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
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00015
`
`Patent 8,118,221 B2
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`
`
`TABLE OF CONTENTS
`
`V.
`
`
`I.
`INTRODUCTION ........................................................................................... 1
`STATEMENT OF MATERIAL FACTS ........................................................ 3
`II.
`III. THE WECHSELBERGER DECLARATION SHOULD BE GIVEN
`LITTLE OR NO WEIGHT .............................................................................. 3
`A. No Evidentiary Standard Is Disclosed in the Wechselberger
`Declaration ............................................................................................ 3
`IV. OVERVIEW OF U.S. PATENT NO. 8,118,221 ............................................ 5
`A. Overview of the Technology of the Patent ........................................... 5
`B.
`Claim Construction ............................................................................... 8
`CLAIM 1 OF THE ‘221 PATENT IS DIRECTED TO STATUTORY
`SUBJECT MATTER ....................................................................................... 9
`A.
`The Two-Part Test for Statutory Subject Matter .................................. 9
`The Claims Are Statutory Under the Second Step of Mayo and Alice
`B.
` ............................................................................................................. 10
`Preemption under DDR Holdings ............................................. 15
`1.
`Preemption under Mayo and Alice ............................................ 18
`2.
`3.
`Non-Infringing Alternatives Show a Lack of Preemption ........ 19
`VI. PETITIONER HAS ALREADY LOST A CHALLENGE TO OTHER
`CLAIMS OF THE SAME PATENT ON THE SAME STATUTORY
`GROUNDS IN ITS LITIGATION WITH PATENT OWNER .................... 21
`VII. THE USPTO IS ESTOPPED FROM REVISITING THE ISSUE OF
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY SUBJECT
`MATTER ....................................................................................................... 22
`VIII. CONCLUSION .............................................................................................. 23
`
`
`
`
`
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`- i -
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`PATENT OWNER’S LIST OF EXHIBITS
`
`Exhibit Number
`
`Exhibit Description
`
`2001
`
`2002
`
`2003
`
`2004
`
`2005
`
`Redline Showing “Corrected Petition” Compared to Original
`Petition in CBM2015-00015
`
`Reserved
`
`Reserved
`
`Congressional Record - House, June 23, 2011, H4480-4505
`
`Congressional Record - Senate, Sep. 8, 2011, S5402-5443
`
`2006-2048
`
`Reserved
`
`2049
`
`2050
`
`Report and Recommendation (on Defendants’ Motions for
`Summary Judgment of Invalidity Pursuant to 35 U.S.C. §
`101), from Smartflash LLC, et al. v. Apple Inc., et al., Case
`No. 6:13-CV-447 (E.D. Tex.) and Smartflash LLC, et al. v.
`Samsung Electronics Co. Ltd, et al., Case No. 6:13-CV-448
`(E.D. Tex.), dated Jan. 21, 2015
`
`Order adopting Report and Recommendation (on
`Defendants’ Motions for Summary Judgment of Invalidity
`Pursuant to 35 U.S.C. § 101), from Smartflash LLC, et al. v.
`Apple Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.) and
`Smartflash LLC, et al. v. Samsung Electronics Co. Ltd, et al.,
`Case No. 6:13-CV-448 (E.D. Tex.), dated Feb. 13, 2015
`
`2051-2057
`
`Reserved
`
`2058
`
`Memorandum Opinion and Order (on Defendants’ Motions
`
`
`
`- ii -
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`
`
`for Stay Pending the Outcome of CBMs) from Smartflash
`LLC, et al. v. Apple Inc., et al., Case No. 6:13-CV-447 (E.D.
`Tex.), Smartflash LLC, et al. v. Samsung Electronics Co. Ltd,
`et al., Case No. 6:13-CV-448 (E.D. Tex.), Smartflash LLC, et
`al. v. Google, Inc., et al., Case No. 6:14-CV-435 (E.D. Tex.),
`and Smartflash LLC, et al. v. Amazon, Inc., et al., Case No.
