DETAILED ACTION
Notice of Pre-AIA or AIA Status
1. The present application, filed on or after March 16, 2013, is being examined under the first inventor to file provisions of the AIA .
Status of Claims
Claims 1, 6-7, 12-14, and 19-31 are pending in the application.
Claim 1 has been amended.
Claims 2-5, 8-11, and 15-18 have been cancelled.
Claims 6-7, 12-14, and 19 are previously presented.
Claims 20-31 are new.
The examiner would like to note that the instant application is being examined by examiner Michael Anderson.
Claim Rejections - 35 USC §101
3. 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.
4. Claims 1, 6-7, 12-14, and 19-31 are rejected under 35 U.S.C. § 101 because the claimed invention is directed to non-statutory patent ineligible subject matter.
claims 1, 6-7, 12-14, and 19-31 are rejected under 35 U.S.C. § 101 because the claimed invention recites and is directed to a judicial exception to patentability (i.e., an abstract idea) and does not provide an integration of the recited abstract idea into a practical application nor include an inventive concept that is “significantly more” than the recited abstract idea to which the claims are directed. (MPEP § 2106)
Step 1 – Statutory Category
In determining subject matter eligibility in an Alice rejection under 35 U.S.C. § 101, it is first determined as Step 1 whether the claims are directed to one of the four statutory categories of an invention (i.e., a process, a machine, a manufacture, or a composition of matter) (MPEP § 2106.03). Here, the claims are directed to the statutory category of a process (claims 1, 6, 12-13, and 19-31), a machine (claim 7), and a manufacture (claim 14). Therefore, we proceed to Step 2A, Prong 1. (MPEP § 2106)
Step 2A, Prong 1 – Abstract Idea
Under a Step 2A, Prong 1 analysis, it must be determined whether the claims recite an abstract idea that falls within one or more enumerated categories of patent ineligible subject matter that amounts to a judicial exception to patentability. (MPEP § 2106.04) Here, the independent claims, at their core, recite the abstract idea of:
receiving, … , a trading product and first and second reference products,
wherein the trading product and the first and second reference products have a price parameter, the price parameter of the trading product is defined as a differential to the price parameter of the first reference product with respect to the second reference product, and
wherein the trading product comprises a variance swap, the first reference product comprises a volatility index, and the price parameter of the trading product is defined as a spread of a number of basis points above and/or below the volatility index; and
trading the trading product by:
determining an occurrence of an event causing the price parameter of the first reference product to be realized;
calculating, based on a predefined algorithm, the price parameter of the trading product based on the price parameter of the first reference product; and
causing the trading product to be settled at a price determined based on the calculated price of the trading product.
Here, the recited abstract idea falls within one or more of the three enumerated categories of patent ineligible subject matter (MPEP § 2106.04), to wit:
(i) Certain methods of organizing human activity, which includes the sub-categories of fundamental economic practices or principles (here, a trading strategy and/or managing risk for managed trade products, i.e., pricing and settling a derivative financial instrument—a variance swap—at a spread relative to a volatility index settlement) and/or of commercial interactions involving sales (trading) activities or behaviors (e.g., in the claims: defining a price parameter of a trading product as a differential to a first reference product with respect to a second reference product, where the trading product is a variance swap and the first reference product is a volatility index, where the trading product price parameter is a spread of a number of basis points above/below the volatility index, where the trading product is traded by determining that the price parameter of the first reference product is realized and calculating the trading product price parameter based on the realized first reference product price parameter and then settling the trading product at a certain price based on the calculated price). See, e.g., Alice, 573 U.S. at 219-220 (intermediated settlement); Bilski v. Kappos, 561 U.S. 593 (2010) (hedging risk).
(ii) Mathematical concepts, which includes the sub-category of mathematical calculations (here, “calculating, based on a predefined algorithm, the price parameter of the trading product based on the price parameter of the first reference product,” i.e., applying a formula such as P = P(ref) ± N basis points to determine a settlement price). See Specification at ¶¶ [0009], [0016], [0057].
