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 ROBBIE MCDONNELL
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`Page 1 of 19
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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 ROBBIE MCDONNELL
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`Page 1 of 19
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`Table of Contents
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`I.
`
`INTRODUCTION ...................................................................................... 1
`
`II. HISTORY OF TT AND MD TRADER ...................................................... 2
`
`III. BENEFITS OF THE INVENTION ............................................................. 4
`
`IV.
`
`INITIAL SKEPTICISM .............................................................................. 5
`
`V.
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`SUCCESS OF MD TRADER .................................................................... 8
`
`VI. COPYING ................................................................................................... 10
`
`VII. CONCLUDING STATEMENTS ............................................................... 11
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`I, Robbie McDonnell, declare as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`I currently serve as the executive vice-president of global sales for
`
`Trading Technologies International, Inc. (“TT”). My responsibilities in this role
`
`include managing TT’s international sales operations and directing sales managers
`
`globally.
`
`2.
`
`Prior to joining TT, I primarily worked in the financial industry.
`
`Initially, I worked for a bank located in Dublin, Ireland. In 1994, I was hired as a
`
`sales manager by a company named FutureSource to sell electronic charting
`
`software called TradeStation. After a few years, I transitioned to a sales position at
`
`Dow Jones, where I again sold charting software, however to larger banks.
`
`3.
`
`I later pursued an opportunity to work for TT. I began my career at
`
`TT in September of 1998 as a sales manager in TT’s London Office. As a sales
`
`manager, my responsibilities included prospecting new customers and meeting
`
`with proprietary and professional traders and bankers. I was also tasked with
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`selling TT’s software product, X_Trader, to TT’s customer base at large. It was
`
`during my time as a sales manager in London that TT launched its MD Trader
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`product within X_Trader, in the fall of 2000.
`
`4.
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`By early 2001, I was promoted to managing director of the London
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`Office, which encompassed all of TT’s European Operations. I assembled a team
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`of account and sales managers to sell X_Trader throughout Europe. Then, in 2006,
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`I moved from London to Asia in order to expand TT’s global reach of its X_Trader
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`product. I opened multiple sales offices, including offices in Hong Kong,
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`Singapore, Tokyo, and Sydney. In September of 2014, I relocated to Chicago to
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`serve as executive vice-president of global sales. Finally, at the end of 2016, I took
`
`on the role of Managing Director of Asia-Pacific.
`
`II. HISTORY OF TT AND MD TRADER
`
`5.
`
`Gary Kemp, an American entrepreneur with a background in software
`
`development, formed TT in Frankfurt, Germany in 1994. Recognizing that futures
`
`trading was moving to an electronic platform in the early 1990’s, Mr. Kemp, in
`
`forming TT, sought to provide traders with connectivity to electronic exchanges.
`
`6.
`
`In 1997, TT and Mr. Kemp relocated to Chicago, Illinois, placing
`
`them closer to the Chicago Board of Trade and the Chicago Mercantile Exchange.
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`Shortly thereafter, Harris Brumfield, a well-known and successful trader, joined
`
`TT as a customer of TT’s software and an investor in TT. Mr. Brumfield would
`
`later become the majority shareholder and CEO of TT around 2002-2003, and
`
`today serves as Chairman of the Board at TT.
`
`7. When TT moved to Chicago, it had two sides of its business. The first
`
`was a consultancy side, which Mr. Kemp was primarily responsible for. Mr.
`
`Brumfield was also a client of Mr. Kemp’s consulting business. The other side,
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`which I was heavily involved in, focused on software development and sales of
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`X_Trader.
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`8. Mr. Brumfield provided a unique trader perspective to the software
`
`development side. Mr. Brumfield had an interest in improving trading interfaces
`
`and assisted TT in developing new software. TT thus established itself as an
`
`independent software vendor (“ISV”), meaning TT began charging customers on a
`
`monthly basis for its trading execution software in order to collect revenue.
