BGC Partners, Inc. et al - [2017] APO 43

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
BGC Partners, Inc. et al [2017] APO 43

Patent Application: 2016203123

Title:SYSTEMS AND METHODS FOR ESTABLISHING FIRST ON THE FOLLOW TRADING PRIORITY IN ELECTRONIC TRADING SYSTEMS

Patent Applicant:                   BGC Partners, Inc., Michael Sweeting, Joseph Noviello and
  Howard W. Lutnick
Delegate:  Isaac Tan
Decision Date:  29 August 2017
Hearing Date:  2 June 2017 by written submissions

Catchwords: PATENTS - examiner objection – manner of manufacture – novelty – inventive step – electronic trading system – novelty and inventive step not considered – no patentable subject matter disclosed - application refused

Representation: Pizzeys Patent and Trade Mark Attorneys Pty Ltd

IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2016203123

Title:SYSTEMS AND METHODS FOR ESTABLISHING FIRST ON THE FOLLOW TRADING PRIORITY IN ELECTRONIC TRADING SYSTEMS

Patent Applicant:                   BGC Partners, Inc., Michael Sweeting, Joseph Noviello, and
  Howard W. Lutnick
Date of Decision:                   29 August 2017
DECISION
The invention as claimed in claims 1 – 36 is not a manner of manufacture.
I refuse the application.
REASONS FOR DECISION

