Conference Call
`
`November 8, 2013
`
`Washington, D.C.
`
` UNITED STATES PATENT AND TRADEMARK OFFICE
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` ________________
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`Page 1
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` _____________
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` APPLE, INC.,
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` Petitioner,
`
` v.
`
` PATENT OF SIGHTSOUND TECHNOLOGIES, LLC,
`
` Patent Owner,
`
` __________________
`
` CASE CBM2013-00020 and 23
`
` Friday, November 8, 2013
`
` 1:35 p.m. to 2:00 p.m.
`
`BEFORE THE HONORABLE JUSTIN T. ARBES, THE HONORABLE
`
`MICHAEL P. TIERNEY and THE HONORABLE GEORGIANNA W.
`
`BRADEN
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`Alderson Reporting Company
`1-800-For-Depo
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` SIGHTSOUND TECHNOLOGIES, LLC
` EXHIBIT 2306
` CBM2013-00023 (APPLE v. SIGHTSOUND)
` PAGE 000001
`
`
`
`November 8, 2013
`
`Washington, D.C.
`
` UNITED STATES PATENT AND TRADEMARK OFFICE
`
` ________________
`
` BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`Page 1
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` _____________
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` APPLE, INC.,
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` Petitioner,
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` v.
`
` PATENT OF SIGHTSOUND TECHNOLOGIES, LLC,
`
` Patent Owner,
`
` __________________
`
` CASE CBM2013-00020 and 23
`
` Friday, November 8, 2013
`
` 1:35 p.m. to 2:00 p.m.
`
`BEFORE THE HONORABLE JUSTIN T. ARBES, THE HONORABLE
`
`MICHAEL P. TIERNEY and THE HONORABLE GEORGIANNA W.
`
`BRADEN
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`Alderson Reporting Company
`1-800-For-Depo
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` SIGHTSOUND TECHNOLOGIES, LLC
` EXHIBIT 2306
` CBM2013-00023 (APPLE v. SIGHTSOUND)
` PAGE 000001
`
`
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`Conference Call
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`November 8, 2013
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`Washington, D.C.
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`Page 2
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` A P P E A R A N C E S
`
` (As introduced on teleconference)
`
`On behalf of the Patent Owner/SightSound
`Technologies, LLC:
`
` DAVID MARSH, ESQUIRE
` KRISTAN L. LANSBERY, ESQUIRE
` Arnold & Porter LLP
` 555 12th Street, N.W.
` Washington, DC 20004
` 202.942.5068
`
`On behalf of the Petitioner, Apple, Inc.:
`
` J. STEVEN BAUGHMAN, ESQUIRE
` CHING-LEE FUKUDA, ESQUIRE
` MEGAN F. RAYMOND, ESQUIRE
` Ropes & Gray
` Three Embarcadero Center
` San Francisco, California 94111-4006
` 415.315.6300
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`November 8, 2013
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`Washington, D.C.
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`Page 3
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` P R O C E E D I N G S
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` * * *
`
` JUDGE ARBES: Good afternoon. This is
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` Judge Arbes with the Patent Trial and Appeal
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` Board. I have with me Judge Tierney, and
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` Judge Braden is also on the line. This is a
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` conference call in Cases CBM2013-20 and 23.
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` Do we have counsel for the Petitioner on
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` the line?
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` MR. BAUGHMAN: Yes, Your Honor.
`
` Steve Baughman and Ching-Lee Fukuda from
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` Ropes & Gray.
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` JUDGE ARBES: And Counsel for the Patent
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` Office?
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` MR. MARSH: Yes, Your Honor. David Marsh
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` and Kristan Lansbery, and we also have, Your
`
` Honor, the court reporter as we pointed out to
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` your paralegal.
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` JUDGE ARBES: Sure. Thank you.
`
` Can the court reporter hear us?
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` THE COURT REPORTER: I can. And may I ask
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` for a request, please, is it okay to interrupt
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` and ask who the speaker is if I don't get an
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` identification midway or into it?
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` JUDGE ARBES: Yes, and we'll try to state
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` that as well who the speaker is before they
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` begin speaking.
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` This is Judge Arbes, by the way.
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` THE COURT REPORTER: Thank you,
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` Your Honor. I appreciate it.
