Trials@uspto.gov
`571-272-7822
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`
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`Paper 44
`Date: March 2, 2015
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`INTERNATIONAL SECURITIES EXCHANGE, LLC,
`Petitioner,
`
`v.
`
`CHICAGO BOARD OPTIONS EXCHANGE, INC.,
`Patent Owner.
`____________
`
`Case IPR2014-00098
`Patent 7,980,457 B2
`____________
`
`
`
`
`Before JUSTIN T. ARBES, RAMA G. ELLURU, and JAMES B. ARPIN,
`Administrative Patent Judges.
`
`ELLURU, Administrative Patent Judge.
`
`
`
`FINAL WRITTEN DECISION
`35 U.S.C. § 318(a) and 37 C.F.R. § 42.73
`
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`IPR2014-00098
`Patent 7,980,457 B2
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`BACKGROUND
`I.
`Petitioner, International Securities Exchange, LLC, filed a Petition (Paper 1,
`
`“Pet.”) requesting inter partes review of claims 1–7 of U.S. Patent No. 7,980,457
`B2 (Ex. 1001; “the ’457 patent”). Patent Owner, Chicago Board Options
`Exchange, Inc., filed a Preliminary Response opposing institution of review (Paper
`9; “Prelim. Resp.”). On May 22, 2014, we instituted an inter partes review of
`claim 1 of the ’457 patent (Paper 12; “Dec. on Inst.”).
`
`Subsequent to institution, Patent Owner filed a Patent Owner Response
`(Paper 26; “PO Resp.”), a Motion to Amend Claims (Paper 28, “Mot.”), and a
`Reply to Petitioner’s Opposition to the Motion to Amend Claims (Paper 35, “PO
`Reply”). Petitioner filed a Reply to Patent Owner’s Response (Paper 34; “Pet.
`Reply”) and an Opposition to Patent Owner’s Motion to Amend Claims (Paper 32;
`“Opp.”).
`We held an oral hearing on January 21, 2014, and a transcript of the hearing
`is included in the record (Paper 43; “Tr.”).
`We have jurisdiction under 35 U.S.C. § 6(c). This Final Written Decision is
`issued pursuant to 35 U.S.C. § 318(a) and 37 C.F.R. § 42.73.
`For the reasons that follow, we determine that Petitioner has not shown by a
`preponderance of the evidence that claim 1 of the ’457 patent is unpatentable based
`on the instituted ground in this inter partes review.
`A. The ʼ457 Patent
`The ’457 patent, titled “Automated Trading Exchange System Having
`
`Integrated Quote Risk Monitoring and Integrated Quote Modification Services,”
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`IPR2014-00098
`Patent 7,980,457 B2
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`issued on July 19, 2011, based on U.S. Patent Application 12/035,996 (“the ’966
`application”), filed February 22, 2008.1
`
`The ’457 patent relates to automated trading systems for option contracts
`(“options”). Ex. 1001, 1:15–19, Abstract. Specifically, the claimed invention is
`directed to systems for managing the risk of a maker of an options market in an
`automated trading system. Id. at 1:15–19.
`Options are traded publicly on exchanges. Id. at 1:24. Each option covers
`
`certain rights to buy or sell an underlying security at a fixed price for a specified
`period of time. Id. at 1:25–28. The potential loss to the buyer of an option is no
`greater than the initial premium paid for the option, regardless of the performance
`of the underlying security. Id. at 1:34–36. On the contrary, in exchange for the
`premium, the seller of the option (“the market-maker”) assumes the risk of being
`assigned the obligation to buy or sell the underlying security, according to the
`option terms, if the contract is exercised. Id. at 1:37–41. Thus, writing options
`may entail large risks to the market-maker. Id. at 1:41–42.
`Many option trading systems utilize an “open outcry” method. Id. at 1:50–
`
`51. In such systems, market-makers are required to make a two-sided market by
`providing an order and offer quote. Id. at 1:51–53. In a non-automated open
`outcry system, a market-maker communicates verbally with traders indicating their
`willingness to buy and sell various quantities of securities. Id. at 1:53–56.
