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`Covered Business Method Patent Review
`United States Patent No. 8,118,221
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`Petitioner: Apple Inc.
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`Attorney Docket No.:
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` 104677-5008-813
`Customer No. 28120
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`§
`Inventor: Hulst et al.
`United States Patent No.: 8,118,221 §
`Formerly Application No.: 12/943,872 §
`Issue Date: February 21, 2012
`§
`Filing Date: November 10, 2010
`§
`Former Group Art Unit: 2887
`§
`Former Examiner: Thien M. Le
`§
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`For: Data Storage and Access Systems
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`MAIL STOP PATENT BOARD
`Patent Trial and Appeal Board
`United States Patent and Trademark Office
`Post Office Box 1450
`Alexandria, Virginia 22313-1450
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`DECLARATION OF ANTHONY J. WECHSELBERGER IN SUPPORT OF
`APPLE INC.’S PETITION FOR COVERED BUSINESS METHOD
`PATENT REVIEW OF UNITED STATES PATENT NO. 8,118,221
`PURSUANT TO 35 U.S.C. § 321, 37 C.F.R. § 42.304
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`Apple Exhibit 1221 Page 00001
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`I, Anthony J. Wechselberger, declare as follows:
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`Covered Business Method Patent Review
`United States Patent No. 8,118,221
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`I.
`INTRODUCTION
`1. My name is Anthony Wechselberger. I am the President of Entropy
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`Management Solutions (EMS), a consulting company I founded in 1999. I have been
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`retained by Apple Inc. to provide assistance regarding U.S. Patent No. 8,118,221 (“the
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`’221 patent”). Specifically, I have been asked to consider the validity of claims 1, 2,
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`11, and 32 of the ’221 patent (“the challenged claims”) under 35 U.S.C. § 101 and the
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`validity of claim 32 under 35 U.S.C. § 103. I have personal knowledge of the facts
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`and opinions set forth in this declaration, and, if called upon to do so, I would testify
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`competently thereto.
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`2. My areas of expertise include broadcast and broadband content
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`distribution networks and communications infrastructures (Internet, broadcast, cable,
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`satellite and wireless mediums) including one-way and two-way interactive
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`architectures, computer networks, communications systems technologies and
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`equipment, various content and information distribution and merchandizing channels,
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`digital television, digital cinema, interactive media/multimedia systems, Internet
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`technologies (including but not limited to delivering content via the Internet,
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`communications standards and protocols), digital rights management (DRM), physical
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`media and file based and streaming content delivery, and other areas of expertise
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`relevant to the technologies of this matter. Attached hereto as Appendix A is a true
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`and correct copy of my Curriculum Vitae describing my background and experience.
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`3.
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`I am currently the President of Entropy Management Solutions
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`(“EMS”), a position I have held since I founded the company in 1999. In this
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`capacity I perform consulting services related to technology and business
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`development, content management, distribution and merchandizing, systems
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`engineering and product design in the areas of industrial and consumer broadband
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`and multimedia technologies and associated commercial systems.
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`4.
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`I have forty years of experience working with high technology systems
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`related to military, commercial, and consumer communication systems and networks.
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`I have held various design, leadership and executive positions in, for example,
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`engineering, operations, sales and marketing, and product management at leading
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`companies in those fields, such as TV/COM International, Inc. (TV/COM) and Oak
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`Communications, Inc. Over many years I have published and/or presented a number
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`of articles and papers related to content/information creation,
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`transmission/distribution and reception/consumption in various media sectors,
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`including cable, satellite, broadcast/wireless, Internet and digital cinema. Attached as
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`part of Appendix A is a list of my publications.
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`5.
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`I specialize in the areas of digital communications technologies, systems
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`and networks, including infrastructures, signal processing, network management and
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`command and control, and information security as used for content management,
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`merchandizing and delivery. My background includes much experience with
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`interactive and client-server technologies, such as those used in broadband and
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`Internet networks. “Network management and command and control” refers to the
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`technical oversight and management of communication systems and equipment
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`within a distribution system to direct both the transmission equipment (e.g., network
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`infrastructures, servers, hubs, nodes, head ends and uplinks etc.) and receiving
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`equipment (e.g., personal computer, television, set top box, handset/mobile device or
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`other consumer appliance) as to communications, applications and set-up and
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`operation in order to perform required features and functions. The “required features
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`and functions” of course includes the managed delivery of content over a network
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`from content suppliers to content consumers according to specified constraints—
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`which in digital delivery systems is commonly referred to as Digital Rights
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`Management (DRM).
