DCT

1:19-cv-02277

Trading Central Canada Inc v. Kavout Corp

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 1:19-cv-02277, D. Del., 12/13/2019
  • Venue Allegations: Venue is asserted on the basis that Defendant Kavout Corporation is incorporated in Delaware and therefore resides in the judicial district.
  • Core Dispute: Plaintiff alleges that Defendant’s financial chart pattern recognition programs and services infringe three patents related to the automated identification and analysis of patterns in financial time-series data.
  • Technical Context: The technology concerns automated systems for performing technical financial analysis, a field that seeks to predict future market behavior by identifying statistical patterns and events in historical price and volume data.
  • Key Procedural History: The complaint alleges that Plaintiff’s predecessor-in-interest, Recognia Inc., sent Defendant a notice of infringement on March 14, 2019, which included initial claim charts. Following this notice, Defendant allegedly shut down its "RoboChartist" website but continued to offer infringing services through a different corporate website, forming the basis for the willfulness allegation.

Case Timeline

Date Event
2001-12-11 Priority Date for ’226 and ’238 Patents
2001-12-17 Priority Date for ’201 Patent
2004-10-05 U.S. Patent No. 6,801,201 Issues
2008-12-23 U.S. Patent No. 7,469,226 Issues
2008-12-23 U.S. Patent No. 7,469,238 Issues
c. 2016 Defendant Kavout Established
2019-03-14 Plaintiff sends Defendant notice of infringement
2019-12-06 Patent assignments recorded with USPTO
2019-12-13 Complaint Filed

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 6,801,201 - "Method for Chart Markup and Annotation in Technical Analysis," issued Oct. 5, 2004

The Invention Explained

  • Problem Addressed: The patent describes the difficulty in automatically mapping the results of computerized pattern recognition onto a conventional time-series chart for review by a technical analyst. Prior methods were either manual and subjective or, if automated, lacked the ability to obtain the necessary "markup to annotate a pattern" with relevant position and scope information (’201 Patent, col. 3:3-9).
  • The Patented Solution: The invention discloses a method for generating markup information to annotate a time-series chart. The system first identifies and categorizes "pivot points" in the time-series data using a modified point-and-figure technique that associates spatial importance (box size) and time data (lag) with each turning point (’201 Patent, col. 4:51-65). This "rich feature set" of categorized pivot points is then used to recognize patterns and generate markup tags (e.g., in XML format) that can be sent to a client to draw lines and annotations on a chart, graphically displaying the recognized pattern (’201 Patent, col. 3:28-44; Fig. 1).
  • Technical Importance: The method aimed to automate the labor-intensive process of technical chart annotation, allowing for rapid, objective identification and visualization of predictive patterns across large volumes of financial data (’201 Patent, col. 2:13-19).

Key Claims at a Glance

  • The complaint asserts independent claims 1, 10, and 11 (Compl. ¶19).
  • Independent Claim 1 (Method):
    • Storing a "rich feature set" of technical event data in a database, where the set includes identified "pivot points" and pattern recognition data derived from them.
    • Receiving a request for markup information from a client.
    • Selecting features from the rich feature set associated with the requested event.
    • Determining markup tags based on the selected features.
    • Assembling the tags into a "markup block."
    • Sending the markup block to the client.
  • Independent Claim 10 (Method): A method for generating markup, comprising selecting features from a rich feature set, determining markup tags, and assembling them into a markup block.
  • Independent Claim 11 (Method): A method for annotating a chart, comprising receiving time-series data, identifying pivot points, performing pattern recognition, storing a rich feature set, receiving a request, selecting features, determining tags, assembling a markup block, and sending it to a client.
  • The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 7,469,226 - "Method of Providing a Financial Event Identification Service," issued Dec. 23, 2008

