UNITED STATES PATENT AND TRADEMARK OFFICE
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`
`IBG LLC, INTERACTIVE BROKERS LLC, TRADESTATION
` GROUP, INC., TRADESTATION SECURITIES, INC.,
`
`Petitioners,
`
`v.
`
`TRADING TECHNOLOGIES INTERNATIONAL, INC.,
`
`Patent Owner.
`
`
`
`Case CBM2016-00054
`U.S. Patent 7,693,768 B2
`
`
`
`
`
`DECLARATION OF TIMOTHY GEANNOPULOS
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`Page 1 of 23
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`
`IBG LLC, INTERACTIVE BROKERS LLC, TRADESTATION
` GROUP, INC., TRADESTATION SECURITIES, INC.,
`
`Petitioners,
`
`v.
`
`TRADING TECHNOLOGIES INTERNATIONAL, INC.,
`
`Patent Owner.
`
`
`
`Case CBM2016-00054
`U.S. Patent 7,693,768 B2
`
`
`
`
`
`DECLARATION OF TIMOTHY GEANNOPULOS
`
`
`
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`Page 1 of 23
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`I.
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`II.
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`III.
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`IV.
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`V.
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`Table of Contents
`INTRODUCTION AND BACKGROUND .................................................1
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`TT FOUNDATION OVERVIEW ...............................................................4
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`TT EARLY PRODUCT HISTORY ............................................................5
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`TT EARLY COMPETITORS .....................................................................7
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`TT DISTINGUISHES ITSELF ...................................................................9
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`VI. HARRIS BRUMFIELD ...............................................................................9
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`VII. MD TRADER HISTORY ............................................................................10
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`VIII. COMPETITOR HISTORY .........................................................................18
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`IX. CONCLUDING STATEMENTS ................................................................20
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`I, Timothy Geannopulos, declare as follows:
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`I.
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`INTRODUCTION AND BACKGROUND
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`1. My name is Timothy Nicholas Geannopulos.
`
`2.
`
`3.
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`I live in Chicago, Illinois.
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`I worked at Trading Technologies International, Inc. (“TT”) in some
`
`fashion from 1998 to 2014.
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`4.
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`I have a degree in political science at Principia College and a law
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`degree from Northwestern University.
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`5.
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`I graduated from law school in 1989, and went on to work at a law
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`firm in Chicago, practicing tax law, business transactional, and corporate
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`transactional law.
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`6.
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`I practiced approximately eleven years, working for various trading
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`shops, some software companies, and various financial institutions. I am no longer
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`practicing law.
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`7.
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`I first learned about Trading Technologies (“TT”) in 1997 during my
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`time as a lawyer. TT was one of my clients. At that time, there were
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`approximately ten to twenty people working at TT.
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`8.
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`At some point in 1998, I started working part time as an in-house legal
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`counsel for TT. At that point TT's business was growing and they needed more
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`
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`hands-on legal help.
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`9.
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`At this time, TT was divided into two separate businesses. The first
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`was selling a software product. The second was providing consulting services for
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`various clients.
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`10.
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`In my early days in-house at TT, the software product was called
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`“X_Trader,” which was an electronic futures trading software package. The
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`software provided connectivity to the various exchanges as well as front end
`
`graphical user interface (“GUI”) tools for electronic order entry and other
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`functions. When I refer to electronic order entry or electronic trading, I am
`
`referring to environments in which the exchange matching functions are performed
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`entirely electronically (by computers and software) and in which the front end GUI
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`order entry tools send electronic messages to the electronic exchange that represent
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`orders and that contain relevant parameters. At the time, pit trading still existed,
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`where humans matched transactions between themselves. Computers and
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`technology were being developed at the time to assist with such pit trading. TT
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`was not interested in that business, but was pursuing software for pure electronic
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`trading that it believed was the future.
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`11. The consulting services TT provided at this time were various one-off
`
`consulting projects for clients that did not have any developers working for them.
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`These organizations would hire TT's developers on an hourly basis to develop
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`various projects for them.
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`12. As part-time general counsel, my involvement in these two business
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`units of TT involved negotiating software license agreements for the product
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`business and negotiating consulting agreements for the consulting business.
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`13.