Step 2A, Prong 2 – Integration into a Practical Application
Under Step 2A, Prong 2, the recited additional elements are evaluated to determine whether they provide an integration of the recited abstract idea into a practical application (i.e., whether they provide a technological solution to a technological problem). (MPEP § 2106.04(d))
Here, the recited additional elements, such as: a “data provider” that provides data, at least one “server,” an “electronic trading system,” a “processor,” and a “non-transitory machine-readable medium” storing executable instructions to accomplish various functions, do not amount to an integration into a practical application since the claims are simply using each of these additional elements, which are recited in the claims at a high degree of generality, as a tool to carry out the recited abstract idea (i.e., “apply it”) on a computer, using a memory device and/or a database, on a data or communication network, on a display device or user interface, or on another computing device listed above, and/or via software programming. (MPEP § 2106.05(f))
The additional elements are not being technologically improved but simply perform generic computer data receipt and processing/analysis steps, data storage and communication steps, and/or outputting/displaying steps such as those typically used in a general purpose computer, an electronic exchange, a computing system, a display or user interface, and/or a computer or a communication network.
Further, to the extent the claims recite “receiving, from a data provider, a trading product and first and second reference products” and “determining an occurrence of an event causing the price parameter of the first reference product to be realized,” these represent insignificant extra-solution activity (i.e., mere data gathering) that does not integrate the abstract idea into a practical application. (MPEP § 2106.05(g))
The Specification confirms that the alleged improvement is to the financial/business process—namely, simplifying the expiration and risk management process for investors (see Specification at ¶¶ [0023], [0070])—rather than an improvement to any computer technology or technical functioning of the system itself. A financial solution to a financial problem is not a technological improvement that provides integration into a practical application. See, e.g., Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1378, 1384-85 (Fed. Cir. 2019).
Thus, the claims do not provide an integration into a practical application.
Step 2B – Significantly More (Inventive Concept)
Under the Step 2B analysis, it is determined whether the recited additional elements amount to something “significantly more” than the recited abstract idea to which the claims are directed (i.e., provide an inventive concept). (MPEP § 2106.05)
Here, the recited additional elements, identified above in the Step 2A, Prong 2 analysis, do not amount to an inventive concept since, as stated above, the additional elements are not being technologically improved, but rather, the claims are simply using the additional elements as a tool to carry out the abstract idea (i.e., “apply it”) on a computer, using a memory device and/or a database, on a data or communication network, or on another computing device listed above, and/or via software programming, where the additional elements are specified at a high level of generality as simply facilitating and/or performing generic computer data receipt and processing/analysis steps, data inputting steps, data storage and communication steps, and/or data outputting/displaying steps such as those typically used in a general purpose computer, a computing system, an electronic exchange, a display or user interface, and/or a computer or a communication network.
The additional elements are being used in the claims to simply implement the abstract idea and are not themselves being technologically improved, and therefore do not provide something “significantly more.” (See, e.g., MPEP § 2106.05(I)(A); Alice, 573 U.S. at 225-26 (generic computer components performing generic functions insufficient to transform abstract idea into patent-eligible invention); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014))
Furthermore, to the extent the claims recite data-gathering steps (e.g., receiving trading products and reference products from a data provider, receiving settlement data), these constitute well-understood, routine, and conventional (WURC) activity. See MPEP § 2106.05(d)(II) (receiving or transmitting data over a network recognized as WURC, citing Symantec, 838 F.3d at 1321; TLI Communications, 823 F.3d at 612; OIP Techs., Inc., 788 F.3d at 1363); see also Specification at ¶¶ [0029]-[0036] (describing data providers, servers, and network communication in generic terms without any specific technical implementation).
Dependent Claims Analysis
The dependent claims simply further refine and limit the abstract idea recited by the independent claims, from which these claims respectively directly or indirectly depend, where the abstract idea is described above.
