PTAB

CBM2018-00021

Miami Intl Holdings Inc v. Nasdaq ISE LLC

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Key Events
Petition

1. Case Identification

2. Patent Overview

  • Title: AUTOMATED EXCHANGE FOR TRADING DERIVATIVE SECURITIES
  • Brief Description: The ’707 patent relates to an automated exchange for trading financial instruments such as derivative securities. The invention describes a system that receives incoming orders or quotations, stores them along with previously received orders, stores parameters for allocating trades, and then automatically allocates portions of the incoming orders to the stored orders based on the predetermined parameters.

3. Grounds for Unpatentability

Ground 1: Patent Ineligibility under 35 U.S.C. §101 - Claims 1-3 and 5-75 are unpatentable as directed to an abstract idea.

  • Evidentiary Support Relied Upon: Petitioner cited numerous publications and historical documents not as prior art for an obviousness challenge, but as evidence of long-standing, fundamental economic practices. Key references included: Domowitz (a 1993 journal article on automated trade execution), Schwartz (a 1993 book on equity markets), Harris (a 1991 book on electronic trading systems), and Buck (a 1992 book on the history of the New York Stock Exchange).
  • Core Argument: Petitioner’s argument followed the two-step framework from Alice Corp. v. CLS Bank Int'l.
    • Alice Step 1: Directed to an Abstract Idea: Petitioner argued that all challenged claims are directed to the patent-ineligible abstract idea of trading a financial instrument according to allocation rules. The petition asserted that the core functional steps recited in the claims—(1) receiving an incoming order, (2) storing previously received orders in a book, (3) storing allocation parameters, and (4) allocating trades based on those parameters—are fundamental economic practices. Petitioner provided extensive evidence that these steps mirror long-standing manual and mental processes performed by human agents (e.g., specialists on an exchange floor) for decades. The petition contended that the various allocation rules described in the claims, such as prioritizing orders based on price, time, size, or order type (public vs. professional), were well-established conventions in financial markets long before the patent's critical date. The automation of these rules on a computer does not change their fundamentally abstract nature.
    • Alice Step 2: Lack of an Inventive Concept: Petitioner argued that the claims fail to recite an inventive concept sufficient to transform the abstract idea into a patent-eligible application. The petition asserted that the claims merely implement the abstract trading rules using generic and conventional computer components. The claims recited elements such as an "interface," "book memory means," "system memory means," and "processor means," which Petitioner contended are generic hardware used for their basic functions of receiving, storing, and processing data. The argument emphasized that the ’707 patent’s own specification confirms this conventionality by stating the exchange can be "implemented on a general purpose computer under the control of a software program" and that the software can be "designed and constructed by computer programmers of ordinary skill." This automation of a previously manual process on a generic computer was argued to be insufficient to supply an inventive concept, as it represents merely a more efficient performance of the same abstract practice.

4. Key Claim Construction Positions

  • Petitioner argued that the "means" limitations recited in many claims (e.g., "book memory means" in claim 1, "processor means") should be interpreted under the Broadest Reasonable Interpretation (BRI) standard applicable to Covered Business Method (CBM) reviews.
  • Under BRI, Petitioner contended these terms encompass generic computer components, such as general-purpose processors and memory systems, performing their conventional functions. This construction was central to Petitioner's argument that the claims do not add any specific, inventive technology beyond the generic computer implementation of an abstract idea, thereby failing the second step of the Alice test.

5. Relief Requested

  • Petitioner requested the institution of a CBM patent review and the cancellation of claims 1-3 and 5-75 of the ’707 patent as unpatentable for claiming patent-ineligible subject matter under 35 U.S.C. §101.