DETAILED ACTION
The present application is being examined under the pre-AIA first to invent provisions.
Status of Claims
Claims 1, 3, 5, 6, 17-20, 22-29 and 31 are currently pending and rejected.
Claims 2, 4, 7-16, 21, 30, 32, and 33 are cancelled.
Claim Rejection – 35 U.S.C. 112
The following is a quotation of the first paragraph of 35 U.S.C. 112(a):
(a) IN GENERAL.—The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor or joint inventor of carrying out the invention.
The following is a quotation of the first paragraph of pre-AIA 35 U.S.C. 112:
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
Claim 1 and 31 are rejected under 35 U.S.C. 112(a) or 35 U.S.C. 112 (pre-AIA ), first paragraph, as failing to comply with the written description requirement. The claim(s) contains subject matter which was not described in the specification in such a way as to reasonably convey to one skilled in the relevant art that the inventor or a joint inventor, or for applications subject to pre-AIA 35 U.S.C. 112, the inventor(s), at the time the application was filed, had possession of the claimed invention. Applicant added “generate electronic adjustment instructions that are automatically transmitted to the external recordkeeping system to modify the non-cash guaranteed outcome without human intervention” to claim 1 and 31. However, the specification does not have support for this limitation. Applicant stated in the Remarks that the amendment is supported the by page 22 of the specification – “guarantee adjustment module 185 may, in some embodiments, perform an ongoing valuation or appraisal of the asset, portfolio of assets and/or investment manager strategy, for example, to determine whether the guarantee should be offered, or whether a lower guarantee should be offered” and “guarantee adjustment module 185 may monitor, for example, whether option payments are being made in a timely manner and whether the investment manager is staying within the prescribed guidelines”. These lines from the specification only mentions reappraising asset portfolio and monitoring option payments. They are silent with regards to generate electronic adjustment instructions, automatically transmitting the instructions to the external recordkeeping system to modify the non-cash guaranteed outcome.
Dependent claims 3, 5, 6, 17-20, and 22-29 are also rejected based on their dependency on claim 1.
Claim Rejection – 35 U.S.C. 101
35 U.S.C. 101 reads as follows:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
Claims 1, 3, 5, 6, 17-20, 22-29 and 31 are rejected under 35 U.S.C. 101 because the claimed invention is directed to non-statutory subject matter. The rationale for this finding is explained below. In the instant case, the claims are directed towards providing option product. Providing option product falls under “certain method of managing human activities” groupings, thus the present claims include an abstract idea. The claims do not include limitations that are “significantly more” than the abstract idea because the claims do not include an improvement to another technology or technical field, an improvement to the functioning of the computer itself, or meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment. Specifically, the current invention is directed to a financial product, which is not tangible. The recitation of computer is merely used to perform simple calculations, which could be and had been performed by human. Therefore, the claims do not include an improvement to the technology or technical field or the computer itself. Note that the limitations, in the instant claims, are done by the generically recited computer device. The limitations are merely instructions to implement the abstract idea on a computer and require no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry. Therefore, claims 1, 3, 5, 6, 17-20, 22-29 and 31 are rejected under 35 U.S.C. 101 as being directed to non-statutory subject matter.
Step 1: The claims 1, 3, 5, 6, 17-20, 22-29 and 31 are directed to a process, machine, manufacture, or composition matter.
In Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S. Ct. 2347 (2014), the Supreme Court applied a two-step test for determining whether a claim recites patentable subject matter. First, we determine whether the claims at issue are directed to one or more patent-ineligible concepts, i.e., laws of nature, natural phenomenon, and abstract ideas. Id. at 2355 (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1296–96 (2012)). If so, we then consider whether the elements of each claim, both individually and as an ordered combination, transform the nature of the claim into a patent-eligible application to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.
Claims 1, 3, 5-7, 17-20 and- 22-29 are directed to a process (i.e., method claims).
Claim 31 is directed to a machine (i.e., system claim).
Step 2A: The claims are directed to an abstract idea.
