UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00017
`
`Patent 8,061,598 B2
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`

`
`TABLE OF CONTENTS
`
`V. 
`
`
`INTRODUCTION ........................................................................................... 1 
`I. 
`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. 8,061,598 ............................................ 5 
`A.  Overview of the Technology of the Patent ........................................... 5 
`B. 
`Claim Construction ............................................................................... 8 
`CLAIMS 1, 2, 15, AND 31 OF THE ‘598 PATENT ARE DIRECTED TO
`STATUTORY SUBJECT MATTER ............................................................. 9 
`A. 
`The Two-Part Test for Statutory Subject Matter .................................. 9 
`The ‘598 Patent Claims Are Statutory Under the Second Step of Mayo
`B. 
`and Alice .............................................................................................. 10 
`Claims 1, 2, 15, and 31 of the ‘598 Patent Do Not Result in
`Inappropriate Preemption .................................................................... 13 
`Preemption under DDR Holdings ............................................. 13 
`1. 
`Preemption under Mayo and Alice ........................................... 16 
`2. 
`3. 
`Non-Infringing Alternatives Show a Lack of Preemption ........ 18 
`VI.  PETITIONER HAS ALREADY LOST A CHALLENGE TO SOME OF
`THE SAME CLAIMS ON THE SAME STATUTORY GROUNDS IN ITS
`LITIGATION WITH PATENT OWNER ..................................................... 20 
`VII.  THE USPTO IS ESTOPPED FROM REVISITING THE ISSUE OF
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY SUBJECT
`MATTER ....................................................................................................... 21 
`VIII.  CONCLUSION .............................................................................................. 22 
`
`
`C. 
`
`
`
`
`
`
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`- i -
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`

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`
`
`Exhibit
`Number
`
`PATENT OWNER’S LIST OF EXHIBITS
`
`Exhibit Description
`
`2001
`
`2002
`
`2003
`
`2004
`
`2005
`
`Reserved
`
`Reserved
`
`Redline Showing “Corrected Petition” Compared to Original
`Petition in CBM2015-00017
`
`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
`
`
`
`- ii -
`
`

`
`2058
`
`Memorandum Opinion and Order (on Defendants’ Motions
`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
`
`Deposition Transcript of Anthony J. Wechselberger dated
`May 28, 2015
`
`2069-2070 Reserved
`
`2071
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`2072-2073 Reserved
`
`2074
`
`Civil Docket Report from Smartflash LLC, et al. v. Apple
`Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.)
`
`
`
`
`
`- iii -
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`

`
`I.
`
`INTRODUCTION
`
`Covered business method review was instituted for U.S. Patent 8,061,598
`
`(“the ‘598 Patent”) claims 1, 2, 15, and 31 as being directed to patent-ineligible
`
`subject matter 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 22 at 20 (PTAB April 10, 2015).
`
`Claims 1, 2, 15, and 31 of the ‘598 Patent are directed to statutory subject
`
`matter because they claim 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, claims 1, 2, 15, and 31 of the ‘598 Patent address the
`
`problem of data content piracy on the Internet “[b]y combining digital rights
`
`management with content data storage using a single carrier” such that “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.” Ex.
`
`1201, ‘598 Patent at 5:29-33. In other words, claims 1, 2, 15, and 31 of the ‘598
`
`Patent are directed to a system that combines on the data carrier both the digital
`
`content and the use rules/use status data, so that access control to the digital
`
`content can be continuously enforced prior to each access to the digital content.
`
`
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`- 1 -
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`

