UNITED STATES PATENT AND TRADEMARK OFFICE
`
`_______________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`_______________
`
`APPLE, INC.,
`
`Petitioner,
`
`v.
`
`Patent of SIGHTSOUND TECHNOLOGIES, LLC,
`
`Patent Owner.
`
`_______________
`
`CBM2013-00019, U.S. Patent No. 5,191,573
`
`_______________
`
`PATENT OWNER SIGHTSOUND TECHNOLOGIES, LLC’S
`PRELIMINARY RESPONSE
`
`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S. Patent & Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`

`

`TABLE OF CONTENTS
`
`I.
`
`II.
`
`III.
`
`IV.
`
`STATEMENT OF PRECISE RELIEF REQUESTED
`
`PRELIMINARY STATEMENT
`
`A.
`
`B.
`
`C.
`
`The Invention of the ’573 Patent
`
`SightSound and the Advent of Digital Media Distribution
`
`SightSound Technologies’ Acquisition of the Patents and
`the Initiation of Litigation
`
`THE CLAIMS
`
`THE PROSECUTION HISTORY
`
`A.
`
`B.
`
`Petitioner’s Characterization of the ’573 Patent’s Claims
`and Prosecution History is Not Consistent with Either
`
`Prosecution Overview
`
`1.
`
`2.
`
`3.
`
`Third-Party-Initiated Ex Parte Reexamination
`
`Appeal to the Board
`
`Original Prosecution
`
`V.
`
`APPLE LACKS STANDING BECAUSE THE SIGHTSOUND
`PATENTS ARE NOT COVERED BUSINESS METHOD
`PATENTS
`
`A.
`
`B.
`
`The SightSound Patents Have No Relation To A
`“Financial Product or Service”
`
`SightSound’s Patents Claim A Technological Invention
`
`1.
`
`SightSound’s Patents Claim The Technical Feature
`Of Transmitting And Storing Digital Audio And
`Video Signals
`
`Page
`1
`
`1
`
`1
`
`4
`
`6
`
`9
`
`11
`
`11
`
`13
`
`13
`
`17
`
`20
`
`23
`
`25
`
`33
`
`35
`
`– i –
`
`

`

`2.
`
`SightSound Provided A Technical Solution To The
`Technical Problems Associated with Prior Art
`Distribution of Media
`
`VI. CONCLUSION
`
`37
`
`40
`
`– ii –
`
`

`

`TABLE OF AUTHORITIES
`
`Federal Cases
`Bilski v. Kappos, 130 S. Ct. 3218 (2010)
`Chrysler Corp. v. Brown, 441 U.S. 281 (1979)
`Diamond v. Diehr, 450 U.S. 175 (1981)
`KSR Int’l Co. v. Teleflex Inc.,550, U.S. 398 (2007)
`Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct.
`1289 (2012)
`Merck & Co. v. Kessler, 80 F.3d 1543 (Fed. Cir. 1996)
`SightSound.com, Inc. v. N2K, Inc., 185 F. Supp. 2d 445 (W.D. Pa.
`2002)
`SightSound.com, Inc. v. N2K, Inc., 391 F. Supp. 2d 321 (W.D. Pa.
`2005)
`State St. Bank & Tr. Co. v. Signature Fin. Grp., 149 F.3d 1368
`(Fed. Cir. 1998)
`
`Page(s)
`
`23, 24
`25
`34
`20, 34
`
`34
`25
`
`7
`
`7
`
`23, 24
`
`32
`
`Decisions of the Patent Trial and Appeal Board
`Bloomberg, Inc. v. Markets-Alert PTY LTD, No. CBM2013-00005,
`Paper No. 18 (P.T.A.B. Mar. 29, 2013)
`CRS Advanced Techs., Inc v. Frontline Techs., Inc., No.
`CBM2012-00005, Paper No. 17 (P.T.A.B. Jan. 23, 2013)
`Interthinx, Inc. v. Corelogic Solutions, Inc., No. CBM2012-00007,
`Paper No. 16 (P.T.A.B. Jan. 31, 2013)
`Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., No. CBM2012-
`00002, Paper No. 10 (P.T.A.B. Jan. 25, 2013)
`31, 35, 36, 37
`Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., No. CBM2012-
`00003, Paper No. 15 (P.T.A.B. Feb. 12, 2013)
`Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., No. CBM2012-
`00010, Paper No. 16 (P.T.A.B. Feb. 25, 2013)
`– iii –
`
`31
`
`31
`
`31
`
`31
`
`