`6:14-CV-992 (E.D. Tex.) dated May 29, 2015
`
`2059-2067
`
`Reserved
`
`2068
`
`2069
`
`Deposition Transcript of Anthony J. Wechselberger dated
`May 28, 2015
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`2070-2073
`
`Reserved
`
`2074
`
`Civil Docket Report from Smartflash LLC, et al. v. Apple
`Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.)
`
`
`
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`- iii -
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`I.
`
`INTRODUCTION
`
`Covered business method review was instituted for U.S. Patent 8,118,221
`
`(“the ‘221 Patent”) claim 1 on the ground that it is patent ineligible under 35
`
`U.S.C. § 101. 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), Paper
`
`23 at 21 (PTAB April 10, 2015).
`
`Claim 1 of the ‘221 Patent is directed to statutory subject matter because it
`
`claims a solution “necessarily rooted in computer technology in order to overcome
`
`a problem specifically arising in the realm of computer networks.” DDR Holdings,
`
`LLC v. Hotels.com, L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014). In particular,
`
`claim 1 of the ‘221 Patent addresses the problem of data content piracy on the
`
`Internet by providing for legitimate acquisition of content data by storing payment
`
`data on a data carrier, retrieving data content from a data content supplier, and
`
`writing the retrieved content data to the data carrier in response to payment
`
`validation data. Ex. 1201, ‘221 Patent at 25:54-56, 59-61. In other words, claim 1
`
`of the ‘221 Patent is directed to a system that combines on the data carrier both the
`
`digital content and payment data, and additional content can be legitimately
`
`obtained in response to payment validation data.
`
`As demonstrated below, claim 1 of the ‘221 Patent does not result in
`
`inappropriate preemption of the “idea of paying for and controlling access to data”
`
`
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`- 1 -
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`(Corrected Petition, Paper 9 at 4) or the “idea of paying for and controlling access
`
`to content” (Ex. 1221, Declaration of Anthony J. Wechselberger (hereinafter “the
`
`Wechselberger Declaration”) at ¶ 86). Nor is there any evidence that a
`
`disproportionate amount of future innovation is foreclosed by claim 1 of the ‘221
`
`Patent.
`
`Additionally, in February 2015, Petitioner lost in Federal Court the purely
`
`legal issue of whether claims 2 and 11 of the ‘221 Patent (which depend from
`
`claim 1 at issue here) are directed to statutory subject matter under 35 U.S.C. §
`
`101. See Exhibit 2049, Report and Recommendation (on Defendants’ Motions for
`
`Summary Judgment of Invalidity Pursuant to 35 U.S.C. § 101) (hereinafter “Report
`
`and Recommendation”), from Smartflash LLC, et al. v. Apple Inc., et al., Case No.
`
`6:13-CV-447 (E.D. Tex.) and Smartflash LLC, et al. v. Samsung Electronics Co.
`
`Ltd, et al., Case No. 6:13-CV-448 (E.D. Tex.), dated Jan. 21, 2015, and Exhibit
`
`2050, Order adopting Report and Recommendation (on Defendants’ Motions for
`
`Summary Judgment of Invalidity Pursuant to 35 U.S.C. § 101), from Smartflash
`
`LLC, et al. v. Apple Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.) and Smartflash
`
`LLC, et al. v. Samsung Electronics Co. Ltd, et al., Case No. 6:13-CV-448 (E.D.
`
`Tex.), dated Feb. 13, 2015.
`
`Finally, Patent Owner submits that the USPTO has already adjudicated the
`
`threshold question of whether claim 1 of the ‘221 Patent comports with 35 U.S.C.
`
`
`
`- 2 -
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`
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`§ 101, which is a question of law, during the prosecution of the ‘221 Patent. The
`
`USPTO is estopped from re-litigating this purely legal issue already considered
`
`and adjudicated by the USPTO.
`
`In support of this Patent Owner’s Response, reference will be made to
`
`concurrently filed Exhibit 2068, the Deposition Transcript of Anthony J.
`
`Wechselberger, dated May 28, 2015.
`
`II.
`
`STATEMENT OF MATERIAL FACTS
`
`1.