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`In October of 2000, I began working full time for TT. My first
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`position was Executive Vice President of Business Development. In this position, I
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`was no longer a lawyer for TT. I left the practice of law and chose to work full-
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`time at TT because I thought TT was an exciting young company that was well
`
`positioned to be successful in the up and coming world of electronic trading.
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`While there was a battle at the time between those who wanted to continue some
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`form of trading pits and those who wanted to completely replace the pits with
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`electronic trading (in which all orders are anonymously matched electronically), I
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`believed that electronic trading was going to win.
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`14. Another factor in my decision was two of the people associated with
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`TT at this time. One person at TT, Gary Kemp (“Gary”), was the CEO and
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`founder. I thought he had great knowledge about the business as well as much
`
`charisma. The other person, who was an investor in TT at this time, was Harris
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`Brumfield (“Harris”). Harris was a successful trader, and he was a proven winner.
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`He was also very excited about a new invention that was going to be assigned to
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`TT and turned into a product (that I discuss in detail below).
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`15. During my time as the Executive Vice President of Business
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`Development, I negotiated with various exchanges and third-party participants in
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`the futures industry. I also negotiated strategic deals with banks who wanted to do
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`business with TT. In this role, I was also familiar with TT’s customers and what
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`was occurring in sales.
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`16. My next position was Executive Vice President of Global Sales,
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`which I started in the first quarter of 2002, and held through February 2014. My
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`responsibilities were basically to manage global sales for TT and also to manage
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`the various sales offices where we had branches (New York, Houston, London,
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`Frankfurt, Geneva, Switzerland, Moscow, Sydney, Singapore, Tokyo, and Hong
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`Kong).
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`17. After TT, I became President of Neurnesic until May of 2016. I am
`
`currently President of LookingGlass Technologies.
`
`II.
`
`TT FOUNDATION OVERVIEW
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`18. Gary Kemp (“Gary”) started TT back in 1994 in Frankfurt, Germany,
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`with just a few employees. He started TT in Frankfurt because, at the time, the
`
`German exchange, EUREX, was launching its electronic exchange. Gary was in
`
`Frankfurt to work with the exchange and also to start TT, with the initial product
`
`from TT offering connectivity and order routing to EUREX. When EUREX came
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`online, it offered trading in futures contracts.
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`19. Gary formed TT recognizing that there was a great opportunity with
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`electronic exchanges coming into existence.
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`20. Shortly thereafter, TT moved from Frankfurt to the Chicago area
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`because Gary anticipated that the two big futures exchanges in Chicago, the
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`Chicago Mercantile Exchange (“CME”) and the Chicago Board of Trade
`
`(CBOT”), would at some point begin electronic trading themselves and that this
`
`would eventually replace the trading pits. Gary thought Chicago, which happens
`
`to be one of the futures capitals of the world, would be a great place to locate TT
`
`so that he could sell futures trading software to those customers and traders that
`
`wanted to trade electronically on the CBOT and the CME.
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`21. Gary first located the TT office in Evanston, Illinois. TT eventually
`
`moved its office to downtown Chicago.
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`III. TT EARLY PRODUCT HISTORY
`
`22. When I first joined part-time in 1998, TT was what is known as an
`
`independent software vendor (“ISV”). As an ISV, TT sold its software products
`
`mainly to futures traders and focused on software to connect to the electronic
`
`exchanges and software for order entry. Some of these traders were independent
`
`while others were in proprietary trading shops or larger institutions such as banks
`
`and large investment firms.
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`23. The focus of the product for Gary and TT at that point was: (1)
`
`stability, and (2) speed. In terms of stability, what I mean is that the product
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`actually stays up and running, especially during periods of volatility when there is
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`a high amount of trading going on. In terms of speed, at the time the connection to
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`the exchange was very important. Both of these are important because the
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`software provided by TT was a mission critical tool to the trader. Customers
`
`expected the software to work without interruption while trading. Any speed
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`advantage in getting into and out of the market was critical, so a constant, fast
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`connection to the exchanges was a must. Any loss in connectivity or speed could
`
`easily result in a loss of money, possibly a great deal of money. The traders’
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`livelihood depended on the software working correctly – uninterrupted and fast!
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`TT’s software was expensive and sold to professional traders. Therefore, it
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`required many developers, testers, and 24/7 support.