`
`As demonstrated below, claims 1, 2, 15, and 31 of the ‘598 Patent do not
`
`result in inappropriate preemption of the “idea of paying for and controlling access
`
`to data” (Corrected Petition, Paper 9 at 6) or the “idea of paying for and controlling
`
`access to content” (Ex. 1219, Declaration of Anthony J. Wechselberger
`
`(hereinafter “the Wechselberger Declaration”) at ¶ 75). Nor is there any evidence
`
`that a disproportionate amount of future innovation is foreclosed by claims 1, 2,
`
`15, and 31 of the ‘598 Patent.
`
`Additionally, in February 2015, Petitioner already lost in Federal Court the
`
`purely legal issue of whether claims 2, 15, and 31 of the ‘598 Patent are directed to
`
`statutory subject matter under 35 U.S.C. § 101 – which the Board is being asked to
`
`reconsider here. 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.
`
`
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`- 2 -
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`
`Patent Owner submits that the USPTO has already adjudicated the threshold
`
`question of whether claims 1, 2, 15, and 31 of the ‘598 Patent comport with 35
`
`U.S.C. § 101, which is a question of law, during the prosecution of the ‘598 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
`
`
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`- 3 -
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`

`
`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
`
`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 ¶¶ 81-85) and opined that “the asserted claims are directed to
`
`nothing more than implementing the basic concept of providing access to content
`
`based on payment data and/or rules, using generic features present on general
`
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`- 4 -
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`purpose computers. Therefore, none of those claims is patentable” (id. at ¶ 86) is
`
`that opinion based on less than a preponderance of the evidence, or more? Without
`
`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. 8,061,598
`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 patent-at-issue, the ‘598 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.” Ex. 1201, ‘598 Patent at 1:20-28.
`
`Preferred embodiments described in the ‘598 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
`
`
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`- 5 -
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`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
`
`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. Id. at 15:65-16:17.
`
`Referring to preferred embodiments, the ‘598 Patent discloses that a data
`
`supply system may provide users with a seamless purchase and content delivery
`
`experience. Id. at 23:63-24:1. 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 id. 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 id. 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 id. 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 id. at 8:6-9.
`
`
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`- 6 -
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`

`
`The ‘598 Patent 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.” Id. at 24:16-18. “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.” Id. at 9:20-22. “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.” Id. at 4:67-5:8. Further, “use status data [is retrieved] from
`
`the data carrier [to] indicat[e] past use of the stored data.” Id. at 9:33-35. Thus, as
`
`described in the ‘598 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 both the digital content
`
`and the use rules/use status data, access control to the digital content can be
`
`continuously enforced prior to access to the digital content. By comparison, unlike
`
`a system that uses use rules/use status data as claimed, when a DVD was
`
`
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`- 7 -
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`

`
`physically rented for a rental period, there was no mechanism to write partial use
`
`status data to the DVD when only part of the DVD had been accessed (e.g., to
`
`track whether a renter had “finished with” the DVD yet).
`
`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 22-23. However, “payment data” in
`
`the context of the claims of the ‘598 Patent should be interpreted to mean “data
`
`that can be used to make payment for content” when using a broadest reasonable
`
`interpretation.1
`
`The ‘598 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 ‘598 Patent, step S54
`
`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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`

`
`reads “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. CLAIMS 1, 2, 15, AND 31 OF THE ‘598 PATENT ARE DIRECTED
`TO STATUTORY SUBJECT MATTER
`A. The Two-Part Test for Statutory Subject Matter
`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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`

