Trials@uspto.gov
`Tel: 571-272-7822
`
`
`
`
`
`Paper 15
`Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`Patent Owner.
`
`Case CBM2015-00018
`Patent 7,942,317 B2
`
`
`
`
`
`
`
`
`
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`ELLURU, Administrative Patent Judge.
`
`DECISION
`Institution of Covered Business Method Patent Review
`37 C.F.R. § 42.208
`
`
`
`
`Tel: 571-272-7822
`
`
`
`
`
`Paper 15
`Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`Patent Owner.
`
`Case CBM2015-00018
`Patent 7,942,317 B2
`
`
`
`
`
`
`
`
`
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`ELLURU, Administrative Patent Judge.
`
`DECISION
`Institution of Covered Business Method Patent Review
`37 C.F.R. § 42.208
`
`
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`INTRODUCTION
`
`A. Background
`Petitioner, Apple Inc. (“Apple”), filed a Petition (Paper 1, “Pet.”) to
`institute a covered business method patent review of claim 18 (“the
`challenged claim”) of U.S. Patent No. 7,942,317 B2 (Ex. 1201, “the ’317
`patent”) pursuant to § 18 of the Leahy-Smith America Invents Act (“AIA”).1
`Patent Owner, Smartflash LLC (“Smartflash”), filed a Preliminary Response
`(Paper 11, “Prelim. Resp.”).
`We have jurisdiction under 35 U.S.C. § 324(a), which provides that a
`covered business method patent review may not be instituted “unless . . . it is
`more likely than not that at least 1 of the claims challenged in the petition is
`unpatentable.”
`
`B. Asserted Ground
`Apple contends that claim 18 is unpatentable under 35 U.S.C. § 101
`(Pet. 1).
`After considering the Petition and Preliminary Response, we
`determine that the ’317 patent is a covered business method patent. We
`further determine that Apple has demonstrated that it is more likely than not
`that the challenged claim is unpatentable. Therefore, we institute a covered
`business method patent review of claim 18 of the ’317 patent.
`
`C. Related Matters
`The parties indicate that the ’317 patent is the subject of the following
`district court cases: Smartflash LLC v. Apple Inc., Case No. 6:13-cv-447
`(E.D. Tex. 2014); Smartflash LLC v. Samsung Elecs Co., Case No. 6:13-cv-
`
`1 Pub. L. No. 112–29, 125 Stat. 284, 296–07 (2011).
`
`2
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`448 (E.D. Tex. 2014). Pet. 19; Paper 6, 3. Smartflash also indicates that the
`’317 patent is the subject of a third district court case: Smartflash LLC v.
`Google, Inc., Case No. 6:14-cv-435 (E.D. Tex.). Paper 6, 3.
`Apple previously filed two Petitions for covered business method
`patent review of the ’317 patent: CBM2014-00112 and CBM2014-00113.
`Those petitions were instituted under 35 U.S.C. § 103 with respect to claims
`1, 6–8, 12, 13, 16, and 18, and consolidated into a single proceeding. Apple
`Inc. v. Smartflash LLC, Case CBM2014-00112, slip op. at 22 (PTAB Sept.
`30, 2014) (Paper 7). Related patents claiming priority back to a common
`series of applications currently are the subject of CBM2014-00102,
`CBM2014-00106, and CBM2014-00108, filed by Apple.
`Concurrent with the filing of this Petition, Apple filed three other
`Petitions for covered business patent review challenging claims of patents
`owned by Smartflash and disclosing similar subject matter: CBM2015-
`00015, CBM2015-00016, and CBM2015-00017.
`
`D. The ’317 Patent
`The ’317 patent relates to “a portable data carrier for storing and
`paying for data and to computer systems for providing access to data to be
`stored” and the “corresponding methods and computer programs.”
`Ex. 1201, 1:18–23. Owners of proprietary data, especially audio recordings,
`have an urgent need to address the prevalence of “data pirates,” who make
`proprietary data available over the internet without authorization. Id. at
`1:38–51. The ’317 patent describes providing portable data storage together
`with a means for conditioning access to that data upon validated payment.
