`571-272-7822
`
`
`
`
`Paper 14
`Entered: October 8, 2013
`
`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 MICHAEL P. TIERNEY, JUSTIN T. ARBES, and
`GEORGIANNA W. BRADEN, Administrative Patent Judges.
`
`ARBES, Administrative Patent Judge.
`
`
`
`DECISION
`Institution of Covered Business Method Review
`37 C.F.R. § 42.208
`
`
`
`Case CBM2013-00020
`Patent 5,191,573
`
`
`Petitioner Apple Inc. filed a Corrected Petition (Paper 6) (“Pet.”) to
`
`institute a covered business method review of claims 1, 2, 4, and 5 of Patent
`
`5,191,573 (the “‟573 patent”) pursuant to 35 U.S.C. § 321 et seq. Patent
`
`Owner SightSound Technologies, LLC filed a preliminary response
`
`(“Prelim. Resp.”). We have jurisdiction under 35 U.S.C. § 324. For the
`
`reasons that follow, the Board has determined to institute a covered business
`
`method review.
`
`
`
`I. BACKGROUND
`
`The standard for instituting a covered business method review is set
`
`forth in 35 U.S.C. § 324(a):
`
`THRESHOLD—The Director may not authorize a post-grant
`review to be instituted unless the Director determines that the
`information presented in the petition filed under section 321, if
`such information is not rebutted, would demonstrate that it is
`more likely than not that at least 1 of the claims challenged in
`the petition is unpatentable.
`
`Petitioner challenges claims 1, 2, 4, and 5 as anticipated under 35
`
`U.S.C. § 102 and as unpatentable under 35 U.S.C. § 103. Pet. 33-73. We
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`grant the Petition as to claims 1, 2, 4, and 5 on certain grounds as discussed
`
`below.
`
`
`
`A. The ’573 Patent (Ex. 1101)
`
`The ‟573 patent, entitled “Method for Transmitting a Desired Digital
`
`Video or Audio Signal,” issued on March 2, 1993 based on Application
`
`07/586,391, filed September 18, 1990, which is a file wrapper continuation
`
`of Application 07/206,497, filed June 13, 1988. The ‟573 patent has
`
`expired.
`
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`Case CBM2013-00020
`Patent 5,191,573
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`The ‟573 patent was previously the subject of an ex parte
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`reexamination (Control No. 90/007,402) requested by Napster, Inc. on
`
`January 31, 2005. Following reexamination, claims 1-6 of the ‟573 patent
`
`were confirmed. Ex. 1101 at 10-25 (reexamination certificate issued
`
`November 30, 2010). Claims 1, 2, 4, and 5 of the ‟573 patent also are the
`
`subject of Case CBM2013-00019 (grounds based on 35 U.S.C. §§ 101 and
`
`112).
`
`The ‟573 patent relates to a “method for the electronic sales and
`
`distribution of digital audio or video signals.” Ex. 1101, col. 1, ll. 9-14. The
`
`patent describes how three types of media used for storing music at the time
`
`of the invention—records, tapes, and compact discs—did not allow for
`
`music to be transferred easily and had various problems, such as low
`
`capacity and susceptibility to damage during handling. Id., col. 1, l. 17-col.
`
`2, l. 9. The patent discloses storing “Digital Audio Music” (i.e., music
`
`encoded into binary code) on a computer hard disk and selling and
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`distributing such music electronically. Id., col. 1, ll. 53-56; col. 2, ll. 10-35.
`
`Figure 1 of the ‟573 patent is reproduced below:
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`Case CBM2013-00020
`Patent 5,191,573
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`As shown in Figure 1 above, an agent authorized to sell and distribute
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`“Digital Audio Music” has a control unit 20 (control panel 20a, control
`
`integrated circuit 20b, and sales random access memory chip 20c) and hard
`
`disk 10, which stores the music to be distributed. Id., col. 3, ll. 44-67. On
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`the other side of the figure, a user has a control unit 50 (control panel 50a,
`
`control integrated circuit 50b, incoming random access memory chip 50c,
`
`and playback random access memory chip 50d), hard disk 60, video display
`
`unit 70, and speakers 80. Id., col. 3, l. 67-col. 4, l. 10. The agent and user
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`are connected via telephone lines 30. Id., col. 3, ll. 63-67. According to the
`
`‟573 patent, control units 20 and 50 are “designed specifically to meet the
`
`teachings of this invention,” but all other components shown in Figure 1
`
`were “already commercially available.” Id., col. 4, ll. 16-23.
