BGC Partners, Inc. - [2018] APO 27

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
BGC Partners, Inc. [2018] APO 27

Patent Application: 2016204442

Title:System for Automatically Distributing a Trading Order over a Range of Prices

Patent Applicant:                   BGC Partners, Inc.
Delegate:  Greg Powell
Decision Date:  23 April 2018
Hearing Date:  Written submissions filed on 6 October 2017

Catchwords: PATENTS – examiner’s objections – system and method for trading – business scheme – no technical contribution in implementation – divisional application filed – application refused.

Representation: Patent attorney for the applicant: Pizzeys Patent and Trade Mark Attorneys

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2016204442

Title:System for Automatically Distributing a Trading Order over a Range of Prices

Patent Applicant: BGC Partners, Inc.
Date of Decision: 23 April 2018
DECISION
The claimed invention, as proposed to be amended is not for a manner of manufacture.
The applicant has filed a divisional application having the same specification. In the public interest, I refuse the application.
REASONS FOR DECISION
Background

BGC Partners, Inc (the applicant) filed patent application 2016204442 (the application) on 28 June 2016. The application is a divisional application based on parent application 2012247060 (the parent). That parent is, itself, a divisional of 2006251674 (the grandparent) which was based on a US application 11/133,767. The earliest claimed priority date is 20 May 2005.
The application was subjected to two examination reports dated 7 September 2016 and 2 August 2017. Following the second report, the applicant requested to be heard. The reports repeated a manner of manufacture objection that had been taken against the parent and grandparent.
In response to the request to be heard, the applicant was invited to provide written submissions. In response, the applicant provided submissions and also proposed amendments to the claims.
The examination of the present application is governed by the Patents Act 1990 (the Act) as amended by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (the Raising the Bar Act). Amendments to sections 7, 40 and 49 of the Act apply to the present case as a consequence of Schedule 1, items 55(1)(d) and 55(4)(a), and Schedule 6, item 133(7)(d) of the Raising the Bar Act – the application was filed after 15 April 2013.
Specification
The specification states that the invention relates generally to trading markets and, more particularly, to a system for automatically distributing a trading order over a range of prices.

The specification notes that electronic trading systems are widely accepted as a means to trade items. The specification notes financial instruments such as stocks, bonds, currency, futures, or the like as examples. The specification notes that, in some markets, electronic trading is the norm and there is very little, if any, human interaction. In such markets, where trading between computers may happen around the globe 24 hours a day, a “market maker” may supply bid-offer spreads to multiple trading systems to flood the general marketplace to make money from the very large volume of trades executed on their prices. The specification notes that the success of this strategy relies on, inter alia, trading at great frequency and ensuring that its price feed is provided to as many trading systems as possible.
When markets move quickly, in an environment where the market maker has its bid-offer price in many trading systems, the specification notes that it is important for the market maker to be protected against latency in any of those trading systems, while limiting their risk. To achieve this, the market maker may ask for a trade authorisation or confirmation from the market maker’s computer price feed rather than deliver a trade confirmation to the trading system as a fait accompli. This system gives some protection against system latency since it could be described as a “not held” trade order where the order is not immediately implemented, but an attempt to get the best possible price is made, with confirmation of the trade held up until the market maker has accepted it.
The specification states:
“Many trading systems facilitate the display of limit bids and offers, i.e., bids and offers at less aggressive prices than the bid(s) and offer(s) currently at the best price (or ‘touch price’). It is often preferable for a market maker to take advantage of such facility to increase the depth of the bids and offers it allows such trading systems to display on their behalf. The market maker's computer system may generate a series of bids and offers such that in a fast moving market they may trade at different levels in quick succession, as opposed to the market maker trading at the best (‘touch’) price first and then needing to recalculate a new (e.g., slightly worse) price each time before trading again, which may possibly result in declining trades from other trading systems during such recalculation, particularly in fast moving markets, such as the Foreign Exchange market. Also, by using a series of limit bids and offers a market maker may be able to show more size to a trading system but also decrease its risk profile from avoiding showing all of its bid and offer size at only the touch bid/offer prices. Increased size at the touch price may attract other traders to a trading system, but in a suddenly fast moving market it may expose the market maker or the trading system to an undesirable level of risk of being “picked off” by other better informed traders in the market place. In a slow moving market, a market maker may have their price distributed to as many markets as possible with the goal of being the best available bid and/or offer, thus resulting in higher trade volume. In a fast moving volatile market, such a strategy may often result in revenue losses. One dilemma a market maker faces is to both support the trading systems with bid and offers price in as much size as possible, but to not be traded upon simultaneously by too many of those trading systems in a suddenly fast moving market at prices that rapidly become disadvantageous to the market maker.
