morning ladies and gentlemen we have four argue cases before the four today and one submitted the first two argued cases are actually related if chicago or the options exchange versus international murray i don't think there's a need to change tables between arguments and i also would encourage you to the extent possible to not repeat anything that has to do with the technology and we certainly understand it we read everything you've submitted i comment comment both of you on your briefing on the quality of your briefings so if it's possible that at least the second argument won't entailed the full amount of time that's a lot of but i'll give it to you if you were in fact think that you need it so as i understand it mr lieberman you want five minutes for rebuttal in the first case i was ok you're ready to proceed ok go ahead prove the functioning of a computer and the second is do the claims affect an improvement in any other technology other meaning other than a computer technological field and it's our position are still limiting if it is the essence of the invention or the reason the extra of the invention that was the language that this court used here we have one amended exchange trading system in the title of the patent in the first sentence of the abstract in the very short field of invention in the first sentence of the summary of invention and to wrap a specification it is critical for the invention moreover it was a close correlation between the language in the preamble and the language in the subsequent steps of the claims such that the preamble such as the claims do not make sense without the preamble being considered a claim limitation now would you then are you then that you might have a situation where eight you could be simply implementing an abstract idea upon the initial computerization but then after the fact if a problem is recall the technology involved was when someone clicked on a link in a website making it look as if when the person travelled off the website that they were still on the website and the panel decision there said two things first this trading systems were created they created a new type of risk not a new variation of risk a new type of risk that never existed before so for example i think everybody will remember in the trading places movie when somebody came into the options pitch and they wanted to do a trade eddie murphy had to say you know i had to make a little movement with this figure saying i acknowledge the trade i accept that's what happened in the open outcry system you could not do which rate you well could not get it as a i think my problem is is is that i understand the distinction you're making and i understand the distinction made in d d r holdings the the problem is is that that distinction has to be supported by the c so even assuming that you're talking about an automated system and even assuming that you are contemplating that some things occur because the automated system there still has to be something invent about what you are claiming so let's give you the preamble being limiting though i'm not sure that's actually necessary but what if we give you that what in the claims there's story and undefined modification how is that enough the the interest to fall the step that has the the the the critical portion of the invention is the automatically modifying the remaining didn't have any place for them to to make right but isn't the fact that there are remaining codes and that you know then store them isn't that sort of a necessarily imply a necessary implication of the automated system well the storage of the quotes is of magically modifying is a disruptive or vent to the way what emitted exchange trading systems typically work just the way the technology and d d r start to be disrupted by the majority of the panel here's what in an inn in a normal automated system without our invention what would happen if a market maker decided that he was it was too much risk he would then put in new quotes those would go to the end of the queue but before it got to the front of the line he could have been hit on hundreds or thousands of existing was what this invention does is it has the system modify a modification in the system so immediately hedging behavior well i think it's no more related to risk taking then if you have an airbag which you put in a card to mitigate the risks of somebody being injured in a crash or bullet proof vest that somebody where somebody get the risk of being injured by a bullet the key here is not that the ultimate result is that the market maker is protected is that you were changing the system which is a complex machine and by the way the preferred hundreds of thousands of dollars or millions of dollars the star fires are crazy supercomputer let's go back to to what what this patent does and and what this claim free site so you do concede that this different from ours the risk that in the us ok so the newness we know because of the result in the i p r proceeding there is really a new risk and a big difference between what is covered by this patent and what was done previously we know that it's not routine in conventional because the same p tam panel found that it wasn't invalid as in to submitted are obvious and i know we'll be speaking more about that probably a little later this morning so we know that it's new and it's different it's a new type of risk it's embodied in an exchange trading system which are machines cables software code millions and millions of dollars that transact transactions involving trillions of dollars every day  can get much more much more real than that how is this different than alice i would turn it around and say the only way it's the same is that it involves financial transactions at the highest level of  abstraction and involves risk and the alice case the supreme court said it was nothing new and you can't get a patent just by taking something that's all and doing on the computer even if it's faster and better on the computer and we agree with that but it seems to me that up until you get to that everything above that if something something has been assigned to a computer i mean in the you know you're describing a system under the open  let me and right for a second what the supreme court said in alice in discussing the deer case the supreme court said the claims in deer were patent eligible because they improved on an existing steckler logical new type of problem created by automated exchange trading systems with an entirely new type of risk and this invention humored that problem created by the internet in a disruptive session and the technology here again we're not we're not talking about you know a conventional scanner or copy or even a laptop computer these are super computers these are hundreds of thousands of dollars these machines this was in the sand home declaration which the p t had really paid very little  no debt he no deference to even though