`
`9. When I joined TT in 1998, quite a few competing ISVs existed in the
`
`industry at the time. Some of these ISVs included Ecco, FFastFill, Pats, Nyfix, and
`
`GL. These ISVs were direct competitors and sold the same conventional trading
`
`screens that TT offered, with only small differences. These conventional screens
`
`included a fixed inside market – they displayed the best bid price and best ask price
`
`at fixed designated locations on the screen (typically side by side). All of us ISVs
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`essentially competed for the same traders and same banks, day in and day out, with
`
`very little differentiation between us. Due to this cut-throat competition, the
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`margins were razor thin and TT struggled in the early years, as did our
`
`competitors. By no means was the ISV business a profitable business.
`
`Shockingly, none of those ISVs currently exist, as they were either acquired or
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`went out of business.
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`10. TT survived in large part to Mr. Brumfield’s investments in the
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`company. By 2000, Mr. Brumfield continued to fund TT by increasing his
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`investments and assigning his invention for a new electronic trading screen to TT.
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`Ultimately, Mr. Brumfield’s idea of a new electronic trading screen was developed
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`by TT as MD Trader in late August 2000 and incorporated into the X_Trader
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`platform.
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`III. BENEFITS OF THE INVENTION
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`11. MD Trader provided an entirely new graphical user interface (“GUI”)
`
`for trading, something I had never seen before, that went against the grain of
`
`conventional trading screens at the time it was introduced.
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`12.
`
`I saw a number of differences between MD Trader and other order
`
`entry screens in the industry. For example, MD Trader included a vertical price
`
`axis that did not move at times when the inside market changed. Also, MD Trader
`
`displayed the market depth (the bids and asks) alongside the vertical price axis,
`
`such that the bids and asks would move up and down relative to the price axis.
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`The user could enter an order with the single click of a mouse in an order entry
`
`region comprised of fixed locations that each corresponded with a price level along
`
`the price axis. For shorthand, I refer to this as “single action order entry.” Also, a
`
`user could cancel an entered order with the single click of a mouse on the
`
`particular order the user wished to cancel. Every version of MD Trader ever
`
`offered by TT since 2000 has included these features.
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`
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`4
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`13. These differences made MD Trader counterintuitive to the
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`conventional market grid style order entry screens that were prevalent in the
`
`industry prior to Mr. Brumfield’s invention. For example, displaying bids and asks
`
`that moved relative to a price axis made the MD Trader slower than conventional
`
`screens because it forced traders to chase the inside market with their cursor. Also,
`
`the combination of displaying the bids and asks relative to a price axis such that
`
`they moved relative to the price axis when the market changed and “single action
`
`order entry” made the MD Trader less accurate than conventional screens because
`
`a trader might click a price when the inside market changes, and consequently miss
`
`the inside market price. The MD Trader screen also went against conventional
`
`wisdom because it consumed more screen real-estate.
`
`14. Even though MD Trader incorporated these negative features, making
`
`the tool less accurate at the inside market, slower, and against the conventional
`
`wisdom of fixing the inside market, it resulted in a more effective screen that
`
`allowed traders to be more profitable. In particular, it provided better market
`
`visualization and improved accuracy without sacrificing speed when a trader was
`
`seeking to enter an order at a specific price. These benefits in turn increased trader
`
`confidence.
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`IV. INITIAL SKEPTICISM
`
`15. Due to the counterintuitive nature of the MD Trader, the launch of
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`TT’s MD Trader around Labor Day of 2000 was initially met with great skepticism
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`in the industry.
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`16. TT’s own sales team, myself included, was slow to appreciate the
`
`benefits of the invention and struggled to understand how it worked. Our sales
`
`team found it incredibly difficult to convince customers to even try MD Trader
`
`after its initial launch. Our customers were professional traders and the order entry
`
`GUI was their most important mission critical tool in carrying out their profession.
`
`The customers were doing well with the conventional trading screens setup to their
`
`particular likings. No customer had asked for a new and different trading GUI.
