Trials@uspto.gov
`Tel: 571-272-7822
`
`Paper 23
`Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`Patent Owner.
`
`Case CBM2015-00015
`Patent 8,118,221 B2
`
`
`
`
`
`
`
`
`
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`BISK, Administrative Patent Judge.
`
`DECISION
`Institution of Covered Business Method Patent Review
`and Denying Motion for Joinder
`37 C.F.R. § 42.208
`37 C.F.R. § 42.222(b)
`
`
`
`
`
`Tel: 571-272-7822
`
`Paper 23
`Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`Patent Owner.
`
`Case CBM2015-00015
`Patent 8,118,221 B2
`
`
`
`
`
`
`
`
`
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`BISK, Administrative Patent Judge.
`
`DECISION
`Institution of Covered Business Method Patent Review
`and Denying Motion for Joinder
`37 C.F.R. § 42.208
`37 C.F.R. § 42.222(b)
`
`
`
`
`
`
`CBM2015-00015
`Patent 8,118,221 B2
`
`INTRODUCTION
`
`A. Background
`Apple Inc. (“Petitioner”), filed a Corrected Petition (Paper 9, “Pet.”)
`requesting covered business method patent review of claims 1, 2, 11, and 32
`(the “challenged claims”) of U.S. Patent No. 8,118,221 B2 (Ex. 1201, “the
`’221 patent”) pursuant to § 18 of the Leahy-Smith America Invents Act
`(“AIA”).1 Petitioner also moved to consolidate the grounds raised in this
`Petition with the already-instituted proceeding, CBM2014-00102, involving
`the ’221 patent. Paper 3 (“Mot.”). Smartflash LLC (“Patent Owner”) filed a
`Preliminary Response (Paper 19, “Prelim. Resp.”) and an Opposition to
`Petitioner’s motion to consolidate (Paper 10, “Opp.”). Petitioner filed a
`Reply in support of its motion. Paper 18 (“Reply”).
`We have jurisdiction under 35 U.S.C. § 324(a), which provides that a
`covered business patent review may not be instituted “unless . . . it is more
`likely than not that at least 1 of the claims challenged in the petition is
`unpatentable.”
`After considering the Petition and Preliminary Response, we
`determine that the ’221 patent is a covered business method patent and that
`Petitioner has demonstrated that it is more likely than not that at least one of
`the challenged claims is unpatentable. Therefore, we institute a covered
`business method patent review of claim 1. We decline to institute a covered
`business method patent review of claims 2, 11, and 32. Petitioner’s Motion
`for Joinder is denied.
`
`
`1 Pub. L. No. 112–29, 125 Stat. 284, 296–07 (2011).
`
`2
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`Patent 8,118,221 B2
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`B. Asserted Grounds
`Petitioner contends that the challenged claims are unpatentable under
`35 U.S.C. § 101. Pet. 1. Petitioner also contends that claim 32 is
`unpatentable under § 103 in view of Stefik ’235,2 Stefik ’980,3 Poggio,4 and
`Kopp5—with or without Smith6 (Pet. 18).7 Petitioner provides a Declaration
`from Anthony J. Wechselberger. Ex. 1221.
`C. Related Matters
`Petitioner indicates that the ’221 patent is the subject of the following
`co-pending district court cases: Smartflash LLC v. Apple Inc., Case No.
`6:13-cv-447 (E.D. Tex. 2014); and Smartflash LLC v. Samsung Elecs. Co.,
`Case No. 6:13-CV-448 (E.D. Tex. 2014). Pet. 17.
`Petitioner previously filed two Petitions for covered business method
`patent review of the ’221 Patent: CBM2014-00102 and CBM2014-00103.
`Those petitions were instituted and consolidated with respect to several
`grounds under 35 U.S.C. § 103 challenging claims 1, 2, and 11–14. Apple
`Inc. v. Smartflash LLC, Case CBM2014-00102, Slip Op. at 24 (PTAB Sept.
