`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`______________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`______________
`
`APPLE INC.
`
`Petitioner
`
`v.
`
`SIGHTSOUND TECHNOLOGIES, LLC
`Patent Owner
`______________
`
`Case CBM2013-00020
`Patent 5,191,573
`______________
`
`Before the Honorable MICHAEL P. TIERNEY, JUSTIN T. ARBES, and
`GEORGIANNA W. BRADEN,
`Administrative Patent Judges.
`
`
`PETITIONER’S REPLY
`
`FILED UNDER SEAL
`
`
`
`
`
`By: Attorneys/Agents For Petitioner
`
`J. Steven Baughman, Lead Counsel
`Registration No. 47,414
`Ching-Lee Fukuda, Back-up Counsel
`Registration No. 44,334
`James R. Batchelder, Back-up Counsel
`Pro Hac Vice Granted
`
`
`
`
`
`ROPES & GRAY
`Prudential Tower
`800 Boylston Street
`Boston, Massachusetts 02199-3600
`(202) 508-4606 (Telephone)
`(617) 235-9492 (Fax)
`
`
`
`

`

`
`
`TABLE OF CONTENTS
`
`I. 
`
`II. 
`
`PO’S KEY ARGUMENTS REST ON INCORRECT CLAIM
`CONSTRUCTIONS AND IGNORE KEY EVIDENCE ................................... 2 
`A.  No Limitation To “Non-Removable” Media Or “Hard Disk” .................. 2 
`B. 
`No Requirement That The Same Device That Receives Digital Signals
`Be “Configured To Transfer Payment Information” .................................. 3 
`COMPUSONICS PUBLICLY DISCLOSED ALL CLAIM ELEMENTS ....... 5 
`A. 
`CompuSonics Was Publicly Disclosed And Anticipates ............................. 5 
`B. 
`CompuSonics’ Disclosure of Electronic Payment Is Enabling .................. 6 
`C. 
`Dependent Claims 2 and 5 Are Also Invalid ................................................. 7 
`D. 
`CompuSonics Amply Discloses Video ........................................................... 8 
`III.  THE BOARD PROPERLY INSTITUTED §103 PROCEEDINGS ................ 8 
`IV. 
`PO DOES NOT CONTEST THAT ALL OF THE INFORMATION KEY
`TO OBVIOUSNESS WAS IN THE PRIOR ART ................................................ 8 
`THERE WOULD HAVE BEEN A CLEAR MOTIVATION TO COMBINE
`THE COMPUSONICS REFERENCES .................................................................. 9 
`PO’S SECONDARY CONSIDERATIONS DO NOT SUPPORT
`NONOBVIOUSNESS ............................................................................................... 10 
`A. 
`iTMS Is Not “Coextensive” With The Claims ............................................ 10 
`B. 
`PO’s Embodying System Flopped, and There Is No Nexus Between the
`Success of ITMS and the Alleged Invention ............................................... 11 
`1. 
`Commercial Success Is Due To iTMS’s Content Selection .......... 12 
`2. 
`Commercial Success Is Due To iTMS’s User Interface ................. 13 
`3. 
`Commercial Success Is Due To Technological Advances............. 13 
`There Was No Copying of PO’s Alleged Invention .................................. 14 
`There Was No Industry Praise For PO’s Alleged Invention .................... 15 
`There Was No Long-Felt Need Met By PO’s Alleged Invention ............ 15 
`
`V. 
`
`VI. 
`
`C. 
`D. 
`E. 
