United States Court of Appeals 

for the Federal Circuit ______________________ 

CHICAGO BOARD OPTIONS EXCHANGE,

INCORPORATED,

Plaintiff-Appellee,

v.

INTERNATIONAL SECURITIES EXCHANGE, LLC,

Defendant-Appellant.

______________________ 

2013-1326

______________________ 

Appeal from the United States District Court for the 

Northern District of Illinois in No. 07-CV-0623, Judge 

Joan H. Lefkow.

______________________ 

Decided: April 7, 2014

______________________ 

JONATHAN A. MARSHALL, Fish & Richardson P.C., of 

New York, New York, argued for plaintiff-appellee. With 

him on the brief were DAVID FRANCESCANI, MICHAEL T.

ZOPPO, BRIAN J. DOYLE, LEAH A. EDELMAN, and JEFFREY 

C. MOK; and FRANK POCELLI, of Boston, Massachusetts. 

Of counsel on the brief was STACIE R. HARTMAN, Schiff 

Hardin LLP, of Chicago, Illinois. 

PARKER H. BAGLEY, Boies Schiller & Flexner LLP, of 

New York, New York, argued for defendant-appellant. 

With him on the brief were MICHAEL UNDERHILL and 
 CHICAGO BOARD OPTIONS EXCHANGE v. INTERNATIONAL 

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RICHARD MEYER, of Washington, DC. Of counsel on the 

brief were MICHAEL S. DE VINCENZO and CALVIN E.

WINGFIELD, Goodwin Procter LLP, of New York, New 

York; DOUGLAS J. KLINE, of Boston, Massachusetts; and 

LAUREL A. KILGOUR, of San Francisco, California. Of 

counsel was NEAL CURTIS HANNAN, Boies Schiller & 

Flexner LLP, of Washington, DC. 

______________________ 

Before RADER, Chief Judge, REYNA and WALLACH, Circuit 

Judges.

REYNA, Circuit Judge

This patent case, involving systems for trading financial instruments, is before us on appeal for the second 

time. Defendant-Appellant International Securities 

Exchange, LLC (“ISE”) argues that the district court 

erred in making certain pretrial rulings that led ISE to 

stipulate to non-infringement and in finding claim 2 

indefinite. We affirm the lower court’s judgment of noninfringement because none of its pretrial rulings were in 

error. Because the specification discloses an algorithm for 

“matching” on a “pro rata” basis, we reverse the finding

that claim 2 is indefinite.

BACKGROUND

ISE asserted U.S. Patent No. 6,618,707 (“’707 Patent”) 

against Plaintiff-Appellee Chicago Board Options Exchange Inc. (“CBOE”) in the Southern District of New 

York. Subsequently, CBOE filed suit in the Northern 

District of Illinois seeking a declaratory judgment of noninfringement. The New York case was transferred to 

Illinois. 

The ’707 Patent generally discloses an “automated exchange” for trading financial instruments. Claim 1 recites: 
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An automated exchange for trading a financial instrument wherein the trade may be one of a purchase of a quantity of the instrument and a sale of 

a quantity of the instrument, the exchange comprising: 

an interface for receiving an incoming order or 

quotation to trade the instrument, the incoming 

order or quotation having a size associated therewith; 

book memory means for storing a plurality of previously received orders or quotations to trade a 

corresponding plurality of quantities of the instrument, the previously received orders and quotations each having a size associated therewith 

and the previously received orders including public customer orders previously entered for public 

customers and professional orders or quotations 

previously entered for one or more professionals; 

system memory means for storing allocating parameters for allocating trades between the incoming order or quotation and the previously received 

orders and quotations; and 

processor means for allocating portions of the incoming order or quotation among the plurality of 

previously received orders and quotations in the 

book memory means based on the allocating parameters in the system memory means, 

wherein the allocating parameters include parameters for allocating a first portion of the incoming 

order or quotation against previously received 

customer orders and allocating a remaining portion of the incoming order or quotation preferentially against professional orders and quotations 

with larger size.