`30, 2014) (Paper 8); Apple Inc. v. Smartflash LLC, Case CBM2014-00103,
`Slip Op. at 24 (PTAB Sept. 30, 2014) (Paper 8). Patents claiming priority
`
`2 U.S. Patent No. 5,530,235 (Ex. 1213) (“Stefik ’235”).
`3 U.S. Patent No. 5,629,980 (Ex. 1214) (“Stefik ’980”).
`4 U.S. Patent No. 5,940,805 (Ex. 1210) (“Kopp”).
`5 European Patent Application Publication No. EP0809221 A2 (Ex. 1216)
`(“Poggio”).
`6 PCT Publication No. WO 95/34857 (Ex. 1219) (“Smith”).
`7 Petitioner refers to Stefik ’235 and Stefik ’980 collectively as “Stefik”
`because, according to Petitioner, Stefik ’235 incorporates Stefik ’980 by
`reference. Pet. 34 n.15. Patent Owner disagrees. Prelim. Resp. 20–22.
`Based on our determination below, we need not address this issue.
`
`3
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`CBM2015-00015
`Patent 8,118,221 B2
`
`back to a common series of applications are currently the subject of
`CBM2014-00106, CBM2014-00108, and CBM2014-00112, filed by
`Petitioner.
`Another party also filed two petitions for covered business method
`patent review of the ’221 Patent: CBM2014-00194 and CBM2014-00199.
`Those petitions were instituted with respect to 35 U.S.C. § 101 challenging
`claims 2, 11, and 32 and 35 U.S.C. § 102 challenging claims 2 and 11.
`Samsung Elecs. Am., Inc. v. Smartflash LLC, Case CBM2014-00194, Slip
`Op. at 20 (PTAB March 30, 2015) (Paper 9); Samsung Elecs. Am., Inc. v.
`Smartflash LLC, Case CBM2014-00199, Slip Op. at 13 (PTAB March 30,
`2015) (Paper 9). Patents claiming priority back to a common series of
`applications are currently the subject of CBM2014-00190, CBM2014-
`00192, and CBM2014-00193, filed by this same party.
`Concurrent with the filing of this Petition, Petitioner filed three other
`Petitions for covered business method patent review challenging claims of
`patents owned by Patent Owner and disclosing similar subject matter:
`CBM2015-00016, CBM2015-00017, and CBM2015-00018.
`D. The ’221 Patent
`The ’221 patent relates to “a portable data carrier for storing and
`paying for data and to computer systems for providing access to data to be
`stored” and the “corresponding methods and computer programs.” Ex. 1201
`1:21–25. Owners of proprietary data, especially audio recordings, have an
`urgent need to address the prevalence of “data pirates” who make
`proprietary data available over the Internet without authorization. Id. at
`1:29–56. The ’221 patent describes providing portable data storage together
`with a means for conditioning access to that data upon validated payment.
`
`4
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`CBM2015-00015
`Patent 8,118,221 B2
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`Id. at 1:59–2:11. This combination allows data owners to make their data
`available over the Internet without fear of data pirates. Id. at 2:11–15.
`As described, the portable data storage device is connected to a
`terminal for internet access. Id. at 1:59–67. The terminal reads payment
`information, validates that information, and downloads data into the portable
`storage device from the data supplier. Id. The data on the portable storage
`device can be retrieved and output from a mobile device. Id. at 2:1–4. The
`’221 patent makes clear that the actual implementation of these components
`is not critical and may be implemented in many ways. See, e.g., id. at
`25:41–44 (“The skilled person will understand that many variants to the
`system are possible and the invention is not limited to the described
`embodiments.”).
`E. Challenged Claims
`Petitioner challenges claims 1, 2, 11, and 32 of the ’221 patent.
`Claims 1 and 32 are independent. Claims 2 and 11 depend from claim 1.
`Claims 1 and 32 recite the following:
`1.
