PAB Rejects Application: Ambiguous and Indefinite Claims are Unpatentable

PAB Rejects Application: Ambiguous and Indefinite Claims are Unpatentable

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PAB 1453, Re Canadian Patent Application No. 2,612,950

This case serves as a reminder for patentees that abstract ideas are not patentable. Canadian patent application no. 2,612,950 (“950 Patent Application”) was filed on June 29, 2006 by ITG Software solutions Inc (“ITG”) for a “System and method for generating real-time indicators in a trading list or portfolio”. In the Final Action (“FA”), it was found that the patent’s claims did not define statutory matter and were obvious – contrary to ss. 2 and 27(4) of the Patent Act. The Patent Appeal Board (“PAB”) reviewed the 950 Patent Application pursuant to para 30(6)(c) of the Patent Rules, and further assessed whether the claimed subject matter is obvious, contrary to para 28.3(b) of the Patent Act. [1-3]

The PAB recommended a refusal of the application, on the basis that the claims define non-statutory subject matter, are indefinite and unclear, would have been obvious at the claim date, and because the description failed to correctly identify a reference document. [69]

There were four issues to be addressed by the PAB; three substantive and one procedural: [10]

  1. Statutory subject matter
  2. Indefiniteness
  3. Obviousness
  4. Description

Before addressing the four main issues, the PAB identified the person having ordinary skill in the art (“POSITA”) as “a team comprising a financial trader-specifically an investment portfolio management expert-and information technology experts with backgrounds in computerized financial data processing and trading systems”. [22] According to the PAB, the common general knowledge (“CGK”) of the POSITA’s includes “investment portfolio management” and “design, implementation, operation and maintenance of computer systems, networks and software”. [23]

The problem was identified as “despite the existence of computerized trading systems allowing traders to view real-time market data, no system identifies abnormal conditions to traders as they occur in real time”. [26] The PAB saw the solution as the algorithm used to produce information indicating abnormal conditions for a security. [30] The PAB identified the following set of essential elements:

  1. receiving a value of a first variable related to a condition of the security;
  2. generating an estimated value of the first variable based on historical market data for the security;
  3. executing calculation of an analytic metric based on a relationship between the received value and the estimated value;
  4. retrieving an empirical distribution of the analytic metrics for a peer group of the security, based on a relationship of empirical values of the first variable for members of the peer group; and
  5. comparing the analytic metric for the security with the empirical distribution of analytic metrics for the peer group to detect whether the condition of the security is abnormal. [34]

Statutory Subject Matter

The PAB noted that the essential elements of claims 1 to 96 are the steps of the algorithm for detecting abnormal conditions in a security; which the PAB found to be outside of the categories of invention in s. 2 of the Patent Act as this is abstract matter. [38,40] The Applicant disagreed that the invention was abstract; arguing that it’s rather “an artificially created state of affairs as there is a concrete, observable effect that provides a practical technical advantage”. [41] While the inclusion of an algorithm in a claim does not automatically make it non-statutory, the PAB found that the claims in this case are non-statutory because the essential elements are only the rules and steps of an abstract algorithm. [46]

Indefiniteness

The PAB found that claims 33, 64, 65 and 96 each recite the execution of trades “after the comparison of the real-time value and the estimated value of the first variable that is related to the condition of the security.” The PAB noted that the comparison is of the analytic metric with the empirical distribution of the analytics for the peer group. “The description indicates that trades may be executed based on the detection of abnormal conditions, not on the comparison of the real-time and estimated values”, therefore the claims enumerated above do not comply with subsection 27(4) of the Patent Act nor s. 84 of the Patent Rules. [47-48]

Obviousness

The PAB identified two documents as being relevant: US 6,907,403 June 14, 2005 Klein et al (“D1”) and William F. Sharpe & Gordon J. Alexander, 4th ed., Investments (Englewood Cliffs, NJ: Prentice-Hall, 1990) (“D2”). [51] Both D1 and D2 show that it is common to use historical market data to attempt to predict future values, and that it is common to compare a security’s behaviour with that of other securities to assess it or identify abnormal conditions. The PAB was of the view “that it would not have required any degree of invention to adapt the techniques of D1 to involve the calculation of a metric based on the difference between estimated and received values, and the comparison of such metrics with those of securities in the same peer group, in view of the teachings of D2 and in view of the CGK.” [60-61] The PAB concluded that the subject matter of claims 1 to 96 would have been obvious to the POSITA in view of D1 and D2; therefore, the claims do not comply with para 28.3(b) of the Patent Act. [62]

Description and proposed claims

The PAB noted there was a typographical error in para 37 of the 950 Patent Application’s description, referencing to “U.S. Patent No. 7,794,906” instead of “U.S. Patent No. 7,974,906”. [63] The PAB found this failed to comply with subsection 81(3) of the Patent Rules. [63]

The PAB also analyzed ITG’s new proposed set of claims, which consisted of the original 96 claims plus an additional 18 claims “having greater emphasis on the displayed indication of abnormality”. [66] The PAB found that the differences would not alter the identified POSITA, CGK nor problem and solution – therefore the PAB’s conclusion on non-statutory subject matter and obviousness apply to the second set of proposed claims. [67] The PAB recommended the refusal of the application on the basis that claims 1 to 96 defined non-statutory subject matter and were obvious, that claims 33, 64,65 and 96 are indefinite and unclear, and that the description failed to correctly identify a referenced document. [69] The Commissioner of Patents (“Commissioner”) concurred with the PAB’s findings and its recommendation to refuse the application. The Commissioner refused to grant the patent for the application under s. 41 of the Patent Act. [70-71]

Commentary

This decision of the PAB serves as caution that patent applications that are ambiguous and indefinite will be refused by the PAB and the Commissioner. The courts have long held that abstract ideas and obvious claims are unpatentable. Patentees should make sure to locate a firm that provides high quality patent drafting in order to avoid the mistakes that were before the PAB in this case. For more information, please contact a PCK agent or IP lawyer.