`
`The Wechselberger Declaration does not state that Mr.
`
`Wechselberger’s opinions presented therein were based on a “preponderance of the
`
`evidence” standard.
`
`2.
`
`The Wechselberger Declaration does not state that Mr.
`
`Wechselberger’s opinions presented therein were based on a “more likely than not”
`
`evidentiary weight standard.
`
`III. THE WECHSELBERGER DECLARATION SHOULD BE GIVEN
`LITTLE OR NO WEIGHT
`
`A. No Evidentiary Standard Is Disclosed in the Wechselberger
`Declaration
`
`The Wechselberger Declaration does not disclose the underlying facts on
`
`which the opinions are based and is, therefore, entitled to little or no weight. 37
`
`CFR § 42.65 (“Expert testimony that does not disclose the underlying facts or data
`
`on which the opinion is based is entitled to little or no weight.”). More
`- 3 -
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`
`
`
`
`specifically, the Wechselberger Declaration does not state the evidentiary weight
`
`standard (e.g., substantial evidence versus preponderance of the evidence) that Mr.
`
`Wechselberger used in arriving at his conclusions. Given that there is no evidence
`
`that Mr. Wechselberger even knows how much weight need be relied upon to show
`
`that a claim is non-statutory, the PTAB can only afford little or no weight to the
`
`testimony therein. To do otherwise would be to accept his opinions without
`
`knowing “the underlying facts ... on which the opinion is based” (i.e., how much
`
`evidence he thinks shows any of his opinions discussed therein).
`
`Similarly, the Board cannot assess under FRE 702 whether Mr.
`
`Wechselberger’s opinion testimony is “the product of reliable principles and
`
`methods” or if Mr. Wechselberger “reliably applied the principles and methods to
`
`the facts of the case” given that Mr. Wechselberger did not disclose the standard
`
`against which he measured the evidence in arriving at his opinions.
`
`For example, when Mr. Wechselberger reviewed various “examples of these
`
`well-known, routine activities and components in the prior art” (Wechselberger
`
`Declaration at ¶¶ 92-96) and opined that “the asserted claims are directed to
`
`nothing more than implementing the basic concept of providing access to content
`
`based on payment or payment and rules, using generic features present on general
`
`purpose computers. Therefore, none of those claims is patentable” (id. at ¶ 97) is
`
`that opinion based on less than a preponderance of the evidence, or more? Without
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`- 4 -
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`Mr. Wechselberger having disclosed what evidentiary standard he used in forming
`
`his opinions, and given that there is no evidence that he even knew what
`
`evidentiary standard he was supposed to be using, the PTAB cannot rely on his
`
`statements. Thus, the PTAB should find that the Wechselberger Declaration is
`
`entitled to little or no weight.
`
`IV. OVERVIEW OF U.S. PATENT NO. 8,118,221
`
`A. Overview of the Technology of the Patent
`
`Although the claims define the actual scope of coverage of the patent, as
`
`described in the first paragraph of the BACKGROUND OF THE INVENTION,
`
`the ‘221 Patent generally describes “data storage and access systems ... [and] is
`
`particularly useful for managing stored audio and video data, but may also be
`
`applied to storage and access of text and software, including games, as well as
`
`other types of data.” ‘221 Patent at 1:20-28.
`
`Preferred embodiments described in the ‘221 Patent at 15:53-62 illustrate
`
`this further: “FIG. 7 ... shows a variety of content access terminals for accessing
`
`data supply computer system 120 over internet 142. The terminals are provided
`
`with an interface to a portable data carrier or ‘smart Flash card’ (SFC) as generally
`
`described with reference to FIG. 2 and as described in more detail below. In most
`
`embodiments of the terminal the SFC interface allows the smart Flash card data
`
`carrier to be inserted into and removed from the terminal, but in some
`
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`- 5 -
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`embodiments the data carrier may be integral with the terminal.” Exemplary
`
`terminals include, but are not limited to, set-top boxes 154, CD/DVD Players 170
`
`and mobile communications devices 152. ‘221 Patent at 16:5-17.