`A data access terminal for retrieving data from a data supplier
`and providing the retrieved data to a data carrier, the terminal
`comprising:
`a first interface for communicating with the data supplier;
`a data carrier interface for interfacing with the data carrier;
`a program store storing code implementable by a processor; and
`a processor, coupled to the first interface, to the data carrier
`interface and to the program store for implementing the stored code,
`the code comprising:
`code to read payment data from the data carrier and to forward
`the payment data to a payment validation system;
`code to receive payment validation data from the payment
`validation system;
`
`5
`
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`CBM2015-00015
`Patent 8,118,221 B2
`
`code responsive to the payment validation data to retrieve data
`from the data supplier and to write the retrieved data into the data
`carrier.
`Ex. 1201, 25:45–61.
`
`32. A data access terminal for retrieving data from a data supplier
`and providing the retrieved data to a data carrier, the terminal
`comprising:
`a first interface for communicating with the data supplier;
`a data carrier interface for interfacing with the data carrier;
`a program store storing code; and
`a processor coupled to the first interface, the data carrier
`interface, and the program store for implementing the stored code, the
`code comprising:
`code to read payment data from the data carrier and to forward
`the payment data to a payment validation system;
`code to receive payment validation data from the payment
`validation system;
`code responsive to the payment validation data to retrieve data
`from the data supplier and to write the retrieved data into the data
`carrier;
`code responsive to the payment validation data to receive at
`least one access rule from the data supplier and to write the at least
`one access rule into the data carrier, the at least one access rule
`specifying at least one condition for accessing the retrieved data
`written into the data carrier, the at least one condition being dependent
`upon the amount of payment associated with the payment data
`forwarded to the payment validation system; and
`code to retrieve from the data supplier and output to a user-
`stored data identifier data and associated value data and use rule data
`for a data item available from the data supplier.
`Id. at 28:23–50.
`
`6
`
`
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`CBM2015-00015
`Patent 8,118,221 B2
`
`ANALYSIS
`
`A. Consolidation
`The statutory provision governing consolidation of inter partes review
`proceedings is 35 U.S.C. § 325(c), which reads as follows:
`(c) JOINDER. — If more than 1 petition for a post-grant review
`under this chapter is properly filed against the same patent and
`the Director determines that more than 1 of these petitions
`warrants the institution of a post-grant review under section
`324, the Director may consolidate such reviews into a single
`post-grant review.
`Petitioner moves to consolidate this proceeding with CBM2014-
`00102.8 Mot. 2. In CBM2014-00102, we instituted trial on claims 1, 2, and
`11–14 of the ’221 patent under 35 U.S.C. § 103. Apple Inc. v. Smartflash
`LLC, CBM2014-00102, Paper 8, 24 (PTAB Sept. 30, 2014). We declined to
`institute trial on claim 32 based on the prior art cited in that Petition. Id. A
`Patent Owner Response was filed on February 27, 2015. CBM2014-00102,
`Paper 26.
`Petitioner argues that consolidating this proceeding with CBM2014-
`00102 will secure the just, speedy, and inexpensive resolution of these
`proceedings. Mot. 4. Petitioner argues that this Petition involves the same
`patent, same parties, same counsel, same expert, and the same primary prior
`art references as CBM2014-00102. Id. at 5–6. Petitioner argues that the
`“significant overlap in subject matter and prior art” lead to significant
`efficiencies in briefing, discovery (i.e., depositions), and argument. Id. at 7.
`Petitioner also argues that “[j]oinder . . . need not have any appreciable
`
`8 Petitioner refers to Section 325(c) and seeks “joinder.” Although that
`provision is titled “Joinder,” it grants the Director authority only to
`“consolidate.” Thus, we treat Petitioner’s request as a request to consolidate
`pursuant to Section 325(c).