Prong One
The present independent claim 1 is directed to a method/system for providing an option to exchange a future value of an asset for noncash settlement on a future date. As such, the claimed invention is essentially describing a process of hedging or mitigating settlement risk, which was found to be abstract by the courts. Examiner also points out that the present claim, even if it is implemented by computers, is still directed to a concept of hedging, in particular, a concept of exchanging a future value of a portfolio assets for at least one non-cash settlement instrument outcome on a future date. The claimed process comprises the steps of determining a delivery of the non-cash guaranteed outcome and an option payment amount, and effecting a purchase of the option. These steps describe the process of hedging, but do not render the concept less abstract. Therefore, the present claim 1 are directed to an abstract idea. Examiner further points out that the focus of the present claims is not on improving existing computer technology. Rather, the present claim 1 recites abstract ideas constituting “certain methods of organizing human activity such as a fundamental economic practice.”
Claim 1 recites the steps of “determining…a delivery of the non-cash guaranteed outcome…” and “determining…an option payment amount and at least one metric required for the delivery of the non-cash guaranteed outcome…”. These determining steps are merely performing calculations for settling a contract, which is an abstract idea and is not related to computer technology. The first wherein clause describes an automation of purchasing of an option to exchange a future value of an asset for a non-cash settlement outcome on a future date and implementing of such option. The steps comprise: generating the outcome of such option, executing a purchase of the option, conducting an ongoing valuation of the non-cash guaranteed outcome, permitting corrective actions to continue to guarantee the non-cash outcome, execute an audit, automatically adjust the non-cash guaranteed outcome in response to the audit, receive regulatory information and option-related information, transmit reports to option owners. These steps could be performed by human. The implementation by computer is merely automating manual task. These steps are also just describing how an option, which is an abstract idea, is implemented. The second wherein clause only adds rules of the option (i.e., the investor can elect to cancel the purchase option; the option payment is made by the investor or an investor agent to a Counterparty directly or through a trust or other acceptable arrangement; the asset is an asset or a portfolio of assets) and describes the recordkeeping is performed by an external system. Even counting every step, claim 1 is still directed to steps of determining a delivery of the non-cash guaranteed outcome and an option payment amount, and effecting a purchase of the option, thus it is directed to a fundamental economic practice (i.e. hedging, insurance, mitigating risk). Therefore, the present claims fall within the grouping of “certain methods of organizing human activity”.
Independent claim 31 recites a (computer implemented) system that provides an option to an investor to exchange a future value of a portfolio of assets, regardless of future performance or value, for at least one non-cash settlement instrument outcome on a future date. Aside from the recitation of being computer implemented, the claim preamble generally concerns hedging and mitigating risk. The claim limitations, under their broadest reasonable interpretation, are associated with mitigating risk and hedging, in particular, a concept of exchanging a future value of a portfolio assets for at least one non-cash settlement instrument outcome on a future date. See Final Act. 18. As discussed below, this constitutes a certain method of organizing human activity, such as a fundamental economic practice, which also constitutes an abstract idea. Additionally, we note the Specification states “[t]his invention relates generally to a system and method for providing financial products and services, and more particularly, to a system and method for providing an option to convert an asset or portfolio of assets into a guaranteed income flow or other settlement at a future date.” Spec. 1:10—12; see also id. at 1:14—2:6. Mitigating risk by managing financial instruments involves organizing human activity and is an economic act that includes products ordinarily sold in the stream of commerce. Since the present claims fall under certain methods of organizing human activities”, they are directed to an abstract concept.
Prong Two
Independent claim 1 recites only a computer processor as additional element. The computer processor is claimed to perform basic computer functions, such as determining a delivery of the non-cash guaranteed outcome (i.e. performing data analysis and calculations), determining an option payment amount (i.e. performing calculations), generating the outcome of such option being contingent on rules (i.e. checking data against rules), executing a purchase (i.e. transmitting purchase instruction over a network), executing an audit (i.e. checking data against rules), adjusting the non-cash guaranteed outcome in response to the audit (i.e. performing calculations), and transmitting repots to option owners (i.e. transmitting data over network). Independent claim 31 recites similar limitations. The additional limitations do not integrate the judicial exception into a practical application. More particularly, the claims do not recite: (i) an improvement to the functionality of a computer or other technology or technical field (see MPEP § 2106.05(a)); (iii) use a “particular machine” to apply or use the judicial exception (see MPEP § 2106.05(b)); (iv) a particular transformation of an article to a different thing or state (see MPEP § 2106.05(c)); or (vi) any other meaningful limitation (see MPEP § 2106.05(e)). See also Memorandum, 84 Fed. Reg. at 55. Here, although the claim includes additional elements (computer implemented system, memory component, computer processor, computer), these are insufficient to constitute integration into a practical application because these elements are recited at high level of generality and the claim simply applies the judicial exception using “computer,” “computer processor,” and “memory component.” That is, the claim merely utilizes these additional elements as a tool to perform the abstract idea (fundamental economic practices). See MPEP § 2106.05(f); Memorandum, 84 Fed. Reg. at 55; see also Alice, 573 U.S. at 223 (“if [the] recitation of a computer amounts to a mere instruction to implement an abstract idea on a computer that addition cannot impart patent eligibility” (quotations and internal citations omitted)). The additional elements also do not constitute a particular machine. Even assuming the additional elements represent a generically recited computer (i.e., generic computer components) to perform the abstract idea, that is insufficient.