`
`The patent describes a process by which a user transfers money “via a
`
`telecommunications line” to purchase music from the agent and the music is
`
`transferred electronically “via a telecommunications line” to the user and
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`stored on the user‟s hard disk. Id., col. 5, ll. 29-45. Control integrated
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`circuits 20b and 50b regulate the electronic transfer. Id., col. 4, ll. 29-47.
`
`The agent‟s sales random access memory chip 20c stores music temporarily
`
`so that it can be transferred to the user. Id. The user‟s incoming random
`
`access memory chip 50c stores music temporarily before storage in hard disk
`
`60, and playback random access memory chip 50d stores music temporarily
`
`so that it can be played. Id. Once a song is stored in the user‟s hard disk 60,
`
`the user can select it among others in a visual display using control panel
`
`50a and play it on speakers 80. Id., col. 4, ll. 52-63. In addition to “Digital
`
`Audio Music,” the patent contemplates “Digital Video” being sold and
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`Patent 5,191,573
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`distributed electronically via the disclosed methods. Id., col. 5, l. 67-col. 6,
`
`l. 2.
`
`
`
`B. Related Matters
`
`The ‟573 patent was asserted previously in two district court
`
`litigations: SightSound.com Inc. v. N2K, Inc. et al., W.D. Pa. Case No.
`
`2:98-cv-00118-DWA (filed January 16, 1998) (the “N2K litigation”), and
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`SightSound Techs., LLC et al. v. Roxio, Inc. et al., W.D. Pa. No.
`
`2:04-cv-01549-DWA (filed October 8, 2004). Pet. 16. Both cases settled
`
`prior to trial. See Ex. 2101. The ‟573 patent is being asserted currently
`
`against Petitioner in SightSound Techs. LLC v. Apple Inc., W.D. Pa. Case
`
`No. 2:11-cv-01292-DWA (filed October 10, 2011) (the “Apple litigation”).
`
`Pet. 16. The Apple litigation has been stayed. Prelim. Resp. 9.
`
`
`
`
`
`C. Exemplary Claim
`
`Claim 1 of the ‟573 patent is exemplary of the claims at issue:
`
`1. A method for transmitting a desired digital audio
`signal stored on a first memory of a first party to a second
`memory of a second party comprising the steps of:
`
`transferring money electronically via a
`telecommunication line to the first party, at a location remote
`from the second memory and controlling use of the first
`memory, from the second party financially distinct from the
`first party, said second party controlling use and in possession
`of the second memory;
`
`connecting electronically via a telecommunications line
`the first memory with the second memory such that the desired
`digital audio signal can pass therebetween;
`
`transmitting the desired digital audio signal from the first
`memory with a transmitter in control and possession of the first
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`Patent 5,191,573
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`party to a receiver having the second memory at a location
`determined by the second party, said receiver in possession and
`control of the second party; and
`
`storing the digital signal in the second memory.