`
`17. To combat this initial skepticism, TT hired a famous trader in the
`
`industry, Mike Burns, to educate TT’s sales teams, including my sales team in
`
`London, and explain the benefits of the new technology. The email set forth below
`
`announced Burns’ role to company – he is referred to as BurnZ in the email. See
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`Exhibit 2532, 9/8/2000 Email from Kemp (PTX 1296).
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`6
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`18. Mr. Burns was responsible for helping TT’s sales personnel with
`
`trading knowledge, providing compelling reasons for traders to test out MD
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`Trader, and visiting customers in the industry, including proprietary traders and
`
`banks, to demonstrate the benefits of the new technology. Id. Once Mr. Burns
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`entered this role, the attitude towards MD Trader changed.
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`19. After viewing MD Trader in action, traders’ opinions eventually
`
`turned around and they recognized the advantage they would gain because of the
`
`improved market visualization and improved speed/accuracy for orders at
`
`particular prices. Once a trader was convinced to try it, the trader would inevitably
`
`see the dramatic benefit provided by the new GUI. At this time, customer demand
`
`for TT’s MD Trader greatly increased. We immediately began receiving feedback
`
`from our customers regarding the value of MD Trader and saw first-hand that our
`
`customers were becoming more profitable and trading more with the new
`
`technology.
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`V.
`
`SUCCESS OF MD TRADER
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`20. Over the next few years following the launch of MD Trader, and once
`
`traders started using and seeing the great benefits of the invention, the product
`
`spread like wildfire and became a huge success.
`
`21. Among customers, the demand for MD Trader skyrocketed and the
`
`screen was universally accepted because of the combination of features I detailed
`
`above in Paragraph 12. For example, the number of TT trading screens that
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`customers paid for on a monthly basis increased from 426 screens in summer of
`
`2000 to 4,331 by the time that the first patents issued in the summer of 2004.
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`22. Likewise, with the release of MD Trader and due to the combination
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`of features detailed above in Paragraph 12, TT’s global revenues also greatly
`
`increased, growing from $11.7 million in 2000 to over $82.1 million in 2006, as
`
`can be seen by the figure below:
`
`Exhibit 2231.
`
`23. With this new trading tool, TT differentiated itself in the industry and
`
`began to displace major competitors such as Easy Screen, Fast Fill, RTS, and Pats.
`
`See Ex. 2533, 10/9/2001 Email from McDonnell (PTX 2757).
`
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`9
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`24. As I detailed in the email above that I sent to all TT employees on
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`October 9, 2001, the growth of the “feature set on TT screens” referenced the
`
`MD_Trader and the features identified in Paragraph 12. In fact, TT’s win of the
`
`Mac Futures deal was directly attributed to the combination of features detailed in
`
`Paragraph 12 that make up MD Trader. In that case, TT won 21 screens from
`
`traders that previously used non-MD Trader screens in favor of the MD Trader
`
`screen. As I mentioned in the fourth paragraph above, MD Trader was also a
`
`“huge hit with long end traders and helped us win our head to head battle with
`
`Easyscreen at GHF.” The success TT had against Easyscreen at GHF (a customer)
`
`was directly attributable to the combination of features in MD Trader detailed
`
`above in Paragraph 12. Further, the referenced wins at GNI London and Geneva
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`Trading were attributed to the same combination of features in MD Trader. The
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`reason traders were demanding the MD Trader product was because traders with
`
`that functionality were becoming hugely successful. One trader started trading
`
`150,000 lots a day using MD Trader due to the successful combination of features
`
`detailed in Paragraph 12. This was a huge increase in trading volume for that
`
`trader.
`
`25. While the commercial success TT had as a result of the launch of MD
`
`Trader is detailed above in Paragraphs 21-22, my 2001 email is also significant
`
`because it shows that TT took sales and grew revenue due to the features set forth
`
`in Paragraph 12 above, while its competitors lost sales and continued
`
`hemorrhaging. Exhibit 2533. For instance, one competitor, Fast Fill, (which lost
`
`the sale to Mac Futures that TT gained due to the MD Trader and the features set
`
`forth in Paragraph 12 above) previously had been trading at £1.20, plunged in its
`
`trading price to just £.045 (4.5 pence):
`
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`12
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`At the same time, Easy Screen dropped from a high of £ 2.8 down to £.155 (15.5
`
`pence), as shown below:
`
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`Likewise, Patsystems dropped from a high of £ 1.35 down to £.14 (14 pence):
`
`
`
`26.
