UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00028
`
`Patent 7,334,720 B2
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00028
`
`Patent 7,334,720 B2
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`
`
`TABLE OF CONTENTS
`
`STATEMENT OF MATERIAL FACTS ........................................................ 8
`
`INTRODUCTION ........................................................................................... 5
`
`I.
`
`II.
`
`III. THE WECHSELBERGER DECLARATION SHOULD BE GIVEN
`LITTLE OR NO WEIGHT .............................................................................. 8
`A. The Wechselberger Declaration Is Not Based on a Review of Any
`Articulated Standard for Statutory Subject Matter ............................... 8
`B. No Evidentiary Standard Is Disclosed in the Wechselberger
`Declaration .......................................................................................... 13
`
`
`IV. OVERVIEW OF U.S. PATENT NO. 7,334,720 .......................................... 15
`A. Overview of the Technology of the Patent ........................................... 15
`B. Claim Construction ............................................................................... 18
`
`
`V.
`
`CLAIMS 1 AND 2 OF THE ‘720 PATENT ARE DIRECTED TO
`STATUTORY SUBJECT MATTER ............................................................ 19
`A. The Two-Part Test for Statutory Subject Matter .................................. 19
`B. The Claims Are Statutory Under the Second Step of Mayo and Alice . 20
`C. Claims 1 and 2 Do Not Result in Inappropriate Preemption ................ 22
`Preemption under DDR Holdings ............................................. 22
`1.
`Preemption under Mayo and Alice ............................................ 24
`2.
`3.
`Non-Infringing Alternatives Show a Lack of Preemption ........ 27
`
`
`VI. PETITIONER HAS ALREADY LOST A CHALLENGE TO OTHER
`CLAIMS OF THE SAME PATENT ON THE SAME STATUTORY
`GROUNDS IN ITS LITIGATION WITH PATENT OWNER .................... 28
`
`
`VII. THE USPTO IS ESTOPPED FROM REVISITING THE ISSUE OF
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY SUBJECT
`MATTER ....................................................................................................... 30
`
`
`
`- 1 -
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`
`
`VIII.
`
`INVALIDATING PATENT CLAIMS VIA CBM REVIEW IS
`
`VIII. INVALIDATING PATENT CLAIMS VIA CBM REVIEW IS
`UNCONSTITUTIONAL ............................................................................... 30
`
`UNCONSTITUTIONAL ............................................................................. . .30
`
`
`IX. SECTION 101 IS NOT A GROUND THAT MAY BE RAISED IN
`COVERED BUSINESS METHOD PATENT REVIEW ............................. 32
`
`IX.
`
`SECTION 101 IS NOT A GROUND THAT MAY BE RAISED IN
`
`COVERED BUSINESS METHOD PATENT REVIEW ........................... ..32
`
`CONCLUSION .............................................................................................. 35
`
`CONCLUSION ............................................................................................ ..35
`
`
`
`
`X.
`
`X.
`
`
`
`
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`- 2 -
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`
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`PATENT OWNER’S LIST OF EXHIBITS
`
`Exhibit Number
`
`Exhibit Description
`
`2001
`
`2002
`
`Congressional Record - House, June 23, 2011, H4480-4505
`
`Congressional Record - Senate, Sep. 8, 2011, S5402-5443
`
`2003-2039
`
`Reserved
`
`2040
`
`2041
`
`2042
`
`2043
`
`Declaration of Anthony Wechselberger in CBM2014-00104
`
`Declaration of Anthony Wechselberger in CBM2014-00105
`
`Patent Owner’s Preliminary Response in CBM2014-00104
`
`Patent Owner’s Preliminary Response in CBM2014-00105
`
`2044-2048
`
`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
`
`
`
`- 3 -
`
`
`
`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 taken in CBM2015-00015, -00016, -00017
`and -00018
`
`2069-2073
`
`Reserved
`
`2074
`
`2075
`
`2076
`
`2077
`
`
`
`Civil Docket Report from Smartflash LLC, et al. v. Apple
`Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.)
`
`Order (on Defendants’ Renewed Motion for Judgment as a
`Matter of Law on the Issue of § 101 under Rule 50(b)); Dkt.
`# 585; from Smartflash LLC, et al. v. Apple Inc., et al., Case
`No. 6:13-CV-447 (E.D. Tex.) dated July 8, 2015.
`
`Deposition Transcript of Anthony J. Wechselberger dated
`July 22, 2015
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`- 4 -
`
`
`
`I.
