UNITED STATES PATENT AND TRADEMARK OFFICE
`
`_______________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`_______________
`
`APPLE, INC.,
`
`Petitioner,
`
`v.
`
`Patent of SIGHTSOUND TECHNOLOGIES, LLC,
`
`Patent Owner.
`
`_______________
`
`CBM2013-00023, U.S. Patent No. 5,966,440
`
`_______________
`
`PATENT OWNER SIGHTSOUND TECHNOLOGIES, LLC’S
`PRELIMINARY RESPONSE
`
`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S. Patent & Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`

`

`TABLE OF CONTENTS
`
`I.
`
`II.
`
`III.
`
`IV.
`
`V.
`
`STATEMENT OF PRECISE RELIEF REQUESTED
`
`PRELIMINARY STATEMENT
`
`A.
`
`B.
`
`C.
`
`The Invention of the ’440 Patent
`
`SightSound and the Advent of Digital Media Distribution
`
`SightSound Technologies’ Acquisition of the Patents and
`the Initiation of Litigation
`
`THE CLAIMS
`
`THE PROSECUTION HISTORY
`
`A.
`
`B.
`
`Prosecution History of the ’440 Patent Lineage
`
`’440 Reexamination Prosecution History
`
`APPLE LACKS STANDING BECAUSE THE SIGHTSOUND
`PATENTS ARE NOT COVERED BUSINESS METHOD
`PATENTS
`
`A.
`
`B.
`
`The SightSound Patents Have No Relation To A
`“Financial Product or Service”
`
`SightSound’s Patents Claim A Technological Invention
`
`1.
`
`2.
`
`SightSound’s Patents Claim The Technical Feature
`Of Transmitting And Storing Digital Audio And
`Video Signals
`
`SightSound Provided A Technical Solution To The
`Technical Problems Associated with Prior Art
`Distribution of Media
`
`VI. CONCLUSION
`
`Page
`
`1
`
`1
`
`1
`
`4
`
`6
`
`9
`
`11
`
`12
`
`24
`
`28
`
`31
`
`39
`
`41
`
`43
`
`45
`
`–i–
`
`

`

`TABLE OF AUTHORITIES
`
`Federal Cases
`Bilski v. Kappos, 130 S. Ct. 3218 (2010)
`
`Chrysler Corp. v. Brown, 441 U.S. 281 (1979)
`
`Diamond v. Diehr, 450 U.S. 175 (1981)
`
`KSR Int’l Co. v. Teleflex Inc.,550, U.S. 398 (2007)
`
`Page(s)
`
`29
`
`31
`
`40
`
`40
`
`40
`
`31
`
`7
`
`7
`
`29
`
`37
`
`37
`
`37
`
`Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289
`(2012)
`
`Merck & Co. v. Kessler, 80 F.3d 1543 (Fed. Cir. 1996)
`
`SightSound.com, Inc. v. N2K, Inc., 185 F. Supp. 2d 445 (W.D. Pa.
`2002)
`
`SightSound.com, Inc. v. N2K, Inc., 391 F. Supp. 2d 321 (W.D. Pa.
`2005)
`
`State St. Bank & Tr. Co. v. Signature Fin. Grp., 149 F.3d 1368 (Fed.
`Cir. 1998)
`
`Decisions of the Patent Trial and Appeal Board
`Bloomberg, Inc. v. Markets-Alert PTY LTD, No. CBM2013-00005,
`Paper No. 18 (P.T.A.B. Mar. 29, 2013)
`
`CRS Advanced Techs., Inc v. Frontline Techs., Inc., No. CBM2012-
`00005, Paper No. 17 (P.T.A.B. Jan. 23, 2013)
`
`Interthinx, Inc. v. Corelogic Solutions, Inc., No. CBM2012-00007,
`Paper No. 16 (P.T.A.B. Jan. 31, 2013)
`
`Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., No. CBM2012-
`00002, Paper No. 10 (P.T.A.B. Jan. 25, 2013)
`
`37, 41, 42
`
`–ii–
`
`