`
`
`
`i
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`
`
`EXHIBIT LIST
`Exhibit 4101
`United States Patent No. 5,191,573
`
`Exhibit 4102
`
`United States Patent No. 5,191,573 File History
`
`Exhibit 4103
`
`Application No. 90/007,402 (’573 Patent Reexamination)
`
`Exhibit 4104
`
`Exhibit 4105
`
`Exhibit 4106
`
`Exhibit 4107
`
`Exhibit 4108
`
`Exhibit 4109
`
`Exhibit 4110
`
`Exhibit 4111
`
`Exhibit 4112
`
`Exhibit 4113
`
`Exhibit 4114
`
`Exhibit 4115
`
`Exhibit 4116
`
`Exhibit 4117
`
`Deposition Transcript of Arthur Hair, dated Dec. 11, 2012,
`SightSound Techs., LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`Deposition of Scott Sander, dated Dec. 18-19, 2012, SightSound
`Techs., LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`“Joint Telerecording Push: CompuSonics, AT&T Link,” Billboard
`(Oct. 5, 1985)
`David Needle, “From the News Desk: Audio/digital interface for
`the IBM PC?,” InfoWorld, vol. 6, no. 23, p. 9, June 4, 1984
`Larry Israelite, “Home Computing: Scenarios for Success,” Billboard,
`Dec. 15, 1984
`International Patent Application WO85/02310, filed on November
`14,1984, and published on May 23,1985 (“Softnet”)
`United States Patent No. 3,718,906 filed on June 1, 1971, issued on
`February 27,1973 (“Lightner”)
`United States Patent No. 3,990,710 filed on March 1, 197, issued on
`November 9, 1976 (“Hughes”)
`Image titled, “CompuSonics Digital Audio Telecommunication
`System”
`7/16/84 CompuSonics Letter from David Schwartz to Shareholders
`
`Hyun Heinz Sohn, “A High Speed Telecommunications Interface
`for Digital Audio Transmission and Reception,” presented at the
`76th AES Convention, October 8-11, 1984
`10/10/85 CompuSonics Letter from David Schwartz to
`Shareholders
`CompuSonics Video Application Notes – CSX Digital Signal
`Processing (1986)
`Image titled, “CompuSonics Digital Audio Software Production/
`
`ii
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`Exhibit 4118
`
`Exhibit 4119
`
`Exhibit 4120
`
`Exhibit 4121
`
`EXHIBIT LIST
`Distribution”
`United States Patent No. 4,682,248 filed on September 17, 1985,
`issued on July 21, 1987 (“Schwartz Patent”)
`“The Search for the Digital Recorder,” Fortune Magazine (Nov. 12,
`1984)
`Excerpts of Lecture at Stanford by D. Schwartz and J. Stautner,
`1987 (video)
`Bryan Bell, “Synth-Bank: The Ultimate Patch Library,” Electronic
`Musician (Sept. 1986)
`2/22/86 Agreement between Synth-Bank and Artist
`
`Exhibit 4122
`
`Exhibit 4123
`
`Exhibit 4124
`
`Exhibit 4125
`
`Exhibit 4126
`
`Exhibit 4127
`
`Exhibit 4128
`
`Exhibit 4129
`
`Exhibit 4130
`
`Exhibit 4131
`
`Exhibit 4132
`
`Exhibit 4133
`
`Exhibit 4134
`
`3/17/87 United States Patent & Trademark Office Notice of
`Acceptance and Renewal, Serial No. 73/568543
`“SynthBank Bulletin Board,” Keyboard Magazine (March 1987)
`
`“Inside Macintosh,” Volumes I, II, and III, Addison-Wesley
`Publishing Company, Inc. (1985)
`Craig Partridge, “The Technical Development of Internet Email,”
`BBN Technologies
`United States Patent 5,966,440 File History
`
`United States Patent No. 4,124,773 filed on November 26, 1976,
`issued on November 7,1978 (“Elkins”)
`United States Patent No. 4,667,088 filed on November 1, 1982,
`issued on May 19,1987 (“Kramer et al.”)
`United States Patent No. 4,528,643 filed on January 10, 1983, issued
`on July 9, 1985 (“Freeny”)
`Photo of CompuSonics equipment
`
`Declaration of Dr. John P.J. Kelly In Support of Petition for
`Covered Business Method Patent Review
`Declaration of David Schwartz In Support of Petition for Covered
`Business Method Patent Review
`11/19/12 Special Master’s Report and Recommendation on Claim
`Construction (D.I. 142), SightSound Techs., LLC v. Apple Inc., No. 11-
`1292 (W.D. Pa.)
`
`iii
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`EXHIBIT LIST
`2/13/13 Order re Claim Construction (D.I. 175), SightSound Techs.,
`Exhibit 4135
`LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`United States Patent No. 5,675,734 File History
`
`Exhibit 4136
`
`Exhibit 4137
`
`Excerpt from Chambers Science and Technology Dictionary (1988)
`
`Exhibit 4138
`
`Excerpt from Webster’s II New Riverside University Dictionary (1988)
`
`Exhibit 4139
`
`Declaration of Dr. John P.J. Kelly, dated Sept. 7, 2012
`
`Exhibit 4140
`
`Exhibit 4141
`
`Exhibit 4142
`
`Exhibit 4143
`
`Exhibit 4144
`
`Exhibit 4145
`
`Exhibit 4146
`
`Exhibit 4147
`
`Exhibit 4148
`
`Exhibit 4149
`
`New Telerecording Method for Audio, Broadcast
`Management/Engineering, pp. 14-15, Oct. 1985
`4/20/01 Markman Hearing Transcript, SightSound.com Inc., v. N2K,
`Inc., et al., No. 98-118 (W.D. Pa.)
