Petitioner Apple Inc.’s Presentation
`
`Covered Business Method Review Of
`Patent Owner’s U.S. Patent
`Nos. 5,191,573 And 5,966,440
`
`May 6, 2014
`
`CBM2013-00020 and CBM2013-00023
`
`Patent Trial and Appeal Board
`United States Patent and Trademark Office
`
`Apple Inc.
`Exhibit 4472
`CBM2013-00023 (Apple v. SightSound)
`
`

`
`’573 And ’440 Patents – Claim 1
`
`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 lien [sic] 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 there-between;
`transmitting the desired digital audio signal from the
`first memory with a transmitter in control and
`possession of the first 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.
`
`Ex. 4101/4304 (’573 Patent), Claim 1.
`
`1. A method for transferring desired digital video or digital audio
`signals comprising the steps of:
`forming a connection through telecommunications lines
`between a first memory of a first party and a second memory of a
`second party control unit of a second party, said first memory
`having said desired digital video or digital audio signals;
`selling electronically by the first party to the second party
`through telecommunications lines, the desired digital video or
`digital audio signals in the first memory, the second party is at a
`second party location and the step of selling electronically includes
`the step of charging a fee via telecommunications lines by the first
`party to the second party at a first party location remote from the
`second party location, the second party has an account and the step
`of charging a fee includes the step of charging the account of the
`second party; and
`transferring the desired digital video or digital audio signals
`from the first memory of the first party to the second memory of the
`second party control unit of the second party through
`telecommunications lines while the second party control unit with
`the second memory is in possession and control of the second party;
`storing the desired digital video or digital audio signals in a non-
`volatile storage portion the second memory; and
`playing through speakers of the second party control unit the
`digital video or digital audio signals stored in the second memory,
`said speakers of the second party control unit connected with the
`second memory of the second party control unit;
`wherein the non-volatile storage portion is not a tape or CD.
`
`Ex. 4301 (’440 Patent), Claim 1.
`
`2
`
`

`
`’573 And ’440 Patents – Figure 1
`
`Ex. 4101/4304 (’573 Patent) Figure 1.
`
`“FIG. 1 is a pictorial flow chart which may be used in carrying out the teachings of this
`invention for the purposes of electronic sales, distribution, storage, manipulation, retrieval,
`playback, and copyright protection of Digital Audio Music . . . .”
`
`Ex. 4101/4304 (’573 Patent) at 3:32-36.
`
`“In FIG. 1 and FIG. 2, the following components are already commercially available: the
`agent’s Hard Disk 10, the Telephone Lines 30, the Compact Disc Player 40, the user’s
`Hard Disk 60, the Video Display Unit 70, and the Stereo Speakers 80.”
`
`Ex. 4101/4304 (’573 Patent) at 4:16-20 (emphasis original).
`
`3
`
`

`
`’573 And ’440 Patents – Figure 1
`
`Ex. 4101/4304 (’573 Patent) Figure 1.
`
`“[T]he applicant’s method in no manner necessitates the need for a receiver which is
`controlled by the controller of the transmitter. Any suitable recording apparatus
`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 . . . .”
`Ex. 4102/4305 (’573 Patent File History) at 140-141.
`“Patent Owner does not dispute that the components needed to practice the claims
`were available prior to 1988 . . . .”
`
`Patent Owner Response, CBM2013-00020 (Paper No. 41, Jan. 3, 2014) at 31 (emphasis original);
`CBM2013-00023 (Paper No. 38, Jan. 3, 2014) at 34 (emphasis original).
`
`4
`
`

