition for entry into the matching system (e.g., stop, market discretion, MIT or stop limit).” Id. at 20-21.

means for matching, in accordance with the constraints and conditions, algorithmic buy orders with algorithmic sell orders; one of the conditions being the requirement that two or more securities are tradable contemporaneously as a

CFTC describes matching a spread order (algorithmic order having constraints and conditions) with another spread order. Ex. 1003 at 28. For a conditional order, the system immediately would buy or sell a contract for the securities in the spread order in accordance with the constraints and conditions contained within the order. Id. at 29. The risk of executing one security and not the other (called legging risk) is eliminated because the securities are traded virtually simultaneously as a contingent trade. Id. at 28-29. Conditional orders adjust as the prices of


47

’387 Patent Claims CFTC (Ex. 1003) contingent trade of those respective securities, and

each item (security) changes. Id. at 28-31.

means for matching or comparing, in accordance with the constraints and conditions, algorithmic buy/sell orders with non-algorithmic sell/buy orders; one of the conditions being the requirement that two or more securities are tradible [sic] contemporaneously as a contingent trade of those respective securities, and

CFTC describes matching a spread order (algorithmic order having constraints and conditions) with orders for the individual component securities (referred to as “underlying futures” or “outrights,” i.e., non-algorithmic orders). Id. at 28. For a conditional order, the system immediately would buy or sell a contract for the securities in the spread order in accordance with the constraints and conditions contained within the order. Id. at 29. The risk of executing one security and not the other (called legging risk) is eliminated because the securities are traded virtually simultaneously as a contingent trade. Id. at 28-29. Conditional orders adjust as the prices of each item (security) changes. Id. at 28-31.

wherein the order algorithm can be represented as a line in two dimensional space with constraints having the price of one security as one axis and the price of another security as its other axis.

CFTC discloses order algorithms that can be represented as a line on a two dimensional graph. See, e.g., Ex. 1002 at ¶ 96; Appendix C, Claim 1. The relationship between the two securities, e.g., the two legs, in the spread order (a linear price difference) can be represented graphically as a line in two dimensions. Id.

D. CFTC and Lupien Render Claim 2 Unpatentable as Obvious under 35 U.S.C. § 103(a)

Lupien, like CFTC, predates the ’387 patent and discloses automated trading

systems. See Ex. 1004 at 2:57-61. To the extent limitations of claim 2 may not be

explicitly disclosed in CFTC, Lupien expressly discloses these features and fills

any gaps. As a result, claim 2 is unpatentable because the claimed subject matter

would have been obvious to one of ordinary skill in the art in view of CFTC and


48

Lupien. Ex. 1002 at ¶ 99. And the Board already determined that it is more likely

than not that CFTC and Lupien teach the claimed subject matter of claim 6. Ex.

1005 at 25. Claims 2 and 6 include substantially similar subject matter. Compare

Ex. 1001 at 27:48-28:5, with 28:54-29:10.

Lupien discloses a trading system where “[e]xternal market data is available

to clients from securities information vendors.” Ex. 1004 at 6:20-22. The “external

market data” discussed in Lupien includes external quotes, trades, and other market

data received from trading systems outside of Lupien’s disclosed system. Id. at

9:53-54; Ex. 1002 at ¶ 100. Lupien also discloses an order matching system that

generates buy and sell orders based on an algorithm operating on the client CPU or

at the system’s controller CPU: “Algorithms operating either at each client CPU 15

or at controller CPU 10 . . . create buy and sell orders for that client.” Id. at 6:37-

40. “As orders are executed, market quotes change or trades occur in the markets,

the system which represents the present invention will . . . recalculate purchase and

sale orders in all relevant securities.” Id. at 4:32-36.

