throbber
UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE, INC.
`
`Petitioner
`
`v.
`
`SMARTFLASH LLC
`
`Patent Owner
`
`____________
`
`Case CBM2015-00018
`
`Patent 7,942,317
`
`____________
`
`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
`

`
`TABLE OF CONTENTS
`
`TABLE OF CONTENTS
`
`
`
`PATENT OWNER’S LIST OF EXHIBITS ............................................................. ii
`
`I.
`
`II.
`II.
`
`III. THE CHALLENGED CLAIM IS NOT DIRECTED TO A FINANCIAL
`PRODUCT OR SERVICE .............................................................................. 4
`
`III.
`
`THE CHALLENGED CLAIM Is NOT DIRECTED TO A FINANCIAL
`
`PRODUCT OR SERVICE ............................................................................ ..4
`
`
`III. THE CHALLENGED CLAIM OF THE ‘317 PATENT IS A
`TECHNOLOGICAL INVENTION EXEMPT FROM CBM REVIEW ........ 8
`
`III.
`
`THE CHALLENGED CLAIM OF THE ‘3 17 PATENT IS A
`
`TECHNOLOGICAL INVENTION EXEMPT FROM CBM REVIEW ...... ..8
`
`IV.
`
`
`IV. APPLE’S UNTIMELY § 101 CHALLENGE WILL NOT SECURE THE
`APPLE’S UNTIMELY § 101 CHALLENGE WILL NOT SECURE THE
`JUST, SPEEDY, AND INEXPENSIVE RESOLUTION OF THE ISSUES
`IUST, SPEEDY, AND INEXPENSIVE RESOLUTION OF THE ISSUES
`SURROUNDING THE ‘317 PATENT ......................................................... 10
`SURROUNDING THE ‘3 17 PATENT ....................................................... ..10
`
` CONCLUSION .............................................................................................. 13
`
`CONCLUSION ............................................................................................ .. 13
`
`
`
`
`V.
`
`
`
`
`
`- i -
`
`PATENT OWNER’S LIsT OF EXHIBITS ........................................................... .. ii
`
`I.
`
`
`
`INTRODUCTION ........................................................................................... 1
`
`INTRODUCTION ......................................................................................... ..1
`
` OVERVIEW OF U.S. PATENT NO. 7,942,317 ............................................ 2
`OVERVIEW OF U.S. PATENT NO. 7,942,317 .......................................... ..2
`
`

`
`PATENT OWNER’S LIST OF EXHIBITS
`
`Exhibit Number
`
`Exhibit Description
`
`2001
`
`2002
`
`2003
`
`2004
`
`2005
`
`Reserved
`
`Reserved
`
`Reserved
`
`Congressional Record - House, June 23, 2011, H4480-4505
`
`Congressional Record - Senate, Sep. 8, 2011, S5402-5443
`
`
`
`
`
`
`
`
`
`- ii -
`
`

`
`Pursuant to 37 C.F.R. § 42.107, Smartflash LLC (“Patent Owner”) files this
`
`preliminary response to the petition, setting forth reasons why no new covered
`
`business method review of U.S. Patent 7,942,317 should be instituted as requested
`
`by Apple, Inc. (“Apple” or “Petitioner”). Arguments presented herein are
`
`presented without prejudice to presenting additional arguments in a later response
`
`should the Board institute a CBM review.
`
`
`
`I.
`
`INTRODUCTION
`
`Petitioner Apple seeks covered business method review of claim 18 of U.S.
`
`Patent No. 7,942,317 (“the ‘317 Patent”). Paper 1 at 1 (“Petition”). Apple filed
`
`two earlier Petitions, CBM2014-00112 and -00113 on April 3, 2014, seeking
`
`covered business method review of the same ‘317 Patent claim, among others. The
`
`Board granted review of claim 18, among others, on 35 U.S.C. § 103 obviousness
`
`grounds, but denied review of the remaining challenged claims. Apple Inc. v.
`
`Smartflash, LLC, Cases CBM2014-00112 and -00113, Paper 7 at 4 (PTAB
`
`September 30, 2014)(Decision, Institution of Covered Business Method Patent
`
`Review)(“00112/00113 Institution Decision”).
`
`In the instant petition, Apple raises for the first time a 35 U.S.C. § 101
`
`nonstatutory subject matter challenge to claim 18. Petition at 1, 22.
`
`
`
`- 1 -
`
`