`
`INTRODUCTION
`
`Covered business method review was instituted for claims 1 and 2 of U.S.
`
`Patent 7,334,720 (“the ‘720 Patent”) on the ground that the claims are directed to
`
`patent-ineligible subject matter under 35 U.S.C. § 101. Decision - Institution of
`
`Covered Business Method Patent Review 37 C.F.R. § 42.208, Paper 11 at 18
`
`(PTAB May 28, 2015).
`
`Claims 1 and 2 of the ‘720 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 and 2 of the ‘720 Patent overcome 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, ‘720 Patent at 5:25-29.
`
`In other words, claims 1 and 2 of the ‘720 Patent are directed to a method of
`
`controlling access to content data that combines on the data carrier both the digital
`
`content and use status data / use rules, so that access control to the digital content
`
`can be enforced prior to access to the digital content.
`
`
`
`- 5 -
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`
`
`As demonstrated below, claims 1 and 2 of the ‘720 Patent do not result in
`
`inappropriate preemption of the “idea of paying for and controlling access to data”
`
`(Corrected Petition, Paper 5 at 5) or the “idea of paying for and controlling access
`
`to content” (Ex. 1219, Declaration of Anthony J. Wechselberger (“Wechselberger
`
`Declaration”) at ¶ 83). Nor is there any credible evidence that a disproportionate
`
`amount of future innovation is foreclosed by claims 1 and 2 of the ‘720 Patent.
`
`Additionally, in February 2015, Petitioner lost in Federal Court the purely
`
`legal issue of whether claim 1 of the ‘720 Patent (claim 2, also at issue here,
`
`depends from claim 1) is directed to statutory subject matter under 35 U.S.C. §
`
`101. See Exhibit 2049, Report and Recommendation (on Defendants’ Motions for
`
`Summary Judgment of Invalidity Pursuant to 35 U.S.C. § 101) (hereinafter “Report
`
`and Recommendation”), from Smartflash LLC, et al. v. Apple Inc., et al., Case No.
`
`6:13-CV-447 (E.D. Tex.) and Smartflash LLC, et al. v. Samsung Electronics Co.
`
`Ltd, et al., Case No. 6:13-CV-448 (E.D. Tex.), dated Jan. 21, 2015, and Exhibit
`
`2050, Order adopting Report and Recommendation (on Defendants’ Motions for
`
`Summary Judgment of Invalidity Pursuant to 35 U.S.C. § 101), from Smartflash
`
`LLC, et al. v. Apple Inc., et al., Case No. 6:13-CV-447 (E.D. Tex.) and Smartflash
`
`LLC, et al. v. Samsung Electronics Co. Ltd, et al., Case No. 6:13-CV-448 (E.D.
`
`Tex.), dated Feb. 13, 2015.
`
`
`
`- 6 -
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`
`
`On July 8, 2015 the District Court “decline[d] to revise or revisit its Rule 56
`
`Order” on post-trial motion, finding that “[t]he § 101 issue has already received
`
`full and fair treatment.” See Exhibit 2075, Order (on Defendants’ Renewed
`
`Motion for Judgment as a Matter of Law on the Issue of § 101 under Rule 50(b));
`
`Dkt. # 585; Smartflash LLC, et al. v. Apple Inc., et al., Case No. 6:13-CV-447
`
`(E.D. Tex. July 8, 2015).
`
`Patent Owner submits that the USPTO has already adjudicated the threshold
`
`question of whether claims 1 and 2 of the ‘720 Patent comport with 35 U.S.C.
`
`§ 101, which is a question of law, during the prosecution of the ‘720 Patent. The
`
`USPTO is estopped from re-litigating this purely legal issue already considered
`
`and adjudicated by the USPTO.
`
`Patent Owner further submits that the CBM review process is an
`
`unconstitutional violation of Separation of Powers principles.
`
`Finally, Patent Owner submits that § 101 is not a ground on which CBM
`
`review may be instituted.
`
`In support of this Patent Owner’s Response, reference will be made to
`
`concurrently filed Exhibit 2076, the Deposition Transcript of Anthony J.
`
`Wechselberger, dated July 22, 2015 (“Wechselberger Deposition”).
`
`
`
`- 7 -
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`
`
`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. The Wechselberger Declaration Is Not Based on a Review of
`Any Articulated Standard for Statutory Subject Matter
`
`The Wechselberger Declaration does not disclose that Mr. Wechselberger
`
`made the proper inquiry into how to assess whether claims are. While Mr.
