Trading Technologies International, Inc. v. CQG, Inc., Not Reported in F.Supp.3d (2015)
`2015 WL 774655
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`KeyCite Yellow Flag - Negative Treatment
`Distinguished by Smart Systems Innovations, LLC v. Chicago
`Transit Authority, N.D.Ill., July 10, 2015
`2015 WL 774655
`Only the Westlaw citation is currently available.
`United States District Court,
`N.D. Illinois, Eastern Division.
`
`Trading Technologies International, Inc., Plaintiff,
`v.
`CQG, Inc., and CQGT, LLC, Defendants.
`
`Case No. 05–cv–4811
`|
`Signed February 24, 2015
`
`Attorneys and Law Firms
`
`Paul H. Berghoff, Alan Wayne Krantz, Andrea Kay Orth,
`Brandon J. Kennedy, Cole Bradley Richter, James Carl
`Gumina, Jennifer M. Kurcz, Jeremy E. Noe, Kirsten L.
`Thomson, Leif R. Sigmond, Jr., Matthew J. Sampson,
`Michael David Gannon, Michelle Lynn McMullen–Tack,
`Paul S. Tully, S. Richard Carden, McDonnell Boehnen
`Hulbert & Berghoff LLP, George I. Lee, Lee Sullivan
`Shea & Smith, Steven F. Borsand, Trading Technologies
`International, Inc., Chicago, IL, Barry F. Irwin, Irwin IP
`LLC, Burr Ridge, IL, for Plaintiff.
`
`Adam Glenn Kelly, Christopher M. Swickhamer, John
`Anthony Cotiguala, Melaina D. Jobs, William J. Kramer,
`William Joshua Voller, Loeb & Loeb LLP, Eugene
`Goryunov, Kenneth R. Adamo, Kirkland & Ellis LLP,
`Johnnet Simone Jones, Sidley Austin LLP, Kara Eve
`Foster Cenar, Greensfelder, Hemker & Gale, P.C.,
`Mariangela M. Seale, Bryan Cave LLP, Chicago, IL,
`Jared B. Briant, Nina Y. Wang, Faegre Baker Daniels,
`LLP, Denver, CO, Laura A. Wytsma, Terry D. Garnett,
`Loeb & Loeb LLP, Los Angeles, CA, for Defendants.
`
`
`
`MEMORANDUM OPINION AND ORDER
`
`SHARON JOHNSON COLEMAN, United States District
`Judge
`
`*1 CQG, Inc. and CQGT, LLC (collectively “CQG”),
`moves for judgment as a matter of law [897] arguing that
`the patents-in-suit, U.S. patent 6,772,132 (“the ‘132
`
`patent”) and U.S. patent 6,766,304 (“the ‘304 patent”),
`are patent-ineligible under 35 U.S.C. § 101. For the
`reasons stated below, this Court denies the motion.
`
`
`
`Background
`The following facts are not materially in dispute. TT is
`the assignee of both the ’132 patent and the ’304 patent.
`The ’132 patent issued in August 2004 and the ’304
`patent issued in July 2004. Both patents claim priority to a
`provisional application filed on March 2, 2000. Both
`patents also share the same specification, and are directed
`to “[c]lick based trading with intuitive grid display of
`market depth.” ’132 patent, 1:2–3. According to the
`shared detailed description,
`the
`invention described
`“provides a display and trading method to ensure fast and
`accurate execution of trades by displaying market depth
`on a vertical or horizontal plane, which fluctuates
`logically up or down, left or right across the plane as the
`price fluctuates.” Id. at 3:54–58. Because the analysis of
`claims under 35 U.S.C. § 101 is the same regardless of
`claim type, i.e. method claim, system claim, computer
`readable medium claim, etc., this Court may analyze one
`representative claim from each of the asserted patents.
`Alice Corp. Pty. v. CLS Bank Int’l, 134 S.Ct. 2347,
`2359–60 (2014).
`
`
`Representative claim 1 of the ’132 patent recites:
`
`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:
`
`setting a preset parameter for the trade order
`
`the commodity,
`displaying market depth of
`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
`
` © 2016 Thomson Reuters. No claim to original U.S. Government Works.
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`Trading Technologies International, Inc. v. CQG, Inc., Not Reported in F.Supp.3d (2015)
`2015 WL 774655
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`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.
`
`
`
`Representative claim 1 of the ’304 patent recites:
`
`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:
`
`Review (“CBMR”) proceeding of the ’132 patent, finding
`that it was more likely than not that all claims of the ’132
`patent recited patent-ineligible subject matter. However,
`the same day, the PTAB declined to institute a CBMR of
`the ’304 patent. As a result, CQG filed a motion with this
`Court requesting a stay in light of the CBMR proceeding
`for the ’132 patent.1 This Court denied the motion to stay.