Clients using the Lupien system can view information pertaining to all of the

orders ranked according to various criteria and shown on a display. Id. at 7:15-19;

Figs. 2-6. Clients can view their orders ranked by size, nearness to execution price,

price move for the day, and other criteria and can change the way data is displayed

or ranked. Id. at 7:48-50, 7:39-41. In one example, Lupien explains that


49

FIG. 6 illustrates information displayed on a screen relevant to a

single order. The top left hand side of the working section of the

screen gives the high, low, open and last trade prices for this security,

along with its change for the day (up an eighth, previous close to last

sale) and volume. Shown below are the best and next best bid and ask

residing on the system, and the best bids and offers represented by the

other markets and exchanges as reported by the client's securities

information vendor. Below this section is a segment of the screen

which contains information on past trades. The top portion of this

screen segment contains shares, price and time for the last 6 market

trades in this security obtained from the client's securities information

vendor, and below that are listed the client's trades in this security,

giving action, size, price, time or date and client account involved in

the trade.

Id. at 8:52-68 (emphasis added).

CFTC discloses each and every limitation of claim 1. See supra Part

VIII(A). CFTC also discloses a plurality of trader work stations including a

display, an input device, a computer, a comparator, and a sorter as further recited

in claim 2. Ex. 1002 at ¶ 103. For example, CFTC discloses that the orders are

entered at Trader Work Stations by users manually typing order information into

the work stations at various remote locations. Ex. 1003 at 19. CFTC explains that

“[c]urrent market information concerning bids, offers, and trade executions would

be displayed on NYMEX ACCESS screens.” Id. at 40.


50

According to CFTC, an “incoming spread order could be executed against

an ‘implied’ spread bid or offer.” Id. at 28. The system of CFTC thus has an

implied out functionality that converts spread orders and the price of a first leg to

create a bid/offer for the other leg a second leg. Ex. 1002 at ¶ 103. Changes in the

offer/bid of the first leg cause changes to the bid/offer of the second leg, and the

revised bid/offer in the second leg is sorted along with the other bids/offers in the

second leg. Id. This sorting affects the “‘depth-of-market’ feature, which would

display all resting bids up to ten ticks above the best offer.” Ex. 1003 at 58.

CFTC also explains that:

Terminal operators would have continuous access to the best bid and

offer price and the available quantity at each such price, session high

and low price, and the last-traded price and volume for each contract.

Similar information would be available with regard to intra- and inter-

commodity spreads.

* * *

A terminal operator also could access a “depth-of-market” feature,

which would display all resting bids up to ten ticks below the best bid

and all resting offers up to ten ticks above the best offer, along with

the total available quantity at each price. In addition, the terminal

operator could configure his trading screen so as to receive a real-time

“ticker” display containing best bids, best offers, and last trade prices

and their respective volumes for all contracts in a selected commodity.

Id. at 58.


51

To the extent that CFTC may not explicitly disclose a display device for

displaying selected parameters of buy and sell orders “in a prioritized sequence in a

descending order of favorability across a display field, with the most favorable

order at one distal end and the least favorable at the other distal end” it would have

been obvious to one or ordinary skill in the art to provide such a display in view of

the teachings of Lupien. See, e.g., Ex. 1002 at ¶ 105. Lupien expressly discloses a

variety of user display screens and teaches that users are enabled to change the way

data is displayed and ranked, and exemplifies a display screen showing ranked best

bids and offers. See, e.g., Ex. 1004 at 7:15-19, 7:39-41, and 8:57-61. “The

combination of familiar elements according to known methods is likely to be

obvious when it does no more than yield predictable results.” KSR Int’l Co. v.

Teleflex Inc., 127 S. Ct. 1727, 1739 (2007). Moreover, one of ordinary skill in the

art would have good reason to provide such a display. Ex. 1002 at ¶ 110. For

example, ranking orders based on favorability, e.g., lowest to highest price for buys

and highest to lowest price for sells, is a common way to show traders other resting

orders that are in the system and enable the traders to make sense of the other

orders and other trading possibilities. Id.

The claim chart below shows exemplary portions of CFTC and Lupien that

disclose and teach the elements of claim 2.