`
`
`
`D. The Prior Art
`
`1. CompuSonics Prior Art
`
`Petitioner relies on the following materials, which Petitioner contends
`
`are evidence of a publicly disclosed prior art system referred to by Petitioner
`
`as the “CompuSonics system”:
`
`1. Declaration of David M. Schwartz, founder of
`CompuSonics Corp. and CompuSonics Video Corp. (Ex. 1133);
`
`2. Joint Telerecording Push: CompuSonics, AT&T Link,
`BILLBOARD, Oct. 5, 1985 (Ex. 1106);
`
`3. David Needle, From the News Desk: Audio/Digital
`Interface for the IBM PC?, INFOWORLD, June 4, 1984, at 9
`(Ex. 1107);
`
`4. Larry Israelite, Home Computing: Scenarios for
`Success, BILLBOARD, Dec. 15, 1984 (Ex. 1108);
`
`5. Image titled “CompuSonics Digital Audio
`Telecommunications System” (Ex. 1112);
`
`6. Letter from David M. Schwartz to CompuSonics
`shareholders, July 16, 1984 (Ex. 1113);
`
`7. Hyun Heinz Sohn, A High Speed Telecommunications
`Interface for Digital Audio Transmission and Reception,
`presented at the 76th Audio Engineering Society (AES)
`Convention, Oct. 8-11, 1984 (Ex. 1114);
`
`8. Letter from David M. Schwartz to CompuSonics
`shareholders, Oct. 10, 1985 (Ex. 1115);
`
`9. CompuSonics Video Application Notes: CSX Digital
`Signal Processing (1986) (Ex. 1116);
`
`
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`6
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`Case CBM2013-00020
`Patent 5,191,573
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`10. Image titled “CompuSonics Digital Audio Software
`Production/Distribution” (Ex. 1117);
`
`11. U.S. Patent No. 4,682,248, issued July 21, 1987
`(Ex. 1118);
`
`12. Brian Dumaine, The Search for the Digital Recorder,
`FORTUNE, Nov. 12, 1984 (Ex. 1119);
`
`13. Video excerpts of a lecture given at Stanford
`University by David M. Schwartz and J. Stautner, Feb. 18, 1987
`(Ex. 4120);1
`
`14. Photograph of CompuSonics equipment (Ex. 1131);
`
`and
`
`15. New Telerecording Method for Audio, BROADCAST
`MANAGEMENT/ENGINEERING, Oct. 1985, at 14-15 (Ex. 1140).
`
`
`
`2. Synth-Bank Prior Art
`
`Petitioner also relies on the following prior art:
`
`1. Bryan Bell, Synth-Bank: The Ultimate Patch Library,
`ELECTRONIC MUSICIAN, Sept. 1986 (“Synth-Bank article”)
`(Ex. 1121);
`
`2. Draft agreement between Synth-Bank and an unnamed
`artist, Feb. 22, 1986 (Ex. 1122);
`
`3. U.S. Patent and Trademark Office materials relating to
`the mark “Synth-Bank,” Trademark Serial No. 73/568,543,
`including a Notice of Acceptance and declaration of use from
`Bryan Bell (Ex. 1123); and
`
`
`1 Petitioner‟s original Exhibits 1101-1146 were not labeled properly. Paper
`5 at 2. Petitioner filed corrected exhibits, but used the same numbers as the
`originally filed exhibits. Paper 7. To avoid confusion, the Board
`renumbered the originally filed copies as Exhibits 4101-4146. Id.
`Petitioner, however, did not re-file Exhibit 1120. Thus, the video is
`numbered Exhibit 4120. For ease of reference by the parties and the Board,
`we will require Petitioner to file a written transcript of the video.
`
`
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`7
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`4. SynthBank Bulletin Board, KEYBOARD, Mar. 1987
`(Ex. 1124).
`
`
`
`E. The Asserted Grounds
`
`Petitioner challenges claims 1, 2, 4, and 5 of the ‟573 patent on the
`
`following grounds:
`
`Prior Art
`
`Basis
`
`Claims
`Challenged
`
`The CompuSonics system
`
`35 U.S.C. § 102
`
`1, 2, 4, 5
`
`The Synth-Bank article, alone or in
`combination with Exhibits 1122-24
`
`35 U.S.C. § 103(a) 1, 2, 4, 5
`
`
`
`F. Claim Interpretation
`
`Consistent with the statute and legislative history of the America
`
`Invents Act (AIA), the Board interprets claims of an unexpired patent using
`
`the “broadest reasonable construction in light of the specification of the
`
`patent in which [they] appear[].” 37 C.F.R. § 42.300(b); see also Office
`
`Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48766 (Aug. 14, 2012).