`Plaintiff SightSound Techs., LLC’s Expert Report of Dr. J. Douglas
`Tygar Regarding Infringement, dated April 22, 2013
`Declaration of Flora D. Elias-Mique In Support of Petition for
`Covered Business Method Patent Review
`Declaration of Ching-Lee Fukuda In Support of Petition for
`Covered Business Method Patent Review
`Declaration of Roberto J. Gonzalez In Support of Petition for
`Covered Business Method Patent Review
`Declaration of Megan F. Raymond In Support of Petition for
`Covered Business Method Patent Review
`Transcription of Audio, Excerpts of CompuSonics Lecture
`(Lecture at Stanford by D. Schwartz and J. Stautner, 1987
`Expert Report of Dr. John P. J. Kelly Regarding Non-Infringement
`of United States Patent Nos. 5,191,573 and 5,966,440
`Virgin Digital Shuts Down, Sept. 24, 2007
`
`Exhibit 4150
`
`AOL, Now Focused on Free, Sells Its Paid Music Service, Jan.13,
`2007.
`Exhibit 4151 Walmart Closing Online Music Store, Aug. 10, 2011
`
`Exhibit 4152
`
`ITunes’ Success Revolutionizes Music Business
`
`Exhibit 4153
`
`iTunes Music Store Sells Over One Million Songs in First Week,
`
`iv
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`EXHIBIT LIST
`May 5, 2003
`April 26, 2013 Email S. Callagy to D. Cohen
`
`Exhibit 4154
`
`Exhibit 4155
`
`Declaration of Arthur Rangel
`
`Exhibit 4156
`
`Declaration of Megan F. Raymond
`
`Exhibit 4157
`
`Private Placement Memorandum, April 27, 1999, SightSound.com
`
`Exhibit 4158
`
`Two Year Expansion Plan for Virtual Records
`
`Exhibit 4159
`
`Exhibit 4160
`
`Exhibit 4161
`
`SightSound Technologies Confidential Offering Memorandum,
`Allen & Company LLC
`April 12, 2000 Memorandum from Alex Lepore to Files Re:
`Company Stock Valuation
`Business Plan for Digital Sight/Sound, Inc.
`
`Exhibit 4162
`
`November 30, 1993 Letter from Ansel M. Schwartz to Arthur Hair
`
`Exhibit 4163
`
`Prospectus, Digital Sight/Sound (August 15, 1997)
`
`Exhibit 4164
`
`Exhibit 4165
`
`Exhibit 4166
`
`Exhibit 4167
`
`Exhibit 4168
`
`Exhibit 4169
`
`Exhibit 4170
`
`Now showing at a computer near you, News Tribune (May 28,
`2000)
`Deposition Transcript of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Redacted Version of Plaintiff SightSound Technologies, LLC’s
`Expert Report of John Snell On Validity, 6/5/13
`Exhibit 9 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Exhibit 10 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Exhibit 11 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Exhibit 12 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`
`v
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`Exhibit 4172
`
`Exhibit 4173
`
`Exhibit 4174
`
`Exhibit 4175
`
`Exhibit 4171
`
`EXHIBIT LIST
`March 6, 2014
`Exhibit 13 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Exhibit 14 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Exhibit 15 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Exhibit 16 of the Deposition of John Snell in Apple Inc. v.
`SightSound Technologies, LLC, Nos. CBM 2013-00020, -0023,
`March 6, 2014
`Robin Raskin, Telecomputing: Shopping in Electronic Stores: Sick
`of Crowds? Tied Up At Work? Want to Compare Prices? Go
`Online and Browse, Family Computing, Vol. 3, No. 11 (November
`1985)
`James Capparell, Three times as much Antic Software now on
`CompuServe, ANTIC The Atari Resource (April 1988)
`Richard Mansfield, Editor’s Notes, Compute, Vol. 9, No. 3, Issue 82
`(March 1987)
`Rodney Mitchell, Jr., Conjuring up data over CATV, Network
`World, Inc. (February 2, 1987)
`Florence Fabricant, How Telephone Orders Deliver The Goods,
`The New York Times (March 4, 1987)
`Shiela Toomey, Like To Shop At Home? This Is For You All Need