`

`MeridianLink, Inc. v. DH Holdings, LLC, No. CBM2013-00008,
`Paper No. 20 (P.T.A.B. June 24, 2013)
`SAP Am., Inc. v. Versata Dev. Grp., Inc., No. CBM2012-00001,
`Paper No. 36 (P.T.A.B. Jan. 9, 2013)
`23, 27, 31, 32, 35
`SAP Am., Inc. v. Versata Dev. Grp., Inc., No. CBM2012-00001,
`Paper No. 70 (P.T.A.B. June 11, 2013)
`
`32
`
`36
`
`Federal Statutes
`
`35 U.S.C.
`§ 102
`§ 103(a)
`§ 112
`§ 120
`America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011)
`§ 18
`§ 18(a)(1)(B)
`§ 18(d)(1)
`
`17
`17
`17
`17
`
`1
`23
`23, 25, 33
`
`Federal Regulations
`
`37 C.F.R.
`§ 1.510
`§ 41.37
`§ 42.207(a)
`§ 42.301(b)
`§ 42.304(a)
`77 Fed. Reg.
`48,734, 48,735 (Aug. 14, 2012)
`48,734, 48,736 (Aug. 14, 2012)
`48,734, 48,737 (Aug. 14, 2012)
`48,734, 48,738–39 (Aug. 14, 2012)
`48,734, 48,744 (Aug. 14, 2012)
`48,756, 48,763–64 (Aug. 14, 2012)
`
`8
`18
`1
`33, 35, 37, 39
`23, 24, 25
`
`26, 37
`27, 32, 35, 39
`34
`26
`27
`27
`
`– iv –
`
`

`

`Legislative Materials
`
`157 Cong. Rec.
`S1053 (daily ed. Mar. 1, 2011)
`S1071 (daily ed. Mar. 1, 2011)
`S1072 (daily ed. Mar. 1, 2011)
`S1363 (daily ed. Mar. 8, 2011)
`S1364 (daily ed. Mar. 8, 2011)
`S1379 (daily ed. Mar. 8, 2011)
`H4428–29 (daily ed. June 22, 2011)
`H4497 (daily ed. June 23, 2011)
`S5432 (daily ed. Sept. 8, 2011)
`S5441 (daily ed. Sept. 8, 2011)
`America Invents Act: Hearings on H.R. 1249 Before the Subcomm.
`On Intellectual Property, Competition and the Internet of the
`H. Comm. on the Judiciary, 112th Cong. 56-58 (2011)
`H.R. Rep. No. 112-98, pt. 1 (2011)
`Patent Quality Improvement Act of 2013, S. 866, 113th Cong.
`§ 2(2) (2013)
`
`26, 27
`12
`12
`24, 28
`24, 28, 37
`29, 31
`26
`28, 30
`28
`25, 29
`
`28
`24, 33
`
`29
`
`– v –
`
`

`

`EXHIBIT LIST
`
`EXHIBITS FILED BY APPLE, INC. (SELECTED)
`
`Exhibit 1001
`
`United States Patent No. 5,191,573
`
`Exhibit 1002
`
`United States Patent No. 5,191,573 File History
`
`Exhibit 1003
`
`Application No. 90/007,402 (’573 Patent Reexamination)
`
`Exhibit 1027
`
`Exhibit 1028
`
`Deposition Transcript of Arthur Hair, dated Dec. 11, 2012,
`SightSound Techs., LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`
`Deposition Transcript of Scott Sander, dated Dec. 18, 2012,
`SightSound Techs., LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`
`EXHIBITS FILED BY SIGHTSOUND TECHNOLOGIES, LLC
`
`Exhibit 2001
`
`Exhibit 2002
`
`Final Order and Judgment on Consent, Sightsound.com, Inc. v.
`N2K, Inc., No. 98-0118 (W.D. Pa. Feb. 20, 2004)
`
`Excerpts from the daily edition of the Congressional Record,
`Volume 157 (2011)
`
`Exhibit 2003
`
`Excerpt from H.R. Rep. No. 112-98, pt. 1 (2011)
`
`Exhibit 2004
`
`Excerpt from America Invents Act: Hearings on H.R. 1249 Before
`the Subcomm. On Intellectual Property, Competition and the
`Internet of the H. Comm. on the Judiciary, 112th Cong. (2011)
`
`Exhibit 2005
`
`Patent Quality Improvement Act of 2013, S. 866, 113th Cong.
`(2013)
`
`– vi –
`
`