`
`In particular, customers transitioned from these competitors over to
`
`TT to gain the edge that MD Trader and specifically the combination of features
`
`identified above in Paragraph 12 was imparting to traders that had already made
`
`the switch.
`
`27.
`
`In response, these major competitors tried, however unsuccessfully, to
`
`retain their customer base or lure customers back by significantly decreasing the
`
`price of their screen prices, offering free products, or shifting the focus of their
`
`business. Exhibit 2533, PTX 2757, at 2. These efforts only seemed to alienate
`
`their existing customer base. Ultimately, as discussed below, in order to compete
`
`with TT’s MD Trader, major competitors took to copying the MD Trader
`
`technology.
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`28. MD Trader differentiated TT from the rest of the competition on the
`
`industry and became the cornerstone of its business. Rather than waiting for
`
`customer feedback to improve on already developed software, TT went into the
`
`market and gave traders software that they did not even know they wanted. And
`
`after fifteen years since TT’s launch of MD Trader, Mr. Brumfield’s invention is
`
`still very successful and in wide use. Exhibit 2533. Brumfield was proven right
`
`as MD Trader has become the industry standard for electronic trading in the futures
`
`space where it was introduced. In recent years, we have seen its usage expand to
`
`other asset classes.
`
`29. As I noted above, TT’s software and MD Trader is for professional
`
`users. This is reflected by the significant cost of the software, which for many
`
`years, going back to the time of the release of MD Trader, has been around $1,000
`
`per month per user.
`
`VI. COPYING
`
`30. The widespread success of MD Trader prompted rapid copying by
`
`other software vendors in the futures industry. In fact, within two years of MD
`
`Trader’s launch date, almost the entire industry of ISVs had copied the features
`
`and functionality of the MD Trader screen, and specifically the features detailed
`
`above in Paragraph 12. Examples of some of these ISVs included Pats and Easy
`
`Screen. I also recall several individuals from TT’s competitors specifically telling
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`me that they copied the MD Trader screen.
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`31. There are striking similarities between TT’s MD Trader and the
`
`trading screens of competitors which were launched after MD Trader. They all
`
`include the following features: a vertical price axis that did not move at times when
`
`the inside market changed; a dynamic display of market depth (the bids and asks)
`
`alongside the vertical price axis, such that the bids and asks would move up and
`
`down relative to the price axis; and single click order entry in an order entry region
`
`comprised of fixed locations that each corresponded with a price level along the
`
`price axis. Also, it was my experience that traders in the industry openly admitted
`
`to copying TT’s product.
`
`32. This copying was and continues to be detrimental to TT’s success.
`
`Competitors that likewise launched an MD Trader style screen (with features
`
`addressed above in Paragraph 31) often offered their software for significantly
`
`lower prices, thus causing price erosion and forcing TT to reduce the cost of MD
`
`Trader. Further, TT lost a significant amount of customers to other competitors
`
`that had copied the MD Trader screen.
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`33. And yet even with this ubiquitous copying, the trading industry at
`
`large still considers the MD Trader style screen (and the specific combination of
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`features described above in Paragraph 31) to be innovative and unprecedented.
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`VII. CONCLUDING STATEMENTS
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`34.
`
`In signing this declaration, I understand that the declaration will be
`
`filed as evidence in a contested case before the Patent Trial and Appeal Board of
`
`the United States Patent and Trademark Office. I acknowledge that I may be
`
`subject to cross-examination in this case and that cross-examination will take place
`
`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.
`
`35.
`
`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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`
`
`Date: January 19, 2017
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`
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`By:
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`Robbie McDonnell
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