Claim 6 further refines the abstract idea by requiring that the trading product and first/second reference products include an interest rate parameter where the trading product interest rate parameter is defined based on a corresponding parameter of the second reference product, which is simply a further specification of trading rules/pricing strategies for a financial product and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claims 12 and 13 simply further refine the abstract idea by requiring that certain pricing rules, strategies and/or conditions apply to determine the trading product price parameter (e.g., the event is a volatility index settlement at a defined price on a particular Wednesday of a given month; upon occurrence of the event, determining the price parameter in accordance with the predefined algorithm), and these claims do not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 19 further refines the abstract idea by requiring that the price parameter of the trading product is defined when the price parameter of the first reference product is realized, which is simply the use of a timing condition for a financial pricing rule and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 20 further refines the abstract idea by requiring that the event comprises an “electronically published settlement value generated by an exchange.” The recitation of electronic publication and an exchange merely describes the source and format of financial data used in the abstract idea and constitutes insignificant extra-solution activity (i.e., data gathering from a particular source). This does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05(g))
Claim 21 further refines the abstract idea by requiring that the trading product is “settled upon occurrence of the event without user input.” This merely describes an automated settlement condition—i.e., a business rule specifying when and how settlement occurs—and generic automation of an otherwise abstract process does not render the claim patent eligible. (See MPEP § 2106.05(f); Credit Acceptance Corp. v. Westlake Services, 859 F.3d 1044, 1055 (Fed. Cir. 2017) (automating a known process does not add significantly more))
Claim 22 further refines the abstract idea by requiring that the determining of the occurrence of the event comprises “receiving settlement data from the data provider,” which is mere data gathering (i.e., insignificant extra-solution activity) and constitutes WURC activity. (See MPEP §§ 2106.05(g), 2106.05(d)(II))
Claim 23 further refines the abstract idea by requiring that the trading product is “not settled until the event causing the price parameter of the first reference product to be realized has occurred,” which is simply a temporal business rule or condition for when settlement may occur and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 24 further refines the abstract idea by requiring that the price parameter of the trading product is “determined at substantially the same time the price parameter of the first reference product is realized,” which is simply a timing rule for the financial calculation and does not provide a technological improvement or inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 25 further refines the abstract idea by requiring that the “event occurs at a predetermined time associated with settlement of the first reference product,” which is simply further specifying the temporal business rules governing when the pricing event occurs and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 26 further refines the abstract idea by requiring that “calculating the price parameter of the trading product comprises applying the predefined algorithm to transform the realized price parameter of the first reference product into a settlement price,” which is simply further describing the mathematical calculation/algorithm that is part of the identified abstract idea and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 27 further refines the abstract idea by requiring that “the predefined algorithm defines the price parameter of the trading product as a numerical spread relative to the realized price parameter of the first reference product,” which further describes the mathematical relationship (i.e., P = P(ref) ± N) and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 28 further refines the abstract idea by requiring that “trading the trading product is performed by the electronic trading system without manual execution of settlement instructions.” The “electronic trading system” is an additional element already identified as generic (see Step 2A, Prong 2 analysis above), and “without manual execution” simply describes generic automation of the abstract process, which does not provide a technological improvement or inventive concept. (See MPEP § 2106.05(f); OIP Techs., 788 F.3d at 1363)
Claim 29 further refines the abstract idea by requiring that “the trading product and the first reference product are processed by the electronic trading system separately,” which describes a manner of data handling/processing within the identified abstract idea and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 30 further refines the abstract idea by requiring that “the volatility index comprises a settlement value determined on a scheduled settlement date,” which is simply further specifying the nature of the reference product and the timing of its settlement—i.e., further describing the financial product and business rules—and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Claim 31 further refines the abstract idea by requiring that “the variance swap is settled based on the realized volatility represented by the volatility index,” which is simply further specifying the settlement mechanism of the financial product—i.e., a fundamental economic practice—and does not add any element or feature that provides an integration into a practical application or an inventive concept. (See MPEP §§ 2106.04, 2106.05)
Conclusion
Thus, neither the independent claims nor the dependent claims, viewed individually and as a whole, including consideration of all the limitations of each claim viewed both individually and in combination, add any additional element or provide any subject matter that provides a technological improvement (i.e., an integration into a practical application) that results in the claims being directed to patent eligible subject matter, nor do the claims provide something significantly more than the recited abstract idea to which the claims are directed. Claims 1, 6-7, 12-14, and 19-31 are therefore not patent eligible under 35 U.S.C. § 101.
Prior Art Not Relied Upon
5. The following relevant prior art made of record and not relied upon is considered pertinent to applicant’s disclosure. (See, MPEP §707.05) The examiner considers the following reference(s) pertinent for disclosing various, but not all, features or combination of features of the claimed invention:
Pine et al. (USPN 7,212,997 B1) discloses determining a price for a trading security (trading product) using a reference product.
