Case CBM2013-00023
`Patent 5,966,440
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`______________
`
`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.
`
`
`
`PETITIONER’S REPLY
`
`FILED UNDER SEAL
`
`
`
`ROPES & GRAY
`Prudential Tower
`800 Boylston Street
`Boston, Massachusetts 02199-3600
`(202) 508-4606 (Telephone)
`(617) 235-9492 (Fax)
`
`
`
`
`
`
`
`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
`
`
`
`

`
`Case CBM2013-00023
`Patent 5,966,440
`
`
`TABLE OF CONTENTS
`
`B. 
`
`C. 
`D. 
`E. 
`
`I. 
`
`II. 
`
`V. 
`
`VI. 
`
`PO’S KEY ARGUMENTS REST ON INCORRECT CLAIM
`CONSTRUCTIONS AND IGNORE KEY EVIDENCE ................................... 2 
`A. 
`Claim 1 Is Not Limited To “Non-Removable” Media Or “Hard Disk,”
`And CompuSonics Disclosed “Second Party Hard Disk” .......................... 2 
`No Requirement That The Same Device That Receives Digital Signals
`Be “Configured To Transfer Payment Information” .................................. 4 
`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. 
`CompuSonics Amply Discloses Video ........................................................... 7 
`III.  THE BOARD PROPERLY INSTITUTED §103 PROCEEDINGS ................ 7 
`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. 
` 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 
`
`
`
`i
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`Case CBM2013-00023
`Patent 5,966,440
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`
`
`EXHIBIT LIST
`Exhibit 4301 United States Patent 5,966,440
`
`Exhibit 4302 United States Patent 5,966,440 File History
`
`Exhibit 4303 Application No. 90/007,407 (‘440 Patent Reexamination)
`
`Exhibit 4304 United States Patent No. 5,191,573
`
`Exhibit 4305 United States Patent No. 5,191,573 File History
`
`Exhibit 4306 Application No. 90/007,402 (‘573 Patent Reexamination)
`
`Exhibit 4307 Deposition Transcript of Arthur Hair, dated Dec. 11, 2012 SightSound
`Techs., LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`Exhibit 4308 Deposition of Scott Sander, dated Dec. 18-19, 2012
`SightSound Techs., LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`Exhibit 4309 “Joint Telerecording Push: CompuSonics, AT&T Link,” Billboard (Oct.
`5, 1985)
`Exhibit 4310 David Needle, “From the News Desk: Audio/digital interface for the
`IBM PC?,” InfoWorld, vol. 6, no. 23, p. 9, June 4, 1984
`Exhibit 4311 Larry Israelite, “Home Computing: Scenarios for Success,” Billboard,
`Dec. 15, 1984
`Exhibit 4312 International Patent Application WO85/02310, filed on November
`14,1984, and published on May 23,1985 (“Softnet”)
`Exhibit 4313 United States Patent No. 3,718,906 filed on June 1, 1971, issued on
`February 27,1973 (“Lightner”)
`Exhibit 4314 United States Patent No. 3,990,710 filed on March 1, 1971, issued on
`November 9, 1976 (“Hughes”)
`Exhibit 4315 Image titled, “CompuSonics Digital Audio Telecommunication
`System”
`Exhibit 4316 7/16/84 CompuSonics Letter from David Schwartz to Shareholders
`
`Exhibit 4317 Hyun Heinz Sohn, “A High Speed Telecommunications Interface for
`Digital Audio Transmission and Reception,” presented at the 76th AES
`Convention, October 8-11, 1984
`
`ii
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`Case CBM2013-00023
`Patent 5,966,440
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`EXHIBIT LIST
`Exhibit 4318 10/10/85 CompuSonics Letter from David Schwartz to Shareholders