’707 Patent at col. 29, l. 53 – col. 30, l. 14. Claim 2 adds:
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The exchange according to claim 1, wherein processor means further comprises means for matching the remaining portion with professional orders 

or quotations in the book memory means on a pro 

rata basis.

Id. at col. 30, ll. 15–19. This court’s previous opinion

described the claimed invention:

The ’707 Patent, titled “Automated Exchange for

Trading Derivative Securities,” discloses an invention that relates generally to markets for the 

exchange of securities. ’707 Patent, col. 1 ll. 13–

14. In particular, the ’707 Patent is directed to an 

automated exchange for the trading of options 

contracts that allocates trades among market professionals and that assures liquidity. Id. col. 1 ll.

14–17. The Patent distinguishes an “automated”

exchange from the traditional, floor-based “openoutcry” system for trading options contracts. Id.

col. 1 ll. 24–26.

In an open-outcry system, trading takes place 

through oral communications between market 

professionals at a central location in open view of 

other market professionals. Id. col. 1 ll. 27–29. 

For example, an order is typically relayed out to a 

trader standing in a “pit.” Id. col. 1 ll. 29–30. The 

trader shouts out that he has received an order 

and waits until another trader or traders shouts 

back a two-sided market (the prices at which they 

are willing to buy and sell a particular option contract), then a trade results. Id. col. 1 ll. 30–34.

The ’707 Patent builds on this traditional exchange system. Specifically, the Patent purports 

that “[i]t is an advantage of the invention to provide an automated system for matching previously 

entered orders and quotations with incoming orders and quotations on an exchange for securities, 
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which will improve liquidity and assure the fair 

handling of orders.” 

Chicago Bd. Options Exch., Inc. v. Int’l Sec. Exch., LLC, 

677 F.3d 1361, 1363–64 (Fed. Cir. 2012). 

CBOE’s accused product is the “Chicago Board Options Exchange,” which uses the Hybrid Trading System 

(“Hybrid”). The Hybrid system includes a fully screenbased trading system called “CBOEdirect.” The Hybrid 

system integrates CBOEdirect with traditional, openoutcry trading. The previous panel noted that “CBOE has 

described the Hybrid as an integrated single market 

system that blends the elements of open-outcry and 

electronic execution.” Id. at 1365. 

In 2011, CBOE moved for summary judgment that, 

among other limitations, Hybrid lacks an “automated 

exchange.” The district court denied the motion. On 

appeal, this court construed the term “automated exchange” to mean “a system for executing trades of financial instruments that is fully computerized, such that it 

does not include matching or allocating through the use of 

open-outcry.” Id. at 1373. We agreed with the district 

court that the patentee disavowed all manual or partially

automated systems of trading:

The ’707 Patent thus disavows the traditional 

open-outcry or floor-based trading systems. There 

is no other way to interpret the listing in the specification of the many reasons why manual and 

partially automated exchanges cannot sustain the 

growing demands of the market. Indeed, the specification goes well beyond expressing the patentee’s preference for a fully automated exchange 

over a manual or a partially automated one, and 

its repeated derogatory statements about the latter reasonably may be viewed as a disavowal of 

that subject matter from the scope of the Patent’s 

claims. 
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Id. at 1372 (citing Honeywell Int’l, Inc. v. ITT Indus., Inc., 

452 F.3d 1312, 1319 (Fed. Cir. 2006)). Thus, under this 

court’s construction, the claims require a fully computerized trading system that does not include “matching or 

allocating through the use of open-outcry.” While it is 

undisputed that the Hybrid system includes both computerized and open-outcry features, it is not clear to what 

extent these features are intertwined. In particular, 

unresolved in the previous appeal was whether CBOEdirect is a separate system that could, on its own, infringe 

the ’707 Patent or whether is it intertwined with the open 

outcry aspects of the Hybrid system such that it is not an 

“automated exchange.” 

This court also construed “matching” as “identifying a 

counterpart order or quotation for an incoming order or 

quotation” and agreed with the district court that “matching” and “allocating” are distinct processes. Id. at 1371. 