`CQG appealed that decision to the Federal Circuit Court
`of Appeals which, on February 5, 2015, affirmed this
`Court’s order. This Court allowed briefing on the
`eligibility
`issue under section 101 and heard oral
`arguments on February 23, 2015.
`
`
`
`*2 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;
`
`Legal Standard
`At the outset, this Court acknowledges that the section
`101 jurisprudence is a recently evolving and unsettled
`area of law as it applies particularly to software patents.
`There is some dispute over the level of proof required in a
`section 101 patent-eligibility inquiry. CQG asserts that
`“[a]s a matter of law, patent-eligibility is not subject to
`the ‘clear and convincing’ burden of proof.” (Dkt. 898 at
`3) (quoting Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct.
`2238, 2253 (2011) (Breyer, Scalia, Alito, JJ, concurring)).
`TT submits that rather than a preponderance of the
`evidence burden of proof the appropriate standard should
`be “clear and convincing.” (Dkt. 962 at 11) (quoting Card
`Verification Solutions, LLC v. Citigroup Inc., 2014 WL
`4922524, at *5 (N.D. Ill. Sept. 29, 2014)).
`
`
`*3 This Court recognizes the persuasiveness of Justice
`Breyer’s reasoning that because the section 101 eligibility
`inquiry is purely a question of law and there is no
`statutory presumption of eligibility, it should not be
`subject to the clear and convincing burden of proof.
`However, 35 U.S.C. § 282 provides that patents are
`presumed valid and it is well established that a party
`seeking to overcome that presumption must do so by clear
`and convincing evidence. See Nystrom v. Trex Co., 424
`F.3d 1136, 1149 (Fed. Cir. 2005). This Court is
`“duty-bound to apply the law as enacted by Congress and
`signed by the President, and in light of the Federal
`Circuit’s interpretation thereof. Defendants have not
`presented any authority indicating that the presumption of
`validity no longer applies to challenges to a patent’s
`validity under section 101.”2 CertusView Techs., LLC v. S
`& N Locating Servs., LLC, 2015 U.S. Dist. LEXIS 7126,
`*42 n.6, Slip Copy, 2015 WL 269427 (E.D. Va. Jan. 21,
`2015). Accordingly, this Court concludes that, until the
`Federal Circuit or the United Supreme Court mandates
`otherwise, CQG must show by clear and convincing
`evidence that the patents-in-suit claim patent-ineligible
`subject matter.
`
` © 2016 Thomson Reuters. No claim to original U.S. Government Works.
`
`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.
`
`On December 4, 2014, the Patent Trials and Appeals
`Board (“PTAB”) instituted a Covered Business Method
`
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`Trading Technologies International, Inc. v. CQG, Inc., Not Reported in F.Supp.3d (2015)
`2015 WL 774655
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`Discussion
`Section 101 provides that “Whoever invents or discovers
`any new and useful process, machine, manufacture, or
`composition of matter, or any new and useful
`improvement thereof.” 35 U.S.C.A. § 101. Supreme Court
`precedents provide three specific exceptions to section
`101’s principles of patentability: “laws of nature, physical
`ideas.” Diamond
`v.
`phenomena,
`and
`abstract
`Chakrabarty, 447 U.S. 303, 309 (1980). Alice articulates
`a two-step process to determine whether claims of a
`patent are within the realm of patent-eligible subject
`matter. Alice Corp., 134 S.Ct. at 2354 (relying on Mayo
`Collaborative Servs. v. Prometheus Labs., 132 S.Ct. 1289,
`1303, 1294 (2012). This Court must first determine
`whether the claims of the asserted patents are directed to a
`patent-ineligible concept:
`laws of nature, physical
`phenomena, and abstract ideas. Alice Corp., 134 S.Ct. at
`2355; see also Mayo, 132 S.Ct. at 1296–1297. This Court
`must then “consider the elements of each claim both
`individually and ‘as an ordered combination’ to determine
`whether the additional elements ‘transform the nature of
`the claim’ into a patent-eligible application.” Alice, 134
`S.Ct. at 2355 (quoting Mayo, 132 S.Ct. at 1298, 1297).
`This second step requires a search for an “ ‘inventive
`concept,’ or some element or combination of elements
`sufficient to ensure that the claim in practice amounts to
`‘significantly more’ than a patent on an ineligible
`concept.” DDR Holdings, LLC v. Hotels.com, L.P., 773
`F.3d 1245, 1255 (Fed. Cir. 2014) (quoting Alice, 134
`S.Ct. at 2355). Finally, as Alice makes clear, the claims
`“do more
`than simply
`instruct
`the practitioner
`to
`implement the abstract idea” on a generic computer either
`separately or as an ordered combination. Alice, 134 S.Ct.