`
`
`1 The ’996 application is a continuation of U.S. Patent Application No. 09/475,534
`(“the ’534 application), which issued as U.S. Patent No. 7,356,498 B2 (“the ’498
`patent”). U.S. Patent Application No. 13/178,289 (“the ’289 application”) is a
`continuation of the ’996 application and issued as U.S. Patent No. 8,266,044 B2
`(“the ’044 patent”). The ’457 patent is also the subject of CBM2013-00050. The
`’498 patent is the subject of CBM2013-00049 and IPR2014-00097. The ’044
`patent is the subject of CBM2013-00051. Final Written Decisions are entered in
`these cases concurrently with this Decision.
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`Because a market-maker in such systems has personal control over the types and
`number of options traded, the market-maker can manage risk associated with his or
`her options portfolio. Id. at 1:56–58. A market-maker manages risk by modifying
`quotes for options to favor trades that tend to hedge against unwanted risk. Id. at
`1:58–62.
`The ’457 patent Specification states that an automated trading environment
`already was known in the art. Id. at 1:63–65, 2:1–2. An automated computer-
`based trading system typically records quotes and automatically matches them with
`orders that enter the system. Id. at 1:65–2:1. One disadvantage of known
`automated trading systems is that the systems execute trades so rapidly that a
`market-maker may be unable to withdraw or modify his quotes in a timely manner.
`Id. at 2:7–12. Software tools that assess trading option portfolio risk and
`recommend quote modifications also were known. Id. at 2:13–18. An automated
`trading system, however, processes transactions in the order received. Id. at 2:23–
`25. Thus, even if a market-maker uses such software tools to modify quotes, those
`tools may be unable to act in time, given the speed at which the automated trading
`exchange system executes orders. Id. at 2:18–23. For example, an automated
`trading exchange may have a message queue containing additional orders that must
`be processed before the automated exchange receives and processes the market-
`maker’s quote modification request. Id. at 2:25–30. These known automated
`trading exchange systems, therefore, limit a market-maker’s ability to manage risk.
`Id. at 2:31–39. The ’457 patent Specification recognizes the need for a method
`that automatically modifies quotes under certain trading conditions in an
`automated trading exchange system. Id. at 2:40–42.
`The invention of the ’457 patent is directed to systems for an automated
`trading exchange that modify quotes, where the system provides integrated quote
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`risk monitoring and quote modification services. Id. at 2:46–48. Thus, one aspect
`of the invention is an apparatus that implements the method using a computer,
`having memory, a processor, and a communication port. Id. at 2:48–51.
`The computer receives orders and quotes, wherein a quote has associated trading
`parameters, such as a risk threshold. Id. at 2:51–54. The computer then may
`generate a trade by matching the received orders and quotes to previously received
`orders and quotes. Id. at 2:61–63. If a trade is not generated, the computer stores
`each of the received orders and quotes. Id. at 2:63–64. The computer determines
`whether a market-maker’s quote has been filled as a result of the generated trade,
`and, if so, determines a risk level and aggregate risk level associated with the trade.
`Id. at 2:64–3:1. The computer then compares the aggregate risk level with the
`market-maker’s risk threshold for a quote; if the threshold is exceeded, the
`computer automatically modifies at least one of the market-maker’s remaining
`quotes. Id. at 3:1–4.
`
`B. Illustrative Claim
`Claim 1 is an independent claim and is reproduced below:
`1.
`A system for processing trades of securitized instruments
`based on security orders and quotes received from client computers,
`comprising:
`
`at least one server computer comprising a memory, and a
`processor, said server computer configured to perform the steps of:
`
`receiving orders and quotes, wherein specified ones of
`said quotes belong to a quote group, and wherein said specified ones
`of said quotes have associated trading parameters comprising a risk
`threshold;
`generating a trade by matching said received orders and
`
`quotes to previously received orders and quotes;
`
`storing each of said orders and quotes when a trade is not
`generated;
`determining whether a quote having associated trading
`
`parameters has been filled as a result of the generated trade, and if so,
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`determining a risk level and an aggregate risk level associated with
`said trade;
`comparing said aggregate risk level with said risk
`
`threshold; and,
`
`automatically modifying at least one of the remaining
`specified ones of said quotes in the quote group if said threshold is
`exceeded.
`
`
`
`
`
`Date of Issuance or
`Publication
`June 11, 2002
`
`C. Prior Art
`The pending ground of unpatentability in this inter partes review is based on
`
`the following prior art.
`Patent/Publication No.
`
`Exhibit No.
`
`U.S. Patent No. 6,405,180 B2
`(“Tilfors”)
`
`Ex. 1002
`
`Petitioner also relies upon the Declaration of Dr. Maureen O’Hara. Ex. 1004.