PROCEEDINGS ON REMAND

On remand, the district court made certain evidentiary and other pretrial rulings. ISE stipulated to noninfringement because it felt that the district court’s pretrial rulings prevented it from proving that the accused 

product met the “automated exchange” limitation.

The parties could not agree on a jury instruction regarding the meaning of “automated exchange.” After 

hearing from both sides – including oral argument, written submissions, and a motion for reconsideration from 

ISE – the court ruled that the jury instruction regarding 

the “automated exchange” claim limitation would be:

An automated exchange is a system for executing 

trades of financial instruments that is fully computerized, such that it does not include matching 

or allocating through the use of open outcry. Conversely, a system for executing trades of financial 

instruments that includes matching or allocating 
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through the use of open outcry is not an automated exchange.

The first sentence above is a direct quotation of this 

court’s construction, while the remaining text was added 

by the district court. In the same order, based upon the

“automated exchange” claim construction and what it

knew about the accused product, the district court identified the factual issue that remained for the jury: 

Presumably, ISE will argue that CBOEdirect infringes because it is an automated exchange, i.e., 

a system for executing trades of financial instruments that includes automated matching or allocating (even though it permits matching or 

allocating through open outcry for some trades). 

CBOE will argue that CBOEdirect is not an automated exchange because it does not provide that 

all matching or allocating be done automatically. 

Because CBOEdirect is a computerized trading 

system with a floor-based component for matching 

and allocating some trades through open outcry, it 

will be a jury question whether CBOEdirect is a 

stand alone automated exchange alongside a floorbased system or whether it is a system that includes matching or allocating through open outcry. 

(emphasis added). Thus, the district court recognized 

that ISE would argue that CBOEdirect infringed but also 

recognized that ISE would have to address the degree to 

which CBOEdirect was integrated with the open-outcry 

aspects of Hybrid. When ruling on CBOE’s Motion in 

Limine No. 1, the court elaborated on the factual infringement question for the jury: 

ISE expects to demonstrate that, although 

CBOEdirect may route orders to the floor, 

CBOEdirect also matches and allocates without 

the use of open outcry; thus, CBOEdirect is an automatic exchange.
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The issue for trial is whether Hybrid is merely 

two independent exchanges, one an “automatic 

exchange” (CBOEdirect) and the other open outcry on the trading floor, or whether it is an integrated system that requires interaction with the 

trading floor. As such, ISE will have the burden 

to demonstrate (1) that each element (e.g., interface, book memory means and processor means) of 

one or more claims is present in CBOEdirect, and 

(2) that Hybrid’s “rule-based order routing algorithm” does not include matching or allocating 

through open outcry. This is necessary because 

the ’707 patent disavows floor based trading. In 

other words, ISE must prove that Hybrid is a system for executing trades of financial instruments 

that is fully computerized, such that it does not 

include matching or allocating through the use of 

open outcry.

ISE may offer evidence that the elements of the 

claims of the ’707 patent are found in CBOEdirect 

but it may not argue that, therefore, CBOEdirect 

infringes or that Hybrid’s algorithm that includes 

routing orders to the trading floor is irrelevant.

(footnote omitted). Again, the court recognized the importance of whether CBOEdirect includes the open-outcry 

aspects of Hybrid.

CBOE also moved in limine to exclude certain portions of ISE’s expert testimony. Ruling on this motion, 

the district court noted that “the invention of the ’707 

patent does not encompass Hybrid unless ISE can also 

establish that [Hybrid] is actually two independent trading systems.” The court restated its view of “the issue for 

trial” as “whether Hybrid is actually two independent 

exchanges, one an ‘automatic exchange’ (CBOEdirect) and 

the other open outcry on the trading floor or whether it is 

an integrated system that requires interaction with the 
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trading floor.” The court then ruled that ISE’s expert, Dr. 

Marvin, “may testify but may not express an opinion that 

CBOEdirect infringes unless ISE can show that the 

system of CBOEdirect is independent of floor-based 

trading.”