`
`Referring to preferred embodiments, the ‘221 Patent discloses that a data
`
`supply system may provide users with a seamless purchase and content delivery
`
`experience. ‘221 Patent at 23:61-66. Users are able to purchase content from a
`
`variety of different content providers even if they do not know where the content
`
`providers are located or how the content is delivered. See id. The exemplary
`
`system is operated by a “content data supply ‘system owner,’” who may act as an
`
`intermediary between a user seeking to purchase content and content providers,
`
`such as record labels, movie studios, and software providers. See, ‘221 Patent at
`
`13:60-67. When a user accesses the system, he or she is able to select content to
`
`purchase or rent from a variety of different content providers. See, ‘221 Patent at
`
`4:64-5:8. If the user finds a content item to buy, his or her device will transmit
`
`stored “payment data” to a “payment validation system” to validate the payment
`
`data. See, ‘221 Patent at 8:3-6. The payment validation system returns proof that
`
`the payment data has been validated, in the form of “payment validation data,” and
`
`the user is able to retrieve the purchased content from the content provider. See,
`
`‘221 Patent at 8:6-9.
`
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`- 6 -
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`The ‘221 Patent at 24:14-16 discloses that “FIG. 13 ... shows a flow chart
`
`for user access of stored data on a smart Flash card using a data access device such
`
`as the MP3 player of FIG. 1.” The ‘221 Patent at 9:20-22 discloses “The data
`
`access device uses the use status data and use rules to determine what access is
`
`permitted to data stored on the data carrier.” The ‘221 Patent at 4:64-5:8 discloses
`
`“The carrier may ... store content use rules pertaining to allowed use of stored data
`
`items. These use rules may be linked to payments made from the card to provide
`
`payment options such as access to buy content data outright; rental access to
`
`content data for a time period or for a specified number of access events; and/or
`
`rental/purchase, for example where rental use is provided together with an option
`
`to purchase content data at the reduced price after rental access has expired.”
`
`Further, as described in ‘221 Patent at 9:33-35, “use status data [is retrieved] from
`
`the data carrier [to] indicat[e] past use of the stored data.” Thus, as described in
`
`‘221 Patent at 5:29-33, “[b]y combining digital rights management with content
`
`data storage using a single carrier, the stored content data becomes mobile and can
`
`be accessed anywhere while retaining control over the stored data for the data
`
`content provider or data copyright owner.” By using a system that combines on
`
`the data carrier the digital content and payment data, access control to the digital
`
`content can be continuously enforced prior to access to the digital content and
`
`additional content can be purchased. By comparison, unlike a system as claimed,
`
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`- 7 -
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`when a DVD was physically rented for a rental period (see, e.g. Wechselberger
`
`Declaration ¶ 87), there was no mechanism associated with the DVD to purchase
`
`additional content.
`
`B. Claim Construction
`
`Petitioner argues that “payment data” should be “construed to mean ‘data
`
`representing payment made for requested content data’ and is distinct from ‘access
`
`control data.’” Corrected Petition, Paper 9 at 19. However, “payment data” in the
`
`context of the claims of the ‘221 Patent should be interpreted to mean “data that
`
`can be used to make payment for content” when using a broadest reasonable
`
`interpretation.1
`
`The ‘221 Patent at 20:59-62, states “payment data for making a payment …
`
`is received from the smart Flash card by the content access terminal and forwarded
`
`to an e-payment system.” That is, the payment data is used for making a payment.
`
`Furthermore, as can be seen in Figure 12c of the ‘221 Patent, step S54 reads
`
`1 Patent Owner’s use of the “broadest reasonable interpretation” (BRI)
`
`standard herein is not an admission that the BRI standard is the proper standard for
`
`CBM proceedings such as this one. However, for the purposes of this proceeding
`
`based on the issues in the instituted proceeding, Patent Owner has presented its
`
`arguments utilizing the BRI standard for “payment data.” Patent Owner reserves
`
`its right to argue for a different standard at a later date or in a different proceeding.
