Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 1 of 9 PageID #:40963
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`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`Case No. 05-cv-4811
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`Judge Sharon Johnson Coleman
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`MEMORANDUM OPINION AND ORDER
`CQG, Inc. and CQGT, LLC (collectively “CQG”), moves for judgment as a matter of law
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`TRADING TECHNOLOGIES
`INTERNATIONAL, INC.,
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`Plaintiff,
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`v.
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`CQG, INC., and CQGT, LLC,
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`Defendants.
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`[897] arguing that the patents-in-suit, U.S. patent 6,772,132 (“the ‘132 patent”) and U.S. patent
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`6,766,304 (“the ‘304 patent”), are patent-ineligible under 35 U.S.C. § 101. For the reasons stated
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`below, this Court denies the motion.
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`Background
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`The following facts are not materially in dispute. TT is the assignee of both the ‘132 patent
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`and the ‘304 patent. The ‘132 patent issued in August 2004 and the ‘304 patent issued in July 2004.
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`Both patents claim priority to a provisional application filed on March 2, 2000. Both patents also
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`share the same specification, and are directed to “[c]lick based trading with intuitive grid display of
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`market depth.” ‘132 patent, 1:2-3. According to the shared detailed description, the invention
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`described “provides a display and trading method to ensure fast and accurate execution of trades by
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`displaying market depth on a vertical or horizontal plane, which fluctuates logically up or down, left
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`or right across the plane as the price fluctuates.” Id. at 3:54-58. Because the analysis of claims under
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`35 U.S.C. § 101 is the same regardless of claim type, i.e. method claim, system claim, computer
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`1
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`Page 1 of 9
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`TRADING TECH EXHIBIT 2070
`IBG ET AL. v. TRADING TECH
`CBM2016-00009
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`Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 2 of 9 PageID #:40964
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`readable medium claim, etc., this Court may analyze one representative claim from each of the
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`asserted patents. Alice Corp. Pty. v. CLS Bank Int'l, 134 S. Ct. 2347, 2359-60 (2014).
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`Representative claim 1 of the ‘132 patent recites:
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`1. A method of placing a trade order for a commodity on an electronic exchange having an inside
`market with a highest bid price and a lowest ask price, using a graphical user interface and a user
`input device, said method comprising:
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`setting a preset parameter for the trade order
`displaying market depth of the commodity, through a dynamic display of a plurality of bids
`and a plurality of asks in the market for the commodity, including at least a portion
`of the bid and ask quantities of the commodity, the dynamic display being aligned
`with a static display of prices corresponding thereto, wherein the static display of
`prices does not move in response to a change in the inside market;
`displaying an order entry region aligned with the static display prices comprising a plurality
`of areas for receiving commands from the user input devices to send trade orders,
`each area corresponding to a price of the static display of prices; and
`selecting a particular area in the order entry region through single action of the user input
`device with a pointer of the user input device positioned over the particular area to
`set a plurality of additional parameters for the trade order and send the trade order to
`the electronic exchange.
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`Representative claim 1 of the ‘304 patent recites:
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`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
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`Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 3 of 9 PageID #:40965
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`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.
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`On December 4, 2014, the Patent Trials and Appeals Board (“PTAB”) instituted a Covered Business
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`Method Review (“CBMR”) proceeding of the ‘132 patent, finding that it was more likely than not
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`that all claims of the ‘132 patent recited patent-ineligible subject matter. However, the same day, the
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`PTAB declined to institute a CBMR of the ‘304 patent. As a result, CQG filed a motion with this
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`Court requesting a stay in light of the CBMR proceeding for the ‘132 patent.1 This Court denied the
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`motion to stay. CQG appealed that decision to the Federal Circuit Court of Appeals which, on
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`February 5, 2015, affirmed this Court’s order. This Court allowed briefing on the eligibility issue
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`under section 101 and heard oral arguments on February 23, 2015.
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`Legal Standard
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`At the outset, this Court acknowledges that the section 101 jurisprudence is a recently
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`evolving and unsettled area of law as it applies particularly to software patents. There is some
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`dispute over the level of proof required in a section 101 patent-eligibility inquiry. CQG asserts that
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`“[a]s a matter of law, patent-eligibility is not subject to the ‘clear and convincing’ burden of proof.”
