`______________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`______________
`
`APPLE INC.
`Petitioner
`
`v.
`
`SIGHTSOUND TECHNOLOGIES, LLC
`Patent Owner
`______________
`
`Case CBM2013-00023
`Patent 5,966,440
`______________
`
`Before the Honorable MICHAEL P. TIERNEY, JUSTIN T. ARBES, and
`GEORGIANNA W. BRADEN,
`Administrative Patent Judges.
`
`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. 5,966,440
`PURSUANT TO 35 U.S.C. § 321, 37 C.F.R. § 42.304
`
`
`
`
`
`
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`
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`Apple Exhibit 4420_ REDACTED
`Apple v. SightSound Technologies
`CBM2013-00023
`Page 00001
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`Case CBM2013-00023
`Patent 5,966,440
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`I, John Kelly, hereby declare as follows:
`
`I.
`
`INTRODUCTION
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`1.
`
`I have been retained to provide assistance regarding U.S. Patent No.
`
`5,966,440 (“’440 patent”). I have previously submitted a declaration to this matter:
`
`“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. 5,966,440
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`Pursuant To 35 U.S.C. § 321, 37 C.F.R. § 42.304” (the “Kelly Decl.”). I have
`
`described my background and experience, previous testimony and my
`
`compensation in the Kelly Decl. I have personal knowledge of the facts and
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`opinions set forth in this declaration, and, if called upon to do so, I would testify
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`competently thereto.
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`2.
`
`In preparing my opinions, I have considered the following materials:
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`• Materials cited in the Kelly Decl.,
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`• Declaration of John Snell in Support of Patent Owner SightSound
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`Technologies, LLC’s Response to Petition (the “Snell Decl.”) [Ex. 2353],
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`• John Snell Mar. 6, 2014 Dep. Tr. [Ex. 4366] and associated exhibits,
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`• Schwartz Dec. 9-10, 2013 Dep. Tr. [Ex. 2324] and associated exhibits,
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`• And the other documents cited herein.
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` 2
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`Page 00002
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`II.
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`CLAIM CONSTRUCTION
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`Case CBM2013-00023
`Patent 5,966,440
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`3.
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`For the Kelly Decl., I was asked to assume constructions for certain
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`claim terms. [See, Ex. 4334 (Kelly Decl.) at § III.] For convenience I have also
`
`included those constructions in the following table. As in the Kelly Decl., for all
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`remaining claim terms, I have assumed their plain and ordinary meaning.
`
`Term
`First Party
`Second Party
`Second Party Control
`Unit
`
`Claim Construction
`a first entity, whether a corporation or a real person
`a second entity, whether a corporation or a real person
`
`control unit of the second party
`
`“Electronic” Terms
`
`Telecommunication Lines
`
`an electronic medium for communicating between
`computers.
`pertaining to devices or systems which depend on the
`flow of electrons.
`connecting through devices or systems which depend
`“Connecting
`on the flow of electrons.
`Electronically” Terms
`transferring through devices or systems which depend
`“Transferring
`on the flow of electrons.
`Electronically” Terms
`providing payment electronically (i.e., through devices
`“Transferring Money
`or systems which depend on the flow of electrons).
`Electronically” Terms
`requesting payment electronically
`“Charging a Fee” Terms
`providing a product or service electronically in
`“Electronically Selling”
`exchange for transferring money electronically
`Terms
`No construction needed
`Sold
`digital representations of sound waves
`Digital Audio Signal
`a permanent, rigid, magnetic storage device
`Hard Disk
`“Second Party Hard Disk” non-volatile storage portion of the second memory
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`III.
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`“SECOND MEMORY”
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`A.
`
`THE ’440 PATENT DOES NOT LIMIT THE “SECOND MEMORY” TO
`“NON-REMOVABLE MEMORY”
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`4. Mr. Snell asserts that the claimed “second memory” encompasses
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`only “non-removable media1.”
`
`“[T]he patented technology pertains to business methods associated
`with
`the
`transmission of digital audio or digital video via
`telecommunications lines to non-removable memory storage owned
`by a customer.” [Ex. 2353 (Snell Decl.) at ¶ 19.]
`
`invention
`the
`that
`“The specification makes abundantly clear
`precluded removable physical storage media as a second memory.”