Where a market maker chooses to make prices available using a price feed as discussed above, it is typically important for all forms of systems latency to be minimized. The speed with which a market maker's computer systems can process trades may dictate the amount of trades it can accept over a short period of time, and ultimately may limit the number of trading systems the market maker may be able to allow their bid and offer prices to be used by. In addition, the speed with which a trading system can make a trade confirmation request to the market maker price feed computer may determine whether that trade is actually executed. In a fast moving market, a delay of only a few hundred milliseconds by the trading system may result in the denial of a trade confirmation request by the market maker price feed computer. Network transmission speed may often be a significant factor of the time taken to get a trade or trade request from a trading system to a market maker’s system, and when dealing in milliseconds, the geographical domicile of each computer system may create a network delay that is costly to minimize through higher bandwidth or faster computer networking equipment. Thus, any reduction in processing time for trading is advantageous. Often, with multiple trading systems all accessing the same market maker price feed computer, only the fastest trading system or Systems succeed.”
To address this concern, the specification describes an electronic trading system whereby a trading order intended for a trading exchange is turned into a group of distributed trading orders based at least on the trading order price and a set of preconfigured distribution parameters associated with the trading order. The generated group of distributed trading orders is automatically submitted to the trading exchange, possibly distributed over multiple price levels. The distribution parameters can be selected from a plurality of sets of parameters depending on the trading order.
The specification continues:
“One advantage of certain embodiments of the invention is that systems and methods are provided that technically reduce the volume of messages communicated over a network between various entities involved in a trading session. Trading systems that allow limit orders behind (worse than) the touch price may accept distinct order messages for each order at each price level. The present invention as disclosed allows for a customer (or trader) of a trading system (such as a market maker or other type of trader) to pre-configure parameters for the automatic distribution of an order submitted by the trader into multiple orders over a range of prices related to the touch price of the submitted order. The trader may send or make available to a trading system at least one of a bid or offer price and at least one of a bid or offer size, and any other parameters necessary to list a bid or offer on the trading system, which may change throughout a trading session according to market conditions. Instead of sending or making available a series of such bid or offer prices and sizes at different price levels, the trader may pre-configure an application to distribute the size of a submitted bid or offer size for display at different prices on the trading system. As the system that distributes the size of a submitted bid or offer size for display at different prices on the trading system may reside close to or even within the same computer system as the trading system, this may technically reduce the amount of messages communicated over the network from the customer (or trader) systems to the trading system through the trading session, while still maximizing the liquidity made available to the trading system at different price levels.”
The specification further states:
“In addition, in some embodiments, in order to protect the trader against adverse market movements, where a series of trader orders are traded by the trading system, any subsequent regeneration of bid or offer size by the trader to replace size traded may be performed via the pre-configuring application to repopulate prices in order of price level, starting with less aggressive (worse) price levels and moving toward more aggressive price levels.
Another advantage is that the invention as disclosed allows a trader, such as a market maker or other type of trader, to efficiently populate a trading system with bids and offers in a risk efficient manner. In addition, the present invention may allow a trader to weight their risk on the buy side or sell side of a market. For example, if a market maker price feed computer creates too much of a long or short position in its attempt for increased trading at its own bid and offer, the operator may reduce or increase the sizes displayed by the system without adjusting the touch bid/offer price it is producing. In some situations, such reduction or increase of displayed sizes may be done automatically by the trader's systems.”
As such, rather than sending a series of bids and offers, which may be relatively time consuming and tedious, a trader can submit a single touch bid and/or offer price, and allow the system to “fill out the order book behind such touch bid and/or offer prices” according to preconfigured parameters for distributing the orders. The trader can be provided with the option of preconfiguring the parameters for distributing orders. Using the interface to pre-configure a computer application to distribute bids and/or offer sizes submitted by the trader at a single bid and/or offer price for display over a range of prices on the exchange is said to provide the technical advantage of reducing the volume of network messages being communicated during the trading session, while maximizing (or at least increasing) the liquidity made available to the trading exchange at different price levels.
Figure 1 disclosing the system is shown below:
The crux of the system lies in the generation of distribution orders 22A defined by the distribution parameters 32 (which may be stored in the order distribution application 18 and backed-up in the trader’s terminal 12).
