United States Court of Appeals for the Federal Circuit __________________________
CHICAGO BOARD OPTIONS EXCHANGE, INC., Plaintiff-Cross Appellant, v. INTERNATIONAL SECURITIES EXCHANGE, LLC, Defendant-Appellant. __________________________
2011-1267, -1298 __________________________
Appeal from the United States District Court for the Northern District of Illinois in Consolidated Case Nos. 07-CV-0623 and 07-CV-4709, Judge Joan H. Lefkow. ___________________________
Decided: May 7, 2012 ___________________________
DAVID FRANCESCANI, Fish & Richardson P.C., of New York, New York, argued for plaintiff-cross appellant. With him on the brief were JONATHAN A. MARSHALL, MICHAEL T. ZOPPO, BRIAN J. DOYLE and LINZY MCCARTNEY.
PARKER H. BAGLEY, Goodwin Procter, LLP, of New York, New York, argued for defendant-appellant. Of counsel on the brief were STEVEN R. GUSTAVSON, MICHAEL S. DE VINCENZO, CALVIN E. WINGFIELD, JR. and CHARLES WIZENFELD. Of counsel was BENJAMIN A. KELLER.
* Honorable Jeremy Fogel, District Judge for the United States District Court for the Northern District of California, sitting by designation. CHICAGO BOARD v. INTL SECURITIES 2
________________________
Before RADER, Chief Judge, WALLACH, Circuit Judge, and FOGEL, District Judge.* WALLACH, Circuit Judge. International Securities Exchange, LLC (“ISE”) ap- peals from a final judgment entered by the United States District Court for the Northern District of Illinois, holding that the trading system of Chicago Board Options Ex- change, Inc. (“CBOE”) does not infringe ISE’s United States Patent No. 6,618,707 (“the ’707 Patent”). CBOE cross-appeals the district court’s denial of its motions for leave to amend its Complaint. Because the district court erred in construing “system memory means,” “matching,” and “automated exchange,” and did not abuse its discre- tion in denying CBOE’s motions for leave to amend its Complaint, we AFFIRM-IN-PART, REVERSE-IN-PART, VACATE-IN-PART, and REMAND. BACKGROUND 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” ex- change from the traditional, floor-based “open-outcry” 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 profession- als. Id. col.1 ll.27-29. For example, an order is typically 3 CHICAGO BOARD v. INTL SECURITIES
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 quota- tions with incoming orders and quotations on an exchange for securities, which will improve liquidity and assure the fair handling of orders.” Id. col.4 ll.55-59. Figure 2 of the ’707 Patent illustrates the exchange in detail: CHICAGO BOARD v. INTL SECURITIES 4
The data interface 23 performs error checking, data compression, encryption, and mediates the exchange of data between the exchange and public customers, profes- sionals, and other entities. Id. col.8 ll.56-60; Fig. 2. Order and quotation information received via the interface 23 is sent to the order process 25. ’707 Patent, col.8 ll.64-66. The order process 25 first checks to see if the order or quotation is valid according to programmable parameters that reflect the particular trading rules of the entity administering the invention. Id. col.8 l.66-col.9 l.2. Order process 25 also checks, among other things, whether a fast market condition (i.e., high market volatility) exists, whether the order is a public customer or professional 5 CHICAGO BOARD v. INTL SECURITIES
order, and what prices are in the away markets. See generally id. col.9. Under certain conditions, upon deter- mining that a better price does not exist in an away market, order process 25 sends orders to the bid matching process 34 (offers to buy) and to the offer matching proc- ess 36 (offers to sell). Id. col.9 ll.58-64. Accordingly, representative claim 1 recites, in part: 1. 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 . . . book memory means . . . system memory means for storing allocat- ing parameters for allocating trades be- tween the incoming order or quotation and the previously received orders and quota- tions; and processor means . . . . Id. col.29 l.53-col.30 l.15. CBOE operates the Chicago Board Options Exchange using the Hybrid Trading System (the “Hybrid”), which allegedly infringes the ’707 Patent. The Hybrid inte- grates a version of CBOEdirect, a fully screen-based trading system, with open-outcry trading. CBOE has described the Hybrid as an integrated single market system that blends the elements of open-outcry and electronic execution. ISE instituted the underlying lawsuit against CBOE for patent infringement in the United States District Court for the Southern District of New York. Subse- CHICAGO BOARD v. INTL SECURITIES 6
