Trials@uspto.gov
`Tel: 571-272-7822
`
`
`Paper 17
`Entered: June 30, 2016
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_______________
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_______________
`
`
`
`CME GROUP, INC.,
`Petitioner,
`
`v.
`
`VOLATILITY PARTNERS, LLC,
`Patent Owner.
`_______________
`
`Case CBM2016-00024
`Patent RE43,435 E
`_______________
`
`
`
`Before MICHAEL W. KIM, TRENTON A. WARD,
`and KEVIN W. CHERRY, Administrative Patent Judges.
`
`WARD, Administrative Patent Judge.
`
`
`
`DECISION1
`Denying Institution of Covered Business Method Patent Review
`37 C.F.R. § 42.208
`
`
`
`
`
`1A sealed “Parties and Board Only” version of this “Decision Denying
`Institution of Covered Business Method Patent Review” (“Decision”) was
`issued on June 30, 2016. Upon notice, neither party elected to file a Motion
`to Seal portions of this decision. Accordingly, the seal is lifted and the June
`30, 2016 Decision is made public.
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`I. BACKGROUND
`CME Group, Inc. (“Petitioner”) filed a Petition (Paper 4, “Pet.”)
`seeking a covered business method patent review of claims 1–50 (the
`“challenged claims”) of U.S. Patent No. RE43,435 E (Ex. 1001, “the ’RE435
`patent”).2 Volatility Partners, LLC (“Patent Owner”) filed a Preliminary
`Response. Paper 10.3 We have jurisdiction under 35 U.S.C. § 324, which
`provides that a post-grant review may not be instituted “unless . . . the
`information presented in the petition . . . would demonstrate that it is more
`likely than not that at least 1 of the claims challenged in the petition is
`unpatentable.”
`After considering the Petition and Preliminary Response, and
`accompanying exhibits, we determine that Petitioner does not have standing
`to file a Petition for a covered business method review of the ’RE435 patent
`under § 18(a)(1)(B) of the Leahy-Smith America Invents Act (“AIA”)4 and
`37 C.F.R. § 42.302. Accordingly, we deny institution of a covered business
`method patent review of the challenged claims of the ’RE435 patent.
`
`
`II. ANALYSIS
`
`A. Standing
`Standing to file a covered business method patent review is a
`threshold issue. Under § 18(a)(1)(B) of the AIA,
`
`
`2 A redacted version of the Petition was also filed. Paper 1.
`3 Patent Owner also filed a public version of its Preliminary Response (Paper
`12, Attachment A).
`4 Pub. Law 112–29, 125 Stat. 284, 330 (Sept. 16, 2011).
`
`
`
`2
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`A person may not file a petition for a transitional proceeding with
`respect to a covered business method patent unless the person or
`the person’s real party in interest or privy has been sued for
`infringement of the patent or has been charged with infringement
`under that patent. Charged with infringement means a real and
`substantial controversy regarding infringement of a covered
`business method patent exists such that the petitioner would have
`standing to bring a declaratory judgment action in Federal court.
`37 C.F.R. § 42.302(a); see also 37 C.F.R. §§ 42.206, 42.304(a) (trial rules
`on standing in a covered business method review). A petition for covered
`business method review must set forth the petitioner’s grounds for standing.
`37 C.F.R. § 42.304(a). Rule 42.304(a) states it is Petitioner’s burden to
`“demonstrate that the patent for which review is sought is a covered business
`method patent, and that the petitioner meets the eligibility requirements
`of § 42.302.” Id.
`As the Office explained in comments to the Final Rules governing
`covered business method patent review:
`To establish standing, a petitioner, at a minimum, would be
`required to certify with explanation that the patent is a
`covered business method patent and that the petitioner
`meets the eligibility requirements of § 42.302. This
`requirement is to ensure that a party has standing to file the
`covered business method patent review and would help
`prevent spuriously instituted reviews. Facially improper
`standing is a basis for denying the petition without
`proceeding to the merits of the decision.