The present opposition 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”).
Background
Patent application 2016203123 (the “present application”) was filed on 13 May 2016 in the name of BGC Partners, Inc., Michael Sweeting, Joseph Noviello, and Howard W. Lutnick (collectively the “Applicant”) and claims an earliest priority date of 9 January 2006. The application is one from a series of related applications 2013200036, 2010214769 and 2007204680 which have all lapsed as a result of a failure to gain acceptance in the prescribed time.
An examination report was issued for the present application on 3 April 2017. In the report, the examiner raised an objection on the ground of manner of manufacture, novelty and inventive step. The report also included the following observation:
“My report below includes objections that are equivalent to objections raised in the examination of the related parent application which is directed to the same or essentially the same subject matter. As there has now been several adverse reports in relation to this subject matter, the application will be referred to a Hearing Officer to consider whether to accept or refuse the application under s49 or to direct amendment under s107. If you wish to be heard on this matter, you have 1 month from the date of this report to request a hearing. Fee item 230 applies.
If you request a hearing you will be contacted regarding the relevant deadlines in due course. Hearings in relation to examination objections are normally by way of written submissions. If you disagree with the Hearing Officer’s decision you may appeal the decision to the Federal Court of Australia. “
The applicant requested to be heard and on 2 June 2017, filed submissions accompanied with an amended claim set consisting of 36 claims.
The specification
According to the specification[1], in one aspect of the invention, trading rules according to the invention relate to “first-on-the-follow” trading rules. These “first-on-the-follow” trading rules relate to the respective priority of participants following a transition from a first trading state to a second trading state. The specification describes a trading state as defining a set of rules or conditions that governs the interaction between participants. Transitioning from one trading state to a second trading state signifies transitioning from one set of rules or conditions to another set of rules or conditions.
[1] Specification as filed at paragraph [0088]
In order to obtain “first-on-the-follow” priority rights[2], a participant may need to be previously identified as the best bidder or best offeror at the conclusion of a previous trade state and satisfy a certain minimum order size requirement, are within a certain predetermined delta of the best bidder and the best offeror, respectively, or satisfy a combination of the minimum size order requirement and the predetermined delta restriction.
[2] Ibid at [0089]
Once a user satisfies the “first-on-the-follow” requirements, the user may have a preset[3] instruction to the system. For example, the user may reduce a bid by a predetermined increment or increase an offer by an increment in the second trading state thereby increasing or decreasing exposure.
[3] Ibid at [0092]
An exemplary system for implementing the present invention is shown in figure 2 reproduced below. It is worth noting that the system is not limited to a single workstation and could also be performed with the single computer network being connected to a plurality of workstations.
The claims as amended
Independent claim 1 and 7 as proposed is reproduced below with a strike-through the portions deleted by the amendment, and the portions added by the proposed amendment underlined:
Claim 1:
“A method for facilitating electronic trading over a network with interfaces of workstations, the method comprising:
transitioning by at least one computing device of an electronic trading system from a first trading state to a second trading state;
determining by the at least one computing device of the electronic trading system, from among orders pending at the conclusion of the first trading state, a best order,
wherein the best order is a best bid chosen as a result of being a last buyer at the conclusion of the first trading state ~~comprises an order having a best price from among the pending orders,~~ and
wherein the best order is associated with a participant;
determining by the at least one computing device of the electronic trading system that ~~a size of~~ the best order satisfies a price criterion with respect to a price of a trade made in the first trading state; ~~minimum size requirement;~~
based at least in part on (i) the participant having the best order and (ii) determining that the ~~size of the~~ price of the best order satisfies the price criterion with respect to a price of a trade made in the first trading state; ~~minimum size requirement~~, awarding by the at least one computing device to the participant a potential trading priority in the second trading state with respect to at least one contra order which includes an offer received in the second trading state;
receiving by the at least one computing device of the electronic trading system a contra order in the second trading state, wherein the contra order is received from an interface of a workstation coupled to the at least one computing device via a communications network;
based at least in part on awarding the participant with the potential trading priority, determining by the at least one computing device that the participant has a right to trade exclusively against the incoming contra order;
causing, by the at least one computing device of the electronic trading system, to display an indicator at a workstation of the participant associated with said best order;
determining by the at least one computing device of the electronic trading system ~~processor~~ that a different participant indicates a willingness to trade against the received contra order; and
based at least in part on (i) determining that the participant has the right to trade exclusively against the received contra order and (ii) determining that the different participant indicates willingness to trade against the received contra order, automatically executing by the at least one computing device, on behalf of the participant, a trade against the received contra order.”
Claim 7:
“An apparatus for facilitating electronic trading over a network with interfaces of workstations, the apparatus comprising:
at least one processor of an electronic trading system; and
at least one memory device electronically coupled to the at least one processor of the electronic trading system, wherein the at least one memory device stores software which, when executed by the at least one processor of the electronic trading system, directs the at least one processor of the electronic trading system to:
transition an electronic trading system from a first trading state to a second trading state;
determine, from among orders pending at a conclusion of the first trading state, a best order,
wherein the best order comprises order is a best bid chosen as a result of being the last buyer at the conclusion of the first trading state ~~an order having a best price from among the pending orders~~, and
wherein the best order is associated with a participant;
determine that a size of the best order satisfies a price criterion with respect to a price of a trade made in the first trading state ~~minimum size requirement;~~
based at least in part on (i) the participant having the best order and (ii) determining that the ~~size of the~~ best order satisfies the price criterion with respect to a price of a trade made in the first trading state ~~minimum size requirement,~~ award to the participant for a potential trading priority in the second trading state with respect to at least one contra order which includes an offer, received in the second trading state;
receive a contra order in the second trading state, wherein the apparatus is operable to receive the contra order from an interface of a workstation via a communications network;
based at least in part on awarding the participant with the potential trading priority, determine that the participant has a right to trade exclusively against the received contra order;
cause to display an indicator at a workstation of the participant associated with said best order;