`
`’573 And ’440 Patents – Claim 1
`
`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 lien [sic] 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 there-between;
`transmitting the desired digital audio signal from the
`first memory with a transmitter in control and
`possession of the first 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.
`
`Ex. 4101/4304 (’573 Patent), Claim 1.
`
`1. A method for transferring desired digital video or digital audio
`signals comprising the steps of:
`forming a connection through telecommunications lines
`between a first memory of a first party and a second memory of a
`second party control unit of a second party, said first memory
`having said desired digital video or digital audio signals;
`selling electronically by the first party to the second party
`through telecommunications lines, the desired digital video or
`digital audio signals in the first memory, the second party is at a
`second party location and the step of selling electronically includes
`the step of charging a fee via telecommunications lines by the first
`party to the second party at a first party location remote from the
`second party location, the second party has an account and the step
`of charging a fee includes the step of charging the account of the
`second party; and
`transferring the desired digital video or digital audio signals
`from the first memory of the first party to the second memory of the
`second party control unit of the second party through
`telecommunications lines while the second party control unit with
`the second memory is in possession and control of the second party;
`storing the desired digital video or digital audio signals in a non-
`volatile storage portion the second memory; and
`playing through speakers of the second party control unit the
`digital video or digital audio signals stored in the second memory,
`said speakers of the second party control unit connected with the
`second memory of the second party control unit;
`wherein the non-volatile storage portion is not a tape or CD.
`
`Ex. 4301 (’440 Patent), Claim 1.
`
`5
`
`

`
`Baseline Knowledge Of POSITA
`• Storing data, including audio and video data, at a remote server, and on various
`types of memory (e.g., hard disks, Winchester disk cartridges).
`See, e.g., Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 107:20-108:2, 109:14-17, 124:13-15, 123:4-124:7; Ex. 4132/4334 (Kelly Decl.) ¶¶ 17-18.
`
`• Transmission of digital signals over networks.
`See, e.g., Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 246:16-247:4, 247:6-248:10, 251:6-253:22, 254:16-21;
`Ex. 4132/4334 (Kelly Decl.) ¶ 20.
`
`• Transmission of digital audio signals over telecommunication lines.
`See, e.g., Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 239:19-23, 241:16-243:8.
`
`• Electronic sales, including digital music.
`See, e.g., Ex. 4132/4334 (Kelly Decl.) ¶¶ 17, 27; Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 54:13-59:1, 59:13-22, 60:12-21, 60:23-61:11,
`61:13-22, 65:4-66:15, 68:3-15, 69:14-70:3, 71:24-72:11, 72:13-73:4, 74:5-77:13, 81:21-85:1, 85:18-87:3, 88:7-92:4, 231:4-24,
`244:24-246:9.
`
`• Devices for playing digital audio and video, including portable audio players.
`See, e.g., Ex. 4132/4334 (Kelly Decl.) ¶ 25; see Ex. 4165/4334 (3/6/14 Snell Dep. Tr.) at 104:22-105:5.
`
`• Use of improved technologies (e.g., increased bandwidth, increased storage).
`See, e.g., Ex. 4165/4334 (3/6/14 Snell Dep. Tr.) at 261:3-12, 257:19-259:9; Ex. 4262/4420 (Kelly Decl.) ¶ 6.
`Applicant’s Statement:
`“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. 4102/4305 (’573 Patent File History) at 163.
`
`6
`
`

`
`Examples Of Prior Art Statements About
`Credit Cards And Electronic Sales
`
`“In the preferred embodiment of the system of the present invention, the
`customer wishing to purchase software connects his modem/SPP with the
`system’s SEC 10 [i.e., central computer facility located at the vendor site or
`operated under the control of the vendor] via telephone. The modem/SPP 12
`passes its unique identification code (preferably in encrypted form) to the SEC
`10 to confirm the identification and the legitimate status of the customer. The
`SEC 10 then generates lists of available software packages along with prices and
`terms of sale. These prices and terms of sale (usually credit card authorization)
`must be agreed upon before a transaction actually occurs. Once the customer has
`met the terms of the sale, the SEC 10 creates a unique copy of the specified
`software package, and this package, which also contains encrypted security
`control information, is transmitted through the customer’s modem/SPP into his
`EUC 14 [i.e., End-User Computer].”
`
`Ex. 4109/4312 (WO85/02310, filed on 11/14/84, and published on 5/23/85 (“Softnet”)) at 12.
`
`“After the control information has been decrypted by the SPP 12, the remainder
`of the transmission, the encrypted software package itself, is then passed through
`the SPP 12 to the customer’s EUC 14 for storage on user-selected media.”
`
`Ex. 4109/4312 (WO85/02310 , filed on 11/14/84, and published on 5/23/85 (“Softnet”)) at 12-13.
`
`7
`
`