quently, CBOE sued ISE at the United States District Court for the Northern District of Illinois seeking, among other relief, a declaratory judgment that the ’707 Patent is invalid, is not infringed by CBOE, and is unenforceable against CBOE because of inequitable conduct by ISE before the United States Patent and Trademark Office. The New York action eventually was transferred to the Northern District of Illinois where the cases were consoli- dated. On January 25, 2010, the district court issued its final claim construction order. On April 15, 2010, CBOE moved for summary judgment of noninfringement based on the district court’s construction of the terms “system memory means,” “matching,” and “automated exchange.” On March 2, 2011, the district court denied CBOE’s motion to the extent that motion was based upon the “automated exchange” limitation, but granted the motion with respect to “system memory means” and “matching.” ISE appeals the district court’s claim construction of the three limita- tions and the resulting summary judgment decision. Prior to CBOE’s motion for summary judgment, the district court twice denied CBOE’s motion for leave to amend its Complaint, denials that CBOE now cross- appeals. We have jurisdiction over both appeals pursuant to 28 U.S.C. § 1295(a)(1). DISCUSSION ISE raises three issues on appeal: (1) whether the dis- trict court erred in construing “system memory means” and further erred in granting summary judgment of noninfringement with respect to claims 1-6, 9-10, and 22- 33 of the ’707 Patent based on its construction of “system memory means”; (2) whether the district court erred in construing “matching” and further erred in granting summary judgment of noninfringement with respect to 7 CHICAGO BOARD v. INTL SECURITIES
claims 35, 36, 43, 45, and 56-58 of the ’707 Patent based on its construction of “matching”; and (3) whether the district court erred in construing “automated exchange.” By its cross-appeal, CBOE raises the issue of whether the district court abused its discretion in denying CBOE leave to amend the inequitable conduct allegations in its Com- plaint. I. We review a district court’s claim construction de novo. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454-55 (Fed. Cir. 1998) (en banc). Likewise, “[a] district court’s identification of the function and corresponding structure of a means-plus-function limitation is . . . re- viewed de novo.” JVW Enters., Inc. v. Interact Accessories, Inc., 424 F.3d 1324, 1329 (Fed. Cir. 2005) (citation omit- ted). To ascertain the scope and meaning of the asserted claims, we look to the words of the claims themselves, the specification, the prosecution history, and, if necessary, any relevant extrinsic evidence. Phillips v. AWH Corp., 415 F.3d 1303, 1315-17 (Fed. Cir. 2005) (en banc). A. The district court erred in holding that the corre- sponding structure for “system memory means” included a system memory, a bid matching process, and an offer matching process. Claim 1, representative of the asserted apparatus claims, recites, in pertinent part: “An auto- mated exchange for trading a financial instrument . . . , the exchange comprising: . . . system memory means for storing allocating parameters for allocating trades be- tween the incoming order or quotation and the previously received orders and quotations . . . .” ’707 Patent, col.29 ll.53-56, col.30 ll.1-4 (emphasis added). The district court construed “system memory means” to be a means-plus- function limitation and construed its function to be “stor- CHICAGO BOARD v. INTL SECURITIES 8
ing parameters of the entity administering the invention for allocating trades between the incoming order or quota- tion and the previously received orders and quotations.” Joint Appendix (“J.A. __”) 34. The district court also held that the corresponding structure includes three separate components: a system memory; a bid matching process; and an offer matching process. Id. The parties’ dispute lies in the district court’s con- struction of the limitation’s corresponding structure. Specifically, ISE argues that the district court erred in holding that the bid matching process and the offer matching process are necessarily included as structure of “system memory means” along with a system memory. ISE also avers that sufficient structure is disclosed in the claim language itself to overcome the presumption of a means-plus-function limitation. CBOE contends that the district court did not err in including the bid matching process and the offer matching process as part of the structure of a “system memory means” because the stor- ing of allocating parameters for professional orders occurs in the system memory and the storing of allocating pa- rameters for public customer orders occurs in the bid matching and offer matching processes. As an initial matter, ISE’s contention that the recita- tion of “system memory” is sufficient structure to over- come the presumption of a means-plus-function limitation was not before the district court. The parties expressly agreed during claim construction that “system memory means” is a means-plus-function limitation. J.A. 11. ISE may not take a different position on appeal. See Lazare Kaplan Int’l, Inc. v. Photoscribe Techs., Inc., 628 F.3d 1359, 1376 (Fed. Cir. 2010) (“As we have repeatedly explained, litigants waive their right to present new claim construction disputes if they are raised for the first time 9 CHICAGO BOARD v. INTL SECURITIES
after trial.”) (citation and quotation omitted). 1 We there- fore turn to the district court’s interpretation of the corre- sponding structure for “system memory means,” which we treat as a mean-plus-function limitation. Means-plus-function limitations are governed by 35 U.S.C. § 112, ¶ 6, which provides: An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure . . . in support thereof, and such claim shall be con- strued to cover the corresponding structure . . . described in the specification and equivalents thereof. As such, § 112, ¶ 6 “represents a quid pro quo by permit- ting inventors to use a generic means expression for a claim limitation provided that the specification indicates what structure(s) constitute(s) the means.” Atmel Corp. v.