`Changes to Implement Inter Partes Review Proceedings, Post-Grant Review
`Proceedings, and Transitional Program for Covered Business Method
`Patents, 77 Fed. Reg. 48,680, 48,709 (Aug. 14, 2012) (Response to
`Comment 102; emphases added). Consequently, the petition must show that
`the petitioner meets the requirements of 37 C.F.R. § 42.302, and such “[a]
`showing can only be made through sufficient proof.” Id. (Response to
`
`
`
`3
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`Comment 106). For example, in Global Tel*Link Corp. v. Securus
`Technologies, Inc., Case CBM2014-00166, slip op. at 9 (PTAB Feb. 17,
`2015) (Paper 17), the Board denied institution of a covered business method
`review based on the determination that Petitioner’s assertion of standing in
`the Petition was not supported sufficiently by proof in the Petition.
`For the reasons discussed below, we determine that the Petition fails
`to proffer sufficient proof to support Petitioner’s standing to file the request
`for a covered business method review.
`
`B. The License Agreement
`U.S. Patent Number 7,328,184 (“the ’184 patent) issued on February
`5, 2008. Ex. 2001. On February 17, 2010 Patent Owner entered into a
`Patent License Agreement (“License Agreement”) for the ’184 patent with
`Chicago Mercantile Exchange, Inc. (“CMEI”), a party designated by
`Petitioner as a real party-in-interest in this proceeding. Prelim. Resp. 2;
`Pet. 1, 4; Ex. 1004.
`The License states that “Licensor [Patent Owner] hereby grants
`Licensee [CMEI] a nonexclusive license to (a) make, have made, use, sell,
`offer for sale and import products embodying or made in accordance with
`the inventions claimed in the VolContracts™ Patent. . .” Ex. 1004, 2
`(emphasis added). The License defines the term “VolContracts™ Patent” as
`follows: “WHEREAS, Krause was issued U.S. patent No. 7,328,184 Bl,
`entitled ‘FINANCIAL INSTRUMENTS, SYSTEM, AND EXCHANGES
`(FINANCIAL, STOCK, OPTION AND COMMODITY) BASED UPON
`REALIZED VOLATILITY,’ on February 5, 2008 (‘VolContracts™
`Patent’).” Id. at 1.
`After entering into the License Agreement for the ’184 patent, Patent
`
`
`
`4
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`Owner filed a reissue application on March 16, 2010. Ex. 1001. The reissue
`application ultimately issued as the ’RE435 patent on May 29, 2012.
`Ex. 1001.
`
`C. Petitioner’s Contentions
`Petitioner argues that as a result of the License Agreement between
`Petitioner and Patent Owner, and the current activities of the Petitioner in
`offering financial instruments based upon realized volatility, there is a real
`and substantial controversy such that Petitioner would have standing to raise
`a declaratory judgment of invalidity. Pet 5 (citing MedImmune, Inc. v.
`Genetech, Inc., 549 U.S. 118 (2007); Powertech Tech. Inc. v. Tessera, Inc.,
`660 F.3d 1301, 1309 (Fed. Cir. 2011)). Specifically, Petitioner argues that
`because the ’RE435 patent was filed more than two years after the issuance
`of the ’184 patent, the claims of the ’RE435 patent can contain only subject
`matter commensurate with or narrower than the scope of the ’184 patent.
`Pet. 3–4. Furthermore, Petitioner argues that because the License
`Agreement licenses “the inventions claimed in” the ’184 patent, all of the
`claims of the ’RE435 patent are within the scope of the License Agreement
`as they are within the scope of the inventions claimed in the ’184 patent. Id.
`Petitioner additionally argues that it currently offers for sale Realized
`Volatilty trades on currency derivatives, including two “EUR/USD Realized
`Volatility Futures Contracts.” Pet. 4 (citing Declaration of Julie Winkler
`(“Winkler Decl.”), ¶ 4).