`
`Examples Of Prior Art Statements About
`Electronic Sale Of Downloaded Music/Video
`
`“I see the time down the road, probably 10 years, when you’ll be able to dial a
`series of numbers on your telephone and get a digital album over the phone line
`into your incoder [sic] in your home. In five minutes, you can have a new
`album. It’s on your telephone bill or it’s on your credit card or whatever.”
`Ex. 4103/4306 (Interview with Jimmy Bowen, published in October 1986, quoted in ’573 Patent
`Reexam File History) at 420.
`
`“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. Movies, which can
`also be recorded digitally, might be sent the same way.”
`Ex. 4119/4319 (“The Search for the Digital Recorder,” Fortune Magazine,
`Nov. 12, 1984) at 2 (emphasis original).
`
`8
`
`

`
`Examples Of Prior Art Statements About
`Electronic Sale Of Downloaded Music/Video
`“At a recent press demonstration hosted by AT&T at its
`headquarters here, CompuSonics made use of AT&T’s land-based
`telephone data transmission system to digitally transmit and
`receive music between Chicago and New York.”
`
`Ex. 4106/4309 (“Joint Telerecording Push: CompuSonics, AT&T Link,” Billboard,
`Oct. 5, 1985) at 3.
`
`“David Schwartz, president of CompuSonics, is a strong
`proponent of the ‘electronic record store’ concept, an idea that has
`been bandied about for some time, but which Schwartz says is
`now poised to ‘become a reality.’”
`
`Ex. 4106/4309 (“Joint Telerecording Push: CompuSonics, AT&T Link,” Billboard,
`Oct. 5, 1985) at 3.
`“[S]uch a system, as seen by Schwartz and CompuSonics, would
`utilize the firm’s telerecording process and hard disk equipment to
`allow music software dealers to receive an album master via a
`digital transmission from the record company. The 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. 4106/4309 (“Joint Telerecording Push: CompuSonics, AT&T Link,” Billboard,
`Oct. 5, 1985) at 3.
`
`9
`
`

`
`Examples Of Prior Art Statements About
`Electronic Sale Of Downloaded Music/Video
`“[Y]ou could pick up the phone, call up the cable TV company, say I’ll buy it. Add it
`to my bill, download it to the disk and then get the bill 30 days later or whatever.
`We think it has real potential for impulse sales to teenagers, [Laughter.] especially
`when, well I’m thinking of younger kids who a lot of the MTV appeals to, when their
`parents are out to dinner, all they need is a credit card number, and a taste for music.
`So some of these machines may end up with locks on them someday. But we, I don’t
`know when this is going to happen.”
`
`Ex. 4147/4348 (Transcript of Audio, Excerpts of CompuSonics
`Lecture at Stanford by D. Schwartz and J. Stautner, 1987) at 9:2-8.
`
`“In the not too distant future consumers will be able to purchase digital recordings of
`their favorite artists directly from the production studio’s dial-up data base and record
`them on blank SuperFloppies in a DSP-1000.”
`
`Ex. 4113/4316 (7/16/84 CompuSonics Letter from David Schwartz to Shareholders) at 1.
`
`“One medium that is currently used for shipping digital data over long distances is
`telephone lines….
`
`* * *
`Making these assumptions, in the not-too distant future consumers will be able to
`buy music at home, over telephone lines or through cable television hookups, and
`play it back through an audio device resembling a microcomputer.”
`* * *
`“Very simply, music (and other home entertainment options) will become just
`another type of computer software.”
`Ex. 4108/4311 (Larry Israelite, “Home Computing: Scenarios for Success,”
`Billboard, Dec. 15, 1984) at 4.
`
`10
`
`