`
`For claims of an expired patent, however, the Board‟s claim interpretation
`
`analysis is similar to that of a district court. See In re Rambus Inc., 694 F.3d
`
`42, 46 (Fed. Cir. 2012). Claim terms are given their ordinary and customary
`
`meaning as would be understood by a person of ordinary skill in the art at
`
`the time of the invention and in the context of the entire patent disclosure.
`
`In re Translogic Tech., Inc., 504 F.3d 1249, 1257 (Fed. Cir. 2007). We
`
`apply this standard to the claims of the expired ‟573 patent.
`
`We note that the district court interpreted various terms of the ‟573
`
`patent in both the N2K litigation and Apple litigation. See SightSound.com
`
`
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`8
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`Case CBM2013-00020
`Patent 5,191,573
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`Inc. v. N2K, Inc., 185 F. Supp. 2d 445 (W.D. Pa. 2002) (report and
`
`recommendation in the N2K litigation); Exs. 1134-35 (Apple litigation).
`
`Petitioner‟s proposed interpretations are consistent with the district court‟s
`
`interpretations in the Apple litigation, and Patent Owner does not dispute
`
`Petitioner‟s proposed interpretations in its preliminary response. See Pet.
`
`29-33. We have reviewed the district court‟s claim interpretations and
`
`determine that the interpretations in the Apple litigation are consistent with
`
`the ordinary and customary meaning of the terms as understood by one of
`
`ordinary skill in the art. Accordingly, for purposes of this decision, we
`
`adopt the following interpretations of terms in claims 1, 2, 4, and 5 of the
`
`‟573 patent:
`
`Claim Term
`
`Interpretation
`
`“first party”
`
`“second party”
`
`“telecommunication
`line” (claim 1),
`“telecommunications
`line” (claims 1 and 4)
`
`a first entity, whether a corporation or a real
`person
`
`a second entity, whether a corporation or a
`real person
`
`an electronic medium for communicating
`between computers
`
`“electronically”
`
`through the flow of electrons
`
`“connecting
`electronically”
`
`connecting through devices or systems which
`depend on the flow of electrons
`
`“transferring money
`electronically”
`
`providing payment electronically (i.e.,
`through devices or systems which depend on
`the flow of electrons)
`
`“digital audio signal”
`
`digital representation of sound waves
`
`All other terms in claims 1, 2, 4, and 5 are given their ordinary and
`
`customary meaning and need not be further construed at this time.
`
`
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`9
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`II. ANALYSIS
`
`We turn now to Petitioner‟s asserted grounds of unpatentability and
`
`Patent Owner‟s arguments in its preliminary response to determine whether
`
`Petitioner has met the threshold standard of 35 U.S.C. § 324(a).
`
`
`
`A. Standing
`
`The parties disagree as to whether Petitioner has standing to file a
`
`petition for a covered business method review of the ‟573 patent. See
`
`Pet. 10-16; Prelim. Resp. 23-39.
`
`Section 18 of the AIA provides for the creation of a transitional
`
`program for reviewing covered business method patents. Section 18 limits
`
`reviews to persons or their privies that have been sued or charged with
`
`infringement of a “covered business method patent,” which does not include
`
`patents for “technological inventions.” AIA §§ 18(a)(1)(B), 18(d)(1); see
`
`37 C.F.R. § 42.302. It is undisputed that Petitioner has been sued for
`
`infringement of the ‟573 patent. The Apple litigation was filed in the U.S.
`
`District Court for the Western District of Pennsylvania on October 10, 2011,
`
`and is pending. See Pet. 16; Prelim. Resp. 8-9. The only dispute is whether
`
`the ‟573 patent is a “covered business method patent” as defined in the AIA.
`
`See Pet. 10-16; Prelim. Resp. 23-39. For the reasons explained below, we
`
`conclude that the ‟573 patent is a “covered business method patent” and
`
`Petitioner has standing to file a petition for a covered business method
`
`review of the ‟573 patent.