However, this reference appears to fail to disclose, at a minimum, the claimed limitations of:
… the trading product and the first and second reference products have a price parameter, the price parameter of the trading product is defined as a differential to the price parameter of the first reference product with respect to the second reference product, and
wherein the trading product comprises a variance swap, the first reference product comprises a volatility index, and the price parameter of the trading product is defined as a spread of a number of basis points above and/or below the volatility index.
Response to Arguments
6. Applicant’s arguments filed 1/16/26 have been fully considered.
Regarding Step 2A, Prong 1
Applicant does not substantively dispute that the claims recite a judicial exception under Step 2A, Prong 1. Applicant states that “even were the presently pending claims … found to fall under the judicial exception (Step 2A, Prong 1), they provide an inventive concept beyond an abstract idea (Step 2B).” As set forth in the § 101 rejection above, the claims clearly recite a fundamental economic practice (i.e., pricing and settling a derivative financial instrument at a spread relative to a volatility index) and mathematical concepts (i.e., applying a predefined algorithm to calculate a price differential), both of which are enumerated categories of abstract ideas under the MPEP. Accordingly, the analysis proceeds to Step 2A, Prong 2.
Regarding Step 2A, Prong 2 – Alleged Technological Improvement
Applicant argues that “causing the trading product to be settled at a price determined based on the calculated price of the trading product” is “a specific technological improvement to the claimed electronic trading system” because it allows “the trader better understand and thus better manage the risk to his portfolio in a rapidly changing market” and allows “the trader to settle the trading product almost instantaneously based on the price of another product.” Applicant further argues that these claims “reflect an improvement to [a] technical field” under MPEP § 2106.05(a). This argument is not persuasive for the following reasons.
First, the alleged improvement identified by Applicant—that a trader “better understands and thus better manages the risk to his portfolio”—is an improvement to the financial/business process, not an improvement to any technology or to the functioning of the computer itself. The claims describe a more efficient or advantageous financial strategy (i.e., settling a variance swap relative to VIX rather than engaging in an expensive basket execution process), not a technological improvement to how the electronic trading system operates at a technical level. An improvement in a business outcome (e.g., better risk management, reduced transaction costs, increased trading efficiency from a financial perspective) is not the same as an improvement to the functioning of a computer or to another technology. See SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1168 (Fed. Cir. 2018) (“[W]e may assume that the techniques claimed are ‘[g]roundbreaking, innovative, or even brilliant,’ but that is not enough for eligibility.”); Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1378, 1384-85 (Fed. Cir. 2019).
Second, Applicant’s characterization that the system settles the trading product “almost instantaneously” is not supported by the claim language. The claims recite “causing the trading product to be settled at a price determined based on the calculated price of the trading product,” which does not recite any particular speed, latency improvement, or technical mechanism by which settlement is accelerated. Even if the claims did recite faster settlement, speed alone resulting from the automation of an otherwise manual financial process on generic computer components does not constitute a technological improvement. See Credit Acceptance Corp. v. Westlake Services, 859 F.3d 1044, 1055 (Fed. Cir. 2017) (merely automating a known manual process does not amount to an improvement in technology); Bancorp Services, L.L.C. v. Sun Life Assurance Co. of Canada, 687 F.3d 1266, 1278 (Fed. Cir. 2012) (using a computer to perform faster calculations does not transform an abstract idea into patent-eligible subject matter).
Third, for a claim to reflect an improvement in technology under MPEP § 2106.05(a), the improvement must be to the technology itself or to the technical functioning of the computer, not merely to the task being performed by the computer. Here, there is no claim language—nor specification support—indicating that the electronic trading system, server, processor, or any other computing component operates differently, more efficiently from a technical standpoint, or with any architectural improvement as a result of the claimed method. The Specification describes conventional system architecture (servers, databases, processors, user interfaces, data providers communicating over networks—see Specification at ¶¶ [0028]-[0049]) and confirms that the alleged benefit is financial in nature (e.g., “traders holding VIX would better understand their risk before and after VIX expiration,” “avoid various margin issues”—Specification at ¶ [0023]). The claimed “improvement” is to how traders manage financial risk, not to how the computer functions.