`
`“Commercial Success”: Expert Qualifications
`
`Patent Owner’s Expert:
`“Q. So the record is clear, sir, is it your
`opinion that the differences in user interface
`between the iTunes Music Store and
`SightSound.com are insignificant?
`MS. SKLENAR: Objection. Foundation. Relevance.
`THE WITNESS: I think they’re insignificant as
`regards the patents involved in this case.
`BY MR. BATCHELDER:
`Q. Are they insignificant in terms of
`explaining differences in the commercial
`success of SightSound.com as compared to the
`iTunes Music Store?
`MS. SKLENAR: Objection. Foundation. Relevance.
`THE WITNESS: I don't think it's a significant
`difference in terms of buying and
`functionality. I'm not a businessperson. I'm
`not a financial analyst. So I think these are
`questions you want to ask someone who is a
`financial analyst here. I'm not a salesman. My
`expertise is in the engineering and the
`computer side. I understand a lot about the
`music industry, but, again, I'm not a
`financial analyst. I'm not a sales expert.”
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 213:14-214:14.
`
`Petitioner’s Expert:
`Positions at Universal Music Group :
`• Executive VP, Business Strategy (2007-2008)
`• President, eLabs (1998-2007)
`• Executive VP, Business and Legal Affairs
`(1991-1998)
`• Business and Legal Affairs Attorney (1983-1991)
`
`Professional Activities:
`• RIAA, Board Member (mid-1990s- 2008)
`•
`Int’l Federation of the Phonographic Industry, Board
`Member (1998-2002)
`• SoundExchange, Board Member (2005-2008)
`See Ex. 4256/4414 (Kenswil Decl.) ¶¶ 7-15.
`
`11
`
`

`
`Patent Owner:
`
`“[SightSound’s] success is dependent on its ability
`to motivate the major owners of video and audio
`recordings to allow the Company to be a retailer
`of their content, to purchase the Company’s DSP
`offerings, or, in the case of audio recordings, to
`quickly commence conducting Entertainment E-
`Commerce as Licensees.”
`
`Ex. 4157/4358 (Private Placement Memorandum, April 27, 1999,
`SightSound.com) at 9-10.
`
`Patent Owner v. Snell
`Patent Owner’s Expert:
`“Q: . . . You said that the content available on
`iTunes Music Store is more compelling than the
`content available on SightSound.com. And I’m
`asking as a matter of historical fact, how did
`that difference in the compelling nature of the
`content impact user purchasing patterns?
`MS. SKLENAR: Objection. Relevance. Foundation.
`THE WITNESS: Again, I think the -- it’s always
`more compelling to -- I shouldn’t say always, but
`it’s usually more compelling to -- a web site is
`going to be more compelling in the future than it
`is today and today’s web sites are more
`compelling than they were ten years ago.
`So as time goes on, they are going to be more
`compelling. That’s just the nature of
`technology, especially computer science and media
`technology.
`Q: And applying that to comparing the iTunes
`Music Store to SightSound.com, what role, if any,
`did that have in explaining the differences in
`the respective commercial success of those two
`websites?
`MS. SKLENAR: Objection. Foundation. Relevance.
`A: I don’t think I’ve formed an opinion about
`this. It’s not something I looked at for this
`proceeding.”
`
`“Many potential [SightSound] investors were
`concerned about the lack of available compelling
`content. The company designed a valuable
`solution. With consumer technology (i.e. high
`speed internet access, faster PCs, initial
`development of ‘smart TVs’) well on the way
`available content was the key missing ingredient.”
`
`Ex. 4160/4361 (April 12, 2000 Memorandum from LePore, Patent Owner’s
`CFO, to Files Re: Company Stock Valuation) at 5.
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 161:18-162:22.
`
`12
`
`