`
`Exhibit 4319 CompuSonics Video Application Notes – CSX Digital Signal
`Processing (1986)
`Exhibit 4320 Image titled, “CompuSonics Digital Audio Software Production/
`Distribution”
`Exhibit 4321 Excerpts of Lecture at Stanford by D. Schwartz and J. Stautner, 1987
`(video)
`Exhibit 4322 Bryan Bell, “Synth-Bank: The Ultimate Patch Library,” Electronic
`Musician (Sept. 1986)
`Exhibit 4323 United States Patent No. 4,682,248 filed on September 17, 1985, issued
`on July 21, 1987 (“Schwartz Patent”)
`Exhibit 4324 “The Search for the Digital Recorder,”Fortune, Nov. 12, 1984
`
`Exhibit 4325 2/22/1986 Agreement between Synth-Bank and Artist
`
`Exhibit 4326 3/17/1987 United States Patent & Trademark Office Notice of
`Acceptance and Renewal, Serial No. 73/568543
`Exhibit 4327 “SynthBank Bulletin Board,” Keyboard Magazine (March 1987)
`
`Exhibit 4328 “Inside Macintosh,” Volumes I, II, and III, Addison-Wesley Publishing
`Company, Inc. (1985)
`Exhibit 4329 Craig Partridge, “The Technical Development of Internet Email,” BBN
`Technologies
`Exhibit 4330 United States Patent No. 4,124,773 filed on November 26, 1976, issued
`on November 7, 1978 (“Elkins”)
`Exhibit 4331 United States Patent No. 4,667,088 filed on November 1, 1982, issued
`on May 19, 1987 (“Kramer et al.”)
`Exhibit 4332 United States Patent No. 4,528,643 filed on January 10, 1983, issued on
`July 9, 1985 (“Freeny”)
`Exhibit 4333 Photo of CompuSonic equipment
`
`Exhibit 4334 Declaration of Dr. J. Kelly In Support of Petition for Covered Business
`Method Patent Review
`Exhibit 4335 Declaration of David Schwartz In Support of Petition for Covered
`Business Method Patent Review
`
`iii
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`Case CBM2013-00023
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`EXHIBIT LIST
`Exhibit 4336 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)
`Exhibit 4337 2/43/43 Order re Claim Construction (D.I. 175), SightSound Techs.,
`LLC v. Apple Inc., No. 11-1292 (W.D. Pa.)
`Exhibit 4338 United States Patent No. 5,675,734 File History
`
`Exhibit 4339 Excerpt from Chambers Science and Technology Dictionary (1988)
`
`Exhibit 4340 Excerpt from Webster’s II New Riverside University Dictionary (1988)
`
`Exhibit 4341 Declaration of Dr. John P.J. Kelly, dated Sept. 7, 2012
`
`Exhibit 4342 New Telerecording Method for Audio, Broadcast Management/Engineering,
`pp. 14-15, Oct. 1985
`Exhibit 4343 Excerpt of Plaintiff SightSound Techs., LLC’s Expert Report of Dr. J.
`Douglas Tygar Regarding Infringement, dated April 22, 2013
`Exhibit 4344 Declaration of Flora D. Elias-Mique In Support of Petition for
`Covered Business Method Patent Review
`Exhibit 4345 Declaration of Roberto J. Gonzalez In Support of Petition for Covered
`Business Method Patent Review
`Exhibit 4346 Declaration of Megan F. Raymond In Support of Petition for Covered
`Business Method Patent Review
`Exhibit 4347 Declaration of Ching-Lee Fukuda In Support of Petition for Covered
`Business Method Patent Review
`Exhibit 4348 Transcription of Audio, Excerpts of CompuSonics Lecture
`(Lecture at Stanford by D. Schwartz and J. Stautner, 1987
`Exhibit 4349 Expert Report of Dr. John P. J. Kelly Regarding Non-Infringement of
`United States Patent Nos. 5,191,573 and 5,966,440
`Exhibit 4350 Virgin Digital Shuts Down, Sept. 24, 2007
`
`Exhibit 4351 AOL, Now Focused on Free, Sells Its Paid Music Service, Jan.13, 2007.