52

’387 Patent Claims CFTC (Ex. 1003) and Lupien (Ex. 1004) Claim 2. The conditional order transaction network of claim 1 further including a plurality of trader workstations for trading and negotiating prospective trades for instruments referenced in buy and sell orders, based upon conditions set forth in the orders including price represented by an algorithm with constraints thereon, each workstation comprising;

CFTC discloses that the orders are entered at a Trader Work Station (terminal) by terminal operators. Ex. 1003 at 4, 9. The order is in the form of an algorithm, i.e., including constraints such as quantity, limit price, strike price and put or call, and “any precondition for entry into the matching system (e.g., stop, market discretion, MIT or stop limit).” Id. at 20-21.

a display device for displaying the selected parameters of buy and sell orders in a prioritized sequence in a descending order of favorability across a display field, with the most favorable order at one distal end and the least favorable at the other distal end;

CFTC discloses that “[c]urrent market information concerning bids, offers, and trade executions would be displayed on NYMEX ACCESS screens.” Id. at 40. CFTC further discloses making buy and sell orders available in a prioritized sequence: “Terminal operators would have continuous access to the best bid and offer price and the available quantity at each such price, session high and low price, and the last-traded price and volume for each contract. Similar information would be available with regard to intra- and inter-commodity spread orders. For options, the system could be set to display indicative and delta values based on current volatilities. A terminal operator also could access a ‘depth-of-market’ feature, which would display all resting bids up to ten ticks below the best bid and all resting offers up to ten ticks above the best offer, along with the total available quantity at each price. In addition, the terminal operator could configure his trading screen so as to receive a real-time ‘ticker’ display containing best bids, best offers, and last trade prices, and their respective volumes for all contracts in a


53

’387 Patent Claims CFTC (Ex. 1003) and Lupien (Ex. 1004) selected commodity.” Id. at 58.

Lupien discloses a display screen that shows data relating to pending orders. Ex. 1004 at 5:37-39, 46-50; FIGS. 2, 5, 6. “This display function allows users to manage their orders.” Id. at 7:22-23. The display screen can show all pending orders, sales and purchases, in the system, ranked in descending order. Id. at FIG. 5.

an input device for entering outgoing orders to be traded or negotiated into the trader workstation; and

CFTC discloses that orders are entered into NYMEX ACCESS through terminals called trader work stations (TWSs) at various remote locations. Ex. 1003 at 19.

Lupien discloses that users of the system place orders with controller CPU 10. Ex. 1004 at 12:61-62; FIG. 8. “Users may either be internal auto-traders . . . or external auto-traders,” where “[a]n auto-trader is a computer process which enters orders directly with the system.” Id. at 12:66-13:2; FIG. 8.

a computer for receiving the outgoing orders and incoming order information from traders' terminals, and for controlling the display device, said computer including,

CFTC discloses that “NYMEX ACCESS terminal operators would enter orders into the system by means of a TWS [trader work station]. Orders would be routed to a trade matching host for execution based on an algorithm employing strict price/time priority.” Ex. 1003 at 4. CFTC discloses that a terminal operator can “configure his trading screen so as to receive a real-time ‘ticker’ display” containing order information such as best bids, best offers and last trade prices. Id. at 58.

Lupien’s CPU 10, through which users of the system

place orders, “acts partially as an order matching device to bring buyers and sellers together.” Ex. 1004 at 5:67-6:6; 12:61-62; FIG. 1. “Each client can have its own computer terminal CPU 15 which is connected to storage device 14 and to controller CPU 10.” Id. at 6:26-28; FIG. 1.

a comparator for comparing all incoming orders relative to outgoing orders, and

CFTC discloses that orders are entered (outgoing) at the Trader Work Station and the trading screen of a Trader Work Station can be configured to receive order information (incoming) such as best bids, best offers, and last trade prices. Ex. 1003 at 4, 58. CFTC discloses that “the terminal operator could configure his trading screen


54

’387 Patent Claims CFTC (Ex. 1003) and Lupien (Ex. 1004) a sorter that sequences the orders in real-time in the display field as each order is received to reflect changes in the relative favorability of the orders responsive to changes in price of said another item is [sic] the independent variable.

so as to receive a real-time ‘ticker’ display containing best bids, best offers, and last trade prices, and their respective volumes for all contracts in a selected commodity.” Id. at 58. An “incoming spread order could be executed against an ‘implied’ spread bid or offer.” Id. at 28. Further, CFTC discloses “terminal operators would have continuous [real-time] access to best bid and offer price and the available quantity at each such price . . . ,” as well as sorting bids and offers by displaying on the trading screen “all resting bids up to ten ticks below the best bid and all resting offers up to ten ticks above the best offer . . . .” Id.