`
`7
`
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`CBM2015-00015
`Patent 8,118,221 B2
`
`effect on the trial schedule of [CBM2014-00102]” because the due dates in
`this proceeding could be compressed without unfairly prejudicing either
`party. Id. at 8. Finally, Petitioner requests, in the event consolidation is
`denied, that we coordinate the schedule in this proceeding with CBM2014-
`00102 such that, at minimum, oral arguments in the two proceedings occur
`together. Id. at 9.
`Patent Owner argues that Petitioner has filed a total of twenty-one
`petitions—“three, four[,] or five per patent”—over an eight month period
`and, therefore, not even consolidation will secure the just, speedy, and
`inexpensive resolution of these proceedings. Opp. 3–4. According to Patent
`Owner, the Petitioner’s motion to consolidate is untimely because the
`changes made in the Corrected Petition were extensive enough to warrant
`according a new filing date of November 21, 2014 (the date of the Corrected
`Petition), which is more than one month after September 30, 2014, the date
`on which CBM2014-00102 was instituted. Opp. 5–7. Patent Owner also
`points out that consolidation will not streamline discovery because Petitioner
`has filed five additional petitions for covered business method patent review
`that will not be entitled to consolidation with the earlier-filed proceedings
`and, therefore, at least those five Petitions, assuming they are instituted, will
`not be on the same schedule. Id. at 8–9. Patent Owner argues that
`Petitioner’s request for coordinated schedules should be denied for the same
`reasons. Id. at 8.
`Petitioner replies that it timely filed the instant Petition and Motion
`for Joinder. Reply 3–4. Petitioner also argues that the later-filed petitions
`for covered business method patent review identified by Patent Owner are
`not relevant to whether to consolidate this proceeding with an earlier
`
`8
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`CBM2015-00015
`Patent 8,118,221 B2
`
`proceeding involving the ’221 patent because those later-filed petitions
`relate to two different patents for which no trial has been instituted yet. Id.
`at 4–5.
`We have considered Petitioner’s arguments in support of
`consolidation and Patent Owner’s arguments in opposition. In CBM2014-
`00102, we instituted under 35 U.S.C. § 103 whereas, in this proceeding, we
`institute only under 35 U.S.C. § 101. We determine that the proceedings
`involve non-overlapping grounds, and thus, we are not persuaded that
`consolidation is warranted or justified on the facts presented. As discussed
`above, consolidation of two or more proceedings for covered business
`method patent review is discretionary. See 35 U.S.C. § 325(c). We decline
`to exercise that discretion to consolidate these proceedings. Likewise, we do
`not exercise our discretion to coordinate the schedule in this case with that of
`CBM2014-00102, given that we instituted trial in CBM2014-00102 on
`September 30, 2014, more than six months ago. See 37 C.F.R. § 42.222(a).
`
`B. Claim Construction
`In a covered business method patent review, claim terms are given
`their broadest reasonable interpretation in light of the specification in which
`they appear and the understanding of others skilled in the relevant art. See
`37 C.F.R. § 42.300(b); see also In re Cuozzo Speed Techs., LLC.,
`778 F.3d 1271, 1281 (Fed. Cir. 2015) (“Congress implicitly adopted the
`broadest reasonable interpretation standard in enacting the AIA,” and “the
`standard was properly adopted by PTO regulation.”). Applying that
`standard, we interpret the claim terms of the ’221 patent according to their
`ordinary and customary meaning in the context of the patent’s written
`description. See In re Translogic Tech., Inc., 504 F.3d 1249, 1257 (Fed. Cir.
`
`9
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`2007). For purposes of this Decision, we construe the claim term “access
`rule.”
`
`Independent claim 32 requires receiving at least one “access rule”
`from the data supplier and that the “at least one access rule specif[ies] at
`least one condition for accessing the retrieved data.” Petitioner proposes
`that “access rule” be construed to mean “rule specifying a condition under
`which access to content is permitted.” Pet. 20.