`
`As the Board already correctly noted about the Petition and other petitions
`
`filed in 2014 on the same patent family, “[t]he 2015 set of petitions assert …
`
`challenges pursuant to 35 U.S.C. § 101, which raise purely legal issues.”
`
`CBM2015-00018, Paper 4 at 2. The Board should deny review of claim 18 on
`
`Apple’s § 101 unpatentable subject matter grounds set forth in the Petition because
`
`Apple’s purely legal challenge is untimely and thus does not “secure the just,
`
`speedy, and inexpensive resolution” of the Board’s proceedings reviewing the
`
`challenged ‘317 Patent claim. 37 C.F.R. § 42.1(b).
`
`
`
`II. OVERVIEW OF U.S. PATENT NO. 7,942,317
`
`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, U.S. Patent No. 7,942,317 (hereinafter “the ‘317 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.” Col.
`
`1, lines 18-26.
`
`Preferred embodiments described in the last full paragraph of col. 15
`
`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
`
`
`
`- 2 -
`
`

`
`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
`
`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. Col. 16, lines 5-17.
`
`Referring to preferred embodiments, the ‘317 patent discloses that a data
`
`supply system may provide users with a seamless purchase and content delivery
`
`experience. Col. 23, line 63 - col. 24, line 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 col.
`
`13, lines 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 col. 4,
`
`line 59 - col. 5, line 3. 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 col. 7, line 67 - col. 8, line 3. The payment validation system
`
`
`
`- 3 -
`
`

`
`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 col. 8, lines 3-6.
`
`
`
`III. THE CHALLENGED CLAIM IS NOT DIRECTED TO A FINANCIAL
`PRODUCT OR SERVICE
`
`Petitioner has cited claim 18 as being the “exemplary” basis for requesting
`
`that a covered business method review be instituted. Petition at 12. Since claim 18
`
`does not, in fact, meet the requirements for instituting a review, the Petition should
`
`be denied.
`
`As set forth in 37 CFR 42.301(a), to be eligible for CBM review, claim 18
`
`must be found to be claiming “a method or corresponding apparatus for performing
`
`data processing or other operations used in the practice, administration, or
`
`management of a financial product or service.” In the publication of the Final
`
`Rules for “Transitional Program for Covered Business Method Patents -
`
`Definitions of Covered Business Method Patent and Technological Invention,” the
`
`PTO stated:
`
`The definition set forth in § 42.301(a) for covered business
`method patent adopts the definition for covered business method
`patent provided in section 18(d)(1) of the AIA. In administering the
`program, the Office will consider the legislative intent and history
`behind the public law definition and the transitional program itself.
`
`
`
`- 4 -
`
`

`
`For example, the legislative history explains that the definition of
`covered business method patent was drafted to encompass patents
`“claiming activities that are financial in nature, incidental to a
`financial activity or complementary to a financial activity.” 157
`CONG. REC. S5432 (daily ed. Sept. 8, 2011) (statement of Sen.
`Schumer). This remark tends to support the notion that “financial
`product or service” should be interpreted broadly.
`
`
`Regardless of this explanation, it is improper for this tribunal to rely on the
`
`legislative history of the AIA to determine the specific issue before it, i.e., whether
`
`trial should be instituted on the present petition. The Supreme Court has “stated
`
`time and again that courts must presume that a legislature says in a statute what it
`
`means and means in a statute what it says. When the words of a statute are
`
`unambiguous, then, this first canon of construction is also the last: judicial inquiry
`
`is complete.” Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992).
`
`“[W]hen the language of the statute is plain, legislative history is irrelevant.”
`
`Zedner v. United States, 547 U.S. 489, 510–11 (2006) (Scalia, J., concurring-in-
`
`part). This long standing rule is based on the constitutional limitation that
`
`legislators cannot achieve through floor statements what “they were unable to
`
`achieve through the statutory text.” Exxon Mobil Corp. v. Allapattah Servs., Inc.,
`
`545 U.S. 546, 568 (2005). Because Section 18 is unambiguously limited to
`
`“financial product[s] and service[s],” there is no reason to look to the statements of
`
`
`
`- 5 -
`
`