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`6.
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`As a Vice President at Oak Communications (1980s) and Chief
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`Technology Officer at TV/COM (1990s), I was involved in the development of
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`terrestrial broadcast, satellite uplink and cable head end industrial equipment for
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`television transmissions, as well as consumer appliance equipment such as set top
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`boxes (STB) and other home based or home networked devices. All of these
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`architectures included computer control systems for network and associated network
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`device command and control, and for management of content distribution and
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`consumer appliance functions. These systems are all “addressable,” meaning that the
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`STB is controlled by a head end management computer, which executes so called
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`“conditional access system” (CAS) computer programs, as to which content
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`(programs and/or networks) is accessible by the consumer via the STB. CAS
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`technology is a form of DRM applied to real-time content delivery and consumption
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`systems such as those used in the pay television industries.
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`7.
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`I was involved from the start with the development and evolution of
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`modern consumer digital audio and video communications systems and technologies.
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`In 1991, my employer, TV/COM, and I began to participate in the International
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`Organization for Standardization (ISO) MPEG-2 digital television standards
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`initiatives, and, in the following year, in both the both the European Digital Video
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`Broadcast (DVB) and U.S. Advanced Television Systems Committee (ATSC) forums
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`(which were based upon MPEG-2). I was an active participant and contributor to the
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`first two standard-setting bodies, and was a voting member of the ATSC. As Chief
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`Technology Officer of TV/COM, I developed a business strategy based on
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`supporting open international standards for digital television (DTV). In the mid
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`1990s, as the technologies and standards in support of DTV moved towards
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`implementation, the dawn of the Internet age arrived. This had a dramatic impact on
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`the way broadband systems engineers like me began to plan for the future. This is
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`because the concept of convergence—the melding of traditional broadband
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`communications systems and equipment, computers and computer networks, and the
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`telecommunications worlds—was changing the communications infrastructure and
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`technology landscape. When television distribution went all-digital, the information
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`of television became simply “data”— and it became possible for the technologies of
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`digital television, computers and computer networks and the telephony industry
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`(which was in the midst of its transition to digital infrastructure that began in the
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`1970s) to coalesce. Support for on-line and Internet services demanded a high
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`performance two-way data transmission capability, and so broadband network
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`providers began to upgrade their distribution infrastructures accordingly.
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`8.
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`In conjunction with this convergence, as TV/COM’s Chief Technology
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`Officer I directed the expansion of our network products into broadband data
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`communications generally, from an initial focus on digital television. Networks
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`became more advanced in order to support real-time interaction between consumers
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`and information sources within the network. Interactive and on-line applications led
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`to rapid adoption of client-server information access approaches (typical of the
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`computer industry) in the products and technologies I worked with for content
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`delivery and network command and control functions. Starting in the early 1990s the
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`ubiquitous set top box began to evolve from a minimalist appliance towards its
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`current status as a communications hub of the consumer’s media room. In this same
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`time period, the PC had also become a ubiquitous consumer appliance, and with the
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`Internet age came much innovation in electronic information distribution and
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`electronic merchandizing – that is, technology related to complementing physical
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`information media and brick and mortar institutions with all-electronic digital
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`alternatives. This was an explosive period of so called digital rights management
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`(“DRM”)—the management and control of the distribution and consumption of
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`digital content in electronic systems, which I will discuss in more detail below. I and
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`TV/COM were part of this evolution until TV/COM was purchased in 1999.
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`9.
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`In my consulting work I have continued to work with technologies,
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`systems, and network infrastructures for content distribution, management, and
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`control, i.e. DRM. My current work involves both traditional and newly developing
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`architectures and distribution channels. As an example of the latter, I am the chief
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`security systems architect on behalf of the six major Hollywood studios for their
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`“Digital Cinema Initiatives” (DCI) consortium.1 DCI develops and evolves the
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`specifications for transitioning first run theatrical movie releases from film to digital
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`for distribution and exhibition display. I am responsible for all elements of command
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`and control and digital rights management (DRM) for digital cinema system design
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`and implementation. I also represent DCI at the Society of Motion Picture and
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`Television Engineers (SMPTE), which is developing the set of internationally
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`1 See: http://www.dcimovies.com
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`recognized standards for global adoption of digital cinema. The migration to all-
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`digital distribution impacts other content distribution channels such as early window
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`release for hospitality, airplane and cable/satellite video-on-demand (VOD), as well as
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`newer so-called “over-the-top” distribution channels based on Internet distribution. I
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`have also been a strategy and technology consultant to content management and
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`distribution entities in those areas. Attached as a part of Appendix A are further
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`details about relevant projects.