`
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`Patent 5,191,573
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`1. Financial Product or Service
`
`A “covered business method patent” is a patent that “claims a method
`
`or corresponding apparatus for performing data processing or other
`
`operations used in the practice, administration, or management of a financial
`
`product or service, except that the term does not include patents for
`
`technological inventions.” AIA § 18(d)(1); see 37 C.F.R. § 42.301(a). For
`
`purposes of determining whether a patent is eligible for a covered business
`
`method patent review, the focus is on the claims. See Transitional Program
`
`for Covered Business Method Patents—Definitions of Covered Business
`
`Method Patent and Technological Invention; Final Rule, 77 Fed. Reg.
`
`48734, 48736 (Aug. 14, 2012) (“CBM Rules”). A patent need have only one
`
`claim directed to a covered business method to be eligible for review. Id.
`
`In promulgating rules for covered business method reviews, the Office
`
`considered the legislative intent and history behind the AIA‟s definition of
`
`“covered business method patent.” Id. at 48735-36. The “legislative history
`
`explains that the definition of covered business method patent was drafted to
`
`encompass patents „claiming activities that are financial in nature, incidental
`
`to a financial activity or complementary to a financial activity.‟” Id. (citing
`
`157 Cong. Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen.
`
`Schumer)). The legislative history indicates that “financial product or
`
`service” should be interpreted broadly. Id.
`
`Claim 1 of the ‟573 patent is directed to activities that are financial in
`
`nature, namely the electronic sale of digital audio. Claim 1 recites
`
`“transferring money electronically via a telecommunication line to the first
`
`party . . . from the second party.” The electronic transfer of money is a
`
`financial activity, and allowing such a transfer amounts to providing a
`
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`financial service. Indeed, Patent Owner acknowledges that a fundamental
`
`step of claim 1 of the ‟573 patent is “selling” a desired digital audio signal to
`
`a user. See Prelim. Resp. 9-10. The financial nature of the claimed method
`
`is indicated further by the fact that the claim requires the first and second
`
`parties to be “financially distinct” from each other. The Specification of the
`
`‟573 patent also confirms the claimed method‟s connection to financial
`
`activities. The Specification states that the invention is a method for the
`
`electronic “sale[]” of digital audio where a user may “purchase” and receive
`
`digital audio. See, e.g., Ex. 1101, col. 1, ll. 9-14; col. 2, ll. 26-30; col. 2,
`
`ll. 51-58; see also claim 3 (“providing a credit card number of the second
`
`party . . . so the second party is charged money”). We are persuaded that
`
`claim 1 recites a method for performing data processing or other operations
`
`used in the practice, administration, or management of a financial product or
`
`service, as required by Section 18(d)(1) of the AIA.
`
`In its preliminary response, Patent Owner makes a number of
`
`arguments that the ‟573 patent does not qualify as a “covered business
`
`method patent.” Patent Owner contends that Congress intended covered
`
`business method reviews to apply only to a “narrow class of patents,”
`
`relying on various statements in the legislative history of the AIA. Prelim.
`
`Resp. 25-30. In particular, Patent Owner asserts that only patents with a
`
`“clear nexus to the financial business” are eligible for a covered business
`
`method review. Id. at 23-24, 27, 30. As such, “a petitioner must show more
`
`than just the existence of a payment step or a monetary element in a patent
`
`claim to establish the necessary nexus between the patent and a financial
`
`product or service.” Id. at 27.
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`It is the statutory language, however, that controls whether a patent is
`
`eligible for a covered business method review. The AIA does not require a
`
`“nexus” to a “financial business,” but rather a “method or corresponding
`
`apparatus for performing data processing or other operations used in the
`
`practice, administration, or management of a financial product or service.”