`The ’221 patent also states that “one or more content access rules are
`received from the system owner data supply computer and written to the
`smart Flash card so that each content data item has an associated use rule to
`specify under what conditions a user of the smart Flash card is allowed
`access to the content data item.” Ex. 1201, 21:48–53; see also id. at 7:31–32
`(stating that access data “links a content identifier with an access rule,
`typically based upon a required payment value”). Accordingly, for purposes
`of this Decision, we construe “access rule” as a rule specifying a condition
`under which access to content is permitted.
`
`C. Covered Business Method Patent
`Section 18 of the AIA provides for the creation of a transitional
`program for reviewing covered business method patents. A “[c]overed
`business method patent” is a patent that “claims a method or corresponding
`apparatus for performing data processing or other operations used in the
`practice, administration, or management of a financial product or service,
`except that the term does not include patents for technological inventions.”
`AIA § 18(d)(1); see 37 C.F.R. § 42.301(a). A patent need have only one
`claim directed to a covered business method to be eligible for review. See
`Transitional Program for Covered Business Method Patents—Definitions of
`
`10
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`CBM2015-00015
`Patent 8,118,221 B2
`
`Covered Business Method Patent and Technological Invention; Final Rule,
`77 Fed. Reg. 48,734, 48,736 (Aug. 14, 2012) (“CBM Rules”) (Comment 8).
`1. Financial Product or Service
`Petitioner asserts that claim 32 “concerns a computer system
`(corresponding to methods discussed in the patent) for performing data
`processing and other operations used in the practice, administration, or
`management of a financial activity and service” because it “explicitly
`describes transmitting payment data to a payment validation system.” Pet.
`11–12. Based on this record, we agree with Petitioner that the subject matter
`recited by claim 32 is directed to activities that are financial in nature,
`namely data access conditioned on payment validation. Claim 32 recites
`“code to read payment data from [a] data carrier and to forward the payment
`data to a payment validation system” and “code responsive to the payment
`validation data . . . dependent upon the amount of payment associated with
`the payment data forwarded to the payment validation system.” We are
`persuaded that payment validation is a financial activity, and conditioning
`data access based on payment validation amounts to a financial service.
`This is consistent with the specification of the ’221 patent, which confirms
`claim 32’s connection to financial activities by stating that the invention
`“relates to a portable data carrier for storing and paying for data.” Ex. 1201,
`1:21–23. The specification also states repeatedly that the disclosed
`invention involves managing access to data based on payment validation.
`See, e.g., Ex. 1201 1:59–68; 6:60–64; 20:50–54.
`Patent Owner disagrees that claim 32 satisfies the financial in nature
`requirement of AIA § 18(d)(1), arguing that that section should be
`interpreted narrowly to cover only technology used specifically in the
`
`11
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`CBM2015-00015
`Patent 8,118,221 B2
`
`financial or banking industry. Prelim. Resp. 5–10. Patent Owner cites to
`various portions of the legislative history as support for its proposed
`interpretation. Id.
`Although we agree with Patent Owner that the statutory language
`controls whether a patent is eligible for a covered business method patent
`review, we do not agree that the phrase “financial product or service” is as
`limited as Patent Owner proposes. The AIA does not include as a
`prerequisite for covered business method patent review, a “nexus” to a
`“financial business,” but rather a “method or corresponding apparatus for
`performing data processing or other operations used in the practice,
`administration, or management of a financial product or service.” AIA
`§ 18(d)(1). Further, contrary to Patent Owner’s view of the legislative
`history, the legislative history indicates that the phrase “financial product or
`service” is not limited to the products or services of the “financial services
`industry” and is to be interpreted broadly. CBM Rules, 77 Fed. Reg. at
`48,735–36. For example, the “legislative history explains that the definition
`of covered business method patent was drafted to encompass patents
`‘claiming activities that are financial in nature, incidental to a financial
`activity or complementary to a financial activity.’” Id. (citing 157 Cong.
`Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer)).