`
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`- 8 -
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`“PAYMENT FOR SCHEME OWNER RECEIVED FROM CARD BY
`
`CONTENT ACCESS TERMINAL AND FORWARDED TO e-PAYMENT
`
`SYSTEM.” Step S55 then reads “PAYMENT RECORD DATA RECEIVED
`
`FROM e-PAYMENT SYSTEM BY CONTENT ACCESS TERMINAL AND
`
`FORWARDED TO CARD.” Both of those steps precede step S56 which recites
`
`“PAYMENT RECORD DATA, PURCHASE REQUEST AND CARD
`
`REGISTRATION DATA TRANSMITTED TO SCHEME OWNER.” Thus, as
`
`payment has not yet been made when the payment data of step S54 is sent,
`
`“payment data” should be interpreted to mean “data that can be used to make
`
`payment for content.”
`
`V. CLAIM 1 OF THE ‘221 PATENT IS DIRECTED TO STATUTORY
`SUBJECT MATTER
`
`The Two-Part Test for Statutory Subject Matter
`A.
`The Supreme Court articulated a two-part test for patentability in Mayo
`
`Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012),
`
`which has been followed by Alice Corp. Pty. v. CLS Bank Int'l, 134 S. Ct. 2347
`
`(2014). The first step in the analysis is to determine whether the claims at issue are
`
`directed to patent-ineligible concepts. If the claims at issue are directed to a
`
`patent-ineligible concept, the second step of the analysis is to determine whether
`
`the limitations of the claims, individually and as ordered combinations, contain an
`
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`- 9 -
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`
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`inventive concept that transforms the nature of the claims into patent-eligible
`
`subject matter. Mayo, 132 S. Ct. at 1294.
`
`B.
`
`The Claims Are Statutory Under the Second Step of Mayo and
`Alice
`
`Post Mayo and Alice, the Federal Circuit has provided guidance on how to
`
`distinguish statutory claims, like those of the ‘221 Patent, from non-statutory
`
`claims. In DDR Holdings, the Federal Circuit analyzed claims, like the ‘221 Patent
`
`claim at issue here, that have technological solutions to technological problems
`
`created by the nature of digital content and the Internet. In DDR Holdings, the
`
`system of exemplary claim 19 included (a) a computer store containing the data
`
`needed to support operation of the system and (b) a computer server (or processor)
`
`that was coupled to the computer store, where the claimed system was
`
`programmed to (by having code configured to) perform the solution to a network-
`
`specific problem. The computer server was “programmed to” perform four steps.
`
`The first two steps are “(i) receive from the web browser of a computer user a
`
`signal indicating activation of one of the links displayed by one of the first web
`
`pages; [and] (ii) automatically identify as the source page the one of the first web
`
`pages on which the link has been activated.” The third and fourth steps were “(iii)
`
`in response to identification of the source page, automatically retrieve the stored
`
`data corresponding to the source page; and (iv) using the data retrieved,
`
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`- 10 -
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`automatically generate and transmit to the web browser a second web page that
`
`displays: (A) information associated with the commerce object associated with the
`
`link that has been activated, and (B) the plurality of visually perceptible elements
`
`visually corresponding to the source page.” The Court found the claims to be
`
`statutory because “the claimed solution is necessarily rooted in computer
`
`technology in order to overcome a problem specifically arising in the realm of
`
`computer networks.” Id. at 1257.
`
`Such is the case here, too. Claim 1 of the ‘221 Patent is not directed to
`
`mental processes or processes performed using pen and paper, rather the claims are
`
`directed to particular devices that can download and store digital content into a
`
`data carrier. By using a system that combines on the data carrier both the digital
`
`content and payment data that can be forwarded to a payment validation system,
`
`and by responding to payment validation data when obtaining digital content, the
`
`claimed data access terminals enable digital content to be obtained effectively and
`
`legitimately.