`Is A TV, Phone And Credit Card Or Checks That Don’t Bounce,
`Anchorage Daily News (September 13, 1987)
`Betsy Lammerding, Shopping By TV A Big Turn-On For Many
`Buyers, Akron Beacon Journal (January 25, 1987)
`iTunes: You've never been so easily entertained, iTunes (March 17,
`2014), http://www.apple.com/itunes/
`iTunes: iTunes looks and sounds better than ever., iTunes (March
`17, 2014), http://www.apple.com/itunes/features/
`FAQs: For Podcast Fans, iTunes (March 17, 2014),
`
`Exhibit 4176
`
`Exhibit 4177
`
`Exhibit 4178
`
`Exhibit 4179
`
`Exhibit 4180
`
`Exhibit 4181
`
`Exhibit 4182
`
`Exhibit 4183
`
`Exhibit 4184
`
`vi
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`Exhibit 4185
`
`Exhibit 4186
`
`Exhibit 4187
`
`Exhibit 4188
`
`Exhibit 4189
`
`EXHIBIT LIST
`http://www.apple.com/itunes/podcasts/fanfaq.html
`iTunes: Give the gift of iTunes, iTunes (March 18, 2014),
`http://www.apple.com/itunes/gifts/
`iTunes Store Allowance, iTunes Support (March 17, 2014),
`http://support.apple.com/kb/HT2105
`Rush Jones, Aggregation and Aggravation – Micropayments 2013,
`PaymentsViews (August 16, 2013),
`http://paymentsviews.com/2013/08/16/aggregation-and-
`aggravation-micropayments-2013/
`Marek Maurizio, Payment Systems, Winter 2011,
`http://www.dsi.unive.it/~marek/files/09.5%20-
`%20payment%20systems.pdf
`Apple and Pepsi to Give Away 100 Million Free Songs, Apple
`Press Info (October 16, 2003),
`http://www.apple.com/pr/library/2003/10/16Apple-and-Pepsi-
`to-Give-Away-100-Million-Free-Songs.html
`Coca-Cola & Apple Team Up on Major Music Promotions in
`Europe, Apple Press Info (August 2, 2006),
`https://www.apple.com/pr/library/2006/08/02Coca-Cola-Apple-
`Team-Up-on-Major-Music-Promotions-in-Europe.html
`iTunes Music Store Now Accepts PayPal, Apple Press Info
`(December 10, 2004),
`http://www.apple.com/pr/library/2004/12/10iTunes-Music-
`Store-Now-Accepts-PayPal.html
`United States Patent No. 3,920,908
`
`Exhibit 4190
`
`Exhibit 4191
`
`Exhibit 4192
`
`Exhibit 4193
`
`United States Patent No. 4,759,060
`
`Exhibit 4194
`
`Exhibit 4195
`
`A Nation Online: Entering the Broadband Age, U.S. Dept. of
`Commerce (Sept. 2004),
`http://www.ntia.doc.gov/files/ntia/editor_uploads/NationOnline
`Broadband04_files/NationOnlineBroadband04.pdf
`Amy Harmon, Music Industry in Global Fight on Web Copies,
`NYTimes.com, (October 7, 2002),
`http://www.nytimes.com/2002/10/07/us/music-industry-in-
`global-fight-on-web-copies.html?pagewanted=all&src=pm
`
`vii
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`Exhibit 4198
`
`Exhibit 4199
`
`Exhibit 4200
`
`Exhibit 4201
`
`Exhibit 4197
`
`EXHIBIT LIST
`Apple Computer, Inc. Form 10-K, Fiscal year ending September
`Exhibit 4196
`24, 2005, SEC.gov (March 18, 2014),
`http://www.sec.gov/Archives/edgar/data/320193/000110465905
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`Brad King, Napster's Assets Go for a Song, Wired (Nov. 28, 2002),
`http://www.wired.com/entertainment/music/news/2002/11/566
`33
`Jeff Leeds, Grokster Calls It Quits on Sharing Music Files,
`NYTimes.com (Nov. 8, 2005),
`http://www.nytimes.com/2005/11/08/technology/08grokster.ht
`ml?_r=0
`Apple Launches the iTunes Music Store, Apple Press Info (April
`28, 2003), https://www.apple.com/pr/library/2003/04/28Apple-
`Launches-the-iTunes-Music-Store.html
`Federal Communications Commission, Making the Connections,
`Communications History (Nov. 21, 2005),
`http://transition.fcc.gov/omd/history/internet/making-
`connections.html
`Marc Fisher, Download Uproar: Record Industry Goes After
`Personal Use, The Washington Post (Dec. 30, 2007),
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`dyn/content/article/2007/12/28/AR2007122800693.html.