`
`AIA § 18(d)(1). Further, contrary to Patent Owner‟s view of the legislative
`
`history, the legislative history indicates that the phrase “financial product or
`
`service” is not limited to the products or services of the “financial services
`
`industry” and is to be interpreted broadly. CBM Rules, 77 Fed. Reg. at
`
`48735-36. Senator Schumer, for example, stated:
`
`Nothing in the America Invents Act limits use of section
`18 to banks, insurance companies or other members of the
`financial services industry. Section 18 does not restrict itself to
`being used by petitioners whose primary business is financial
`products or services. Rather, it applies to patents that can apply
`to financial products or services. Accordingly, the fact that a
`patent is being used by a company that is not a financial
`services company does not disqualify the patent from section 18
`review. . . .
`
`The plain meaning of “financial product or service”
`demonstrates that section 18 is not limited to the financial
`services industry. At its most basic, a financial product is an
`agreement between two parties stipulating movements of money
`or other consideration now or in the future. . . .
`
`157 Cong. Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer)
`
`(emphasis added). Although claim 1 of the ‟573 patent does not relate to a
`
`financial services business, it does recite the electronic movement of money
`
`between financially distinct entities, which is an activity that is financial in
`
`nature.
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`Patent Owner further argues that SightSound Technologies, LLC was
`
`formed as a media company, not a financial services company, and the
`
`entities sued by Patent Owner for infringement of the ‟573 patent (including
`
`Petitioner) sell digital content, not financial products. Prelim. Resp. 30-31.
`
`Again, however, as the legislative history cited above demonstrates, a patent
`
`need not be used by a financial services company or involve a traditional
`
`financial services business to qualify as a covered business method patent.
`
`The cited entities may not provide typical financial services, but, according
`
`to Petitioner, they do sell digital content, which is the financial activity
`
`recited in claim 1.
`
`Finally, Patent Owner argues that a determination that the ‟573 patent
`
`is a covered business method patent would be a “radical expansion of the
`
`scope of patents subject to CBM review” where “[v]irtually any patent that
`
`mentions a sale would be subject to CBM review, even when the patent
`
`itself has nothing to do with finance.” Id. at 31-33. Patent Owner‟s
`
`argument is not persuasive. The Board reviews petitions on their own facts
`
`to determine whether the challenged patent is a “covered business method
`
`patent” under the AIA definition. Petitioner‟s argument that every patent
`
`mentioning a sale would be subject to covered business method review
`
`ignores the specific language of claim 1 (“transferring money electronically”
`
`from a second party to a “financially distinct” first party) and the claim‟s
`
`expressly stated connection to financial activity.2 Further, we do not agree
`
`with Patent Owner that the ‟573 patent has nothing to do with finance. The
`
`
`2 Petitioner‟s argument also ignores the fact that a patent mentioning a sale,
`but directed to a “technological invention[],” would not be a covered
`business method patent. See AIA § 18(d)(1); infra Section II.A.2.
`
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`Specification of the ‟573 patent states repeatedly that the disclosed method
`
`involves the electronic “sale” of digital audio and the electronic “transfer” of
`
`“money.” See, e.g., Ex. 1101, col. 1, ll. 9-14; col. 2, ll. 26-30; col. 2, ll.
`
`51-58; col. 3, ll. 3-8; col. 5, ll. 33-35. For the reasons stated above, and
`
`based on the particular facts of this proceeding, we conclude that claim 1 of
`
`the ‟573 patent meets the “financial product or service” component of the
`
`definition in Section 18(d)(1) of the AIA.
`
`
`
`2. Technological Invention
`
`The definition of “covered business method patent” in Section
`
`18(d)(1) of the AIA does not include patents for “technological inventions.”
`
`To determine whether a patent is for a technological invention, we consider
`
`“whether the claimed subject matter as a whole recites a technological
`
`feature that is novel and unobvious over the prior art; and solves a technical
`
`problem using a technical solution.” 37 C.F.R. § 42.301(b). The following
`
`claim drafting techniques, for example, typically do not render a patent a
`
`“technological invention”:
`
`(a) Mere recitation of known technologies, such as
`computer hardware, communication or computer networks,
`software, memory, computer-readable storage medium,
`scanners, display devices or databases, or specialized machines,
`such as an ATM or point of sale device.