`

`I.
`
`STATEMENT OF PRECISE RELIEF REQUESTED
`
`Pursuant to 37 C.F.R. § 42.207(a), Patent Owner, SightSound Technologies,
`
`LLC, submits this Preliminary Response to Petitioner’s petition for Covered
`
`Business Method (CBM) patent review. Patent Owner respectfully requests that
`
`the Patent Trial and Appeal Board (“PTAB”) deny Petitioner’s petition for CBM
`
`review of claims 1, 2, 4, and 5 of U.S. Patent No. 5,191,573 (“the ’573 Patent”)
`
`under § 18 of the America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011)
`
`(“AIA”) because the ’573 Patent is not a covered business method patent, but
`
`rather one directed to a technological invention and unrelated to any financial
`
`product or service.1
`
`II.
`
`PRELIMINARY STATEMENT
`
`A.
`
`The Invention of the ’573 Patent
`
`In the mid 1980s, Arthur Hair developed an innovative way to provide music
`
`and movies to consumers, allowing them to access digital audio and digital video
`
`files over telecommunications lines, such as the Internet, in a new format for
`
`personal consumption. Today, this technology is ubiquitous. At the time,
`
`however, the concept of digital distribution of media over the Internet was truly
`
`new. Indeed, audio cassettes and phonograph records were still the most common
`
`1 In the event that the PTAB were to initiate a Covered Business Method
`Proceeding, Patentee specifically reserves the right to respond to all the issues
`raised by the Petitioner.
`
`– 1 –
`
`

`

`ways to obtain and store music at the time of Mr. Hair’s invention.
`
`His invention was not a pen-and-paper financial product or a mere service to
`
`be implemented on a computer. The “service” of which he conceived was a
`
`technological innovation, one dependent on and supported by the specific hardware
`
`recited in the claimed method — in particular, the “second memory” recited in the
`
`claims and described in the patent. Typically, automated media distribution
`
`systems in the 1988 timeframe required a retail vending machine connected to a
`
`distribution center. See, e.g., U.S. Patent No. 3,718,906 (“Lightner”). To use such
`
`systems, a consumer needed to travel to the machine’s location in order to select
`
`songs for purchase, and he or she could only retrieve those songs on traditional
`
`removable “cartridges.” In contrast, Mr. Hair’s invention permitted digital audio
`
`and video signals to be transmitted to a “second memory” in the user’s possession
`
`to allow for random access and non-volatile storage. By employing this “second
`
`memory,” a user could save the transmitted signal at home and play the selection
`
`back at his or her leisure.
`
`In 1988, the idea of storing a transmitted digital signal in non-volatile
`
`memory for future selection and playback represented a novel approach. At that
`
`time, distribution models for digital audio and video were limited in part by signal
`
`compression rates and memory storage capacity. It was not obvious how to
`
`download and store digital audio and video signals in memory, much less was it
`
`– 2 –
`
`

`

`commercially inevitable that the industry would. Mr. Hair’s technical solution to
`
`audio and video transmission and storage signaled the shift in this conventional
`
`thinking. Conventional storage media such as cartridges, digital audio tape, and
`
`CDs simply did not offer the same control and flexibility of Mr. Hair’s “memory”
`
`storage. Moreover, in order to rearrange the order of songs in a given session, a
`
`user was forced to resort to cumbersome hardware such as wall-mounted
`
`jukeboxes (e.g., U.S. Patent No. 3,412,496 (“Hendricks”)) and multi-disc CD
`
`changers (e.g., U.S. Patent No. 4,839,764 (“Ikedo”)). Such technologies did not
`
`permit one to select, download, store, and rearrange individual signals making up a
`
`digital audio or video recording.
`
`His invention also addressed some problems present in conventional
`
`methods of selling and distributing media. For example, Mr. Hair described how
`
`his invention would reduce the transactional costs of transferring and handling
`
`retail hardware units. See ’573 patent at 1:39–49. These efficiencies flowed from
`
`the technological advantages of the invention, including the “second memory,”
`
`rather than from any improvements in any financial service model.
`
`In 1988, Mr. Hair applied for patent protection of his invention. The U.S.
`
`Patent and Trademark Office (“USPTO”) ultimately awarded Mr. Hair three
`
`patents relating to the digital distribution of audio and video signals: the ’573
`
`Patent, issued March 2, 1993; U.S. Patent No. 5,675,734 (“the ’734 Patent”),
`
`– 3 –
`
`