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`10. The technologies of the ’221 patent and its family relate generally to
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`apparatus, systems and methods to download content over a network from a source
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`location to a data carrier storage device via an intermediary device called a data access
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`terminal, after which content on the data carrier can be consumed by a user via a
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`rendering device. This involves methods and technologies to collect (select or
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`source), distribute and deliver content to consumers, who interact with supplied
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`information and supporting network infrastructure in real time. My experience with
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`these types of systems and technologies for conditioned distribution and access to
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`content stretches from the late 1970s (long before the term “DRM” was coined) until
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`today, inclusive of similar network architectures, interactive systems and equipment,
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`and associated consumer appliances.
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`11. My consulting practice today includes a balance of technology and
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`systems engineering services and assistance to the legal community as a technology
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`consultant and/or expert witness. I have been accepted to provide, and have
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`provided expert testimony in the areas of multimedia technologies and associated
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`networks as used for content management and delivery on many occasions.
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`12.
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`I have a Bachelors degree and a Master’s degree in Electrical
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`Engineering, conferred by the University of Arizona in 1974 and San Diego State
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`University in 1979, respectively. I also completed the Executive Program for
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`Scientists and Engineers at the University of California at San Diego in 1984. I am a
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`named inventor on two patents, U.S. Patent No. 4,531, 020, “Multi-layer Encryption
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`System for the Broadcast of Encrypted Information,” and U.S. Patent No. 5,113,440,
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`“Universal Decoder.”
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`13. A listing of testimony that I have provided in the last six years is
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`attached hereto as Appendix B. I am being compensated for my time spent in
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`connection with this case at a flat rate of $325 per hour (plus expenses). I am being
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`paid regardless of the facts I know or discover and/or the conclusions or opinions I
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`reach. I have no personal interest or financial stake in the outcome of this case.
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`14.
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`In preparing my opinions I have considered the materials itemized in
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`Appendix C.
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`II. THE ’221 PATENT
`15. The ’221 patent, entitled “Data Storage and Access Systems,” issued on
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`February 21, 2012, to assignee Smartflash Technologies Limited and named inventors
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`Patrick Racz and Hermen-ard Hulst. The ’221 patent purports to cover “[d]ata
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`storage and access systems [that] enable downloading and paying for data such as
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`audio and video data, text, software, games and other types of data.” See, e.g., Ex.
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`1201 (the ’221 patent) at Abstract. The alleged invention applies classical client-server
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`models in a multi-stage architecture that revolves around appliances and methods for
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`loading data into a memory storage device generally referred to as a data carrier. The
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`user can then access the data subject to certain conditions.
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`16.
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`I have analyzed claims 1, 2, 11, and 32 of the ’221 patent and reviewed
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`the File History of the ’221 patent (Ex. 1211).
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`17. The ’221 patent issued from application number 12/943,872, which was
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`filed on November 10, 2010. This application issued from a chain of applications
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`claiming priority to United Kingdom application no. 9925227, filed October 25, 1999.
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`18. The Examiner considering the application leading to the ’221 patent
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`issued a Restriction Requirement on the originally filed claims on March 22, 2011.
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`The Examiner stated that the filed claims were drawn to five inventions that are
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`“related as subcombinations disclosed as usable together in a single combination.”
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`(Ex. 1211, 3/22/2011 OA at 3). The Examiner defined Group I as “drawn to a
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`method for providing data,” Group II as “drawn to a portable data carrier,” Group
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`III as “drawn to a method for controlling access,” Group IV as “drawn to a reader
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`terminal and its specifics,” and Group V as “drawn to a computer system for handling
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`data payment and security procedures.” (Ex. 1211, 3/22/2011 OA at 2).
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`19. Applicants filed an amendment responsive to the Restriction
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`Requirement on May 20, 2011. Applicants elected to prosecute the claims designated
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`as Group IV in the Restriction Requirement (claims 35-65, 73, and 75) and cancelled
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`the remaining claims (1-34, 66-72, 74, and 76) without traverse. (Ex. 1211, 5/20/2011
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`Amend. at 9).
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`20. On July 19, 2011, Applicants filed a Petition to Change Order of Names
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`of Joint Inventors in the Heading of the Patent Application under 37 C.F.R. 1.182.