`Id. at 1:55–2:3. This combination allows data owners to make their data
`available over the internet without fear of data pirates. Id. at 2:3–11.
`
`3
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`As described, the portable data storage device is connected to a
`terminal for internet access. Id. at 1:55–63. The terminal reads payment
`information, validates that information, and downloads data into the portable
`storage device from a data supplier. Id. The data on the portable storage
`device can be retrieved and output from a mobile device. Id. at 1:64–67.
`The ’317 patent makes clear that the actual implementation of these
`components is not critical and the alleged invention may be implemented in
`many ways. See, e.g., id. at 25:49–52 (“The skilled person will understand
`that many variants to the system are possible and the invention is not limited
`to the described embodiments.”).
`
`E. Challenged Claim
`Apple challenges claim 18 of the ’317 patent, which recites the
`following.
`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.
`
`ANALYSIS
`
`A. Claim Construction
`We determine that no claim term requires express construction for
`purposes of this Decision.
`
`4
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`B. Covered Business Method Patent
`Section 18 of the AIA provides for the creation of a transitional
`program for reviewing covered business method patents. A “covered
`business method patent” is a patent that “claims a method or corresponding
`apparatus for performing data processing or other operations used in the
`practice, administration, or management of a financial product or service,
`except that the term does not include patents for technological inventions.”
`AIA § 18(d)(1); see 37 C.F.R. § 42.301(a). A patent need have only one
`claim directed to a covered business method to be eligible for review. See
`Transitional Program for Covered Business Method Patents—Definitions of
`Covered Business Method Patent and Technological Invention; Final Rule,
`77 Fed. Reg. 48,734, 48,736 (Aug. 14, 2012) (“CBM Rules”) (Comment 8).
`
`1. Financial Product or Service
`Apple asserts that “because claim 18 explicitly describes receiving
`and responding to payment data, as well as outputting payment data, it
`clearly relates to a financial activity and providing a financial service.”
`Pet. 14. Based on this record, we agree with Apple that the subject matter
`recited by claim 18 is directed to activities that are financial in nature,
`namely “receiving payment data from the requester relating to payment for
`the requested data,” “reading payment distribution information from a data
`store,” and “outputting payment data to a payment system for distributing
`the payment for the requested data,” limitations which are recited in the
`claim. Electronic transfer of money is a financial activity, and providing for
`such a transfer amounts to a financial service. This is consistent with the
`Specification of the ’317 patent, which confirms claim 18’s connection to
`financial activities by stating that the invention “relates to a portable data
`
`5
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`carrier for storing and paying for data.” Ex. 1201, 1:18–20. The
`Specification also states repeatedly that the disclosed invention involves
`managing access to data based on payment validation. See, e.g., id. at 1:55–
`63, 2:12–26, 3:22–30, 3:51–56, 7:59–8:6, 8:18–31.
`Smartflash disagrees that claim 18 satisfies the financial in nature
`requirement of AIA § 18(d)(1), arguing that that section should be
`interpreted narrowly to cover only technology used specifically in the
`financial or banking industry. Prelim. Resp. 5–8. Smartflash cites to
`various portions of the legislative history as support for its proposed
`interpretation. Id.
`Although we agree with Smartflash that the statutory language
`controls whether a patent is eligible for a covered business method patent
`review, we do not agree that the phrase “financial product or service” is as
`limited as Smartflash proposes. The AIA does not include as a prerequisite
`for covered business method patent review, a “nexus” to a “financial
`business,” but rather a “method or corresponding apparatus for performing
`data processing or other operations used in the practice, administration, or
`management of a financial product or service.” AIA § 18(d)(1). Further,
`contrary to Smartflash’s view of the legislative history, the legislative
`history indicates that the phrase “financial product or service” is not limited
`to the products or services of the “financial services industry” and is to be
`interpreted broadly. CBM Rules, 77 Fed. Reg. at 48,735–36. For example,
`the “legislative history explains that the definition of covered business
`method patent was drafted to encompass patents ‘claiming activities that are
`financial in nature, incidental to a financial activity or complementary to a
`
`6
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`financial activity.’” Id. (citing 157 Cong. Rec. S5432 (daily ed. Sept. 8,
`2011) (statement of Sen. Schumer)).