`[Ex. 2353 (Snell Decl.) at ¶ 28.]
`
`Mr. Snell bases this opinion on the inventors’ discussion of the limitations of the
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`“prior modes of distributing and selling music.” [See, e.g., Ex. 2353 (Snell Decl.)
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`1 In his deposition, regarding claim 64 of the ’440 patent, Mr. Snell further
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`specified that the term “second party hard disk” means “second-party
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`nonremovable hard disk” and does not cover non-removable memories that are not
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`hard disks. [See, e.g., Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 220:18-
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`224:13.]
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`Patent 5,966,440
`at ¶¶ 28, 31-42.] Mr. Snell’s analysis is incorrect for the following reasons.
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`5.
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`First, Mr. Snell, Mr. Snell confuses the means of distributing music
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`with the means of storing music after it has been distributed. The ’440 patent says
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`that “[t]he three basic mediums (hardware units) of music: records, tapes, and
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`compact discs, greatly restricts the transferability of music.” [See Ex. 4301 (’440
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`patent) at 1:24-26 (emphasis added).] Since, according to the ’440 patent, the prior
`
`art music distributer sells music recorded on hardware units, distribution of music
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`requires warehousing and transportation of the hardware units. [See, e.g., Ex. 4301
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`(’440 patent) at 1:45-54.] Therefore, the ’440 patent proposes the electronic
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`distribution of digital audio/video over telecommunications lines as opposed to the
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`physical distribution of hardware units. [See, e.g., Ex. 4301 (’440 patent) at
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`Abstract, 2:22-26.] Mr. Snell admitted during his deposition that this is the key
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`distinction between the patent and the prior art. Mr. Snell was asked about an
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`earlier answer in which he commented that a removable (Winchester2 cartridge3)
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`hard drive cannot be transferred over telecommunication lines.
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`2 As I noted in my deposition, there were both removable and non-removable
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`Winchester disks. [See, e.g., Ex 2326 (John Kelly Dec. 12, 2013 Dep. Tr.) at
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`135:5-24.]
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`“Q. You mentioned that you -- you can't push a Winchester cartridge
`through telecommunication lines. Is that what you meant to say?
`A. Well, I was being a little facetious. I apologize for my sarcasm,
`but that's the -- that's the point of the patent, is to not distribute
`physical media, instead to distribute the signals across
`telecommunication lines. So once it's recorded on the Winchester
`cartridge, how do you -- how do you get that Winchester cartridge to
`the consumer, to the user?” [Ex. 4366 (John Snell Mar. 6, 2014 Dep.
`Tr.) at 114:3-10 (emphasis added).]
`
`Mr. Snell’s concern about physically distributing the removable media – in this
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`case a Winchester cartridge – is misleading. There is no need for a seller to
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`physically distribute the removable media containing the digital signals because
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`the buyer can download the digital signals over telecommunication lines and then
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`store the digital signals on removable media (such as a removable hard drive) as
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`disclosed, for example, by the CompuSonics System. [See, e.g., Ex. 4334 (Kelly
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`3 Mr. Snell admitted that Winchester disk cartridges were commercially available
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`in May 1988 and that a person of ordinary skill in the art would have known of
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`Winchester disk cartridges. [See, e.g., Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.)
`
`109:1-17, 124:13-15.] For example, in 1983, SyQuest produced a removable
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`cartridge hard drive with a capacity of about 6 megabytes and was working on
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`larger capacity drives. [See Ex. 4409 (Byte magazine, March 1983) at p.115.]
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`Decl.).] The particular storage device utilized by the purchaser to store the digital
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`audio/video after it has been electronically transferred over telecommunications
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`lines from the seller to the purchaser is irrelevant to the mode of distribution.
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`Furthermore, the use of floppy disks, instead of hard disks, to store the
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`electronically purchased and downloaded music also provides the benefit of
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`eliminating inventory and distribution delays associated with the traditional
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`distribution and sale of CDs and tapes.
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`6.
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`Second, Mr. Snell asserts that a user would have to organize, search,
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`sort and cue removable media (presumably because the user’s music library is too
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`large to fit on a single unit of the removable media) whereas the user could
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`electronically organize all songs using a hard disk (presumably because the user’s
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`music library is small enough to fit on the hard disk). [See, e.g., Ex. 2353 (Snell
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`Decl.) at ¶ 70; Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 112:11-24.] Mr.