Examiner further points out that the courts have found several examples of using general purpose computer to execute finance concepts to be abstract in May 2016 Update: Subject Matter Eligibility Court Decisions. For example, "automated trading exchange system having integrated quote risk monitoring and quote modification services" (Chicago Bd. Options Exch., Inc. v. Int'l Sec. Exch., LLC), "converting a portion of future retirement payments to current benefits" (Retirement Capital Access Management Co., LLC v. U.S. Bancorp), "safe transaction guaranty" (buySAFE, Inc. v. Google, Inc.), “system for managing a stable value protected investment plan” (Bancorp Services v. Sun Life), and “methods and investment instruments for performing tax-deferred real estate exchanges” (Fort Properties, Inc. v. American Master Lease LLC) are found to be abstract by the courts. Therefore, simply reciting generic computer components to perform abstract finance concepts does not render the claims any less abstract nor make them eligible for patent.
Unlike DDR Holdings, the present claimed elements do not solve an Internet-centric problem what a claimed solution that is necessarily rooted in the computer technology. The problem of converting a portfolio of assets into a guaranteed income flow at a future date is not unique in the Internet environment, and the process can be done without computer. In the present claims, general purpose computer is merely used as a tool to execute the abstract concept of converting a portfolio of assets into a guaranteed income flow at a future date. Therefore, the rational from DDR Holdings does not apply to the present claims. Moreover, the present claims do not include any physical transformation of one particular article from one physical state to another and the claimed concept can clearly be performed by a general-purpose computer, thus the claims fail the machine-or-transformation test. Therefore, the additional limitation does not integrate the abstract concept into a practical application. The present claims are directed to an abstract idea.
In the response filed on 05/12/2021, Applicant cancelled claims 9, 12, and 13, and rolled the limitations of these claims into claim 1 (“conduct an ongoing valuation or appraisal of the non-cash guaranteed outcome on a periodic basis by assessing compliance with the at least one metric; and permitting, upon a finding of non-compliance, one or more remedies and corrective actions to continue to guarantee the non-cash outcome”). Examiner points out that these limitations are not new, and have been considered by the PTAB in the decision mailed on 04/23/2019. Examiner also points out that these limitations are not necessarily performed by a computer. Even if they are, these limitations are analogous to human mental processes, and are typically performed by human staff at an insurance/investment firm. Conducting an ongoing valuation or appraisal of an investment product (which is a contract and an abstract concept) by assessing compliance with at least one metric is merely and permitting remedies to ensure compliance is merely complying with a legal contract. Such process is required by laws and regulations, and it is not related to improving computer function. Even if the compliance process is performed or facilitated by computer, the computer is merely used as a tool to implement an abstract concept.
In the response filed on 09/08/2021, Applicant cancelled claim 8, and rolled the limitation of claim 8 into claim 1 (“wherein the option fee is based in part on the current value of the at least one asset”). Examiner points out that this limitation not new, and have been considered by the PTAB in the decision mailed on 04/23/2019. Examiner also points out that specifying the option fee is based in part on the current value of an asset is purely a business decision and does not affect technology. The limitation can also be implemented with pen and paper, without any computer.
Furthermore, dependent claims 2, 5, 6, 17-20 and 22-29 do not recite limitation that would integrate the abstract concept into a practical application. Claims 2, 5, 6, and 17-29 do not recite any additional element, but merely specify terms related to the “non-cash guaranteed outcome” instrument in claim 1. These claims are merely providing further explanation of the abstract concept itself.
