PTAB Invalidates Nasdaq Patent Claims on Automated Securities Trading in Series of CBMs

“Christine Morgan of Reed Smith, who represented MIAX, said that the claims at issue in these cases covered information manipulation technologies that have consistently been deemed ineligible by the Federal Circuit.”

Nasdaq - October 9, the Patent Trial and Appeal Board issued a final written decision in a covered business method (CBM) review which invalidated all 38 claims of Nasdaq’s U.S. Patent No. 7747506, Recipient Status Indicator System and Method, challenged by Miami International Holdings (MIAX), on Section 101 grounds for being directed to unpatentable subject matter. The decision is the latest in a series of CBM reviews at the PTAB which stem from a district court patent infringement proceeding targeting fintech technologies employed by MIAX’s technological securities trading platform.

A Series of Unfortunate Events for Nasdaq

The decision on the ‘506 patent issued October 9 is the latest bit of bad news for Nasdaq, who also lost on a few PTAB decisions issued the week prior. On October 3, MIAX announced that final written decisions were issued in CBM reviews that invalidated all claims of two other Nasdaq patents: U.S. Patent No. 7246093, Automated Exchange for Trading Derivative Securities; and U.S. Patent No. 6618707, same title as the ‘093 patent. The following day, on October 4, MIAX announced the results of another CBM final written decision invalidating all 49 claims from Nasdaq’s U.S. Patent No. 7921051, Security-Based Order Processing Technique. Then, on October 11, after the ‘506 patent claims were invalidated, MIAX announced that the PTAB had invalidated all claims of Nasdaq’s U.S. Patent No. 8386371, Method and System for Canceling Orders for Financial Articles of Trades.

These patents were asserted by Nasdaq in a lawsuit alleging claims of patent infringement and trade secret misappropriation against MIAX in the District of New Jersey back in September 2017. That suit alleged that MIAX infringed upon the patents-in-suit through technologies incorporated into options trading platforms launched in 2012 and 2017. Along with the patent claims recently invalidated by the PTAB, that district court suit involves one other patent currently being challenged in a CBM review which has been instituted and is awaiting a final written decision expected in November. That patent is U.S. Patent No. 7933827, Multi-Parallel Architecture and a Method of Using the Same. Another patent, U.S. Patent No. 7599875, Dual Quote Market System, was voluntarily dismissed by Nasdaq from the district court litigation after a CBM review proceeding was instituted upon that patent as well.

CBM review proceedings give petitioners more grounds for invalidity than can be pursued in inter partes review (IPR) proceedings, which far outnumber CBM proceedings at the PTAB, but petitioners have to show that a challenged patent is eligible for CBM review as covering a covered business method. As the final written decision on the ‘506 patent shows, the PTAB employs a two-prong test to determine CBM eligibility after a showing has been made that the patent claims encompass a financial activity. First, the challenged claims are examined to see if they recite any novel and nonobvious technological features. Second, the PTAB determines whether the claimed subject matter as a whole solves a technical problem using a technical solution. In the case of the ‘506 patent, Nasdaq’s argument that the functional recitations of the claims are required to be considered novel and nonobvious technological features failed after the PTAB found that the alleged technical features weren’t recited in claims directed to a four-step computer-implemented process. On the second prong, Nasdaq argued that the patent claims recited a solution to a problem found in distributed networks related to determining whether a computing device was online or offline, but the PTAB found that the claims covered techniques to ensure that a recipient receives messages, a problem in message delivery that isn’t limited to the realm of computers.

The Importance of Expert Witnesses at the PTAB

Lisa Chiarini, Partner at Reed Smith and part of the legal team representing MIAX in the CBM reviews challenging Nasdaq’s ‘506, ‘051, ‘827 and the withdrawn ‘875 patents, credited much of MIAX’s success at the PTAB on the ability to choose experts who were skilled at conveying that elements of Nasdaq’s patent claims were well-understood, routine and conventional for purposes of proving Section 101 invalidity. “You’re not dealing with a jury at the PTAB,” Chiarini said. “You’re dealing with three judges that have scientific backgrounds and they’re lawyers, so you have to consider that audience.” While MIAX used one expert witness in the ‘506 CBM, two experts were utilized in the other CBMs to provide testimony on trading floor practices that were analogous to the patent claims, as well as another expert who was an expert in communications systems. “At the end of the day, these patents essentially covered aspects of old, generic communications systems used as tools for automatic aspects of securities trading,” Chiarini said. “For Section 101, limiting the claims to a particular field of use doesn’t transform an abstract idea into a patentable invention.”

Christine Morgan, Partner at Reed Smith and another member of MIAX’s legal team, added that the claims at issue in these cases covered information manipulation technologies that have consistently been deemed ineligible by the Federal Circuit. “Section 101 gets a lot of airtime in the press as being an unmanageable body of law, but in the case of information manipulation patents, the line is pretty clear,” she said.