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`Snell then incorrectly concludes that “[o]nly the use of non-removable memory
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`such as a hard disk accomplishes an objective of the ’440 patent to easily and
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`electronically sort stored music based on many different criteria.” [See Ex. 2353
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`(Snell Decl.) at ¶ 70.] As an initial matter, claims 1, 64 and 95 of the ’440 patent
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`do not include limitations that require sorting of digital audio/video stored on the
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`purchaser’s system (or other special manipulations such as randomly playing
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`selections). More fundamentally, Mr. Snell’s argument is that certain storage
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`Patent 5,966,440
`devices (such as floppy disks) are too small to store a sufficiently large library of
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`songs although Mr. Snell never provides an opinion on what would be a sufficient
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`amount of storage to accomplish this objective of the ’440 patent. Likewise, the
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`specification of the ’440 patent never says how many songs or videos the
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`purchaser’s storage device must be able to store, and claims 1, 64 and 95, on their
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`face, only require storing the one desired digital video or digital audio signal. Mr.
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`Snell is also wrong because all storage media are limited in the amount of data that
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`they can store. Mr. Snell admitted that disk drives, in general, were limited in
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`capacity. [See, e.g., Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 114:19-23.]
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`Mr. Snell also admitted that a thumb drive4 may or may not be able to store a
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`user’s music library depending on the size of the thumb drive and music library.
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`[See, e.g., Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 216:20-218:8.] Of
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`course, this is true of any storage device whether it be a hard drive or not a hard
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`drive, removable media or non-removable media. In addition, in 1988 removable
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`media storage devices could have larger capacity than non-removable media
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`storage devices. For example, the 466 MB magneto-optical disk used in some of
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`the DSP-1000 devices provided more storage capacity than a common consumer
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`4 Mr. Snell has opined that thumb drives are removable. [See, e.g., Ex. 4366 (John
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`Snell Mar. 6, 2014 Dep. Tr.) at 106:8-107:4.]
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`hard drive from 1988. [See, e.g., Ex. 2324 (Schwartz Dec. 10, 2013 Dep. Tr.) at
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`pp. 45, 94, 98-99; Ex. 4334 (Kelly Decl.) at ¶ 31.] In 1988, a person of ordinary
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`skill in the art would have also expected the observed trend of increased capacity
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`and lower prices for memory devices to continue and would have expected
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`improved memory devices to be incorporated into consumer devices.
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`7.
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`Third, Mr. Snell’s argues that “the concern about copyright protection
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`disclosed in the '440 patent specification would be no better with floppy disks than
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`with existing media at the time” and that the use of non-removable storage medium
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`rendered the problem of copyright infringement moot. [See Ex. 2353 (Snell Decl.)
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`at ¶¶ 28, 71.] Again, Mr. Snell is incorrect. Claims 1, 64 and 95 of the ’440 patent
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`do not include limitations directed toward copyright protection of digital
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`audio/video stored on the purchaser’s system. In fact, “electronically coding the
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`desired digital video or digital audio signals into a configuration which would
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`prevent unauthorized reproduction of the desired digital video or digital audio
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`signals” is separately claimed in claims 6 and 66 of the ’440 patent, and even there,
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`the claims are drawn to “electronically coding the desired digital video or digital
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`audio signals,” not to a particular storage medium intended to deter copying.
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`Therefore, a copy protection mechanism is not required of the “second memory” in
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`claims 1, 64 and 95. In addition, non-removable media and removable media are
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`both susceptible to copying of copyrighted data as recognized in the specification
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`of the ’440 patent and by Mr. Snell. [See, e.g., Ex. 4301 (’440 patent) at 2:12-13;
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`Ex. 2353 (Snell Decl.) at ¶ 71; Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at
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`229:3-12, 230:14-17.]
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`8.
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`Fourth, Mr. Snell opines that quality was another inefficiency
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`associated with removable media that was rendered moot by the use of a non-
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`removable storage medium. [See, e.g., Ex. 2353 (Snell Decl.) at ¶¶ 28, 33-36.]
