Applying the Alice Standard to Electronic Stock Trading by Maxey-Fisher, PLLC

On January 18, 2017, the Court of Appeals for the Federal Circuit affirmed the decision by the United States District Court for the Northern District of Illinois that two patents related to electronic stock trading contain patent eligible subject matter. These patents are owned by Trading Technologies International, Inc. and are directed toward reducing the time it takes for a trader to place an electronic trade. Specifically, the patents solve a problem where a trader attempts to enter a trade at a particular price, but they miss that price because the market had changed before the trade was entered and executed.

This holding is another guide post in a patent litigator’s understanding of the 2014 Supreme Court holding in Alice Corporation Pty. Ltd. v. CLS Bank International which turned patent-eligibility for software and business method patents upside-down. If you are unsure of the significance of Alice, the Court set out the framework for the patent-eligibility of patents that effected the validity of an enormous number of patents, overnight. The two-part test set out in Alice states that, a claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2), if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”

In the present case, the Court reviewed the two patents in view of the two-part Alice test. In holding the patents valid, the Court agreed with the District Court in stating that the patents “solve problems of prior graphical user interface devices…in the context of computerized trading [] relating to speed, accuracy and usability.” This improvement “recite[s] more than setting, displaying, and selecting data or information that is visible on the [graphical user interface] device.” For these reasons the Court concluded the subject matter of the patents were not abstract and therefore patent eligible under Step one of Alice.

Next, the Court looked to the improvement in a trader’s efficiency and accuracy in placing trades using the electronic trading system which, the Court stated, distinguishes “the routine or conventional use of computers or the Internet.” The Court pointed to the “specific structure and concordant functionality of the graphical user interface” as reasons the system is removed from being an abstract idea. According to the Court, this improvement in efficiency and accuracy on the part of the trader are the “inventive concept” necessary to meet Step 2 of Alice. Thus, the Court held Trading Technologies International, Inc.’s patents were valid.

This decision provides further guidance and additional examples that can help guide patent litigators to a better understanding of the elements necessary to have patent-eligible subject matter within various software and business method patents.


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