`D. Pending Ground of Unpatentability
`We instituted an inter partes review of the ’457 patent based on the
`following ground:
`Claim 1 is anticipated under 35 U.S.C. § 102(e) by Tilfors.
`Dec. on Inst. 18.
`II. ANALYSIS
`
`A. Claim Construction
`Consistent with the statute and the legislative history of the AIA,2 the Board
`will interpret claims using the broadest reasonable construction in light of the
`specification of the challenged patent. See Office Patent Trial Practice Guide, 77
`Fed. Reg. 48,756, 48,766 (Aug. 14, 2012); 37 C.F.R. § 42.100(b); In re Cuozzo
`
`
`2 Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011)
`(“AIA”).
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`Speed Techs., LLC, No. 2014-1301, 2015 WL 448667, at *5–8 (Fed. Cir. Feb. 4,
`2015). There is a “‘heavy presumption’ that a claim term carries its ordinary and
`customary meaning.” CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366
`(Fed. Cir. 2002) (internal citation omitted).
`
`In our Decision on Institution, we construed certain claim terms as follows:
`Claim Term
`Construction
`“risk level . . .
`“a calculated, measured, or otherwise obtained
`associated with said
`value of exposure to the possibility of loss related
`trade”
`to said trade”
`“aggregate risk level
`“a calculated, measured, or otherwise obtained
`associated with said
`aggregate value (e.g., combination, sum, weighed
`trade”
`sum, difference) of exposure to the possibility of
`loss related to such trade”
`“automatically cancelling or revising a price or
`quantity of at least one of the received specified
`quotes still available for execution”
`
`“automatically
`modifying at least one
`of the remaining
`specified ones of said
`quotes in the quote
`group if said threshold
`is exceeded”
`
`
`Dec. on Inst. 8–11. Petitioner does not challenge these constructions (Tr. 6:18–
`7:2), nor does Patent Owner (id. at 39:14–15, 40:1–3). We discern no reason to
`deviate from our constructions in our Decision on Institution for purposes of this
`Final Written Decision.
`B. Anticipation of Claim 1 by Tilfors
`With respect to Petitioner’s contention that claim 1 is anticipated by Tilfors,
`
`we have reviewed Petitioner’s arguments and the evidence relied upon by
`Petitioner, and conclude that Petitioner has not established by a preponderance of
`the evidence that claim 1 is anticipated by Tilfors. Specifically, Petitioner has not
`established by a preponderance of the evidence that Tilfors discloses “determining
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`a risk level and an aggregate risk level associated with said trade,” as recited by
`claim 1.
`
`Petitioner refers predominantly to one passage in Tilfors as disclosing the
`limitations of claim 1. See Pet. 26, 28–29, 33, 35 (citing Ex. 1002, 4:46–62); Pet.
`Reply 2 (citing Ex. 1002, 4:46–62); Tr. 8:4–22, 18:19–25. The relied-upon
`passage provides the following:
`However, in a preferred embodiment, the step 211 can be
`executed in the following manner (not shown). If the total volume is
`only a little smaller than the volume required by the exchange, the
`step up parameter is used to automatically generate more volume at
`the current price. If, on the other hand, a larger volume needs to be
`generated in order to obtain the volume X, the one tick worse
`parameter is used to generate the requested volume at a worse price.
`Also, if in the step 211, the step up parameter has been used to
`generate more volume a number of consecutive times at the same
`price, the one tick worse parameter can be used, even though the step-
`up parameter normally should have been used. This will prevent that
`a customer enters a large number of small orders and that the system
`then generates more volume at the current price instead of offering a
`worse price as would have been the case if the customer had entered
`one large order.
`
`
`Ex. 1002, 4:46–62. Petitioner explains that Tilfors’s “step up functionality allows
`a partially filled quote to be automatically modified by increasing the volume in
`the quote to a predetermined level set by the market maker or the exchange.” Pet.
`23. Petitioner provides the following example—if the market-maker’s original
`quote was for 50 option contracts, and the market-maker trades against an order for
`20 contracts, 30 contracts remain in the quote. Id. The step-up function
`automatically modifies the quote to increase the volume back up to the
`predetermined level (“X”), which could be, for example, 50 contracts. Id.; see Ex.
`1002, 4:37–41 (“X is a parameter predefined by the exchange”).
