UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE PATENT TRIAL AND APPEAL BOARD CHICAGO MERCANTILE EXCHANGE, INC. Petitioner FIFTH MARKET INC.

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1 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: Facsimile: 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

2 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 The 387 patent claims cover financial products or services Claims 1 and 2 are not directed to a Technological Invention 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 C. Inter Partes Reexamination of the 387 Patent D. Covered Business Method Review History of the 387 Patent VII. Claim Construction A. One of Ordinary Skill in the Art B. Claim Terms means for matching... 16

3 2. means for matching or comparing VIII. Claims 1 and 2 of the 387 Patent are Unpatentable A. Claims 1 and 2 are Unpatentable under 35 U.S.C Claims 1 and 2 of the 387 patent recite an abstract idea Because the 387 patent does not add significantly more, the abstract idea recited in claims 1 and 2 is not patent-eligible 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 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 The 387 patent does not disclose any structure for the claimed means for matching The 387 patent does not disclose any structure for matching or comparing orders C. CFTC Anticipates Claim 1 under 35 U.S.C D. CFTC and Lupien Render Claim 2 Unpatentable as Obvious under 35 U.S.C. 103(a) E. Clemons and CFTC Render Claim 1 Unpatentable under 35 U.S.C. 103(a) F. Clemons, CFTC, and Lupien Render Claim 2 Unpatentable under 35 U.S.C. 103(a) IX. Conclusion ii

4 TABLE OF AUTHORITIES CASES Page(s) Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct (2014) , 25 Bilski v. Kappos, 130 S.Ct (2010) KSR Int l Co. v. Teleflex Inc., 127 S. Ct (2007)... 51, 56, 62 Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct (2012)... 20, 21, Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct (2014) Wildtangent, Inc. v. Ultramercial, LLC, 134 S. Ct (2014) Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013), cert. denied, 134 S. Ct (2014) 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) 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) iii

5 Ergo Licensing LLC v. Carefusion 303, Inc., 673 F.3d 1361 (Fed. Cir. 2012) Finisar Corp. v. DirecTV Grp., Inc., 523 F.3d 1323 (Fed. Cir. 2008) Ibormeith IP, LLC v. Mercedes-Benz USA, LLC, 732 F.3d 1376 (Fed. Cir. 2013) In re Donaldson Co., 16 F.3d 1189 (Fed. Cir. 1994) 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) 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 (2014) Ultramercial, Inc. v. Hulu, LLC, No (Fed. Cir. Nov. 14, 2014) WMS Gaming, Inc. v. Int'l Game Tech., 184 F.3d 1339 (Fed. Cir. 1999)... 19, 27 MotionPoint Corp. v. TransPerfect Global, Inc., CBM , Paper 8 (July 23, 2014)... 30, 31 SAP Am., Inc. v. Versata Dev. Grp., Inc., CBM , Paper 70 (June 11, 2013)... 21, 24 iv

6 STATUTES 35 U.S.C passim 35 U.S.C passim 35 U.S.C passim 35 U.S.C passim 35 U.S.C U.S.C OTHER AUTHORITIES 37 C.F.R C.F.R C.F.R , 14, C.F.R , 5 37 C.F.R C.F.R , 4, 15, 17, 20 Office Patent Trial Practice Guide, 77 Fed. Reg (August 14, 2012) v

7 List of Exhibits Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit 1013 Exhibit U.S. Patent No. 7,024,387 to Nieboer et al. Declaration of Craig Pirrong, Ph.D. CFTC Report on NYMEX s Proposal to Implement the Access Trading System (Dec. 7, 1992) ( CFTC ) U.S. Patent No. 5,101,353, issued March 31, 1992 to Lupien et al. ( Lupien ) Institution Decision dated October 9, 2014, in CBM , U.S. Patent No. 7,024,387 Declaration of Craig Pirrong, Ph.D. dated June 18, 2013, in CBM , U.S. Patent No. 6,418,419 Declaration of Craig Pirrong, Ph.D. dated April 3, 2014, in CBM , U.S. Patent No. 7,024,387 Petition dated June 18, 2013, in CBM , U.S. Patent No. 6,418,419 Institution Decision dated December 18, 2013, in CBM , U.S. Patent No. 6,418,419 U.S. Patent No. 6,418,419 to Nieboer et al. Petition dated April 3, 2014, in CBM , U.S. Patent No. 7,024,387 Patent Owner Preliminary Response dated July 11, 2014, in CBM , U.S. Patent No. 7,024,387 Petitioner s Request for Rehearing, dated October 23, 2014, in CBM , U.S. Patent No. 7,024,387 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 vi