`

`issued October 7, 1997; and U.S. Patent No. 5,966,440 (“the ’440 Patent”), issued
`
`October 12, 1999. All three patents (collectively the “Hair patents”) are directed to
`
`methods and systems for providing digital audio and/or video signals from a host
`
`computer to a remotely located personal computer via telecommunications lines.
`
`B.
`
`SightSound and the Advent of Digital Media Distribution
`
`In 1995, Mr. Hair and Scott Sander founded Parsec Sight/Sound, Inc. and
`
`Digital Sight/Sound, Inc., SightSound’s predecessors in interest, to commercialize
`
`Mr. Hair’s invention. Mr. Hair subsequently assigned all of his ownership rights in
`
`the ’573 Patent, and every subsequent patent to issue from that same disclosure, to
`
`SightSound. Since its inception, SightSound sought to commercialize the
`
`technology described and claimed in the Hair patents. In the 1990s, SightSound
`
`worked extensively with copyright holders (including musicians, songwriters and
`
`record labels) to license digital audio content for sale over the Internet. In so
`
`doing, SightSound expended significant effort to educate the record labels that the
`
`next wave in music distribution would be via a digital online format. During the
`
`course of its efforts, SightSound achieved several notable firsts with respect to the
`
`provision of digital content. In 1995, it became the first company to offer digital
`
`downloads of music through electronic sale over the Internet. The offering was
`
`– 4 –
`
`

`

`The Gathering Field’s eponymous album “The Gathering Field.”2 Individual songs
`
`from the album were priced at $1.00.3
`
`In 1999, SightSound became the first company to offer the sale of a movie
`
`over the Internet (Darren Aronofsky’s movie “Pi”). And, in May of 2001,
`
`SightSound became the first company to provide and sell a movie (the “Quantum
`
`Project”) and furnish it electronically to a handheld pocket personal computer.
`
`While achieving these breakthroughs, SightSound continued to approach major
`
`record labels and motion picture companies, eventually entering into a limited
`
`agreement with Miramax Films as well as a number of independent music, movie,
`
`and television producers. SightSound also sought to license the Hair patents to
`
`technology and media companies with sufficient infrastructure and financing to
`
`commercialize the patents’ potential.
`
`2 See http://www.sightsound.com. Shortly after offering the Gathering Field’s
`album for sale, SightSound temporarily ceased selling music on its website due to
`the industry’s reluctance to embrace or support the digital distribution of music as
`it was viewed as financially unattractive to the record labels. Unfortunately,
`SightSound’s continued efforts encountered significant resistance from copyright
`holders, record labels feared SightSound’s system and method, which allowed for
`the sale of individual songs and albums, rather than only complete albums (as was
`then done on physical media) would be profitable. Unable to get major record
`labels to license content to SightSound, SightSound also tried to obtain content
`from independent labels or directly from artists to demonstrate to the industry the
`capabilities of the technology covered by the Hair patents.
`3 See id.
`
`– 5 –
`
`

`

`Ultimately, however, SightSound’s licensing efforts proved unsuccessful.
`
`There were a variety of reasons for this lack of traction in the marketplace. Many
`
`companies were slow to understand the market potential for online digital music
`
`and video sales. Also, many copyright holders and music labels continued to be
`
`resistant to providing content and proved especially reluctant to allow the sale of
`
`individuals songs (as opposed to whole albums). Because of its resulting revenue
`
`shortfalls, SightSound ceased commercial operations in or around 2002.
`
`C.
`
`SightSound Technologies’ Acquisition of the Patents and
`the Initiation of Litigation
`
`Through a series of corporate transactions, the Hair patents are currently
`
`held by SightSound Technologies, LLC. Specifically, on September 22, 1998,
`
`Parsec Sight/Sound, Inc. and Digital Sight/Sound, Inc. executed an Agreement and
`
`Plan of Merger whereby they merged into a surviving corporation named
`
`SightSound.com, Inc. (incorporated in Pennsylvania), which in 2000 was further
`
`merged into a Delaware
`
`corporation subsequently renamed SightSound
`
`Technologies, Inc.
`
`In 2005, DMT Licensing, LLC (“DMT”), an entity wholly,
`
`indirectly owned by the General Electric Company, purchased the SightSound
`
`Technologies, Inc. patent portfolio.
`
`In 2011, through a series of transactions,
`
`SightSound Technologies, Inc. and DMT created SightSound Technologies LLC,
`
`– 6 –
`
`