`In addition, Smartflash asserts that claim 18 is not directed to an
`apparatus or method that is financial in nature because claim 18 “omits the
`specifics of how payment is made.” Prelim. Resp. 8. We are not persuaded
`by this argument because § 18(d)(1) of the AIA does not include such a
`requirement, nor does Smartflash point to any other authority that makes
`such a requirement. Id. We determine that because claim 18 recites
`payment data, as Smartflash acknowledges, the financial in nature
`requirement of § 18(d)(1) is satisfied.
`For the reasons stated above, and based on the particular facts of this
`proceeding, we conclude that the ’317 patent includes at least one claim that
`meets the financial in nature requirement of § 18(d)(1) of the AIA.
`
`2. Exclusion for Technological Inventions
`Apple asserts that claim 18 does not fall within § 18(d)(1)’s exclusion
`for “technological inventions.” Pet. 14–19. In particular, Apple contends
`that claim 18 “involves no ‘technology’ at all other than, at most, the use of
`a data store and payment system.” Id. at 15 (citations omitted). Smartflash
`disagrees. Prelim. Resp. 8–10.
`We are persuaded that claim 18 as a whole does not recite a
`technological feature that is novel and unobvious over the prior art. Claim
`18 recites a “payment system.” The Specification, however, discloses that
`the required payment system may be one that is already in use or otherwise
`commercially available. For example, the payment validation system “may
`be part of the data supplier’s computer systems or it may be a separate
`system such as an e-payment system.” Ex. 1201, 8:18–22; see also id. at
`
`7
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`8:60–63. Claim 18 also recites a “data store.” This component, however, is
`described as generic memory. Pet. 15–16. The Specification discloses, for
`instance, that “[t]he data storage means is based on a standard smart card.”
`Ex. 1201, 11:28–30; see also id. at 14:25–29 (“[l]ikewise data stores 136,
`138 and 140 may comprise a single physical data store or may be distributed
`over a plurality of physical devices and may even be at physically remote
`locations from processors 128-134 and coupled to these processors via
`internet 142.”), Fig. 6.
`In addition, the ’317 patent makes clear that the asserted novelty of
`the invention is not in any specific improvement of software or hardware,
`but in the method of controlling access to data. For example, the ’317 patent
`states that “there is an urgent need to find a way to address the problem of
`data piracy” (id. at 1:50–51), while acknowledging that the “physical
`embodiment of the system is not critical and a skilled person will understand
`that the terminals, data processing systems and the like can all take a variety
`of forms” (id. at 12:29–32). Thus, we determine that claim 18 is merely the
`recitation of a combination of known technologies, which indicates that it is
`not a patent for a technological invention. See Office Patent Trial Practice
`Guide, 77 Fed. Reg. 48,756, 48,764 (Aug. 14, 2012)
`Smartflash also argues that claim 18 falls within § 18(d)(1)’s
`exclusion for “technological inventions” because it is directed towards
`solving the technological problem of “transmitting requested data to a
`requester, e.g., as part of a convenient, legitimate acquisition of data from a
`data supplier” with the technological solution of “a data store, from which
`payment distribution information is read, in combination with a payment
`system.” Prelim. Resp. 9. We are not persuaded by this argument because,
`
`8
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`as Apple argues, the problem being solved by claim 18 is a business
`problem—data piracy. Pet. 17–19. For example, the Specification states
`that “[b]inding the data access and payment together allows the legitimate
`owners of the data to make the data available themselves over the internet
`without fear of loss of revenue, thus undermining the position of data
`pirates.” Ex. 1201, 2:7–11. Therefore, based on the particular facts of this
`proceeding, we conclude that claim 18 does not recite a technological
`invention and is eligible for a covered business method patent review.
`
`3. Conclusion
`In view of the foregoing, we conclude that the ’317 patent is a covered
`business method patent under AIA § 18(d)(1) and is eligible for review
`using the transitional covered business method patent program.
