UNITED STATES PATENT AND TRADEMARK OFFICE
`__________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`__________________
`IBG LLC, INTERACTIVE BROKERS LLC, TRADESTATION GROUP, INC.,
`TRADESTATION SECURITIES, INC., TRADESTATION TECHNOLOGIES,
`INC., and IBFX, INC.,
`
`Petitioner
`v.
`
` TRADING TECHNOLOGIES INTERNATIONAL, INC.
`
`Patent Owner
`_________________
`CBM2015-00161 (U.S. Patent 6,766,304 B2)1
`CBM2015-00181 (U.S. Patent No. 7,676,411 B2)
`CBM2015-00182 (U.S. Patent No. 6,772,132 B1)
`_________________
`
`DECLARATION OF ROBBIE MCDONNELL
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`1 Case CBM2016-00035 has been joined with this proceeding.
`
`
`
`
`TRADING TECH EXHIBIT 2173
`TRADESTATION, IBG, ET AL. v. TRADING TECH
`CBM2015-00161, CBM2015-00181, CBM2015-00182
`
`PAGE 1 OF 22
`
`

`
`
`
`Table of Contents
`
`I.
`
`INTRODUCTION ...................................................................................... 1
`
`II. HISTORY OF TT AND MD TRADER ...................................................... 2
`
`III. BENEFITS OF THE INVENTION ............................................................. 4
`
`IV.
`
`V.
`
`INITIAL SKEPTICISM .............................................................................. 5
`
`SUCCESS OF MD TRADER .................................................................... 8
`
`VI. COPYING .................................................................................................. 10
`
`VII. CONCLUDING STATEMENTS ............................................................... 11
`
`
`
`PAGE 2 OF 22
`
`

`
`
`
`I, Robbie McDonnell, declare as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`I currently serve as the executive vice-president of global sales for
`
`Trading Technologies International, Inc. (“TT”). My responsibilities in this role
`
`include managing TT’s international sales operations and directing sales managers
`
`globally.
`
`2.
`
`Prior to joining TT, I primarily worked in the financial industry.
`
`Initially, I worked for a bank located in Dublin, Ireland. In 1994, I was hired as a
`
`sales manager by a company named FutureSource to sell electronic charting
`
`software called TradeStation. After a few years, I transitioned to a sales position at
`
`Dow Jones, where I again sold charting software, however to larger banks.
`
`3.
`
`I later pursued an opportunity to work for TT. I began my career at
`
`TT in September of 1998 as a sales manager in TT’s London Office. As a sales
`
`manager, my responsibilities included prospecting new customers and meeting
`
`with proprietary and professional traders and bankers. I was also tasked with
`
`selling TT’s software product, X_Trader, to TT’s customer base at large. It was
`
`during my time as a sales manager in London that TT launched its MD Trader
`
`product within X_Trader.
`
`4.
`
`By early 2001, I was promoted to managing director of the London
`
`Office, which encompassed all of TT’s European Operations. I assembled a team
`
`
`
`1
`
`PAGE 3 OF 22
`
`

`
`
`
`of account and sales managers to sell X_Trader throughout Europe. Then, in 2006,
`
`I moved from London to Asia in order to expand TT’s global reach of its X_Trader
`
`product. I opened multiple sales offices, including offices in Hong Kong,
`
`Singapore, Tokyo, and Sydney. Finally, in September of 2014, I was promoted to
`
`my current position as executive vice-president of global sales and relocated to
`
`Chicago.
`
`II. HISTORY OF TT AND MD TRADER
`
`5.
`
`Gary Kemp, an American entrepreneur with a background in software
`
`development, formed TT in Frankfurt, Germany in 1994. Recognizing that futures
`
`trading was moving to an electronic platform in the early 1990’s, Mr. Kemp, in
`
`forming TT, sought to provide traders with connectivity to electronic exchanges.
`
`6.
`
`In 1997, TT and Mr. Kemp relocated to Chicago, Illinois, placing
`
`them closer to the Chicago Board of Trade and the Chicago Mercantile Exchange.
`
`Shortly thereafter, Harris Brumfield, a well-known and successful trader, joined
`
`TT as a customer of TT’s software and an investor in TT. Mr. Brumfield would
`
`later become the majority shareholder and CEO of TT around 2002-2003, and
`
`today serves as Chairman of the Board at TT.
`
`7. When TT moved to Chicago, it had two sides of its business. The first
`
`was a consultancy side, which Mr. Kemp was primarily responsible for. Mr.
`
`Brumfield was also a client of Mr. Kemp’s consulting business. The other side,
`
`
`
`2
`
`PAGE 4 OF 22
`
`