A matrix showing example distribution parameters is shown in figure 2:
Parameters can be what is being traded 100, the particular time zone the trade is to happen in 102, a total bid size and a total offer size 104 (100 million and 100 million in this example). For bids, parameters can be bid price levels for distributing the orders received from the trader 106, for each of the bid price levels, an indicated price offset 108 (the numbers define the price of the level relative to the submitted bid price), the size of the distributed bid orders for each level 110 (30 million, 35 million, 25 million, 10 million for a received bid order of size 100 million in this example). Equivalent parameters (114, 116, 118) can also be used for offers. These parameters can be varied to suit circumstances. For example, while the above parameters were proposed for trading for London time, different parameters may be set where the trade is to be made in a different time zone (e.g. Asia or the US).
Finally, figure 4 shows the process of the invention:
The specification states:
“The invention as disclosed allows a trader (such as a market maker or other trader) to efficiently populate a trading system with bids and offers in a risk efficient manner.”
The specification (as proposed to be amended) comprises 18 claims. Claim 1 is a method claim based on figure 4. There are two other claims for an apparatus and a means storing instructions, both of which are limited to performing the method of at least claim 1. Claim 1 is reproduced below, including the proposed amendments shown in underlining and strikethrough. It is not necessary to reproduce the other claims as they define further, non-technical refinements of these steps and, assuming claim 1 to not meet the requirements for manner of manufacture, will rise and fall with claim 1:
1. A method ~~for facilitating~~ of improving the efficiency of an electronic trading ~~with interfaces of computing device~~networks, the method comprising:
receiving, by at least one processor of a computing device of an electronic trading system, from an interface of a computing device of a particular trader, data representing a trading order for a particular instrument intended for an electronic trading exchange, the trading order having an associated price;
identifying, by the at least one processor of the computing device of the electronic trading system, from a plurality of sets of pre-configured distribution parameters a particular set of distribution parameters for processing the trading order;
responsive to receiving the trading order, automatically generating, by the at least one processor of the computing device of the electronic trading system, data representing a group of distributed trading orders for the instrument distributed over multiple price levels based at least on the trading order price and the identified set of distribution parameters associated with the trading order, each order of the group of distributed trading orders having a respective price that is different from the price of every other order in the group of distributed trading orders, in which each of the group of distributed trading orders comprises a same side as the trading order such that the group of distributed trading orders comprise buy orders if the trading order comprises a buy order and the group of distributed trading orders comprise sell orders if the trading order comprises a sell order, in which the group of distributed trading orders are generated simultaneously; and
automatically submitting, by the at least one processor of the computing device of the electronic trading system, the data representing the generated group of distributed trading orders to an interface of a computing device of the electronic trading exchange for the particular instrument instead of the trading order;
determining a size for each of the group of distributed trading orders based at least on the identified set of distribution parameters;
receiving one or more trade notifications indicating one or more trades between one or more particular ones of the group of distributed trading orders and one or more contra trading orders;
communicating a single executed trade notification to the particular trader indicating details of the one or more trades between the one or more particular distributed trading orders and the one or more contra trading orders;
the one or more trades include multiple trades between multiple particular distributed trading orders at multiple prices and one or more contra trading orders;
the method further includes determining an average trade price for the multiple trades based at least on the price and size of each of the traded multiple particular distributed trading orders; and
the single executed trade notification communicated to the particular trader indicates the average trade price.
Allowability of the amendments
The proposed amendments add features to the claims that do not extend beyond the specification as filed. Consequently the proposed amendments comply with s 102(1) and so this decision is being made on the basis of the proposed amendments.
The examiner’s objection
The examiner has objected that the present application is not for a manner of manufacture. The objection reads as follows (italics in original):
“Objection 1 of the previous report is maintained. Claims 1-20 do not define a manner of manufacture within the meaning of Section 18(1)(a) of the Patents Act 1990.
Regarding the patentability of the present claims, the Applicant has submitted:
‘The claimed invention solves a technical problem within the computer, and improves the computer functionality itself. The computing device involved in the present application is providing non-native functionality for facilitating electronic trading with interfaces of computing devices.
The invention provides the technical advantage of reducing the volume of messages communicated over a network between various entities involved in a trading session. This increases the efficiency of the system as a whole by limiting unnecessary data traffic. Prior art trading systems that allow limit orders behind the touch price generally accept distinct order messages for each order at each price level, result in a large amount of data traffic. The present invention employs pre-configured distribution parameters for the automatic distribution of an order submitted by a trader into multiple orders over a range of prices related to the touch price of the submitted order. Responsive to receiving the trading order, the invention automatically generates, by the at least one processor of the computing device of the electronic trading system, data representing a group of distributed trading orders for the instrument distributed over multiple price levels based at least on the trading order price and the identified set of distribution parameters associated with the trading order. As a result, this reduces the amount of messages communicated over the network from the customer (or trader) systems to the trading system through the trading session.