Lupien discloses “[a] sorting function [that] allows the

user to concentrate on the most important orders according to the selected criteria.” Ex. 1004 at 7:19-22. “The bottom portion of all screens contains prompts that enable the user to change the way the data is displayed or ranked.” Id. at 7:39-41. The display screen can show all orders, purchases and sales, in the system, ranked in descending order, with a “Sort” indication displayed near the bottom of the screen. Id. at FIG. 5. The securities can be ranked by move from the previous night’s closing prices. Id. at 8:33-35; FIG. 5.

E. Clemons and CFTC Render Claim 1 Unpatentable under 35 U.S.C. § 103(a)

Clemons, which predates the ’387 patent, describes the OptiMark order

matching system that processes expressions of trading interest according to a price-

setting algorithm. See, e.g., Ex. 1018 at Abstract, 1. Traders enter orders from

computer terminals using a graphical user interface to participate in block trade

matching within OptiMark. Id. at 3.2, 4.3. That is, each trade described in Clemons

includes numerous individual securities that are matched within OptiMark. The


55

matching system attempts to execute potential matches between orders from

buyers and sellers given particular prices and quantities. Id. at 1, 3.2, 4.2.

Clemons discloses “an order for an item in the form of an algorithm with

constraints . . . .” Traders input and submit their trading preferences (e.g., price and

quantity), representing a willingness to transact. Id. at 1, 4.2. And Clemons

provides several examples of the types of block orders expected to be matched in

the OptiMark system. See id. at 3.2.

To the extent that Clemons does not disclose algorithmic orders where two

or more securities are traded contemporaneously, CFTC does so. Ex. 1002 at

¶ 114. CFTC discloses that operators enter orders at Trader Work Stations (trader

terminals), wherein the orders can include constraints like quantity, limit price,

strike price, and “any precondition for entry into the matching system” (constraints

and conditions). Id. at 4, 9, 20-21. A spread order is inherently algorithmic. See,

e.g., Ex. 1002 at ¶¶ 60, 94, 114, 120. As disclosed in CFTC, when a trader enters a

spread order into the system, the price of the spread order is represented as an

algorithm based on the prices, and price difference, between the separate legs. Id.

at 27-28. The orders are then routed to a trade matching host (controller computer)

for execution. Id. at 4, 19, 27-31.

It would have been obvious to one of ordinary skill in the art at the time of

the invention to modify Clemons to include algorithmic orders, like the spread


56

orders of CFTC, and trade two or more securities (e.g., two legs of a spread trade)

contemporaneously. See, e.g., Ex. 1002 at ¶ 116. The OptiMark system of Clemons

includes contingent block trades, and could indeed be modified to include

contingent spread orders as taught by CFTC. Id. Such a modification would, for

example, merely involve adding spread orders and trading, as taught by CFTC,

within the trading system disclosed in Clemons. Id. “The combination of familiar

elements according to known methods is likely to be obvious when it does no more

than yield predictable results.” KSR, 127 S. Ct. at 1739. Moreover, one of ordinary

skill in the art would have good reason to include spread orders in the system

described in Clemons to provide traders with a simple and flexible electronic

trading system for trading conditioned orders. See, e.g., Ex. 1002 at ¶ 116.

Regarding claim 1, the trading system of Clemons as modified by CFTC to

provide spread orders includes algorithmic orders that can be represented as a line

in two dimensional space. For example, Clemons provides several exemplary

orders represented as lines on graphs showing price versus quantity. See, e.g., Ex.

1018 at Figs. 5-8. CFTC teaches spread orders that can be represented as a two-

dimensional line. See, e.g., Ex. 1002 at ¶¶ 96, 97; see supra Part VIII(C). As

explained in detail above, a spread order that executes its two legs simultaneously

can be represented as a line in two dimensional space with constraints having the

price of one security as one axis and the price of another security as its other axis.


