Chicago Board Options Exchange, Inc. v. International Securities Exchange, LLC
677 F.3d 1361
| Fed. Cir. | 2012Background
- ISE and CBOE dispute patent compliance of the '707 patent on an automated exchange for trading options; district court construed system memory means, matching, and automated exchange and denied leave to amend; the district court held no infringement but denied amendments on inequitable conduct; the patent disavowed floor-based trading; the case was appealed and remanded for construction-based proceedings.
- The Hybrid Trading System combines electronic and open-outcry trading; the '707 patent discloses parameters stored in system memory affecting trade allocation.
- Claim construction was central to summary judgment on infringement, and equitable conduct was at issue in CBOE's motion to amend.
- The panel held that the district court erred in several constructions and remanded for further proceedings; the denial of leave to amend was affirmed.
- The court clarified that automated exchange is a system, not a method, and that allocat ing and matching are distinct processes under the claims.
- The ultimate disposition was AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART, and REMANDED.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| System memory means scope | ISE: system memory is the structure; bid/offer processes need not be included | CBOE: system memory plus bid/offer processes are the structure | System memory means confines to system memory only; bid/offer processes not required as structure. |
| Is matching based solely on price? | ISE: matching includes size and time priority, not just price | CBOE: district court properly limited to price-based matching | Matching can be based on pro rata and time priority, not solely price. |
| Automated exchange as a method vs. system | ISE: automated exchange is a system for executing trades | CBOE: district court treated it as a method | Automated exchange construed as a fully computerized system, not a method. |
| Denial of leave to amend inequitable conduct | ISE: district court abused discretion by denying amendment | CBOE: delay and lack of diligence supported denial | District court did not abuse its discretion; denial affirmed. |
Key Cases Cited
- Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (de novo claim construction standard)
- Atmel Corp. v. Info. Storage Devices, Inc., 198 F.3d 1374 (Fed. Cir. 1999) (means-plus-function structure disclosure)
- Budde v. Harley-Davidson, Inc., 250 F.3d 1369 (Fed. Cir. 2001) (read the specification as a whole to determine corresponding structure)
- Med. Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205 (Fed. Cir. 2003) (linking structure to claimed function requires clear association)
- Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc guidance on claim construction sources)
- Honeywell Int'l, Inc. v. ITT Indus., Inc., 452 F.3d 1312 (Fed. Cir. 2006) (disavowal of prior art or subject matter limits claim scope)
- CAE Screenplates, Inc. v. Heinrich Fiedler GMBH & Co. KG, 224 F.3d 1308 (Fed. Cir. 2000) (different terms imply different meanings absent evidence to the contrary)
- SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360 (Fed. Cir. 2010) (principles on distinguishing matching vs. allocating)