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`Petitioner maintains that when Tilfors executes trades, risk level and
`
`aggregate risk level are tracked. Pet. 26. According to Petitioner, “[e]ach trade
`against a quote, and implementation of the step up function, carries with it an
`inherent risk level as volume is added.” Id. (citing Ex. 1004 ¶ 50). Petitioner
`further contends that “Tilfors counts the number of step ups applied against a
`quote, thus determining an ‘aggregate risk level.’” Id. at 26–27 (citing Ex. 1002,
`4:46–62, 6:45–53). Petitioner argues that the recited “risk threshold” “reads
`directly on the programmed number of times the step up parameter is permitted to
`generate more volume at the same prices before invoking tick worse.” Id. at 27
`(citations omitted; emphasis added). With respect to the “modifying” limitation of
`claim 1, Petitioner asserts that “[w]hen the step up count threshold is exceeded,
`tick worse is invoked, which regenerates the quote at a worse price,” which
`according to Petitioner, is “something the ’457 patent makes clear is one of the
`ways a quote can be modified in response to exceeding a risk threshold.” Id.
`(citations omitted).
`
`In our Decision on Institution, based on the record then before us, we
`instituted a review based on the following determinations.
`
`[W]hether or not a trade triggers a step-up in volume is a
`calculation of the market maker’s exposure to the possibility of loss
`related to a trade, i.e., the claimed “risk level.” Ex. 1004 ¶ 51.
`
`Dec. on Inst. 14. We further agreed with Petitioner that the number of step-
`ups, i.e., volume increases, applied against a quote, satisfies the recited
`“aggregate risk level.” Id. We also determined that because a tick worse
`parameter is applied if a step-up has been triggered a pre-defined number of
`times, Petitioner had made a sufficient showing that Tilfors discloses
`“automatically modifying at least one of the remaining specified ones of said
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`quotes in the quote group if said threshold is exceeded,” as recited by claim
`1. Id.
`
`Patent Owner disagrees that Tilfors discloses “determining a risk level
`. . . associated with said trade.” PO Resp. 27–32. Specifically, Patent
`Owner argues that “whether or not a trade triggers a step-up” does not
`satisfy the recited “risk level . . . associated with said trade,” which we
`interpreted as “a calculated, measured, or otherwise obtained value of
`exposure to the possibility of loss related to said trade.” Id. at 28 (emphasis
`added); see Dec. on Inst. 8–9. According to Patent Owner, whether or not a
`trade triggers a step-up is merely a decision to maintain the exchange-
`required minimum volume and “is clearly not a value of anything.” PO
`Resp. 28. Patent Owner asserts that “whether or not a step-up is triggered is
`merely a yes-or-no question about exchange volume with only a yes-or-no
`answer.” Id. Thus, argues Patent Owner, the decision to step-up is not “a
`calculated, measured, or otherwise obtained value of exposure, but rather a
`determination to fulfill an exchange requirement.” Id. (emphasis in
`original).
`
`In its Reply, with respect to the recited “risk level . . . associated with
`said trade,” Petitioner argues that “[e]ach step-up represents the addition of
`volume to a quote, and volume is a risk level.” Pet. Reply 7. Thus,
`according to Petitioner, because each step-up represents the addition of
`volume—volume which could be bought by a trade—the “risk level” is
`increased. Tr. 20:20–21, 21:14–17, 21:18–22, 22:3–8; see Pet. Reply 10–12
`(Petitioner’s hypothetical presented to Patent Owner’s witness, Dr. Benn
`Steil). Petitioner states that “counting step-ups effectively counts risk levels
`and creates an aggregate risk level.” Pet. Reply 12. Petitioner further argues
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`that Tilfors discloses the recited “aggregate risk level” because it keeps track
`of the number of times volume is added in the step-up procedure. Id. at 7.
`
`In support of its argument, at the oral hearing, Petitioner provided the
`following example of Tilfors’s embodiment.
`
`Ex. 1010, Slide 14 (citing Pet. Reply 13); see Tr. 19:6–20:21.3
`
`Petitioner confirms that it is relying on the aspect of the embodiment
`illustrated in Figure 2A, in which less than the full volume of the market-
`
`
`3 For purposes of explaining the parties’ positions, and ease of reference, we
`address herein the parties’ arguments in the context of the examples discussed at
`the hearing. The parties’ substantive arguments, on which those examples are
`based, however, are reflected in the parties’ papers. See, e.g., Pet. 21–35;
`PO Resp. 27–32; Pet. Reply 7–14.