`

`and DMT subsequently assigned the Hair patents to the newly formed entity,
`
`SightSound Technologies, LLC.4
`
`On January 16, 1998, SightSound initiated litigation against N2K, Inc.5 in
`
`the Western District of Pennsylvania, Case No. 2:98-cv-0118 (the “N2K
`
`Litigation”) alleging infringement of the Hair patents. Six years later, in February
`
`2004, after SightSound obtained a favorable claim construction ruling6 and a
`
`decision denying N2K’s motions for summary judgment seeking to invalidate the
`
`patents on the grounds of anticipation, obviousness and enablement,7 SightSound
`
`resolved the litigation and obtained a consent judgment acknowledging the validity
`
`4 Specifically, on November 10, 2005, SightSound Technologies, Inc. entered into
`an Asset Purchase Agreement with DMT. Under this agreement, DMT purchased
`the SightSound Technologies, Inc. patent portfolio, including the rights to the
`patents-in-suit. DMT and SightSound Technologies, Inc. also executed a services
`agreement on November 10, 2005, entitled Master Services Agreement, whereby
`SightSound Technologies, Inc. would perform certain consulting services for
`DMT. On or around January 5, 2011, SightSound Technologies, Inc. formed
`SightSound Technologies Holdings, LLC, a Delaware limited liability company.
`SightSound Technologies, Inc. subsequently merged into SightSound Technologies
`Holdings, LLC. On August 24, 2011, DMT and SightSound Technologies
`Holdings, LLC jointly formed SightSound Technologies, LLC and executed a
`Limited Liability Company Agreement to serve as the Operating Agreement of
`SightSound Technologies, LLC. On the same date, DMT and SightSound
`Technologies Holdings, LLC entered into a New Services Agreement which
`replaced the Master Services Agreement executed on November 10, 2005. On
`August 24, 2011, DMT assigned all rights, title and interest of the Hair patents to
`SightSound Technologies, LLC.
`5 CDNow, Inc. and CDNow Online Inc. were added as defendants in March 2000.
`6 SightSound.com, Inc. v. N2K, Inc., 185 F. Supp. 2d 445 (W.D. Pa. 2002).
`7 SightSound.com, Inc. v. N2K, Inc., 391 F. Supp. 2d 321 (W.D. Pa. 2003).
`– 7 –
`
`

`

`and enforceability of the patents. Ex. 2001. On October 8, 2004, SightSound
`
`asserted the Hair patents against Napster LLC and its successor, Roxio, Inc. in the
`
`Western District of Pennsylvania, Case No. 2:2004-cv-01549 (the “Napster
`
`Litigation”). After SightSound moved for a preliminary injunction, on January 31,
`
`2005, Napster filed a Request for Ex Parte Reexamination under 37 C.F.R. §
`
`1.510, and on February 28, 2005, the District Court stayed the Napster Litigation
`
`pending completion of the reexamination. The reexamination proceedings lasted
`
`over five-and-a-half years and did not conclude until December 2010. The Roxio
`
`litigation concluded on May 7, 2012, when District Court granted the parties’
`
`stipulation of dismissal with prejudice after a settlement had been reached.
`
`On October 10, 2011, SightSound asserted the three Hair patents, including
`
`the ’573 Patent, against Apple, Inc. in the Western District of Pennsylvania, Case
`
`No. 2:11-cv-01292-DWA (the “Apple Litigation”). Apple proceeded to defend the
`
`litigation for over nineteen months, with the parties exchanging hundreds of
`
`thousands of pages of documents, conducting depositions, completing claim
`
`construction, and exchanging expert reports. In September 2012, the Court denied
`
`Apple’s motion for summary judgment on grounds of laches and estoppel. On
`
`February 13, 2013, the Court issued its decision on claim construction. On April
`
`11, 2013,
`
`the Court
`
`issued a ruling striking certain late-disclosed prior art,
`
`including art that Apple seeks to assert in these proceedings. On May 6, 2013,
`
`– 8 –
`
`

`

`Apple filed four petitions for CBM review, including the one at issue in this paper,
`
`and simultaneously moved to stay the litigation in the District Court. In seeking to
`
`stay the litigation, Apple claimed it had been working on the CBM review petitions
`
`since the Court’s February 2013 decision on claim construction and the April 2013
`
`ruling striking certain of its asserted prior art. On June 6, 2013, the District Court
`
`stayed the Apple Litigation pending the PTAB’s decision regarding Apple’s
`
`petition for CBM review.
`
`*
`
`*
`
`*
`
`The ’573 Patent is not a “covered business method patent” because the
`
`claimed invention is not a “financial product or service.”
`
`Instead, the patent
`
`clearly describes and claims a “technological invention,” as demonstrated by the
`
`intrinsic record before the PTO, as summarized below. Apple’s petition for CBM
`
`review — made after nineteen months of litigation and almost eight months after
`
`CBM review first became available — is simply a delay tactic and attempt by
`
`Apple to circumvent unfavorable decisions rendered by the District Court.
`
`III. THE CLAIMS
`
`Petitioner asks that the PTAB initiate a CBM proceeding with respect to
`
`claims 1, 2, 4, and 5 of the ’573 Patent. These claims of the ’573 Patent are
`
`directed to the use of a second memory for digital and audio media and a method
`
`for the accompanying sales. The basic steps to accomplish this comprise: (1)
`
`– 9 –
`
`