`
`inventive concept that transforms the nature of the claims into patent-eligible
`
`subject matter. Mayo, 132 S. Ct. at 1294.
`
`B.
`
`The ‘598 Patent 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 that of the ‘598 patent, from non-statutory claims.
`
`In DDR Holdings, the Federal Circuit 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.” DDR Holdings,
`
`773 F.3d at 1257.
`
`Such is the case here too. Claims 1, 2, 15, and 31 of the ‘598 Patent are 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 the
`
`digital content data item and at least one use rule (claim 1), and “code to provide
`
`access to the at least one content data item in accordance with the at least one use
`
`rule” (claim 2), or “a content access PIN memory store to store a PIN number for
`
`controlling access to the content data memory” (claim 15), or “evaluating the use
`
`status data using the one or more use rules to determine whether access to the
`
`content data item is permitted; and enabling access to the content data item
`
`responsive to a determination that access to the content data item is permitted”
`
`
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`- 10 -
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`
`(claim 31), access control to the digital content data item can be continuously
`
`enforced prior to access to the digital content data item, allowing subsequent use
`
`(e.g., playback) of the digital content to be portable and disconnected, and
`
`additional content can be obtained.
`
`The Report and Recommendation also acknowledged the statutory nature of
`
`claims in the patent family, finding:
`
`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).
`
`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
`
`
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`- 11 -
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`
`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.
`
`The Corrected Petition alleges that “[t]he challenged claims of the ’598
`
`Patent merely recite steps and corresponding systems well-known in the field of
`
`data storage and access, including use of a ‘portable data carrier.’” Corrected
`
`Petition, Paper 9 at 3 (citing Ex.1201 1:20-24, Abstract, claim 1). The Corrected
`
`Petition further alleges “Claim 1, for example, recites five rudimentary
`
`components of a portable data carrier (e.g., smart card)—(A) an interface, (B and
`
`C) content data and use rule memory, (D) a program store storing code
`
`implementable by a processor, and (E) a processor . . . for implementing code. The
`
`recited code is similarly elementary, storing content data and a use rule in
`
`memory.” Id. Claim 1, and its dependent claims 2 and 15, however, recite that
`
`one or more use rules and the content data item are stored in the same data carrier.
`
`Ex. 1201, ‘598 Patent at 25:54-67. The Corrected Petition does not allege that
`
`such a configuration was known, nor does such a configuration relate to mental or
`
`pen-and-paper processes. By ignoring that the one or more use rules and the
`
`content data item are stored in the same data carrier, it can be seen that the
`
`Corrected Petition is ignoring even the context of the problem – that a
`
`technological solution is necessary to address the technological problem created by
`
`
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`- 12 -
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`
`the nature of digital content and the Internet. Accordingly, the claims of the ‘598
`
`Patent are directed to statutory subject matter under the two-part test of Mayo and
`
`Alice.
`
`C. Claims 1, 2, 15, and 31 of the ‘598 Patent Do Not Result in
`Inappropriate Preemption
`1.
`Claims 1, 2, 15, and 31 of the ‘598 Patent do not result in inappropriate
`
`Preemption under DDR Holdings
`
`preemption of the “idea of paying for and controlling access to data” (Corrected
`
`Petition, Paper 9 at 6) or the “idea of paying for and controlling access to content”
`
`(Ex. 1219, Wechselberger Declaration at ¶ 75) 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 36. 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 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)).
`
`
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`- 13 -
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`