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`24. This focus changed over time, however. Speed of connection and
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`stability stayed as a major emphasis of Gary and TT. But as Harris became more
`
`and more of an active investor, as discussed below, he brought an important front-
`
`end GUI invention to TT. The success of that invention, discussed below, brought
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`additional focus to TT on improving the GUI tools for order entry.
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`25. The MD Trader product launched in August of 2000 right before I
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`came on full time. At the time TT had about 100 employees and was struggling.
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`Prior to August 2000, TT was selling X_Trader, which had an order entry GUI
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`called a market grid. And the market grid was the design that was prevalent during
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`that period of time and was the same basic design as offered by almost every
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`competitor of TT. The market grid was a simple grid that displayed bid quantity
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`and prices on one side and ask quantity and prices on the other with the inside
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`market (the best bid and ask prices) always displayed at the same location
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`(typically the top row). The following is a drawing from one of TT’s patents that
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`illustrates this type of GUI:
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`
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`26. As illustrated, values representing bid prices are displayed in column
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`203 and values representing ask prices are displayed in column 204. The best bid
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`and the best ask price at any given time were displayed at the top of those columns
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`in the first row 1. So, for example, in this figure, at this moment the GUI is
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`displaying a best bid price of 7626 and a best ask price of 7627. These two prices
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`are the inside market, and as the market changed those displayed values constantly
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`changed.
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`IV. TT EARLY COMPETITORS
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`27. Around 2000, TT’s competitors included: Patsystems from the UK;
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`Ecco from the UK; Easy Screen from the UK; GL Trade from France; RTS from
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`Germany; Orc Software from Sweden; and others. These companies were ISVs. At
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`that time Patsystems was TT’s main competitor, and TT’s main focus was selling
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`in the futures industry.
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`28. The competitive landscape soon changed in a couple of different
`
`ways. The ISV business is a very tough business. Many ISVs either went out of
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`business or were purchased by bigger companies.
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`29. Other types of competition at this time included a new breed of
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`competitor – a much bigger type of diversified company that has a different
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`primary business and has now diversified into futures trading GUIs. One example
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`was eSpeed which was an exchange that also started offering futures trading GUIs.
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`Another example would be Interactive Brokers (“IB”) and TradeStation (“TS”).
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`30. Before 2000 and for a while after, almost every provider of GUI tools
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`for electronic order entry, whether an ISV or a more diversified competitor such as
`
`IB or TS, if not all of them, used the same basic market grid design, as illustrated
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`above in paragraph 23. The way that providers would distinguish themselves
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`would be on their speed to their exchange connections, on the number of exchange
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`connections, on the stability of their software, and on pricing. At this time the
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`trading GUIs were all similar (like figure 2 above) and companies focused on
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`trying to provide enhanced screen features to that particular GUI.
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`V.
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`TT DISTINGUISHES ITSELF
`
`31. TT managed to survive when many other ISVs were having trouble.
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`The primary factor that allowed TT to survive was that TT was able to introduce
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`MD Trader into the industry. MD Trader gave TT an amazing opportunity to sell
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`trading GUI tools that were totally different than the traditional market grid. TT
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`was able to accomplish this against companies that provided much more exchange
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`connectivity, much larger companies with significantly more resources, and with
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`more diversified companies in terms of other asset classes (e.g., equities) that were
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`not limited to providing software only for electronic futures exchanges like TT was
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`at the time.
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`VI. HARRIS BRUMFIELD
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`32. The first time I heard the name Harris Brumfield was some time back
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`in 1999. He was a very, very big trader at the Chicago Board of Trade and he was
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`also a customer of TT’s. It was my understanding that Harris was one of the
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`world’s largest individual traders.
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`33. Harris was a customer of TT’s X_Trader software.
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`34. Harris also became a client of TT's consulting business. He would
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`engage TT's consulting business on an hourly basis to do projects for him on ideas
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`he had.
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`35. At some point in the late 1990s, Harris became an investor in TT
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`(private company). Harris was the primary investor and provided much needed
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`capital because the company was losing money at the time. At some point, Harris
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`became majority shareholder. Harris became the CEO of TT during the first
`
`quarter of 2002. He is no longer CEO, but remains Chairman of the Board and the
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`majority shareholder.