`
`Petitioner’s Expert:
`“A key to the success of iTMS was Apple’s ability
`to secure licenses with the major record labels
`prior to the launch of iTMS. This was an attractive
`feature for consumers because it gave them a store
`with a full catalog of offerings to browse and from
`which to select.”
`
`Ex. 4256/4414 (Kenswil Decl.) ¶ 69.
`
`Kenswil v. Snell
`Patent Owner’s Expert:
`“Q: . . . You said that the content available on
`iTunes Music Store is more compelling than the
`content available on SightSound.com. And I’m
`asking as a matter of historical fact, how did
`that difference in the compelling nature of the
`content impact user purchasing patterns?
`MS. SKLENAR: Objection. Relevance. Foundation.
`THE WITNESS: Again, I think the -- it’s always
`more compelling to -- I shouldn’t say always, but
`it’s usually more compelling to -- a web site is
`going to be more compelling in the future than it
`is today and today’s web sites are more
`compelling than they were ten years ago.
`So as time goes on, they are going to be more
`compelling. That’s just the nature of
`technology, especially computer science and media
`technology.
`Q: And applying that to comparing the iTunes
`Music Store to SightSound.com, what role, if any,
`did that have in explaining the differences in
`the respective commercial success of those two
`websites?
`MS. SKLENAR: Objection. Foundation. Relevance.
`A: I don’t think I’ve formed an opinion about
`this. It’s not something I looked at for this
`proceeding.”
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 161:18-162:22.
`
`13
`
`

`
`CompuSonics:
`“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. Movies, which can
`also be recorded digitally, might be sent the same way.”
`
`Ex. 4119/4324 (“The Search for the Digital Recorder,” Fortune
`Magazine, Nov. 12, 1984) at 2 (emphasis original).
`
`CompuSonics v. Snell
`Snell’s “Interpretation”:
`“The 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. Exhibit 4324 therefore
`fails to teach ‘selling electronically’ by the first
`party or ‘charging a fee via telecommunications
`lines’ and ‘charging the account of the second
`party,’ and fails to anticipate claims 1, 64 and 95
`for this reason as well.”
`Ex. 2353 (Snell Decl.) ¶ 55 (emphasis original); see
`also Ex. 2153 (Snell Decl.) ¶ 55.
`
`Petitioner’s Expert’s Interpretation:
`
`“When the above excerpt is read in context, i.e., one sentence after
`the other, one of ordinary skill in the art would understand that the
`customer would call the record company, provide their credit card
`number, have it charged and have the symphony be transmitted via
`phone lines to the customer’s home to be recorded.
`
`There are other ways to make purchases and one of ordinary skill in
`the art would have been aware of this. However, given this passage’s
`phrases ‘sell direct over the telephone’ and ‘Symphonies, ordered by
`credit card, could travel digitally over phone lines…,’ one of ordinary
`skill in the art would not have interpreted this passage, as Mr. Snell
`urges, to involve ‘writing down a code for a recording and a credit
`card number and mailing it to the seller.’”
`
`Ex. 4262/4420 (Second Kelly Decl.) ¶ 19.
`
`14
`
`

`
`Other CompuSonics Disclosures
`Regarding Electronic Payment
`
`“The 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. 4106/4309 (“Joint Telerecording Push: CompuSonics,
`AT&T Link,” Billboard, Oct. 5, 1985) at 3.
`
`“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. 4115/4318 (10/10/85 CompuSonics Letter
`from David Schwartz to Shareholders) at 1.
`
`15
`
`

`
`Named Inventor v. Snell
`“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.”
`Ex 4136/4338 (’734 Patent File History)
`(3/6/14 Snell Dep. Ex. 6) at 109.
`
`Ex 4136/4338 (’734 Patent File History)
`(3/6/14 Snell Dep. Ex. 6) at 109.
`
`“Q. So focusing again on Exhibit 6, page 109, the
`third paragraph, I’m going to read it again. ‘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.’ Have I read that
`correctly?
`A. Yes.
`Q. And focusing on the time period just before the
`priority date, are you now saying that is not
`an accurate statement?
`MR. SKLENAR: Objection. Foundation.
`A. Yes. Again, I did not review this document for
`this proceeding, but as I read it more clearly, I
`-- I disagree.
`Mr. BATCHELDER:
`Q. You disagree with the statement I just read?
`A. Yes.”
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 83:9-84:8.
`
`“Q. Focusing on the fourth paragraph of page 109
`of Exhibit 6, I’m going to read the paragraph.
`‘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.’ Have I read
`that correctly?
`A. Yes.
`Q. And focusing on the time period just before
`the priority date, do you disagree with [the
`Inventor’s] statement?
`MR. SKLENAR: Objection. Foundation.
`THE WITNESS: I disagree with this statement.”
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 84:9-85:1.
`
`16
`
`

