DETAILED ACTION
Notice of Pre-AIA or AIA Status
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
This action is in reply to the amendment filed 02/12/2026.
Claims 1, 3-9, and 11-15 are pending and have been examined on the merits (claims 1 and 9 being independent).
The amendment filed 02/12/2026 to the claims has been entered.
Response to Arguments
Applicant’s arguments and amendments filed 02/12/2026 have been fully considered.
With regarding to the rejection under 35 USC 112(a), Applicant’s arguments (see Applicant’s remarks, page 2) are not persuasive. The recited claim is not clear as to how the transition matrix represents a gradient boosted decision tree trained to minimize cross entropy because the claimed limitations are not described in the application with sufficient detail such that one skilled in the art can reasonably conclude that the inventor had possession of the claimed invention at the time of filing. As such, the rejection under 35 USC 112(a) is maintained.
Applicants assert that the pending claims fully comply with the requirement of 35 U.S.C. 101. Examiner respectfully disagrees. Applicant’s arguments have been considered and are not persuasive. The rejections under 35 U.S.C. 101 have been maintained and clarified in view of the USPTO MPEP 2106. (see also Patent Board Decision filed 06/25/2025)
Applicant’s arguments (see Applicant’s remarks, pages 2-4):
(1) The declaration under 37 CFR 1.132 filed 02/18/2026 is insufficient to overcome the rejection of claims 1, 3-9, and 11-15 based upon insufficiency of disclosure under 35 USC 112(a) and no patent eligible under 35 USC 101 as set forth in the last Office action because:
i) The Declaration (at point 12) offers an explanation of what cross-entropy means, that the “specific detail is also, in my opinion, not conventional” and that the detail “specifically guides the implementer relative to how the transition matrix is to be trained”. These are conclusions. Other than the desired end-result (better model performance), the Declaration points to no facts or detail in the specification as to how the inventors might create a gradient boosted decision tree trained to minimize cross-entropy, with the particular data that the claim places in the transition matrix. The independent claims do not contain any training details, just the end-result of what the decision tree is trained to accomplish. Therefore, the claimed limitations are not described in the application with sufficient detail such that one skilled in the art can reasonably conclude that the inventor had possession of the claimed invention at the time of filing.
ii) The Declaration (at point 13 and 14) concludes “the claims of ‘725 application integrate any alleged judicial exception into a practical application”, and “the transition matrix is also specifically defined in relation to how it is trained in ways that are not conventional” and “The training of the transition matrix is defined in detail and is also not conventional.” However, the training of the transition matrix is not even claimed and perhaps one can infer from the Declaration that the structure of the transition matrix is unconventional. But the Declaration does not appear to offer any facts demonstrating that the unconventional structure of the transition matrix provides any particular technological advantage. In summary, the instant recited claims including additional elements do not improve the functioning of the computer or improve another technology or technical field nor do they recite meaningful limitations beyond generally linking/applying the use of an abstract idea to a particular technological environment, and also the claims do not include additional elements that are sufficient to amount to significantly more than the judicial exception (i.e., the claim elements when considered separately and in an ordered combination, do not add significantly more than implementing the abstract idea.)
(2) Applicant’s arguments that “Applicant respectfully submits that independent claims 1 and 9 integrate any alleged judicial exception into a practical application under Step 2A, Prong 2.” (see remarks, page 3), are not found persuasive.