This is clearly an improvement in the functionality of a computing device, and is far from an abstract idea or scheme as alleged by the Examiner. We respectfully submit that an increase in processing efficiency quashes any notion that the claims are directed toward an abstract idea. Furthermore, there is no doubt that the computer is inextricably linked with the invention itself. That is, the computer is not simply incidental to the effect or advantage produced, as the magnitude of the task performed by the invention, and the express terms of the claims, demonstrates that the computing apparatus is an essential part of the invention. The “distributing of trading orders” is neither the centre of novelty of the invention, nor sufficient to facilitate the receiving, generating and automatic submitting of data.’
However I do not accept that the presently claimed arrangement results in an improvement to the involved computer systems as asserted by the Applicant. The Applicant has asserted that the present method improves the functionality of the computer itself by reducing the volume of messages transmitted over a network. However it is apparent that the alleged reduction in the volume of messages is merely a by-product of the particular rules implemented in the business scheme, and therefore merely stems from the particular business logic employed, and not to any improvement in the efficiency of the network itself. Any reduction in the volume of the network traffic results from the business rules of the claim which dictate transmitting a particular set of trading orders, rather than an allegedly higher number of prior art trading orders. Therefore any reduction in network traffic simply results from the business rules implemented in the scheme, which essentially amounts to a simple decision to utilise the network to a lesser extent. It cannot be said that deciding to utilise a network less has thereby increased the efficiency of that network. This is analogous to claiming to have increased the efficiency of a telephone by deciding to make fewer or shorter calls. In this analogy the telephone continues to operate as usual, while only the utilisation of the telephone has changed. The same can be said of the network in the present invention. Although the Applicant may have decided to transmit less information via the network, the network itself, and all other involved computer systems, continue to operate in the normal way, while only the extent of the utilisation of these elements has changed. Therefore it is apparent from a reading of the specification as a whole that the computer is being utilised for its conventional properties in order to merely carry out the steps of the scheme, as discussed in Commissioner of Patents v RPL Central Pty Ltd (‘RPL’) [2015] FCAFC 177 at [104]:
‘This alone cannot render the claimed invention patentable if it involves simply the speed of processing and the creation of information for which computers are routinely used. In those circumstances, the claimed invention is still to the business method itself. A computer-implemented business method can be patentable where the invention lies in the way in which the method is carried out in the computer. This necessitates some ingenuity in the way in which the computer is utilised (Research Affiliates).’
It is apparent that it cannot be said that the present claims contain the requisite ingenuity in the way in which the computer is utilised as understood from RPL.
Consequently claims 1-20 do not define a manner of manufacture.”
The law

With respect to manner of manufacture, subsection 18(1) of the Patents Act 1990 states:
Subject to subsection (2), an invention is a patentable invention for the purposes of a standard patent if the invention, so far as claimed in any claim:
(a) is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies;…
In National Research Development Corporation v Commissioner of Patents [1959] HCA 67, (1959) 102 CLR 252 (“NRDC”), the High Court provided a statement of the law in respect to manner of manufacture. At page 275, “… a process, to fall within the limits of patentability which the context of the Statute of Monopolies has supplied, must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art …- that its value to the country is in the field of economic endeavour”. In discussing the “vendible product” proposition put forward by Morton J in Re G.E.C’s Application, (1942) 60 RPC 1, the High Court in NRDC upheld the validity of a patent for the use of previously unknown properties of a known chemical to effect a new purpose. At page 277:
“The effect produced by the appellant’s method exhibits the two essential qualities upon which ‘product’ and ‘vendible’ seem designed to insist. It is a ‘product’ because it consists in an artificially created state of affairs, discernible by observing over a period the growth of weeds and crops respectively on sown land on which the method has been put into practice. And the significance of the product is economic; for it provides a remarkable advantage … for one of the most elemental activities by which man has served his material needs, the cultivation of the soil for the production of its fruits.”
The High Court though was not laying down a precise formulation that can be applied unthinkingly. In D’Arcy v Myriad Genetics Inc [2015] HCA 35, at [23] (“Myriad”):
“This Court in NRDC did not prescribe a well-defined pathway for the development of the concept of ‘manner of manufacture’ in its application to unimagined technologies with unimagined characteristics and implications. Rather, it authorised a case-by-case methodology.”