`

`Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., No. CBM2012-
`00003, Paper No. 15 (P.T.A.B. Feb. 12, 2013)
`
`Liberty Mut. Ins. Co. v. Progressive Cas. Ins. Co., No. CBM2012-
`00010, Paper No. 16 (P.T.A.B. Feb. 25, 2013)
`
`MeridianLink, Inc. v. DH Holdings, LLC, No. CBM2013-00008,
`Paper No. 20 (P.T.A.B. June 24, 2013)
`
`37
`
`37
`
`38
`
`SAP Am., Inc. v. Versata Dev. Grp., Inc., No. CBM2012-00001, Paper
`No. 36 (P.T.A.B. Jan. 9, 2013)
`29, 33, 37, 38, 41
`
`SAP Am., Inc. v. Versata Dev. Grp., Inc., No. CBM2012-00001, Paper
`No. 70 (P.T.A.B. June 11, 2013)
`
`42
`
`Federal Statutes
`
`35 U.S.C.
`§ 102
`§ 103(a)
`§ 112
`
`17, 26
`27
`18, 19, 20, 21, 27
`
`America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011)
`§ 18
`§ 18(a)(1)(B)
`§ 18(d)(1)
`
`1
`29
`29, 30, 31, 39
`
`Federal Regulations
`
`37 C.F.R.
`§ 1.510
`§ 42.207(a)
`§ 42.301(b)
`§ 42.304(a)
`§ 42.304(b)
`
`8
`1
`39, 41, 42, 45
`29, 30
`31
`
`–iii–
`
`

`

`77 Fed. Reg.
`48,734, 48,735 (Aug. 14, 2012)
`48,734, 48,736 (Aug. 14, 2012)
`48,734, 48,737 (Aug. 14, 2012)
`48,734, 48,738–39 (Aug. 14, 2012)
`48,734, 48,744 (Aug. 14, 2012)
`48,756, 48,763–64 (Aug. 14, 2012)
`
`Legislative Materials
`
`157 Cong. Rec.
`S1053 (daily ed. Mar. 1, 2011)
`S1363 (daily ed. Mar. 8, 2011)
`S1364 (daily ed. Mar. 8, 2011)
`S1379 (daily ed. Mar. 8, 2011)
`H4428–29 (daily ed. June 22, 2011)
`H4497 (daily ed. June 23, 2011)
`S5432 (daily ed. Sept. 8, 2011)
`S5441 (daily ed. Sept. 8, 2011)
`
`31, 43
`33, 38, 41, 45
`40
`32
`32
`33
`
`32
`29, 34
`34, 43
`35, 36, 37
`32
`34, 35, 36
`31, 32, 34
`31, 35
`
`America Invents Act: Hearings on H.R. 1249 Before the Subcomm. On
`Intellectual Property, Competition and the Internet of the
`H. Comm. on the Judiciary, 112th Cong. 56-58 (2011)
`
`H.R. Rep. No. 112-98, pt. 1 (2011)
`
`Patent Quality Improvement Act of 2013, S. 866, 113th Cong. § 2(2)
`(2013)
`
`27
`
`29, 39
`
`35
`
`–iv–
`
`

`

`EXHIBIT LIST
`
`EXHIBITS FILED BY APPLE, INC. (SELECTED)
`
`Exhibit 1301 United States Patent No. 5,966,440
`
`Exhibit 1302 United States Patent No. 5,966,440 File History
`
`Exhibit 1303 Application No. 90/007,407 (’440 Patent Reexamination)
`
`Exhibit 1305 United States Patent No. 5,191,573 File History
`
`Exhibit 1338 United States Patent No. 5,675,734 File History
`
`Exhibit 1308 Deposition Transcript of Scott Sander, dated Dec. 18–19,
`2012 SightSound Techs., LLC v. Apple Inc., No. 11-1292
`(W.D. Pa.)
`
`EXHIBITS FILED BY SIGHTSOUND TECHNOLOGIES, LLC
`
`Exhibit 2301
`
`Final Order and Judgment on Consent, Sightsound.com, Inc.
`v. N2K, Inc., No. 98-0118 (W.D. Pa. Feb. 20, 2004)
`
`Exhibit 2302
`
`Excerpts from the daily edition of the Congressional Record,
`Volume 157 (2011)
`
`Exhibit 2303
`
`Excerpt from H.R. Rep. No. 112-98, pt. 1 (2011)
`
`Exhibit 2304
`
`Excerpt from America Invents Act: Hearings on H.R. 1249
`Before the Subcomm. On Intellectual Property, Competition
`and the Internet of the H. Comm. on the Judiciary, 112th
`Cong. (2011)
`
`Exhibit 2305
`
`Patent Quality Improvement Act of 2013, S. 866, 113th
`Cong. (2013)
`
`–v–
`
`