At a pre-trial hearing, the parties and the court again 

discussed the interplay between Hybrid and CBOEdirect 

as it related to proof of infringement. The court stated: 

“it seems to me that the accused system is Hybrid. However, if CBOEdirect is an independent exchange so that it 

can operate without the [trading] floor, then there could 

be infringement if all the elements of infringement are 

proved.” It went on to state: “the patented process is a 

system for executing trades. Hybrid is a system for executing trades. And these are the two apples that we’re 

going to compare” and “I don’t know what more I can say 

about that that I think the accused system is Hybrid.” 

The district court also found that claim 2, a computer 

implemented means-plus-function claim, was indefinite 

because the specification failed to disclose an algorithm 

for performing the recited function. 

In view of the district court’s rulings in limine and its

description of the factual issue for trial, ISE concluded 

that it could not prove that the accused system met the 

“automated exchange” claim limitation. As such, ISE 

stipulated to non-infringement. Based upon this stipulation, the court entered final judgment and ISE appealed. 

We have jurisdiction under 28 U.S.C. § 1295(a)(1). 

DISCUSSION

The District Court’s Pre-Trial Rulings

ISE argues that the district court erred by “holding 

that” Hybrid is the accused product and “precluding ISE 

from accusing CBOEdirect of infringement.” The district 

court, however, did not preclude ISE from arguing that 

CBOEdirect infringes the ’707 Patent. In fact, on more 
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than one occasion, the district court said just the opposite: 

“if CBOEdirect is an independent exchange so that it can 

operate without the [trading] floor, then there could be 

infringement if all the elements of infringement are 

proved” and “ISE expects to demonstrate that, although 

CBOEdirect may route orders to the floor, CBOEdirect 

also matches and allocates without the use of open outcry; 

thus, CBOEdirect is an automatic exchange.” While the 

court did refer, on occasion, to Hybrid as the accused 

product, it clearly recognized that ISE could prove its 

infringement case if it showed that CBOEdirect, by itself, 

was the claimed automated exchange. For example, the 

court identified “the issue for trial” as “whether Hybrid is 

actually two independent exchanges, one an ‘automatic 

exchange’ (CBOEdirect) and the other open outcry on the 

trading floor or whether it is an integrated system that 

requires interaction with the trading floor.” It also noted 

that “it will be a jury question whether CBOEdirect is a 

stand alone automated exchange alongside a floor-based 

system or whether it is a system that includes matching 

or allocating through open outcry.” Thus, the court did 

not preclude ISE from accusing CBOEdirect of infringing. 

Rather, it expressly invited ISE to show that CBOEdirect 

was independent of the open-outcry aspects of Hybrid, as 

required by this court’s construction of “automated exchange.” 

ISE also argues that, by requiring it to prove that 

CBOEdirect was independent from, or not integrated 

with, Hybrid, the district court improperly added additional limitations to this court’s construction of “automated exchange.” ISE argues that it should have “no burden 

to prove ‘independence’ or to disprove ‘integration’ . . . or 

to mention Hybrid at all; rather, it must prove only that 

CBOEdirect is ‘a system for executing trades of financial 

instruments that is fully computerized, such that it does 

not include matching or allocating through the use of 

open-outcry.’” ISE argues that requiring it to prove that 
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CBOEdirect is not integrated with Hybrid or the trading 

floor violates the mandate rule. See, e.g., Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1324 

(Fed. Cir. 1987) (“[P]rior findings and the claim construction based thereon are the law of the case. They are not 

available for redetermination.”).