`
`Exhibit 4352 Walmart Closing Online Music Store, Aug. 10, 2011
`
`Exhibit 4353 ITunes’ Success Revolutionizes Music Business
`
`iv
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`EXHIBIT LIST
`Exhibit 4354 iTunes Music Store Sells Over One Million Songs in First Week, May 5,
`2003
`Exhibit 4355 April 26, 2013 Email S. Callagy to D. Cohen
`
`Exhibit 4356 Declaration of Arthur Rangel
`
`Exhibit 4357 Declaration of Megan F. Raymond
`
`Exhibit 4358 Private Placement Memorandum, April 27, 1999, SightSound.com
`
`Exhibit 4359 Two Year Expansion Plan for Virtual Records
`
`Exhibit 4360 SightSound Technologies Confidential Offering Memorandum, Allen
`& Company LLC
`Exhibit 4361 April 12, 2000 Memorandum from Alex Lepore to Files Re: Company
`Stock Valuation
`Exhibit 4362 Business Plan for Digital Sight/Sound, Inc.
`
`Exhibit 4363 November 30, 1993 Letter from Ansel M. Schwartz to Arthur Hair
`
`Exhibit 4364 Prospectus, Digital Sight/Sound (August 15, 1997)
`
`Exhibit 4365 Now showing at a computer near you, News Tribune (May 28, 2000)
`
`Exhibit 4366 Deposition Transcript of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4367 Redacted Version of Plaintiff SightSound Technologies, LLC's Expert
`Report of John Snell On Validity, 6/5/13
`Exhibit 4368 Exhibit 9 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4369 Exhibit 10 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4370 Exhibit 11 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4371 Exhibit 12 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4372 Exhibit 13 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`
`v
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`Case CBM2013-00023
`Patent 5,966,440
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`EXHIBIT LIST
`Exhibit 4373 Exhibit 14 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4374 Exhibit 15 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4375 Exhibit 16 of the Deposition of John Snell in Apple Inc. v. SightSound
`Technologies, LLC, Nos. CBM 2013-00020, -0023, March 6, 2014
`Exhibit 4376 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)
`Exhibit 4377 James Capparell, Three times as much Antic Software now on
`CompuServe, ANTIC The Atari Resource (April 1988)
`Exhibit 4378 Richard Mansfield, Editor’s Notes, Compute, Vol. 9, No. 3, Issue 82
`(March 1987)
`Exhibit 4379 Andrew Zipern, Technology Briefing - Software: Alliance Will Acquire
`Liquid Audio, NYTimes.com (June 14, 2002),
`http://www.nytimes.com/2002/06/14/business/technology-briefing-
`software-alliance-will-acquire-liquid-audio.html
`Exhibit 4380 Florence Fabricant, How Telephone Orders Deliver The Goods, The
`New York Times (March 4, 1987)
`Exhibit 4381 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)
`Exhibit 4382 Betsy Lammerding, Shopping By TV A Big Turn-On For Many Buyers,
`Akron Beacon Journal (January 25, 1987)
`Exhibit 4383 iTunes: You've never been so easily entertained, iTunes (March 17,
`2014), http://www.apple.com/itunes/
`Exhibit 4384 iTunes: iTunes looks and sounds better than ever., iTunes (March 17,
`2014), http://www.apple.com/itunes/features/
`Exhibit 4385 FAQs: For Podcast Fans, iTunes (March 17, 2014),
`http://www.apple.com/itunes/podcasts/fanfaq.html
`Exhibit 4386 iTunes: Give the gift of iTunes, iTunes (March 18, 2014),
`http://www.apple.com/itunes/gifts/
`Exhibit 4387 iTunes Store Allowance, iTunes Support (March 17, 2014),
`http://support.apple.com/kb/HT2105
`
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`EXHIBIT LIST
`Exhibit 4388 Rush Jones, Aggregation and Aggravation – Micropayments 2013,
`PaymentsViews (August 16, 2013),
`http://paymentsviews.com/2013/08/16/aggregation-and-aggravation-