`RIAA Threatens to Sue Hundreds for Illegal File-Sharing,
`FoxNews.com (June 26, 2003), available at
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`Ruth Schubert, Tech-Savvy Getting Music for a Song; Industry
`Frustrated That Internet Makes Free Music Simple, Seattle Post-
`Intelligencer, Feb. 10, 1999
`Sam Costello, Court Orders Napster to Stay ShutAppeals court
`rejects company's request to overturn shutdown order,
`PCWorld.com (Mar. 25, 2002),
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`Sarah McBride and Ethan Smith, Music Industry to Abandon Mass
`Suits, The Wall Street Journal (Dec. 19, 2008),
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`Stan Liebowitz, File Sharing: Creative Destruction or Just Plain
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`Exhibit 4202
`
`Exhibit 4203
`
`Exhibit 4204
`
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`
`Exhibit 4206
`
`viii
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`Exhibit 4207
`
`EXHIBIT LIST
`Destruction?, 49 Journal of Law & Economics 1, 13-17 (April
`2006)
`The RIAA: "The Piracy Rate Is Growing", Bloomberg
`Businessweek Magazine (May 12, 2002),
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`Larry Sarisky, "Will Removable Hard Disks Replace the Floppy?,"
`Byte Magazine, Vol. 8, Number 3 (March 1983)
`United States Patent No. 4,567,359
`
`Exhibit 4208
`
`Exhibit 4209
`
`Exhibit 4210
`
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`
`Exhibit 4211
`
`United States Patent No. 5,966,440
`
`Exhibit 4212
`
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`
`Exhibit 4213
`
`United States Patent No. 6,453,355
`
`Exhibit 4214
`
`United States Patent No. 6,538,665
`
`Exhibit 4215
`
`United States Patent No. 6,714,984
`
`Exhibit 4216
`
`United States Patent No. 6,717,952
`
`Exhibit 4217
`
`United States Patent No. 6,829,648
`
`Exhibit 4218
`
`United States Patent No. 6,850,256
`
`Exhibit 4219
`
`United States Patent No. 7,007,062
`
`Exhibit 4220
`
`United States Patent No. 7,191,242
`
`Exhibit 4221
`
`United States Patent No. 7,319,761
`
`Exhibit 4222
`
`United States Patent No. 7,320,069
`
`Exhibit 4223
`
`United States Patent No. 7,366,788
`
`Exhibit 4224
`
`United States Patent No. 7,478,323
`
`Exhibit 4225
`
`United States Patent No. 7,650,570
`
`ix
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`EXHIBIT LIST
`Exhibit 4226
`United States Patent No. 7,653,685
`
`Exhibit 4227
`
`United States Patent No. 7,672,464
`
`Exhibit 4228
`
`United States Patent No. 7,680,849
`
`Exhibit 4229
`
`United States Patent No. 7,685,163
`
`Exhibit 4230
`
`United States Patent No. 7,686,215
`
`Exhibit 4231
`
`United States Patent No. 7,747,765
`
`Exhibit 4232
`
`United States Patent No. 7,797,446
`
`Exhibit 4233
`
`United States Patent No. 7,827,259
`
`Exhibit 4234
`
`United States Patent No. 7,853,893
`
`Exhibit 4235
`
`United States Patent No. 7,853,972
`
`Exhibit 4236
`
`United States Patent No. 7,860,830
`
`Exhibit 4237
`
`United States Patent No. 7,865,927
`
`Exhibit 4238
`
`United States Patent No. 7,958,441
`
`Exhibit 4239
`
`United States Patent No. 7,962,505
`
`Exhibit 4240
`
`United States Patent No. 7,966,362
`
`Exhibit 4241
`
`United States Patent No. 8,028,080
`
`Exhibit 4242
`
`United States Patent No. 8,032,565
`
`Exhibit 4243
`
`United States Patent No. 8,046,369
`
`Exhibit 4244
`
`United States Patent No. 8,103,793
`
`Exhibit 4245
`
`United States Patent No. 8,136,030
`
`Exhibit 4246
`
`United States Patent No. 8,148,622
`
`Exhibit 4247
`
`United States Patent No. 8,196,214
`
`x
`
`

`

`Case CBM2013-00020
`Patent 5,191,573
`
`EXHIBIT LIST
`Exhibit 4248
`United States Patent No. 8,214,315
`
`Exhibit 4249
`
`United States Patent No. 8,255,815
`
`Exhibit 4250
`
`United States Patent No. 8,261,246
`
`Exhibit 4251
`
`Exhibit 4252
`
`Exhibit 4253
`
`Exhibit 4254
`
`Exhibit 4255
`
`Apple Wins 2002 Technical GRAMMY Award, Apple Press Info
`(February 26, 2002),
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`May Wong, Apple's iPod in Short Supply for Holidays, Associated
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`Andrew Zipern, Technology Briefing - Software: Alliance Will
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`(March 29, 1998)
`Declaration of Jeff Robbin
`
`Exhibit 4256
`
`Declaration of Lawrence Kenswil
`
`Exhibit 4257
`
`Declaration of Marco Mazzoni
`
`Exhibit 4258
`
`Declaration of Tom Weyer
`
`Exhibit 4259
`
`Exhibit 4260
`
`Exhibit 4261
`
`Exhibit 4262
`
`Liquid audio, available at
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`Michael Stroud, Big Hopes for Hollywood Net Film, Wired.com,
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`DWA (Western District of Pennsylvania)
`Second Declaration of Dr. John P. J. Kelly In Support Of Apple
`Inc.'s Petition For Covered Business Method Patent Review Of
`United States Patent No. 5,191,573 Pursuant To 35 U.S.C. § 321,
`
`xi
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`

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`Case CBM2013-00020
`Patent 5,191,573