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`(Dkt. 898 at 3) (quoting Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238, 2253 (2011) (Breyer, Scalia,
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`Alito, JJ, concurring)). TT submits that rather than a preponderance of the evidence burden of proof
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`the appropriate standard should be “clear and convincing.” (Dkt. 962 at 11) (quoting Card Verification
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`Solutions, LLC v. Citigroup Inc., 2014 WL 4922524, at *5 (N.D. Ill. Sept. 29, 2014)).
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`This Court recognizes the persuasiveness of Justice Breyer’s reasoning that because the
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`section 101 eligibility inquiry is purely a question of law and there is no statutory presumption of
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`eligibility, it should not be subject to the clear and convincing burden of proof. However, 35 U.S.C.
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`1 The patents were before the PTAB on a petition filed by TD Ameritrade, a party in another lawsuit proceeding in
`this court. CQG filed its own petition with the USPTO for a covered business method patent review for each of the
`patents-in-suit on January 9, 2015.
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`Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 4 of 9 PageID #:40966
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`§ 282 provides that patents are presumed valid and it is well established that a party seeking to
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`overcome that presumption must do so by clear and convincing evidence. See Nystrom v. Trex Co.,
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`424 F.3d 1136, 1149 (Fed. Cir. 2005). This Court is “duty-bound to apply the law as enacted by
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`Congress and signed by the President, and in light of the Federal Circuit’s interpretation thereof.
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`Defendants have not presented any authority indicating that the presumption of validity no longer
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`applies to challenges to a patent’s validity under section 101.” 2 CertusView Techs., LLC v. S&N
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`Locating Servs., LLC, 2015 U.S. Dist. LEXIS 7126, *42 n.6, Slip Copy, 2015 WL 269427 (E.D. Va.
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`Jan. 21, 2015). Accordingly, this Court concludes that, until the Federal Circuit or the United
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`Supreme Court mandates otherwise, CQG must show by clear and convincing evidence that the
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`patents-in-suit claim patent-ineligible subject matter.
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`Discussion
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`Section 101 provides that “Whoever invents or discovers any new and useful process,
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`machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35
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`U.S.C.A. § 101. Supreme Court precedents provide three specific exceptions to section 101’s
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`principles of patentability: “laws of nature, physical phenomena, and abstract ideas.” Diamond v.
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`Chakrabarty, 447 U.S. 303, 309 (1980). Alice articulates a two-step process to determine whether
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`claims of a patent are within the realm of patent-eligible subject matter. Alice Corp., 134 S. Ct. at 2354
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`(relying on Mayo Collaborative Servs. v. Prometheus Labs., 132 S. Ct. 1289, 1303, 1294 (2012).
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`This Court must first determine whether the claims of the asserted patents are directed to a patent-
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`ineligible concept: laws of nature, physical phenomena, and abstract ideas. Alice Corp., 134 S. Ct. at
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`2355; see also Mayo, 132 S.Ct. at 1296-1297. This Court must then “consider the elements of each
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`2 CQG points to another concurrence to show that no presumption of eligibility should attach to a § 101 analysis.
`Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 720 (Fed. Cir. Nov. 14, 2014) (Mayer, J, concurring)).
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`Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 5 of 9 PageID #:40967
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`claim both individually and ‘as an ordered combination’ to determine whether the additional
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`elements ‘transform the nature of the claim’ into a patent-eligible application.” Alice, 134 S.Ct. at
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`2355 (quoting Mayo, 132 S.Ct. at 1298, 1297). This second step requires a search for an “‘inventive
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`concept,’ or some element or combination of elements sufficient to ensure that the claim in practice
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`amounts to ‘significantly more’ than a patent on an ineligible concept.” DDR Holdings, LLC v.
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`Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014) (quoting Alice, 134 S. Ct. at 2355). Finally, as
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`Alice makes clear, the claims “do more than simply instruct the practitioner to implement the
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`abstract idea” on a generic computer either separately or as an ordered combination. Alice, 134 S.
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`Ct. at 2359.
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`1. Abstract Idea
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`This Court must first determine whether the claims at issue are directed to an abstract idea.