That case-by-case approach must have regard to the substance of the claimed invention, not simply the form of the claim. The point was made succinctly in the Myriad case by Gageler and Nettle JJ. At [144]:
“Whatever words have been used, the matter must be looked at as one of substance and effect must be given to the true nature of the claim.”
In Research Affiliates LLC v Commissioner of Patents [2013] FCA 71 Emmett J, in seeking to apply the NRDC test, stated at [22] that (with my emphasis in bold):
“For a method to be patentable, it must produce a product in which a new and useful effect may be observed. In the case of computer programs, it is necessary to look to the application of the program to produce a practical and useful result, so that more than mere information is involved. The method of a claimed invention will not be patentable if it does not produce an artificial state of affairs, in the sense of a concrete, tangible, physical or observable effect. Even if there is not a physically observable end result, in the sense of a tangible product, a claimed invention that is a method may nevertheless be patentable if it applies the method in a physical device. In such a case, an artificial state of affairs is produced in the physical device by the claimed method. Thus, a physical effect, in the sense of a concrete effect or phenomenon or manifestation or transformation, is required. It is sufficient if there is a component that was physically affected or a change in state or information in part of a machine. They can be regarded as physical effects. However, if the claimed invention is a mere scheme, an abstract idea or mere information, it will not be patentable as there is no physical consequence (Grant v Commissioner of Patents (2006) 154 FCR 62 at 70-71).”
In Grant v Commissioner of Patents [2006] FCAFC 120; 154 FCR 62 Justices Heerey, Kiefel and Bennet stated at [29] and [30] (with my emphasis in bold):
“NRDC emphasised the need for the adaptability of the law of patents to cover technological developments. In NRDC the High Court looked to the application of the claimed method. That is similar to the approach of courts in the United States. A product of a method is something in which a new and useful effect may be observed. For claimed computer programs, the courts looked to the application of the program to produce a practical and useful result, so that more than ‘intellectual information’ was involved. CCOM provides a useful analysis of the development of patent law in this context. The underlying principle, developed from the Statute of Monopolies, that business, commercial and financial schemes, which are ‘intellectual information’ are not themselves properly the subject of letters patent, was maintained. As Gyles J concluded in Arrow Pharmaceuticals Ltd v Merck & Co Inc (2004) 213 ALR 182 at [87], cited by the Full Court in Merck at [23], a method that is in the nature of directions for use does not constitute an invention or a manner of manufacture. Neither in Merck, nor here, has some previously unrecognised property of an aspect of the method been discovered.
Contrary to Mr Grant’s submission, the method of his patent does not produce any artificial state of affairs, in the sense of a concrete, tangible, physical, or observable effect. It is quite different from the invention in Catuity, which was a method involving components such as smart cards and point of sale terminals, and produced tangible results in the writing of new information to the Behaviour file and the printing of the coupon (at [128]). While there was not a physically observable end result in the sense of a tangible product, the invention involved an application of an inventive method where part of the invention was the application and operation of the method in a physical device. Within the concept of NRDC an artificial state of affairs was produced, a state of affairs created by the application or effect of the method.”
In Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 it was stated at [94]:
“When the authorities in Australia prior to and including Grant are considered, a consistent approach emerges as to the relevance of:
·a distinction between a claim to a business scheme and claims to methods which in practice result in a new machine or process or an old machine giving a new and improved result – that is, a distinction between mere intellectual information and a method that affects the operation of an apparatus in a physical form (Grant at [18]);
·the fact that the claimed steps are foreign to the normal use of computers, such as the production of an improved curve image (IBM 2 at 225-226);
·the particular mode or manner of achieving an end result which is an artificially created state of affairs, such as the storage of data as to Chinese characters and retrieval of graphic representations to enable word processing (CCOM at 295);
·whether part of the invention is an inventive method which includes the application and operation in a physical device (Grant at [30]);
·the distinction drawn in Catuity, as explained in Grant (at [24]), between ‘a technological innovation which is patentable and a business innovation which is not’. In Catuity, Heerey J did not accept that a physically observable effect was necessarily required (at [128]) but the Full Court in Grant expressed the opinion that a physical effect in the sense of a concrete effect or phenomenon, or manifestation or transformation is required (at [32]).