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`This is also incorrect. Mr. Snell discusses quality issues with analog media (audio
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`tapes and LPs) as if they were comparable to removable digital media (floppy disk,
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`magneto-optical disk and removable hard drives). They are not comparable and
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`this discussion is misleading. Mr. Snell also suggests that all removable media
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`would have lower quality because the media is not protected. [See, e.g., Ex. 2353
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`(Snell Decl.) at ¶ 33.] On the contrary, floppy disks, cartridge hard disks and
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`magneto-optical disks were constructed with protective jackets to protect the
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`storage medium while the disk was outside of the drive. Such media have been
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`used quite successfully for storing digital data. Finally, even non-removable hard
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`drives suffer failures that result in the loss of the entire contents of the drive or
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`particular files on the drive.
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`9.
`
`For all of these reasons, the removable/non-removable distinction is a
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`false dichotomy in assessing whether a system will derive the benefits described in
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`the ‘440 patent. Indeed, this is reinforced by the fact that the only example of non-
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`removable memory named specifically in the ‘440 patent – a hard disk – itself has
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`a removable counterpart, and did so in the prior art time period, as admitted by Mr.
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`Snell. [See, e.g., Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 107:20-109:17.]
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`10. Mr. Snell’s opinions are also at odds with the prosecution history of
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`the SightSound patents. For example, during prosecution of the ’391 application,
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`SightSound emphasized its broad interpretation of “second memory” when
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`distinguishing over the Hughes reference.
`
`“A second clear distinction between the applicant's method and
`Hughes' teachings is that the applicant's method in no manner
`necessitates the need for a receiver which is controlled by the
`controller of the transmitter. Any suitable memory device controlled
`and in possession of the second party can be used to record the
`incoming digital signals. Accordingly, the second party's own stereo
`system can be coupled to the incoming signals for recording. In this
`manner, the second party is not limited to a predesigned receiver of
`the first party controlling the transmitter, but instead can alter the
`recording components, change recording media, equalize the signal
`and many other parameters of the system.” [See Ex. 4305 (June 25,
`1992 Amendment of Application No. 07/586,391) at p. 18 (emphasis
`added).]
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`11. Mr. Snell’s opinions are also at odds with positions taken by the
`
`inventors as they attempted to commercialize the method of the SightSound
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` Mr. Snell has stated that optical drives were (and are) considered removable.
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`5 Mr. Snell has opined that optical disks would not be considered as hard disks, and
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`that one of skill in the art would consider optical disks as removable. [Ex. 4366
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`(John Snell Mar. 6, 2014 Dep. Tr.) at 109:18-110:18, 115:24-117:12.]
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`[Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 115:24-118:19.]
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`12. Claim 1 of the ’440 patent recites a “nonvolatile storage portion [of]
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`the second memory” that is “not a tape or CD.” If the inventors had desired to
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`exclude all removable media or all non-hard disks from the scope of the term a
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`“nonvolatile storage portion [of] the second memory,” the inventors could have
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`done so. Instead, the inventors excluded only tape and CD. Removable cartridge
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`hard drives, floppy disks and writable optical discs (including magneto-optical
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`disks) were known technologies in 1988, are nonvolatile storage devices, and are
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`not a tape or CD.
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`13. Contrary to Mr. Snell’s assertion [see, e.g., Ex. 2353 at ¶ 73],
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`CompuSonics does not teach away from using non-removable media. For
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`example, CompuSonics produced and sold a version of the DSP-1000 (called the
`
`DSP-1800) that contained a hard disk6. [See Ex. 2324 (Schwartz Dec. 9-10, 2013
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`Dep. Tr.) at 41:4-6, 114:9-12, 173:14-21, 177:5-16, 188:25-189:18.]
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`CompuSonics also produced and sold a version of the DSP-1000 that used solid
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`6 Mr. Snell was unaware that a version of the DSP-1000 was produced and sold
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`that included a hard disk. [Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at 233:5-
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`12]
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`state memory for storage. [See Ex. 2324 (Schwartz Dec. 9-10, 2013 Dep. Tr.) at
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`173:14-21, 177:17-178:14, 188:25-189:18.]
`
`IV. CHARGING PURCHASES USING A CREDIT CARD OVER PHONE
`LINES WAS KNOWN
`
`14. Contrary to the arguments put forward by SightSound and Mr. Snell,
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`one of ordinary skill in the art would have understood the CompuSonics System to
`
`disclose charging a credit card over telecommunication lines.
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`15.