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`VII. MD TRADER HISTORY
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`36. Harris assigned his invention on a new GUI tool to TT and TT
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`ultimately incorporated it into its product suite and called it MD Trader. He was
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`the primary inventor of this new tool. By this time Harris was a major investor in
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`TT and he insisted that this new GUI tool be added to the product. His investment
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`was conditioned on that. Harris believed that this new GUI tool could change
`
`trading and propel TT to market leadership. I know this because I heard him
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`communicate this belief many times. TT’s management at the time was not
`
`enthusiastic about the new GUI tool – they did not yet see the benefit of it. But
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`because creating the new GUI tool was a requirement for further much needed
`
`investment from Harris, management agreed to develop the GUI tool and add it to
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`the product. So, the addition of MD Trader ultimately improved TT’s product and
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`also motivated Harris to further invest in TT. Development of MD Trader began in
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`around late 1999 or the early part of 2000 and it was launched as a product in
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`August 2000.
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`37. MD Trader was very counterintuitive to the traditional market grid
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`that was prevalent in the industry. The MD Trader GUI tool dynamically displayed
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`bid and ask indicators at locations relative to price levels along a price axis, such
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`that when updates from the electronic exchange were received reflecting a market
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`change, the indicators would move relative to the price axis (e.g., up and down
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`with respect to a vertical price axis). MD Trader also provided fixed locations that
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`could be selected by a single click to set parameters (e.g., price, type of order) and
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`send order messages to an electronic exchange. These fixed locations
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`corresponded to different fixed levels along the price axis. MD Trader also
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`provided locations aligned with the price levels of the price axis to display entered
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`order indicators representing the user’s own order. The entered order indicator is
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`also sometimes referred to as a working order. The user could cancel a particular
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`working order at a particular price level by clicking on a particular working order
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`indicator. Because the price levels did not move as in the market grid, MD Trader
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`also provided that the axis could be manually recentered, for example when the
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`inside market went off the top or bottom of the GUI or when the trader simply
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`wanted the inside market in the center of the GUI. The combination of the
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`dynamically displayed indicators moving relative to the price axis along with the
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`fixed order entry locations for receiving single click commands to set parameters
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`and send order messages in MD Trader dramatically improved upon the traditional
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`market grid screens. For example, this combination permitted users to enter orders
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`rapidly without sacrificing accuracy as was the case in the prior conventional
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`screens. Every version of MD Trader launched by TT since 2000 has included
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`these features and thus provided these benefits.
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`38. MD Trader was very different than, and in a sense the opposite to, the
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`market grid, which was prevalent before MD Trader’s launch. For example, MD
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`Trader did not display the best bid and best ask prices at fixed designated locations,
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`while the prices and quantities were constantly changing, as in the market grid.
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`Instead, the price levels in the price axis did not change with each inside market
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`change and the inside market indicators moved on the GUI tool relative to those
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`price levels. It turned out traders found this relative movement to be very
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`beneficial and provide a much better visualization of market changes than the
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`previous conventional screen. In addition, MD Trader allowed customers to enter
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`orders by selecting a fixed location corresponding to a level along the price axis
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`with a single action, to set order parameters (e.g., price and whether a bid or ask)
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`and send an order message to an electronic exchange. MD Trader also took up
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`much more space on the trader’s screen than the prevalent market grids.
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`39.
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`Initially this product was received in the industry with great
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`skepticism. The customers were used to and liked the market grid trading GUI tool.
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`It is also important to note that the prevalent market grid trading GUI is what the
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`traders were using in their profession to make money. If the tool is perceived as
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`working well, which it was, the idea of a trader wanting to make a drastic change
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`to a new tool, like MD Trader, which was so different than the conventional
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`screen, is very unusual. The skepticism ran much deeper than just an
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`unwillingness to change. The traders were also not used to the inside market
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`indicators moving around relative to the prices on the GUI. The inside market is
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`the most important piece of information for a trader and the reasons that it was
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`prevalent to fix that location on the screen ran deep. Also, because of the display
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`of a range of price levels along a price axis, MD Trader took up much more screen
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`space that the conventional market grid. Screen space is a valued commodity in
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`the trader’s workspace, and their initial reaction was that MD Trader wasted a lot
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`of this valuable space.
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`40. TT’s own sales people were likewise very skeptical also about selling
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`MD Trader. They wanted to sell the market grid and they thought that was
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`something that the traders wanted. A typical sales person wanted to be responsive
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`to customer requests like fixing bugs or making incremental improvements that
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`customers request. Asking a trader to try something new, especially something
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`that looked so different, could be met with anger. MD Trader was never requested
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`by any customer – it was sprung upon them by TT’s salespeople. To these traders,
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`their trading GUI was mission critical and they were not about to mess with
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`something that worked. They did not care about aesthetics. Getting these
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`customers to try a radically different screen was thought to be a non-starter.