The district court correctly framed the factual issue 

remaining for the jury by requiring ISE to show that 

CBOEdirect did not include open-outcry. ISE recognizes 

that, in order to prove infringement, it must show that 

CBOEdirect is “a system for executing trades of financial 

instruments that is fully computerized, such that it does 

not include matching or allocating through the use of 

open-outcry.” As noted above, CBOEdirect is a part of the 

larger Hybrid trading system. The Hybrid system does 

utilize, at least to some extent, “matching or allocating

through the use of open-outcry.” Thus, ISE must demonstrate that CBOEdirect is separate from the open-outcry

aspects of Hybrid. The district court recognized this 

unresolved factual issue on more than one occasion. (“The 

issue for trial is whether Hybrid is merely two independent exchanges, one an ‘automatic exchange’ (CBOEdirect) 

and the other open outcry on the trading floor, or whether 

it is an integrated system that requires interaction with 

the trading floor.”); (noting “the issue for trial” as “whether Hybrid is actually two independent exchanges, one an 

‘automatic exchange’ (CBOEdirect) and the other open 

outcry on the trading floor or whether it is an integrated 

system that requires interaction with the trading floor”). 

We hold that, because this factual issue was unresolved in 

the previous appeal, the trial court did not violate the 

mandate rule by allowing this unresolved issue to go to 

the jury. See, e.g., Del Mar Avionics, 836 F.2d at 1324. 

Indefiniteness of Claim 2

Claim 2, a computer-implemented means-plusfunction claim, recites:
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The exchange according to claim 1, wherein processor means further comprises means for matching the remaining portion with professional orders 

or quotations in the book memory means on a pro 

rata basis.

’707 Patent at col. 30, ll. 15–19. (emphasis added). The

parties agree that the claimed function is precisely what 

the claim recites: “matching the remaining portion with 

professional orders or quotations in the book memory 

means on a pro rata basis.” As noted, this court previously construed “matching” as “identifying a counterpart 

order or quotation for an incoming order or quotation” and 

agreed with the district court that “matching” and “allocating” are distinct processes. Chicago Bd., 677 F.3d at 

1371. 

Relying on Aristocrat Techs. Australia Pty Ltd. v. Int’l 

Game Tech., 521 F.3d 1328, 1333 (Fed. Cir. 2008), the 

district court found that claim 2 was indefinite because 

the specification did not disclose a step-by-step algorithm 

for performing the claimed function. Aristocrat and 

related cases hold that, for means-plus-function claims, 

the corresponding structure in the specification must be a 

step-by-step algorithm, unless a general purpose computer is sufficient for performing the claimed function. 

Aristocrat, 521 F.3d at 1333 (requiring disclosure of an 

algorithm); WMS Gaming Inc. v. Int’l Game Tech., 184 

F.3d 1339, 1349 (Fed. Cir. 1999) (same); ePlus, Inc. v. 

Lawson Software, Inc., 700 F.3d 509, 518 (Fed. Cir. 2012)

(same); In re Katz Interactive Call Processing Patent 

Litig., 639 F.3d 1303, 1316 (Fed. Cir. 2011) (finding that 

disclosure of a general purpose computer is sufficient 

corresponding structure for the means-plus-function 

claims at issue). 

Such an “algorithm” may be expressed “in any understandable terms including as a mathematical formula, in 

prose, or as a flow chart, or in any other manner that 
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provides sufficient structure” to a person of ordinary skill 

in the art. Finisar Corp. v. DirecTV Grp., Inc., 523 F.3d 

1323, 1340 (Fed. Cir. 2008) (internal citation omitted); 

Noah Sys., Inc. v. Intuit Inc., 675 F.3d 1302, 1313 (Fed. 

Cir. 2012) (“When the specification discloses some algorithm, on the other hand, the question is whether the 

disclosed algorithm, from the viewpoint of a person of 

ordinary skill, is sufficient to define the structure and 

make the bounds of the claim understandable.”). We 

must also remember that “a challenge to a claim containing a means-plus-function limitation as lacking structural 

support requires a finding, by clear and convincing evidence, that the specification lacks disclosure of structure 

sufficient to be understood by one skilled in the art as 

being adequate to perform the recited function.” Budde v. 

Harley-Davidson, Inc., 250 F.3d 1369, 1376–77 (Fed. Cir. 

2001). 