`
`a single Senator to re-tool text that was approved by both houses of Congress and
`
`signed by the President.
`
`Moreover, the PTO’s synopsis of the legislative history is an improper
`
`oversimplification and does not address that “financial product or service” was
`
`intended to be interpreted narrowly. In fact, when the House of Representatives
`
`debated Congressman Schock’s Amendment to remove Section 18 in its entirety
`
`from the America Invents Act, several members of Congress discussed their
`
`understanding of that narrower interpretation. For example, Mr. Schock himself
`
`discussed at the beginning of his remarks that “Section 18 carves out a niche of
`
`business method patents covering technology used specifically in the financial
`
`industry and would create a special class of patents in the financial services field
`
`subject to their own distinctive post-grant administrative review.” (Exhibit 2004,
`
`Congressional Record - House, June 23, 2011, H4496.) (Emphasis added.)
`
`Similarly, Congressman Shuster expressly discussed his understanding of
`
`the narrow interpretation of the legislation. He stated:
`
`Mr. Chair, I would like to place in the record my understanding
`that the definition of ‘‘covered business method patent,’’ Section
`18(d)(1) of H.R. 1249, the America Invents Act, is intended to be
`narrowly construed to target only those business method patents that
`are unique to the financial services industry in the sense that they are
`patents which only a financial services provider would use to
`furnish a financial product or service. The example that I have been
`- 6 -
`
`
`
`

`
`given is a patent relating to electronic check scanning, which is the
`type of invention that only the financial services industry would
`utilize as a means of providing improved or more efficient banking
`services. In contrast, Section 18 would not encompass a patent that
`can be used in other industries, but which a financial services
`provider might also use. Lastly, it is also my understanding from
`discussions with the Committee that Section 18 is targeted only
`towards patents for non-technological inventions.
`
`
`
`Id. at H4497. (Emphasis added.) It was based on that understanding that
`
`Congressman Shuster then voted to keep Section 18 in the bill. (See Id. at H4503.)
`
`
`
`Likewise, Congresswoman Waters discussed that Section 18 was directed to
`
`cost savings measures in the banking industry when she stated “too-big-to-fail
`
`banks ... are now coming to Congress in hopes that [Congress] will help them steal
`
`a specific type of innovation and legislatively take other financial services-related
`
`business method patents referenced in H.R. 1249, section 18. ... Financial
`
`services-related business method patents have saved financial services companies
`
`billions of dollars.” Id. at H4496. See also Exhibit 2005, 157 Cong. Rec. S5428
`
`(Rep. Pryor) (“It is of crucial importance to me that we clarify the intent of the
`
`[AIA § 18] process and implement it as narrowly as possible.”)
`
`In contrast to the banking or other financial products or services patents,
`
`claim 18 recites:
`
`
`
`- 7 -
`
`

`
`18. A method of providing data to a data requester comprising:
`
`receiving a request for a data item from the requester;
`
`receiving payment data from the requester relating to payment
`
`for the requested data;
`
`transmitting the requested data to the requester;
`
`reading payment distribution information from a data store; and
`
`outputting payment data to a payment system for distributing
`
`the payment for the requested data.
`
`
`
`Rather than recite the “practice, administration, or management of a financial
`
`product or service,” claim 18 actually omits the specifics of how payment is made
`
`and focuses on technical steps that take place as part of transmitting requested data
`
`to the requester. Claim 18, therefore, does not recite a “financial product or
`
`service” when that phrase is properly construed, both under its plain meaning and
`
`in light of the legislative history showing Congress’ intent of the narrow meaning
`
`of that phrase.
`
`
`
`III. THE CHALLENGED CLAIM OF THE ‘317 PATENT IS A
`TECHNOLOGICAL INVENTION EXEMPT FROM CBM REVIEW
`
`
`
`As set forth in 37 CFR 42.301(a), even if claim 18 were considered to be
`
`claiming “a method or corresponding apparatus for performing data processing or
`
`
`
`- 8 -
`
`