The Invention Explained

  • Problem Addressed: The patent addresses the challenge of providing relevant, tailored financial event data to different types of investors (e.g., professional vs. retail) and the inability of prior systems to combine different types of technical and fundamental events to identify high-value trading opportunities (’226 Patent, col. 4:5-12, 4:40-54). Manually scanning for such confluences of events is described as "quite impossible" for human analysts (’226 Patent, col. 4:1-4).
  • The Patented Solution: The invention describes a service that identifies various "financial events," which can be complex patterns (e.g., head-and-shoulders), indicator crossings (e.g., price crossing a moving average), or fundamental events (’226 Patent, col. 11:38-48). The core of the method involves receiving a request for financial event data, querying a database of such events, and "dynamically modifying" the results based on other financial event data that is "substantially coincident" with the identified pattern of interest. The modified data, which may involve superposing multiple coincident events, is then displayed to the client (’226 Patent, Fig. 11-12, col. 12:55-66).
  • Technical Importance: This "data fusion" approach allows the service to automate the identification of coincident technical events—a powerful confirmation technique used by analysts—and to tailor the output to an investor's specific profile or interest, reducing noise and highlighting more robust signals (’226 Patent, col. 5:22-35).

Key Claims at a Glance

  • The complaint asserts independent claims 1 and 18 (Compl. ¶27).
  • Independent Claim 1 (Method):
    • Identifying complex patterns within stock market data.
    • Generating a database of financial event data (including technical and fundamental events).
    • Receiving from a client an identification of a "pattern of interest" and a request for related financial event data.
    • Querying to identify the financial event data related to the pattern of interest.
    • "Dynamically modifying" the identified data "in accordance with other financial event data substantially coincident with the identified financial event data."
    • Superposing the modified data on the pattern of interest and displaying it to the client.
  • Independent Claim 18 (System): A system comprising means for performing the steps of the method of claim 1.
  • The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 7,469,238 - "Method of Rule Constrained Statistical Price Formation Recognition," issued Dec. 23, 2008

Multi-Patent Capsule

  • Technology Synopsis: This patent addresses the problem that purely rule-based or purely statistical models for pattern recognition are flawed. It proposes a hybrid "rule-constrained statistical" method where an "under-specified" set of mandatory rules first identifies a broad set of "candidate patterns," which may include many false positives. A statistical model (e.g., a neural network), trained on expert opinions, then acts as a filter to assess the validity of these candidates and provide a quality rating (’238 Patent, Abstract; col. 5:16-32).
  • Asserted Claims: Independent claims 1, 9, 10, and 17 are asserted (Compl. ¶35).
  • Accused Features: The complaint alleges that Kavout's "chart pattern recognition program and related products and services" infringe by providing financial products that automatically identify and assess technical chart patterns (Compl. ¶1, ¶16).

III. The Accused Instrumentality

Product Identification

  • The accused instrumentalities are Defendant Kavout’s "financial investment products and services," including a chart pattern recognition program formerly branded as "RoboChartist" and continuing services offered through www.kavout.com (Compl. ¶11, ¶14, ¶16).

Functionality and Market Context

  • The complaint alleges the accused services "automatically and graphically identify and assess technical chart pattern formations in financial time series data (such as triangles, double top, double bottom, head-and-shoulders, etc.)" (Compl. ¶11, ¶14). The services are marketed to the investment community, including hedge funds, institutional asset managers, and proprietary trading firms (Compl. ¶13). The complaint references screenshots of the "RoboChartist and Kavout sites" in an unprovided exhibit, which allegedly demonstrate the infringing functionality (Compl. ¶15).

IV. Analysis of Infringement Allegations

The complaint provides only high-level, conclusory allegations of infringement, stating that Kavout’s products meet "each and every limitation" of the asserted independent claims (Compl. ¶19, ¶27, ¶35). The specific factual basis for these allegations is contained within initial claim charts (Exhibits E, F, G) and screenshots (Exhibit H) that are referenced by, but not attached to, the complaint document (Compl. ¶15). Therefore, a detailed claim-chart summary cannot be constructed from the provided documents.

The narrative infringement theory, synthesized from the complaint and patents, is that Kavout's automated chart pattern recognition service performs the patented methods. For the ’201 Patent, Kavout's system allegedly identifies key points in financial data to recognize patterns and generates graphical outputs, which Plaintiff contends is equivalent to the claimed method of using "pivot points" to create a "markup block." For the ’226 Patent, the infringement theory appears to be that Kavout’s services identify not just a single pattern but also other coincident technical events, thereby performing the claimed "dynamically modifying" and "superposing" steps.