We find that claim 2 is not indefinite because the 

specification discloses an algorithm for matching the 

remaining orders on a pro rata basis. First, “matching” 

itself is not indefinite, having been construed by this court 

as “identifying a counterpart order or quotation for an

incoming order or quotation.” Chicago Bd., 677 F.3d at 

1371. The remaining question then is whether the specification discloses an algorithm for “identifying a counterpart order” on a pro rata basis. 

“Pro rata” means in proportion. The summary of the

invention explains that pro rata assignments in the ’707 

Patent are made based upon order size. See ’707 Patent 

at col. 4, ll. 60–64 (“[A]n incoming order is filled first 

against public customer orders and then filled against 

professional orders and quotations on a pro rata basis 

based on the size of the professional order or quotation.”). 

The specification specifically describes matching the 

“remaining” portion of orders on a size-based, pro rata 

basis, as recited in claim 2:
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The remainder of the order is filled by the professionals, PRO #1 and PRO #2 on a pro rata basis. 

Although PRO #1 has time priority, PRO #2 has a 

greater size, so his share is computed first. PRO 

#2 has 20 out of the 30 contracts of the orders 

placed by the two professionals at the lowest offer 

and is entitled to 66% of the 6 remaining contracts, or 4 contracts. The remaining 2 contracts 

are traded by PRO #1. 

. . .

In this case, PRO #1 and PRO #2 have the same 

size, which is greater than PRO #3. Because PRO 

#1 has time priority over PRO #2, PRO #1 gets

matched first. PRO #1 has 40% of the orders 

among the professionals (20/50) and is entitled to 

15 contracts, leaving 21 contracts. PRO #2 has 

now has the largest size and 66% of the size at the 

highest bid (20/30) and is matched for 14 contracts, leaving 7 contracts. PRO #3, the last remaining professional, trades the balance of 7 

contracts.

Id. at col. 18, ll. 1–8; col. 18, l. 63 – col. 19, l. 4 (emphases 

added). Thus, the specification explains that orders are 

matched in proportion to the size of the order requested 

by the professional. It also explains that, if the order 

sizes are equal for two professionals, the professional who 

placed the first order, gets matched first. Based upon this 

discussion of size-based, pro rata matching, a person of 

ordinary skill in the art would understand the algorithmic 

structure for performing the claimed function.

The specification discusses using a similar pro rata 

process to allocate orders. See, e.g., ’707 Patent at col. 16, 

ll. 57–67. At times, the discussion of pro rata allocation 

and the discussion of pro rata matching somewhat overlap. See, e.g., id. at col. 18, l. 61 – col. 19, l. 4 (stating that 

the contracts are “allocated” on a pro rata basis before 
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describing “matching” contracts on a pro rata basis). 

According to CBOE, because this court construed allocating and matching as distinct processes, any discussion of 

pro rata allocating cannot provide structure for pro rata

matching. It may be correct that, if the specification 

disclosed only pro rata allocation, there would not be

sufficient structure for the claimed pro rata matching

function. But this is not the case. As outlined above, the 

specification outlines an algorithm for matching on a sizebased, pro rata basis. The disclosure of pro rata allocation does not detract from the disclosure of pro rata 

matching. Indeed, a person of ordinary skill in the art 

would likely look to the similar pro rata allocating process 

when implementing pro rata matching. Additionally, 

simply because the pro rata aspects of allocation and 

matching may be similar, or even the same, does not 

mean that the overall processes are no longer “distinct.” 

As an example, two distinct calculation processes may 

both use addition but remain distinct overall.

The district court erred in finding that there was clear 

and convincing evidence that the specification did not 

disclose sufficient structure such that a person of ordinary 

skill in the art would know how to match on a pro rata 

basis. While it is true that the specification also discusses 

pro rata allocating, this does not detract from the disclosure of pro rata matching such that claim 2 is indefinite. 

Accordingly, we reverse the district court’s decision that 

claim 2 is indefinite. 

AFFIRMED-IN-PART AND REVERSED-IN-PART

COSTS

Each party shall bear its own costs.