`
`
`
`which I was heavily involved in, focused on software development and sales of
`
`X_Trader.
`
`8. Mr. Brumfield provided a unique trader perspective to the software
`
`development side. Mr. Brumfield had an interest in improving trading interfaces
`
`and assisted TT in developing new software. TT thus established itself as an
`
`independent software vendor (“ISV”), meaning TT began charging customers on a
`
`monthly basis for its trading execution software in order to collect revenue.
`
`9. When I joined TT in 1998, quite a few competing ISVs existed in the
`
`industry at the time. Some of these ISVs included Ecco, FFastFill, Pats, Nyfix, and
`
`GL. These ISVs were direct competitors and sold the same conventional trading
`
`screens that TT offered, with only small differences. These conventional screens
`
`included a fixed inside market – they displayed the best bid price and best ask price
`
`at fixed designated locations on the screen (typically side by side). All of us ISVs
`
`essentially competed for the same traders and same banks, day in and day out, with
`
`very little differentiation between us. Due to this cut-throat competition, the
`
`margins were razor thin and TT struggled in the early years, as did our
`
`competitors. By no means was the ISV business a profitable business.
`
`Shockingly, none of those ISVs currently exist, as they were either acquired or
`
`went out of business.
`
`10.
`
`TT survived in large part to Mr. Brumfield’s investments in the
`
`
`
`3
`
`PAGE 5 OF 22
`
`

`
`
`
`company. By 2000, Mr. Brumfield continued to fund TT by increasing his
`
`investments and assigning his invention for a new electronic trading screen to TT.
`
`Ultimately, Mr. Brumfield’s idea of a new electronic trading screen was developed
`
`by TT as MD Trader in late August 2000 and incorporated into the X_Trader
`
`platform.
`
`III. BENEFITS OF THE INVENTION
`
`11. MD Trader provided an entirely new graphical user interface (“GUI”)
`
`for trading, something I had never seen before, that went against the grain of
`
`conventional trading screens at the time it was introduced.
`
`12.
`
`I saw a number of differences between MD Trader and other order
`
`entry screens in the industry. For example, MD Trader included a vertical display
`
`of prices along a price axis that did not move at times when the inside market
`
`changed. Also, MD Trader displayed the market depth (the bids and asks)
`
`alongside the vertical price axis, such that the bids and asks would move up and
`
`down relative to the price axis. The user could enter an order with the single click
`
`of a mouse in an order entry region at a location that corresponded with a price
`
`level along the price axis. For shorthand, I refer to this as “single action order
`
`entry.” Also, a user could cancel an entered order with the single click of a mouse
`
`on the particular order the user wished to cancel.
`
`13.
`
`These differences made MD Trader counterintuitive to the
`
`
`
`4
`
`PAGE 6 OF 22
`
`

`
`
`
`conventional market grid style order entry screens that were prevalent in the
`
`industry prior to Mr. Brumfield’s invention. For example, displaying bids and asks
`
`that moved relative to a price axis made the MD Trader slower than conventional
`
`screens because it forced traders to chase the inside market with their cursor. Also,
`
`the combination of displaying the bids and asks relative to a price axis such that
`
`they moved relative to the price axis when the market changed and “single action
`
`order entry” made the MD Trader less accurate than conventional screens because
`
`a trader might click a price when the inside market changes, and consequently miss
`
`the inside market price. The MD Trader screen also went against conventional
`
`wisdom because it consumed more screen real-estate.
`
`14.
`
`Even though MD Trader incorporated these negative features, making
`
`the tool less accurate at the inside market, slower, and against the conventional
`
`wisdom of fixing the inside market, it resulted in a more effective screen that
`
`allowed traders to be more profitable. In particular, it provided better market
`
`visualization and improved accuracy without sacrificing speed when a trader was
`
`seeking to enter an order at a specific price. These benefits in turn increased trader
`
`confidence.
`
`IV. INITIAL SKEPTICISM
`
`15. Due to the counterintuitive nature of the MD Trader, the launch of
`
`TT’s MD Trader around Labor Day of 2000 was initially met with great skepticism
`
`
`
`5
`
`PAGE 7 OF 22
`
`