`
`other operations used in the practice, administration, or management of a financial
`
`product or service,” Petitioner must show that claim 18 does not meet the
`
`exception of being directed to a technological invention. Section 42.301(b) sets
`
`forth that a claim is directed to a technological invention (and therefore not the
`
`basis for instituting a CBM review) if “the claimed subject matter as a whole
`
`recites a technological feature that is novel and unobvious over the prior art; and
`
`solves a technical problem using a technical solution.”
`
`Claim 18, as a whole, recites at least one technological feature that is novel
`
`and unobvious over the prior art and solves a technical problem using a technical
`
`solution. At least one technological problem solved by the method of claim 18 is
`
`transmitting requested data to a requester, e.g., as part of a convenient, legitimate
`
`acquisition of data from a data supplier. Moreover, it does so using a technical
`
`solution -- a data store, from which payment distribution information is read, in
`
`combination with a payment system. In fact, Petitioner admits the technological
`
`nature of the data store and the payment system when it states on page 15 “Claim
`
`18 clearly involves no ‘technology’ at all other than … a ‘payment system’ and
`
`‘data store.’” Petition at 15. (Emphasis added.)
`
`Section III.A. of the Petition also does not provide a detailed analysis of how
`
`the various claim elements are allegedly disclosed in the cited sections of the
`
`referenced exhibits. Thus, as previously held in Epsilon Data Management, LLC
`
`
`
`- 9 -
`
`

`
`et al. v. RPOST Comm. Ltd., CBM2014-00017, paper 21, page 8, any analysis in
`
`any other portion of the Petition (other than the portion relating to whether CBM
`
`review is proper) need not be considered in determining that the Petitioner has not
`
`met its burden of proving that the claim at issue is a covered business method
`
`patent. Id. (“In addition, although Patent Owner addresses the analysis in the
`
`Declaration of [Petitioner’s Declarant] (id. at 19), which Petitioner submitted with
`
`the Petition, this analysis was not included in the relevant portion of the Petition
`
`(Pet. 2-6), and need not be considered in determining that the ... Patent[-at-issue] is
`
`a covered business method patent.”) Thus, Petitioner has not proven that claim 18
`
`of the ‘317 patent are not directed to technological inventions exempt from CBM
`
`review.
`
`
`
`IV. APPLE’S UNTIMELY § 101 CHALLENGE WILL NOT SECURE THE
`JUST, SPEEDY, AND INEXPENSIVE RESOLUTION OF THE ISSUES
`SURROUNDING THE ‘317 PATENT
`
`The instant Petition is Apple’s third-filed covered business method challenge
`
`against claim 18 of the ‘317 Patent. Apple filed its first two petitions on April 3,
`
`2014 (CBM2014-00112, Paper 2 and CBM2014-00113, Paper 2), 7 months before
`
`filing its petition in this matter on November 3, 2014 (CBM2015-00018, Paper 1).
`
`There is no reason Apple could not have raised its § 101 challenge in its initial
`
`filings.
`
`
`
`- 10 -
`
`

`
`“[T]he Board is charged with securing the just, speedy, and inexpensive
`
`resolution of every proceeding.” EMC Corporation, et al. v. Personal Web
`
`Technologies, LLC, Case IPR2013-00082, Paper 33 at 4 (PTAB June 5,
`
`2013)(Decision, Denying Request for Rehearing)(citing 37 C.F.R. § 42.1(b)).
`
`“Rules for inter partes review proceedings were promulgated to take into account
`
`the ‘regulation on the economy, the integrity of the patent system, the efficient
`
`administration of the Office, and the ability of the Office to timely complete
`
`proceedings.’” Id. at 2 (citing 35 U.S.C. § 316(b)).
`
`Apple’s § 101 unpatentable subject matter grounds are raised for the first
`
`time in the instant Petition. As the Board has acknowledged, “challenges pursuant
`
`to 35 U.S.C. § 101 … raise purely legal issues.” CBM2015-00018, Paper 4 at 2.
`
`Apple provides no valid reason why it did not raise this purely legal issue as
`
`grounds for invalidity in its two prior petitions filed long before the instant
`
`Petition. While it is true that Alice Corp. Pty, Ltd. v. CLS Bank Int’l, 134 S. Ct.
`
`2347 (2014) was “decided after Petitioner’s original petitions challenging the ‘317
`
`Patent were filed” (Petition at 2), there was no impediment to Apple asserting
`
`§ 101 back in April when it filed CBM2014-00112 and -00113. As Apple
`
`acknowledges, “in its recent decision in Alice, … the Supreme Court applied the
`
`two-part framework set forth in [Mayo Collaborative Servs. v. Prometheus Labs,
`
`132 S. Ct. 1289, 1293 (2012)] to ‘distinguish[] patents that claim laws of nature,
`
`
`
`- 11 -
`
`