`

`I.
`
`STATEMENT OF PRECISE RELIEF REQUESTED
`
`Pursuant to 37 C.F.R. § 42.207(a), Patent Owner, SightSound Technologies,
`
`LLC, submits this Preliminary Response to Petitioner’s petition for Covered
`
`Business Method (CBM) patent review. Patent Owner respectfully requests that
`
`the Patent Trial and Appeal Board (“PTAB”) deny Petitioner’s petition for CBM
`
`review of claims 1, 64, and 95 of U.S. Patent No. 5,966,440 (“the ’440 Patent”)
`
`under § 18 of the America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011)
`
`(“AIA”) because the ’440 Patent is not a covered business method patent, but
`
`rather one directed to a technological invention and unrelated to any financial
`
`product or service.1
`
`II.
`
`PRELIMINARY STATEMENT
`
`A.
`
`The Invention of the ’440 Patent
`
`In the mid 1980s, Arthur Hair developed an innovative way to provide music
`
`and movies to consumers, allowing them to access digital audio and digital video
`
`files over telecommunications lines, such as the Internet, in a new format for
`
`personal consumption. Today, this technology is ubiquitous. At the time,
`
`however, the concept of digital distribution of media over the Internet was truly
`
`new. Indeed, audio cassettes and phonograph records were still the most common
`
`1 In the event that the PTAB were to initiate a Covered Business Method
`Proceeding, Patentee specifically reserves the right to respond to all the issues
`raised by the Petitioner.
`
`– 1 –
`
`

`

`ways to obtain and store music at the time of Mr. Hair’s invention.
`
`His invention was not a pen-and-paper financial product or a mere service to
`
`be implemented on a computer. The “service” of which he conceived was a
`
`technological innovation, one dependent on and supported by the specific hardware
`
`recited in the claimed method — in particular, the “second memory” recited in the
`
`claims and described in the patent. Typically, automated media distribution
`
`systems in the 1988 timeframe required a retail vending machine connected to a
`
`distribution center. See, e.g., U.S. Patent No. 3,718,906 (“Lightner”). To use such
`
`systems, a consumer needed to travel to the machine’s location in order to select
`
`songs for purchase, and he or she could only retrieve those songs on traditional
`
`removable “cartridges.” In contrast, Mr. Hair’s invention permitted digital audio
`
`and video signals to be transmitted to a “second memory” in the user’s possession
`
`to allow for random access and non-volatile storage. By employing this “second
`
`memory,” a user could save the transmitted signal at home and play the selection
`
`back at his or her leisure.
`
`In 1988, the idea of storing a transmitted digital signal in non-volatile
`
`memory for future selection and playback represented a novel approach. At that
`
`time, distribution models for digital audio and video were limited in part by signal
`
`compression rates and memory storage capacity. It was not obvious how to
`
`download and store digital audio and video signals in memory, much less was it
`
`– 2 –
`
`

`

`commercially inevitable that the industry would. Mr. Hair’s technical solution to
`
`audio and video transmission and storage signaled the shift in this conventional
`
`thinking. Conventional storage media such as cartridges, digital audio tape, and
`
`CDs simply did not offer the same control and flexibility of Mr. Hair’s “memory”
`
`storage. Moreover, in order to rearrange the order of songs in a given session, a
`
`user was forced to resort to cumbersome hardware such as wall-mounted
`
`jukeboxes (e.g., U.S. Patent No. 3,412,496 (“Hendricks”)) and multi-disc CD
`
`changers (e.g., U.S. Patent No. 4,839,764 (“Ikedo”)). Such technologies did not
`
`permit one to select, download, store, and rearrange individual signals making up a
`
`digital audio or video recording.
`
`His invention also addressed some problems present in conventional
`
`methods of selling and distributing media. For example, Mr. Hair described how
`
`his invention would reduce the transactional costs of transferring and handling
`
`retail hardware units. See ’440 Patent at 1:45–54. These efficiencies flowed from
`
`the technological advantages of the invention, including the “second memory,”
`
`rather than from any improvements in any financial service model.
`
`In 1988, Mr. Hair applied for patent protection of his invention. The U.S.
`
`Patent and Trademark Office (“USPTO”) ultimately awarded Mr. Hair three
`
`patents relating to the digital distribution of audio and video signals: U.S. Patent
`
`No. 5,191,573 (“the ’573 Patent”), issued March 2, 1993; U.S. Patent No.
`
`– 3 –
`
`