`
`C. Section 101 Unpatentability
`Apple challenges claim 18 as being directed to patent-ineligible
`subject matter under 35 U.S.C. § 101. Pet. 22–30. Smartflash does not
`address the merits of this challenge. See Prelim. Resp. 10–13. Analyzing
`the challenged claims using the two-step process applied recently in Alice
`Corp. Pty, Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), Apple asserts that
`the challenged claim is directed to an abstract idea without additional
`elements that transform the claims into a patent-eligible application of that
`idea. Pet. 22–30. Specifically, Apple argues that the challenged claim is
`directed to the abstract idea of “payment for content.” Id. at 24–25.
`We agree with Apple that the challenged claim of the ’317 patent is
`more likely than not directed to patent-ineligible subject matter. Under 35
`U.S.C. § 101, we must first identify whether an invention fits within one of
`the four statutorily provided categories of patent-eligibility: “processes,
`
`9
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`machines, manufactures, and compositions of matter.” Ultramercial, Inc. v.
`Hulu, LLC, 772 F.3d 709, 713–714 (Fed. Cir. 2014). Here, the challenged
`claim recites a “process,” i.e., a “method of providing data to a data
`requester,” under § 101. Section 101, however, “contains an important
`implicit exception [to subject matter eligibility]: Laws of nature, natural
`phenomena, and abstract ideas are not patentable.” Alice, 134 S. Ct. at 2354
`(2014) (citing Assoc. for Molecular Pathology v. Myriad Genetics, Inc., 133
`S. Ct. 2107, 2116 (2013) (internal quotation marks and brackets omitted)).
`We are persuaded that the challenged claim is more likely than not
`drawn to a patent-ineligible abstract idea. In Alice, the Supreme Court
`reiterated the framework set forth previously in Mayo Collaborative Servs.
`v. Prometheus Labs., 132 S. Ct. 1289, 1293 (2012) “for distinguishing
`patents that claim laws of nature, natural phenomena, and abstract ideas
`from those that claim patent-eligible applications of these concepts.” Alice,
`134 S. Ct. at 2355. The first step in the analysis is to “determine whether the
`claims at issue are directed to one of those patent-ineligible concepts.” Id.
`If so, the second step in the analysis is to consider the elements of the claims
`“individually and ‘as an ordered combination’” to determine whether there
`are additional elements that “‘transform the nature of the claim’ into a
`patent-eligible application.” Id. (quoting Mayo, 132 S. Ct. at 1291, 1297).
`In other words, the second step is to “search for an ‘inventive concept’—i.e.,
`an element or combination of elements that is ‘sufficient to ensure that the
`patent in practice amounts to significantly more than a patent on the
`[ineligible concept] itself.’” Id. (brackets in original) (quoting Mayo, 132 S.
`Ct. at 1294).
`
`10
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`As discussed above, the ’317 patent discusses addressing recording
`industry concerns of data pirates offering unauthorized access to widely
`available compressed audio recordings. Ex. 1201, 1:27–51. The ’317 patent
`proposes to solve this problem by restricting access to data on a device based
`“upon checked and validated payment being made for the data.” Id. at 2:3–
`11. The ’317 patent makes clear that the heart of the claimed subject matter
`is restricting access to stored data based on validated payment information.
`Id. at 1:55–2:11, Abstract. We are, thus, persuaded, on this record, that the
`claimed process is directed to an abstract idea. See Alice, 134 S. Ct. at 2356
`(holding that the concept of intermediated settlement at issue in Alice was an
`abstract idea); Accenture Global Servs., GmbH v. Guidewire Software, Inc.,
`728 F.3d 1336, 1344 (Fed. Cir. 2013) (holding the abstract idea at the heart
`of a system claim to be “generating tasks [based on] rules . . . to be
`completed upon the occurrence of an event”).