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` JUDGE ARBES: The conference call for
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` today was requested by the Patent Owner to
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` discuss some follow-up issues from the initial
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` conference call. The Patent Owner is to go
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` first and explain what the status of the
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` parties' discussions are and what you are
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` requesting today.
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` MR. MARSH: Thank you, Your Honor. Would
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` it be possible just to have sort of a roll call
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` to see who is on the phone before I start
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` because when I dialed, there were a number
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` already on the call.
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` JUDGE ARBES: Sure. I believe for the
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` Petitioner, it was Mr. Baughman and Ms. Fukuda?
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` MR. BAUGHMAN: Yes, your Honor. We may
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` have one or more of our attorneys listening but
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`Page 5
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` not speaking. I believe my colleague,
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` Megan Raymond, is on the line.
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` MS. RAYMOND: That's correct.
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` MR. MARSH: Thank you, Your Honor.
`
` Your Honor, we have a few issues
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` outstanding and a third issue we wish to raise
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` with you which we raised with Petitioner's
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` counsel.
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` The first issue is whether Tracy Lane and
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` Sean Callagy can observe the proceedings. The
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` parties are disagreeing on whether they are
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` permitted to observe the proceedings under the
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` protective order.
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` Your Honors, because we do not wish to put
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` you in a position of trying to elucidate which
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` party is correct on that front, seeing it's the
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` Judge of the District Court, we've agreed to
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` table that discussion to discuss in between the
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` litigation counsel, one of them is on the call
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` as counsel to Apple, and get a resolution on
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` that point.
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` This raises two issues for us. The first
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` issue relates to a request that we're going to
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` make during this call for an extension of time
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` as the -- because of the discussions regarding
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` both Tracy Lane and Sean Callagy have been
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` unsuccessful and they've also been -- the
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` discussions of discovery have been unsuccessful
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` in getting a meeting of the minds and the
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` combined delay of both means that we want to
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` request an extension.
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` We've also, during the process of the
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` discussions, provided to counsel for the
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` Petitioner that we will not be making any
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` amendments to the claims, which permits more
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` flexibility, in our view, in the schedule to
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` have an extension of date one.
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` JUDGE ARBES: Okay. Well, let's defer
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` discussing the schedule until the end and try
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` to resolve the two first issues first.
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` The issue of the two additional attorneys
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` observing, you said that you are going to
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` continue discussions with the Petitioner's
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` counsel, then?
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` MR. MARSH: Yes. Your Honor, we
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` believe -- we believe that they're entitled to
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` observe. They disagree. We don't believe it's
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` useful for them to use the Court's time in that
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` discussion. We may obtain resolution or we may
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` just continue on without them observing. But
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` the role we wanted to have them -- that the
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` role that we wanted to have them play was to
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` make sure that there were not documents that
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` are out there in the litigation that we felt
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` under our duty to disclose that we needed to
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` give to you. Unfortunately, the record is very
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` extensive in the litigation. So on the call,
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` if part of the litigation comes up, we won't be
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` handicapped because we won't be able to answer
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` necessarily whether that paper was filed or
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` wasn't filed. But, in light of wanting to move
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` the proceedings along and to focus on the
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` merits, we decided that it would be more
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` appropriate to not request the Court to modify
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` that and discuss with litigation counsel on
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` both sides and see if it can be resolved.
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` JUDGE ARBES: Okay. That's fine.
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` Again, the Court believes that that is an
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` issue that you-all need to work out -- work out
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` amongst yourselves and, in particular, with
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` respect to issues of the protective order in
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` the District Court. Okay, that's fine.
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` MR. MARSH: Thank you, Your Honor.
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` JUDGE ARBES: The second issue that you
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` wanted to discuss today was a question about
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` additional discovery?
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` MR. MARSH: That's correct, Your Honor.
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` Your Honor, it's our position that we have
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` a good basis to bring a commercial success
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` argument based on Apple's commercial success
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` and, as your Honors know, it's the patentee's
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` part to show a nexus with the claims, and this
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` takes us back a little bit to the litigation.
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` The discovery has closed in the
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` litigation. Counsel in this proceeding for the
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` patentee does not have access to those
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` materials under the protective order. We tried
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` to draw some narrowly tailored additional
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` discovery requests with respect to some
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` materials. Those materials, ironically, I
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` believe are probably within a building but we
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` don't have access to them.