`micropayments-2013/
`Exhibit 4389 Marek Maurizio, Payment Systems, Winter 2011,
`http://www.dsi.unive.it/~marek/files/09.5%20-
`%20payment%20systems.pdf
`Exhibit 4390 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
`Exhibit 4391 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
`Exhibit 4392 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
`Exhibit 4393 United States Patent No. 3,920,908
`
`Exhibit 4394 United States Patent No. 4,759,060
`
`Exhibit 4395 A Nation Online: Entering the Broadband Age, U.S. Dept. of
`Commerce (Sept. 2004),
`http://www.ntia.doc.gov/files/ntia/editor_uploads/NationOnlineBro
`adband04_files/NationOnlineBroadband04.pdf
`Exhibit 4396 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
`Exhibit 4397 Apple Computer, Inc. Form 10-K, Fiscal year ending September 24,
`2005, SEC.gov (March 18, 2014),
`http://www.sec.gov/Archives/edgar/data/320193/000110465905058
`421/a05-20674_110k.htm
`Exhibit 4398 Brad King, Napster's Assets Go for a Song, Wired (Nov. 28, 2002),
`http://www.wired.com/entertainment/music/news/2002/11/56633
`
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`Case CBM2013-00023
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`EXHIBIT LIST
`Exhibit 4399 Jeff Leeds, Grokster Calls It Quits on Sharing Music Files,
`NYTimes.com (Nov. 8, 2005),
`http://www.nytimes.com/2005/11/08/technology/08grokster.html?_r
`=0
`Exhibit 4400 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
`Exhibit 4401 Federal Communications Commission, Making the Connections,
`Communications History (Nov. 21, 2005),
`http://transition.fcc.gov/omd/history/internet/making-
`connections.html
`Exhibit 4402 Marc Fisher, Download Uproar: Record Industry Goes After Personal
`Use, The Washington Post (Dec. 30, 2007),
`http://www.washingtonpost.com/wp-
`dyn/content/article/2007/12/28/AR2007122800693.html.
`Exhibit 4403 RIAA Threatens to Sue Hundreds for Illegal File-Sharing,
`FoxNews.com (June 26, 2003), available at
`http://www.foxnews.com/story/0,2933,90403,00.html;
`Exhibit 4404 Ruth Schubert, Tech-Savvy Getting Music for a Song; Industry
`Frustrated That Internet Makes Free Music Simple, Seattle Post-
`Intelligencer, Feb. 10, 1999
`Exhibit 4405 Sam Costello, Court Orders Napster to Stay ShutAppeals court rejects
`company's request to overturn shutdown order, PCWorld.com (Mar.
`25, 2002), http://www.pcworld.com/article/91144/article.html
`Exhibit 4406 Sarah McBride and Ethan Smith, Music Industry to Abandon Mass
`Suits, The Wall Street Journal (Dec. 19, 2008),
`http://online.wsj.com/article/SB122966038836021137.html
`Exhibit 4407 Stan Liebowitz, File Sharing: Creative Destruction or Just Plain
`Destruction?, 49 Journal of Law & Economics 1, 13-17 (April 2006)
`Exhibit 4408 The RIAA: "The Piracy Rate Is Growing", Bloomberg Businessweek
`Magazine (May 12, 2002),
`http://www.businessweek.com/stories/2002-05-12/the-riaa-the-
`piracy-rate-is-growing
`Exhibit 4409 Larry Sarisky, "Will Removable Hard Disks Replace the Floppy?," Byte
`Magazine, Vol. 8, Number 3 (March 1983)
`
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`Patent 5,966,440
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`EXHIBIT LIST
`Exhibit 4410 United States Patent No. 4,567,359
`
`Exhibit 4411 United States Patent No. RE32,115
`
`Exhibit 4412 Barry Willis, AT&T's a2b music Joins the Online Stampede,
`Stereophile.com, http://www.stereophile.com/news/10133/ (March
`29, 1998)
`Exhibit 4413 Declaration of Jeff Robbin
`
`Exhibit 4414 Declaration of Lawrence Kenswil
`
`Exhibit 4415 Declaration of Marco Mazzoni
`
`Exhibit 4416 Declaration of Tom Weyer
`
`Exhibit 4417 Liquid audio, available at
`http://www.crunchbase.com/company/liquid-audio (last visited Mar.