8 Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit 1021 Exhibit 1022 Exhibit 1023 U.S. Patent No. 7,024,387 Appeal Brief dated November 25, 2013, in Inter Partes Reexamination Control No. 95/002,032, as obtained from PAIR 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 Third Amended Complaint filed in Fifth Market, Inc. v. CME Group Inc. et al., Civil Action No GMS, United States District Court for the District of Delaware dated August 15, 2008 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 ) Final Written Decision dated December 17, 2014, in CBM , U.S. Patent No. 6,418,419 Decision on Petitioner s Request for Rehearing dated November 18, 2014, in CBM , U.S. Patent No. 7,024,387 Petitioner s Motion to Stay Inter Partes Reexamination of U.S. Patent No. 7,024,387, dated November 5, 2014, in CBM , U.S. Patent No. 7,024,387 Patent Owner s Opposition to Motion to Stay Inter Partes Reexamination of U.S. Patent No. 7,024,387, dated November 12, 2014, in CBM , U.S. Patent No. 7,024,387 Decision Denying Petitioner s Motion to Stay Inter Partes Reexamination of U.S. Patent No. 7,024,387, dated January 9, 2015, in CBM , U.S. Patent No. 7,024,387 vii

9 I. Introduction U.S. Patent No. 7,024,387 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 and 37 C.F.R 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 at 1: 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 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 CBM Ex at 29. And the Office similarly found that the CFTC reference discloses conditional trading when 1

10 holding claims 1-23 and 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 CBM Ex at 27, 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 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. CBM for U.S. Patent No. 6,418,419, concluded; and Covered Business Method Patent Review Case No. CBM for U.S. Patent No. 7,024,387, pending. Lead Counsel: Erika A. Arner, Reg. No. 57,540; telephone: ; erika.arner@finnegan.com. Back-up Counsel: Timothy P. McAnulty; Reg. No. 56,939; telephone ; timothy.mcanulty@finnegan.com. Service Information: Please send all correspondence to the lead counsel at: 2

11 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP; Freedom Drive Reston, VA CME consents to service by at the following addresses: III. Payment of Fees The required fees are submitted herewith in accordance with 37 C.F.R (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 IV. Grounds for Standing Pursuant to 37 C.F.R (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 3

12 method patent eligible for a covered business method patent review. Ex 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 at 10. However, in accordance with 18(d)(1) of the AIA and 37 C.F.R (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 ( AIA ) 18(d)(1); see also 37 C.F.R 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 at 27:14-16, 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 4

13 and over-the-counter markets. Ex at 1:14-16; Ex at 1: 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 (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 See, e.g., Ex 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 at 1: 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 5

14 technical solution. U.S. Patent No. 7,024,387 In addition, the Board already determined that the 387 patent and its parent, the 419 patent, are not technological invention[s], in related matters CBM and CBM Ex at 11-12; Ex at 9-10; Ex at 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 GMS, in the United States District Court for the District of Delaware. Ex 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 (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 6

15 under 35 U.S.C. 102(b). U.S. Patent No. 7,024,387 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 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. Ground 5: Claim 1 is unpatentable under 35 U.S.C. 103(a) as being obvious over Clemons in view of CFTC. Ground 6: Claim 2 is unpatentable under 35 U.S.C. 103(a) as being 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 7

16 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 at 7:40-8

17 43; 17: 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: In a preferred embodiment, the items are security instruments, such as stocks, bonds, options, futures, and forward contracts or swap contracts. Id. at 2: The types of trades described in the 387 patent are not new. Ex 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 at 19. CFTC and the 387 patent both discuss spread orders. See, e.g., Ex at 27-34; Ex at 25: Spread orders are executed by the simultaneous purchase of one item and sale of another item in a single order. See, e.g., Ex at Each component of a spread order is called a leg. Ex 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 P order Q 1 P 1 - Q 2 P 2 (1) where P order is a constant representing the price of the entire order; Q 1 and Q 2 are 9