`
`(b) Reciting the use of known prior art technology to
`accomplish a process or method, even if that process or method
`is novel and non-obvious.
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`(c) Combining prior art structures to achieve the normal,
`expected, or predictable result of that combination.
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`Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48763-64 (Aug. 14,
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`2012).
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`We are persuaded that claim 1 as a whole does not recite a
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`technological feature that is novel and unobvious over the prior art. See Pet.
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`11-16. The method of claim 1 utilizes various technical components: a
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`“first memory,” “second memory,” “telecommunications line,”
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`“transmitter,” and “receiver.” All of these components, however, were
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`generic hardware devices known in the prior art. The Specification of the
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`‟573 patent discloses, for instance, that “agent‟s Hard Disk 10,” “user‟s Hard
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`Disk 60,” and “Telephone Lines 30” were “already commercially available.”
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`See Ex. 1101, col. 4, ll. 16-20; Pet. 13. The applicant also acknowledged
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`during prosecution that certain prior art references had a “transmitter” and
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`“receiver,” and stated that claim 1 can use “[a]ny suitable recording
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`apparatus” and is “not limited to a predesigned receiver.” See Ex. 1102 at
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`100, 139-41; Pet. 9, 13-14. Claim 1 is merely the recitation of known
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`technologies to perform a method, which indicates that it is not a patent for a
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`technological invention. See Office Patent Trial Practice Guide, 77 Fed.
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`Reg. at 48764 (examples a and b).
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`Patent Owner does not dispute that the individual technical
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`components of claim 1 were known in the art, but argues that Petitioner fails
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`to address whether the particular combination of steps in claim 1 was novel
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`and non-obvious. Prelim. Resp. 33-37. Petitioner, however, discusses claim
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`1 as a whole in its Petition and explains sufficiently why the combination of
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`steps does not recite a technological feature that is novel and non-obvious
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`over the prior art. See, e.g., Pet. 11-16 (addressing Patent Owner‟s
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`admissions regarding the claim), 33-55 (alleging anticipation by the
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`CompuSonics system).
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`Patent Owner also argues that claim 1 of the ‟573 patent is not merely
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`an abstract idea and is not a business process capable of being performed
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`using a pen and paper. Prelim. Resp. 35-37. According to Patent Owner,
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`the hardware components recited in the claim are necessary to perform the
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`claimed method. Id. Patent Owner‟s argument appears to relate to whether
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`claim 1 recites patent-eligible subject matter under 35 U.S.C. § 101 rather
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`than whether the patent is for a “technological invention” under the AIA.
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`The tests are not the same. As explained above, none of the technical
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`components of claim 1 were novel or non-obvious at the time of the ‟573
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`patent, and we are not persuaded that the particular combination of
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`components in the claim amounts to a technological feature that is novel and
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`unobvious over the prior art. Further, while we agree with Patent Owner
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`that the steps in claim 1 must be implemented using the recited hardware
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`(i.e., a “first memory,” “second memory,” “telecommunications line,”
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`“transmitter,” and “receiver”), that does not mean necessarily that the patent
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`is for a technological invention because the components themselves were
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`known in the art.
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`We also have considered whether the method of claim 1 solves a
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`technical problem using a technical solution, but, because we conclude that
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`claim 1 does not recite a technological feature that is novel and unobvious
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`over the prior art, the ‟573 patent is a “covered business method patent” and
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`is eligible for a covered business method patent review.
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`B. Asserted Ground Based on the CompuSonics System
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`Petitioner contends that claims 1, 2, 4, and 5 are anticipated by a
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`computer system developed by CompuSonics Corp. and CompuSonics
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`Video Corp. (collectively, “CompuSonics”) in the 1980s, which Petitioner
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`refers to as the “CompuSonics system.” Pet. 33-34. According to
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`Petitioner, the CompuSonics system was disclosed and demonstrated
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`publicly before “any possible effective filing date” of the ‟573 patent and,
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`therefore, constitutes prior art under Section 18(a)(1)(C) of the AIA.3 Pet.