Step 2B: The claims do not recite additional elements that amount to significantly more than the abstract idea.
The additional claimed element other than the abstract concept of providing investor the ability to purchase an option includes only a computer comprising a memory component and a processor. The memory component is recited to store portfolio data (i.e. receiving, processing, and storing data). The computer processor is recited to assess portfolio data, underwriting strategy (i.e. performing calculation and automating mental task), determining a guaranteed delivery of outcome (i.e. performing calculation), and executing an option (i.e. transmitting order data over network). According to MPEP 2106.05(d), “performing repetitive calculations”, “receiving, processing, and storing data”, “electronically scanning or extracting data from a physical document”, “electronic recordkeeping”, “automating mental tasks”, and “receiving or transmitting data over a network, e.g., using the Internet to gather data” are considered well-understood, routine, and conventional functions of computer. The modules recited in claim 31 merely comprise generic computer components, which the Applicant did not specify in the original specification. The computer components describe in page 16 to 17 of the original specification are generic computer components, which are the same or similar to a general-purpose computer. The recitation of the computer element amounts to mere instruction to implement the abstract idea on a computer.
Claim 1 now “interface with at least one external system to receive regulatory information and option-related information; and transmit reports to option owners based on changes in the asset performance”. However, these limitations are merely “receiving or transmitting data over a network”, which is a well-understood, routine, and conventional computer function according to MPEP 2106/05(d). As such, they fail to improve the functioning of a computer or any other technology or field. Since receiving information from external system and transmitting reports to user can be performed by any general-purpose computer, the claimed invention does not require a particular machine. Moreover, there is clearly not physical transformation of a particular article from one state to another. Furthermore, the added limitations are merely linking the use of the abstract idea on existing networked computers. Even combining the added limitations to other additional elements, claim 1 is nothing more than using existing computer technology as a tool to implement an abstract idea of hedging, in particular, a concept of exchanging a future value of a portfolio assets for at least one non-cash settlement instrument outcome on a future date, where receiving and transmitting information are performed by a general-purpose computer.
Claim 1 also recites “wherein the investor determines the at least one non-cash settlement instrument”, which was originally recited in claim 14. No other claim is amended. Examiner points out that the added limitation is not related to computer technology. Allowing investor to determine non-cash settlement instrument is related to contract agreement, which is an abstract idea.
Claim 1 also recites “generate electronic adjustment instructions that are automatically transmitted to the external recordkeeping system to modify the non-cash guaranteed outcome without human intervention”. This limitation is not related to the functioning of computer or any technology. It is related to an abstract business rule: investors are allowed to purchase additional non-cash settlement instrument prior or at conversion. Since it is not related to improving computer function or requires any particular machine to implement, the addition of this limitation does not render claim 1 any less abstract. Applicant also added this limitation to independent claim 31.
As such, there is no inventive concept sufficient to transform the claimed subject matter into a patent-eligible application. The claims do not amount to significantly more than the abstract idea itself. Accordingly, the claims are not patent eligible.
Response to Remarks
In the response filed on 12/12/2025, Applicant only amended independent 1 by amending one limitation – “generate electronic adjustment instructions that are automatically transmitted to the external recordkeeping system to modify the non-cash guaranteed outcome without human intervention” to claim 1 and 31. However, the specification does not have support for this limitation. Applicant stated in the Remarks that the amendment is supported the by page 22 of the specification – “guarantee adjustment module 185 may, in some embodiments, perform an ongoing valuation or appraisal of the asset, portfolio of assets and/or investment manager strategy, for example, to determine whether the guarantee should be offered, or whether a lower guarantee should be offered” and “guarantee adjustment module 185 may monitor, for example, whether option payments are being made in a timely manner and whether the investment manager is staying within the prescribed guidelines”. These lines from the specification only mentions reappraising asset portfolio and monitoring option payments. They are silent with regards to generate electronic adjustment instructions, automatically transmitting the instructions to the external recordkeeping system to modify the non-cash guaranteed outcome. As such, the amended feature is not given patentable weight.