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`maker’s quote is traded consecutively (i.e., the answer is “no” at step 203
`and “yes” at step 209) and more volume is generated in the market-maker’s
`existing quote at the same price (step 211). Tr. 18:19–19:2, 26:11–16,
`63:20–25; see Ex. 1002, 4:37–43. Thus, at least “1” contract remains in the
`market-maker’s quote. The other aspect of Tilfors’s embodiment provides
`that if the full volume in the market-maker’s quote is traded at Tilfors’s step
`203 in Figure 2A, the next step is step 205. Petitioner, however, is not
`relying on this aspect of the embodiment. Tr. 63:17–64:6.
`
`In the hypothetical presented by Petitioner, “X,” the minimum volume
`required by the electronic exchange, is “2” contracts (id. at 19:24–25), the
`predefined number of step-ups (i.e., what we determined at institution is the
`claimed “risk threshold”) is “2” (id. at 19:11–15), the market-maker’s initial
`quote is for “2” contracts, and there is a matching order for “1” contract (id.
`at 19:16–17, 20:1–2). According to Petitioner, after the first trade, because
`the “full volume” of the market-maker’s quote was not traded according to
`step 203 (i.e., one contract still remains in the market-maker’s quote), the
`process proceeds to step 207. Id. at 20:5–10. At step 207, the process
`checks whether the total volume remaining in the market-maker’s quote, “1”
`contract, is less than the “2” contract minimum required by the exchange.
`Id. at 20:10–12. Because the remaining volume in the market-maker’s quote
`is less than X, the minimum required by the exchange, a step-up application
`is triggered (step 211), whereby volume (“1” contract) is added to the
`market-maker’s quote to satisfy X, at the market-maker’s current price. Ex.
`1010, Slide 14; Tr. 19:20–20:2; Ex. 1002, 4:47–50. According to Petitioner,
`“one step-up equals a risk level of one,” so the market-maker’s risk level
`after the first trade in the hypothetical is “1” and the claimed “aggregate risk
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`level” is “1.” Tr. 20:13–21, 22:16–19. Petitioner further contends that the
`claimed “risk level” does not depend on the price of the contract traded. Id.
`at 21:18–22:8. Petitioner further argues that the “risk level” is “1” each time
`a step-up is applied, and that after applying the step-up functionality twice,
`the “aggregate risk level” is “2.” Ex. 1010, Slide 14.
`
`Petitioner acknowledges that, based on the relied-upon Tilfors
`embodiment, the volume added to a market-maker’s quote during a step-up
`can be more than “1” contract. Tr. 23:16–24. For example, Petitioner
`explains that if X is equal to “11,” a market-maker knows that every time
`Tilfors’s step-up is applied, the volume added to his quote could be “1”
`contract “up to 10 contracts.” Id. at 27:5–10. Petitioner, however, maintains
`that although any time a trade triggers a step-up, the volume of contracts that
`can be added could be a range, the “risk level” is “1” “because that
`represents one increase in volume” and “[h]ow many times you’ve increased
`that volume is your aggregate risk value.” Id. at 28:11–16, 29:6–25. Thus,
`according to Petitioner, Tilfors discloses that the “risk level” is “1”
`whenever an executed trade triggers a step-up, regardless of any other
`information, including the volume of the executed trade and the volume that
`is added when the step-up is applied to the market-maker’s quote. Id. at
`30:6–24.
`JUDGE ELLURU: So, you’re saying the risk value is the same
`regardless of the number of contracts you’re increasing?
`Mr. MURRAY: That’s right. That’s exactly right.
`Id. at 31:1–3; 32:19–25, 34:12–16. Although Tilfors’s step-up functionality
`may indicate an increase in risk because it is an indication that volume needs
`to be added to a market maker’s quote, Petitioner has not persuaded us that
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`Tilfors discloses the claimed “risk level”—which the parties do not contest
`means “a calculated, measured, or otherwise obtained value of exposure to
`the possibility of loss related to said trade.” See supra Sec. II.A.
`
`Foremost, Petitioner has not shown sufficiently that Tilfors expressly
`discloses “determining” a “risk level . . . associated with said trade.” See Tr.