there was nothing on the other side i see i only have a few minutes left and i would like to save some time for rebuttal but i do want to answer any other questions accra might have right now ok i'll give you three minutes for about when your hours may please the court i'd like to do what cboe has been very reluctant to do from the beginning of this case which is addressed a two part test in alice for determining whether we have pan pan eligible subject matter here alice step one says we have to see if we have an abstract method embodied in the claim and we clearly do as the board concluded below they said we conclude that the concept of managing trading risk is an economic practice one prevalent in our system of commerce and squarely within the realm of abstract ideas that really said nothing but trading risk right and that in your particular case you are talking about trading risk through as it relates to these classic exchanges correct it doesn't have to be in a in an exchange actually this sort of basic economic practice could apply to other fields so it all would you concede that you could have a situation in which the initial automation of an idea is just automation with a generic computer of an abstract idea but if that automation itself generates an additional problem that was unknown before that a new patent could be  the solution to that problem in their claims that i think that's possible your honor and i think that's i want to focus on ok yes just managing risk and that's i mean that's that's like a red flag right that goes off for everybody because the bills and we know what the supreme court was looking at there but assumed there was no risk related to sort of the the amassing of quotes that occurs because as a necessary incident the automation could there be a patent that claims a solution to that additional risk that wouldn't just be addressing the abstract idea of risk i think it's possible that it's not this patent it's not this claim that's what i want to focus on right this claim the risk in this claim is very clearly set forth in the claim it's about the risk of your of personal there's a risk level society with each trade and this claim  directed specifically in its language to avoiding having that aggregate risk getting too large so as a trader is trading each trade has a risk associated with it and we describe in the brief this this  and in aggregate risk level now that risk level is the risk associated with a trade the aggregate risk level is simply adding up the risks associated with each trade so if your first trade has a risk level of one and your second trade has a  sort of displayed or stored on a train for is not true quotes were stored in open outcry mr kaminski admitted that quote market makers would determine the quotes which are in most cases post on large monitors mounted in rows above the pit this is that a one for nine for the record so even in open outcry the market makers would put their coats up on a port and there would be lots of quotes there so now in open outcry when the market maker is trading and monitoring his or her appears at column one lines forty three through fifty five so this is the risk of the claim is the same risk that existed in open outcry where market makers would monitor their risk and then make adjustments from that risk at too high all they did was complete out see that that there's a difference between a risk and an exponential volume of that risk well first of all there's nothing in the claims about below the claims are part of nothing other than a plurality of quotes two quotes so even if they have some unique solution to how to deal with millions of quotes it certainly isn't claimed there's nothing in the claim that requires interface so it was it was a good week repl user interface that arranged that in a certain way that was sort of presented the data in a unique way to the to the market makers that were doing the trading so that is rooted in the technology it's a it's interface so that had no sort of analog in the in the open outcry market it was it wasn't something that you know market makers would do with pencil paper for example was it was a unique graphical interface that changed in a certain what happened open outcry market makers nobel prize would have quotes posted on the board behind them in the pit for some reason see the us focus on the fact that in a pit you have multiple market makers instead of just one so the quotes aren't are sort of pick stored which it was stored in open outcry but if i'm a market maker i'm saying here's my code for this i b m option and then somebody trades with me and is is buying a lot of that particular option and i decide that i want to change the price i say here's my revised price for but they are this claim is too broad to get this claim doesn't even begin to touch on that kind of thing so if when you look at their briefing what they're talking about are message queues and things are being processed in the order that they're received and an execution message of it's sitting in the message queue behind an order you know these are the problems they're talking about in the electronic world was this claim has nothing to do with this claim is just taking the basic problem that was sort of rooted in technology it's about when you click a hyperlink in the internet instead of going where you would normally go which is out to a few a different web site the you know the invention was if you know let's say i'm  depot web site and i'm looking at a color faucet and i click on the color hyperlink in prior art i would jump to the color website so now home depot is kind of lost that customer lost control of that customer because they've jumped to the  color web site and so the invention there was instead of that hyperlink jumping to the color website i'm going to create within the home depot website a little sort of kohler page to maybe sell that faucet but i keep my customer within the home depot website so this is something that is that is solidly sort of rooted in technology in d d r now it now i think there is you know already another way of looking separate the trading from the risk analysis so in an open outcry the market maker we would do a trade with see how their trade affected his or her risk profile it's my risk getting too large make some adjustments and do another trade it was always known that whoever or whatever is doing the trading has to the risk analysis so mr lieberman and sort of hypothetically says well what if we had an electronic exchange the took the trading away from the market maker to a computer down the road but the risk analysis is left back with the market maker so now you have separated the trading from the risk analysis well now you have a problem because the computer is going to do the trading very quickly and if the market maker is sitting back in his or her office trying to trying to do the risk analysis as the trades happen well