·the fact that a physical effect is required does not make it sufficient to confer patentability;
·the fact that a method may be called a business method does not prevent it being properly the subject of letters patent (Grant at [26] citing Catuity at [125]-[126]);
·the fact that for claimed computer programs, the courts look to the application of the program to produce a practical and useful result, so that more than ‘intellectual information’ is involved (Grant at [29]). A method that is in the nature of directions for use does not constitute an invention or a manner of manufacture in the absence of some previously unrecognised property of an aspect of the method (Grant at [29]).”
In Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 (“RPL”), the Full Court of the Federal Court stated at [96] and [98]:
“A claimed invention must be examined to ascertain whether it is in substance a scheme or plan or whether it can broadly be described as an improvement in computer technology. The basis for the analysis starts with the fact that a business method, or mere scheme, is not, per se, patentable. The fact that it is a scheme or business method does not exclude it from properly being the subject of letters patent, but it must be more than that. There must be more than an abstract idea; it must involve the creation of an artificial state of affairs where the computer is integral to the invention, rather than a mere tool in which the invention is performed.
…
It is not a question of stating precise guidelines but of deciding, in each case, whether the claimed invention, as a matter of substance not form, is properly the subject of a patent”.
The Full Court of the Federal Court in RPL then detailed a number of considerations relevant to the determination and coming from earlier decisions of the Court. Summarising from [99] of RPL:
- It is necessary to ascertain whether the contribution to the claimed invention is technical in nature.
- One consideration is whether the invention solves a “technical” problem within the computer or outside the computer, or whether it results in an improvement in the functioning of the computer, irrespective of the data being processed.
- Does the claimed method merely require generic computer implementation?
- Is the computer merely the intermediary, configured to carry out the method using a computer readable medium containing program code for performing the method, but adding nothing to the substance of the idea?
In Research Affiliates LLC v Commissioner of Patents, [2014] FCAFC 150, the Full Federal Court noted similarities in approach between Australia, the United Kingdom (“UK”) and the United States (“US”). In particular, the UK consideration of the “necessary technical contribution”, in the context of the statutory exclusions existing in the UK, was of relevance to an analysis of a necessary technical or artificial effect under Australian law (see [36], [45]). It follows that the UK cases may provide assistance in the present case.
In Aerotel Ltd v Telco Holdings Ltd; Macrossan’s Application [2006] EWCA Civ 1371; [2007] RPC 7, the England and Wales Court of Appeal outlined a four-step “technical effect” approach in respect to the question of excluded subject matter under UK law. At [40]:
“(1) properly construe the claim
(2)   identify the actual contribution;
(3)   ask whether it falls solely within the excluded subject matter;
(4)   check whether the actual or alleged contribution is actually technical in nature.”
I also note, for the avoidance of doubt, it was stated in the recent decision in McCormick & Company, Incorporated [2017] APO 62 (at [54]):
“Aerotel … [is] entirely consistent with the approach of the High Court in Myriad, and provide a simple encapsulation of the principles in Myriad in the form of the three step approach.”
Discussion
It seems clear to me that it is the substance of the invention that must be considered when determining if an invention is directed to patentable subject matter. Once the substance of the invention is identified, it must then be determined whether it provides a technical contribution to the art.
I do not take the applicant to disagree with this position, rather they submitted (emphasis in original):
“… the system provides the technical advantage of reducing the volume of network messages being communicated during the trading session. The invention is therefore in the operation of the computer, or alternatively, the implementation by the computer to operate the method. This is a manner of manufacture, as noted by the Federal Court in Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 at [110].”
In this regard, the applicant submitted (emphasis in original):
“The Examiner’s contention that the claimed invention is directed to a mere scheme is incorrect, as the claims are directed to a method of improving the efficiency of an electronic trading network, and not merely a scheme ‘to utilise a network less’ as asserted by the Examiner.”
The applicant took issue with the examiner’s use of the analogy of a telephone network when the examiner claimed that the present invention was analogous to claiming an increase in the efficiency of telephone by deciding to make fewer or shorter calls. The applicant submitted that, in the present invention:
“the same number of trades are being performed in a more efficient manner, by reducing the volume of network messages being communicated during the trading session, and freeing up computing resources for other trades.”
It seems clear to me that the substance of the invention is what is shown in Figure 4 above. That is, the substance lies in reconfiguring (or configuring) an order received from a trader into a number of different distribution orders to be sent to the trading exchanges. The configuration of these orders is determined by a set of parameters that allow the trader to avoid the tedious task of preparing and sending a series of bids and offers while at the same time, allowing the trader to weight their risk to the buying or selling side of the market.
The applicant submitted that:
“The claimed invention addresses a problem that exists in technology itself, and improves electronic trading system efficiency itself by reducing network traffic and latency. This clearly results in an improvement in the functioning of the system, and is far from an abstract idea or scheme.”