`20, 2014)
`Exhibit 4418 Michael Stroud, Big Hopes for Hollywood Net Film, Wired.com,
`http://www.wired.com/culture/lifestyle/news/2000/03/35076
`(March 23, 2000)
`Exhibit 4419 Protective Order (Dkt. No. 56) entered in SightSound Technologies,
`LLC v. Apple Inc., Civil Action No. 2:11-cv-01292-DWA (Western
`District of Pennsylvania)
`Exhibit 4420 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
`Exhibit 4421 United States Patent No. 5,561,670
`
`Exhibit 4422 United States Patent No. 6,453,355
`
`Exhibit 4423 United States Patent No. 6,538,665
`
`Exhibit 4424 United States Patent No. 6,714,984
`
`Exhibit 4425 United States Patent No. 6,717,952
`
`Exhibit 4426 United States Patent No. 6,829,648
`
`Exhibit 4427 United States Patent No. 6,850,256
`
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`EXHIBIT LIST
`Exhibit 4428 United States Patent No. 7,007,062
`
`Exhibit 4429 United States Patent No. 7,191,242
`
`Exhibit 4430 United States Patent No. 7,319,761
`
`Exhibit 4431 United States Patent No. 7,320,069
`
`Exhibit 4432 United States Patent No. 7,366,788
`
`Exhibit 4433 United States Patent No. 7,478,323
`
`Exhibit 4434 United States Patent No. 7,650,570
`
`Exhibit 4435 United States Patent No. 7,653,685
`
`Exhibit 4436 United States Patent No. 7,672,464
`
`Exhibit 4437 United States Patent No. 7,680,849
`
`Exhibit 4438 United States Patent No. 7,685,163
`
`Exhibit 4439 United States Patent No. 7,686,215
`
`Exhibit 4440 United States Patent No. 7,747,765
`
`Exhibit 4441 United States Patent No. 7,797,446
`
`Exhibit 4442 United States Patent No. 7,827,259
`
`Exhibit 4443 United States Patent No. 7,853,893
`
`Exhibit 4444 United States Patent No. 7,853,972
`
`Exhibit 4445 United States Patent No. 7,860,830
`
`Exhibit 4446 United States Patent No. 7,865,927
`
`Exhibit 4447 United States Patent No. 7,958,441
`
`Exhibit 4448 United States Patent No. 7,962,505
`
`Exhibit 4449 United States Patent No. 7,966,362
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`Case CBM2013-00023
`Patent 5,966,440
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`EXHIBIT LIST
`Exhibit 4450 United States Patent No. 8,028,080
`
`Exhibit 4451 United States Patent No. 8,032,565
`
`Exhibit 4452 United States Patent No. 8,046,369
`
`Exhibit 4453 United States Patent No. 8,103,793
`
`Exhibit 4454 United States Patent No. 8,136,030
`
`Exhibit 4455 United States Patent No. 8,148,622
`
`Exhibit 4456 United States Patent No. 8,196,214
`
`Exhibit 4457 United States Patent No. 8,214,315
`
`Exhibit 4458 United States Patent No. 8,255,815
`
`Exhibit 4459 United States Patent No. 8,261,246
`
`Exhibit 4460 Apple Wins 2002 Technical GRAMMY Award, Apple Press Info
`(February 26, 2002),
`http://www.apple.com/pr/library/2002/02/26Apple-Wins-2002-
`Technical-GRAMMY-Award.html
`Exhibit 4461 May Wong, Apple's iPod in Short Supply for Holidays, Associated
`Press Online, LexisNexis (Dec. 18, 2004)
`Exhibit 4462 Declaration of Roberto J. Gonzalez
`
`Exhibit 4463 Declaration of Flora D. Elias-Mique
`
`Exhibit 4464 Declaration of Lauren N. Robinson
`
`Exhibit 4465 Declaration of Ching-Lee Fukuda
`
`Exhibit 4466 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)
`Exhibit 4467 Declaration of Michael P. Duffey
`
`Exhibit 4468 Proposed Protective Order, Office Patent Trial Practice Guide at 77
`Fed. Reg. 48756, 48771 (Aug. 14, 2012)
`
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`Case CBM2013-00023
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`
`TABLE OF ABBREVIATIONS
`PO
`Patent Owner
`
`iTMS
`
`Claims
`
`Resp
`
`PTO
`
`cl.