`

`5,675,734 (“the ’734 Patent”), issued October 7, 1997; and the ’440 Patent, issued
`
`October 12, 1999. All three patents (collectively, the “Hair patents”) are directed
`
`to methods and systems for providing digital audio and/or video signals from a
`
`host computer to a remotely located personal computer via telecommunications
`
`lines.
`
`B.
`
`SightSound and the Advent of Digital Media Distribution
`
`In 1995, Mr. Hair and Scott Sander founded Parsec Sight/Sound, Inc. and
`
`Digital Sight/Sound, Inc., SightSound’s predecessors in interest, to commercialize
`
`Mr. Hair’s invention. Mr. Hair subsequently assigned all of his ownership rights in
`
`the ’573 Patent, and every subsequent patent to issue from that same disclosure
`
`(including the ’440 Patent), to SightSound. Since its inception, SightSound sought
`
`to commercialize the technology described and claimed in the Hair patents. In the
`
`1990s, SightSound worked extensively with copyright holders (including
`
`musicians, songwriters and record labels) to license digital audio content for sale
`
`over the Internet. In so doing, SightSound expended significant effort to educate
`
`the record labels that the next wave in music distribution would be via a digital
`
`online format. During the course of its efforts, SightSound achieved several
`
`notable firsts with respect to the provision of digital content. In 1995, it became
`
`the first company to offer digital downloads of music through electronic sale over
`
`– 4 –
`
`

`

`the Internet. The offering was The Gathering Field’s eponymous album “The
`
`Gathering Field.”2 Individual songs from the album were priced at $1.00.3
`
`In 1999, SightSound became the first company to offer the sale of a movie
`
`over the Internet (Darren Aronofsky’s movie “Pi”). And, in May of 2001,
`
`SightSound became the first company to provide and sell a movie (the “Quantum
`
`Project”) and furnish it electronically to a handheld pocket personal computer.
`
`While achieving these breakthroughs, SightSound continued to approach major
`
`record labels and motion picture companies, eventually entering into a limited
`
`agreement with Miramax Films as well as a number of independent music, movie,
`
`and television producers. SightSound also sought to license the Hair patents to
`
`technology and media companies with sufficient infrastructure and financing to
`
`commercialize the patents’ potential.
`
`2 See http://www.sightsound.com. Shortly after offering the Gathering Field’s
`album for sale, SightSound temporarily ceased selling music on its website due to
`the industry’s reluctance to embrace or support the digital distribution of music as
`it was viewed as financially unattractive to the record labels. Unfortunately,
`SightSound’s continued efforts encountered significant resistance from copyright
`holders, record labels feared SightSound’s system and method, which allowed for
`the sale of individual songs and albums, rather than only complete albums (as was
`then done on physical media) would be profitable. Unable to get major record
`labels to license content to SightSound, SightSound also tried to obtain content
`from independent labels or directly from artists to demonstrate to the industry the
`capabilities of the technology covered by the Hair patents.
`3 See id.
`
`– 5 –
`
`

`

`Ultimately, however, SightSound’s licensing efforts proved unsuccessful.
`
`There were a variety of reasons for this lack of traction in the marketplace. Many
`
`companies were slow to understand the market potential for online digital music
`
`and video sales. Also, many copyright holders and music labels continued to be
`
`resistant to providing content and proved especially reluctant to allow the sale of
`
`individuals songs (as opposed to whole albums). Because of its resulting revenue
`
`shortfalls, SightSound ceased commercial operations in or around 2002.
`
`C.
`
`SightSound Technologies’ Acquisition of the Patents and
`the Initiation of Litigation
`
`Through a series of corporate transactions, the Hair patents are currently
`
`held by SightSound Technologies, LLC. Specifically, on September 22, 1998,
`
`Parsec Sight/Sound, Inc. and Digital Sight/Sound, Inc. executed an Agreement and
`
`Plan of Merger whereby they merged into a surviving corporation named
`
`SightSound.com, Inc. (incorporated in Pennsylvania), which in 2000 was further
`
`merged into a Delaware corporation subsequently renamed SightSound
`
`Technologies, Inc. In 2005, DMT Licensing, LLC (“DMT”), an entity wholly,
`
`indirectly owned by the General Electric Company, purchased the SightSound
`
`Technologies, Inc. patent portfolio. In 2011, through a series of transactions,
`
`SightSound Technologies, Inc. and DMT created SightSound Technologies LLC,
`
`– 6 –
`
`