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`The order of the inventors was changed to list Patrick S. Racz first, followed by
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`Hermen-ard Hulst. (Ex. 1211, 7/19/2011 Petition at 1-2). The Office of Petitions
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`granted the petition to change the order of the names of the inventors on August 19,
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`2011. (Ex. 1211, 8/19/2011 Decision on Petition).
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`21. The Examiner issued a first non-final office action on July 29, 2011.
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`The Examiner rejected application claims 35-55, 57-59, 62, 73, and 75 on the ground
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`of nonstatutory obviousness-type double patenting over claims of U.S. Patent
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`7,334,720. (Ex. 1211, 7/29/2011 OA at 3). The Examiner recited claim 3 of the ’720
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`patent to reject pending independent claims 35, 73, and 75, and cited to additional
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`claims of the ’720 patent to reject other pending independent and dependent claims.
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`(Ex. 1211, 7/29/2011 OA at 3-5). The Examiner rejected application claims 63-65 on
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`the ground of nonstatutory obviousness-type double patenting over claims 1 and 3 of
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`the ’720 patent in view of claims of U.S. Patent 7,942,317. (Ex. 1211, 7/29/2011 OA
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`at 5-7). The Examiner objected to application claims 56, 60, and 61 as being
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`dependent upon a rejected base claim. (Ex. 1211, 7/29/2011 OA at 9).
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`22. On August 16, 2011, Applicants filed a reply to the office action along
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`with a terminal disclaimer to overcome the double patenting rejection. The Examiner
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`issued a Notice of Allowance on October 25, 2011. The Examiner stated that “the
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`prior art fails to disclose a data access terminal comprising the interface, the data
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`carrier, the processor and the program store for storing the codes in the manner as
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`recited in claim 35,” and also “fails to disclose the limitations of claims 46, 51, 58, 62,
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`and 73.” (Ex. 1211, 10/25/2011 Notice at 2). On December 9, 2011, the Examiner
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`issued a Supplemental Notice of Allowance to correct the dependency of claim 75.
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`(Ex. 1211, 12/09/2011 Supp. Notice at 2).
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`III. ONE OF ORDINARY SKILL
`I understand that the factors considered in determining the ordinary
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`23.
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`level of skill in the art include the level of education and experience of persons
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`working in the field; the types of problems encountered in the field; and the
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`sophistication of the technology.
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`24.
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`In my opinion, a person of ordinary skill in the art relating to the
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`technology of the asserted patents at the time at which the patents were filed—the
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`field of “data storage and access systems,” including the use of a “portable data carrier
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`for storing and paying for data and to computer systems for providing access to data
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`to be stored” (See, e.g.¸ Ex. 1201 (the ’221 patent) at col. 1, lns. 20-23)—would have
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`had at least a Bachelor of Science degree in electrical engineering, computer science or
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`a telecommunications related field, and at least three years of industry experience that
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`included client-server data/information distribution and management architectures.
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`25. As I described in the discussion of my background beginning at
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`paragraph 3 above, I have had decades of experience with computer based content/
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`information distribution networks, which included mixtures of consumer and
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`industrial equipment. As of October 25, 1999, I would have qualified as one of skill
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`in art according to the above definition.
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`IV. CLAIM CONSTRUCTION
`For the purposes of this declaration, I have been asked to assume
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`26.
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`constructions for certain claim terms as presented in the following table. For all
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`remaining claim terms, I have assumed their plain and ordinary meaning.
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`Claim term
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`“payment data” 2
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`Claim Construction
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`“data representing payment made for
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`2 I understand that the district court construed “payment data” to mean “data that can
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`be used to make payment for content.” My conclusions regarding invalidity would
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`not be changed if the Board adopted that construction here.
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`Claim term
`(Claims 1, 2, 11, and 32)
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`“use rule data”
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`“access rule”
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`Claim Construction
`requested content data” and distinct from
`“access control data”
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`“data for rules specifying a condition
`under which access to content is
`permitted”
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` “rule specifying a condition under which
`access to content is permitted”
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`V.
`STATE OF THE ART
`27. By Smartflash’s claimed priority date of October 25, 1999, the elements
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`of the challenged claims were all well-known in the art, and their combination as
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`claimed was also well-known or at minimum obvious to a person of ordinary skill.3
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`28. Years before the October 25, 1999 priority date claimed by Smartflash,
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`the electronic sale and distribution of digital products and content protection for
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`digital products were well-known. Further, the concept of providing access to data in
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`exchange for payment as well known.