`In addition, Patent Owner asserts that claim 32 is not directed to an
`apparatus or method that is financial in nature because claim 32 “omits the
`specifics of how payment is made.” Prelim. Resp. 10. We are not
`persuaded by this argument because § 18(d)(1) of the AIA does not include
`such a requirement, nor does Patent Owner point to any other authority that
`makes such a requirement. Id. We determine that because payment data is
`
`12
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`Patent 8,118,221 B2
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`used by claim 32, the financial in nature requirement of § 18(d)(1) is
`satisfied.
`For the reasons stated above, and based on the particular facts of this
`proceeding, we conclude that the ’221 patent includes at least one claim that
`meets the financial in nature requirement of § 18(d)(1) of the AIA.
`2. Exclusion for Technological Inventions
`Petitioner asserts that the claims of the ’221 patent do not fall within
`§ 18(d)(1)’s exclusion for “technological inventions.” Pet. 12–17. In
`particular, Petitioner argues that claim 32 “does not claim ‘subject matter as
`a whole [that] recites a technological feature that is novel and unobvious
`over the prior art[] and solves a technical problem using a technical
`solution.’” Id. at 12 (quoting 37 C.F.R. § 42.301(b)). Patent Owner
`disagrees and argues that claim 32, as a whole, recites at least one
`technological feature that is novel and unobvious over the prior art. Prelim.
`Resp. 10–12.
`We are persuaded that claim 32 as a whole does not recite a
`technological feature that is novel and unobvious over the prior art.
`Claim 32 does recite a “payment validation system.” The specification,
`however, discloses that the required payment validation system may be one
`that is already in use or otherwise commercially available. For example,
`“[t]he payment validation system may be part of the data supplier’s
`computer systems or it may be a separate e-payment system.” Ex. 1201,
`8:63–65; see id. at 13:35–47. Claim 32 also recites a “data carrier.” This
`component, however, is a generic hardware device known in the prior art.
`The specification discloses, for instance, that a data carrier may be a
`“standard smart card” (id. at 11:28–29).
`
`13
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`In addition, the ’221 patent makes clear that the asserted novelty of
`the invention is not in any specific improvement of software or hardware,
`but in the method of controlling access to data. For example, the ’221 patent
`states that “there is an urgent need to find a way to address the problem of
`data piracy,” (id. at 1:52–55) while acknowledging that the “physical
`embodiment of the system is not critical and a skilled person will understand
`that the terminals, data processing systems and the like can all take a variety
`of forms” (id. at 12:29–32). Claim 32 is merely the recitation of known
`technologies to perform a method, which indicates that it is not a patent for a
`technological invention. See Office Patent Trial Practice Guide, 77 Fed.
`Reg. 48,756, 48,764 (Aug. 14, 2012).
`Patent Owner also argues that claim 32 falls within § 18(d)(1)’s
`exclusion for “technological inventions” because it is directed towards
`solving the technological problem of “writing data and at least one access
`rule from a data supplier into a data carrier” with the technological solution
`of “a data carrier from which payment data is read and to which retrieved
`data and at least one access rule from a data supplier [is] written.” Prelim.
`Resp. 11. We are not persuaded by this argument because, as Petitioner
`argues, the problem being solved by claim 32 is a business problem—data
`piracy. Pet. 15. For example, the specification states that “[b]inding . . .
`data access and payment together allows the legitimate owners of the data to
`make the data available themselves over the Internet without fear of loss of
`revenue, thus undermining the position of data pirates.” Ex. 1201, 2:11–15.
`Therefore, based on the particular facts of this proceeding, we conclude that
`claim 32 does not recite a technological invention and is eligible for a
`covered business method patent review.
`
`14
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`3. Conclusion
`In view of the foregoing, we conclude that the ’221 patent is a covered
`business method patent under AIA § 18(d)(1) and is eligible for review
`under the transitional covered business method patent program.
`D. Statutory Subject Matter
`Petitioner challenges claims 1, 2, 11, and 32 as directed to patent-
`ineligible subject matter under 35 U.S.C. § 101. Pet. 22–34. Analyzing the
`challenged claims using the two-step process applied recently in Alice Corp.