It is certainly true that something which increases the speed of a computer could be said to likely involve a manner of manufacture. However, I do not take the specification as going that far. As far as I can understand it, and as noted by the applicant, the same number of trades is being made. They are, however, created by the system after receiving the order from the trader. Furthermore, in so far as latency is concerned, the invention does not appear to address latency within the network. Rather, it appears to be supplying strategies of ways to organise orders (in the sense of price and amount) to deal with risk in a system that inherently has latencies. In addition to what I have said at [7] et seq above, the specification says, at pages 10 and 16 respectively (my emphasis):
“Such arrangement may be described as the trading exchange 20 acquiring bid and offer prices from the trader's order price feed 26 on a ‘not held’ basis. Such system may afford the market maker some protection against latency in trading platform 16 or communications system 18, and also against a plurality of trading exchange 20 and/or trading platforms 16 all trying to trade on the same order 22 (e.g., bid or offer) simultaneously, which protection may be particularly important in a fast moving market.
…
Distribution parameters 32 may be configured, stored, and/or managed by order distribution application 18. In addition, various distribution parameters 32 may be configured and/or managed by a trader 14 using a distribution management interface application 40, such that the trader 14 may configure its settings as desired, such as in accordance with the available trading size limits that may be set, desired aggressiveness, desired risk level, latency, and/or other characteristics associated with that trader 14. Thus, distribution parameters 32 may be configured completely automatically (e.g., by order distribution application 18), manually by a trader 14 using distribution management interface application 40, or any combination thereof.”
As such, while latency is something that affects electronic trading platforms (since every piece of technology has limitations), I take the present invention to be a scheme that, within the confines of the latency that already exists in the network, generates trading orders that minimise the risks that are associated with fast- (or slow-) moving markets given this latency. Minimising trading risks within the constraints and limitations of a network by using a set of rules is a business improvement. It is not, as the amended claim seeks to define, a scheme that improves the efficiency of a trading network as a whole (which could be seen as a technological improvement). Rather, it is a scheme directed to the placing of orders and subsequent tracking of price which results in using the existing network in way that reduces exposure to undesirable trading results. This improves the business outcome using the same network. It does not, as noted by the examiner, result in the network itself running better. While I do note, as quoted above, the specification states that there is a reduction is message volume communicated over the network, it is not clear to me at all, and the specification is unhelpfully silent and/or indefinite in its language, that this solves any latency issues within the network when trading.
It follows that I agree with the examiner’s contention that the claimed invention is directed to a mere scheme with no improvement in technology. Any improvement in risk exposure and/or amount of money made arises from the particular rules implemented and business parameters employed in the scheme. There does not appear, on the face of the specification, any improvement in the efficiency of the network itself.
The applicant submitted (at [19] to [24] of its submissions – emphasis in original):
“The Examiner’s assertion that ‘the computer is being utilised for its conventional properties in order to merely carry out the steps of the scheme’ is also incorrect. Presumably these ‘conventional properties’ include low-level functions such as ‘receiving’, ‘generating’ and ‘storing’, which are common to all computer-implemented methods. Based on this reasoning, no computer-implemented method would ever be considered a manner of manufacture, as the computer would merely be implementing a program or ‘scheme’ that it is inherently capable running. This approach was specifically rejected in RPL at [108], which states:
‘On the other hand, the fact that a computer has been programmed to carry out a process does not invalidate an invention because, if that were the case, no computer method, indeed no computer development would be patentable.’
As clearly stated in Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 at [104]:
‘A computer-implemented business method can be patentable where the invention lies in the way in which the method is carried out in the computer. This necessitates some ingenuity in the way in which the computer is utilised.’
Thus, it is clear that an improvement in hardware is not a necessary requirement for a manner of manufacture; rather, the improvement can be in the way in which the hardware is utilised. We respectfully submit that claim 1, which is directed to an improved combination of hardware operating in a non-conventional manner, clearly satisfies this requirement. Claim 1 is not merely claiming the idea of a solution or outcome, but rather provides a specific solution for facilitating transactions using the improved combination of hardware.
At the very least, the claimed invention is clearly an application of a method where part of the method of the invention is the application and operation of the method in a physical device. As noted in RPL at [101], this is a manner of manufacture. To adopt the approach taken by the Examiner would mean that no computer that has been programmed to carry out a process would be patentable unless improved hardware was involved.