18 the quantities of the two legs; and P 1 and P 2 are the prices of the two legs. Id. The price of the order (P order ) is also dependent on the changing prices of the two legs (P 1 and P 2 ). Id. A generic spread order can also be written as P 2 (1/ Q 2 )*(Q i1 P 1 - P order ) (2) where the price of one of the legs (P 2 ) is dependent (a dependent variable) on the price of the other leg (P 1 ) (an independent variable) and the price of the order (P order ). 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 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 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 at 6:20-22; Ex at 59. Lupien also discloses that its trading 10

19 system provides users the opportunity to execute sales and purchases that are external to its system. Ex 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 at 27: This is a natural and inherent property of every conditional trade involving multiple items, such as spread orders. Ex 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 twodimensional space. Ex 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 11

20 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 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 at In the 387 patent, claim 1 similarly recites that the order algorithm can be represented as a line in two dimensional space. Ex at 27: 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, On January 9, 2015, the Board denied CME s Motion to Stay. See Ex 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 at 3-5; Ex 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, 12

21 as anticipated by CFTC. Ex 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. CBM 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 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 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 at 29. The Board did not institute review of claims 1 and 2 in CBM because CME did not explicitly propose a claim construction for the terms means 13

22 for matching and means for matching or comparing recited in independent claim 1. Id. at CME filed a request for rehearing of the Board s denial to institute review of claims 1 and 2. See Ex at 1, 15. The Board denied CME s request. Ex 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 (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, (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 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 at 44; Ex at

23 B. Claim Terms U.S. Patent No. 7,024,387 Independent claim 1 of the 387 patent recites a conditional order transaction network. Ex at 27: 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 (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 (b); Office Patent Trial Practice Guide, 77 Fed. Reg , (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. 15

24 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-plusfunction 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, (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 at 27: 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 at 7:13-14, 17:39-44 ( The Trade Engine is the server-side system component ultimately charged with... matching open orders when 16

25 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 computerimplemented 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 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 (b)(3), Petitioner proposes that the recited means for matching be construed as hardware, software, or a hardware-software combination. See Ex at 7:13-14, 17:39-43; Ex at 61, 63. Nevertheless, as a matter of law this construction does not overcome the grounds of unpatentability discussed in Part(VII)(B)(i), 17

26 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 at 27: 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 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 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. 18

27 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: 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. 19

28 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 at 7:13-14, 17:39-44; Ex 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. 20

29 Prometheus Labs., Inc., 132 S. Ct (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 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., CBM , Paper 70 at (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, , 3230 (2010) Under any of these analyses, claims 1 and 2 of the 387 patent fail to satisfy 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 21

30 prices for multiple items. See, e.g., Ex at 27: 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 at 3:1-8. However, a claim embodying an otherwise patentineligible 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 at

31 2. Because the 387 patent does not add significantly more, the abstract idea recited in claims 1 and 2 is not patenteligible 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 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 (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 Claim 1 of the 387 patent includes trader terminals and a communications network. Ex at 27:19, 29. Claim 2 further defines the conditional order transaction network of claim 1 to include trader workstations, 23

32 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 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, CBM , Paper 70 at 29 (citing Gottschalk v. Benson, 93 S. Ct. 253, (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, CBM , 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 at 27: Receiving data as inputs is a routine computer function. Ex at 71. The 387 patent admits that electronic trading networks were well known before the 387 patent. Ex at 1: And the 387 patent requires no more than a generic computer hardware (e.g., network, display device, trader terminals and 24

33 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 at 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 at 2, The Board relied heavily on Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, vacated, 134 S. Ct (2014) to deny institution under 101 for any of the claims in the 419 patent. See Ex 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 However, the Supreme Court vacated and remanded Ultramercial in light of Alice. See Wildtangent, Inc. v. Ultramercial, LLC, 134 S. Ct (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

34 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 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). 26

35 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 at 27: However, the specification of the 387 patent fails to disclose an algorithm for performing the claimed matching 27

36 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. 28

37 (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, (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 (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 29

38 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 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 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., CBM , 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 30