`at 2359.
`
`
`
`idea such that others cannot practice it.” Dkt. 962 at 13.
`
`
`*4 Here, neither the claims in the ’132 patent nor the
`claims in the ’304 patent are directed to a mathematical
`algorithm. See Gottschalk v. Benson, 409 U.S. 63, 64
`(1972) (holding that mathematical algorithms, even those
`implemented on a computer, are abstract ideas). The
`claims similarly do not “recite a fundamental economic or
`longstanding commercial practice,” DDR Holdings, 773
`F.3d at 1257, as electronic trading has only been viable
`for a couple of decades, and its analog predecessor, open
`outcry trading systems, operate in a significantly different
`fashion. The claims of the patents also do not address a
`challenge in business. Rather, the claims at issue in both
`patents profess to solve problems of prior graphical user
`interface devices (GUIs), in the context of computerized
`trading, relating to speed, accuracy and usability.
`
`
`CQG argues that: “[t]he Asserted Claims recite the
`abstract idea of placing an order for a commodity on an
`electronic
`exchange, based on observed market
`information, as well as updating the market information.”
`Dkt. 898 at 1. CQG further contends that the elements
`recited in the claims merely perform basic functions
`relating to electronic commodity trading and updating
`market
`information using unidentified and generic
`computer components. CQG further asserts that, “the
`functions
`recited
`in
`the Asserted Claims—setting,
`displaying, and selecting—are all ‘purely conventional’
`and cannot save the claims.” Id. at 2 (quoting Alice, 134
`S.Ct. at 2359).
`
`If the claims simply provided for “setting, displaying, and
`selecting” data or information, CQG would be correct in
`its assessment that the claims are directed to an abstract
`idea. However, CQG ignores much of the details of the
`representative claims. Neither the claims of the ’304
`patent nor the claims of the ’132 patent are directed to
`solely “setting, displaying, and selecting” data or
`information that is visible on the GUI device. Rather, the
`claims are directed to solving a problem that existed with
`prior art GUIs, namely, that the best bid and best ask
`prices would change based on updates received from the
`market. There was a risk with the prior art GUIs that a
`trader would miss her intended price as a result of prices
`changing from under her pointer at the time she clicked
`on the price cell on the GUI. The patents-in-suit provide a
`system and method whereby traders may place orders at a
`particular, identified price level, not necessarily the
`highest bid or the lowest ask price because the invention
`keeps the prices static in position, and allows the
`quantities at each price to change.
`
`
`This issue did not arise in the open outcry systems, i.e. the
`
`1. Abstract Idea
`This Court must first determine whether the claims at
`issue are directed to an abstract idea. DDR Holdings, 773
`F.3d at 1256–1257. CQG argues that the claims of both
`the ’132 patent and the ’304 patent “recite the abstract
`idea of placing an order for a commodity on an electronic
`exchange, based on observed market information, as well
`as updating the market information.” Dkt. 898 at 1. As a
`result, CQG maintains, “the abstract idea is nothing more
`than ‘a fundamental economic practice long prevalent in
`our system of commerce.’ ” Id. (quoting Alice, 134 S.Ct.
`at 2356). TT asserts that the claims of the patents in suit
`are not directed to an abstract idea, but to an improvement
`in computer technology. However, TT maintains that
`assuming arguendo that the claims do recite an abstract
`idea, the claims “do not seek to tie up the alleged abstract
` © 2016 Thomson Reuters. No claim to original U.S. Government Works.
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`Trading Technologies International, Inc. v. CQG, Inc., Not Reported in F.Supp.3d (2015)
`2015 WL 774655
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`pre-electronic trading analog of the ’304 and ’132 patents’
`claims. In live trading “pits,” traders would use verbal
`communication and hand signals to transfer information
`about buy and sell orders. In an open outcry system, bids
`and offers would be made in the open market giving all of
`the participants a chance to compete for an order with the
`best price. There is no question that electronic trading is
`much different than trading in open outcry pits. The
`speed, quantity and variety of trades that can be made by
`a single trader over an electronic system are no doubt
`markedly different than those trades a single trader can
`make in the open outcry system. This Court concludes, in
`part, from the apparent differences between the analog
`versions of trading and electronic trading that the claims
`of the patents in suit are not directed to the abstract idea
`of “placing an order for a commodity on an electronic
`exchange.” Dkt. 898 at 1.