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` So because commercial success is an
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` important component potentially here of the not
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` obviousness, we, as the patentee, don't have
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` access to the nexus to the claims, so it's
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` basically what we're after here is the ability
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` to show that they practiced the claimed
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` invention and the claimed invention is the
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` reason for the commercial success, not some
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` other issue.
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` JUDGE ARBES: Okay. Can you give us some
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` examples of what specific materials you've
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` requested?
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` MR. MARSH: To the extent -- let me get
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` you the whole list of materials that we shared
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` with them on this.
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` Our request number one was, in part,
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` because we don't have access to narrow it down
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`Page 10
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` that much when we were trying to do that:
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` Specifications, engineering manuals,
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` programming manuals, theory of operations
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` documents, design and user guides or other
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` documentation sufficient to show how Apple
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` solved digital audio and video signals by the
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` iTunes Music Store at the time of the launch of
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` the iTunes Music Store. We were limited at the
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` time of the launch of the iTunes Music Store in
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` an attempt to sort of rather than having to
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` engineering changes that could have happened
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` but that was one of our attempts to narrowing
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` it down.
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` Our second grouping was very similar in
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` scope, and the last one was the surveys
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` conducted by or for Apple from 2003 to 2007
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` requesting consumers, designs purchased,
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` digital -- digital audio and video signals by
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` telecommunications including -- per the iTunes
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` Music Store. The reason for that -- for that
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` is to show that it was the commercial success
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` was the result of the invention and not for
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` other reasons.
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` JUDGE ARBES: Okay. To make sure we have
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` this correct. One is that a set of documents
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` pertaining to how the iTunes Music Store works.
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` You mentioned specifications and manuals and
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` other documents and, two, the second category
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` being consumer surveys from 2003 to 2007; is
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` that correct?
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` MR. MARSH: Yes. And the first category
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` is how customers purchased the digital audio
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` and video signals by the iTunes. Those are the
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` three categories, and I jumped over the second
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` one. I apologize, Your Honor.
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` JUDGE ARBES: Okay. Well, before we get
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` into some of these issues, are any of these
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` materials publically available? For instance,
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` materials about how customers purchase things,
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` is that the sort of information that you might
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` not need the Petitioner to obtain?
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` MR. MARSH: We don't believe that they are
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` available, your Honor. It is possible if I had
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` the ability to talk to my litigation counsel,
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` but I could be corrected on that factor, but
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` based on the diligence we've been able to do so
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` far including discussions with an expert, we
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` don't believe that, based on the feedback from
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` the expert, that we can necessarily show it
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` from the public -- public domain. That would
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` be our preference if we could.
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` JUDGE TIERNEY: This is Judge Tierney. I
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` have a question here.
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` Are you saying that you can't determine
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` how iTunes works sufficiently if you read it
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` off of the claim?
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` MR. MARSH: Discussions of our --
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` discussions of our expert today, that these
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` materials would be helpful in determining how
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` to map it against the claim.
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` JUDGE TIERNEY: What information in
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` particular is missing? You have a computer --
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` with a computer going through what I believe is
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` usually the internet and buying music over the
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` internet. Which part are we missing here in
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` the understanding of how it works?
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` MR. MARSH: We asked the -- we asked the
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` Petitioner's counsel for a stipulation to that
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` effect and they did not give that stipulation.
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` JUDGE TIERNEY: I understand, but I'm
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` asking you what, in particular, are you lacking
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` that you need additional information on that is
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` not publically available? Not to make a wish
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` list here, but what in particular is it that
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` you lack currently?
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` MS. LANSBERY: In particular, we believe
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` that there are arguments within the file
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` history about when the transfer occurred and
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` the timing with regard to payment step, and we
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` have some questions about that that we haven't
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` been able to find documentation for in the
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` publically available documents. The
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` financial -- the payment in particular,
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` Your Honor.
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` This is Kristan Lansbery for SightSound.
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` JUDGE TIERNEY: And the dispute is as to
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` whether that reads on the claim?
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` MR. MARSH: Your Honor, we believe that
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` the iTunes reads on the claim, but we have
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` to -- for commercial success, the burden is
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` to prove -- we have to prove the nexus and we
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` don't have documentation that would
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` necessarily -- we're still looking -- would
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` necessarily allow us to do that.