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`3 At various points in this declaration I refer to my opinions about the
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`knowledge or understanding of a person of ordinary skill in the art. All of these
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`opinions should be understood to refer to the knowledge or understanding of a
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`person of ordinary skill in the art as of October 25, 1999, unless specifically noted
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`otherwise.
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`For example, U.S. Patent No. 4,999,806, entitled “Software Distribution
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`29.
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`System,” filed on September 4, 1987 and issued on March 12, 1991, to Fred Chernow
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`and Randy J. Peterson (“Chernow” or “the Chernow patent”), discloses a system and
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`method for the sale and distribution of digital products, by telephone, with a focus on
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`software, and also discloses content protection for those digital products. See, e.g., Ex.
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`1206, the Chernow Patent, at Abstract (“A central station distributes software by
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`telephone. The central station accepts credit card information, transmits an
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`acceptance code to a caller and then terminates the call. After verifying the credit card
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`information, the station calls the purchaser back and continues with the transaction
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`only after receiving the acceptance code.”); col. 1, ln. 67-col. 2, ln. 9 (“It is an object
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`of this invention to provide a means for selling and distributing protected software
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`using standard telephone lines for transferring the software from the seller to the
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`purchaser. Another object of this invention is to permit the purchaser to rent the
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`protected software for a period of time after which it will self destruct. Another
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`object of this invention is to permit the purchaser to rent the protected software for a
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`specific number of runs which would be useful, e.g., if the software were a game.”).
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`As explained above, the Chernow patent discloses making different types of access
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`available, such as purchase versus rental. Further, the Chernow patent discloses a
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`Control Transfer Program and a Primary Protection Program that ensure the
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`computer receiving a downloaded program does not have another program present
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`that could create unauthorized copies of that downloaded program. See Ex. 1206
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`Abstract; col. 2, ln. 65-col. 3, ln. 23.
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`30. U.S. Patent No. 4,878, 245, entitled “Control and Metering System for
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`Pay Television Over a Cable Network,” filed January 22, 1987 and issued October 31,
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`1989, to Graham C. Bradley et al. (“Bradley” or “the Bradley patent”), discloses a
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`system for pay television. See, e.g., Ex. 1207, the Bradley patent, at Abstract, col. 4 lns.
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`27-35 (“This apparatus can permit programming to be sold to the subscriber by the
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`month, by the program, and by the hour of any portion thereof. Payment by the
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`month is known as Subscription Television. Payment by the program is known as
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`Pay-per-View. Payment by viewing time is known as Pay-for-Use (PFU) television. It
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`also permits the Cable Operator to share revenues with independent programming
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`suppliers sharing some portion of the cable TV distribution system.”).
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`31. U.S. Patent No. 5,675,734, entitled “Method for Transmitting a Desired
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`Digital Video or Audio Signal,” filed September 18, 1990 and issued March 2, 1993, to
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`Arthur R. Hair (“the Hair patent”), discloses a method for electronic sales of digital
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`audio and digital video. See, e.g., Ex. 1205, the Hair patent, at Abstract (“A method for
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`transferring desired digital video of digital audio signals”), col. 1, lns. 15-20 (“The
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`present invention is related to a system and associated method for the electronic sales
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`and distribution of digital audio or digital video signals, and more particularly, to a
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`system and method which a user may purchase and receive digital audio or digital
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`video signals from any location which the user has access to telecommunications
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`lines.”).
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`32.
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`In addition, U.S. Patent No. 5,103,392, entitled “System for Storing
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`History of Use of Programs Including User Credit Data and Having Access by the
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`Proprietor,” filed on December 5, 1990 and issued on April 7, 1991, to Ryoichi Mori
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`and assigned to Fujitsu Limited (“Mori” or “the Mori patent”), discloses a method for
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`storing information about customer use of digital products so that a customer can be
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`charged according to that use and in accordance with that customer’s credit. See, e.g.,
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`Ex. 1212, the Mori Patent at col. 1, ln. 64-col. 2, ln. 17 (“In accordance with a
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`fundamental aspect of the present invention, there is provided a system for storing
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`data on the history of use of programs, including a data processing apparatus used by
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`a user and program storage means for storing a program acquired from a proprietor
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`and program-specific data. The data processing apparatus includes user-specific credit
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`data storage means for storing data identifying the user of the data processing
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`apparatus and indicating credit for payment capacity, use time length, or the like of
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`the user of the data processing apparatus. Also included is use decision means for
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`determining permission to use the program on the data processing apparatus on the
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`basis of program-specific data supplied from the program storage means or user-
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`specific credit data supplied from the user-specific credit data storage means, the use
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`decision means delivering either an affirmative or negative signal corresponding to
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`results of the decision. Also included is program use history storage means connected
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`to the use decision means for storing program use history data derived from the
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`program-specific data or the user-specific credit data.”). The Mori patent’s emphasis
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`on determining whether a user has permission to access a program and making sure
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`program providers are compensated for the use of their programs underscores this
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`existing focus in the art on digital rights management (“DRM”), over eight years
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`before Smartflash’s claimed October 25, 1999 priority date.