1 Even if this argument was not waived, the pre- sumption that “system memory means” is a means-plus- function limitation is not overcome. Specifically, the claim language fails to sufficiently recite the correspond- ing structure of “system memory means.” In particular, the limitation articulates a function, but nowhere in the language of the limitation is there a specific and definite structure of a “system memory means.” As a result, this limitation as drafted does not aid a skilled artisan in ascertaining its corresponding structure because no such structure is sufficiently recited. See Serrano v. Telular Corp., 111 F.3d 1578, 1582 (Fed. Cir. 1997) (“The ‘deter- mination means’ limitation . . . recites a means for deter- mining the last digit without reciting definite structure in support of that function, and that limitation therefore is a ‘means plus function’ limitation . . . .”). Accordingly, “system memory means . . .” is a means-plus-function limitation. CHICAGO BOARD v. INTL SECURITIES 10
Info. Storage Devices, Inc., 198 F.3d 1374, 1381 (Fed. Cir. 1999). Construction of a means-plus-function limitation in- volves two steps. First, the court must identify the claimed function. Applied Med. Res. Corp. v. U.S. Surgi- cal Corp., 448 F.3d 1324, 1332 (Fed. Cir. 2006). Second, the court must identify the corresponding structure in the specification that performs the recited function. Id. The parties’ dispute in this case concerns only the second step. It is well-established that the “specification must be read as a whole to determine the structure capable of performing the claimed function.” Budde v. Harley- Davidson, Inc., 250 F.3d 1369, 1379 (Fed. Cir. 2001). A “structure disclosed in the specification is corresponding structure only if the specification or prosecution history clearly links or associates that structure to the function recited in the claim.” Med. Instrumentation & Diagnos- tics Corp. v. Elekta AB, 344 F.3d 1205, 1210 (Fed. Cir. 2003) (citation omitted). “The duty of a patentee to clearly link or associate structure with the claimed func- tion is the quid pro quo for allowing the patentee to express the claim in terms of function under section 112, paragraph 6.” Id. at 1211 (citations omitted). Thus, “[i]f an applicant fails to set forth an adequate disclosure, the applicant has in effect failed to particularly point out and distinctly claim the invention . . . .” Biomedino, LLC v. Waters Techs. Corp., 490 F.3d 946, 948 (Fed. Cir. 2007) (citation omitted). Whether the specification “adequately sets forth structure corresponding to the claimed function necessitates consideration of that disclosure from the viewpoint of one skilled in the art.” Budde, 250 F.3d at 1376. In this case, system memory is the disclosed structure clearly associated with “system memory means.” CBOE 11 CHICAGO BOARD v. INTL SECURITIES
attempts to draw a fine line with a broad brush by con- tending that the system memory alone does not store allocating parameters for both public customer and pro- fessional orders as the claims require. Based on this premise, CBOE argues that the bid and offer matching processes must be included as structure of a “system memory means” because the bid and offer matching processes store allocating parameters pertaining to public customer orders while the system memory stores allocat- ing parameters related to professional orders. The speci- fication, however, tells a different tale as system memory indeed is linked with storing allocating parameters for both types of orders. For example, certain parameters for determining whether an incoming public customer order is automati- cally traded are, in fact, stored in the system memory: The derive or trade process 32 will either . . . automatically match an incoming public customer order that improves the market for fewer than 10 contract at the order’s stated price, or else derive an order for the [Professional] at the stated price at the order so that the size of the best price will be 10 contracts. Whether an order is automati- cally traded or whether an order is derived is de- termined by a parameter stored in the system memory 26. ’707 Patent, col.22 ll.32-39 (emphases added). Likewise, the Patent describes a set of predetermined parameters stored in the system memory that pertain to public cus- tomer orders that are either traded or stored based on away market prices: The away market process 28 either trades the public customer order automatically against the [Professional] at the same price as the better price CHICAGO BOARD v. INTL SECURITIES 12
in the away market 17 or else stores the order in the book memory 33 and alerts the [Professional] to the order according to a set of predetermined parameters stored in the system memory 26 by the [Professional]. Id. col.9 ll.46-51 (emphases added). 2 In yet another example, fast market parameters are stored in the system memory that introduce time delays and determine opti- mal price for executions based upon orders and quotes that accumulate during the delay. Id. col.9 ll.14-22. Because optimal price is determined based on orders and quotes that accumulate during the delay, the parameters stored in the system memory necessarily pertain to all orders, including public and professional orders. 3