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`In his declaration regarding the ’573 Patent, Mr. Snell does not
`
`dispute that Exhibit 4106 containing the following excerpt discloses charging a
`
`credit card over telephone lines [See Ex. 2153 (Snell Decl.) at ¶ 45]:
`
`“[Telerecording would] allow music software dealers to receive an
`album master via a digital transmission from the record company,”
`and “[t]he retailers would then be able, in turn to digitally transmit the
`music to consumers who would use credit cards to charge their
`purchases over the phone lines.” [Ex. 4106 at p.3.]
`
`However, in his declaration regarding the ’440 patent, regarding the same
`
`reference but now designated Exhibit 4309, Mr. Snell simply makes the following
`
`conclusory statement:
`
`“Exhibit 4309 also fails to disclose ‘selling electronically’ by the first
`party or ‘charging a fee via telecommunications lines’ and ‘charging
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`the account of the second party’ and on that basis does not anticipate
`claims 1, 64 and 95.” [See Ex. 2353 (Snell Decl.) at ¶ 45.]
`
`In particular, in neither case does Mr. Snell provide a counter argument to Exhibit
`
`4106 disclosing “charging a fee via telecommunication lines” and “charging the
`
`account of the second party.”
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`16. Additionally, Mr. Snell does not unequivocally dispute the disclosure
`
`of “charging a fee via telecommunications lines” in Exhibit 4318. The excerpt
`
`from Exhibit 4318 is shown below:
`
`“Audio recording and production facilities will be able to digitally
`transmit and receive music using special telephone lines. At present,
`high priority audio material is either physically transferred by courier,
`or encode onto high bandwidth satellite channels. The cost of those
`methods is much higher than telerecording for most applications.
`AT&T’s commitment to telerecording may hasten the arrival of that
`day, in the not too distant future, when the technology will filter down
`to the consumer level, allowing all-electronic purchases, transfers and
`digital recording of high fidelity audio from any music dealer’s DSP-
`2000 to the DSP-1000 in your living room.” [Ex. 4318 at p.1.]
`
`The most Mr. Snell can say is that “[e]ven if the single, cryptic reference to ‘all-
`
`electronic purchases’ taught ‘charging a fee via telecommunications lines’ and
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`‘charging the account of the second party,’ Exhibit 4318 fails to anticipate claims
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`1, 64 and 95” for other reasons. [See Ex. 2353 (Snell Decl.) at ¶ 51.] In particular,
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`Mr. Snell does not provide an alternate theory for how the purchases were
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`performed if it does not disclose "charging a fee via telecommunications lines."
`
`17. An analogous issue arose during prosecution of the ‘391 Application
`
`regarding whether the step of “transferring money” had basis in the specification.
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`[Ex. 4305 (1992-02-24 Non-Final Rejection for the ’391 Application) at pp. 5-6.]
`
`The Applicant pointed to the presence of terms “electronically sell,” “electronic
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`sales” and “electronically sold” in the specification [Ex. 4305 (1992-06-25
`
`Amendment/Req. Reconsideration After Non-final Rejection for the ’391
`
`Application) at p.11-12] and argued that “Electronic sales via telephone lines
`
`inherently assumes a transferring of money. Any ‘sale’ by definition assumes a
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`transference of money for a desired commodity, in this instance, digital audio or
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`video signals.” [Ex. 4305 (1992-06-25 Amendment/Req. Reconsideration After
`
`Non-final Rejection for the ’391 Application) at p.13.] Additionally, Mr. Hair, the
`
`named inventor of the ’440 patent, declared during prosecution of the ’391
`
`application that:
`
`“One skilled in the art would know that an electronic sale inherently
`assumes a transferring of money by providing a credit or debit card
`number (since this is the only way for electronic sales to occur)
`coupled with a transferring of a service or product.” [See Ex. 4305
`(Hair Declaration dated May 12, 1992 attached to the June 25, 1992
`Amendment of Application No. 07/586,391) at p. 2.]
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`Similarly, during the prosecution of the ’398 application, Mr. Hair declared:
`
`“One skilled in the art would know that an electronic sale inherently
`assumes a transferring of money by providing an account number or a
`credit or debit card number which then allows for access to or a
`transferring of a service or product through telecommunications lines.