Even if the amended feature is supported and carries weight, it does not render the claims any less abstract. Generating adjustment instructions for modifying guaranteed outcome is generally performed based on predefined formula. It is merely an automation of mental processes using existing computer functions. According to MPEP 2106.05(d), “performing repetitive calculations”, “receiving, processing, and storing data”, “electronically scanning or extracting data from a physical document”, “electronic recordkeeping”, “automating mental tasks”, and “receiving or transmitting data over a network, e.g., using the Internet to gather data” are considered well-understood, routine, and conventional functions of computer. Transmitting adjustment instructions and updating recordkeeping system are well-understood, routine, and conventional computer function, and such the amended feature does not improve computer function or integrate the abstract concept into a practical application.
Applicant also argued that under Step 2A prong 1, the Office Action concluded that the claim as a whole recites an abstract idea without analyzing specific claim elements. Examiner disagrees and points out that each of the claimed step has been analyzed and claim 1 and claim 31 have been considered as a whole. The background section and the summary section of the specification also clearly state that the present claims are directed towards “providing an option to convert an asset of portfolio of assets into a guaranteed income flow or other settlement at a future date”. Clearly, the claims are not directed to improve computer function, but to provide a novel financial product, which is entirely in the realm of abstract concept.
Applicant argued that the specific technical implementation recited by claim 1 goes beyond merely using a computer as a tool to perform abstract calculation. Applicant argued the amended feature “requires the computer system to generate specific electronic instructions based on the audit results, automatically transit these instructions to external systems, modify the guaranteed outcome without any human intervention, and interface with external recordkeeping system in real-time”. Examiner points out again, the amended feature is not mentioned in the specification. It is unclear whether the instruction is a specific novel datastructure or just plain text which can be implemented by human. Page 16 and 17 of the specification suggests the consumer and investor management stations can be any general-purpose computer running any operating systems, such as Microsoft Windows, Linux, MacOS, etc. Transmitting instruction and updating recordkeeping system in real-time were also existing computer function at the time of filing. Various court decisions have indicated that relying on existing computer function to implement an abstract concept is not sufficient to show improvement in computer functionality or integrate the abstract concept into practical application. See “accelerating a process of analyzing audit log data when the increased speed comes solely from the capabilities of a general-purpose computer”, FairWarning IP, LLC v. Iatric Sys., 839 F.3d 1089, 1095, 120 USPQ2d 1293, 1296 (Fed. Cir. 2016), “mere automation of manual processes, such as using a generic computer to process an application for financing a purchase”, Credit Acceptance Corp. v. Westlake Services, 859 F.3d 1044, 1055, 123 USPQ2d 1100, 1108-09 (Fed. Cir. 2017), “a commonplace business method being applied on a general purpose computer”, Alice Corp., 573 U.S. at 223, 110 USPQ2d at 1976; Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306, 1334, 115 USPQ2d 1681, 1701 (Fed. Cir. 2015), “Gathering and analyzing information using conventional techniques and displaying the result”, TLI Communications, 823 F.3d at 612-13, 118 USPQ2d at 1747-48, etc.
Applicant further argued the amended limitations provide significantly more than the abstract idea under Step 2B. Applicant again argued the amended feature represents an inventive concept because it requires specific computer functionality beyond routine data processing and data transmission. Examiner disagrees and points out that the specification does not discuss any computer rooted problem being solved by the present invention or the requirement of any specific machine or new computer functionality. Generating payment adjustment instruction and transmitting instructions over network are well within the conventional capacity of general-purpose computer.
The present claims do not improve the functioning of computer. Simply implementing the abstract idea on a generic computer or using a computer as a tool to perform an abstract idea cannot integrate a judicial exception into a practical application at Step 2A or provide an inventive concept in Step 2B. Therefore, the present claims are ineligible for patent. Examiner maintains the ground of rejection under 35 U.S.C. 101.
Conclusion
THIS ACTION IS MADE FINAL. Applicant is reminded of the extension of time policy as set forth in 37 CFR 1.136(a).
A shortened statutory period for reply to this final action is set to expire THREE MONTHS from the mailing date of this action. In the event a first reply is filed within TWO MONTHS of the mailing date of this final action and the advisory action is not mailed until after the end of the THREE-MONTH shortened statutory period, then the shortened statutory period will expire on the date the advisory action is mailed, and any nonprovisional extension fee (37 CFR 1.17(a)) pursuant to 37 CFR 1.136(a) will be calculated from the mailing date of the advisory action. In no event, however, will the statutory period for reply expire later than SIX MONTHS from the mailing date of this final action.
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/HAO FU/Primary Examiner, Art Unit 3697 DEC-2025