a human can't keep up with a computer so you have you have this kind of mismatch but this is this is a hypothetical that didn't exist first of all in the real world there were no exchanges that did that and it's illogical you're saying there are no changes in the united states that well no there were no exchanges anywhere they did that the exchanges in europe were really kind of hybrid exchanges market makers we put  for example one quotes into the electronic exchange and see if it matched and fit matched maybe make some adjustments and they put another quote in it was really kind of like open outcry sort of a hybrid open outcry electronic system but there was no system that took away the trading completely and that was the problem have to exist in the real world you can't intisar paint the problem that that's going to be created by the automation i'm sure you could you could anticipate a problem but again the what happened in open outcry the basic economic practice here is trade do your risk analysis do another trade to your risk analysis that's what market makers did so it's not statutory now if i could get back to that i mean i think we haven't talked about alice part one and part two and it's about as i want to talk about part two of alice because what you have to do is you have to look at the additional elements beyond the abstract method that are in the claim and explain why those additional elements in part patentability and there are there are no additional elements in this claim when you take out the abstract method all you have left is is automatically modifying and that certainly isn't something that would add something sufficient to the abstract method to make it happen eligible so she won't never talks about step two about us and they don't talk about it because they have nothing to say about it now the election just a couple of other things the first of all the preamble issue only one patent out of the three even has automated electronic exchange in the preamble something that kind of glosses over so automated it electronic exchange is so critical why isn't it in issue about novelty only applies to the second step in alice so you don't you don't get you don't get over the one on one hurdle if even if you have a novel abstract idea this court made that clear enough for marshall  specifically which talked about that the the so called search for novelty or the novelty issues in alice come in come in only with respect to the additional elements so if there was some additional elements added to these claims beyond the abstract method and those additional elements really new and innovative technology then they might have a case for for why that would be relevant but give me an example beyond the idea of where you would see and additional element that if and if you you say in fail the first problem it is there there is an abstract idea that you're definitely dealing with but your improving upon the automation or there's something else that occurs that could give rise to that knowledge ability because of the novelty of additional well it's possible if they had claimed some of the things that they talk about in their brief like ok you have you have a message queue and you have orders and cancellations to commit to that message queue if a cancellation is behind an order maybe you change the you know you don't process it in the order that which is received this is the you know the so called problem so maybe you you know you take cancellations out of water in the message queue and process cancellations first i think the pattern actually discloses that but we're talking hypothetically so if you if you had a claim like that that was really sort of rooted in what's going on in the computer and in the in the technology  it's possible that that kind of claim could be patentable so you say you're saying they don't the patent doesn't really claim that because the the use of the word modification in light of this fact doesn't really couldn't be interpreted to claim that well i it doesn't so it says will you do if you modify one of the remaining quotes and in the specification they talk about just changing the price for example which is what market makers did in open outcry of course ok i will save the rest of the thanks guys and for the perceive some of those problems but me but the claims are so broad that they don't really say anything about that well i don't believe that the war requires that in the claim itself you specifically repeat the problem that you're fixing here in the claim we deal with the specific solution that fixes the problem talked about in the specification and the solution is the what are magically modify it the purpose of the automatically modifying is to make sure that that new type of risk doesn't redound to the detriment of the market maker that is that the market maker doesn't get hit doesn't have quotes to change quotes a hundred thousand plus and might want to magically modifying those  how you say that automatically modifying that we are supposed to assume that it does things like you know it alter the orders of the quotes or and not just and it's not just addressed to the price it right so let me answer that question very directly you can modify the quotes in a number of different ways you could modify them by withdrawing them you could modify them by changing price you could modify them by changing volume i mean there are a whole variety of different ways that in general quote can be modified we didn't have to i would submit limit the claim to particular types of modifications if the problem out there for the market maker is that he's got ten thousand quotes with respect to the stock in b p and that the b p horizon oil rig just blew up now he may decide to take all those points off the market but he can't because he can't get there first automatically modify the quote in a waste of the market maker doesn't lose thirty years of of you know of accumulated savings from from work it does it immediately it does it automatically and it's fixes that problem we know it's a new problem and we know it's very different from what existed an open outcry call because in two places in the in her testimony maureen o'hara their expert admitted the differences both as to risk into the way things worked in open outcry this is the appendix at seven hundred fifty two to fifty six and the appendix at eight hundred thirty four to thirty five g four also admitted in those in and in those sites that the steps that are in the  are by and large steps that would not have been done by a marketing these are steps that are done by an exchange so will this will all or almost all the steps here relate to what the exchange the machine does and it's an approve machine and let me analogize this to a case that on first blush may seem to be very different but i would submit that it's it's very very closely related and that's the supreme court's case dear and here there were