Fourth, Applicant’s citation to the McRO decision is inapposite. In McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299 (Fed. Cir. 2016), the claims were directed to a specific technological process—the automatic animation of lip synchronization and facial expressions using specific rules applied to particular data structures (morph weight sets and phoneme subsequences)—that improved the technological process of computer animation itself, replacing a previously manual technical animation process with a specific rules-based automated approach that achieved a different and improved technical result. Here, by contrast, the claims do not improve any technical process; they merely automate a financial settlement calculation on generic hardware. Unlike McRO, there are no specific technical rules or data structures claimed that improve the technical functioning of the system.
Accordingly, the claims do not integrate the judicial exception into a practical application under Step 2A, Prong 2.
Regarding Step 2B – Significantly More / WURC
Applicant argues that “the Office Action cites no art against the existing claims to show that their features are ‘well-understood, routine, and conventional in the field’” and requests that art be shown. (Amendment, Pg. 7.) This argument is not persuasive for the following reasons.
First, the Step 2B analysis is not limited solely to a WURC finding regarding the additional elements. Under MPEP § 2106.05, claims fail Step 2B where the additional elements, individually and in combination, do not amount to significantly more than the judicial exception. Here, the additional elements (i.e., a “data provider,” “electronic trading system,” “server,” “processor,” “non-transitory machine-readable medium”) are recited at a high level of generality and are being used merely as tools to implement the abstract idea (i.e., “apply it” per MPEP § 2106.05(f)). Simply appending well-known, generic computer components to a judicial exception does not constitute “significantly more.” See Alice, 573 U.S. at 225-26; Affinity Labs of Texas, LLC v. DIRECTV, LLC, 838 F.3d 1253, 1262 (Fed. Cir. 2016).
Second, to the extent a WURC determination is relevant to the additional elements, the Examiner notes that receiving/transmitting data over a network (e.g., “receiving, from a data provider, a trading product and first and second reference products”) and performing calculations on generic computer processors are recognized as well-understood, routine, and conventional functions. See MPEP § 2106.05(d)(II), citing Symantec, 838 F.3d at 1321 (receiving or transmitting data over a network); TLI Communications LLC v. AV Auto. LLC, 823 F.3d at 612; OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d at 1363; Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306, 1334 (Fed. Cir. 2015) (storing and retrieving information in memory); see also the Specification at ¶¶ [0028]-[0049], which describes the server, data providers, processors, databases, and network communications in entirely generic terms without any specific or unconventional technical implementation.
Third, the Examiner notes that the § 101 eligibility inquiry and the § 102/103 prior art inquiry are distinct analyses. The absence of prior art rejections does not establish that claim elements are “significantly more” under § 101. A novel abstract idea is still an abstract idea. See SAP Am., 898 F.3d at 1163 (“We may assume that the techniques claimed are ‘[g]roundbreaking, innovative, or even brilliant,’ but that is not enough for eligibility. … [N]o matter how much of an advance in the finance field the claims recite, the advance lies entirely in the realm of abstract ideas, with no plausibly alleged innovation in the non-abstract application realm.”); Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016) (“[A] claim for a new abstract idea is still an abstract idea.”). The WURC analysis applies to the additional elements beyond the abstract idea, not to the abstract idea itself.
Accordingly, the additional elements, individually and in combination, do not provide “significantly more” under Step 2B, and the § 101 rejection is maintained.
Regarding New Claims 20-31
New claims 20-31 have been considered. As set forth in the § 101 rejection above, these dependent claims further refine the abstract idea by specifying additional financial/business rules, timing conditions, data sources, and settlement parameters (e.g., the event comprises an electronically published settlement value; settlement occurs without user input; settlement data is received from the data provider; settlement timing conditions; the algorithm defines a numerical spread; the system performs settlement without manual execution), none of which add an element or feature that provides an integration into a practical application or an inventive concept. These claims are rejected under § 101 for the reasons set forth above in the detailed rejection of the dependent claims.
Conclusion
For the foregoing reasons and the reasons set forth in the § 101 rejection above, Applicant’s arguments are not persuasive, and the rejection of claims 1, 6-7, 12-14, and 19-31 under 35 U.S.C. § 101 is maintained.
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.
Any inquiry concerning this communication or earlier communications from the examiner should be directed to MICHAEL W ANDERSON whose telephone number is (571)270-0508. The examiner can normally be reached Monday - Thursday 9am-4pm.
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Mike Anderson
Supervisor Patent Examiner
Art Unit 3693
/Mike Anderson/Supervisory Patent Examiner, Art Unit 3693
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