`
`natural phenomena, and abstract ideas from those that claim patent-eligible
`
`applications of these concepts.’” Petition at 22. Apple proffers no reason why it
`
`could not have raised this purely legal issue and applied Mayo’s two-part
`
`framework in its April petitions, as it does now in the instant Petition. Petition at
`
`22-30.
`
`Here, allowing Apple to raise a new ground of invalidity that it could have
`
`and should have raised in its April 3, 2014 petitions encourages Apple’s piecemeal
`
`invalidity challenges to Patent Owner’s patent claims and runs afoul of the Board’s
`
`charge to “secure the just, speedy, and inexpensive resolution” of Apple’s covered
`
`business method challenges to the ‘317 Patent. In fact, Patent Owner has been
`
`subjected to a continuing barrage of Petitions such that, together with the ten
`
`petitions filed by another group of Petitioners, the six patents in the patent family
`
`under review have now been subject to 31 different CBM petitions. Thus, of the
`
`277 CBM petitions filed through the end of 2014, 31/277 or more than 11% of all
`
`CBMs ever filed have targeted only six patents belonging to the same assignee. As
`
`in Conopco, Inc. dba Unilever v. The Proctor & Gamble Company, Case IPR2014-
`
`00628, Paper 21 at 12 (PTAB October 20, 2014)(Decision, Declining Institution of
`
`Inter Partes Review), Smartflash’s “concern that it will ‘have to continually
`
`defend against repetitive challenges’ to the same patent claims is not without merit,
`
`given the multiplicity of grounds applied in each petition.” Id. at 12. Patent Owner
`
`
`
`- 12 -
`
`

`
`therefore respectfully requests that the Board deny review of claim 18 on Apple’s
`
`newly asserted § 101 nonstatutory subject matter grounds.
`
`
`
`V.
`
`CONCLUSION
`
`
`
`The Petition does not set forth a basis upon which to institute a CBM review,
`
`the challenged claim is directed to statutory subject matter and Petitioner’s Petition
`
` /
`
` Michael R. Casey /
`
`
`Michael R. Casey
`Registration No. 40,294
`Davidson Berquist Jackson &
`
`Gowdey, LLP
`4300 Wilson Blvd, Suite 700
`Arlington, VA 22203
`Telephone: (703) 894-6406
`Fax: (703) 894-6430
`Email: mcasey@dbjg.com
`
`
`should be denied.
`
`
`
`Dated: January 15, 2015
`
`
`
`
`
`
`
`- 13 -
`
`

`
`
`
`
`
`CERTIFICATE OF SERVICE
`
`
`The undersigned hereby certifies that this PATENT OWNER’S
`
`PRELIMINARY RESPONSE (including Patent Owner’s List of Exhibits) and
`
`Exhibits 2004-2005 in CBM2015-00018 were served, by agreement of the parties,
`
`January 15, 2015 by emailing copies to counsel for the Petitioner as follows:
`
`Steven.Baughman@ropesgray.com
`Ching-Lee.Fukuda@ropesgray.com
`ApplePTABService-SmartFlash@ropesgray.com
`
` /
`
` Michael R. Casey /
`
`
`Michael R. Casey
`Registration No. 40,294
`Davidson Berquist Jackson &
`
`Gowdey, LLP
`4300 Wilson Blvd, Suite 700
`Arlington, VA 22203
`Telephone: (703) 894-6406
`Fax: (703) 894-6430
`Email: mcasey@dbjg.com
`Attorney for Patent Owner
`
`
`
`
`
`Dated: January 15, 2015
`
`
`
`
`
`- 14 -

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