`

`and DMT subsequently assigned the Hair patents to the newly formed entity,
`
`SightSound Technologies, LLC.4
`
`On January 16, 1998, SightSound initiated litigation against N2K, Inc.5 in
`
`the Western District of Pennsylvania, Case No. 2:98-cv-0118 (the “N2K
`
`Litigation”) alleging infringement of the Hair patents. Six years later, in February
`
`2004, after SightSound obtained a favorable claim construction ruling6 and a
`
`decision denying N2K’s motions for summary judgment seeking to invalidate the
`
`patents on the grounds of anticipation, obviousness and enablement,7 SightSound
`
`resolved the litigation and obtained a consent judgment acknowledging the validity
`
`4 Specifically, on November 10, 2005, SightSound Technologies, Inc. entered into
`an Asset Purchase Agreement with DMT. Under this agreement, DMT purchased
`the SightSound Technologies, Inc. patent portfolio, including the rights to the
`patents-in-suit. DMT and SightSound Technologies, Inc. also executed a services
`agreement on November 10, 2005, entitled Master Services Agreement, whereby
`SightSound Technologies, Inc. would perform certain consulting services for
`DMT. On or around January 5, 2011, SightSound Technologies, Inc. formed
`SightSound Technologies Holdings, LLC, a Delaware limited liability company.
`SightSound Technologies, Inc. subsequently merged into SightSound Technologies
`Holdings, LLC. On August 24, 2011, DMT and SightSound Technologies
`Holdings, LLC jointly formed SightSound Technologies, LLC and executed a
`Limited Liability Company Agreement to serve as the Operating Agreement of
`SightSound Technologies, LLC. On the same date, DMT and SightSound
`Technologies Holdings, LLC entered into a New Services Agreement which
`replaced the Master Services Agreement executed on November 10, 2005. On
`August 24, 2011, DMT assigned all rights, title and interest of the Hair patents to
`SightSound Technologies, LLC.
`5 CDNow, Inc. and CDNow Online Inc. were added as defendants in March 2000.
`6 SightSound.com, Inc. v. N2K, Inc., 185 F. Supp. 2d 445 (W.D. Pa. 2002).
`7 SightSound.com, Inc. v. N2K, Inc., 391 F. Supp. 2d 321 (W.D. Pa. 2003).
`– 7 –
`
`

`

`and enforceability of the patents. Ex. 2301. On October 8, 2004, SightSound
`
`asserted the Hair patents against Napster LLC and its successor, Roxio, Inc. in the
`
`Western District of Pennsylvania, Case No. 2:2004-cv-01549 (the “Napster
`
`Litigation”). After SightSound moved for a preliminary injunction, on January 31,
`
`2005, Napster filed a Request for Ex Parte Reexamination under 37 C.F.R.
`
`§ 1.510, and on February 28, 2005, the District Court stayed the Napster Litigation
`
`pending completion of the reexamination. The reexamination proceedings lasted
`
`over five-and-a-half years and did not conclude until December 2010. The Roxio
`
`litigation concluded on May 7, 2012, when District Court granted the parties’
`
`stipulation of dismissal with prejudice after a settlement had been reached.
`
`On October 10, 2011, SightSound asserted the three Hair patents, including
`
`the ’440 Patent, against Apple, Inc. in the Western District of Pennsylvania, Case
`
`No. 2:11-cv-01292-DWA (the “Apple Litigation”). Apple proceeded to defend the
`
`litigation for over nineteen months, with the parties exchanging hundreds of
`
`thousands of pages of documents, conducting depositions, completing claim
`
`construction, and exchanging expert reports. In September 2012, the Court denied
`
`Apple’s motion for summary judgment on grounds of laches and estoppel. On
`
`February 13, 2013, the Court issued its decision on claim construction. On
`
`April 11, 2013, the Court issued a ruling striking certain late-disclosed prior art,
`
`including art that Apple seeks to assert in these proceedings. On May 6, 2013,
`
`– 8 –
`
`

`

`Apple filed four petitions for CBM review, including the one at issue in this paper,
`
`and simultaneously moved to stay the litigation in the District Court. In seeking to
`
`stay the litigation, Apple claimed it had been working on the CBM review petitions
`
`since the Court’s February 2013 decision on claim construction and the April 2013
`
`ruling striking certain of its asserted prior art. On June 6, 2013, the District Court
`
`stayed the Apple Litigation pending the PTAB’s decision regarding Apple’s
`
`petition for CBM review.
`
`*
`
`*
`
`*
`
`The ’440 Patent is not a “covered business method patent” because the
`
`claimed invention is not a “financial product or service.” Instead, the patent
`
`clearly describes and claims a “technological invention,” as demonstrated by the
`
`intrinsic record before the PTO, as summarized below. Apple’s petition for CBM
`
`review — made after nineteen months of litigation and almost eight months after
`
`CBM review first became available — is simply a delay tactic and attempt by
`
`Apple to circumvent unfavorable decisions rendered by the District Court.
`
`III. THE CLAIMS
`
`Petitioner asks that the PTAB initiate a CBM proceeding with respect to
`
`claims 1, 64, and 95 of the ’440 Patent. These claims of the ’440 Patent are
`
`directed to the use of a second memory for digital and audio media and a method
`
`– 9 –
`
`