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`DDR Holdings, 773 F.3d at 1256-1257. CQG argues that the claims of both the ‘132 patent and the
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`‘304 patent “recite the abstract idea of placing an order for a commodity on an electronic exchange,
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`based on observed market information, as well as updating the market information.” Dkt. 898 at 1.
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`As a result, CQG maintains, “the abstract idea is nothing more than ‘a fundamental economic
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`practice long prevalent in our system of commerce.’” Id. (quoting Alice, 134 S.Ct. at 2356). TT
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`asserts that the claims of the patents in suit are not directed to an abstract idea, but to an
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`improvement in computer technology. However, TT maintains that assuming arguendo that the
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`claims do recite an abstract idea, the claims “do not seek to tie up the alleged abstract idea such that
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`others cannot practice it.” Dkt. 962 at 13.
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`Here, neither the claims in the ‘132 patent nor the claims in the ‘304 patent are directed to a
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`mathematical algorithm. See Gottschalk v. Benson, 409 U.S. 63, 64 (1972) (holding that mathematical
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`algorithms, even those implemented on a computer, are abstract ideas). The claims similarly do not
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`“recite a fundamental economic or longstanding commercial practice,” DDR Holdings, 773 F.3d at
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`Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 6 of 9 PageID #:40968
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`1257, as electronic trading has only been viable for a couple of decades, and its analog predecessor,
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`open outcry trading systems, operate in a significantly different fashion. The claims of the patents
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`also do not address a challenge in business. Rather, the claims at issue in both patents profess to
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`solve problems of prior graphical user interface devices (GUIs), in the context of computerized
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`trading, relating to speed, accuracy and usability.
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`CQG argues that: “[t]he Asserted Claims recite the abstract idea of placing an order for a
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`commodity on an electronic exchange, based on observed market information, as well as updating
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`the market information.” Dkt. 898 at 1. CQG further contends that the elements recited in the
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`claims merely perform basic functions relating to electronic commodity trading and updating market
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`information using unidentified and generic computer components. CQG further asserts that, “the
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`functions recited in the Asserted Claims – setting, displaying, and selecting – are all ‘purely
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`conventional’ and cannot save the claims.” Id. at 2 (quoting Alice, 134 S. Ct. at 2359).
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`If the claims simply provided for “setting, displaying, and selecting” data or information,
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`CQG would be correct in its assessment that the claims are directed to an abstract idea. However,
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`CQG ignores much of the details of the representative claims. Neither the claims of the ‘304 patent
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`nor the claims of the ‘132 patent are directed to solely “setting, displaying, and selecting” data or
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`information that is visible on the GUI device. Rather, the claims are directed to solving a problem
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`that existed with prior art GUIs, namely, that the best bid and best ask prices would change based
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`on updates received from the market. There was a risk with the prior art GUIs that a trader would
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`miss her intended price as a result of prices changing from under her pointer at the time she clicked
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`on the price cell on the GUI. The patents-in-suit provide a system and method whereby traders may
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`place orders at a particular, identified price level, not necessarily the highest bid or the lowest ask
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`price because the invention keeps the prices static in position, and allows the quantities at each price
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`to change.
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`This issue did not arise in the open outcry systems, i.e. the pre-electronic trading analog of
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`the ‘304 and ‘132 patents’ claims. In live trading “pits,” traders would use verbal communication and
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`hand signals to transfer information about buy and sell orders. In an open outcry system, bids and
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`offers would be made in the open market giving all of the participants a chance to compete for an
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`order with the best price. There is no question that electronic trading is much different than trading
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`in open outcry pits. The speed, quantity and variety of trades that can be made by a single trader
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`over an electronic system are no doubt markedly different than those trades a single trader can make
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`in the open outcry system. This Court concludes, in part, from the apparent differences between the
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`analog versions of trading and electronic trading that the claims of the patents in suit are not
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`directed to the abstract idea of “placing an order for a commodity on an electronic exchange.” Dkt.
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`898 at 1.
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`The asserted claims similarly do not preempt every way of “placing an order for a
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`commodity on an electronic exchange,” as systems for doing so existed before this invention, and
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`systems exist now that allow traders to buy and sell commodities on electronic exchanges without
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`infringing the claims of the patents in suit. Therefore, CQG has not met its burden of proving by
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`clear and convincing evidence that the patents in suit are directed to an “abstract idea.”