57

See, e.g., Ex. 1002 at ¶¶ 57, 60, 116, 117. Moreover, the Office has already

acknowledged this feature of CFTC. Ex. 1016 at 21 (“The order algorithms as set

forth by CFTC can indeed be represented as a line on such a 2D graph. The

relationship between the two securities in the spread order (a linear price

difference) has an inherent ability to be represented graphically.”).

The claim chart below identifies exemplary portions of Clemons and CFTC

that disclose the elements of claim 1.

’387 Patent Claims Clemons (Ex. 1018) and CFTC (Ex. 1003) Claim 1. A conditional order transaction network that matches or compares buy and sell orders for a plurality of items based upon conditions set forth within the order, including a price represented as an algorithm with constraints thereon, the conditional order transaction network comprising:

Clemons describes the OptiMark system for block trading. “Traders using OptiMark input their trading preferences graphically across a range of sizes and prices, and submit them electronically.” Ex. 1018 at 1. OptiMark uses a matching algorithm to match buyers and sellers, and “[t]he system ‘optimizes’ the matching of these OptiMark trading preferences.” Id. Block trading includes trades over 10,000 shares, and can be several million shares. Id. at 2.1.

CFTC discloses NYMEX ACCESS, an electronic order

matching system: “The NYMEX ACCESS trade matching host is designed to accept limit orders, i.e., orders to buy and sell a particular number of futures or option contracts in a given commodity and month at a specified price, and spread orders entered at a differential.” Ex. 1003 at 19. The system generates implied spread bids and offers by calculating spread differentials based on the current best underlying futures market prices. Id. at 27-29. The order price of one item in each spread order is inherently conditioned on the price of the other item.

a variable number of trader terminals for entering an order for an item in the form of an algorithm with

Clemons discloses that “OptiMark subscribers will log in from their own computer terminals and communicate over commercial information services and market data networks of their choice.” Ex. 1018 at 4.3. Traders enter orders from computer terminals using a graphical user


58

’387 Patent Claims Clemons (Ex. 1018) and CFTC (Ex. 1003) constraints thereon that represent a willingness to transact, where the price is the dependent variable of the algorithm within the constraints and dynamically changing price of another item is an independent variable, the price as the dependent variable being continuously changeable responsive to changes in price of the independent variable, the algorithm representing a buy or sell order;

interface to participate in block trade matching within OptiMark. Id. 3.2, 4.3. Traders input and submit their trading preferences (e.g., price and quantity), representing a willingness to transact. Id. at 1, 4.2.

CFTC discloses that an order is in the form of an

algorithm with constraints representing a willingness to transact. Ex. 1003 at 4, 19, 27-31. The constraints include quantity, limit price, strike price and put or call, and “any precondition for entry into the matching system (e.g., stop, market discretion, MIT or stop limit).” Id. at 20-21. The price of at least one security is dependent on the price of another security being traded in that the disclosed system would “generate implied spread bids and offers by calculating spread differentials based on the current best . . . prices . . .” in the market for each item (leg of the order). Id. at 28. CFTC also discloses that “the contingent bid or offer [for one item] would move correspondingly” if the price of the other item in the order changes. Id. at 31. CFTC also discloses “chaining” spread orders together to create a larger synthetic spread order equal in magnitude to the sum of the combined orders. Id. The price of the synthetic spread (also called a synthetic security) is a dependent variable based on the price of the individual “chained” spread orders, which are independent variables. Id. at 32.

controller computer means coupled to each of the trader terminals over a communications network and receiving as inputs, each algorithm with its corresponding constraints;

Clemons discloses that “OptiMark subscribers will log in from their own computer terminals and communicate over commercial information services and market data networks of their choice.” Ex. 1018 at 4.3. Traders enter orders from computer terminals using a graphical user interface to participate in block trade matching within OptiMark. Id. at 3.2, 4.3. Traders input and submit their trading preferences (e.g., price and quantity), representing a willingness to transact. Id. at 1, 4.2.