2 Professional” refers to Primary Market Mak- ers (“PMMs”), Competitive Market Makers (“CMMs”), or Electronic Market Makers (“EAMs”) as articulated in the Patent. See ’707 Patent, col.6 l.62-col.7 l.11. 3 The prosecution history of the ’707 Patent further confirms that the patentee contemplated and desired to clarify that the system memory, in fact, stored allocating parameters for both professional and public customer orders:
Claims 1 and 35, as filed, recite the identification of customer and professional orders and the use of a stored parameter to allocate portions of an incoming order among previously received orders. Thus, as discussed below, claims 1 and 35, as well as the claims which depend from them, prior to the present amendment, are submitted as pat- entable over the prior art. Nonetheless, to more clearly show that parameters stored in the system memory are used to allocate portions of an incom- ing order or quotation, amended claims 1 and 35 recite this as an “allocating” parameter. 13 CHICAGO BOARD v. INTL SECURITIES
Despite this language in the specification, CBOE con- tends that the bid matching process and the offer match- ing process “store” allocation parameters because they “apply” and “contain” allocation parameters. In effect, CBOE argues that “store,” “apply,” and “contain” have similar meanings. See Bid for Position, LLC v. AOL, LLC, 601 F.3d 1311, 1317-18 (Fed. Cir. 2010) (holding “bid” and “value of the bid” to have the same meaning because the claim language and specification used the terms inter- changeably). We disagree. The term “store” or a derivation thereof is associated with “system memory” or “book memory” or a “memory” every time the term is used in the specification. Nowhere is “system memory” or “book memory” associated with “apply” or “contain.” Nothing in the Patent suggests that “storing” and “applying” are used interchangeably in reference to allocating parameters. Hence, CBOE’s contention that the bid matching process and the offer matching process “store” allocating parameters fails because the Patent does not ascribe the same meaning for “apply,” “contain,” and “store.” The general presumption that different terms have different meanings remains. See CAE Screenplates, Inc. v. Heinrich Fiedler GmbH & Co. KG, 224 F.3d 1308, 1317 (Fed. Cir. 2000) (“In the absence of any evidence to the contrary, we must presume that the use of these different terms in the claims connotes differ- ent meanings.”). Accordingly, we construe the function of “system memory means” to be “storing parameters of the entity administering the invention for allocating trades between the incoming order or quotation and the previ- ously received orders and quotations.” The clearly linked
Response to Office Action dated November 2, 1999 at 29 (emphases added), J.A. 2130. CHICAGO BOARD v. INTL SECURITIES 14
structure associated with this function is “system mem- ory.” B. The district court concluded that “matching” and “al- locating” are distinct processes, and we agree. However, the district court erred by concluding that “matching” may be based on price only. Claims 35 and 56 are repre- sentative of the asserted method claims. Claim 35 recites: 35. A process for trading a financial instrument on an automated exchange wherein the trade may be one of a purchase of a quantity of the instru- ment and a sale of a quantity of the instrument, the process comprising: ... first matching a first portion of the incom- ing order or quotation against the public customer order stored in the book memory based on the allocating parameter; and second matching a remaining portion of the incoming order or quotation preferen- tially against professional orders and quo- tations with larger size based on the allocating parameter. ’707 Patent, col.35 ll.23-26, 40-47 (emphases added). In addition, claim 56 states, in part: “matching the incoming order or quotation against the orders and quotations stored in the book memory based on the allocating pa- rameter . . . .” Id. col.39 ll.18-20 (emphases added). The district court construed “matching” to mean “identifying a counterpart order or quotation for an in- coming order or quotation based on price.” J.A. 32. It also construed “allocating” to mean “dividing all or portions of 15 CHICAGO BOARD v. INTL SECURITIES