`Turning to the second step of the analysis, we look for additional
`elements that can “transform the nature of the claim” into a patent-eligible
`application of an abstract idea. Mayo, 132 S. Ct. at 1297. On this record,
`we are not persuaded that the challenged claim of the ’317 adds an inventive
`concept sufficient to ensure that the patent in practice amounts to
`significantly more than a patent on the abstract idea itself. Alice, 134 S. Ct.
`at 2355; see also Accenture Global Servs., 728 F.3d at 1345 (holding claims
`directed to the abstract idea of “generating tasks [based on] rules . . . to be
`completed upon the occurrence of an event” to be unpatentable even when
`applied in a computer environment and within the insurance industry).
`The Specification, as discussed above, treats as well-known all
`potentially technical aspects of the claim, including “data store” and
`
`11
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`“payment system” limitations recited in the challenged claim. For example,
`the Specification states that the payment validation system “may be part of
`the data supplier’s computer systems or it may be a separate system such as
`an e-payment system.” Ex. 1201, 8:18–22; see id. at 8:60–63. Further, with
`respect to the recited data store, the Specification discloses that “[t]he data
`storage means is based on a standard smart card.” Ex. 1201, 11:28–30; see
`also id. at 14:25–29 (“[l]ikewise data stores 136, 138 and 140 may comprise
`a single physical data store or may be distributed over a plurality of physical
`devices and may even be at physically remote locations from processors
`128-134 and coupled to these processors via internet 142.”), Fig. 6. The use
`of a data store and the linkage of existing hardware devices to existing
`payment validation processes appear to be “‘well-understood, routine,
`conventional activit[ies]’ previously known to the industry.” Alice, 134 S.
`Ct. at 2359; Mayo, 132 S. Ct. at 1294.
`Having considered the information provided in the Petition and the
`Preliminary Response, we are persuaded that Apple has demonstrated that it
`is more likely than not that challenged claim 18 is unpatentable under
`35 U.S.C. § 101.
`Smartflash argues that Apple’s assertion of this ground is untimely
`because 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.” Prelim. Resp. 11. According to Smartflash,
`[A]llowing 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.
`
`12
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`Id. at 12. Smartflash, however, cites no statutory or regulatory authority
`precluding Apple from asserting this ground. Moreover, Smartflash
`acknowledges that the Supreme Court’s June 19, 2014, decision in Alice was
`decided after Apple’s original petitions were filed on April 3, 2014. Id. at
`11. Thus, on this record, we are not persuaded that Apple’s assertion of a
`new ground based on 35 U.S.C. § 101 is untimely.
`On this record, Apple has established that it is more likely than not
`that claim 18 is unpatentable under 35 U.S.C. § 101.
`
`CONCLUSION
`For the foregoing reasons, we determine that the information
`presented in the Petition establishes that it is more likely than not that Apple
`would prevail in establishing the unpatentability of claim 18 of the ’317
`patent.
`The Board has not made a final determination on the patentability of
`any challenged claims.
`
`ORDER
`
`For the reasons given, it is:
`ORDERED that a covered business method patent review is instituted
`as to claim 18 under 35 U.S.C. § 101 as being directed to patent-ineligible
`subject matter under;
`FURTHER ORDERED that no other ground raised in the Petition is
`authorized for covered business method patent review; and
`FURTHER ORDERED that pursuant to 35 U.S.C. § 324(d) and
`37 C.F.R. § 42.4, notice is hereby given of the institution of a trial on the
`grounds of unpatentability authorized above; the trial commencing on the
`entry date of this Decision.
`
`13
`
`
`
`CBM2015-00018
`
`CBM2015-00018
`Patent 7,942,317 B2
`Patent 7,942,317 B2
`
`
`
`
`14
`
`14
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`PETITIONER:
`
`J. Steven Baughman
`Ching-Lee Fukuda
`ROPES & GRAY LLP
`steven.baughman@ropesgray.com
`ching-lee.fukuda@ropesgray.com
`
`
`PATENT OWNER:
`
`Michael R. Casey
`J. Scott Davidson
`DAVIDSON BERQUIST JACKSON & GOWDEY LLP
`mcasey@dbjg.com
`jsd@dbjg.com
`
`
`
`
`
`
`
`
`
`
`15
`
`
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