CFTC discloses that an order is in the form of an

algorithm with constraints such as quantity, limit price, strike price and put or call, and “any precondition for entry


59

’387 Patent Claims Clemons (Ex. 1018) and CFTC (Ex. 1003) into the matching system (e.g., stop, market discretion, MIT or stop limit).” Ex. 1003 at 4, 19, 20-21, 27-31.

means for matching, in accordance with the constraints and conditions, algorithmic buy orders with algorithmic sell orders; one of the conditions being the requirement that two or more securities are tradable contemporaneously as a contingent trade of those respective securities, and

Clemons’ matching system attempts to execute potential matches between orders from buyers and sellers given particular prices and quantities. Ex. 1018 at 1, 3.2, 4.2. “When OptiMark runs its matching, it processes all submitted order profiles, and computes an optimal pricing and matching result for users based on their willingness to trade across the range of prices and sizes.” Id. at 4.2.

CFTC describes matching a spread order (algorithmic

order having constraints and conditions) with another spread order. Ex. 1003 at 28. For a conditional order, the system immediately would buy or sell a contract for the securities in the spread order in accordance with the constraints and conditions contained within the order. Id. at 29. The risk of executing one security and not the other (called legging risk) is eliminated because the securities are traded virtually simultaneously as a contingent trade. Id. at 28-29. Conditional orders adjust as the price of each item (security) changes. Id. at 28-31.

means for matching or comparing, in accordance with the constraints and conditions, algorithmic buy/sell orders with non-algorithmic sell/buy orders; one of the conditions being the requirement that two or more securities are tradible contemporaneously as a contingent trade of those respective securities, and

Clemons’ matching system attempts to execute potential matches between orders from buyers and sellers given particular prices and quantities. Ex. 1018 at 1, 3.2, 4.2. “When OptiMark runs its matching, it processes all submitted order profiles, and computes an optimal pricing and matching result for users based on their willingness to trade across the range of prices and sizes.” Id. at 4.2.

CFTC describes matching a spread order (algorithmic

order having constraints and conditions) with orders for the individual component securities (referred to as “underlying futures” or “outrights,” i.e., non-algorithmic orders). Ex. 1003 at 28. For a conditional order, the system immediately would buy or sell a contract for the securities in the spread order in accordance with the constraints and conditions contained within the order. Id. at 29. The risk of executing one security and not the other (called legging risk) is eliminated because the securities are traded


60

’387 Patent Claims Clemons (Ex. 1018) and CFTC (Ex. 1003) virtually simultaneously as a contingent trade. Id. at 28-29. Conditional orders adjust as the prices of each item (security) changes. Id. at 28-31.

wherein the order algorithm can be represented as a line in two dimensional space with constraints having the price of one security as one axis and the price of another security as its other axis.

CFTC discloses order algorithms that can be represented as a line on a two dimensional graph. See, e.g., Ex. 1002 at ¶ 96. The relationship between the two securities in the spread order (a linear price difference) has an inherent ability to be represented graphically in two dimensions. Id.

F. Clemons, CFTC, and Lupien Render Claim 2 Unpatentable

under 35 U.S.C. § 103(a)

As discussed above, Clemons describes the OptiMark order matching system

that processes expressions of trading interest according to a price-setting algorithm.

See, e.g., Ex. 1018 at Abstract, 1. CFTC discloses that operators enter orders at

Trader Work Stations (trader terminals), wherein the orders can include constraints

like quantity, limit price, strike price, and “any precondition for entry into the

matching system” (constraints and conditions). Ex. 1003. at 4, 9, 20-21. According

to CFTC, when a trader enters a spread order, which is inherently algorithmic, into

the system, the price of the spread order is represented as an algorithm based on

the prices, and price difference, between the separate legs. Id. at 27-28.