`
`One skilled in the art would know that an electronic sale inherently
`assumes' a charging of a fee to an account which then allows for
`access to or a transferring of a product or service through
`telecommunications lines.
`
`The use of transferring money across telecommunication connections,
`such as by telephoning over the phone lines the agent who has a first
`party’s hard disk, or charging a fee to a purchaser or “second party”
`preferably at a location remote from a purchaser or “second party”, for
`obtaining data on
`the
`first party's hard disk
`through
`telecommunications lines is well known to one skilled in the art to be
`part of electronic sales.” [See Ex. 4338 (Hair Declaration dated Dec.
`30, 1993 attached to the Jan. 3, 1994 Amendment of Application
`No.08/023,398) at pp. 109-110.]
`
`The difference between an “electronic purchase” and an “electronic sale” is a
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`simply a matter of perspective i.e. whether one is the buyer or the seller, the
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`underlying transaction is the same. In particular, to the extent7 that an electronic
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`sale inherently assumes a charging a fee to an account, then mutatis mutandis so
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`too does an electronic purchase.
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`18. With regard to the other references, as will be discussed in detail
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`below, Mr. Snell goes to great lengths to suggest how one of ordinary skill in the
`
`art would fail to understand that the purchase is being performed using a credit
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`card over the telephone lines. However, Mr. Snell does not consider that making a
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`purchase over the telephone with a credit card had been practiced for quite some
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`time by 1988 and so one of ordinary skill in the art would have considered it.
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`Further, Mr. Snell does not consider how one of ordinary skill in the art would read
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`the disclosures in light of the unchallenged disclosure given in Exhibit 4309.
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`Finally, Mr. Snell’s characterization of how subscription services (such as cable
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`television) bill purchases is incorrect.
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`19. Mr. Snell presents the following argument:
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`“In addition, Exhibit 4324 speaks of selling ‘over the telephone,’ but a
`person of skill in the art would understand that this could mean
`placing an order by telephone to be invoiced on a monthly bill. The
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`7 Mr. Snell does not agree with this and opines that “electronic sale” is a “vague
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`term” and “has to be defined.” [Ex. 4366 (John Snell Mar. 6, 2014 Dep. Tr.) at
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`82:7-84:3]
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`18
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`reference to ‘symphonies ordered by credit card’ also suggests that a
`credit card payment would be made in writing in advance of purchase,
`for instance by writing down a code for a recording and a credit card
`number and mailing it to the seller.” [See Ex. 2353 (Snell Decl.) at
`¶ 55.]
`
`The full excerpt from which Mr. Snell quotes is the following:
`
`“Compusonics is talking to AT&T about setting up a service that
`would enable record companies to sell direct to consumers over the
`telephone. Symphonies ordered by credit card, could travel digitally
`over phone lines into homes to be recorded by Compusonics’
`machine.” [Ex. 4324 at p.2.]
`
`When the above excerpt is read in context, i.e., one sentence after the other, one of
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`ordinary skill in the art would understand that the customer would call the record
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`company, provide their credit card number, have it charged and have the
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`symphony be transmitted via phone lines to the customer’s home to be recorded.
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`There are other ways to make purchases and one of ordinary skill in the art would
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`have been aware of this. However, given this passage’s phrases “sell direct over
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`the telephone” and “Symphonies, ordered by credit card, could travel digitally over
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`phone lines…,” one of ordinary skill in the art would not have interpreted this
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`passage, as Mr. Snell urges, to involve “writing down a code for a recording and a
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`credit card number and mailing it to the seller.” Furthermore, Mr. Snell’s
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`
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`19
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`interpretation is again inconsistent with claims made during prosecution of the
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`’391 application. The Applicant states:
`
`“In a similar argument, ‘electronic sales’ over ‘telephone lines 30’ are
`terms which encompass the well known process of ‘providing a credit
`card number’ over a telephone line and ‘telephoning’ to make the
`connection.”
`
`[Ex.
`4305
`(1992-06-25 Amendment/Req.
`Reconsideration After Non-final Rejection) at p. 13.]
`
`Under the Applicant’s own statements, one of ordinary skill in the art would reach
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`a similar conclusion regarding “sell direct to consumers over the telephone.