`

`forming a telecommunications connection between two parties; (2) selling to the
`
`second party a desired digital video or audio signal stored in the first party’s
`
`memory through this connection; and (3) subsequently transferring the desired
`
`digital media signal from the first party’s memory to the second party’s memory
`
`through the connection. A graphic illustration of a system to implement this
`
`method is shown in Figure 1 of the ’573 Patent.
`
`As depicted in Figure 1, the first party system, i.e., the copyright holder’s system,
`
`includes Control Panel 20A, Control Integrated Circuit (I.C.) 20B, Sales Random
`
`Access Memory (R.A.M.) 20C, and Hard Disk 10.8 The Control Integrated Circuit
`
`(item 20B) controls and executes responsive commands of a user, e.g., second
`
`party, and regulates the electronic transfer of digital audio and video throughout
`
`the system. (Col. 4:28–35.) It may also serve to prevent unauthorized
`
`8 Items 20A, 20B, and 20C constitute the control unit of the first party, copyright
`holder. Col. 3:47–50.
`
`– 10 –
`
`

`

`reproduction of copyrighted material. (Id.) The Control Panel (item 20A) permits
`
`user programming of such electronic transfer and authorization features regulated
`
`through the Control Integrated Circuit. (Col. 4:25–27.) The Sales Random Access
`
`Memory Chip (item 20C) represents a temporary store for user purchased digital
`
`music that will be subsequently transferred via the telecommunications line (item
`
`30). (Col. 4:36–39.) These subsequent electronic transfers eventually reach the
`
`second party’s Incoming Random Access Memory (R.A.M.) Chip 50C before
`
`storage in its Hard Disk 60. (Col. 4:40–43.) Payment of the desired digital media
`
`is also handled through the telecommunications connection (item 30); and the
`
`mechanism for charging a second party’s account and/or receiving their credit card
`
`number — thereby permitting the transfer of the desired digital media — is
`
`achieved through the first party’s Control Integrated Circuit 20B. (Col. 3:60–
`
`4:10.)
`
`IV. THE PROSECUTION HISTORY
`
`A.
`
`Petitioner’s Characterization of the ’573 Patent’s Claims and
`Prosecution History is Not Consistent with Either
`
`This Preliminary Response is directed to a single, threshold issue — whether
`
`the challenged claims of the ’573 Patent claim a covered business method. They
`
`do not. This is clear from a reading of the full file history from the filing of the
`
`patent application throughout the original prosecution and culminating in the
`
`opinion of Judge Boalick of the Board of Patent Appeals and Interferences
`
`– 11 –
`
`

`

`(“Board”) in the ex parte reexamination. Throughout this original prosecution and
`
`the ex parte reexamination, the art rejections have focused on the technological
`
`teachings of the art, e.g., what “memory” serves what purpose, etc.
`
`The Petitioner’s description of the prosecution obscures the fact that the U.S.
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`Patent and Trademark Office (“PTO”) consistently and unequivocally treated the
`
`pending claims as directed to a technological process rather than a financial or
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`business method. Indeed, perhaps nowhere is this so evident as in the Opinion
`
`authored by Judge Boalick. Ex parte DMT Licensing, LLC, No. 2009-003609
`
`(B.P.A.I. Sept. 4, 2009) (Ex. 1003 at 01441). It is for this reason that Patentee
`
`believes that it will be easier to follow an abbreviated file history summary that
`
`starts with the ex parte reexamination prosecution and is then followed by focusing
`
`on the cited art in the original prosecution.
`
`While the summary provided herein is intended to be fully representative of
`
`the prosecution history, the summary of the prosecution history provided by the
`
`Appellant at the time of the Appeal necessarily provides a view of the prosecution
`
`not slanted by the issues in this proceeding as it was written more than a year
`
`before a CBM was even on the radar of those involved with the passage of the
`
`AIA. 157 Cong. Rec. S1071, S1072 (daily ed. Mar. 1, 2011) (introducing text of
`
`amendments, including Section 18, to S. 23, 112th Cong. (as reported by Sen.
`
`Leahy with amendments, Feb. 3, 2011) (Congressional Record excerpts are filed
`
`– 12 –
`
`