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`2. Inventive Concept
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`Even if this Court were to find that the claims of the patents in suit are directed to an
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`abstract idea, the second part of the Alice framework, considering the claim elements “both
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`individually and ‘as an ordered combination’ to determine whether the additional elements
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`‘transform the nature of the claim’ into a patent-eligible application,” leads this Court to one
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`conclusion: the claims recite an inventive concept. Alice, 134 S.Ct. at 2355. CQG spent much of its
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`argument, on paper and in court, expounding on the “conventional” nature of trading GUIs. Yet,
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`this argument seems more appropriate for a pre-AIA §§ 102 or 103 validity challenge (for failing to
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`be novel or nonobvious in light of the prior art). The “inventive concept” step of the Alice analysis
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`requires something different than pre-AIA §§ 102 and 103. This step requires courts to locate an
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`element or a combination of elements in the claims “sufficient to ensure that the patent in practice
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`amounts to significantly more than a patent upon the [ineligible concept] itself.” Alice, 134 S.Ct. at
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`2355 (quoting Mayo, 132, S.Ct. at 1294).
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`To ensure patents are not granted when the subject matter to which the claims are directed
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`completely preempts an idea, “[a] claim that recites an abstract idea must include ‘additional features’
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`to ensure ‘that the [claim] is more than a drafting effort designed to monopolize the [abstract idea].’”
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`Id. at 2357 (quoting Mayo, 132 S.Ct. at 1297). It is important to note, “the mere recitation of a
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`generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention,”
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`Id. at 2358, thus, the recitation of a GUI in the claims of the patents in suit does not automatically
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`impart patent eligibility.
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`In searching for the “inventive concept,” by analyzing the claim elements both individually
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`and as an ordered combination, this Court need not delve further than identify the clause in the
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`claims which has raised a flurry of commotion throughout these proceedings: the static price index.
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`The ‘132 patent recites a “dynamic display being aligned with a static display of prices
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`corresponding thereto,” and the ‘304 patent recites “each location in the bid display region
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`corresponding to a price level along a common static price axis.” This element of the
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`representative claims is what adds the “inventive concept” to the patents-in-suit. While not declaring
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`that the “static price axis” is the defining characteristic of the patents which was not known in the
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`prior art before the date of invention (which is only proper under a §§ 102 or 103 analysis), it seems
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`to be the “inventive concept” that allowed some traders the ability to more efficiently and accurately
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`place trades on electronic trading systems.
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`Case: 1:05-cv-04811 Document #: 1073 Filed: 02/24/15 Page 9 of 9 PageID #:40971
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`As such, even if this Court found that the patents were directed to an abstract idea, under
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`the second part of the Alice test, this Court finds that at least the “static price axis” element of the
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`patents in suit was an “inventive concept,” which eliminated some problems of prior GUIs relating
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`to speed, accuracy and usability, therefore the patents-in-suit claim patent eligible subject matter
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`under the Alice framework. DDR Holdings, 773 F.3d at 1259. When the elements of the claims of
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`both the ‘304 patent and the ‘132 patent are “taken together as an ordered combination, the claims
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`recite an invention that is not merely the routine or conventional use” of computers or the Internet.
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`DDR Holdings, 773 F.3d at 1259. This Court disagrees with CQG’s assessment of DDR Holdings as
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`inapposite. Instead, this Court finds that because the claims of both the ‘132 patent and the ‘304
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`patent are “necessarily rooted in computer technology in order to overcome a problem specifically
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`arising in the realm of” computers, like the asserted claims in DDR Holdings, the claims here satisfy
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`the requirements of 35 U.S.C. § 101. See 773 F.3d at 1257.
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`CONCLUSION
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`Because the claims are directed to a technological improvement of GUIs, the invention
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`embodied within the claims of both the ‘132 patent and the ‘304 patent is not directed to an abstract
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`idea, and even if they were, an element of the claims recite an inventive concept, the claims recite
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`patent eligible subject matter under 35 U.S.C. § 101.
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`IT IS SO ORDERED.
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`Date: February 24, 2015
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`Entered:
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` SHARON JOHNSON COLEMAN
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` United States District Judge
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