`
`Thus, the claims are rooted in computer technology in order to overcome a
`
`problem specifically arising in the realm of computer networks – that of digital
`
`data piracy, and, like in DDR Holdings, “address … a challenge particular to the
`
`Internet.” Id. at 1257. The Report and Recommendation also acknowledged this
`
`distinction, finding:
`
`
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`- 11 -
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`As in DDR Holdings, the patents here do not simply
`apply a known business practice from the pre-Internet
`world to computers or the Internet. “The claimed solution
`is necessarily rooted in computer technology in order to
`overcome a problem specifically arising in the realm of
`computer networks.” ... Digital Rights Management is a
`technology that was developed after widespread use of
`the Internet. Entry into the Internet Era presented new
`and unique problems for digital content providers in
`combatting unauthorized use and reproduction of
`protected media content.
`
`Report and Recommendation at 19, lines 7-12 (quoting DDR Holdings, 773 F.3d at
`
`1257) (internal citation omitted).
`
`Claim 1 of the ‘221 Patent meets the requisites of § 101 under DDR
`
`Holdings. Claim 1 recites a data access terminal (a system) that parallels the
`
`structure of the statutory claim 19 in DDR Holdings. The table below sets forth a
`
`mapping of claim 1 of the ‘221 Patent to claim 19 of the patent in DDR Holdings
`
`and shows that claim 1 is directed to statutory subject matter.
`
`Claim element from DDR Holding
`
`Similar claim element from claim 1
`
`19. A system useful in an outsource
`
`“1. A data access terminal for retrieving
`
`provider serving web pages offering
`
`data from a data supplier and providing
`
`commercial opportunities, the system
`
`the retrieved data to a data carrier, the
`
`comprising:
`
`terminal comprising:”
`
`(a) a computer store containing data, for
`
`“a first interface for communicating
`
`each of a plurality of first web pages,
`
`with the data supplier;
`
`
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`- 12 -
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`Claim element from DDR Holding
`
`Similar claim element from claim 1
`
`defining a plurality of visually
`
`a data carrier interface for interfacing
`
`perceptible elements, which visually
`
`with the data carrier;
`
`perceptible elements correspond to the
`
`a program store storing code
`
`plurality of first web pages; (i) wherein
`
`implementable by a processor;”
`
`each of the first web pages belongs to
`
`one of a plurality of web page owners;
`
`(ii) wherein each of the first web pages
`
`displays at least one active link
`
`associated with a commerce object
`
`associated with a buying opportunity of
`
`a selected one of a plurality of
`
`merchants; and (iii) …
`
`(b) a computer server at the outsource
`
`“…and a processor, coupled to the first
`
`provider, which computer server is
`
`interface, to the data carrier interface
`
`coupled to the computer store and
`
`and to the program store for
`
`programmed to:
`
`implementing the stored code, the code
`
`comprising:”
`
`(i) receive from the web browser of a
`
`“code to read payment data from the
`
`computer user a signal indicating
`
`data carrier and to forward the payment
`
`
`
`- 13 -
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`
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`Claim element from DDR Holding
`
`Similar claim element from claim 1
`
`activation of one of the links displayed
`
`data to a payment validation system;”
`
`by one of the first web pages;
`
`
`
`(ii) automatically identify as the source
`
`“code to receive payment validation
`
`page the one of the first web pages on
`
`data from the payment validation
`
`which the link has been activated;
`
`system;”
`
`(iii) in response to identification of the
`
`“code responsive to the payment
`
`source page, automatically retrieve the
`
`validation data to retrieve data from the
`
`stored data corresponding to the source
`
`data supplier…”
`
`page; and
`
`(iv) using the data retrieved,
`
`“code responsive to the payment
`
`automatically generate and transmit to
`
`validation data to… to write the
`
`the web browser a second web page that
`
`retrieved data into the data carrier”
`
`displays: (A) information associated
`
`with the commerce object associated
`
`with the link that has been activated, and
`
`(B) the plurality of visually perceptible
`
`elements visually corresponding to the
`
`source page.
`
`
`
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`- 14 -
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`Thus, like in DDR Holdings, when “the limitations of the … claims are
`
`taken as [a] combination, the claims recite[] an invention that is not merely the
`
`routine or conventional use of the Internet.” DDR Holdings, 773 F.3d at 1259.