`
`Wechselberger recites the standard from Alice Corp. Pty. Ltd. v. CLS Bank Int’l,
`
`134 S. Ct. 2347, 2355 (2014) that the patent claim elements must be “sufficient to
`
`ensure that the patent in practice amounts to significantly more than a patent upon
`
`the [abstract idea] itself” (Wechselberger Declaration at ¶83), he could not explain
`
`how he determined what constituted “significantly more” other than: “I think it’s
`
`just a judgment.” Ex. 2076, Wechselberger Deposition at 10:10-24. When asked
`
`about his understanding of “significantly more,” he also testified “I don’t know
`
`that there’s a hard answer to that question. ‘Significantly more’ could be as simple
`
`
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`- 8 -
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`as more than half” (id. at 10:10-14) showing that he, in fact, confused it with a
`
`preponderance of the evidence. He also could not explain how he would know that
`
`his judgment as to what constitutes “significantly more” was repeatable between
`
`patents and even claims. Instead, when asked about repeatability, he testified,
`
`“The best I can answer for that, it’s going to have to be my opinion.” Id. at 11:5-
`
`12.
`
`Mr. Wechselberger’s testimony on what constitutes “significantly more”
`
`also lacks any support as he did not even consider what the minimum number of
`
`elements are that are required to implement the allegedly abstract idea of paying
`
`for and controlling access to content, either in a computer-implemented version or
`
`generally. See, Id. at 19:25-20:15, and 31:10-21. Thus, he could not know if the
`
`challenged claims constitute “significantly more.”
`
`Mr. Wechselberger also took no steps to test whether the exercise of his
`
`judgment yielded the proper results for patentability under § 101. For example, he
`
`never analyzed a patent under § 101 and found it to be patentable. Id. at 12:18-
`
`13:11. In other words, Mr. Wechselberger did not use claims that a court had
`
`found to be statutory as an analytical tool for assessing the Smartflash patent
`
`claims in this case. The only way Mr. Wechselberger would know if he came to
`
`the wrong conclusion is “if somebody … were to convince me that or show me
`
`some claim elements or combination of elements really creates an inventive step, if
`
`
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`- 9 -
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`
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`you could convince me, that would show that I was wrong.” Id. at 137:2-7. That
`
`said, the fact that the District Court found the same or related Smartflash claims
`
`patentable under § 101 is of no moment to Mr. Wechselberger because he is “not
`
`influenced by any other analysis that’s taken place” and he “[does not] think there
`
`is anybody else that's done what I have done with my level of qualification.” Id. at
`
`156:14-157:18. Mr. Wechselberger was not aware that challenges under § 101 are
`
`a legal question (id. at 159:11-16); but he got one thing right: “If that is a legal
`
`question, then I would question why I'm here at all” (id. at 160:4-11).
`
`In fact, Mr. Wechselberger admitted that he did not use any articulable
`
`methodology in even determining what the abstract idea of the claims allegedly is
`
`when he testified: “so there isn’t a formalized methodology.” Id. at 18:6-13. He
`
`further admitted that his selection of what the abstract idea allegedly is was
`
`arbitrary when he testified:
`
`Q. ... Couldn't you have ... as easily said that the abstract idea
`
`was for controlling access to content, instead of paying for and
`
`controlling access to content?
`
`A. I could have.
`
`Id. at 19:2-6.
`
`With respect to “inventive step” in a § 101 analysis, Mr. Wechselberger
`
`likewise had no articulable standard for what makes a combination “inventive.”
`
`
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`- 10 -
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`
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`When asked in the context of how he would know if a combination of code steps
`
`was inventive, he testified:
`
`Q. ... How does one know when [an arbitrary set of code steps]
`
`is inventive and when it isn't inventive? Do you just have to look at
`
`the steps and know?
`
`MS. FUKUDA: Objection to form.
`
`THE WITNESS: You have to look at the steps through the eyes
`
`of the hypothetical person of ordinary art -- or ordinary skill in the art
`
`who would know what the prior art is and make that judgment call.
`
`Id. at 153:11-20. When asked if the standard he was using to determine if a
`
`combination of elements was inventive was “stricter or less strict than an
`
`obviousness standard,” he testified, “My opinions wouldn't change irrespective of
`
`which standard you want to ask me about.” Id. at 139:13-14.