`

`for the accompanying sales. The basic steps to accomplish this comprise:
`
`(1) forming a telecommunications connection between two parties; (2) selling to
`
`the second party a desired digital video or audio signal stored in the first party’s
`
`memory through this connection; (3) subsequently transferring the desired digital
`
`media signal from the first party’s memory to the second party’s memory through
`
`the connection; and (4) playing the signal. A graphic illustration of a system to
`
`implement this method is shown in Figure 1 of the ’440 Patent.
`
`As depicted in Figure 1, the first party system, i.e., the copyright holder’s system,
`
`includes Control Panel 20A, Control Integrated Circuit (I.C.) 20B, Sales Random
`
`Access Memory (R.A.M.) 20C, and Hard Disk 10.8 The Control Integrated Circuit
`
`(item 20B) controls and executes responsive commands of a user, e.g., second
`
`party, and regulates the electronic transfer of digital audio and video throughout
`
`8 Items 20A, 20B, and 20C constitute the control unit of the first party, copyright
`holder. Col. 3:65–4:1.
`
`– 10 –
`
`

`

`the system. (Col. 4:45–52.) It may also serve to prevent unauthorized
`
`reproduction of copyrighted material. (Id.) The Control Panel (item 20A) permits
`
`user programming of such electronic transfer and authorization features regulated
`
`through the Control Integrated Circuit. (Col. 4:42–44.) The Sales Random Access
`
`Memory Chip (item 20C) represents a temporary store for user purchased digital
`
`music that will be subsequently transferred via the telecommunications line (item
`
`30). (Col. 4:53–56.) These subsequent electronic transfers eventually reach the
`
`second party’s Incoming Random Access Memory (R.A.M.) Chip 50C before
`
`storage in its Hard Disk 60. (Col. 4:57–60.) Payment of the desired digital media
`
`is also handled through the telecommunications connection (item 30); and the
`
`mechanism for charging a second party’s account and/or receiving their credit card
`
`number — thereby permitting the transfer of the desired digital media — is
`
`achieved through the first party’s Control Integrated Circuit 20B. (Col. 7:51–56.)
`
`IV. THE PROSECUTION HISTORY
`
`The ’440 Patent’s file history is extensive and includes a third-party
`
`requested ex parte review. The original prosecution distinguished several prior art
`
`technologies, including: Lightner, as it lacked at least a “second memory” to which
`
`the digital signal is transmitted; Hughes, as it lacked a “receiver” being “in
`
`possession” of the second party; and Freeny, as it did not play audio or video
`
`signals. The original prosecution was followed by a third-party initiated ex parte
`
`– 11 –
`
`

`

`reexamination. Three additional amendments were made to claim 1.9
`
`Reexamination also added claims 64 and 95 that are challenged by the Petitioner,
`
`and which also recite additional technical attributes of the second memory recited
`
`in claim 1. In light of the extensive prosecution about the technical features laid
`
`out below, Petitioner’s request must be denied.
`
`The Ex Parte Reexamination of the ’440 Patent was initiated on January 31,
`
`2005 and a Reexamination Certificate issued on July 27, 2010. U.S. Patent No.
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`5,966,440 C1, at [45]. Over 80 U.S. patents, 3 foreign patents and approximately
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`750 other publications were made of record. The original prosecution was the
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`product of three continuations over an 11-year period, during which 18 references
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`were made of record.
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`A detailed description of the prosecution history is set forth below.
`
`A.
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`Prosecution History of the ’440 Patent Lineage
`
`The ’440 Patent issued from U.S. Pat. Appln. No. 08/471,964 (“the ’964
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`Application”), which was filed as a continuation of U.S. Pat. Appln. No.
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`08/023,398 (“the ’398 Application”), which was filed as a continuation of U.S. Pat.
`
`Appln. No. 07/586,391 (“the ’391 Application”), which was filed as a continuation
`
`9 Of the three amendments, two focused on the attributes of the second memory:
`“storing the desired digital video or digital audio signals in a non-volatile storage
`portion the second memory,” and “wherein, the non-volatile storage portion is not
`a tape or CD.” The earliest amendment focused on the location of the parties and
`the charging of an associated fee.
`
`– 12 –
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`