In response (2): In the instant application, Examiner considers the judicial exception is not integrated into a practical application. The claim limitations are not indicative of integration into a practical application by claiming an improvement to the functioning of the computer or to any other technology or technical field. Further, the claim limitations are not indicative of integration into a practical application by applying or using the judicial exception in some other meaningful way. In particular the claim limits of “via machine learning”, “a repayment module” (e.g. a process running on a processor), and “a cash flow module” (e.g. amount to simply applying the abstract idea to a computer component (i.e. “apply it”)) are claimed and described at a high level of generality and are functions any general purpose computer performs such that it amount no more than mere instruction to apply the exception to a particular technological environment. Further, none of the limitations recite technological implementation details for any of the steps but, instead, only recite broad functional language being performed by the generic use of a computer component. The claim limits also recite the use of an apparatus, a repayment model, a repayment module, gradient boosted decision tree, a transition matrix, a probability-weighted principal balance vector, a cash flow module, the matrix of probability-weighted amounts, machine learning, and an amortization matrix as additional elements. However, the use of these additionally elements, described at a high level of generality, perform generic computer functions such that it amounts to no more than mere instruction to apply the exception to a particular technological environment. Accordingly, these additional elements do not integrate the abstract idea into a practical application because it does not impose any meaning limits on practicing the abstract idea as generally linking the use of the judicial exception to a particular technological environment or field of use - see MPEP 2106.05(h) or apply it with the judicial exception, or mere instructions to implement an abstract idea on a computer, or merely uses a computer as a tool to perform an abstract idea - see MPEP 2106.05(f). Thus, Applicant’s argument are not persuasive.
(3) Applicant’s arguments that “Applicant also respectfully submits that independent claims 1 and 9 amount to significantly more than any alleged abstract idea.” (see remarks, page 3), are not found persuasive.
In response (3): In instant application, Examiner considers the claim does not include additional elements that are sufficient to amount to significantly more than the judicial exception. As discussed above with respect to integration into a practical application, the additional elements amount to no more than mere instructions to apply the exactly using generic computer component. The claim elements when considered separately and in an ordered combination, do not add significantly more than implementing the abstract idea. Thus, Applicant’s arguments are not persuasive.
Claim Rejections - 35 USC § 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.
Claims 1, 3-9, and 11-15 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.
Independent claims 1 and 9 recite “generating, via machine learning, a transition matrix…… wherein the transition matrix comprises a gradient boosted decision tree trained to minimize cross entropy”, the subject matter is not properly described in the application as filed, and provide an explanation of your position. The recited amendment as highlighted above is not clear as to how the transition matrix represents a gradient boosted decision tree trained to minimize cross entropy because the claimed limitations are not described in the application with sufficient detail such that one skilled in the art can reasonably conclude that the inventor had possession of the claimed invention at the time of filing. And, also it is not described with sufficient detail beyond the claimed function being repeated in the written description.
Dependent claims (3-8 and 11-15) stand rejected also, under 35 U.S.C. 112(a) by virtue of their dependency on a rejected claim.
Claim Rejections - 35 USC § 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, 3-9, and 11-15 are rejected under 35 U.S.C. 101 because the claimed invention is directed to non-statutory subject matter without significantly more.
When considering subject matter eligibility under 35 U.S.C. 101, (1) it must be determined whether the claim is directed to one of the four statutory categories of invention, i.e., process, machine, manufacture, or composition of matter. If the claim does fall within one of the statutory categories, (2a) it must then be determined whether the claim is directed to a judicial exception (i.e., law of nature, natural phenomenon, and abstract idea), and if so (2b), it must additionally be determined whether the claim is a patent-eligible application of the exception. If an abstract idea is present in the claim, any element or combination of elements in the claim must be sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. Examples of abstract ideas include fundamental economic practices; certain methods of organizing human activities; an idea itself; and mathematical relationships/formulas. Alice Corporation Pty. Ltd. v. CLS Bank International, et al., 573 U.S. (2014).
The claimed invention is directed to a judicial exception (i.e. a law of nature, a natural phenomenon, or an abstract idea) without significantly more. In the instant case, the claim(s) as a whole, considering all claim elements both individually and in combination, do not amount to significantly more than an abstract idea.
Step (1): In the instant case, the claims are directed towards a method for modeling loan transitions of an individual which contains the steps of defining, determining, generating, aggregating, multiplying, accounting, and repeating. The claim recites a series of steps and, therefore, is a process. The claims do fall within at least one of the four categories of patent eligible subject matter because claim 1 is direct to a method and claim 9 is direct to an apparatus, i.e. machines programmed to carrying out process steps, Step 1-yes.
