Business method patent surprisingly survives judicial scrutiny

June 27, 2017
Patterson Thuente IP

Business method patents on software have had a tough time in the courts in recent years. But a recent ruling may now provide some hope for patent holders. The Federal Circuit Court of Appeals’ decision in Trading Technologies Int’l, Inc. v. CQG, Inc. marks a rare example of the court finding software to be patent-eligible. The ruling provides valuable guidance on just what it takes for these patents to withstand judicial scrutiny.

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Patents target trading

Trading Technologies International, Inc., owns two patents on a method and system for the electronic trading of stocks, bonds, futures, options and similar investment products. The patents are intended to address problems that arise when:

  • A trader attempts to enter an order at a particular price but misses that price because the market moved before the order was entered and executed, and
  • Trades are executed at different prices than intended due to rapid market movement.

The patented inventions are described as reducing the time required for a trader to place a trade on an exchange, thereby increasing the likelihood that the trader will have orders filled at desirable prices and quantities. The trading system includes a graphical user interface (GUI) that displays a security’s current bid and ask prices and quantities in the market. It enables a plurality of bids and asks and provides a static display of prices corresponding to the plurality of bids and asks. The system pairs orders with the static display and prevents orders from being entered at a changed price.

Trading Technologies sued CQG, Inc., for infringement of its patents. CQG asked the trial court to dismiss the case, asserting that the covered invention is a patent-ineligible abstract idea. The trial court denied the request, and CQG appealed.

Court buys in

The appeals court began its analysis by citing earlier precedential cases recognizing that specific technological modifications to solve a problem or improve the functioning of a known system typically produce patent-ineligible inventions. Ineligible patents generally lack steps or limitations specific to the solution of a problem or improvement in the functioning of technology.

Turning to Trading Technologies’ system, the court explained that, for some computer-implemented methods, software may be essential to conduct the contemplated improvements. A proposed new application or computer-implemented function that isn’t simply the generalized use of a computer to conduct a known or obvious process isn’t a patent-ineligible abstract idea. Instead, it represents an improvement to the capability of the system as a whole.

According to the court, there was no dispute that the system at issue improves the accuracy of trader transactions using a software-implemented program. And the GUI method “imparts a specific functionality” to a trading system that implements a solution to “a problem in the software arts.”

A caution

While the appeals court found that the patented method and system are patent-eligible, it cautioned that it wasn’t taking a stance on whether they satisfy any other statutory criteria of patentability. In other words, the patent could still be struck down for other reasons — for not being novel, nonobvious or adequately described.

Trading Technologies Int’l, Inc. v. CQG, Inc., No. 2016-1616, Jan. 18, 2017 (Fed. Cir.)