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`41. To change this attitude, TT, at the insistence of Harris and Gary, hired
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`Mike Burns (“Burns”). Burns became an MD Trader specialist. Harris had known
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`Burns from the trading floor and knew that Burns was very excited about MD
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`Trader. Burns truly understood the benefits of MD Trader as compared to
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`conventional trading GUIs discussed above. It is important to remember that the
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`benefits I described above were not readily apparent to users – they became clear
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`after MD Trader became a success. Burns’ job was to educate the TT sales people
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`about the benefits of MD Trader. The sales people also brought Burns out to
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`various trader customers to sell these trader customers about the benefits of MD
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`Trader. Burns was a former CBOT pit trader and an electronic trader familiar with
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`the prevalent software being used for order entry, so he understood how to relate to
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`these traders. Burns was willing to go toe to toe with these traders – he was one of
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`them. He was uniquely situated to argue with and convince these traders to give
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`MD Trader a try. For example, Burns understood the significance of asking a
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`trader to try using a radically different order entry GUI – which the trader’s most
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`important mission critical tool. The email set forth below announced Burns’ role
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`to company – he is referred to as BurnZ in the email. See Exhibit 2532, 9/8/2000
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`Email from Kemp (PTX 1296).
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`42. Eventually, the attitude and skepticism towards MD Trader within TT
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`started to change and Harris’ vision proved correct. As the MD Trader product
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`started really taking off and sales started coming in, sales people – being traditional
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`sales people – liked the idea, liked selling the product, and the sales people started
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`reaping the rewards of an explosive growth in both revenues and screen sales.
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`43. MD Trader became a massive success for TT. MD Trader was a
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`direct cause for the significant increase in TT’s revenue in the years following the
`
`launch of MD Trader. The number of trading screens that customers paid for on a
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`monthly basis increased from by orders of magnitude between the summer of 2000
`
`to the time that the first patents issued in the summer of 2004. This growth was
`
`driven by demand for MD Trader. This was important, because TT was
`
`compensated on a per screen basis (typically around $1,000 per end user per
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`month). In fact, MD Trader allowed TT to remain in business. TT was losing a
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`significant amount of money on a monthly basis prior to the launch of MD Trader.
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`In the years following the launch, TT not only got to the breakeven point, but
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`eventually became profitable because of the revenue that was driven by the
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`customer demand for MD Trader. TT had gone from a little known, unprofitable
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`company to having a substantial presence within the futures space with sales
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`increasing around 700%. The success of MD Trader was directly attributable to
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`the combination of features I identify above in paragraphs 37-38 and the benefits
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`caused by that combination as compared to the prior conventional trading screens
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`discussed above. I know this from personal experience and living through this
`
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`period at TT.
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`44.
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`It is my understanding that MD Trader provided unexpected benefits
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`as well. By displaying prices in the manner of MD Trader, i.e., where the prices do
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`not move, but the inside market indicators move relative to the prices, traders were
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`able to submit orders at their intended prices. A couple of unexpected benefits
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`came from this. First, traders using MD Trader became more confident in their
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`trading as a result of avoiding the submission of orders at unintended prices. And
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`second, MD Trader actually increased the volume of trades that a particular trader
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`would typically enter. I became aware of these unexpected benefits through
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`speaking with customers, including Charles McElveen from Kingstree Trading,
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`and speaking with exchange employees. Mr. McElveen specifically credited MD
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`Trader with increasing the volume of orders that Kingstree Trading sent to
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`exchanges, and this was confirmed by Scott Johnston from the CME.
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`45. MD Trader is a window within the entire X_Trader package. But it’s
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`the MD Trader GUI tool (and its features set forth above in paragraphs 37-38) that
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`is responsible for this explosive growth. MD Trader was the GUI tool that the
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`customers soon identified with TT. MD Trader and the ability to protect it with
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`patents is also the reason that Harris continued to fund TT – he believed in MD
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`Trader. MD Trader became our heart and soul. Without Harris’ funding, TT would
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`have ceased to exist. It also became the feature that TT was known for, like Burger
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`King’s Whopper. In fact, some in the industry began referring to MD Trader by the
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`shorthand of “TT.” MD Trader is the reason why people came and talked to TT
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`and—and why the company got on the map—it is why customers choose TT.