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` JUDGE TIERNEY: Okay. I understand the
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` requirements for nexus -- this is
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` Judge Tierney. But what I'm not -- okay. So
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` what is the feature that you believe
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` distinguishes your claim that is the novel
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` feature that sets it apart from -- and what
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` you're trying to show that that novel feature
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` is present in iTunes?
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` MR. MARSH: Your Honor, we believe there
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` are multiple features that distinguishes. So
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` far the payment is definitely one that clearly
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` distinguished us from the prior art. None of
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` the other cites has a payment step in the prior
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` art use.
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` JUDGE TIERNEY: So the one step which you
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` apparently say you need information on. What
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` other steps do you need information on?
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` MS. LANSBERY: The second party,
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` your Honor, I think is also an issue with the memory
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` component. I think it's obvious that you're
`
` saying that iTunes, the second user has memory
`
` in their home. That is -- we're trying to find
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` documentation for if there's any other
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` transfer, is there multiple places of transfer,
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` multiple memories. We're trying to tie down
`
` exactly the process because the steps laid out
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` would have to be followed in order for that
`
` nexus requirement.
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` MR. MARSH: The control of the first
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` memory and control of the second memory, does
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` the video or music data flow from the first
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` memory and the second memory, Your Honor.
`
` MS. LANSBERY: And when does that flow
`
` occur with regard to payment as well. So there
`
` is a little bit of a timing aspect that's not
`
` there from the public documents.
`
` JUDGE ARBES: Okay. So those are the two
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` -- the two things you would point to in the
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` claims that you are missing information about
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` how iTunes Music Store works?
`
` MR. MARSH: Yes, Your Honor.
`
` JUDGE ARBES: Okay. Well, let's go -- can
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` we hear -- what is the status of the parties'
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` negotiations? I presume that you have
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` discussed with the Petitioner and you've given
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` them these specific -- these specific requests.
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` What's been the resolution of those
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` discussions?
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` MR. MARSH: Your Honor, these go more
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` specific than the conversations between the
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` parties.
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` MR. BAUGHMAN: Your Honor, this is
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` Steve Baughman for the Petitioner, if I may.
`
` JUDGE ARBES: Yes. What can we hear from
`
` the Petitioner now?
`
` MR. BAUGHMAN: Thanks, your Honor, yes.
`
` So, as your Honors heard, we received
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` three broad categories about how the music
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` store and the audio and video signals are sold,
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` how customers purchase them, and essentially
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` customer preference for -- customer preference
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` information about buying digital and video
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` signals through iTunes.
`
` We don't -- we've not gotten to any level
`
` of detail, nor have we heard any kind of
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` threshold showing about why the patent owner
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` believes it's going to be able to make out the
`
` case to support discovery here.
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` There are three reasons we would suggest
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` that the request for leave to file a motion
`
` should be denied here. The first is that this
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` sort of trial within a trial requiring us to
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` disprove infringement, which is contested in
`
` the District Court, runs entirely contrary to
`
` the purposes of this proceeding.
`
` The Bloomberg case CBM2013-0005 Paper 32,
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` talks about how the AIA's provisions and
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` legislative intent reflect a strong public policy
`
` to limit discovery in administrative trial
`
` proceedings as opposed to the practice in
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` District Court. And we believe that this kind
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`Page 18
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` of inquiry requiring us to go into an
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` infringement analysis to prove the invalidity
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` of these claims is not an appropriate use of
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` this proceeding.
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` More specifically in terms of these
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` requests, the second matter, we think, the
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` motion, if it were allowed to be briefed, would
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` be futile because Patent Owner's own motions list
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` here confirms it lacks the basis to justify
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` discovery under the Board's standards. That
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` same Bloomberg case, Paper 32, at 5 clarifies
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` that the mere possibility of finding something
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` useful and mere allegations that something useful
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` will be found are insufficient to establish
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` the good cause showing you need to get
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` discovery here. And they've conceded that they
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` don't have a nexus -- they don't have a basis
`
` for suggesting there is one. And the third
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` reason is that this futility is confirmed by
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` SightSounds' own admissions and the findings of
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` a prior examiner that are in the record already
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` before the Board.