`
`iTunes Store / iTunes Music Store
`
`Challenged Claims
`
`2013-00023, paper 38.
`
`Patent Office
`
`Claim
`
`Consumer Electronics Show
`
`CES
`
`Note: All emphasis herein added unless otherwise stated.
`
`xii
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`While PO’s Response offers more than a dozen arguments, none rebuts the
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`Case CBM2013-00023
`Patent 5,966,440
`
`
`clear evidence of invalidity presented in Apple’s petition. PO’s key contention is that
`
`two elements are not disclosed and not obvious in view of CompuSonics—“second
`
`memory” and “charging a fee” to a second party account. Not so. For the first time
`
`in over 15 years of litigation and reexamination, PO argues the claimed “second
`
`memory” is limited to “non-removable” media or “hard disk.” Yet neither limitation
`
`is claimed or justified by any disclaimer or lexicography. In any event, the
`
`CompuSonics system, as publicly disclosed and sold, included non-removable hard
`
`disks as the “second memory”—evidence PO ignores. PO likewise ignores that
`
`CompuSonics repeatedly disclosed charging a fee to a second party account, such as
`
`by using “credit cards to charge their purchases over the phone lines.” CompuSonics
`
`also disclosed using its devices with telephones and computers connected to
`
`telecommunication lines, amply enabling the disclosed transfer of credit card
`
`information to effectuate charging a fee to an account.
`
`Rather than confront the obviousness of its Claims, PO makes three attempts
`
`to avoid the issue altogether. All fail: (1) the Board has authority to consider its
`
`instituted §103 ground, which is supported by Apple’s petition and expert declaration;
`
`(2) a POSITA is presumed to know all pertinent prior art, which certainly includes the
`
`CompuSonics publications; and (3) PO fails to rebut Apple’s showing that it would
`
`have been obvious to a POSITA to combine the CompuSonics articles.
`
`1
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`Case CBM2013-00023
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`Finally, PO fails to show secondary considerations of non-obviousness. PO’s
`
`commercial success argument relies on iTMS, but fails to show the requisite nexus or
`
`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.
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`I.
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`PO’S KEY ARGUMENTS REST ON INCORRECT CLAIM
`CONSTRUCTIONS AND IGNORE KEY EVIDENCE
`A.
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`Claim 1 Is Not Limited To “Non-Removable” Media Or “Hard
`Disk,” And CompuSonics Disclosed “Second Party Hard Disk”
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`PO fails to rebut CompuSonics’ disclosure of a “second memory.”
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`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, Claim
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`1 does not require a “hard disk,” and the logical reading is that it is not so limited. Cf.
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`EX4301 cl. 1 with cl. 64, 95; see also EX4420 ¶¶4-13. See Golight, Inc. v. Wal-Mart
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`Stores, Inc., 355 F.3d 1327, 1330 (Fed. Cir. 2004) (claims not limited where limitation
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`appears in other claims but not in claims at issue). Similarly, PO’s expert could not
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`defend his stated opinion that Claim 1 requires “non-removable” media. EX4366
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`226:5-27:23. Although the specification urges reducing inventory and delay associated
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`with 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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`provided those same benefits. EX4420 ¶5. PO itself urged its customers to store music
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`purchased from its website on removable optical memory. EX4368 at 5, 10; EX4367
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`144:7-146:12; EX4420 ¶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 ’440 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. PO cannot justify seeking a
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`narrower construction under the “broadest reasonable interpretation” standard
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`applicable here than it did in its district court proceedings.
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`Second, even if “second memory” were limited to “non-removable” media or
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`“hard disk,” Claim 1 would still be invalid, along with Claims 64 and 95.