`
`D. Patent Owner’s Contentions
`Patent Owner argues that Petitioner lacks standing because the mere
`existence of a license that the licensee is not practicing, and for which the
`licensor is not demanding royalties, is not sufficient to confer declaratory
`
`
`
`5
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`judgment standing or AIA standing to bring the instant petition. Prelim.
`Resp. 7 (citing Ocean Tomo, LLC v. Patent Ratings, LLC, Case CBM2015-
`00157 (PTAB Jan. 26, 2016) (Paper 17) (“Ocean Tomo”)). Patent Owner
`further argues that Petitioner lacks standing because Petitioner does not
`allege it has been sued for infringement, or that another dispute exists
`between the parties, or that there has been a specific charge of infringement
`related to the ’RE435 patent against a specific product. Prelim. Resp. 7.
`Relying upon a Declaration from the inventor of the ’RE435 patent, Robert
`Krause, Patent Owner makes the following representations:
`(1) Patent Owner alleges it has never charged Petitioner, nor its real
`party-in-interest, customers or privies with infringement of the ’RE435
`patent. Prelim. Resp. 8 (citing Ex. 2002 ¶ 8).
`(2) Patent Owner alleges that it is not aware of any conduct of
`Petitioner which could form the basis of a charge of infringement of the
`’RE435 patent. Prelim. Resp. 8 (citing Ex. 2002 ¶ 8).
`(3) Patent Owner alleges that it has never sued Petitioner, nor its real
`party-in-interest, customers, or privies for infringement of the ’RE435
`patent. Prelim. Resp. 8 (citing Ex. 2002 ¶ 7).
`(4) Patent Owner alleges that it is not aware of any instance of
`Petitioner practicing the method of the ’RE435 patent, and CMEI has not
`traded any volatility contract according to the ’RE435 patent since it issued
`in 2012. Prelim. Resp. 8 (citing Ex. 2002 ¶¶ 3–6).
`
`(5) Patent Owner alleges that it has not made any demand for payment
`of royalties of Petitioner or of any other party, whether pursuant to the
`License Agreement or otherwise. Prelim. Resp. 8–9 (citing Ex. 2002 ¶ 11).
`Based on the statements above, Patent Owner argues that no activities
`have occurred that could give rise to a charge of infringement; thus,
`
`
`
`6
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`Petitioner does not have standing to bring a declaratory judgment action or
`this Petition. Prelim. Resp. 9.
`
`E. Analysis of Standing
`Central to the dispute is the parties’ disagreement over the
`applicability of the Supreme Court’s holding in MedImmune to this case.
`Compare Pet. 3 (arguing MedImmune applies) with Prelim. Resp. 10–12
`(arguing MedImmune does not apply). In MedImmune, patent owner
`Genetech had a preexisting license with MedImmune for its pending patent
`application, and, once its application issued as a patent, Genetech sent a
`“letter expressing its belief that [MedImmune’s product] Syangis was
`covered by the [ ] patent and its expectation that petitioner would pay
`royalties.” MedImmune, 549 U.S. at 121. In finding that MedImmune could
`properly maintain a declaratory judgment action, the Supreme Court noted
`that if Genetech “were to prevail in a patent infringement action, petitioner
`[MedImmune] could be ordered to pay treble damages and attorney’s fees,
`and could be enjoined from selling Synagis, a product that has accounted for
`more than 80 percent of its revenue from sales since 1999.” Id. at 122. The
`Supreme Court noted that MedImmune was unwilling to risk such serious
`revenue consequences; thus, MedImmune paid royalties under protest while
`pursuing a declaratory judgment action. Id.
`In this case, unlike MedImmune, Patent Owner has not delivered a
`
`demand letter to Petitioner. See Prelim. Resp. 8–9; Ex. 2002 ¶¶ 9, 11.