`

`of U.S. Pat. Appln. No. 07/206,497 (“the ’497 Application”), which was the
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`originally filed application. The ’391 Application issued as the ’573 Patent, which
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`is the subject of copending petitions in CBM2013-00019 and CBM2013-00020.
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`The ’497 Application was originally filed on June 13, 1998, by Arthur Hair
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`as a pro se applicant. In the period after the initial filing of the ’497 Application,
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`Mr. Hair retained Ansel M. Schwartz as patent counsel. The ’497 Application was
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`examined by Examiner Hoa T. Nguyen (“Examiner Nguyen”).
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`On December 19, 1988, Patentee filed a Preliminary Amendment cancelling
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`original claims 1–10 in the ’497 Application and replacing them with new claims
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`11–13. Ex. 1305 at 00024. Independent claim 11 was presented as follows:
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`11. A method for transmitting a desired digital audio
`music signal stored on a first memory to a second memory
`comprising the steps of:
`
`transferring money to a party controlling use of the first
`memory from a party controlling use of the second memory;
`
`connecting electronically the first memory with the second
`memory such that
`the desired digital
`signal can pass
`therebetween;
`
`transmitting the digital signal from the first memory to the
`second memory; and
`
`storing the digital signal in the second memory.
`
`– 13 –
`
`

`

`This claim represents significant aspects of the claims petitioned by Apple,
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`but after the extensive original prosecution and reexamination described below, the
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`technical features of the petitioned claims included additional detail. For example,
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`the changes brought about by the inclusion of a patent attorney reflect a
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`clarification and emphasis of the role of the “second memory,” discussed in detail
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`below and in the CBM2013-00019, CBM2013-00020 and CBM2013-00021
`
`Preliminary Responses. The first Office Action in the ’497 Application was issued
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`on November 30, 1989, responsive to claims 11–13 added by the Preliminary
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`Amendment. Ex. 1305 at 00031. All of the claims were rejected as anticipated by
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`Lightner. Ex. 1305 at 00032–33. Patentee responded to the Office Action on
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`February 26, 1990. Ex. 1305 at 00035. In this response, claims 14–20 were added.
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`Patentee also responded that Lightner was a vending machine and that:
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`It is only after the ejection from the machine that the consumer
`has control of the “second memory.” This is an important
`distinction since applicant defines his invention as the ability
`for the “second party” to have transmitted a desired digital
`signal
`to the “second memory” that
`the second party is
`“controlling.”
`This could be, for instance, some type of
`recording machine at the home of the “party controlling the
`second memory” or even at a commercial vending machine but
`which allows the “party controlling use of the second memory”
`to supply it to the commercial vending machine and compile a
`collection of desired signal over time. Lightner teaches the
`– 14 –
`
`

`

`second memory is in the possession of the vending machine and
`provides no ability to receive a “second memory” which is
`controlled by the party providing the “second memory.”
`
`Ex. 1305 at 00040–41.
`
`The second Office Action in the ’497 Application was issued on May 14,
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`1990, in response to claims 11–20. Ex. 1305 at 00043. All of the claims were
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`rejected as anticipated by either Lightner or U.S. Patent No. 3,990,710 (“Hughes”).
`
`The Office Action stated that Lightner taught selections of type and format of
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`information to be duplicated to the second memory from the first memory and, as
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`the selections of the kind and format of information made by the second party
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`would initiate the first memory to reproduce the requested kind and format of
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`information, the second party is thus seen to control the second memory. Ex. 1305
`
`at 00045. It also stated, without explanation, that Figures 1, 6, 8, and 9 of Hughes
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`taught the invention. Ex. 1305 at 00046.
`
`Patentee responded to this Office Action on August 21, 1990.10 Ex. 1305 at
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`00062. In this response, claims 11, 12, and 15 were amended, and claim 21 was
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`added. Claims 14 and 16–20 were cancelled. Claims 11 and 15 were amended
`
`inter alia by including the recitation of a “transmitter” and a “receiver.” New
`
`claim 21 read nearly identically to claim 12, except that it depended from
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`10 The response was accompanied by a petition for extension of time. Ex. 1305 at
`00070.
`
`– 15 –
`
`