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`EXHIBIT LIST
`37 C.F.R. § 42.304
`Declaration of Roberto J. Gonzalez
`
`Exhibit 4263
`
`Exhibit 4264
`
`Declaration of Flora D. Elias-Mique
`
`Exhibit 4265
`
`Declaration of Lauren N. Robinson
`
`Exhibit 4266
`
`Declaration of Ching-Lee Fukuda
`
`Exhibit 4267
`
`Exhibit 4268
`
`Exhibit 4269
`
`Sandeep Junnarkar, a2b Music team leaves AT&T for Reciprocal,
`CNET, http://news.cnet.com/a2b-music-team-leaves-att-for-
`reciprocal/2100-1023_3-226006.html (May 18, 1999)
`Declaration of Michael P. Duffey
`
`Proposed Protective Order, Office Patent Trial Practice Guide at
`77 Fed. Reg. 48756, 48771 (Aug. 14, 2012)
`
`xii
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`

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`Case CBM2013-00020
`Patent 5,191,573
`
`
`TABLE OF ABBREVIATIONS
`PO
`Patent Owner
`
`iTMS
`
`Claims
`
`Resp
`
`PTO
`
`iTunes Store / iTunes Music Store
`
`Challenged Claims
`
`CBM2013-00020, paper 38.
`
`Patent Office
`
`’440 Resp
`
`CBM2013-00023, paper 38.
`
`cl.
`
`Claim
`
`Consumer Electronics Show
`
`CES
`
`Note: All emphasis herein added unless otherwise stated.
`
`xiii
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`

`

`While PO’s Response offers more than a dozen arguments, none rebuts the
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`Case CBM2013-00020
`Patent 5,191,573
`
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`clear evidence of invalidity presented in Apple’s petition. PO’s key contention is that
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`two elements are not disclosed and not obvious in view of CompuSonics—“second
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`memory” and “transferring money electronically.” Not so. For the first time in over
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`15 years of litigation and reexamination, PO argues the claimed “second memory” is
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`limited to “non-removable” media or “hard disk.” Yet neither limitation is claimed or
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`justified by any disclaimer or lexicography. In any event, the CompuSonics system, as
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`publicly disclosed and sold, included non-removable hard disks as the “second
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`memory”—evidence PO ignores. PO likewise ignores that CompuSonics repeatedly
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`disclosed transferring money electronically, such as by using “credit cards to charge
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`their purchases over the phone lines.” CompuSonics also disclosed using its devices
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`with telephones and computers connected to telecommunication lines, amply enabling
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`the disclosed transfer of credit card information to effectuate an electronic sale.
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`Rather than confront the obviousness of its Claims, PO makes three attempts
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`to avoid the issue altogether. All fail: (1) the Board has authority to consider its
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`instituted §103 ground, which is supported by Apple’s petition and expert declaration;
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`(2) a POSITA is presumed to know all pertinent prior art, which certainly includes the
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`CompuSonics publications; and (3) PO fails to rebut Apple’s showing that it would
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`have been obvious to a POSITA to combine the CompuSonics articles.
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`Finally, PO fails to show secondary considerations of non-obviousness. PO’s
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`1
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`Case CBM2013-00020
`Patent 5,191,573
`commercial success argument relies on iTMS, but fails to show the requisite nexus or
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`that iTMS is “coextensive” with PO’s “invention.” Similarly, PO’s copying
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`allegation—based on people unrelated to iTMS development, and rudimentary prior
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`art technology—has several fatal holes, and Apple’s declarants here confirm that
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`iTMS was developed without knowledge of PO or any PO information.
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`Simply put, PO has failed to rebut Apple’s evidence, and its Claims are invalid.
`
`I.
`
`PO’S KEY ARGUMENTS REST ON INCORRECT CLAIM
`CONSTRUCTIONS AND IGNORE KEY EVIDENCE
`A. No Limitation To “Non-Removable” Media Or “Hard Disk”
`PO fails to rebut CompuSonics’ disclosure of a “second memory.”