`
`Patent Owner’s System Encouraged Use
`Of Removable Memory
`“Digital Sight/Sound: System Requirements”
`
`“Memory Hogasaurus!
`In the very near future, we will think of hard storage in terms of
`gigabytes, lots of gigabytes. In fact, the Maxoptix Corporation currently
`sells a very affordable 20 gigabyte optical juke box. If you really want
`massive memory go for their 180 gigabyte juke box. Measly storage
`devices measured in megabytes will soon be remembered with nostalgia
`as are 8-track tapes and other extinct technosaurs. What are you waiting
`for? Set up your home music archive today!”
`
`This optical jukebox was removable memory.
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 109:18-110:18, 115:24-
`116:4; Ex. 4262/4420 (Second Kelly Decl.) ¶ 11.
`
`Ex. 4167/4368 (Ex. 9 of 3/6/14 Snell Dep. Tr.) at 10.
`“THE WITNESS: You said, ‘Do you understand that SightSound is here recommending
`to its customers that you should buy music from us via our Virtual Records site
`and you should store purchased music on a removable optical juke box.’
`Q: That’s my question.
`A: And my answer was no.
`Q: And my question is why?
`MS. SKLENAR: Same objections.
`A: Because they’re not recommending it.”
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 145:13-24.
`
`17
`
`

`
`Motivation To Combine Multiple References Describing
`How A System Could Be Used
`
`“Q. Even though in situations where papers weren't explicitly
`cross-referencing each other, would one of ordinary skill in
`the art prior to the priority date have thought it obvious to
`combine and read together publications that were speaking to
`how the Lucas Film ASP system could be used?
`MS. SKLENAR: Objection. Foundation. Hypothetical.
`A. Well, your question seems to be focused on how the ASP
`system could be used. And I think it was reasonable to
`combine the papers about how the audio signal processor could
`be used.”
`
`Ex. 4165/4366 (3/6/14 Snell Dep. Tr.) at 250:16-251:4.
`
`18
`
`

`
`Nexus Between Commercial Success And
`Patented Invention
`
`“As to commercial success, to establish a proper nexus between a claimed invention
`and the commercial success of a product, a patent owner must offer ‘proof that the
`sales [of the product] were a direct result of the unique characteristics of the claimed
`invention—as opposed to other economic and commercial factors unrelated to the
`quality of the patented subject matter.’ In re Huang, 100 F.3d 135, 140 (Fed. Cir.
`1996). In addition, ‘if the commercial success is due to an unclaimed feature of the
`device,’ or ‘if the feature that creates the commercial success was known in the prior
`art, the success is not pertinent.’ Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299,
`1312 (Fed. Cir. 2006); see also In re Kao, 639 F.3d 1057, 1070 (Fed. Cir. 2011)
`(requiring a determination of ‘whether the commercial success of the embodying
`product resulted from the merits of the claimed invention as opposed to the prior art
`or other extrinsic factors’).”
`
`Apple Inc. v. SightSound Techs. LLC,
`CBM2013-00020, slip op. at 9-10 (PTAB Dec. 11, 2013) (Paper No. 40);
`CBM2013-00023, slip. op. at 9-10 (PTAB Dec. 11, 2013) (Paper No. 36).
`
`19
`
`

`
`Requirements For Presumption Of Nexus
`
`“A presumption that such a nexus exists arises if the
`patentee can show that the marketed product ‘embodies
`the claimed features’ and ‘is coextensive with them.’ The
`reason for the first part of this inquiry is obvious: the
`patentee must show that the marketed product embodies
`(that is, infringes or is covered by) the patent claim. If the
`product does not read on the claim, there can be no
`relevance of the product’s commercial success to whether
`the claim is obvious or not.”
`
`Rambus Inc. v. Hynix Semiconductor, Inc.,
`254 F.R.D. 597, 601-03 (N.D. Cal. 2008) (internal citation omitted).
`
`20
`
`