`
`
`
`in the industry.
`
`16.
`
`TT’s own sales team, myself included, was slow to appreciate the
`
`benefits of the invention and struggled to understand how it worked. Our sales
`
`team found it incredibly difficult to convince customers to even try MD Trader
`
`after its initial launch. Our customers were professional traders and the order entry
`
`GUI was their most important mission critical tool in carrying out their profession.
`
`The customers were doing well with the conventional trading screens setup to their
`
`particular likings. No customer had asked for a new and different trading GUI.
`
`17.
`
`To combat this initial skepticism, TT hired a famous trader in the
`
`industry, Mike Burns, to educate TT’s sales teams, including my sales team in
`
`London, and explain the benefits of the new technology. The email set forth below
`
`announced Burns’ role to company – he is referred to as BurnZ in the email.
`
`
`
`6
`
`PAGE 8 OF 22
`
`

`
`
`
`
`
`18. Mr. Burns was responsible for helping TT’s sales personnel with
`
`trading knowledge, providing compelling reasons for traders to test out MD
`
`Trader, and visiting customers in the industry, including proprietary traders and
`
`banks, to demonstrate the benefits of the new technology. Id. Once Mr. Burns
`
`
`
`7
`
`PAGE 9 OF 22
`
`

`
`
`
`entered this role, the attitude towards MD Trader changed.
`
`19. After viewing MD Trader in action, traders’ opinions eventually
`
`turned around and they recognized the advantage they would gain because of the
`
`improved market visualization and improved speed/accuracy for orders at
`
`particular prices. Once a trader was convinced to try it, the trader would inevitably
`
`see the dramatic benefit provided by the new GUI. At this time, customer demand
`
`for TT’s MD Trader greatly increased. We immediately began receiving feedback
`
`from our customers regarding the value of MD Trader and saw first-hand that our
`
`customers were becoming more profitable and trading more with the new
`
`technology.
`
`V.
`
`SUCCESS OF MD TRADER
`
`20. Over the next few years following the launch of MD Trader, and once
`
`traders started using and seeing the great benefits of the invention, the product
`
`spread like wildfire and became a huge success.
`
`21. Among customers, the demand for MD Trader skyrocketed and the
`
`screen was universally accepted. For example, the number of TT trading screens
`
`that customers paid for on a monthly basis increased from 426 screens in summer
`
`of 2000 to 4,331 by the time that the first patents issued in the summer of 2004.
`
`22.
`
`Likewise, with the release of MD Trader, TT’s global revenues also
`
`greatly increased, growing from $11.7 million in 2000 to over $82.1 million in
`
`
`
`8
`
`PAGE 10 OF 22
`
`

`
`
`
`2006, as can be seen by the figure below:
`
`
`
`23. With this new trading tool, TT differentiated itself in the industry and
`
`began to displace major competitors such as Easy Screen, Fast Fill, RTS, and Pats.
`
`See Ex. 1, 10/9/2001 Email from McDonnell (PTX 2757). In particular, customers
`
`transitioned from these competitors over to TT to gain the edge that MD Trader
`
`was imparting to traders that had already made the switch.
`
`24.
`
`In response, these major competitors tried, however unsuccessfully, to
`
`retain their customer base or lure customers back by significantly decreasing the
`
`price of their screen prices, offering free products, or shifting the focus of their
`
`
`
`9
`
`PAGE 11 OF 22
`
`