`
`Mr. Wechselberger’s deposition testimony supports that claims 1, 2, 15, and
`
`31 of the ‘598 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 his declaration regarding the ‘598 Patent
`
`is not saying that the challenged claims cover all possible implementations of
`
`controlling access to content based on payment or rules. See, Exhibit 2068,
`
`Wechselberger Deposition at 48:16 – 50:15. More specifically, Mr. Wechselberger
`
`admitted that “[it is] possible to build a portable data carrier that includes a content
`
`data memory and a program store that enables access to content that does not
`
`include a use rule memory” as required by claim 1 of the ‘598 Patent. Ex. 2068,
`
`Wechselberger Deposition at 50:16-51:5 (emphasis added). Mr. Wechselberger
`
`similarly testified that “[it is] possible to build a portable data carrier that includes
`
`content data memory and a program store that enables access to content that does
`
`not include code for storing at least one use rule in a use rule memory” as required
`
`by claim 1 of the ‘598 Patent. Id. at 51:6-19 (emphasis added). As relates to claim
`
`2 of the ‘598 Patent, which adds the limitation of “code to provide access to the at
`
`least one content data item in accordance with the at least one use rule,” Mr.
`
`Wechselberger conceded that “[it is] possible to build a portable data carrier that
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`does not restrict access to content data items stored therein using at least one use
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`rule.” Id. at 52:9-53:8 (emphasis added). Similarly, as relates to claim 15 of the
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`‘598 Patent, Mr. Wechselberger admitted that “[it is] possible to build a portable
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`data carrier … that does not include a content access PIN memory store to store a
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`PIN number for controlling access to the content data memory” as required by
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`claim 15. Id. at 55:19- 56:16 (emphasis added). Finally, as relates to method
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`claim 31, which has a step including “reading the use status data,” Mr.
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`Wechselberger testified that “[it is] possible to provide access to content based on
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`payment without utilizing use status data as the term ‘use status data’ would be
`
`understood in the context of the 598 Patent.” Id. at 57:7-16 (emphasis added).
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`The Report and Recommendation also found that the claims of the ‘598
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`Patent do not result in inappropriate preemption:
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`[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.
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`Moreover, the Corrected Petition’s assertion that “the challenged claims’
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`broad functional nature firmly triggers preemption concerns,” (Paper 9 at 36) is
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`contradicted by Petitioner’s litigation assertions (1) that it does not infringe the
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`challenged claims (see, e.g., Ex. 2074, Civil Docket Report from Smartflash LLC,
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`et al. v. Apple Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.), at 45, Dkt. # 271,
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`Apple's Motion for Partial Summary Judgment of Non−Infringement) and (2) that
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`there are non-infringing alternatives to the claims. As described in the Report and
`
`Recommendation, “both Smartflash and Defendants identified numerous non-
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`infringing alternatives, such as those employed by Netflix and Spotify.” Report and
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`Recommendation at 15 (emphasis added). Indeed, Mr. Wechselberger admitted
`
`that he himself provided opinions on non-infringing alternatives for certain
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`Smartflash claims. Ex. 2068, Wechselberger Deposition at 22:2-8.
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`Thus, the Corrected Petition’s argument that the challenged claims would
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`result in preemption is without merit.
`
`Preemption under Mayo and Alice
`
`2.
`The Supreme Court’s analyses in Mayo and Alice further confirm that the
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`challenged claims do not result in preemption. In Mayo, the Supreme Court
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`clarified that “the underlying functional concern ... is a relative one: how much
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`future innovation is foreclosed relative to the contribution of the inventor.” Mayo,
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`132 S. Ct. at 1303. To analyze that issue, the Court looks to the “risk [of]
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`disproportionately tying up the use of the underlying natural laws, inhibiting their
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`use in the making of further discoveries.” Id. at 1294. However, in support of the
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`Petitioner’s case here, Mr. Wechselberger did not even analyze whether there is
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`any future innovation that is foreclosed by any of the Smartflash patents. Mr.
`
`Wechselberger testified:
`
`Q. In preparing your declaration for the
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`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.
`
`Q. In preparing your declaration for any of
`
`the four patents at issue, did you analyze what
`
`future innovations would be foreclosed by any of the
`
`claims of those four patents?
`
`MS. FUKUDA: Objection to form.
`
`A. Same answer. Future innovations --
`
`innovations is a hugely broad arena, and, again,
`
`I -- I would not know how a single person could
`
`reasonably do that.
`
`Exhibit 2068, Wechselberger Deposition at 22:9-23 (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
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`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
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`greater detail below, there are numerous non-infringing alternatives. Thus, the
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`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.
`
`Non-Infringing Alternatives Show a Lack of Preemption
`
`3.
`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
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`the Petitioner’s alleged field of “paying for and controlling access to data”
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`(Corrected Petition, Paper 9 at 6) and/or “paying for and controlling access to
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`content” (Ex. 1219, Wechselberger Declaration at ¶ 75).
`
`Mr. Wechselberger admitted to the existence of non-infringing alternatives
`
`to each of the claims at issue here. For example he admitted that “[it is] possible to
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`build a portable data carrier that includes a content data memory and a program
`
`store that enables access to content that does not include a use rule memory” as
`
`required by claim 1 of the ‘598 Patent. Ex. 2068, Wechselberger Deposition at
`
`50:16-51:5 (emphasis added). Mr. Wechselberger similarly testified that “[it is]
`
`possible to build a portable data carrier that includes content data memory and a
`
`program store that enables access to content that does not include code for storing
`
`at least one use rule in a use rule memory” as required by claim 1 of the ‘598
`
`Patent. Id. at 51:6-19 (emphasis added). As relates to claim 2 of the ‘598 Patent
`
`which adds the limitation of “code to provide access to the at least one content data
`
`item in accordance with the at least one use rule,” Mr. Wechselberger conceded
`
`that “[i