`
`Furthermore, Mr. Wechselberger’s methodology was circular and
`
`nonobjective. He claimed to have analyzed a combination of allegedly routine,
`
`conventional and well-known elements to see if the combination became inventive
`
`(see Id. at 143:18-241) and indicated that he knew the combination was inventive
`
`“When the combination represents something that collectively ... is inventive,
`
`1 Mr. Wechselberger admitted that in his declaration he used “routine,” “well
`
`known” and “conventional” to mean the same thing. See, Id. at 166:16-167:19.
`
`
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`- 11 -
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`
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`meaning that it is not well-known, not conventional, and not routine” Id. at
`
`144:20-23. However, when asked what rules he applied to combine alleged prior
`
`art, he testified “If the combination -- if the various elements of the prior art are
`
`conventional, routine, and well-known, you don't really need rules to combine it. If
`
`it's out there and everybody -- everybody of skill knows about it, I don't think that
`
`asks for a combinatorial rule. It's just known.” Id. at 210:17-25. Such a lack of
`
`rules is not only nonobjective, it results in arbitrary and capricious results.
`
`Thus, any purported “standard” by Mr. Wechselberger for what constitutes
`
`“significantly more” or an “inventive step” is so broad, circular, and lacking rules
`
`that it amounts to no standard at all. First he says that a hypothetical person of
`
`ordinary skill in the art “knows what’s in the art, all of it” and with that knowledge
`
`would “compare it to the collection of elements for any of the given instituted
`
`claims and you look at the result, individually and collectively, and if it's already in
`
`the art, it's already well-known, if it's already -- if the result of that combination is
`
`well-known, if it's in the art, if it's conventional, then it lacks an inventive step.”
`
`Id. at 198:14-199:9. But Mr. Wechselberger could not articulate any safeguards
`
`against using hindsight reconstruction when combining the elements. Id. at
`
`199:11-22.
`
`Mr. Wechselberger did concede that even if all of the patent claim elements
`
`“individually may be conventional, routine, and well-known, there is the
`
`
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`- 12 -
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`
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`opportunity for [the inventor] to have a legitimate claim, a valid claim, if when
`
`those -- the claim elements are put together in combination, then there may be a
`
`combinatorial effect of that combination which is inventive.” Id. at 205:24-206:15.
`
`But, the only way to know if the combinatorial effect is inventive is to “look[]
`
`through the eyes of the hypothetical person of ordinary skill in the art who knows
`
`what the landscape of prior art is. If all those -- if that prior art landscape -- if the
`
`result of the claim as a whole shows an inventive step over what is conventional,
`
`well-known by the person of skill in the art, then there -- then the claim should not
`
`be … invalid under 101.” Id. at 206:19-207:1.
`
`Mr. Wechselberger also could not articulate why he believed that other
`
`technologies that used the same kind of code that he alleged that the challenged
`
`claims used were patentable when he had opined that the challenged claims were
`
`not. See, e.g., Id. at 183:13-189:6 (relating to DCT-compression using
`
`conventional mathematical operations); and 191:1-192:20 and 194:17-195:17
`
`(relating to public key encryption). Accordingly, Mr. Wechselberger’s testimony
`
`lacks foundation and should be disregarded.
`
`B. No Evidentiary Standard Is Disclosed in the Wechselberger
`Declaration
`
`The Wechselberger Declaration does not disclose the underlying facts on
`
`which the opinions are based and is, therefore, entitled to little or no weight. 37
`
`CFR § 42.65 (“Expert testimony that does not disclose the underlying facts or data
`
`
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`- 13 -
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`
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`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 ¶¶ 89-93) and opined incorrectly that “the asserted claims are
`
`directed to nothing more than implementing the basic concept of providing access
`
`to content based on payment or payment data and/or rules, using generic features
`
`present on general purpose computers. Therefore, none of those claims is
`
`
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`- 14 -
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`patentable” (id. at ¶ 97), 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. 7,334,720
`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, U.S. Patent No. 7,334,720 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, ‘720 Patent at 1:6-14.
`
`Preferred embodiments described in the ‘720 Patent at 16:1-10 illustrate this
`
`further: “FIG. 7 ... shows a variety of content access terminals for accessing data
`
`supply computer system 120 over internet 142. The terminals are provided with an
`
`interface to a portable data carrier or ‘smart Flash card’ (SFC) as generally
`
`described with reference to FIG. 2 and as described in more detail below. In most
`
`embodiments of the terminal the SFC interface allows the smart Flash card data
`
`
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`- 15 -
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`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 16:19-32.