the incoming order or quotation among the previously received orders and quotations.” J.A. 31. It construed “allocating parameters” as “rules for dividing portions of the incoming order or quotation among the previously received orders and quotations,” and determined that allocating and matching are distinct processes. J.A. 29, 32. ISE contends that the district court’s construction limiting “matching” as based on price alone is not sup- ported by the specification, and otherwise, renders other claims internally inconsistent. It also claims that “allo- cating” and “matching” are not distinct processes, and instead, that “allocating” is part of the “matching” proc- ess. The plain language of the ’707 Patent shows that “matching” cannot be based on price only. Claim 35 recites: “matching a remaining portion of the incoming order or quotation . . . against professional orders and quotations with larger size based on the allocating pa- rameter.” ’707 Patent, col.35 ll.44-47. Claim 2 also pro- vides that matching is based on a pro rata basis. Id. col.30 l.18. Additionally, claim 4 recites matching based on an allocation formula. Id. col.30 l.55. Thus, the claim lan- guage supports ISE’s argument that “matching” cannot be based on price only. The specification offers further support for ISE’s con- tention. It provides that “when all stored public customer orders at the best price have been matched, then profes- sional orders and quotations are matched on a pro rata basis.” ’707 Patent, col.6 ll.1-3 (emphasis added). “Time priority” is another basis on which “matching” can occur: “In this case, [Professional] #1 and [Professional] #2 have the same size, which is greater than [Professional] #3. Because [Professional] #1 has time priority over [Profes- CHICAGO BOARD v. INTL SECURITIES 16
sional] #2, [Professional] #1 gets matched first.” Id. col.18 ll.63-66 (emphases added). 4 Thus, while price is one basis that may apply to all matches, it is not the only basis of “matching.” The parties also dispute whether and to what extent “matching” and “allocating” are distinct or of the same process. While ISE appears to concede that “matching” and “allocating” are different, it maintains that they are part of a single process. 5 CBOE disagrees contending that “allocating” is a process that is distinct from “match- ing.” We conclude that “matching” and “allocating” are, indeed, distinct processes. The claim language supports this distinction. Claim 1 recites, in relevant part, a processor means: for allocating portions of the incoming order or quotation . . . , wherein the allocating parameters include parameters for allocating a first portion of the incoming order or quotation . . . and allocating
4 As discussed above in reference to claim 35, orders and quotations may further be matched based on size: “[Professional] #2 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. [Professional] #3, the last remaining professional, trades the balance of 7 contracts.” ’707 Patent, col.19 ll.1-4 (emphases added). 5 CBOE contends that ISE is precluded from argu- ing that “allocating” and “matching” are not different and that matching is not based on price because it agreed otherwise during the Markman hearing. A review of the hearing transcripts does not support CBOE’s contention. ISE did not represent that “allocating” and “matching” were distinct. On the contrary, ISE expressly stated on the record that the two terms were different yet part of the same process. J.A. 9011-13. 17 CHICAGO BOARD v. INTL SECURITIES
a remaining portion of the incoming order or quo- tation . . . . ’707 Patent, col.30 ll.5-13 (emphases added). Dependent claim 2 provides a further limitation to claim 1: ”[t]he exchange according to claim 1, wherein processor means further comprises means for matching the remaining portion . . . .” Id. col.30 ll.15-18 (emphasis added). These claims indicate that “matching” and “allocating” are distinct because “the presence of a dependent claim that adds a particular limitation gives rise to a presumption that the limitation in question is not present in the inde- pendent claim.” 6 Phillips, 415 F.3d at 1315. This pre- sumption is not rebutted by the specification. In describing the Trading Process, the specification provides: As a first example . . . [a]t step S170, the bid matching process determines that all 4 contracts in the incoming order have [to] be matched. The match between the incoming order and the cus- tomer order in the book memory 33 is sent to the execute trade process 27 in step S172. As a second example . . . . [a]s shown in FIG. 4(a), the bid matching process 34 completes step S168 as above, matching 10 contracts of the incoming
6 Other claims recite similar limitations that dis- tinguish between “allocating” and “matching.” Specifi- cally, claim 35 provides “second matching a remaining portion of the incoming order or quotation preferentially against professional orders and quotations with larger size based on the allocating parameter.” ’707 Patent, col.35 ll.44-47 (emphasis added). Depending on claim 35, claim 36 recites: “The process according to claim 35, wherein the step of second matching further comprises allocating the remaining portion among the plurality of professional orders and quotations on a pro rata basis.” ’707 Patent, col.35 ll.48-51 (emphasis added). CHICAGO BOARD v. INTL SECURITIES 18