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`Symphonies ordered by credit card, could travel digitally over phone lines…”
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`20. Contrary to Mr. Snell’s assertions, credit card sales could be achieved
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`by means other than being in a retail store [see Ex. 2353 at 23] or by writing down
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`and mailing in the credit card number [see Ex. 2353 at 47, 52, 55]. In particular,
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`by the 1970s there were patents describing ways to increase the efficiency of credit
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`card sales transactions over the telephone. For example, Exhibit 4393 ( U.S. Patent
`
`No. 3,920,908) published November 18, 1975 and titled “Buyer credit service for a
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`telephone system” describes a pay by phone system where the seller is provided with
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`the buyer’s credit information, including their credit card number, and the buyer’s
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`credit is verified prior to the call being connected to the seller.
`
`“Modern merchandising techniques are designed to permit a person to
`obtain a copy of an item, purchase an article or a personal service or
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`
`
`20
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`Case CBM2013-00023
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`the like on credit in a simple manner in a face-to-face transaction by
`merely exhibiting a validated credit card in place of cash. In situations
`where the buyer and seller are geographically separated as in a
`telephone system, a problem heretofore has been to provide the called
`seller at the moment with adequate information regarding the credit
`integrity of the calling buyer attempting to make a purchase on credit.
`…
`
`Therefore, it is contemplated by the present invention to provide a
`credit center for expeditiously retrieving therefrom credit intelligence
`including credit card information pertinent to a calling buyer and
`thereafter displaying such intelligence to a called seller before the
`calling buyer is connected with the called seller for the purpose of
`tendering an offer to purchase a service on credit in a telephone
`system. This visual credit intelligence display enables the called seller
`to make a quick determination at the moment whether to accept or
`reject such credit purchase before the offer is actually tendered by the
`calling buyer to the called seller.
`
`Accordingly, it is a principal object of the present invention to provide
`a called seller with substantially instant credit intelligence pertinent to
`a calling buyer wishing to obtain credit in a sales transaction handled
`in a telephone system.”
`
`[Ex. 4393 (U.S. Patent No. 3,920,908) at 1:13-49.]
`
`21. By the mid-1980s the use of credit cards for phone purchases was
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`common. For example, one could watch HBO using a descrambler by providing a
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`
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`21
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`credit card number and the serial number of the descrambler. [See Ex. 4378
`
`(Compute Issue 82, 1987) pp. 4-5.] One could have groceries delivered. [See Ex.
`
`4380 (“How Telephone Orders Deliver The Goods,” New York Times, 3/4/1987).]
`
`It was during this period that home shopping channels, such as Home Shopping
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`Network, rose to prominence. [See Ex. 4381 (“Like To Shop At Home? This Is For
`
`You All You Need Is A TV, Phone And Credit Card Or Checks That Don’t
`
`Bounce,” Anchorage Daily News, 9/13/87).] To purchase goods from such
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`networks the customer either had to provide a credit card number or mail in a
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`check:
`
`“All shop shows operate the same way: Items are displayed, described
`and often demonstrated, and viewers may order by calling toll-free
`numbers and using credit cards or checks as payment.
`
`…
`
`In a recent look at the trend, ABC’s news feature show 20/20 found a
`number of viewers who have run up huge credit-card bills. Some
`shoppers admitted to being addicted, spending hours glued to the tube,
`plastic cards ready.”
`
`[Ex. 4382 (“Shopping By TV A Big Turn-on For Many Buyers,”
`Akron Beacon Journal, 1/25/87).]
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`In addition, CompuServe allowed billing by credit card through its online service.
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`For example, Antic, a vendor of Atari software, sold software through
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`
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`22
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`CompuServe.
`
`“When you use Softex, your online software purchases will simply be
`added to your monthly CompuServe bill. Your Electric Mall
`purchases and subscriptions will be fulfilled directly by Antic and
`charged to your credit card.” [See Ex. 4377 (ANTIC, April 1988) at
`p. 6.]
`
`Purchases of Antic products through the CompuServe Softex electronic sales and
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`delivery system were added to the CompuServe bill; however, purchases of Antic
`
`products through the CompuServe Electronic Mall were charged to the customer’s
`
`credit card. In general, to purchase an item through the Electronic Mall the
`
`purchaser provided a credit card number online:
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`list
`“Other services (such as CompuServe’s Electronic Mall)
`individual retailers, such as Waldenbooks or Record World, and their
`offerings. To place an order, you