`Pty, Ltd. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014), Petitioner asserts that all
`the challenged claims are directed to an abstract idea without additional
`elements that transform the claims into a patent-eligible application of that
`idea. Id. Specifically, Petitioner argues that the challenged claims are
`directed to the abstract idea of “payment for something, and/or of controlling
`access to something.” Pet. 24.
`We agree with Petitioner that the challenged claims of the ’221 patent
`are more likely than not directed to patent-ineligible subject matter. Under
`35 U.S.C. § 101, we must first identify whether an invention fits within one
`of the four statutorily provided categories of patent-eligibility: “processes,
`machines, manufactures, and compositions of matter.” Ultramercial, Inc. v.
`Hulu, LLC, 772 F.3d 709, 713–714 (Fed. Cir. 2014). Here, each of the
`challenged claims recites a “machine,” i.e., a “data access terminal,” under
`§ 101. Section 101, however, “contains an important implicit exception [to
`subject matter eligibility]: Laws of nature, natural phenomena, and abstract
`ideas are not patentable.” Alice, 134 S.Ct. at 2354 (citing Assoc. for
`Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013)
`(internal quotation marks and brackets omitted)).
`
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`We are persuaded that the challenged claims are more likely than not
`drawn to a patent-ineligible abstract idea. In Alice, the Supreme Court
`reiterated the framework set forth previously in Mayo Collaborative Servs.
`v. Prometheus Labs., 132 S.Ct. 1289, 1293 (2012) “for distinguishing
`patents that claim laws of nature, natural phenomena, and abstract ideas
`from those that claim patent-eligible applications of those concepts.” Alice,
`134 S.Ct. at 2355. The first step in the analysis is to “determine whether the
`claims at issue are directed to one of those patent-ineligible concepts.” Id.
`If so, the second step in the analysis is to consider the elements of the claims
`“individually and ‘as an ordered combination’” to determine whether there
`are additional elements that “‘transform the nature of the claim’ into a
`patent-eligible application.” Id. (quoting Mayo, 132 S.Ct. at 1291, 1297). In
`other words, the second step is to “search for an ‘inventive concept’—i.e., an
`element or combination of elements that is ‘sufficient to ensure that the
`patent in practice amounts to significantly more than a patent upon the
`[ineligible concept] itself.’” Id. (brackets in original) (quoting Mayo, 132
`S.Ct. at 1294).
`As discussed above, the ’221 patent discusses addressing recording
`industry concerns of data pirates offering unauthorized access to widely
`available compressed audio recordings. Ex. 1201, 1:20–55. The ’221 patent
`proposes to solve this problem by restricting access to data on a portable
`data carrier based upon payment validation. Id. at 1:59–2:4. The ’221
`patent makes clear that the heart of the claimed subject matter is restricting
`access to stored data based on supplier-defined access rules and validation of
`payment. Id. at 1:59–2:15. We are, thus, persuaded, on this record, that the
`claimed “data access terminal,” is directed to an abstract idea. See Alice,
`
`16
`
`
`
`CBM2015-00015
`Patent 8,118,221 B2
`
`134 S.Ct. at 2356 (holding that the concept of intermediated settlement at
`issue in Alice was an abstract idea); Accenture Global Servs., GmbH v.
`Guidewire Software, Inc., 728 F.3d 1336, 1344 (Fed. Cir. 2013) (holding the
`abstract idea at the heart of a system claim to be “generating tasks [based on]
`rules . . . to be completed upon the occurrence of an event”).
`Turning to the second step of the analysis, we look for additional
`elements that can “transform the nature of the claim” into a patent-eligible
`application of an abstract idea. Mayo, 132 S.Ct. at 1297. On this record, we
`are not persuaded that the challenged claims of the ’221 patent add an
`inventive concept sufficient to ensure that the patent in practice amounts to
`significantly more than a patent on the abstract idea itself. Alice, 134 S. Ct.