Rob Sokohl of Sterne Kessler Goldstein & Fox, who acted as counsel for Nasdaq in the CBM on the ‘056 patent, said that Nasdaq had no comment on the cases.

Proceedings Feature Unique Issues of Representation

The CBM proceeding on Nasdaq’s ‘051 patent included Morgan, arguing for MIAX, and Michelle Holoubek of Sterne Kessler arguing for Nasdaq. The panel of APJs included Toni Schiener, Meredith Petravick and Kristi Sawert. Given the current conversation about female representation among inventors in the wake of the SUCCESS Act, the all-female team of both counsel and APJs in the ‘051 CBM is noteworthy.

While Reed Smith represented MIAX in four CBM review proceedings stemming from Nasdaq’s district court lawsuit, lawyers from Fish & Richardson represented MIAX in CBMs challenging the other three patents asserted by Nasdaq. Those proceedings have proven to be more controversial, with Nasdaq filing a motion last December to disqualify Fish & Richardson from representing MIAX at the PTAB because of that firm’s prior representation of Nasdaq. Whereas Nasdaq’s challenge resulted in disqualifying Fish & Richardson from representing MIAX in the district court proceedings, the PTAB denied Nasdaq’s request to disqualify counsel.  According to the PTAB’s analysis, factors that weighed most heavily against disqualifying Fish & Richardson included the fact that Fish & Richardson wasn’t involved in the prosecution of the challenged patent and the untimeliness of Nasdaq’s challenge, filed more than half a year after Nasdaq made the same challenge in the district court proceeding.

Image Source: Deposit Photos
Image ID: 64079551
Copyright: toxawww 



Warning & Disclaimer: The pages, articles and comments on do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of Read more.

Join the Discussion

8 comments so far.

  • [Avatar for Someone]
    October 16, 2019 01:48 pm

    So who needs section 103?

    “Surplusage Canon. If possible, every word and every provision is to be given effect (verba cum effectu sunt accipienda). None should be ignored. None should needlessly be given an interpretation that causes it to duplicate another provision or to have no consequence.”


  • [Avatar for Jam]
    October 16, 2019 01:41 pm

    Striking down patents left and right. It’s gone past the point of reasonable minds may disagree. Imagine what would happen if real property was held by the court as abstract ideas.

    “Oh that title you have? Oh, that’s just describing the abstract idea of that property, not the property itself, therefore, that property is ineligible to be titled and so now anyone can use that property you used to own. Now be a good little peon and go buy title to some more land so we can take that away too.”

  • [Avatar for Anon]
    October 16, 2019 11:23 am

    Paul @ 3,

    Because the Chinese learned the lesson of Kruschev and operate without drawing such direct attention (and we — the royal “We” are only too happy to hand over the rope).

  • [Avatar for Concerned]
    October 16, 2019 09:01 am


    Thank you and I agree with your observation. As bad as SCOTUS was with Alice, that ruling is expanded even further by unsubstantiated fathom statements within Alice.


    Congress wrote s101
    SCOTUS penned Alice and Benson
    USPTO authored the 2019 guidelines

    Up and down the authoritative ladder a new and useful process is still patentable without the computer hardware mandate and even with an abstract concept.

    Why are the middlemen (District Court, CAFC, and PTAB) calling all the contrary shots and insisting on a computer hardware mandate? Why has SCOTUS not corrected the middlemen and accepted cert on many occasions? Where is Congress?

    A smokescreen to eliminate patents in the computer arts?

  • [Avatar for Anon]
    October 16, 2019 07:46 am


    Seek not the law as written by Congress, but instead look forward as the law is being re-written through the tool of Common Law law writing.

    (and never you mind that this particular law is statutory law, allocated per our Constitution to be within the sole domain of the Legislative branch).


  • [Avatar for Paul Morinville]
    Paul Morinville
    October 15, 2019 10:52 pm

    Can anyone tell me why fintech is owned by the Chinese?

  • [Avatar for Concerned]
    October 15, 2019 08:53 pm

    Please educate me.

    Where in Alice do the claims have to improve the computer itself? Where oh Where?

    S101, Benson and 2019 guidance state new and useful or practical application, void of the computer mandate, even on an abstract idea.

  • [Avatar for Pro Say]
    Pro Say
    October 15, 2019 07:41 pm

    NASDAQ was robbed, repeatedly.

    Properly treated and analyzed ; their patents were not — and are not — eligible for CBMRs.

    Properly treated and analyzed; their patents pass SCOTUS’ Alice test — though unconstitutional it be.

    But hey — it is almost Halloween after all, and we surely don’t want to take off our Death Squad masks now . . .

    . . .and yet another bastion of American free enterprise loses its ability to protect its valuable innovations from free loaders the world over.

    Congress: Where? Are? You?

    How much longer must our Country wait for you to return our beleaguered patent system to its former world-leading gold standard?

    How? Much? Longer?