Accordingly, we respectfully submit that the ingenuity of the inventors is not only in the combination of hardware but also the operation of the ‘computer’. The invention solves a technical problem (how to improve the efficiency of a trading network) which results in improvement in the functioning of the computer, irrespective of the data being processed.
The increase in network efficiency incontrovertibly produces a practical and useful result, which can be broadly described as an improvement in computer technology. As noted above, in an electronic trading system it is typically important for all forms of systems latency to be minimized, and the invention achieves the goal of improved efficiency by reducing the volume of network messages being communicated during the trading session. Accordingly, there is ingenuity in the way in which the computer is utilised.”

From the specification it seems that, in the prior art, the trader’s computer sent multiple orders to a system which then generated a set of orders to pass to the exchange. This arrangement resulted in relatively high traffic between the trader’s computer and the system. In the present invention the traffic from the trader’s computer is reduced to a single (or so) order, but, as that order then needs to be converted into the multiple orders usually sent to the exchange, the exposure to risk arising from a possible loss of fidelity in converting from just one (or so) order to multiple orders to be sent to the exchange has to be minimised. The substance of the invention claimed is in the way that order is converted into multiple orders to minimise this risk. I have noted above that I do not believe it is appropriate that this invention be labelled as something which improves network latency. The examiner is also correct that the computer(s) used in the present invention does nothing more than receive, generate, send, and determine. While I accept what was said at [108] of RPL, the quote from [104] of RPL provided by the applicant is also instructive. That is, if there is “some ingenuity in the way in which the computer is utilised”, then a computer-implemented business method “can be patentable”. However, the converse must also apply – where there is no ingenuity in the way in which the computer is utilised, then a computer-implemented business method will not be patentable. I am being invited to conclude that, because the amount of some (but not all) messages is reduced, it must mean latency of the network is reduced. There is nothing to support this.
In this regard I would note the now oft-quoted paragraph [35] from Aristocrat Technologies Australia Pty Limited [2016] APO 49:
“35.I conclude that it is relevant to consider a range of matters. Without seeking to be exhaustive, these include:
·there must be more than an abstract idea, mere scheme or mere intellectual information;
·is the contribution of the claimed invention technical in nature;
·does the invention solve a technical problem within the computer or outside the computer;
·does the invention result in improvement in the functioning of the computer, irrespective of the data being processed;
·does the application of the method produce a practical and useful result;
·can it be broadly described as an improvement in computer technology;
·does the method merely require generic computer implementation;
·is the computer merely an intermediary or tool for performing the method while adding nothing of substance to the idea;
·is there ingenuity in the way in which the computer is utilised;
·does the invention involve steps that are foreign to the normal use of computers; and
·does the invention lie in the generation, presentation or arrangement of intellectual information.”
While it could be said that the present invention changes the operation of a physical device (i.e. a computer), the computer is presented in the specification as merely an intermediary or tool for performing the method, albeit a vital tool. There is no evidence in the specification of any ingenuity in the way the computer is utilised, in the sense that there were apparently no technical problems encountered in implementing the scheme of the invention. For example, if, after loading the program required to run the scheme, the computer could not interact with the trading platforms that exist in the world and, hence, would not be of any use, then solving that problem might be said to provide the necessary technical contribution that would need to be claimed to show a manner of manufacture. This is not the case. Neither is it the case, despite the amended claims asserting this, that the trading network as a whole is improved.
To put it another way in light of the wording found in Aerotel, the “actual contribution” of the invention lies in the scheme for generating a group of trading orders and this scheme is not technical in nature.
Conclusion
In my opinion, the substance of the invention is a mere scheme which does not provide a technical contribution to the art. Moreover, there is no technical effect in the implementation of the scheme that would make the requisite technical contribution. An invention that does not provide a technical contribution to the art cannot be an invention that is a manner of manufacture under s 18(1)(a).
It follows that the invention, both as defined in the claims and as described in the specification, is not a manner of manufacture. At present I cannot see how this state of affairs could be avoided by suitable amendment. While, given the vagueness of the specification, I may have been minded to provide the applicant the additional three months available pursuant to regulation 13.4(1)(g) to explain where in the specification evidence of improved computer function was described (beyond mere platitudes), I note that the applicant filed a divisional application (2017225041) on 6 September 2017 having an identical description to the present application and, furthermore, requested examination on 17 November 2017. Clearly the applicant was seeking to continue prosecution of the application regardless of my decision. In these circumstances, it seems appropriate to me to refuse the present application in the public interest to avoid any uncertainty and I do so.
Greg Powell
Delegate of the Commissioner of Patents