order with the public customer order to sell 10 contract[s] at 3 1/2. At step S170, however, the bid matching process 34 determines that there are still 20 contracts . . . . The bid matching process then applies the allocation algorithm as illus- trated in FIG. 4(b). FIG. 4(b) shows an allocation formula for match- ing incoming orders against quotations and pro- fessional orders at the best price . . . . [T]he balance of the incoming order of 20 contracts is al- located among [different Professionals] according to the following formula . . . ’707 Patent, col.16 ll.1-34 (emphases added). As the first example indicates, all incoming orders initially are “matched” to public customer orders, and where no incom- ing orders remain to be filled, the order is executed. In the second example, the incoming order is initially “matched” to the available public customer orders. Where there are remaining incoming orders, the balance of the incoming order is then “allocated” among quotations and professional orders. In addition, the ’707 Patent’s ab- stract describes an “exchange [that] allocates the match- ing of orders first to fill customer orders and then to fill professional orders on a pro rata basis.” These examples show that “matching” occurs at some point that is distinct from “allocating.” Based on the claims and the specification, we conclude that “allocating” and “matching” are distinct processes. We often assume different terms convey different mean- ings. SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360, 1369 (Fed. Cir. 2010) (citation omitted). The ’707 Patent does not teach otherwise in this instance. Accord- ingly, we construe “matching” as “identifying a counter- part order or quotation for an incoming order or 19 CHICAGO BOARD v. INTL SECURITIES
quotation.” We hold that “matching” is a process that is distinct from “allocating.” C. Although the district court did not err in holding that the ’707 Patent disavowed all floor-based exchange sys- tems, it did err in determining that “automated exchange” describes a “method.” The district court construed “auto- mated exchange” to mean “a method for executing trades of financial instruments that is fully computerized, such that it does not include matching or allocating through use of open outcry.” J.A. 27. It also construed “exchange” as “a method for executing trades of financial instru- ments,” and construed “automated” to mean “fully com- puterized, such that its protocol does not include matching or allocating through use of open-outcry in order to execute trades.” Id. The district court further ex- plained that “a method that effects trades of financial instruments by automatically matching and allocating but also entails ‘oral communications between market professionals at a central location in open view of other market professionals’ is not fully computerized and there- fore not ‘automated.’” Id. This construction was based largely on the district court’s holding that the ’707 Patent disavowed traditional floor-based trading. J.A. 7, 27. We have recognized that “[w]here the specification makes clear that the invention does not include a particu- lar feature, that feature is deemed to be outside the reach of the claims of the patent, even though the language of the claims, read without reference to the specification, might be considered broad enough to encompass the feature in question.” Honeywell Int’l, Inc. v. ITT Indus., Inc., 452 F.3d 1312, 1319 (Fed. Cir. 2006) (quoting SciMed Life Sys. v. Advanced Cardiovascular Sys., 242 F.3d 1337, 1341 (Fed. Cir. 2001)). Here, we agree with the district CHICAGO BOARD v. INTL SECURITIES 20
court and find that the ’707 Patent disavows traditional floor-based trading. The Patent describes a system of trading options con- tracts in these floor-based environments as an “open- outcry” system because trading takes place through oral communications between market professionals at a cen- tral location in open view of other market professionals. ’707 Patent, col.1 ll.24-28. The Patent characterizes the open-outcry system as “antiquated,” but it explains that because of efforts to preserve the traditional system, the transition to and use of computer-based technology on options exchanges has been slow. Id. col.1 ll.34-37. While floor-based exchanges employ some level of automation in the execution and allocation of orders, the specification recites that such exchanges have “inherent inadequacies” and “deficiencies [that] make it difficult to assess market depth and liquidity [which] ultimately impact the quality of the prices customers receive for their order.” Id. col.2 ll.19-24, 59-67. The Patent further discloses that the disjointed nature of the various manual, and occasionally automated, systems used in floor-based exchanges culti- vate these deficiencies, and again, make it difficult to assess the true market depth and liquidity ultimately impacting the quality of prices. Id. col.4 ll.47-51. The Patent suggests that the increasing volume of trades in options contracts, as well as the speed at which price information of underlying stocks is transmitted to con- sumers, have increased the demand for faster execution of trades. Id. col.4 ll.34-37. The Patent proposes an auto- mated exchange for the express purpose of remedying these perceived deficiencies. 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 21 CHICAGO BOARD v. INTL SECURITIES