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`33.
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`Further, European Patent Application, Publication No. EP0809221A2,
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`entitled “Virtual vending system and method for managing the distribution, licensing
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`and rental of electronic data,” listing applicant Sun Microsystems, Inc. and inventors
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`Andrew A. Poggio and Leo A. Hejza, and published on November 26, 1997
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`(“Poggio” or “the Poggio patent application”), likewise discloses a ”virtual vending
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`machine” system for the sale and distribution of digital products. See, e.g., Ex. 1216,
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`the Poggio patent application at Abstract (“A virtual vending machine manages a
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`comprehensive vending service for the distribution of licensed electronic data (i.e.,
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`products) over a distributed computer system. . . . The virtual vending machine
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`distributes licenses for the electronic data for the complete product or for
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`components thereof and for a variety of time frames, including permanent licenses
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`and rental period licenses. The virtual vending machine provides client computers
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`with the capability to obtain information regarding the available products and the
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`associated license fees and rental periods, to receive the product upon receipt of a
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`corresponding electronic payment, and to reload the product during the term of the
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`license.”). Like the Chernow patent, the Poggio patent application discloses different
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`types of access, including rentals, and re-download capabilities for already-purchased
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`content. See, e.g., Id. The Poggio patent application will be discussed in more detail
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`below and in Appendix D, and that discussion is incorporated here by reference.
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`34.
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`Similarly, a 1997 IEEE article, “The Secure Distribution of Digital
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`Contents,” by Eberhard von Faber, Robert Hammelrath, and Franz-Peter Heider
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`(“von Faber” or “the von Faber article”), recognized in its Introduction that
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`“[e]lectronic commerce systems dealing with the distribution of digital contents like
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`software or multimedia data have to couple the use of the provided digital goods with
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`a prior payment for the goods in a way which cannot be bypassed.” See Ex. 1220, the
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`von Faber article, at 7. The von Faber article sets forth a proposal for a system in
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`which encrypted contents are distributed and customers purchase keys required to
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`utilize that encrypted content. See, e.g., Ex. 1220, the von Faber article, at 7 (“The
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`basic idea of one possible solution is to distribute the contents in encrypted form, and
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`to have the customer pay for the key which he needs to transform the encrypted
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`content in an usable form. The security problem can in this way be transformed into
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`a problem of key distribution.”); Id. at 7 (“The Content Provider provides digital
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`contents in encrypted form being distributed by the Content Distributor. The Key
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`Management System holds the keys for the contents to be decrypted. The
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`Authorisation System permits the distribution of the appropriate key after settling of
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`the fees payable by the Customer, who will enjoy the decrypted digital contents. The
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`role of the Content Distributor is not essential for the subsequent discussion but, of
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`course, for the business to take place.”); see also Ex. 1220, the von Faber article, Fig. 1.
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`35. The von Faber article recognizes that its system could be used for
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`different content distribution methods and different payment methods known in the
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`art. See, e.g., Ex. 1220, the von Faber article at 13 (“The outlined system has the
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`following characteristics: Different methods can be used to distribute the encrypted
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`contents (standard techniques). This includes broadcasting, point-to-point
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`networking, as well as offering disks. Different electronic payment methods can be
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`integrated independent from the number of protocol steps needed. This includes
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`credit card based systems as well as electronic purses. This flexibility leads to the fact
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`that totally different authorisation methods can be integrated.”).
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`36.
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`Further, the von Faber article addressed the issue of payment
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`distribution to content providers, such as royalties. See, e.g., Ex. 1220, the von Faber
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`article at 13 (“The system will support re-selling in a simple way. Re-sellers can
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`integrate other manufacturer’s products into own packages without the need of
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`signing any extra contract. The system automatically divides the package price
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