`Furthermore, Patent Owner concedes that are “no actions have been taken
`that would warrant a charge of infringement.” Prelim. Resp. 12 (citing Ex.
`2002 ¶¶ 6–12). Additionally, unlike MedImmune, Petitioner has not made
`any royalty payments under protest. See Prelim. Resp. 8–9; Ex. 2002 ¶¶ 9,
`
`
`
`7
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`11. In fact, Patent Owner states that there are “no existing payment
`obligations arising from the use of the ’[RE]435 Patent.” Prelim. Resp. 12–
`13 (citing Ex. 2002 ¶¶ 6–12). Patent Owner goes on to concede that “neither
`Petitioner nor CMEI is trading any product for sale that would fall within the
`scope of the ’[RE]435 Patent, and Patent Owner is not aware of any plans to
`operate under the ’[RE]435 Patent.” Prelim. Resp. 12–13 (citing Ex. 2001
`¶¶ 5–8).
`In Powertech, the additional case relied upon by Petitioner as
`
`supporting declaratory judgment jurisdiction, the Federal Circuit noted that
`there must be an “adverse legal interest” for there to be declaratory judgment
`jurisdiction. Powertech, 660 F.3d at 1306 (citing Arris Grp. Inc. v. British
`Telecomms. PLC, 639 F.3d 1368, 1374 (Fed. Cir. 2011)). “This ‘adverse
`legal interest’ required a ‘dispute as to a legal right—for example, an
`underlying legal cause of action that the declaratory defendant could have
`brought or threatened to bring[,]’ and ‘[i]n the absence of such a legal
`controversy . . ., a mere adverse economic interest is insufficient to create
`declaratory judgment jurisdiction.’” Id. (citing Arris Grp., 639 F.3d at 1374–
`75).
`
`Here, we determine that Petitioner fails to sufficiently establish an
`“adverse legal interest” by failing to identify an underlying cause of action
`that Patent Owner could have brought or threatened to bring. First,
`Petitioner has not sufficiently established that the License Agreement covers
`the ’RE435 patent. The License Agreement licenses “the inventions claimed
`in the [’184 patent]” (Ex. 1004, 2). None of the claims in the original
`’184 patent was confirmed during the prosecution of the reissue application,
`as only claim 1 from the ’184 patent was maintained in the reissue
`application, and this claim was amended during the prosecution of the
`
`
`
`8
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`reissue application. See Ex. 1003, 26–40, 176–182, 189–203. Therefore,
`Petitioner fails to establish sufficiently how any of “the inventions claimed
`in the ’184 patent” are currently claimed in the ’RE435 patent.
`Insofar as Petitioner is asserting that a claim in the ’RE435, whose
`scope is narrower than a claim in the ’184 patent, is the same as “the
`inventions claimed in the ’184 patent,” Petitioner has not cited sufficient
`authority or provided sufficient analysis in support of its assertion. Indeed,
`if anything, we discern the opposite, as sections 251 and 252 state,
`respectively, that “[w]henever any patent is, through error, deemed wholly
`or partly inoperative or invalid, . . . the Director shall, on the surrender of
`such patent . . . , reissue the patent for the invention disclosed in the original
`patent” and “[t]he surrender of the original patent shall take effect upon the
`issue of the reissued patent.” 35 U.S.C. §§ 251, 252 (emphasis added). The
`new reissue patent is a distinct property right that “does not simply replace
`an original patent nunc pro tunc.” Intel Corp. v. Negotiated Data Sols., Inc.,
`703 F.3d 1360, 1364 (Fed. Cir. 2012) (citing Spectronics Corp. v. H.B.
`Fuller Co., 940 F.2d 631, 637–38 (Fed. Cir. 1991)). To that end, we need
`not decide in this case the precise relationship between inventions in original
`patents and reissue patents, and original claims compared to amended or
`new claims, or both. It is enough, here, that Petitioner has not provided
`sufficient analysis, in the face of seemingly unfavorable case law, in order to
`meet its burden.