`
`Such a finding was further echoed by the Report and Recommendation when it
`
`held that the “asserted claims … recite specific ways of using distinct memories,
`
`data types, and use rules that amount to significantly more than the underlying
`
`abstract idea. Although in some claims the language is functional and somewhat
`
`generic, the claims contain significant limitations on the scope of the inventions.”
`
`Report and Recommendation at 19, lines 1-4.
`
`
`
`C. Claim 1 Does Not Result in Inappropriate Preemption
`
`1.
`
`Preemption under DDR Holdings
`
`Claim 1 of the ‘221 Patent does not result in inappropriate preemption of the
`
`“idea of paying for and controlling access to data” (Corrected Petition, Paper 9 at
`
`4) or the “idea of paying for and controlling access to content” (Ex. 1221,
`
`Wechselberger Declaration at ¶ 86) under DDR Holdings, Mayo and Alice. The
`
`Corrected Petition alleges that “Here, the challenged claims’ broad functional
`
`nature firmly triggers preemption concerns.” Paper 9 at 32. However, using the
`
`analysis of the Federal Circuit in DDR Holdings, claims are statutory when “the
`
`claims ... do not attempt to preempt every application of the idea [relating to the
`
`field of the invention]. Rather, they recite a specific way … that incorporates
`
`
`
`- 15 -
`
`
`
`elements from multiple sources in order to solve a problem faced by [servers] on
`
`the Internet.” DDR Holdings, 773 F.3d at 1259. Such a standard is consistent with
`
`other Supreme Court precedent as well. As cited in Mayo, in “Bilski, the Court
`
`pointed out that to allow ‘petitioners to patent risk hedging would [inappropriately]
`
`preempt use of this approach in all fields.” Mayo, 132 S. Ct. at 1301 (citing Bilski
`
`v. Kappos, 561 U.S. 612 (2010)).
`
`Mr. Wechselberger’s deposition testimony supports that the claims of the
`
`‘221 Patent do not result in inappropriate preemption because they do not preempt
`
`every application of the idea of paying for and controlling access to content. Mr.
`
`Wechselberger admitted that when he said in paragraph 86 of the Wechselberger
`
`Declaration that the claims of the ‘221 Patent “are unpatentable because they are
`
`directed to ineligible subject matter, in particular the abstract idea of ‘paying for
`
`and controlling access to content’” he did not “mean that they cover all possible
`
`ways to pay for and control access to content.” Wechselberger Deposition, Ex.
`
`2068 at 11:10 – 12:18. Mr. Wechselberger further admitted that the claims of the
`
`‘221 Patent “do not cover all possible ways of providing access to content based on
`
`payment or payment and rules.” Id. at 12:19-13:18. In fact, Mr. Wechselberger
`
`testified:
`
`
`
`[I]t’s not my opinion that claim one [of the ‘221 Patent]
`covers all conceivable ways of requesting access and
`paying for content, and I'm just simply saying in my
`expansive career history I'm sure I came across
`- 16 -
`
`
`
`technological solutions that would do that function that
`would be outside the scope of these claims.
`
`Id. at 18:9-15.
`
`The Report and Recommendation also found that the claims of the ‘221
`
`Patent do not result in inappropriate preemption:
`
`[T]he claims do not risk preempting all future inventions
`related to exchanging access to data for payment on the
`Internet. Instead, when taken as ordered combinations,
`the claims recite specific ways of combining system
`components and method steps beyond the routine use of
`the Internet. The claims address specific ways of
`managing access to digital content data based on
`payment validation through storage and retrieval of use
`status data and use rules in distinct memory types and
`evaluating the use data according to the use rules.
`
`Report and Recommendation at 20.
`
`Moreover, the Corrected Petition’s assertion that “the challenged claims’
`
`broad functional nature firmly triggers preemption concerns,” (Corrected Petition
`
`at 32) is contradicted by Petitioner’s litigation assertions (1) that it does not
`
`infringe the challenged claims (see, e.g., Ex. 2074, Civil Docket Report from
`
`Smartflash LLC, et al. v. Apple Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.), at
`
`45, Dkt. # 271, Apple's Motion for Partial Summary Judgment of
`
`Non−Infringement) and (2) that there are non-infringing alternatives to the claims.