`
`First, PO relies on an incorrect claim construction, attempting to limit “second
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`memory” to “non-removable” media or “hard disk.” Unlike Claims 64 and 95 of the
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`’440 Patent in CBM2013-23, none of these ’573 Claims here requires a “hard disk,”
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`and the logical reading is that they are not so limited. Cf. EX4101 cl. 1, 2, 4, 5 with
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`EX4211 cl. 64, 95; see also EX4262 ¶¶4-13. See Golight, Inc. v. Wal-Mart Stores, Inc., 355
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`F.3d 1327, 1330 (Fed. Cir. 2004) (claims not limited where limitation appears in other
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`claims but not in claims at issue). Similarly, PO’s expert could not defend his stated
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`opinion that the Claims require “non-removable” media. EX4165 226:5-27:23.
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`Although the specification urges reducing inventory and delay associated with
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`traditional distribution and sale of music through CDs and tapes, the use of
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`removable hard disks or floppy disks to store electronically purchased music would have
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`2
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`Case CBM2013-00020
`Patent 5,191,573
`provided those same benefits. EX4262 ¶5. PO itself urged its customers to store music
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`purchased from its website on removable optical memory. EX4167 at 5, 10; EX4166
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`144:7-146:12; EX4262 ¶11. PO thus fails to show “non-removability” is required to
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`carry out its claimed “invention.” PO’s litigation history further belies its newly-
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`minted construction. Before this proceeding, PO asserted the ’573 Patent in three
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`separate suits from 1998 to the present. See Petition at 15 n.17. Not once did PO
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`urge the construction for “second memory” that it now seeks, and neither court
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`imposed such a construction. Resp at 8-9, 12 n.4.
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`Second, even if “second memory” were limited to “non-removable” media or
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`“hard disk,” the Claims would still be invalid. CompuSonics sold DSP 1000 and 2000
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`devices containing hard disks, and publicly taught that these DSPs may be used to
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`transmit and receive music purchased electronically. See, e.g., EX2124 187:15-189:18.
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`PO itself admits “CompuSonics taught the use of a hard disk for an ‘electronic record
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`store’” (Resp 64), although PO’s expert failed to consider that fact. EX4165 233:5-12.
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`Third, it would in any event have been entirely obvious to a POSITA that, as
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`the capacity/price ratio of memory devices continued to improve over time, improved
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`memory would be incorporated in implementing devices like CompuSonics’. EX4262
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`¶6; EX4165 257:19-259:9, 261:3-12; EX4174 at 4.
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`B. No Requirement That The Same Device That Receives Digital
`Signals Be “Configured To Transfer Payment Information”
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`PO erroneously argues that the Claims require the same device receiving digital
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`3
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`Case CBM2013-00020
`Patent 5,191,573
`signals to be “configured to transmit payment information.” Resp 2, 14. The Claims
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`(all methods) simply require “transferring money electronically … to the first party …
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`from the second party.” No language requires any second party device—let alone the
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`same device with the “second memory”—to be “configured” to do this. Rather, the
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`Claims permit electronic payment to be carried out using separate devices: digital
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`signals are sent from “first memory” to “second memory,” while electronic payment
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`is sent from “second party” to “first party.” EX4262 ¶25; see also id. ¶82.
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`PO seeks this unjustified limitation because PO cannot reasonably dispute that
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`EX4119 (at 2) discloses “transferring money electronically”: “a service that would
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`enable record companies to sell direct to consumers over the telephone. Symphonies, ordered
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`by credit card, could travel digitally over phone lines into homes to be recorded by
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`Compusonics’ machine.” Mr. Snell’s characterization of this disclosure as a consumer
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`making a phone purchase after using paper mail to provide a credit card number is not
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`credible. EX2153 ¶55. Mr. Snell also fails to address EX4106’s disclosure: “The
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`retailers would then be able, in turn to digitally transmit the music to consumers who
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`would use credit cards to charge their purchases over the phone lines.” EX4106 at 3.
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`CompuSonics likewise disclosed “all-electronic purchases” (EX4115), and as Arthur
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`Hair agued to the PTO, “an electronic sale inherently assumes a transferring of money
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`by providing a credit or debit card number … coupled with a transferring of a service
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`or product.” EX4102 at 170; see also, e.g., EX4136 at 109, 112; EX4162 at 4-6;
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`EX4159 at 13; EX4158 at 3. Thus, by the ’573 inventor’s own admissions,
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`4
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`Case CBM2013-00020
`Patent 5,191,573
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`CompuSonics discloses “transferring money electronically.”