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`While TT’s product includes other GUIs, almost all, if not all, of them either
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`expand the usage of MD Trader or integrate and work with MD Trader.
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`VIII. COMPETITOR HISTORY
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`46. After TT released MD Trader and once it became successful,
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`competitors quickly began copying the GUI tool. We saw competitors adopting
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`the same features. Specifically, the competitors were adopting the features of
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`displaying a price axis and allowing the bid and ask indicators to move relative to
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`the price axis as the market updates are displayed. The competitors were also
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`adopting the features of displaying an order entry region having fixed areas
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`corresponding with price levels along the price axis and providing the ability for
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`those areas of the order entry region to be selected with a single click of a mouse
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`cursor to set order parameters (e.g., a price value and type of order) and send a
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`message representing a trade order to an electronic exchange. Traders were
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`demanding these features in the years after TT launched MD Trader. After the first
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`TT patents were issued in July and August of 2004, we started approaching these
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`various competitors. Over time, we reached deals with many competitors,
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`including most of TT’s archrival competitors, such as Patsystems, Orc, RTS,
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`Futures Dynamics, in which they honored the patents by either dropping the
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`invention from their product or taking royalty bearing license.
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`47. Beginning with Patsystems (TT’s archrival at the time – a publicly
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`traded UK company), I noticed in my sales role that competitors were copying MD
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`Trader. At first we noticed competitors adding a vertical column. Some of these
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`early implementations had the inside market always at the center of the price
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`column with the prices in the price cells always moving (e.g., EasyScreen). But
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`eventually our competitors caught on and made the price levels in the vertical price
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`column a price axis in which the price levels stayed in the same position while the
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`bid and ask indicators moved up and down relative to the price levels of the price
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`column. Competitors added single click order entry. In particular, they added fixed
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`areas associated with each level of the price axis that could be selected by a single
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`click to set order parameters and send an order message. They also added other
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`features of MD Trader, such as displaying indicators representing the user’s
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`working orders (also known as entered orders) at locations relative to the price axis
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`and the ability for a user to cancel those orders by simply clicking on the working
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`order indicator.
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`48. This spread beyond TT’s traditional competitors. As first the ISVs
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`were implementing these features and later we observed exchanges and proprietary
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`trading shops developing GUIs that copied these features. Sales staff at TT would
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`present me with examples of this copying regularly. We also observed this
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`spreading to areas outside of futures trading software.
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`49. During this copying, TT waited for its patents to issue. The copying
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`grew until the MD Trader type screen became a standard in the futures industry.
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`This type of trading GUI tool (with the combination of features I identify above)
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`also began to spread to other asset classes where it was not the standard, such as
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`equities.
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`50. Eventually, TT’s first two patents issued. After that, TT was
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`successful in getting many of these software providers to respect the patent. TT
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`entered into licensing and settlement agreements regarding its patents with many
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`other entities during this time and over the years. I was personally involved, at
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`least on the business side, in discussions with many of the parties that entered into
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`licensing and/or settlement agreements with TT.
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`51.
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`I have personal knowledge of the information discussed above based
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`on my personal experience at TT, including my interactions and discussions as part
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`of the ordinary course of my job activities with other employees at TT (including
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`the individuals identified above), customers of TT, and competitors of TT.
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`IX. CONCLUDING STATEMENTS
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`52.
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`In signing this declaration, I understand that the declaration will be
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`filed as evidence in a contested case before the Patent Trial and Appeal Board of
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`the United States Patent and Trademark Office. I acknowledge that I may be
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`subject to cross-examination in this case and that cross-examination will take place
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`within the United States. If cross-examination is required of me, I will appear for
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`cross-examination within the United States during the time allotted for cross-
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`examination.
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`53.
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`I declare that all statements made herein of my knowledge are true,
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`and that all statements made on information and belief are believed to be true, and
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`that these statements were made with the knowledge that willful false statements
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`and the like so made are punishable by fine or imprisonment, or both, under
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`Section 1001 of Title 18 of the United States Code.
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` Dated: January 18, 2017
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`TRADING TECH EXHIBIT 2171
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