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`33-34. Petitioner contends that the details of the CompuSonics system were
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`disclosed publicly in various printed publications that Petitioner submits as
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`Exhibits 1106-08, 1112-1119, and 1140, a photograph that Petitioner
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`submits as Exhibit 1131, and a video lecture that Petitioner submits as
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`Exhibit 4120. Id. at 33-55.
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`In support of its contentions, Petitioner provides two declarations.
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`First, Petitioner provides a declaration from the founder of CompuSonics,
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`David M. Schwartz (Exhibit 1133). Mr. Schwartz describes the
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`CompuSonics materials and testifies as to how the CompuSonics system was
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`created. Ex. 1133 ¶¶ 4-19. Second, Petitioner submits the declaration of Dr.
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`John P. J. Kelly (Exhibit 1132). Dr. Kelly has a Ph.D. in computer science
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`and was a professor of computer science. Ex. 1132 ¶ 2. Dr. Kelly states that
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`he has “worked in the area of computer software, hardware and system
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`design and development for over thirty-five years.” Id. ¶ 5. In his
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`declaration, Dr. Kelly describes the state of the art at the time of the ‟573
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`3 Section 18(a)(1)(C) of the AIA provides, for example, that a covered
`business method review may be based on “prior art that is described by
`section 102(a)” as in effect before March 16, 2013. Prior to being amended
`by the AIA, 35 U.S.C. § 102(a) provided that a person shall be entitled to a
`patent unless “the invention was known or used by others in this country
`. . . before the invention thereof by the applicant for patent.”
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`patent and opines that the challenged claims are anticipated by the
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`CompuSonics system. Id. ¶¶ 17-40, Appx. C.
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`Patent Owner in its preliminary response does not argue the merits of
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`Petitioner‟s asserted ground of unpatentability based on the CompuSonics
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`system other than to state that the system lacks “the ability to store digital
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`audio and digital video signals in a second memory.” Prelim. Resp. 25 n.20.
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`Patent Owner, however, does not explain why it believes that to be the case.
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`Upon review of Petitioner‟s analysis and supporting declarations, for the
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`reasons explained below, we are persuaded that claims 1, 2, 4, and 5 are
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`more likely than not anticipated by the CompuSonics system under 35
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`U.S.C. § 102. We also determine that it is more likely than not that claims
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`1, 2, 4, and 5 are unpatentable under 35 U.S.C. § 103(a), as explained below.
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`1. Overview of the CompuSonics System
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`According to Mr. Schwartz, the CompuSonics system comprised
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`“digital recorder/players, which CompuSonics referred to as DSPs [Digital
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`Signal Processors].” Ex. 1133 ¶ 4. A DSP could “download digital data
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`from a remote source to a local disk” (a process CompuSonics called
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`“[t]elerecording”) and playback the stored digital data. Id. A 1984 article
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`describes the device as a “digital / audio disk player that uses a new
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`3.3-megabyte floppy drive to store music in digital form” and has a “built-in
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`communications device that receives information via an existing phone
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`line.” Ex. 1107.
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`Mr. Schwartz provides a photograph as Exhibit 1131, which is
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`reproduced below:
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`Exhibit 1131 depicts the CompuSonics device and a floppy disk that can be
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`inserted in the drive of the device.
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`According to Mr. Schwartz, CompuSonics disclosed to the public a
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`diagram illustrating the transmission of digital audio from a source DSP to a
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`receiver DSP over an AT&T telephone line or T1 line. See Ex. 1133 ¶ 9.
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`Exhibit 1112 is reproduced below:
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`Exhibit 1112 depicts a “CompuSonics DSP-2002” with an “Audio System,”
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`“CPU,” and “AT&T Equipment” that communicates with “AT&T
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`Equipment” of a similar device over “AT&T Accunet Switched 56 or T 1.5
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`Service.” CompuSonics also disclosed a diagram illustrating how its system
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`was able to distribute digital audio from a seller to a user. See Ex. 1133
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`¶ 14.
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`Exhibit 1117 is reproduced