determine that a different participant indicates a willingness to trade against received contra order; and
based at least in part on (i) determining that the participant has the right to trade exclusively against the received contra order and (ii) determining that the different participant indicates the willingness to trade against the received contra order, automatically execute, on behalf of the participant, a trade against the received contra order.”
No amendments have been proposed for dependent claims 2 – 16 and 18 – 36.
I have reviewed the claims as proposed to be amended, and am satisfied that the amendments are allowable.
From the above, it is clear that the invention as claimed is directed towards the interaction and relationship between a first trading state and a second trading state. Any reference to the hardware components of the computer system is made in a general sense.
Outstanding objections
In the first examination report issued on 3 April 2017, the objections outstanding are that the claims as filed are not for a manner of manufacture, and that the claims are not novel and lack an inventive step.
According to the manner of manufacture objection raised by the examiner, the substance of the alleged invention was said to be directed towards a scheme for implementing trading rules and that the problem addressed by the present invention is that in certain known trading systems the availability of entered bids/offers may be restricted to certain participants based on certain trading rules.
Regarding novelty, the examiner refers to US 2004/0210512 A1 (Fraser et al.) 21 Oct 2004 (“Fraser”) and noted:
“… fig. 6 [622] discloses selecting a best order prior to entering a second state and paragraph 59 discloses a priority order being determined based on price and volume, a person skilled in the art when reading D1 at its publication date would have understood this relationship and would therefore have assumed that the best order of D1 was chosen with regard to price and volume as claimed in claims 1 and 7.
It is noted that fig. 6 of D1 does not explicitly disclose choosing the ‘best order’ but rather determines priority in a queue of orders. This inherently requires an element of ranking orders and therefore includes within its scope choosing the best order. In addition, D1 discloses providing exclusive trading rights to one trader (see e.g. para. 82) and therefore inherently the prioritised order would be given to the trader with the best offer. This is further reinforced by the fact that, surrounding the disclosures of providing exclusive trading rights in the second state, D1 does not teach any other method for selecting the best order. Therefore there would be no other logical technique for selecting the exclusive trade order.”
The law for Manner of Manufacture
According to section 18 of the Patent Act 1990;
(1) Subject to subsection (2), an invention is a patentable invention for the purpose 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.
Section 6 of the Statue of Monopolies provides as follows:
“Provided also and be it declared and enacted that any declaration before mentioned shall not extend to any letters patent and grants of privilege, for the term of 14 years or under hereafter to be made of the sole working or making of any manner of new manufacture within this realm to the true and first inventor and inventors of such manufactures which others, at the time of making such letters or grant, shall not use, so as also they be not contrary to the law, nor mischievous to the state, by raising prices of commodities at home or hurt of trade or generally inconvenient.”
In National Research Development Corp v Commissioner of Patents [1959] HCA 67; 102 CLR 252, the high court provided a definitive statement that[4]:
"The point is that 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."
[4] National Research Development Corp v Commissioner of Patents [1959] HCA 67 at [22]
Following on from this decision, there have been a number of cases concerning computer related invention. For example, in International Business Machines Corporation v Commissioner of Patents [1991] 22 IPR 417 the application was directed towards use of a mathematical formula in a computer to produce an improved curve image. In CCOM Pty Ltd v Jiejing Pty Ltd [1994] 28 IPR 481, a computer processing apparatus was used for assembling text in Chinese language characters. In both instances, the claimed subject matter was held to be patentable.
In Grant v Commissioner of Patents [2006] FCAFC 120, the Full Court stated[5]:
[5] Grant v Commissioner of Patents [2006] FCAFC 120 at [16]
“Patents have also been refused for methods of calculation, theoretical schemes, including business schemes and abstract plans, such as:
·systems for arrangement of known things, such as a plan relating to the layout of houses in a row or terrace so as to prevent overlooking (Re ESP’s Application (1944) 62 RP 87);
·an arrangement of buoys for navigational purposes (Re W’s Application (1914) 31 RPC 141);
·a system of business even though its implementation involved the use of a printed envelope with a particular arrangement of words (Re Johnson’s Application for a Patent (1901) 19 RPC 56 at 56); and
·a method of preventing the fraudulent re-use of sale book dockets and books used in that connection (Re Brown (1899) 5 ALR 81).”
and[6]
“It has long been accepted that "intellectual information", a mathematical algorithm, mere working directions and a scheme without effect are not patentable.”
[6] Ibid at [47]
There have been two recent decisions of the Full Court of the Federal Court on the patentability of computer implemented inventions. There are Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 (“Research Affiliates”) and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 (“RPL Central”).
In Research Affiliates, the Full Federal Court considered a computer implemented method for generating a financial index and identified a distinction “between the employment of an abstract idea or law of nature and the idea or law itself” and “between technological innovation which is patentable and a business innovation which is not”.
The Full Court stated[7]
“The determination whether the claimed invention is truly “an artificially created state of affairs” in satisfaction of NRDC is made not by some mechanistic application of the criterion of artificiality or physical effect, but by an understanding of the claimed invention itself. The invention is to be understood as a matter of substance and not merely as a matter of form.”
and[8]:
“In the context of the claim, the significance lies in the content of the data rather than any specific effect generated by the computer. The computer-implementation is an essential integer of the claimed process. That is, of course, important. It is of particular importance in the assessment of, for example, novelty and infringement. However, in examining whether a claimed invention is properly the subject of letters patent, it is necessary to look not only at the integers of that claimed invention but also at the substance of that invention.”
[7] Research Affiliates LLC v Commissioner of Patents at [2014] FCAFC 150 at [106]
[8] Ibid at [117]
More recently in RPL Central, the Full Federal Court considered a computer implemented method and system for automatic collection of evidence of skills and knowledge and concluded that the claimed invention was to a scheme or a business method that is not properly the subject of letters patent. In the above case the Full Court made several important observations which are pertinent in the present matter. It was stated[9]
“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. Where the claimed invention is to a computerised business method, the invention must lie in that computerisation. It is not a patentable invention simply to “put” a business method “into” a computer to implement the business method using the computer for its well- known and understood functions.”
[9] Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 at [96]
In determining whether an invention contains patentable subject matter, I note what the delegate in Aristocrat Technologies Australia Pty Limited [2016] APO 49 (“Aristocrat”) stated[10]:
[10] Aristocrat Technologies Australia Pty Limited [2016] APO 49 at [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.”