Step (2A) Prong 1: A method for modeling loan transitions of an individual is akin to the abstract idea subject matter grouping of: Certain Methods of Organizing Human Activity as fundamental economic principles or practices and Mathematical Concepts as mathematical relationships. As such, the claims include an abstract idea.
The specific limitations of the invention are (a) identified to encompass the abstract idea include: {…determining expected cash flow based on modeling loan transitions…, defining a plurality of potential repayment states of an individual loan between origination and a terminal state comprising either a paid off state or a charged off state, the potential repayment states including a current state, a plurality of delinquency states distinguished from each other based on length of delinquency, the paid off state and the charged off state; defining valid transitions between a present state among the potential repayment states and each respective one of the potential repayment states that is a possible next state from the present state; determining, for the individual loan, a probability of transitioning from the present state to the next state during each period of a term of the individual loan; generating, …. defining the probability of transitioning for each combination of the present state and the next state independent of any previous state prior to the present state during each period of the individual loan,….; generating …. a plurality of other loans to define a repayment model for applying to the individual loan and the plurality of other loans over a defined period of time; aggregating results of applying …. over the individual loan and the plurality of other loans to determine cash flow expected for the individual loan and the plurality of other loans for the defined period of time.}
As stated above, this abstract idea falls into the (b) subject matter grouping of: Certain Methods of Organizing Human Activity as fundamental economic principles or practices and Mathematical Concepts as mathematical relationships as defining a plurality of potential repayment states of an individual loan, defining valid transitions between a present state among the potential repayment states, determining, for the individual loan, a probability of transitioning from the present state to the next state, and aggregating results over the individual loan.
Step (2A) Prong 2: The instant claims do not integrate the exception into a practical application because the limits of “via machine learning”, “gradient boosted decision tree”, “a repayment module” (e.g., a process running on a processor), and “a cash flow module” (e.g. amount to simply applying the abstract idea to a computer component (i.e. “apply it”)) do not apply, rely on, or use the judicial exception in a manner that that imposes a meaningful limitation on the judicial exception (i.e. generally linking the use of the judicial exception to a particular technological environment or field of use - see MPEP 2106.05(h) or apply it with the judicial exception, or mere instructions to implement an abstract idea on a computer, or merely uses a computer as a tool to perform an abstract idea - see MPEP 2106.05(f)).
The instant recited claims including additional elements (i.e. an apparatus, a repayment model, a repayment module, gradient boosted decision tree, a transition matrix, a probability-weighted principal balance vector, a cash flow module, the matrix of probability-weighted amounts, machine learning, and an amortization matrix) do not improve the functioning of the computer or improve another technology or technical field nor do they recite meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment. The limitations merely use a generic computing technology (Specification paragraphs [0039-0041]: the loan transition model platform, a repayment module, a cash flow module, processing circuitry, server, devices, apparatus, processor, etc.) as tools to perform an abstract idea or merely add insignificant extra-solution activity to the judicial exception. (MPEP 2106.05 (f) (g)).
There is a fundamental difference between computer functionality improvements, on the one hand, and uses of existing computers as tools to perform a particular task, on the other. There is nothing, for example, in the pending claims to suggest that any of the claimed “a repayment module” and “a cash flow module” (e.g. a process running on a processor), all of which are suitably programmed, are somehow made more efficient or that the manner in which these elements carry out their basic functions is otherwise improved in any way. Any advantages from the claimed invention do not concern an improvement in computer capabilities but instead relate to an alleged improvement in the fundamental economic practice of modeling loan transitions of an individual, for which a computer is used as a tool in its ordinary capacity. Therefore, the claims are directed to an abstract idea.