`
`
`
`business. These efforts only seemed to alienate their existing customer base.
`
`Ultimately, as discussed below, in order to compete with TT’s MD Trader, major
`
`competitors took to copying the MD Trader technology.
`
`25. MD Trader differentiated TT from the rest of the competition on the
`
`industry and became the cornerstone of its business. Rather than waiting for
`
`customer feedback to improve on already developed software, TT went into the
`
`market and gave traders software that they did not even know they wanted. And
`
`after fifteen years since TT’s launch of MD Trader, Mr. Brumfield’s invention is
`
`still very successful and in wide use. Ex. 2. Brumfield was proven right as MD
`
`Trader has become the industry standard for electronic trading in the futures space
`
`where it was introduced. In recent years, we have seen its usage expand to other
`
`asset classes.
`
`26. As I noted above, TT’s software and MD Trader is for professional
`
`users. This is reflected by the significant cost of the software, which for many
`
`years, going back to the time of the release of MD Trader, has been around $1,000
`
`per month per user.
`
`VI. COPYING
`
`27.
`
`The widespread success of MD Trader prompted immediate copying
`
`by other software vendors in the futures industry. In fact, within two years of MD
`
`Trader’s launch date, almost the entire industry of ISVs had copied the features
`
`
`
`10
`
`PAGE 12 OF 22
`
`

`
`
`
`and functionality of the MD Trader screen. Examples of some of these ISVs
`
`included Pats and Easy Screen. I also recall several individuals from TT’s
`
`competitors specifically telling me that they copied the MD Trader screen.
`
`28.
`
`There are striking similarities between TT’s MD Trader and the
`
`trading screens of competitors which were launched after MD Trader. Also, it was
`
`my experience that traders in the industry openly admitted to copying TT’s
`
`product.
`
`29.
`
`This copying was and continues to be detrimental to TT’s success.
`
`Competitors that likewise launched an MD Trader style screen often offered their
`
`software for significantly lower prices, thus causing price erosion and forcing TT
`
`to reduce the cost of MD Trader. Further, TT lost a significant amount of
`
`customers to other competitors that had copied the MD Trader screen.
`
`30. And yet even with this ubiquitous copying, the trading industry at
`
`large still considers the MD Trader style screen to be innovative and
`
`unprecedented.
`
`VII. CONCLUDING STATEMENTS
`
`31.
`
`In signing this declaration, I understand that the declaration will be
`
`filed as evidence in a contested case before the Patent Trial and Appeal Board of
`
`the United States Patent and Trademark Office. I acknowledge that I may be
`
`subject to cross-examination in this case and that cross-examination will take place
`
`
`
`11
`
`PAGE 13 OF 22
`
`

`
`
`
`within the United States. If cross-examination is required of me, I will appear for
`
`cross-examination within the United States during the time allotted for cross-
`
`examination.
`
`32.
`
`I declare that all statements made herein of my knowledge are true,
`
`and that all statements made on information and belief are believed to be true, and
`
`that these statements were made with the knowledge that willful false statements
`
`and the like so made are punishable by fine or imprisonment, or both, under
`
`Section 1001 of Title 18 of the United States Code.
`
`
`
`
`
`
`
`
`
`12
`
`PAGE 14 OF 22
`
`