It is clear from the above decisions that in order for an invention to define patentable subject matter, what is claimed as a matter of substance needs to meet the requirements for manner of manufacture and in particular is not a mere scheme, abstract idea or mere information.
Submissions
The Applicant’s submissions are that:[11]
“The computing device involved in the present application is providing non-native functionality for facilitating transitioning of different trading states in an electronic trading system.”
and[12]
“The invention results in an improvement in the functioning of the computer, irrespective of the data being processed. The claims here do not pre-empt all ways of automatically executing a trade, but rather recite a specific implementation with specific features that limit the claim to a specific process. Moreover, we respectfully submit that an improvement in computer-related technology is not limited to improvements in the hardware of the computer but may also be claimed as a set of “rules”…that improve computer-related technology by allowing computer performance of a function not previously performable by a computer. The current invention explicitly recites a set of well-defined rules that are utilized in order to improve the functionality of a trading system. These rules explicitly narrow the claim and avoid the risk of pre-emption to all types of mechanism for executing trades.”
“The claims recite an invention that is both novel and inventive in view of the state of the art at the time of the invention and, specifically, recite an inventive concept. It follows that if the claimed invention did not exist at the time of filing and describes an inventive concept, the functions described within the currently amended claims were not previously performable by a computer. Thus, the currently amended claims are quite clearly directed to an “improvement in computer-related technology” that was not previously performable by a computer.”
[11] The Applicant’s Submission at [39]
[12] Ibid at [43]-[44]
Based on this, the applicant submits[13] that the substance of the inventive as presented in claim 1 “provides a technological solution for facilitating transitioning of different trading states in an electronic trading system, and is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”
[13] Ibid at [45]
Manner of Manufacture Considerations
In essence, the Applicant’s position is that just because a claim involves generic utilisation of well-known functions of a computer does not automatically imply that the claim as a whole is therefore not directed to a manner of manufacture. Furthermore, the Applicant submits that as the claims define an invention that is both novel and inventive in view of the prior art, it must follow that the invention results in an improvement in the functioning of the computer irrespective of the data being processed.
Section 18(1) of the Act stipulates that for a standard patent an invention is a patentable invention for the purposes of a standard patent if the invention, so far as claimed in any claimed:
“(a) is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies; and
(b) when compared with the prior art base as it existed before the priority date of that claim:
i.is novel; and
ii.involves an inventive step”
While I agree with the Applicant that it is possible for a software invention to be patentable, I do not agree that an invention is automatically patentable if it merely meets the requirements for both novelty and inventive step. Section 18(1) makes it clear that the question of whether an invention is a manner of manufacture is separate to the question of whether an invention is novel and involves an inventive step.
According to the specification[14]:
“It should be noted that in some embodiments of the invention, the first on the follow participant may be granted exclusive or semi-exclusive rights, depending on the rules of the trading system.”
and further[15]:
“It should be noted that first-on-the follow rights may obtain a particular advantage for the participant at least because these rights, in some embodiment of the invention, may entitle the participants to priority with respect to any incoming orders at the commencement of the second trading state.”
[14] Specification as filed at paragraph at [0088]
[15] Ibid at [0090]
The remainder of the specification describes various embodiments on how these first on the follow rights may be obtained.
For example[16]:
“With respect to yet another embodiment of the invention, hidden size –i.e., a portion of the order that is not shown to the rest of the participants, but, if acted upon, is tradable – may also count towards satisfying the minimum size requirement of the order either as the first on the follow order or the current order in the system.”
[16] Ibid at [0094]
In another aspect[17]:
“…the invention provides rules associated with a method that restricts all incoming orders to a selected number of traders. For example, the exclusive bidder or offeror preferably has an option to exclusively trade on an incoming order, although another participant is behind the exclusive bidder or offeror and has the ability to indicate a willingness to hit the incoming bid or lift the incoming order. In one rule according to the invention, the exclusive bidder or offeror may preferably set, or have set, his respective default position to trade on an incoming bid or offer when there is another participant who has indicated a willingness to hit the incoming bid or lift the incoming offer. Thus, the default position becomes a “take when (another party has indicated that he is willing …) taken” or “hit when (another party has indicated that he is willing …) hit.”
[17] Ibid at [0095]
However, regardless of the criteria or requirement in which a user is awarded exclusive or semi-exclusive rights, the claimed invention merely results in a financial benefit for the user.