`

`herewith as Exhibit 2002)). In addition, Judge Boalick referred to Appellant’s
`
`summary in a positive manner in his Opinion (Ex parte DMT Licensing, LLC, No.
`
`2009-003609 at 21 (Ex. 1003 at 01461)) and emphasized the technological features
`
`in the claims to distinguish the prior art (Id. at 9–10, 25–28 (Ex. 1003 at 01449–
`
`1450, 01465–1468)) consistent with the rest of the patent’s cumulative nearly 11
`
`years of prosecution up until Requester’s recent Petition to start these proceedings.
`
`B.
`
`Prosecution Overview
`
`The ’573 Patent has an extensive record before the PTO that focuses
`
`primarily on the technological nature of the invention.9 This record includes a
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`third-party-initiated ex parte reexamination (summarized below), which included
`
`an appeal to the Board (as mentioned above and discussed in more detail at Section
`
`IV.B.2), as well as its original prosecution (summarized at Section IV.B.3). The
`
`originally issued claims were confirmed without amendment in the third-party-
`
`requested ex parte reexamination proceeding.
`
`Third-Party-Initiated Ex Parte Reexamination
`1.
`An Ex Parte Reexamination of the ’573 Patent was initiated on January 31,
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`2005 and a Reexamination Certificate issued on November 30, 2010. U.S. Patent
`
`No. 5,191,573 C1, at [45]. Over 80 U.S. patents, 3 foreign patents and
`
`approximately 750 other publications were made of record in the reexamination.
`
`9 The prosecution overview focuses on the cited art as it provides the prism through
`which to assess the technological nature of the invention.
`– 13 –
`
`

`

`The original prosecution occurred over a five-year period, during which five
`
`references were made of record. As noted above and described in more detail
`
`below, Patentee’s successful reexamination of the ’573 Patent focused almost
`
`exclusively on technological — not financial — features of the claimed invention
`
`vis-à-vis the asserted art. For example, prior to issuing a Reexamination
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`Certificate, the PTO issued a Notice of Intent to Issue Ex Parte Reexamination
`
`Certificate (“Notice”) that distinguished the technology of the prior art, “cassette
`
`tapes, CDs and the like” from the claimed “second memory,” stating:
`
`The prior art “base references” applied in the last Office Action
`mailed March 25, 2010, namely Akashi, Bush and Gallagher,
`relied upon a second memory in the form of a tape and/or CD.
`Thus, any combination based upon these references fails to teach
`the claimed invention.
`
`Notice dated August 16, 2010, at 4 (Ex. 1003 at 01587). Nowhere in this Notice
`
`did the PTO refer to “transferring money” as a basis for the issuance of the Notice.
`
`The ex parte reexamination was requested by Napster, Inc., stating that
`
`claims 1–6 were anticipated by Gallagher, GB 2178275A (“Gallagher”), or
`
`rendered obvious by Gallagher in view of multiple additional references10;
`
`10 U.S. Pat. No. 4,499,568 to Gremillet, U.S. Pat. No. 4,528,643 to Freeny; JP. Pat.
`No 62-284496 to Akashi; U.S. Pat. No. 4,658,093 to Hellman; E. Ferrarini, “Direct
`Connections for Software Selections,” Business Computer Systems, February,
`1984, pp 35+; and P. Elmer-DeWitt, “Calling up an on-line cornucopia; computer
`networks are supermarkets of services and information,” Time, April 7, 1986.
`– 14 –
`
`

`

`anticipated by Gremillet, U.S. Pat. No. 4,499,568 (“Gremillet”), or rendered
`
`obvious by Gremillet in view of multiple additional references,11 or anticipated by
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`Freeny, U.S. Pat. No. 4,528,643 (“Freeny II”). (Ex. 1003 at 00001). Of these
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`asserted grounds, only Gallagher in view of Freeny II formed the basis of the
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`examiner’s obviousness rejection, notwithstanding the relatively low standard
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`required for review (substantial new question) in comparison to these proceedings.
`
`Office Action dated June 21, 2005, at 2–4 (Ex. 1003 at 00100–102). In response to
`
`the initial rejection by the Examiner in the ex parte proceedings, Patentee
`
`responded that the art lacked (among other aspects of the claimed invention) a
`
`second memory in the possession of a second party:
`
`the Court held that Freeny was teaching a
`In other words,
`vending machine, for instance, inside the user’s living room
`where the user would have to pay for the tape to be dispensed.
`That is, Freeny teaches that the first party is in possession and
`control of the second memory, not the second party, as found in
`Patentee’s claimed invention.
`
`Response dated August 18, 2005, at 6 (Ex. 1003 at 00117).
`
`11 GB 2178275A to Gallagher; U.S. Pat. No. 4,528,643 to Freeny; JP. Pat. No 62-
`284496 to Akashi; U.S. Pat. No. 4,658,093 to Hellman; E. Ferrarini, “Direct
`Connections for Software Selections,” Business Computer Systems, February,
`1984, pp 35+; and P. Elmer-DeWitt, “Calling up an on-line cornucopia; computer
`networks are supermarkets of services and information,” Time, April 7, 1986.
`– 15 –
`
`