`22:20–23:2. Based on our review of the record, Petitioner has not shown
`sufficiently that Tilfors describes determining a specific “risk level” value,
`“1,” as asserted by Petitioner. Although Tilfors keeps track of the number of
`times a market-maker has stepped up (id.), we are not persuaded that that
`disclosure describes determining a “risk level” of “1” for each “such trade.”
`Furthermore, we are not persuaded that under our construction, a “risk level”
`for a particular trade can be calculated without taking into account critical
`information, such as volume traded, volume remaining in the market-
`maker’s quote, price of the trade, etc. See id. at 40:18–21. As Patent Owner
`contends, the recited “risk level” is for each “such trade,” i.e., “[a] trade that
`has already taken place.” Id. at 37:6–9; see id. at 40:4–5. Petitioner argues
`that any trade that triggers a step-up in the relied upon embodiment in
`Tilfors has a “risk level” of “1.” A “risk level” of “1,” however, does not
`take into account the volume that was traded in the executed trade, nor does
`“1” reflect the amount of volume that may be added by Tilfors’s step-up
`function. Even accepting Petitioner’s assertion that Tilfors’s step-up is an
`“indication” of risk because it tells a market-maker that volume has been
`added to the quote (id. at 31:11–14, 65:18–23), and the market-maker is
`aware of the range of volume that has been added to his quote, (i.e., 1 to X,
`the minimum number of contracts that must be quoted by the market-
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`maker), that range, calculated mentally by the market-maker, would not be
`represented by a “risk level” of “1.” See id. at 31:3–14, 37:19–21, 65:13–24.
`
`The absence of a correlation between whether a step-up has been
`triggered in the relied upon embodiment in Tilfors and our uncontested
`interpretation of “risk level” of an executed trade is illustrated by specific
`examples. Applying the embodiment in Tilfors relied upon by Petitioner, if
`“X” is “100,” and a market-maker has “101” contracts outstanding in the
`exchange’s order book, and “2” contracts are traded, the market-maker’s
`available quote drops to “99” contracts (step 209). Id. at 37:22–24.
`Pursuant to the embodiment described in Tilfors, a step-up function (step
`211) would be applied to increase the market-maker’s available quote by “1”
`contract to reach “X.” Id. at 37:24–35:1; Ex. 1002, Fig. 2A (steps 209 and
`211). According to Petitioner’s argument, “2” contracts have been traded,
`and the “risk level” is “1” because one step-up has been triggered. Tr. 38:1–
`2.
`
`In another example, if “X” is “100,” and a market-maker has “200”
`contracts outstanding in the exchange’s order book, and “101” contracts are
`traded, the market-maker’s available quote drops to “99” contracts (step
`209). As in the example above, a step-up function (step 211) would be
`applied to increase the market-maker’s available quote by “1” contract to
`reach “X.” Pursuant to Petitioner’s argument, “101” contracts have been
`traded, and the “risk level” is “1” (the same “risk level” as in the preceding
`example in which “2” contracts were traded) because one step-up has been
`triggered. This example demonstrates that a “risk level” of “1” does not take
`into account the volume of the executed trade (i.e., the recited “said trade” in
`claim 1). In yet another example, if “X” remains “100,” and a market-maker
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`has “101” contracts outstanding in the exchange’s order book, and “100”
`contracts are traded, the market-maker’s available quote drops to “1”
`contract (step 209). Pursuant to the embodiment described in Tilfors, a step-
`up function (step 211) would be applied to increase the market-maker’s
`available quote by “99” contracts to reach “X.” According to Petitioner’s
`argument, “99” contracts have been added to the market-maker’s quote and
`the “risk level” is “1” (the same “risk level” as in the first example in which
`“1” contract was added to the market-maker’s quote) because one step-up
`has been triggered. This example demonstrates that a “risk level” of “1”
`does not take into account the volume added to a market-maker’s quote
`when a step-up is triggered by an executed trade (i.e., the recited “said trade”
`in claim 1). In sum, these examples demonstrate to us the indefensible
`nature of Petitioner’s argument.
`
`We also do not find the testimony provided by Petitioner’s witness,
`Dr. Maureen O’Hara, in support of Petitioner’s argument to be persuasive.
`Dr. O’Hara states, for example, “Tilfors/Katz examines the risk level by
`looking at whether or not a trade triggers a step up.” Ex. 1004 ¶ 48
`(emphasis added); see Ex. 2012 ¶ 52 (Patent Owner’s witness testifies that
`“no risk level (i.e., value) is ever determined in Tilfors”). Dr. O’Hara also
`testified as follows:
`Q: So the risk level is the fact that we’re stepping up?