`at 2355; see also Accenture Global Servs., 728 F.3d at 1345 (holding claims
`directed to the abstract idea of “generating tasks [based on] rules . . . to be
`completed upon the occurrence of an event” to be unpatentable even when
`applied in a computer environment and within the insurance industry).
`As discussed above, the specification notes that the data carrier may
`be a generic, known, hardware device such as a “standard smart card,” and
`that “[t]he payment validation system may be part of the data supplier’s
`computer systems or it may be a separate e-payment system.” Ex. 1201,
`11:28–29, 8:63–65. Moreover, on this record, Patent Owner has not shown
`that all other potentially technical additions to the claims—including
`“processor,” “program store,” and code to receive/retrieve/write data—
`perform a function that is anything other than “purely conventional.” See
`Alice, 134 S.Ct. at 2359. The linkage of existing hardware devices to
`existing payment validation processes and supplier-defined access rules, as
`claimed here, appear to be “‘well-understood, routine, conventional
`
`17
`
`
`
`CBM2015-00015
`Patent 8,118,221 B2
`
`activit[ies]’ previously known to the industry.” Id.; Mayo, 132 S.Ct. at
`1294. Based on the record, we determine that none of these limitations,
`viewed “both individually and as an ordered combination,” transform the
`nature of the claims into patent-eligible subject matter. See Alice, 134 S.Ct.
`at 2355 (quoting Mayo, 132 S.Ct. at 1297, 1298).
`Having considered the information provided in the Petition and the
`Preliminary Response, we are persuaded that Petitioner has demonstrated
`that it is more likely than not that the challenged claims are unpatentable
`under 35 U.S.C. § 101. However, because we already instituted a covered
`business method patent review of claims 2, 11, and 32 under 35 U.S.C.
`§ 101 in CBM2014-00194 (Samsung Elecs. Am. Inc. v. Smartflash LLC,
`CBM2014-00194, Paper 9, 20 (PTAB March 30, 2015)), and because
`whether these claims are directed to patent-eligible subject matter is an issue
`of law, we exercise our discretion under 35 U.S.C. § 325(d) to decline to
`institute a covered business method patent review of claims 2, 11, and 32
`under this ground in this case.
`Patent Owner argues that Petitioner’s assertion of this ground is
`untimely because Apple provides no valid reason why it did not raise this
`purely legal issue . . . in its two prior petitions.” Prelim. Resp. 13.
`According to Patent Owner,
`[A]llowing Apple to raise a new ground of invalidity that it
`could have and should have raised in its March 28, 2014
`petitions encourages Apple’s piecemeal invalidity challenges to
`Patent Owner’s patent claims and runs afoul of the PTAB’s
`charge to “secure the just, speedy, and inexpensive resolution”
`of Apple’s covered business method challenges to the ‘221
`Patent.
`
`18
`
`
`
`CBM2015-00015
`Patent 8,118,221 B2
`
`Id. at 14. Patent Owner, however, cites no statutory or regulatory authority
`precluding Petitioner from asserting this ground. Moreover, Patent Owner
`acknowledges that the Supreme Court’s June 19, 2014, decision in Alice was
`decided after Petitioner’s original petitions were filed on April 1, 2014. Id.
`at 13. Thus, on this record, we are not persuaded that Petitioner’s assertion
`of a new ground based on 35 U.S.C. § 101 is untimely.
`On this record, Petitioner has established that it is more likely than not
`that claim 1is unpatentable under 35 U.S.C. § 101.
`
`E. Obviousness Challenges
`Petitioner argues that claim 32 is unpatentable under 35 U.S.C.
`§ 103(a) as obvious over Stefik, Poggio, and Kopp, and Stefik, Poggio,
`Kopp, and Smith. Pet. 38–79.
`A patent claim is unpatentable, under 35 U.S.C. § 103(a), if the
`differen
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