`Petitioner also fails to establish sufficiently a reasonable apprehension
`of a charge of infringement based upon activities that would allegedly
`infringe the claims of the ’RE435 patent. As to its activities, Petitioner
`offers only a short statement from its Declarant Ms. Winkler that the “CME
`group currently offers one month and three month ‘EUR/USD Realized
`
`
`
`9
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`Volatility Futures Contracts,’” Pet. 4 (citing Ex. 1005 ¶ 4). Neither
`Petitioner nor its Declarant offers any information about these contracts, the
`characteristics of the contracts, how they operate, any comparison of these
`products to the claims of the ’RE435 patent, or any basis as to why
`Petitioner might reasonably apprehend a charge of infringement of the
`’RE435 patent in view of Petitioner’s offer for sale of these products. See
`Pet. 4–5; Ex. 1005 ¶¶ 1–4. With no information about the characteristics of
`its two futures contracts, Petitioner’s allegations amount to nothing more
`than a mere invitation to the Board to speculate about whether these
`products relate to the claims of the ’RE435 patent. Accordingly, we are not
`persuaded that Petitioner has established sufficiently an adverse legal
`interest in relation to the challenged patent.
`Patent Owner argues that the Board’s decision in Ocean Tomo is
`instructive here, as the Board considered the existence of a licensing
`agreement and ongoing litigation regarding the license agreement, but
`ultimately determined the Petitioner lacked standing to bring a covered
`business method review petition. Prelim. Resp. 10 (citing Ocean Tomo,
`CBM2015-00157, (Paper 17)). In Ocean Tomo, the Board determined that
`despite the active litigation between the parties, the Petitioner did not have
`sufficient standing to bring its covered business methods patent review
`request because (1) there was no evidence that patent owner sued petitioner
`for infringement of the challenged patent, (2) petitioner failed to demonstrate
`sufficiently a charge by patent owner of petitioner’s infringement of the
`challenged patent, and (3) the petitioner’s cause of action for declaratory
`judgment of non-breach of contract did not establish a real and substantial
`controversy for purposes of covered business method review standing. See
`Ocean Tomo, slip. op. at 8–10. Similarly, in this matter, Petitioner fails to
`
`
`
`10
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`establish at least that Patent Owner has sued Petitioner for infringement of
`the ’RE435 patent, Petitioner fails to establish sufficiently a charge by Patent
`Owner of infringement of the ’RE435 patent, and Petitioner fails to establish
`that the License Agreement provides the basis for a real and substantial
`controversy over the ’RE435 patent.
`In accordance with 37 C.F.R. § 42.302(a), the Petitioner bears the
`burden of establishing “petitioner has been sued for infringement of the
`patent or has been charged with infringement under that patent.” Based on
`the record before us, and for purposes of this Decision, we determine the
`information presented in the Petition and supporting evidence does not
`establish that Petitioner had standing to file the Petition.
`
`
`III. CONCLUSION
`Petitioner has not established standing for filing a petition for covered
`business method patent review.
`
`
`IV. ORDER
`In consideration of the foregoing, it is hereby:
`ORDERED that the Petition is denied; and
`FURTHER ORDERED that no covered business method patent
`review is instituted.
`
`11
`
`
`
`
`
`

`

`
`CBM2016-00024
`Patent RE43,435 E
`PETITIONER:
`
`Michael Hawes
`Brad Bowling
`Ali Dhanani
`BAKER BOTTS LLP
`michael.hawes@bakerbotts.com
`brad.bowling@bakerbotts.com
`ali.dhanani@bakerbotts.com.
`
`
`
`PATENT OWNER:
`
`David P. Lentini
`david.lentini@gmail.com
`
`Bryan K. Wheelock
`HARNESS, DICKEY & PIERCE, PLC
`bwheelock@hdp.com
`
`
`
`
`12
`
`