Clients using Lupien’s system can view information pertaining to all orders

ranked according to various criteria and shown on a display. Ex. 1004 at 7:15-19;


61

Figs. 2-6. Clients can view their orders ranked by size, nearness to execution price,

price move for the day, and other criteria and can change the way data is displayed

or ranked. Id. at 7:39-41, 7:48-50. In one example, Lupien explains that

FIG. 6 illustrates information displayed on a screen relevant to a

single order. The top left hand side of the working section of the

screen gives the high, low, open and last trade prices for this security,

along with its change for the day (up an eighth, previous close to last

sale) and volume. Shown below are the best and next best bid and ask

residing on the system, and the best bids and offers represented by the

other markets and exchanges as reported by the client's securities

information vendor. Below this section is a segment of the screen

which contains information on past trades. The top portion of this

screen segment contains shares, price and time for the last 6 market

trades in this security obtained from the client's securities information

vendor, and below that are listed the client's trades in this security,

giving action, size, price, time or date and client account involved in

the trade.

Id. at 8:52-68 (emphasis added).

Traders using Clemons’ OptiMark system enter orders from computer

terminals using a graphical user interface to participate in block trade matching

within OptiMark. Ex. 1018 at 3.2, 4.3. And CFTC discloses that the orders are

entered at Trader Work Stations by users manually typing order information into

the work stations at various remote locations. Ex. 1003 at 19. CFTC explains that


62

“[c]urrent market information concerning bids, offers, and trade executions would

be displayed on NYMEX ACCESS screens.” Id. at 40, 58; see supra Part

VIII(C)(1).

To the extent that Clemons and CFTC do not disclose the “display device,”

the “input device,” and the “computer” including “a comparator” and “a sorter”

recited in claims 2 and 6, it would have been obvious to one or ordinary skill in the

art to provide such features in view of the teachings of Lupien. See, e.g., Ex. 1002

at ¶ 129. Lupien discloses a variety of user display screens and teaches that users

are enabled to change the way data is displayed and ranked, and exemplifies a

display screen showing ranked best bids and offers. See, e.g., Ex. 1004 at 7:15-19,

7:39-41, and 8:57-61. “The combination of familiar elements according to known

methods is likely to be obvious when it does no more than yield predictable

results.” KSR, 127 S. Ct. at 1739. Moreover, one of ordinary skill in the art would

have good reason to provide these features. Ex. 1002 at ¶ 129. For example,

ranking orders based on favorability, e.g., lowest to highest price for buys and

highest to lowest price for sells, is a common way to show traders other resting

orders that are in the system and enable the traders to make sense of the other

resting orders and other trading possibilities. Id.

The claim chart below shows exemplary portions of Clemons, CFTC, and

Lupien that disclose and teach the elements of claim 2.


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’387 Patent Claims

Clemons (Ex. 1018), CFTC (Ex. 1003), and Lupien (Ex. 1004)

Claim 2. The conditional order transaction network of claim 1 further including a plurality of trader workstations for trading and negotiating prospective trades for instruments referenced in buy and sell orders, based upon conditions set forth in the orders including price represented by an algorithm with constraints thereon, each workstation comprising;

Clemons discloses that “OptiMark subscribers will log in from their own computer terminals and communicate over commercial information services and market data networks of their choice.” Ex. 1018 at 4.3. Traders enter orders from computer terminals using a graphical user interface to participate in block trade matching within OptiMark. Id. at 3.2, 4.3. Traders input and submit their trading preferences (e.g., price and quantity), representing a willingness to transact. Id. at 1, 4.2.

CFTC discloses that an order is in the form of an algorithm

with constraints thereon. Ex. 1003 at 4, 19, 20-21, 27-31.

a display device for displaying the selected parameters of buy and sell orders in a prioritized sequence in a descending order of favorability across a display field, with the most favorable order at one distal end and the least

Clemons discloses that traders enter orders from computer terminals using a graphical user interface to participate in block trade matching within OptiMark. Ex. 1018 at 3.2, 4.3.