`

`independent claim 15. Patentee’s arguments focused again on technical
`
`distinctions, particularly the role of the second memory.
`
`There is no teaching or suggestion in Lightner of the “second
`memory” to which the digital signal is transmitted to be “in
`control and in possession” by the “second party”. Furthermore,
`there is no teaching or suggestion in Lightner for the “receiver”
`having the second memory being “in possession and in control
`of the second party” and “at a location determined by the
`second party” as found in applicant’s Claim 15.
`
`Ex. 1305 at 00067.
`
`With respect to Hughes, a coin-operated recording machine, Patentee argued
`
`that:
`
`There is no teaching or suggestion in Hughes of the “receiver”
`being “in possession of the second party … at a location
`determined by the second party”. Hughes actually teaches
`away from applicant’s claimed invention since the recording
`apparatus is taught
`to be in possession of the “first party
`controlling use of the first memory” not the “second party in
`possession of the second memory”.
`
`Ex. 1305 at 00068–69.
`
`On September 5, 1990, Examiner Nguyen issued an Advisory Action
`
`indicating that the amendments would not be entered. Ex. 1305 at 00072.
`
`– 16 –
`
`

`

`The amendment was resubmitted with a File Wrapper Continuation and
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`subsequently entered. Ex. 1305 at 00076, 00095. The File Wrapper Continuation
`
`was assigned Application No. 07/586,391 (“the ’391 Application”). The ’391
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`Application was filed as a continuation of the parent ’497 Application and claimed
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`priority to the June 13, 1988, filing date. Due to an unintentional error, Patentee
`
`was required to revive the ’497 Application as unintentionally abandoned for the
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`express purpose of establishing copendency with the ’391 Application so that a
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`proper claim for priority could be made. See Ex. 1305 at 00103–119, 00121.11 No
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`new oath was required by the PTO when the ’391 Application was filed.
`
`The prosecution of the ’391 Application focused on two pieces of prior art:
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`Hughes and Lightner. The initial art rejections over Lightner and Hughes under
`
`§ 102(b) were subsequently joined by a § 103 rejection over Hughes. Office
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`Action dated September 9, 1991 (Ex. 1305 at 00122). The Examiner argued that,
`
`while Hughes did not disclose the methods and steps, it did disclose a device that
`
`could do the steps. The Patentee followed up with both an interview and a
`
`response arguing that the cited art lacked both the location of the receiver and the
`
`step of transferring money. Summary of Interview dated October 24, 1991 (Ex.
`
`11 Request for Corrected Filing Receipt dated Oct. 30, 1990; Office Action dated
`October 31, 1990; Petition dated December 14, 1990; Decision on Petition dated
`March 11, 1991; Petition under 37 CFR § 1.137(b) dated April 11, 1991; Decision
`Granting Petition dated June 20, 1991.
`– 17 –
`
`

`

`1305 at 00125); Amendment dated December 9, 1991 (Ex. 1305 at 00127).
`
`Neither argument succeeded. Office Action dated February 24, 1992 at 7–8 (Ex.
`
`1305 at 00143). In an Amendment dated June 23, 1992, Patentee reiterated these
`
`arguments, which were ultimately successful and the claims issued in the ’573
`
`patent on March 2, 1993. Ex. 1305 at 00151; ’573 Patent, at [45]. In the final
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`Office Action dated September 21, 1992 (Ex. 1305 at 00193, “Final Office
`
`Action”), the Examiner noted that with respect to the issued claims that “[t]he
`
`prior art of record considered as a whole fails to teach or suggest 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 as recited in claims 11 and 15.” Final
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`Office Action at 2 (Ex. 1305 at 00194) (emphasis added).
`
`The ’398 Application, the parent of the application that issued as the ‘440
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`patent, was filed on February 26, 1993 as a continuation of the ’391 Application
`
`with a new Power of Attorney dated February 22, 1993. Ex. 1338 at 00004,
`
`00041. The “New Application Transmittal” papers included a claim for priority to
`
`the ’391 Application, which in turn claimed priority to the ’497 Application.
`
`The first Office Action in the ’398 Application was issued by the same
`
`examiner that examined the ’573 Patent claims, Examiner Nguyen, on July 1,
`
`1993, responsive to the originally-filed claims 1–31. Ex. 1338 at 00048. The
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`specification was objected to and all of claims 1–31 were rejected under 35 U.S.C.
`
`– 18 –
`
`

`