`A: That is kind of strange; right?
`Ex. 2013, 187:5–7. Dr. O’Hara did not provide a satisfactory explanation as
`to how Tilfors discloses the recited step of “determining a risk level . . .
`associated with said trade.”
`Q: I'm just talking about the decision whether or not to step up.
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`A: So the decision to step up is related to the market maker’s risk.
`
`Id. at 93:16–19 (emphasis added). In addition, Dr. O’Hara testified that not
`stepping-up, i.e., not increasing the volume in a market-maker’s quote, also
`represents risk.
`Q: So the measure of risk was what?
`A: It was the fact that I had to step up, it was the trade.
`. . .
`Q: And the [market-maker’s] risk is not being in the market?
`A: The risk is not having a quote that can be hit by people who want
`to trade.
`
`Id. at 203:22–24, 93:21–23. As Patent Owner notes (PO Resp. 30 n.4),
`however, when a trade triggers a step-up in volume, which Petitioner
`contends has a risk level of “1,” Tilfors does not keep track of the risk to
`which Dr. O’Hara refers, i.e., not increasing the volume in a market-maker’s
`quote so that it “can be hit by people who want to trade.” Ex. 2013 93:16–
`23. Thus, we are not persuaded that Dr. O’Hara’s testimony supports
`Petitioner’s position that whether an executed trade triggers the application
`of a step-up in volume in a market-maker’s quote discloses the recited
`“determining a risk level . . . associated with said trade.”
`
`In sum, we determine that Petitioner has not demonstrated by a
`preponderance of the evidence that Tilfors discloses the recited step of
`“determining a risk level . . . associated with said trade.”
`
`Using the same reasoning, Patent Owner also argues that Tilfors fails
`to disclose the recited step of “determining . . . an aggregate risk level
`associated with said trade.” PO Resp. 31–32. We construed “aggregate risk
`level associated with said trade” as “a calculated, measured, or otherwise
`obtained aggregate value (e.g., combination, sum, weighed sum, difference)
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`of exposure to the possibility of loss related to such trade.” See supra Sec.
`II.A. Specifically, Patent Owner contends that “[b]ecause Tilfors does not
`disclose determining a calculated, measured, or otherwise obtained value of
`exposure to the possibility of loss related to said trade, Tilfors . . . does not
`disclose determining a calculated, measured, or otherwise obtained
`aggregate value of exposure to the possibility of loss related to such trade.”
`PO Resp. 31 (citing Ex. 2012 ¶¶ 55–60) (emphasis in original). We agree
`that Petitioner has not shown sufficiently that Tilfors discloses the step of
`“determining . . . an aggregate risk level associated with said trade.”
`
`We further agree with Patent Owner (id. at 31–32) that Dr. O’Hara,
`
`Petitioner’s witness, does not provide persuasive testimony that Tilfors
`discloses the recited step of “determining . . . an aggregate risk level
`associated with said trade.” For example, Dr. O’Hara testified as follows.
`Q: Where in Tilfors does it expressly describe the aggregate risk
`level?
`A: I’m not sure that it does. I could go through and see if it uses the
`word “aggregate,” but I think Tilfors, Tilfors is just giving you a
`broad measure of risk, it just -- this is your -- a broad exposure to
`what's happening to you in your trading, it’s -- like I said, it’s a broad
`measure.
`
`Ex. 2013, 162:11–19. Dr. O’Hara also testified as follows.
`
`
`Q: Has your opinion been based on your understanding that the risk
`level and the aggregate risk level can be the same?
`A: They can be. I don’t know that they have to be, but they can be the
`same.
`
`Id. at 179:13–17. Thus, we likewise determine that Petitioner has not
`demonstrated by a preponderance of the evidence that Tilfors discloses the
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`recited step of “determining . . . an aggregate risk level associated with said
`trade.”
`III. MOTION TO AMEND CLAIMS
`
`Patent Owner moves to amend claim 1, “contingent upon claim 1
`being held [unpatentable].” Mot. 1. Because we have not determined that
`claim 1 is unpatentable, we need not address Patent Owner’s Motion to
`Amend Claims.
`IV. CONCLUSION
`
`Based on the foregoing, we determine that Petitioner has