Int’l Securities Exchange LLC v. Chicago Board Options Exchange, Inc.; SAP America, Inc. v. Lakshmi Arunachalam

Addressing the patent eligibility of claims from two challenged covered business method patents (CBMs), the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB or Board) found the challenged claims to be not patent eligible.  In each case the Board rejected arguments by the respective patent owner that the challenged claims covered specific applications, explaining that the asserted specificity was not required by the claims.  Int’l Securities Exchange LLC v. Chicago Board Options Exchange, Inc., CBM2013-00049 (PTAB, Mar. 2, 2015) (Elluru, ALJ) and SAP America, Inc. v. Lakshmi Arunachalam, CBM2014-00018 (PTAB, Mar. 6, 2015) (McNamara, ALJ).

In CBM2013-00049, Int’l Securities Exchange requested a CBM review of a Chicago Board Options Exchange patent on a method for managing risk in the options market.  The patent describes a conventional method where a market-maker personally entered into contracts and thus manually managed the risk of their portfolio, but noted, as a disadvantage, the rapid speed at which trades are executed.  The patent then presented an automated trading system that determined a risk level associated with a trade and compared the risks to a market-maker’s risk threshold value.

Int’l Securities argued that the claims were directed to the abstract concept of managing risk.  The patent owner responded that the claims were “not merely” directed to an abstract idea, but rather a specific application with meaningful limitations.  However, the Board interpreted the patent owner’s position to be an admission that the first step of the Alice test, i.e., that the claim was directed to an abstract idea, was met.  Thus, turning to the second prong of the Alice test, whether the claims recite an inventive concept, the patent owner argued that the claimed subject matter required specific programming to create specific interactions between computers.  The petitioner argued that the claims required nothing more than the application of an abstract idea using a generic computer.  The Board concluded that none of the specific interactions that the patent owner identified were required by the claims and thus found the claims to be non-patent eligible.

In CBM2014-00018, SAP America requested a CBM review of Lakshmi Arunachalam’s patent on real-time web transactions.  Applying the two-step Alice test, the Board first concluded that the claims were directed to an abstract method, i.e., performing a real-time web transaction by providing a web application for a user to transfer funds between bank accounts.  Turning next to the inventive step, the patent owner argued that the claims required that the transactions occur by way of a specific routing of a specific data structure.  However, the Board, noting that it had rejected a broadest reasonable interpretation claim construction that required those specifics, concluded the specific routing relied on was not part of the claims.  The Board found nothing else in the claims that contributed patent-eligible subject matter.