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`Page 19
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` So the named inventor here, Mr. Hair
`
` was deposed, it's Exhibit 1104 in the record
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` here. And he acknowledged that SightSound,
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` while it was trying to make a commercial
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` success ten years before the iTunes Store,
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` failed because, among other things, it couldn't
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` sign up record companies after the patent issued
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` and it might take more than a day to download
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` one song. And the examiner considering the
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` Napster re-exam of the '573 Patent, observed --
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` and that's on Pages 24 and 25 of the CBM2013-20
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` Petition and Pages 27 and 28 of the 2013-23
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` Petition --
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` the Patent Owner had made the same
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` arguments there about the iTunes Store but,
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` quote, has not provided proof that the claimed
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` features were responsible for the commercial
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` success of mentioned distribution systems. The
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` examiner pointed to the advances in recent
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` technology and not to the patentee's claimed
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` invention as the basis, and noted that the
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` inventor had attempted to implement the claimed
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`Page 20
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` invention himself but failed because the RIAA
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` and NPAA would not license their music and
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` movies.
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` So we just don't see a basis for this
`
` broad inquiry into how iTunes works, their
`
` allegations that it infringes and sort of an
`
` exploration of the reasons customers do or
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` don't prefer the iTunes Music Store. So,
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` respectfully, we would oppose the request for a
`
` motion on discovery here.
`
` THE COURT: Okay. I think we understand.
`
` Those are all arguments that you're free
`
` to make as to why a nexus does not exist.
`
` Here, what we need to determine, is whether the
`
` Patent Owner has provided or shown more than a
`
` mere possibility that what it is asking for
`
` exists and is going to be relevant to its
`
` determination. So what we would ask the Patent
`
` Owner is what evidence do you already have to
`
` show there is more than mere speculation and
`
` something useful will be uncovered here.
`
` MR. MARSH: Well, Your Honor, the evidence
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`Page 21
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` we have is that the payment is made in the
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` iTunes system. How it's made I don't believe
`
` is public, so beyond that I would have no
`
` additional information beyond that iTunes
`
` payment is paid. And all we're asking for,
`
` for instance, on the payment step is if that we
`
` can determine if the payment is made in the way
`
` it falls within the scope of the claim so we
`
` can argue commercial success, not infringement.
`
` MR. BAUGHMAN: Your Honor, Steve Baughman
`
` for the Petitioner.
`
` We would suggest that there is no
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` threshold showing here that however payment is
`
` made, it has an effect on whether the iTunes
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` Store is commercially successful or not.
`
` JUDGE ARBES: Okay. The panel will
`
` discuss -- we'll go on mute for just a minute
`
` and be back shortly.
`
` MR. BAUGHMAN: Thank you, Your Honor.
`
` (Proceedings in brief recess, after which,
`
` the following proceedings were had:)
`
` JUDGE ARBES: Okay. This is
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`Page 22
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` Judge Arbes. The panel is back and has
`
` conferred.
`
` Given the level of arguments presented
`
` today, we're going to permit briefing to
`
` attempt to focus the issues so that the Board
`
` can make an informed decision on the matter.
`
` We're going to do so on an expedited basis.
`
` The Patent Owner will be permitted one week to
`
` file a motion for additional discovery. It
`
` will be limited to ten pages. The Petitioner
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` will have one week to file an opposition with
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` the same page limit with no reply being
`
` authorized at this time.
`
` We would encourage the Patent Owner to be
`
` as specific and focused as possible on what is
`
` being requested. Focused discovery requests
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` are more likely to be granted than broad
`
` discovery requests. Some of the things that
`
` had been mentioned today, we believe, fall
`
` under the category of the latter. So we
`
` encourage the Patent Owner to be as specific as
`
` possible and the particular materials be
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` requested and why you believe they would be
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` useful in this proceeding.
`
` Does either party have any questions about
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`Page 23
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` that?
`
` MR. MARSH: Thank you, Your Honor. We
`
` understand your desires.
`
` JUDGE ARBES: Okay.
`
` MR. BAUGHMAN: Yes, Your Honor.
`
` JUDGE ARBES: Okay. And we will put out
`
` an order after the call pertaining to the
`
` briefing schedule as well.
`
` Are there other issues or other matters
`
` that the parties would like to discuss?
`
` MR. MARSH: Yes, Your Honor. We would
`
` like to discuss a possible extension of the
`
` times for the Patent Owners initial paper.
`
` JUDGE ARBES: Sure. What exactly are you
`
` requesting?