  • Identified Points of Contention:
    • Scope Questions:
      • Does Kavout’s method for identifying key points in a data series fall within the scope of the term "pivot points" as defined in the ’201 Patent, which is tied to a specific "modified point and figure technique" (’201 Patent, col. 4:51-56)?
      • For the ’226 Patent, does Kavout’s system merely display multiple indicators on a chart, or does it perform the claimed step of "dynamically modifying... financial event data in accordance with other financial event data substantially coincident" with a pattern, a distinction central to claim 1?
    • Technical Questions:
      • What evidence will show that Kavout's system generates and transmits a "markup block" or its technical equivalent to a client for annotation, as required by claim 1 of the ’201 Patent, rather than simply rendering a pre-annotated image?
      • What specific feature in the accused products performs the "data fusion" step of identifying "substantially coincident" events and modifying data accordingly, as recited in claim 1 of the ’226 Patent? The complaint references screenshots in Exhibit H that allegedly provide evidence on this point (Compl. ¶15).

V. Key Claim Terms for Construction

For the ’201 Patent:

  • The Term: "pivot points"
  • Context and Importance: This term is the foundational element for the "rich feature set" in all asserted independent claims of the ’201 Patent. The infringement analysis will depend on whether Kavout's method of identifying pattern features is captured by the patent's specific definition of "pivot points." Practitioners may focus on this term because its definition appears to be tied to a specific algorithm described in the specification, potentially limiting its scope.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The claims themselves do not restrict "pivot points" to a single method, referring to them as being "identified" in time-series data (e.g., ’201 Patent, col. 12:45-46), which a party might argue covers any method of identifying turning points in a chart.
    • Evidence for a Narrower Interpretation: The detailed description states that the invention "builds upon a modified point and figure technique" and that this technique "determines the pivot, or turning points, and categorizes them according to the box size at which they appear" (’201 Patent, col. 4:46-53). A party could argue this ties the term to the specific, multi-step process described for categorizing points based on progressively decreasing box sizes.

For the ’226 Patent:

  • The Term: "dynamically modifying... the identified financial event data"
  • Context and Importance: This active step distinguishes the invention from simply displaying pre-existing data. It is the core functional limitation of claim 1 of the ’226 Patent. The dispute will likely center on what level of data transformation or fusion is required to meet this limitation.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The claim language is general. A party might argue that any real-time filtering or combining of data based on a user query or profile constitutes "dynamically modifying" the data set presented to the user.
    • Evidence for a Narrower Interpretation: The specification links this concept to identifying the "coincidence of these financial events," for example by superposing charts as shown in Figure 11 (’226 Patent, col. 9:36-43). A party could argue that "modifying" requires more than just filtering a list; it requires creating a new, combined data representation based on the temporal coincidence of separate events.

VI. Other Allegations

  • Indirect Infringement: The complaint does not contain a separate count for indirect infringement. However, it alleges that Kavout "distribute[s], offer[s] to sell, and sell[s]" the infringing services, which could potentially form the basis for an inducement claim if it is alleged that Kavout instructs its users on how to use the services in an infringing manner (Compl. ¶16, ¶19).
  • Willful Infringement: The complaint explicitly alleges willful infringement based on pre-suit knowledge. It states that Plaintiff’s predecessor sent Kavout a notice letter on March 14, 2019, which included patents-in-suit and claim charts, and that Kavout’s infringement continued after receiving this notice (Compl. ¶15, ¶22, ¶30, ¶38).

VII. Analyst’s Conclusion: Key Questions for the Case

  1. A central issue will be one of evidentiary proof: Given the complaint’s reliance on unprovided exhibits, a primary question will be whether discovery reveals that the accused RoboChartist and Kavout.com services perform the specific technical steps recited in the claims, such as using a "modified point and figure technique" to find "pivot points" (’201 Patent) or "dynamically modifying" data based on "substantially coincident" events (’226 Patent).
  2. A key legal battle will be over claim scope: Can the term "pivot points," which the ’201 Patent specification links to a particular "box size" categorization method, be construed broadly enough to read on the algorithmic techniques used by Kavout's modern financial analysis platform?
  3. The outcome may also depend on a question of functional operation: Does Kavout’s system simply present multiple, independent data streams (e.g., a pattern and an oscillator) on the same chart, or does it perform the specific "data fusion" process claimed in the ’226 Patent, where one event's data is actively "modified" by the presence of a second, coincident event?