January 20, 2017

Commodity Trading System and Method are Patent Eligible Subject Matter Under 101

By Nicholas S. Drysdale, Principal

In Trading Technologies International, Inc. v. CQG, Inc., CQG LLC, FKA CQGT, LLC., [2016-1616] (January 18, 2017), the Court of Appeals for the Federal Circuit (CAFC) affirmed a lower court’s holding that the claims of U.S. Patent No. 6,772,132 (‘132 patent) and U.S. Pat. No. 6,766,304 (‘304 patent) are patent eligible under 35 U.S.C. 101 because the claims are not directed to an abstract idea and, even if they were, include an inventive concept.

Claim 1 of the ‘304 patent was addressed by the CAFC and is as follows.

  1. A method for displaying market information relating to and facilitating trading of a commodity being traded in an electronic exchange having an inside market with a highest bid price and a lowest ask price on a graphical user interface, the method comprising:

dynamically displaying a first indicator in one of a plurality of locations in a bid display region, each location in the bid display region corresponding to a price level along a common static price axis, the first indicator representing quantity associated with at least one order to buy the commodity at the highest bid price currently available in the market;dynamically displaying a second indicator in one of a plurality of locations in an ask display region, each location in the ask display region corresponding to a price level along the common static price axis, the second indicator representing quantity associated with at least one order to sell the commodity at the lowest ask price currently available in the market;

displaying the bid and ask display regions in relation to fixed price levels positioned along the common static price axis such that when the inside market changes, the price levels along the common static price axis do not move and at least one of the first and second indicators moves in the bid or ask display regions relative to the common static price axis;

displaying an order entry region comprising a plurality of locations for receiving commands to send trade orders, each location corresponding to a price level along the common static price axis; and

in response to a selection of a particular location of the order entry region by a single action of a user input device, setting a plurality of parameters for a trade order relating to the commodity and sending the trade order to the electronic exchange.

The CAFC began by noting that “[t]he patents explain problems that arise when a trader attempts to enter an order at a particular price, but misses the price because the market moved before the order was entered and executed. It also sometimes occurred that trades were executed at different prices than intended, due to rapid market movement. This is the problem to which these patents are directed.” Id. at 3. The CAFC characterized the patents as being directed to “[a] method and system for reducing the time it takes for a trader to place a trade when electronically trading on an exchange, thus increasing the likelihood that the trader will have orders filled at desirable prices and quantities.” Id. at 3. citing ’132 patent, Abstract; and ’304 patent, Abstract.

The CAFC agreed with the lower court’s assessment that the claims are not directed to an abstract idea because:

  1. The claims did not cite a mathematical algorithm, a fundamental economic or longstanding business practice, or a business challenge. Instead, the claims “‘solve problems of prior graphical user interface devices . . . in the context of computerized trading[] relating to speed, accuracy and usability.’” Id. at 6; quoting Dist. Ct. op. at *4 (citations omitted).
  2. “The claims require a specific, structured graphical user interface paired with a prescribed functionality directly related to the graphical user interface’s structure that is addressed to and resolves a specifically identified problem in the prior state of the art.” Id. at 6.
  3. “[T]hese patents are directed to improvements in existing graphical user interface devices that have no ‘pre-electronic trading analog,’ and recite more than ‘setting, displaying, and selecting’ data or information that is visible on the [graphical user interface] device.’” Id. at 6; quoting Dist. Ct. op. at *4.

Of interest regarding whether a claim is directed to an abstract idea or not, the CAFC noted that “[a]bstraction is avoided or overcome when a proposed new application or computer-implemented function is not simply the generalized use of a computer as a tool to conduct a known or obvious process, but instead is an improvement to the capability of the system as a whole.” Id. at 8; citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016).

Even if the claims were directed to an abstract idea, however, the CAFC also agreed with the lower court’s assessment that the claims include an inventive concept that amounts to significantly more than an abstract idea because:

  1. The claimed static price index was an inventive concept “that allows traders to more efficiently and accurately place trades using this electronic trading system.” Id. at 7.
  2. The claimed system is distinguishable from routine or conventional use of computers or the Internet. Id. at 7.
  3. “[T]he specific structure and concordant functionality of the graphical user interface are removed from abstract ideas, as compared to conventional computer implementations of known procedures.” Id. at 7.

The CAFC provided some generalization regarding whether claims include patent eligible subject matter under 35 U.S.C. 101 or not. “Precedent has recognized that specific technologic modifications to solve a problem or improve the functioning of a known system generally produce patent-eligible subject matter.” Id. at 7. By way of contrast, patent “ineligible claims generally lack steps or limitations specific to solution of a problem, or improvement in the functioning of technology.” Id.at 8.

The CAFC also reiterated that a claim is to be considered as a whole (i.e., the claim elements are to be considered in combination) to determine whether the claim is directed to an abstract idea (Alice Step 1). To determine whether the claim includes significantly more than an abstract idea (Alice Step 2), the claim elements are to be considered individually.

Based on the above, it appears that (1) at least the possible existence of a “problem” and (2) inclusion of a statement of direction to a specific new way of overcoming that “problem” may support patent eligibility under 35 U.S.C. 101.