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`II. COMPUSONICS PUBLICLY DISCLOSED ALL CLAIM ELEMENTS
`A.
`Under §102(a) and (b), an “invention” that was publicly known or in public use
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`CompuSonics Was Publicly Disclosed And Anticipates
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`may invalidate. PO appears to argue that only “public use” of CompuSonics could
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`invalidate, and that additional disclosures of CompuSonic’s capabilities in publications
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`should be ignored. E.g., Resp 1, 34-35. PO is wrong. Under § 102(a) CompuSonics
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`invalidates because it was “known … by others,” and its features can be demonstrated
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`by a public presentation or by various publications that disclose the invention’s
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`capabilities.1 Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361, 1369 (Fed. Cir. 2000);
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`Aspex Eyewear, Inc. v. Concepts in Optics, Inc., 111 F. App’x 582, 587 (Fed. Cir. 2004)
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`(anticipating public knowledge can be disclosed in multiple written documents).
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`In complaining of “futurama” statements made in CompuSonics publications,
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`PO ignores that an “invention” may be publicly disclosed even if no system with the exact
`
`disclosed properties had yet been built. See In re Antor Media Corp., 689 F.3d 1282 (Fed. Cir.
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`2012); Bristol-Myers Squibb Co. v. Ben Venue Labs., Inc., 246 F.3d 1368, 1379 (Fed. Cir.
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`2001). And although PO also characterizes CompuSonics’ demonstration as
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`“experimental use,” that doctrine does not apply to third party conduct. See Atlanta
`
`
`1 Contrary to PO’s assertion, the petition relies on CompuSonics evidence not
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`previously before the PTO, e.g., EXS. 4106, 4112, 4117.
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`5
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`Case CBM2013-00020
`Patent 5,191,573
`Attachment Co. v. Leggett & Platt, Inc., 516 F.3d 1361, 1365-66 (Fed. Cir. 2008) (“the
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`experimental use exception only concerns the actions of the inventors and their
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`agents” and does not apply to third parties). See id; MPEP 2133.03(e)(7).2
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`To avoid Compusonics’ disclosures of a retailer as a “second party” (EX4106 at
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`3), PO also argues a “second party” must be a consumer, not a retailer. E.g., Resp. 2-
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`3, 7; EX4165 235:20-237:16. No Claim or intrinsic evidence supports that position.
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`CompuSonics’ Disclosure of Electronic Payment Is Enabling
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`B.
`The CompuSonics publications amply and repeatedly disclose “transferring
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`money electronically” (See II.A.), and PO also falls short in arguing that CompuSonics’
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`disclosure of electronic payment is not enabling.3 Resp 22-23, 33, 62. First, PO
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`admits that “the components needed to practice the claims were available prior to 1988”
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`and operated as intended. Resp 31; EX4110 4:16-21. And PO’s expert, Mr. Snell,
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`admits a POSITA would have known how to carry out electronic payment, agreeing
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`2 Likewise, PO’s assertion that EX4112 and 4117 are not “printed publications” fails.
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`These slides were publicly presented in conferences, lectures, and industry events,
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`including trade shows such as CES, where POSITAs had sufficient time to view and
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`copy the slides and/or retain the information. EX2124 44:11-15, 63:19-67:8;
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`EX4133 ¶¶ 9, 14; In re Klopfenstein, 380 F.3d 1345, 1348-1352 (Fed. Cir. 2004).
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`3 Prior art publications are presumed enabling. See Antor Media Corp., 689 F.3d 1282,
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`1287-89 (Fed. Cir. 2012). See also EX4262 ¶83.
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`6
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`Case CBM2013-00020
`Patent 5,191,573
`that, before the priority date, transferring and verifying monies across telephone lines
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`such as by credit card was well known. EX4165 74:5-75:9; see also, e.g., id. 230:23-
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`231:24. Mr. Snell also agrees a POSITA would have known that credit card numbers
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`could be provided by voice over a phone line, or by keypad. Id. 74:5-75:24. Indeed,
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`the ’573 Patent’s only disclosure about “transferring money electronically” is the bare
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`statement: “transferring money via a telecommunications line to the first party from
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`the second party.” EX4101 at 3:6-8, 5:32-34. Thus, there is no merit to PO’s
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`argument that “[i]n the absence of a defined billing method, the ‘CompuSonics
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`systems’ do not adequately disclose the claimed elements . . .” Resp 65.
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`C. Dependent Claims 2 and 5 Are Also Invalid
`Claims 2 and 5 include the steps of “searching” the first memory and
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`“selecting” the desired digital signals, after the “transferring” step. PO’s Mr. Snell
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`agrees that in an electronic sale of content stored in memory, the first party always
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`searches the first memory