`
`
`The asserted claims similarly do not preempt every way
`of “placing an order for a commodity on an electronic
`exchange,” as systems for doing so existed before this
`invention, and systems exist now that allow traders to buy
`and sell commodities on electronic exchanges without
`infringing the claims of the patents in suit. Therefore,
`CQG has not met its burden of proving by clear and
`convincing evidence that the patents in suit are directed to
`an “abstract idea.”
`
`
`
`idea, “[a] claim that recites an abstract idea must include
`‘additional features’ to ensure ‘that the [claim] is more
`than a drafting effort designed to monopolize the [abstract
`idea].’ ” Id. at 2357 (quoting Mayo, 132 S.Ct. at 1297). It
`is important to note, “the mere recitation of a generic
`computer cannot transform a patent-ineligible abstract
`idea into a patent-eligible invention,” Id. at 2358, thus, the
`recitation of a GUI in the claims of the patents in suit does
`not automatically impart patent eligibility.
`
`In searching for the “inventive concept,” by analyzing the
`claim elements both individually and as an ordered
`combination, this Court need not delve further than
`identify the clause in the claims which has raised a flurry
`of commotion throughout these proceedings: the static
`price index. The ’132 patent recites a “dynamic display
`being aligned with a
`static display of prices
`corresponding thereto,” and the ’304 patent recites “each
`location in the bid display region corresponding to a price
`level along a common static price axis.” This element of
`the representative claims is what adds the “inventive
`concept” to the patents-in-suit. While not declaring that
`the “static price axis” is the defining characteristic of the
`patents which was not known in the prior art before the
`date of invention (which is only proper under a §§ 102 or
`103 analysis), it seems to be the “inventive concept” that
`allowed some traders the ability to more efficiently and
`accurately place trades on electronic trading systems.
`
`
`As such, even if this Court found that the patents were
`directed to an abstract idea, under the second part of the
`Alice test, this Court finds that at least the “static price
`axis” element of the patents in suit was an “inventive
`concept,” which eliminated some problems of prior GUIs
`relating to speed, accuracy and usability, therefore the
`patents-in-suit claim patent eligible subject matter under
`the Alice framework. DDR Holdings, 773 F.3d at 1259.
`When the elements of the claims of both the ’304 patent
`and the ’132 patent are “taken together as an ordered
`combination, the claims recite an invention that is not
`merely the routine or conventional use” of computers or
`the Internet. DDR Holdings, 773 F.3d at 1259. This Court
`disagrees with CQG’s assessment of DDR Holdings as
`inapposite. Instead, this Court finds that because the
`claims of both the ’132 patent and the ’304 patent are
`“necessarily rooted in computer technology in order to
`overcome a problem specifically arising in the realm of”
`computers, like the asserted claims in DDR Holdings, the
`claims here satisfy the requirements of 35 U.S.C. § 101.
`See 773 F.3d at 1257.
`
`
`
`2. Inventive Concept
`*5 Even if this Court were to find that the claims of the
`patents in suit are directed to an abstract idea, the second
`part of the Alice framework, considering the claim
`elements “both
`individually and
`‘as an ordered
`combination’
`to determine whether
`the additional
`elements ‘transform the nature of the claim’ into a
`patent-eligible application,” leads this Court to one
`conclusion: the claims recite an inventive concept. Alice,
`134 S.Ct. at 2355. CQG spent much of its argument, on
`paper and in court, expounding on the “conventional”
`nature of trading GUIs. Yet, this argument seems more
`appropriate for a pre-AIA §§ 102 or 103 validity
`challenge (for failing to be novel or nonobvious in light of
`the prior art). The “inventive concept” step of the Alice
`analysis requires something different than pre-AIA §§
`102 and 103. This step requires courts to locate an
`element or a combination of elements in the claims
`“sufficient to ensure that the patent in practice amounts to
`significantly more than a patent upon the [ineligible
`concept] itself.” Alice, 134 S.Ct. at 2355 (quoting Mayo,
`132, S.Ct. at 1294).
`
`
`CONCLUSION
`To ensure patents are not granted when the subject matter
`to which the claims are directed completely preempts an
`Because the claims are directed to a technological
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`Trading Technologies International, Inc. v. CQG, Inc., Not Reported in F.Supp.3d (2015)
`2015 WL 774655
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`improvement of GUIs, the invention embodied within the
`claims of both the ’132 patent and the ’304 patent is not
`directed to an abstract idea, and even if they were, an
`element of the claims recite an inventive concept, the
`claims recite patent eligible subject matter under 35
`U.S.C. § 101.
`
`
`*6 IT IS SO ORDERED.
`
`All Citations
`
`Not Reported in F.Supp.3d, 2015 WL 774655
`
`
`Footnotes
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` 1
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`
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`
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`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.
`
`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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