`
` MR. MARSH: Your Honor, we are
`
` requesting -- and this is in light of the --
`
` which was the scheduling after agreeing with --
`
` the Petitioner's counsel not to make any
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`Page 24
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` claim amendments. We're requesting an
`
` additional month to January the 9th, to file
`
` our paper, which would just confirm the
`
` schedule at our end but not lose the last date,
`
` the time called for.
`
` JUDGE ARBES: Okay. So the oral hearing
`
` would still be scheduled for May 6th then with
`
` regard to extend the initial date by a month?
`
` MR. MARSH: That's correct, Your Honor.
`
` JUDGE ARBES: Okay. What are the exact
`
` dates that you would propose you need, 1
`
` through 7?
`
` MR. MARSH: Sure, Your Honor. We haven't
`
` discussed beyond the initial date with opposing
`
` counsel and there's no agreement -- but it
`
` will be 1/9/2013 and the other date was made
`
` back up until the oral hearing.
`
` MS. LANSBERY: Your Honor, petitioner --
`
` that would be Petitioner's reply to Patent
`
` Owner's response to be March 7th -- I'm sorry,
`
` January, February -- April, the third month of
`
` 7th, April 7th --
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`Page 25
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` MR. MARSH: March.
`
` MS. LANSBERY: March, sorry.
`
` And, as we said, there would be no
`
` amendments so that the request for oral hearing
`
` could occur as scheduled on March 28th.
`
` MR. MARSH: The motion to exclude
`
` evidence, so that would be April 28th and
`
` then --
`
` MS. LANSBERY: January, February,
`
` March --
`
` JUDGE ARBES: Well, the parties can
`
` continue to discuss this.
`
` Given our briefing schedule that we set
`
` today, we believe a limited extension on some
`
` of the initial due dates is warranted. We
`
` would like to have the parties discuss that
`
` further and propose, counter -- and propose in
`
` their motion a revised schedule. Hopefully,
`
` that will be a joint request for the revised
`
` schedule, recognizing that the oral hearing
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` date will not change. So you-all can get
`
` together and discuss earlier -- or discuss
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`Page 26
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` changes to the date of some of the early due
`
` dates and propose that with your motion. Is
`
` that acceptable?
`
` MR. MARSH: Yes, Your Honor.
`
` MR. BAUGHMAN: Your Honor, just to
`
` clarify. Steve Baughman for the Petitioner.
`
` So all the dates are potentially movable
`
` except for date seven; is that correct,
`
` Your Honor?
`
` THE COURT: Well, you will get together
`
` and hopefully agree on some revised dates, that
`
` can include the later dates, recognizing that
`
` the date of oral hearing will not change, and
`
` propose that -- the Patent Owner can propose
`
` that in their motion, and if the Petitioner
`
` opposes it, then they can say what schedule
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` that you-all will propose in your opposition.
`
` MR. BAUGHMAN: Understood, Your Honor.
`
` Thank you.
`
` JUDGE ARBES: Okay.
`
` MR. BAUGHMAN: Your Honor, if I can
`
` clarify one other thing, Your Honor. I believe
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`Page 27
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` we have an order outstanding on the issue of
`
` the protective order question. It sounded as
`
` though Patent Owners is not pressing that
`
` motion, so are we excused from filing a paper
`
` today, Your Honor?
`
` JUDGE ARBES: Yes, you are.
`
` MR. BAUGHMAN: Thank you.
`
` MR. MARSH: Thank you, Your Honor.
`
` JUDGE ARBES: Any other issues to discuss
`
` today?
`
` MR. MARSH: No, not from our concern of
`
` the Patentee, Your Honor.
`
` MR. BAUGHMAN: No thank you, Your Honor.
`
` JUDGE ARBES: Okay. The Patent Owner
`
` should file a copy of the transcript of today's
`
` call as an exhibit and the other proceedings as
`
` well.
`
` MR. MARSH: We will do that, Your Honor.
`
` Thank you.
`
` JUDGE ARBES: Okay. Thank you for your
`
` time.
`
` MR. MARSH: Thank you.
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` JUDGE ARBES: All right. We're adjourned.
`
` MR. BAUGHMAN: Thank you, Your Honor.
`
` (THEREUPON, the proceedings were concluded
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`Page 28
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` at 2:00 p.m.)
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