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`CompuSonics sold DSP 1000 and 2000 devices containing hard disks, and publicly
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`taught that these DSPs may be used to transmit and receive music purchased
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`electronically. See, e.g., EX2324 187:15-189:18. PO itself admits “CompuSonics
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`taught the use of a hard disk for an ‘electronic record store’” (Resp 64), although PO’s
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`expert failed to consider that fact. EX4366 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’. EX4420
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`¶6; EX4366 257:19-258:9, 260:3-12; EX4375 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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`signals to be “configured to transmit payment information.” Resp 2, 14. But the
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`Claims (all methods) simply require “charging a fee … by the first party to the second
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`party.” No language requires any second party device—let alone the same device with
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`the “second memory”—to be “configured” to do this. If anything, the Claims make
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`clear that electronic payment can be carried out using separate devices: digital signals
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`are sent from “first memory” to “second memory,” while charging a fee is by “first party”
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`to “second party.” EX4420 ¶ 25.
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`PO seeks this unjustified limitation because PO cannot reasonably dispute that
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`EX4324 (at 2) discloses “charging a fee” to a second party account: “a service that
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`would enable record companies to sell direct to consumers over the telephone. Symphonies,
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`ordered by credit card, could travel digitally over phone lines into homes to be recorded
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`by Compusonics’ machine.” Mr. Snell’s characterization of this disclosure as a
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`consumer making a phone purchase after using paper mail to provide a credit card number is
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`not credible. EX2353 ¶ 55. Mr. Snell also fails to address EX4309’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.” EX4309 at 3.
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`CompuSonics likewise disclosed “all-electronic purchases” (EX4318), and as Arthur
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`Hair agued to the PTO, “an electronic sale inherently assumes a charging of a fee to
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`an account which then allows for access to or a transferring of a product or service.”
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`EX4305 at 170. Thus, by the ’440 inventor’s own admissions, CompuSonics discloses
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`“charging a fee” to a second party account.
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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
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`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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`1 Contrary to PO’s assertion, the petition relies on CompuSonics evidence not
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`previously before the PTO, e.g., EXS. 4309, 4315, 4320.
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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
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`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” (EX4309 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; EX4366 235:20-237:16. Neither the Claims nor any other intrinsic evidence
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`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 “charging a fee”
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`to a second party account (See II.A.), and PO also falls short in arguing that
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`CompuSonics’ disclosure of electronic payment is not enabling.3 Resp 22-23, 33, 62.
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`2 Likewise, PO’s assertion that EX4315 and 4320 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. EX2324 44:11-15, 63:19-67:8;
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`EX4335 ¶¶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 EX4420 ¶83.
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`First, PO admits that “the components needed to practice the claims were available prior
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`to 1988” and operated as intended. Resp 31; EX4313 4:16-21. And PO’s expert, Mr.
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`Snell, admits a POSITA would have known how to carry out electronic payment,
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`agreeing that, before the priority date, the practice of transferring and verifying
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`monies across telephone lines such as by credit card was well known. EX4366 74:5-
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`75:19; see also, e.g., id. 230:23-231:24. Mr. Snell also agrees a POSITA would have
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`known that credit card numbers could be provided by voice over a phone line, or by
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`keypad. Id. 74:5-75:24. Indeed, the ’440 Patent’s only disclosures about “charging a
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`fee” are: “charging an account,” “charging a credit card number,” “telephoning the
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`first party [and] providing a credit card number … so the second party is charged
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`money,” and “transferring money electronically.” EX4301 at 7:34-43, 8:19-35. Thus,
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`there is simply no merit to PO’s argument that “[i]n the absence of a defined billing
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`method, the ‘CompuSonics systems’ do not adequately disclose the claimed
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`elements. . . .” Resp 65. See also, e.g., EX4420 ¶¶14-25.
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`CompuSonics Amply Discloses Video
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`C.
`The disclosures of CompuSonics apply equally to video as to audio, EX4334 at
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`58 (App’x C at 10); see also, e.g., EX4319 at 1-3; EX4323 at Abstract, 5:52-58; EX4324
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`at 2, and thus CompuSonics discloses each of its steps as applicable to video signals.
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`Indeed, even PO admits EX4323 discloses “additional ability to record and play back
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`digital video.” Resp 13.
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`III. THE BOARD PROPERLY INSTITUTED §103 PROCEEDINGS
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`37 C.F.R. §42.208(c), improperly applied by PO, recites that the Board may
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`institute review for a ground if it decides that “the