`
`Exhibit 1
`
`Exhibit 1
`
`
`
`
`
`PAGE 15 OF 22
`
`PAGE 15 OF 22
`
`

`
`Jill Fitzpatrick (TT)
`
`From:
`Sent:
`To:
`Subject:
`
`Tina Yarovsky (TT)
`Tuesday, August 31, 2004 7:15 PM
`Jill Fitzpatrick (TT)
`FW~ The real story
`
`----Original Message----
`From:
`Robbie McDonnell (TI-UK)
`Sent:
`Tuesday, October 09, 20013:08 PM
`All Employees
`To:
`Subject:
`The real story ·
`
`DEPARTMENT:
`AUTHOR:
`SUBJECT:
`
`Managing Director London
`Robbie Mc Donnell
`The real story
`
`The continuing growth of the feature set on TT screens clearly differentiates us from the rest of the pack. The
`recent Mac Futures win is a clear evidence of how TT can be not just react to customer demand but be proactive
`in designing and building specific functionality for our customers.
`
`In the Mac Futures case, it literally meant the difference between signing the deal and not. The site now has 21
`brand new converts from RTS to TT screens across three different exchanges with a fourth currently testing.
`Further growth will happen not just in London but Paris and Chicago.
`
`Easy Screen who had made a lot of noise in the initial battle for the hearts and minds of the trading community
`in London are beginning to weaken. The recent addition of Options Direct and Cube to the TT family
`significantly hurts the Easy base. We have also put our first screen into their largest customer who also happens
`to be their major beta site.
`
`MD trader has been a huge hit with long end traders and helped us win our head to head battle with Easyscreen
`at GHF. Latest score TI 54 Easy 10. They even gave away their API for free to one trader in order to keep his
`business.!
`
`It is also interesting to note that Fast Fill having failed to win the Mac Futures deal are trading below 4.Sp
`(High: £1.20). Easy Screen plunges to 15.Sp (High: £2.80) along with Pats 14p (High £1.35) They all look
`distinctly unhealthy. TT is bigger than these three publicly quoted companies put together!
`
`10808_765220 I 10824_189368 I 10829 _65681 I
`.jpg (20 KB)
`.jpg (23 KB)
`.jpg (19 KB)
`
`.
`Highly c
`Attor
`,onfidential
`neys Eyes Only
`
`TT 027626
`
`TTX00027626
`
`PTX 2757.0001
`
`TT v. CQG (05-4811)
`
`PAGE 16 OF 22
`
`

`
`The recent win at GNI London following on from the successes in Chicago has clearly shown that the market is
`prepared to pay a premium for TI products. The initial users have gone live and knock out huge size. One
`trader is regularly trading in excess of 150,000 lots ... a DAY! In a desperate attempt to s~ore up the business
`Pats have continued to drop screen prices to ridiculously low levels. This policy has served only to alienate
`their existing customer base. The competitive clearing business space has just gotten a lot hotter.
`
`Geneva Trading have cancelled both RTS and Pats. Geneva is now trading exclusively with TI screens in
`Dublin (great town!) and Chicago. Tiris was a two screen deal that is now pushing through forty positions and
`growing.
`
`One final point to note is that TT London has added 10 new sites this year while Pats have added exactly -1.
`Pats have given up on trying to win the business of high end traders and shifted their focus to their Internet
`based system. This is low volume business containing semi professional traders and retail investors. Pats are
`extremely envious of our institutional business (this comes from inside their organisation, first hand )
`
`I could go on but I think you get the picture. Don't believe the hype. We are winning and YES is the first to fall.
`Others will follow and we will not be one of them.
`
`This is the real story.
`
`Robbie
`
`2
`
`Highly Confidential
`Attorneys' Eyes Only
`
`TT 027627
`
`TTX00027627
`
`PTX 2757.0002
`
`TT v. CQG (05-4811)
`
`PAGE 17 OF 22
`
`

`
`TT v. CQG (05-4811)
`
`High\y Confldentia\
`Attorneys' Eyes On\y
`
`IT027628
`
`TTX00027628
`
`PTX 2757.0003
`
`PAGE 18 OF 22
`
`

`
`TT v. CQG (05-4811)
`
`Highly Confidential
`Attorneys• Eyes Only
`
`TT 027629
`
`TTX00027629
`
`PTX 2757.0004
`
`PAGE 19 OF 22
`
`

`
`TT v. CQG (05-4811)
`
`H\gh\Y Conf\dent\a\
`Attorneys' Eyes Qn\y
`
`TI 027630
`
`TTX00027630
`
`PTX 2757.0005
`
`PAGE 20 OF 22
`
`

`
`Exhibit 2
`
`Exhibit 2
`
`
` 
`
`PAGE 21 OF 22
`
`PAGE 21 OF 22
`
`

`
`Grand Total
`
`0
`
`2006
`7293
`
`2007
`7740
`
`TT Screen Counts 2006-2016
`2009
`2010
`2011
`8333
`7809
`6925
`
`2008
`8099
`
`2012
`6833
`
`2013
`6501
`
`2014
`6511
`
`2015
`6784
`
`2016
`7487
`
`PAGE 22 OF 22