In Trading Technologies International, Inc. v. CQG, Inc. et al., [2016-1616] (January 18, 2017), the Court of Appeals for the Federal Circuit (CAFC) affirmed the district court’s holding of patent eligibility with regard to U.S. Patents 6,772,132 (“the ‘132 patent”) and 6,766,304 (“the ‘304 patent”).  While doing so, the CAFC relied on the specification (e.g., specifically identified problem(s) in the prior state of the art) of the contested patents.

Trading Technologies International, Inc. (“TT”) charged CQG, Inc. et al. (CQG) with infringement of the ‘132 and ‘304 patents, both of which share a common specification.  CGQ then moved for judgment as a matter of law (“JMOL”), asserting patent ineligibility of the subject matter.  The district court denied CQG’s motion and held that the subject matter is patent eligible under § 101 for two reasons:

1. The claims are not directed to an abstract idea
2. The claims recite an inventive concept

CQG appealed.

The ’132 and ’304 patents claim a method and system for the electronic trading of stocks, bonds, futures, options and similar products, and explain problems that arise when a trader attempts to enter an order at a particular price, but misses the price because the market moved before the order was entered and executed.  Specifically, the patents describe a trading system in which a graphical user interface “display[s] the market depth of a commodity traded in a market, including a dynamic display for a plurality of bids and for a plurality of asks in the market for the commodity and a static display of prices corresponding to the plurality of bids and asks” (emphasis added).

The CAFC reviewed the patent eligibility issue de novo and affirmed the district court’s holding of patent eligibility under the Alice two-step framework.

With regard to Alice Step 1, the District Court held that the challenged patents “solve problems of prior graphical user interface devices … in the context of computerized trading relating to speed, accuracy and usability” because “these patents are directed to improvements in existing graphical user interface devices that have no “pre-electronic trading analog,” and recite more than “‘setting, displaying, and selecting’ data or information that is visible on the [graphical user interface] device.”  In detail, the district court explained that “the challenged patents do not simply claim displaying information on a graphical user interface,” instead “[t]he claims require specific, structured graphical user interface paired with a prescribed functionality directly related to the graphical user interface’s structure that is addressed to and resolves a specifically identified problem in the prior state of the art.”

The CAFC agreed with the district court’s conclusion that the patented subject matter meets the eligibility standard of Alice Step 1, further stating “that the graphical user interface system of these two patents is not an idea that has long existed.”

Alternatively, the District Court determined that “the challenged claims recite an “inventive concept,” as required by Alice Step 2 as identifying “the static price index as an inventive concept that allows traders to more efficiently and accurately place trades using this electronic trading system.”  The court concluded that “the specific structure and concordant functionality of the graphical user interface are removed from abstract ideas,” as compared to conventional computer implementations of known procedures,” and thus provide an inventive concept as required by Alice Step 2.

The CAFC agreed with the district court’s conclusion with regard to Alice Step 2 without adding any further rationale.

In reaching its conclusion, the CAFC heavily relied on the specification, more specifically, the specifically identified problem in the prior state of the art described in the specification, to test Alice Step 1 as well as Alice Step 2.

The CAFC cited McRO, Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299, 1315 (Fed. Cir. 2016) and Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir.2016) as precedents supporting its instant holding of patent eligibility.  Although the CAFC did not specifically state, the McRO court also relied on the specification’s explanation of how the claimed rules enabled the automation of specific animation tasks that previously could not be automated when determining that the claims were directed to improvements in computer animation instead of an abstract idea.  The Enfish court also referred to the teaching of the specification to make a determination as to whether the claims are directed to an improvement in existing computer-related technology.

Under current U.S. patent practice, stating advantages, effects, or problems trying to solve in the specification is not generally encouraged because of concerns about possible narrow interpretation of claim terms.  In situations where the applicant anticipates patent eligibility issues, however, reciting “specifically identified problem(s) in the prior state of the art” that the invention is trying to solve would be beneficial to overcome potential future patent eligibility challenges because the CAFC is consistently relying on such contents in the specification to test the Alice framework for patent eligibility.