`
`Not Embodying
`
`Patent Owner Bears Burden Of
`Proving Embodiment:
`“A presumption that such a nexus exists arises if the patentee
`can show that the marketed product ‘embodies the claimed
`features’ and ‘is coextensive with them.’ The reason for the
`first part of this inquiry is obvious: the patentee must show
`that the marketed product embodies (that is, infringes or is
`covered by) the patent claim. If the product does not read on
`the claim, there can be no relevance of the product’s
`commercial success to whether the claim is obvious or not.”
`Rambus Inc. v. Hynix Semiconductor, Inc.,
`254 F.R.D. 597, 601-03 (N.D. Cal. 2008).
`
`Petitioner’s Expert Explained Several
`Reasons Why iTMS Does Not Embody
`The Claimed Features, Such As:
`• Not transferring money with, e.g., gift cards, store credit,
`redemption codes, third party payments
`
`• No “electronic” medium when signals are sent over WiFi
`and cellular networks
`
`•
`
`•
`
`Secondary player devices not “second memory”
`
`Solid state memory is not hard disk
`
`Ex. 4262 (Second Kelly Decl.) ¶¶ 48-49, 50-52, 55-57, 61-63;
`Ex. 4420 (Second Kelly Decl.) ¶¶ 63-64.
`
`21
`
`

`
`Not Co-Extensive
`
`“A presumption that such a nexus exists arises if the patentee can
`show that the marketed product ‘embodies the claimed features’
`and ‘is coextensive with them.’ The reason for the first part of this
`inquiry is obvious: the patentee must show that the marketed
`product embodies (that is, infringes or is covered by) the patent
`claim. If the product does not read on the claim, there can be no
`relevance of the product’s commercial success to whether the
`claim is obvious or not. But for a presumption to attach, the
`patentee must also show that the claimed invention is
`‘coextensive’ with the product. The reason for this part of the
`inquiry is equally important, but less clear. This requirement
`accommodates the reality that many products embody dozens of
`patents or features and that their success or failure cannot solely be
`attributed to any particular one.”
`
`* * *
`“For example, if a product embodies several claimed inventions,
`why should any one invention be presumed to be the cause of its
`success? Put another way, how could one tell that the product’s
`success was due to the claimed invention at issue and not the
`collective utility of the other inventions? Thus, where the product
`is not coextensive with the claimed invention, the patentee must
`show more to establish the chain of inference that suggests that the
`claimed invention is non-obvious.”
`
`Rambus Inc. v. Hynix Semiconductor, Inc.,
`254 F.R.D. 597, 601-03 (N.D. Cal. 2008) (internal citation omitted).
`
`22
`
`

`
`Petitioner’s Expert, Mr. Kelly:
`“iTMS embodies a large number of features, many of which are
`subjects of Apple’s own patents.” For example, the following U.S.
`Patents:
`• 7,650,570 – visualizing and interacting with a music library
`using metadata;
`• 8,136,030 – library maintenance and organization with display
`of selectable albums and songs;
`• 8,255,815 – improvements in the area of preview icons for
`motion pictures;
`• 7,853,972 – improvements in previewing content through the
`use of menus;
`• 8,214,315 – automated addition and/or deletion of media items
`for a mobile media player based on user taste data;
`• 5,561,670 – using multicast system to transmit digital audio
`and video using control packets;
`• 7,653,685 – transferring multimedia data using streaming
`media protocols;
`• 7,962,505 – recommending users to other users based on music
`listening and recommending history;
`• 7,320,069 – media data encryption and protection;
`• 7,797,446* – updating of playlists when media is added or
`removed from the media system;
`• 7,827,259* – repeatedly selecting and presenting media on a
`media device by applying rules or user criteria;
`• 7,860,830* – improvements on presentation of media for sale
`to buyers;
`• 7,680,849* – synchronization with a media device.
`
`See Ex. 4262/4420 (Second Kelly Decl.) ¶¶ 66-81.
`* denotes a patent that issued over the ’573 Patent
`
`Not Co-Extensive
`Jeff Robbin, Petitioner’s VP of iTunes:
`“The iTunes client and iTunes Music Store include many technological
`features developed by Apple. One example is the “Genius” feature,
`which, among other functions, implements a sophisticated algorithm to
`provide recommendations based on past purchases.”
`
`At least nine