`

`In addition to identifying technical omissions, or gaps, in the cited art, the
`
`Patentee argued that there was long-felt need for the claimed invention and pointed
`
`to evidence supporting that argument. These arguments, which turned on the
`
`technical distinctions between the claimed invention and the prior art (such as a
`
`second memory in the possession of a second party) successfully overcame the
`
`PTO’s first obviousness rejection. Office Action dated October 26, 2005, at 4 (Ex.
`
`1003 at 00268).
`
`The Examiner issued a new obviousness rejection of Akashi “Automated
`
`Music Purchasing System” (“Akashi”) in view of Freeny II. Ex. 1003 at 00268–
`
`270. On March 20, 2006, the Examiner made his rejection final, but that Office
`
`Action was vacated on May 15, 2006, and replaced with an Office Action that set
`
`forth most of the art that ultimately was the basis of the rejections that were the
`
`subject of the appeal to the Board before Judges Joseph F. Ruggerio, Scott R.
`
`Boalick, and Kevin F. Turner. Office Action dated October 26, 2005, at 4–6 (Ex.
`
`1003 at 00268–270); Decision, Sua Sponte, to Vacate Reexamination Office
`
`Action dated May 15, 2006, at 3 (Ex. 1003 at 00567); Office Action dated
`
`September 29, 2006, at 22–37 (Ex. 1003 at 00606–621); Ex parte DMT Licensing,
`
`LLC, No. 2009-003609 (B.P.A.I. Sept. 4, 2009) (Ex. 1003 at 01441). Multiple
`
`– 16 –
`
`

`

`interactions between the Patentee and the PTO occurred,12 culminating in the
`
`issuance of the certificate on November 30, 2010. As discussed in Section IV.A
`
`and below, Judge Boalick’s Opinion and the arguments before the Board, along
`
`with the appeal briefs, capture the essence of the prosecution dialogue and, as such,
`
`the earlier Examiner interactions need not be expanded upon here.
`
`2.
`
`Appeal to the Board
`
`The prior art rejections before the Board were Cohen, U.S. Pat. No.
`
`4,949,187 (“Cohen”), various combinations of Cohen and Bush, U.S. Pat. No.
`
`4,789,863 (“Bush”), and rejections over Bush and Freeny, U.S. Pat. No. 4,837,797
`
`(“Freeny I”) and over Akashi and Freeny II. In addition to the art rejections, the
`
`Examiner had argued that the ’573 Patent was not entitled to its priority benefit and
`
`did not describe or enable certain claims.
`
`In addressing the Examiner’s rejections under § 103, Appellants’ Brief
`
`focused on the technical defects of the art.13 Amended Brief on Appeal under 37
`
`C.F.R. § 41.37 dated December 15, 2008, at 46–51 (Ex. 1003 at 01278–1283). For
`
`12 See Office Action dated March 25, 2010 (reopening prosecution) (Ex. 1003 at
`01501); Response dated May 25, 2010 (Ex. 1003 at 01530); Notice of Intent to
`Issue Ex Parte Reexamination Certificate dated August 16, 2010 (Ex. 1003 at
`01582).
`13 The appeal brief also responded to and reversed the Examiner’s rejections to
`claims of priority under 35 U.S.C. § 120, both written description and enablement
`under 35 U.S.C. § 112, first paragraph, anticipation under 35 U.S.C. § 102, and
`obviousness under 35 U.S.C. § 103(a).
`– 17 –
`
`

`

`example, the Patentee stated “Freeny I does not discuss transmission of digital
`
`video or digital audio signals from a first memory to a second memory, let alone
`
`the sale of such digital video or digital audio signals” and further stated that Bush
`
`did not disclose storing digital audio signals or digital video signals in a non-
`
`volatile storage portion of a second memory or hard disk. Id. at 46–47 (Ex. 1003 at
`
`01278–1279). Similarly, Patentee noted that “not only does Akashi fail to disclose
`
`transmitting digital audio signals or digital video signals from a first memory to a
`
`second memory and storing the digital audio signals or digital video signals in a
`
`non-volatile portion of the second memory that is not a tape or CD, Akashi
`
`expressly teach