CFTC discloses that “[c]urrent market information

concerning bids, offers, and trade executions would be displayed on NYMEX ACCESS screens.” Ex. 1003 at 40. Buy and sell orders are made available in a prioritized sequence: “Terminal operators would have continuous access to the best bid and offer price and the available quantity at each such price, session high and low price, and the last-traded price and volume for each contract. Similar information would be available with regard to intra-and inter-commodity spread orders. For options, the system could be


64



favorable at the other distal end; an input device for entering outgoing orders to be traded or negotiated into the trader workstation; and a computer for receiving the outgoing orders and incoming order information from traders' terminals, and for controlling the display device, said computer including,

set to display indicative and delta values based on current volatilities. A terminal operator also could access a ‘depth-of-market’ feature, which would display all resting bids up to ten ticks below the best bid and all resting offers up to ten ticks above the best offer, along with the total available quantity at each price. In addition, the terminal operator could configure his trading screen so as to receive a real-time ‘ticker’ display containing best bids, best offers, and last trade prices, and their respective volumes for all contracts in a selected commodity.” Id. at 58.

Lupien discloses a display screen that shows data relating

to pending orders. Ex. 1004 at 5:37-39, 46-50; FIGS. 2, 5, 6. “This display function allows users to manage their orders.” Id. at 7:22-23. The display screen can show ranked orders, sales and purchases in the system. Id. at FIG. 6. For example, the display screen can show “the best and next best bid and ask residing on the system, and the best bids and offers represented by the other markets and exchanges as reported by the client’s securities information vendor.” Id. at 8:57-61; FIG. 6. Users of the system place orders with controller CPU 10. Id. at 12:61-62; FIG. 8. “Users may either be internal auto-traders . . . or external auto-traders,” where “[a]n auto-trader is a computer process which enters orders directly with the system.” Id. at 12:66-13:2; FIG. 8. The CPU 10, through which users of the system place orders, “acts partially as an order matching device to bring buyers and sellers together.” Id. at 5:67-6:6; 12:61-62; FIG. 1. “Each client can have its own computer terminal CPU 15 which is connected to storage device 14 and to controller CPU 10.” Id. at 6:26-28; FIG. 1.


65



a comparator for comparing all incoming orders relative to outgoing orders, and a sorter that sequences the orders in real-time in the display field as each order is received to reflect changes in the relative favorability of the orders responsive to changes in price of said another item is [sic] the independent variable.

CFTC discloses that orders are entered (outgoing) at the Trader Work Station and the trading screen of a Trader Work Station can be configured to receive order information (incoming) such as best bids, best offers, and last trade prices. Ex. 1003 at 4, 58. “[T]he terminal operator could configure his trading screen so as to receive a real-time ‘ticker’ display containing best bids, best offers, and last trade prices, and their respective volumes for all contracts in a selected commodity.” Id. at 58. An “incoming spread order could be executed against an ‘implied’ spread bid or offer.” Id. at 28. Further, CFTC discloses “terminal operators would have continuous [real-time] access to best bid and offer price and the available quantity at each such price . . . ,” as well as sorting bids and offers by displaying on the trading screen “all resting bids up to ten ticks below the best bid and all resting offers up to ten ticks above the best offer . . . .” Id.

Lupien discloses “[a] sorting function [that] allows the user

to concentrate on the most important orders according to the selected criteria.” Ex. 1004 at 7:19-22. “The bottom portion of all screens contains prompts that enable the user to change the way the data is displayed or ranked.” Id. at 7:39-41. The display screen can show all orders, purchases and sales, in the system, ranked in descending order, with a “Sort” indication displayed near the bottom of the screen. Id. at FIG. 5. The securities can be ranked by move from the previous night’s closing prices. Id. at 8:33-35; FIG. 5. Additionally, the display screen can show “the best and next best bid and ask residing on the system, and the best bids and offers represented by the other markets and exchanges as reported by the client’s securities information vendor.” Id. at 8:57-61; FIG. 6.


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IX. Conclusion

For the reasons set forth above, claims 1 and 2 of the ’387 patent are

unpatentable and should be cancelled. CME respectfully requests that the Board

grant this petition for covered business method review and institute trial.

Respectfully submitted,

Date: January 14, 2015 /Timothy P. McAnulty/ Erika A. Arner (Lead Counsel) Reg. No. 57,540 Timothy P. McAnulty (Backup Counsel) Reg. No. 56,939

filed: january 14, 2015 filed on behalf of: chicago mercantile … · 2020-03-13 · u.s. patent...

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