exchanges cannot sustain the growing demands of the market. Indeed, the specification goes well beyond ex- pressing 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 rea- sonably may be viewed as a disavowal of that subject matter from the scope of the Patent’s claims. Honeywell Int’l, Inc., 452 F.3d at 1319. ISE nonetheless argues that the ’707 Patent does not disavow all aspects of the traditional floor-based system because it does not require a trading system to execute all trades automatically. This argument misconstrues the district court’s construction of “automated exchange.” The district court’s construction requires that such an ex- change be “fully computerized, such that it does not include matching or allocating through use of open out- cry.” J.A. 7. In addition, ISE contends that the district court erred in construing “automated exchange” as a method rather than a system for trading. CBOE argues that the district court settled on the concept of a “method” in order to differentiate the claims of the Patent from the way op- tions contracts are traded in the traditional floor-based environments. At least in this respect, ISE’s position has merit. Once again, the claims are instructive. The ’707 Pat- ent has seventeen independent claims. Eight of these are system claims and nine are method claims. The system claims are directed to “[a]n automated exchange for trading a financial instrument,” e.g., ’707 Patent, col.29 ll.53-54, whereas the method claims recite “a process for trading a financial instrument on an automated ex- change,” e.g., id. col.35 l.23. Hence, “automated ex- change” cannot be construed as a method when the CHICAGO BOARD v. INTL SECURITIES 22
recited method or “process for trading a financial instru- ment” is conducted on the “automated exchange.” The specification also explains that: “[o]ver time, each of the existing options exchanges has developed systems to track the best quotation . . . ,” id. col.2 ll.2-3; that “[i]t is an advantage of the invention to provide an automated system for matching previously entered orders and quota- tions . . . ,” id. col.4 ll.54-56; and that “[i]t is to be under- stood that the exchange according to the invention simultaneously provides a market for a series of options . . . . The vast number of options that can be traded makes the invention particularly advantageous over less auto- mated systems . . . ,” id. col.6 ll.49-55 (emphases added). In this instance, proper claim construction may not vary from the Patent’s own description of “automated exchange” as being a system. Accordingly, while we affirm the district court’s determination that the “auto- mated exchange” disavowed the open-outcry system, we cannot adopt the district court’s construction of “auto- mated exchange” as a “method.” Instead, we construe “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.” II. The district court did not abuse its discretion in deny- ing CBOE’s motions for leave to amend its Complaint. On October 25, 2007, the district court entered a scheduling order that required the parties to move to amend their respective pleadings by January 11, 2008. J.A. 1772. CBOE deposed pertinent witnesses on April 6, 2009, May 22, 2009, and June 22-23, 2009 at which time CBOE alleges that it discovered new facts concerning its inequi- table conduct defense. J.A. 21. On September 16, 2009, 23 CHICAGO BOARD v. INTL SECURITIES
CBOE moved for a prior and separate bench trial on the inequitable conduct allegations which the district court granted. J.A. 64, Dkt. Nos. 182, 204. On November 4, 2009, CBOE moved for leave to file an amended Com- plaint (“proposed November Second Amended Com- plaint”). J.A. 66, Dkt. No. 209. On November 18, 2009, ISE moved for summary judgment on the proposed amended allegations of inequitable conduct. J.A. 3029. On December 22, 2009, the district court denied CBOE’s motion for leave to file the proposed November Second Amended Complaint (“December 22, 2009 Order”), finding that CBOE had not demonstrated the requisite “good cause” to amend after the deadline set in the scheduling order. J.A. 20-22. The district court also concluded that CBOE had not pled the inequitable conduct allegations with particularity pursuant to Federal Rule of Civil Procedure 9 (“Rule 9”). J.A. 23-26. Based on CBOE’s failure to plead sufficiently, the district court determined that ISE’s motion for summary judgment on CBOE’s inequitable conduct defense was moot. J.A. 26. On December 31, 2009, CBOE again sought leave to amend its Complaint (“proposed December Second