`
`Referring to preferred embodiments, the ‘720 Patent discloses that a data
`
`supply system may provide users with a seamless purchase and content delivery
`
`experience. Id. at 24:25-30. 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 14:5-13.
`
`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 4:59 5:3. 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 id. at 8:4-7. 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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`- 16 -
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`The ‘720 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 24:46-48. “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 9:21-23. “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 4:62-5:3. Further, “use status data [is retrieved] from
`
`the data carrier [to] indicat[e] past use of the stored data.” Id. at 9:36-37.
`
`Thus, as described in the ‘720 Patent at 5:25-29, “[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 at least one access rule, access control to the digital content can be
`
`enforced prior to access to the digital content. By comparison, unlike a system that
`
`uses at least one access rule as claimed, when a DVD was physically rented for a
`
`
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`- 17 -
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`
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`rental period, the renter could continue to play the DVD, even if the renter kept the
`
`DVD past the rental period because the use rules were not associated with the
`
`DVD. Similarly, there was no way to track a use of the DVD such that a
`
`system could limit its playback to specific number of times (e.g., three times)
`
`or determine that the DVD had only been partially used.
`
`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 5 at 22. However, “payment data” in the
`
`context of the claims of the ‘720 Patent should be interpreted to mean “data that
`
`can be used to make payment for content” when using a broadest reasonable
`
`interpretation.2
`
`The ‘720 Patent at 21:15-18, states “payment data for making a payment …
`
`is received from the smart Flash card by the content access terminal and forwarded
`
`2 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.
`
`
`
`- 18 -
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`
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`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 ‘720 Patent, step S54 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 AND 2 OF THE ‘720 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
`
`
`
`- 19 -
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`
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`the limitations of the claims, individually and as ordered combinations, contain an
`
`inventive concept that transforms the nature of the claims into patent-eligible
`
`subject matter. Mayo, 132 S. Ct. at 1294.
`
`B.
`
`The Claims Are Statutory Under the Second Step of Mayo and
`Alice
`Post Mayo and Alice, the Federal Circuit has provided guidance on how to
`
`distinguish statutory claims, like those of the ‘720 Patent, from non-statutory
`
`claims. In DDR Holdings, the Federal Circuit analyzed claims, like the ‘720 Patent
`
`claims at issue here, that have technological solutions to technological problems
`
`created by the nature of digital content and the Internet. In DDR Holdings, the
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`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 and 2 of the ‘720 Patent are not directed
`
`to mental processes or processes performed using pen and paper, rather the claims
`
`are directed to a particular method to combat data content piracy on the Internet by
`
`providing for legitimate acquisition of content data by transmitting requested data
`
`content to the requester after evaluating use status data using use rules to determine
`
`whether access to the requested data content is permitted. Ex. 1201, ‘720 Patent at
`
`
`
`- 20 -
`
`
`
`26:29-31. In the case of claim 2, the use rules are dependent on payment data
`
`stored on the data carrier. Id. at 26:37-40.
`
`Thus, claims 1 and 2 are “rooted in computer technology in order to
`
`overcome a problem specifically arising in the realm of computer networks” –
`
`that of digital data piracy – and, like in DDR Holdings, “address … a challenge
`
`particular to the Internet.” DDR Holdings, 773 F.3d at 1257. The Report and
`
`Recommendation also acknowledged this distinction, 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,
`
`
`
`- 21 -
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`
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`data types, and use rules that amount to significantly more than the underlying
`
`abstract idea. Although in some claims the language is functional and somewhat
`
`generic, the claims contain significant limitations on the scope of the inventions.”
`
`Report and Recommendation at 19, lines 1-4.
`
`C. Claims 1 and 2 Do Not Result in Inappropriate Preemption
`1.
`Preemption under DDR Holdings
`Claims 1 and 2 of the ‘720 Patent do not result in inappropriate preemption
`
`of the “idea of paying for and controlling access to data” (Corrected Petition, Paper
`
`5 at 5) or the “idea of paying for and controlling access to content” (Ex. 1219,
`
`Wechselberger Declaration at ¶ 83) under DDR Holdings, Mayo and Alice. The
`
`Corrected Petition alleges that “Here, [the] challenged claims’ broad functional
`
`nature firmly triggers preemption concerns.” Paper 5 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]
`
`
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`- 22 -
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`
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`preempt use of this approach in all fields.” Mayo, 132 S. Ct. at 1301 (citing Bilski
`
`v. Kappos, 561 U.S. 612 (2010)).
`
`Mr. Wechselber
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