Step (2B): When considered individually and in combination, the claims do not include additional elements that are sufficient to amount to significantly more than the judicial exception. As discussed above with respect to integration of the abstract idea into a practical application, the additional elements (Claims: e.g., an apparatus, a repayment model, a repayment module, gradient boosted decision tree, a transition matrix, a probability-weighted principal balance vector, a cash flow module, the matrix of probability-weighted amounts, machine learning, and an amortization matrix) amount to no more than generally linking the use of the judicial exception to a particular technological environment or merely using generic components as tool to perform an abstract idea.
The computer is merely a platform on which the abstract idea is implemented. Simply executing an abstract concept on a computer does not render a computer “specialized,” nor does it transform a patent-ineligible claim into a patent-eligible one. See Bancorp Servs., LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1280 (Fed. Cir. 2012). There are no improvements to another technology or technical field, no improvements to the functioning of the computer itself, transformation or reduction of a particular article to a different state or thing or any other meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment as a result of performing the claimed method. Also, the addition of merely novel or non-routine components to the claimed idea does not necessarily turn an abstraction into something concrete (See Ultramercial, Inc. v. Hulu, LLC, _ F.3d_, 2014 WL 5904902, (Fed. Cir. Nov. 14, 2014). Hence, the claims do not recite significantly more than an abstract idea. In conclusion, merely “linking/applying” the exception using generic computer components does not constitute ‘significantly more’ than the abstract idea. (MPEP 2106.05 (f) (h)). Therefore, the claims are not patent eligible under 35 USC 101.
Dependent claims 3-8 and 11-15 when analyzed as a whole and in an ordered combination are held to be patent ineligible under 35 U.S.C. 101 because the additional recited limitation(s) fail(s) to establish that the claim(s) is/are not directed to an abstract idea, as detailed below. The additional recited limitations in the dependent claims only refine the abstract idea.
For instance, in claims 3 and 11, the step of “… generating a probability-weighted principal balance vector” (i.e., generating… a probability), in claims 4 and 12, the step of “… multiplying the probability-weighted principal balance vector by the transition matrix...” (i.e., multiplying…), in claims 5 and 13, the step of “… multiplying the matrix of probability- weighted amounts by an amortization matrix and summing each column of the matrix of probability-weighted amounts...” (i.e., multiplying… ), in claim 6, the step of “… accounting for interest and principal payments...” (i.e., accounting… ), in claims 7 and 14, the step of “… repeating the iterations for each of n number of time steps to define n iterations, where n is the number of periods in the term of the loan...” (i.e., repeating… iterations), and in claims 8 and 15, the step of “… repeating the n iterations for each of a plurality of other loans...” (i.e., repeating… iterations) are all processes that, under its broadest reasonable interpretation, covers performance of a fundamental economic practice but for the recitation of a generic computer component. The process of producing loan transitions of an individual is a most fundamental commercial process.
This is an abstract concept with nothing more and is also considered mere instructions to apply an exception akin to a commonplace business method or mathematical algorithm being applied on a general purpose computer, Alice Corp. Pty. Ltd.; Gottschalk and Versata Dev. Group, Inc.; see MPEP 2106.05(f)(2).
In dependent claims 3-8 and 11-15, the steps claimed are rejected under the same analysis and rationale as the independent claims 1 and 9 above. Merely claiming the same process using modules to perform modeling loan transitions of an individual does not change the abstract idea without an inventive concept or significantly more. Clearly, the additional recited limitations in the dependent claims only refine the abstract idea further. Further refinement of an abstract idea does not convert an abstract idea into something concrete.
Therefore, claims 1, 3-9, and 11-15 are rejected under 35 U.S.C. 101 as being directed to non-statutory subject matter.
Conclusion
The prior art made of record but not relied upon herein but pertinent to Applicant’s disclosure is listed in the enclosed PTO-892.
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 extension fee 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 YONG S PARK whose telephone number is (571)272-8349. The examiner can normally be reached on M-F 9:00-5:00 PM, EST.
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/YONGSIK PARK/Examiner, Art Unit 3694
March 26, 2026
/BENNETT M SIGMOND/Supervisory Patent Examiner, Art Unit 3694
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