Therefore I do not agree with the applicant that the substance of the invention could be said to be a technological solution for facilitating transitioning of different trading states in an electronic trading system. It is clear that the substance of the claimed invention is merely a business or financial scheme and is not patentable.
To the extent that the hardware components of the computer system may result in a technical contribution, I note that the only requirement is that said components must be suitable. For example (my emphasis added)[18]:
“…server 104 may be any suitable server, processor, computer, or data processing device, or combination of the same.”
“Computer network 103 may be any suitable computer network including the internet, an intranet, a wide-area network (WAN), a local-area network (LAN), a wireless network, a digital subscriber line (DSL) network, a frame relay network, an asynchronous transfer mode (ATM) network, a virtual private network (VPN), or any combination of the same.
“Workstations 101 may be personal computers, laptop computers, mainframe computers, dumb terminals, data displays, Internet browsers, Personal Digital Assistants (PDAs), two-way pagers, wireless terminals, portable telephones, programmed computers having memory, the programmed computer using the memory for implement trading models, etc., or any combination of the same”
“Back office clearing center 112 may be any suitable equipment, such as a computer, a laptop computer, a mainframe computer, etc., or any combination of the same, for causing transactions to be cleared through a clearinghouse and/or verifying the transactions are cleared through a clearinghouse … Communications link 110 may be any communications link suitable for communicating data between server 104 and back office clearing center 112, such as network links, dial-up links, wireless links, hard-wired links, etc.”
[18] Ibid at [0099]-[00103]
Regarding the trading system software[19]:
“Electronic trading system application 216 may preferably include application program interface 215, or alternatively, as described above, electronic trading system 216 may be resident in the memory of the server 104. In this embodiment, the electronic trading system may contain application program interface 215 as a discrete application from the electronic trading system application which may be included therein. The only distribution to the user may then be a Graphical User Interface which allows the user to interact with electronic trading system application 216 resident at server 104.”
[19] Ibid at [00104]
From the general nature of how the hardware and software components of the computer system are described, it is clear that the computer implementation is left to the skilled addressee. Therefore the system could not be said to involve some ingenuity or advance in computer technology, nor does it involve steps foreign to the normal use of a computer system.
The Applicant’s position on this point is that the trading rules as claimed were not previously performable by a computer. Therefore the act of programming said rules on a computer system would result in functions that were not previously performable by a computer resulting in an improvement in computer-related technology.
In Trading Technologies International, Inc [2017] APO 13, it was submitted that programming a computer results in improving the computer by granting it functionality it previously did not have. However I disagreed with this line of reasoning and stated[20]:
“The difficulty I have with this statement is that if I proceed on the basis that a computer system is automatically patentable if provided with functionality it previously did not have, then this would thereby extend to any computer system that is programmed in some manner regardless of how rudimentary said functionality may be. In order to utilise a computer system, said system would need to be initially programmed with software.”
[20] Trading Technologies International, Inc [2017] APO at [31]
As I concluded above, the substance of the claimed invention is a business or financial scheme and is not patentable. Although the particular scheme may be new, the requirement for a claim to be novel and inventive is independent from the requirement for the claimed invention to be a manner of manufacture.
I do not agree that programming a computer system to operate in a particular manner would automatically save a claimed invention that is already considered to lack a manner of manufacture.
It is well established that schemes are not patentable[21]. In RPL Central, the Full Court made it clear that[22]:
“It is not a patentable invention simply to “put” a business method “into” a computer to implement the business method using the computer for its well- known and understood functions.”
[21] Grant v Commissioner of Patents [2006] FCAFC 120, 69 IPR 221
[22] Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 at [96]
Consequently I am not satisfied that the present invention as claimed would qualify as being a manner of manufacture. This applies to all of the claims and I see no patentable subject matter within the present application that could be made the subject of a claim so as to result in that claim being for a manner or manufacture.
Novelty
The examiner objected that the claims 1, 4, 7, 10, 15 – 18, 23 – 26, 35 and 36 as filed are not novel and do not involve an inventive step in light of Fraser.
Although the claims as proposed to be amended were not considered during examination, in light of my conclusion in relation to manner of manufacture, it is not necessary for me to consider this ground.
Conclusion
I find that the claims as proposed to be amended are not directed towards a manner of manufacture. Additionally I see no patentable subject matter within the present application that could be made the subject of a claim so as to result in that claim being for a manner or manufacture.
I refuse the application.
Isaac Tan
Delegate of the Commissioner of Patents