Amended Complaint”). J.A. 5099. While finding this pleading satisfied Rule 9, the district court nevertheless denied the motion holding that CBOE had failed to show good cause for its delay in seeking leave to amend (“Janu- ary 27, 2010 Order”). J.A. 5100. CBOE contends that the district court abused its discretion. A decision to deny a motion for leave to amend a pleading raises an issue not unique to patent law, and thus, we apply the law of the regional circuit in which the district court sits. Juicy Whip, Inc. v. Orange Bang, Inc., 382 F.3d 1367, 1370 (Fed. Cir. 2004). Here, we apply the law of the Seventh Circuit and review a district court’s denial of leave to amend a complaint for abuse of discre- CHICAGO BOARD v. INTL SECURITIES 24
tion and “reverse only if no reasonable person could agree with that decision.” Carroll v. Stryker Corp., 658 F.3d 675, 684 (7th Cir. 2011) (citation omitted). Applying this standard, we find no error in the dis- trict court’s rulings of December 22, 2009 and January 27, 2010. In the December 22, 2009 Order, the district court found that CBOE failed to show good cause by “not provid[ing] any explanation for why it waited until No- vember 4, 2009 to seek leave to file an amended com- plaint.” J.A. 21. The district court found fault in CBOE’s delay in seeking leave “particularly since it announced its theory in its detailed memorandum in support of its motion for a prior and separate nonjury trial which in- cluded the proposed allegations” on September 16, 2009. Id. The district court also found that “CBOE cannot claim to be surprised that it has to amend its complaint to assert these new bases for inequitable conduct [because] CBOE is a sophisticated litigant and was notified by ISE as early as August 6, 2009 that ISE expected any new allegations would have to be made part of CBOE’s com- plaint before CBOE could proceed further on them.” Id. Because “CBOE . . . waited until after fact discovery had closed (on June 23, 2009), the Markman hearing took place, expert reports were exchanged, and two weeks before dispositive motions were due to move to amend[,]” without any explanation, the district court held that CBOE’s delay did not reflect diligence. J.A. 21-22. The district court repeated this reasoning in denying CBOE’s subsequent attempt to amend its Complaint. J.A. 5100. In the January 27, 2010 Order, the district court noted that ISE had objected to the timeliness of the proposed new allegations in August 2009 and again at the time the parties were scheduling their meet and confer conference on October 14, 2009. Id. The district court also rejected CBOE’s claim that, “between September 16 and 25 CHICAGO BOARD v. INTL SECURITIES
November 4, it was seeking ISE’s consent to the amend- ment [to include the new allegations] and, once it became clear ISE would not consent, filed its motion four business days later” as a basis for diligence. Id. The district court found that “CBOE’s focus on other aspects of the litigation in September and October does not serve as good cause in this case, as its decision to set aside its inequitable con- duct claims was a tactical one.” Id. We cannot say that these determinations, either individually or collectively, amount to an abuse of discretion. CBOE also contends that the Complaint was con- structively amended when ISE consented to prior and separate trial on the allegations in the proposed Novem- ber Second Amended Complaint. However, the district court expressly rejected CBOE’s efforts to amend its pleading to include the proposed allegations because it found that the allegations of the proposed November Second Amended Complaint did not comport with Rule 9. J.A. 23. As a result, the district court never considered the merits of ISE’s motion for summary judgment on the proposed allegations that were the subject of the pur- ported “constructive amendment.” See Walton v. Jennings Cmty. Hosp., 875 F.2d 1317, 1320 (7th Cir. 1989) (finding constructive amendment where plaintiff originally pleaded contract-based theory but at briefing on summary judgment both parties included a tort based theory to which the court viewed as viable and to which the court ruled on the merits). Finally, the district court found that the “more particularized allegations in CBOE’s [proposed December Second Amended Complaint, while sufficient,] would require another round of summary judgment briefs, which would prejudice ISE.” J.A. 5100. These determina- tions are supported by the record and do not amount to an abuse of discretion. CHICAGO BOARD v. INTL SECURITIES 26
CONCLUSION We vacate the district court’s judgment of nonin- fringement and remand for further proceedings based on this court’s interpretation of the “system memory means,” “matching,” and “automated exchange.” We also affirm the district court’s denial of CBOE’s motions for leave to amend the Complaint. AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART, and REMANDED. Each party shall bear its own costs.