`
`As described in the Report and Recommendation, “both Smartflash and
`
`Defendants identified numerous non-infringing alternatives, such as those
`
`employed by Netflix and Spotify.” Report and Recommendation at 15 (emphasis
`- 17 -
`
`
`
`
`
`added). Indeed, Mr. Wechselberger admitted that he himself provided opinions on
`
`non-infringing alternatives. Wechselberger Deposition, Ex. 2068 at 22:2-8.
`
`Thus, the Corrected Petition’s argument that the challenged claims would
`
`result in preemption is without merit.
`
`2.
`
`Preemption under Mayo and Alice
`
`The Supreme Court’s analyses in Mayo and Alice further confirm that the
`
`challenged claims do not result in preemption. In Mayo, the Supreme Court
`
`clarified that “the underlying functional concern ... is a relative one: how much
`
`future innovation is foreclosed relative to the contribution of the inventor.” Mayo,
`
`132 S. Ct. at 1303. To analyze that issue, the Court looks to the “risk [of]
`
`disproportionately tying up the use of the underlying natural laws, inhibiting their
`
`use in the making of further discoveries.” Id. at 1294. However, in support of the
`
`Petitioner’s case here, Mr. Wechselberger did not even analyze whether there is
`
`any future innovation that is foreclosed. Mr. Wechselberger testified:
`
`Q. In preparing your declaration for the
`
`221 patent, did you analyze what future innovations
`
`would be foreclosed by claim one of the 221 patent?
`
`MS. FUKUDA: Objection to form.
`
`A. I did not. I don't know how one could
`
`reasonably do that.
`
`
`
`- 18 -
`
`
`
`Exhibit 2068, Wechselberger Deposition at 22:9-14 (emphasis added).
`
`When dealing with preemption issues in Alice, the Supreme Court held:
`
`Accordingly, in applying the § 101 exception, we must
`distinguish between patents that claim the “‘building
`blocks’” of human ingenuity and those that integrate the
`building blocks into something more, ...thereby
`“transforming” them into a patent-eligible invention.
`The former “would risk disproportionately tying up the
`use of the underlying” ideas, and are therefore ineligible
`for patent protection. The latter pose no comparable risk
`of pre-emption, and therefore remain eligible for the
`monopoly granted under our patent laws.
`
`Alice, 134 S. Ct. at 2354 (citing Mayo)(internal citations omitted). As discussed in
`
`greater detail below, there are numerous non-infringing alternatives. Thus, the
`
`Corrected Petition has failed to carry its burden of proof that a disproportionate
`
`amount of future innovation is foreclosed. Said differently, without an analysis of
`
`the number of “innovations” that are foreclosed and the relative contribution of the
`
`inventor, the Corrected Petition fails to prove disproportionality or that the relative
`
`preemption results in a finding of non-statutory subject matter.
`
`3.
`
`Non-Infringing Alternatives Show a Lack of Preemption
`
`While the Corrected Petition alleges that the claims would result in
`
`inappropriate preemption, the reality is that even Petitioner’s own expert agrees
`
`that there are a significant number of alternatives that would nonetheless still meet
`
`the Petitioner’s alleged field of “paying for and controlling access to data”
`
`
`
`- 19 -
`
`
`
`(Corrected Petition, Paper 9 at 4) and/or “paying for and controlling access to
`
`content” (Ex. 1221, Wechselberger Declaration at ¶ 86).
`
`Mr. Wechselberger testified that in his “expansive career history” he “came
`
`across” numerous “technological solutions that would do that function” of
`
`“requesting access and paying for content” “that would be outside the scope of
`
`these claims,” including claim 1 of the ‘221 Patent. Ex. 2068, Wechselberger
`
`Deposition at 18:9-15. Mr. Wechselberger also admitted in his deposition that
`
`
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