Paper No. 49
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________________
`GOOGLE LLC and APPLE INC.,
`Petitioners,
`
`v.
`CONTENTGUARD HOLDINGS, INC,
`Patent Owner.
`____________________
`Case No. CBM2015-000401
`U.S. Patent No. 7,774,280
`
`
`
`
`
`PETITIONER APPLE INC.’S NOTICE OF APPEAL
`
`
`1 This Notice of Appeal also has been filed in Case No. CBM2015-00160, which
`was joined with this proceeding.
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________________
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________________
`GOOGLE LLC and APPLE INC.,
`Petitioners,
`
`v.
`CONTENTGUARD HOLDINGS, INC,
`Patent Owner.
`____________________
`Case No. CBM2015-000401
`U.S. Patent No. 7,774,280
`
`
`
`
`
`PETITIONER APPLE INC.’S NOTICE OF APPEAL
`
`
`1 This Notice of Appeal also has been filed in Case No. CBM2015-00160, which
`was joined with this proceeding.
`
`
`
`CBM2015-00040 (U.S. Pat. No. 7,774, 280)
`
`
`Pet. Apple Inc.’s Notice of Appeal
`
`Pursuant to 35 U.S.C. §§ 141, 142, and 319, and in accordance with 37
`
`C.F.R. §§ 90.2(a) & 90.3, Petitioner Apple Inc. (“Apple”) appeals to the United
`
`States Court of Appeals for the Federal Circuit from the final written decision on
`
`remand (“Decision on Remand”) of the Patent Trial and Appeal Board (“Board”)
`
`entered on February 19, 2019 (Paper No. 48) in CBM2015-000402 and from all
`
`underlying findings, determinations, rulings, opinions, orders, and decisions
`
`regarding the covered business method reviews of U.S. Patent No. 7,774,280
`
`(“’280 patent”). A copy of the Decision on Remand is attached. Petitioner Google
`
`LLC is concurrently filing a notice of appeal in this matter.
`
`In accordance with 37 C.F.R. § 90.2(a)(3)(ii), Apple states that the issues on
`
`appeal include, but are not limited to: the Board’s determination on remand that
`
`Patent Owner demonstrated by a preponderance of the evidence that proposed,
`
`substitute independent claim 37 satisfies the requirements of 37 C.F.R. § 42.221;
`
`the Board’s determination on remand that Petitioners have not demonstrated by a
`
`preponderance of the evidence that proposed, substitute independent claim 37 is
`
`unpatentable over the prior art of record; any additional construction(s) of claim
`
`37; the process by which the Board reached its determination(s); and any finding or
`
`
`2 An identical copy of the Decision on Remand was filed as Paper 14 in Case No.
`CBM2015-00160.
`
`1
`
`
`
`CBM2015-00040 (U.S. Pat. No. 7,774, 280)
`
`determination supporting or related to these issues, as well as all other issues
`
`Pet. Apple Inc.’s Notice of Appeal
`
`decided adversely to Apple in any orders, decisions, rulings and opinions.
`
`Apple is filing a copy of this Notice of Appeal with (i) the Director of the
`
`U.S. Patent and Trademark Office, (ii) electronically with the Board, and (iii)
`
`electronically with the Clerk’s Office for the U.S. Court of Appeals for the Federal
`
`Circuit, along with the required docketing fee.
`
`Dated: April 22, 2019
`
`Respectfully Submitted,
`
`/Jeffrey P. Kushan/
`Jeffrey P. Kushan
`Reg. No. 43,401
`SIDLEY AUSTIN LLP
`1501 K Street NW
`Washington, DC 20005
`jkushan@sidley.com
`(202) 736-8914
`Attorney for Petitioner Apple Inc.
`
`2
`
`
`
`
`
`
`
`CBM2015-00040 (U.S. Pat. No. 7,774, 280)
`
`
`Pet. Apple Inc.’s Notice of Appeal
`
`CERTIFICATE OF FILING
`
`I certify that the foregoing was filed electronically with the Board through
`
`the PTAB E2E System, and a paper copy was served by hand-delivery on April 22,
`
`2019, with the Director of the United States Patent and Trademark Office, at the
`
`following address:
`
`Director of the U.S. Patent and Trademark Office
`c/o Office of the General Counsel
`United States Patent and Trademark Office
`P.O. Box 1450
`Alexandria, Virginia 22313-1450
`
`I further certify that a true and correct copy of the foregoing Notice of
`
`
`
`Appeal, along with the required filing fee, was filed electronically with the Court
`
`of Appeals for the Federal Circuit via CM/ECF on April 22, 2019. Per Fed. Cir.
`
`Rule 15(a)(1), one copy of this Notice of Appeal will be hand-delivered to the
`
`Clerk’s office of the United States Court of Appeals for the Federal Circuit on
`
`April 22, 2019, at the following address:
`
`Clerk of Court
`United States Court of Appeals for the Federal Circuit
`717 Madison Place NW
`Washington, DC 20439
`
`CERTIFICATE OF SERVICE
`
`
`
`Pursuant to 37 C.F.R. § 42.6(e), I hereby certify that on April 22, 2019, I
`
`caused to be served a true and correct copy of the foregoing by electronic mail on
`
`the following counsel:
`
`3
`
`
`
`Pet. Apple Inc.’s Notice of Appeal
`
`Robert R. Laurenzi
`PAUL HASTINGS LLP
`robert.laurenzi@paulhastings.com
`Attorney for Petitioner Google LLC
`
`
`CBM2015-00040 (U.S. Pat. No. 7,774, 280)
`
`Timothy P. Maloney
`Nicholas T. Peters
`FITCH EVEN TABIN & FLANNERY LLP
`tpmalo@fitcheven.com
`ntpete@fitcheven.com
`
`Robert A. Cote
`MCKOOL SMITH, P.C.
`rcote@mckoolsmith.com
`
`Attorneys for Patent Owner
`ContentGuard Holdings, Inc.
`
`
`
`Dated: April 22, 2019
`
`Respectfully Submitted,
`
`/Jeffrey P. Kushan/
`Jeffrey P. Kushan
`Reg. No. 43,401
`SIDLEY AUSTIN LLP
`1501 K Street NW
`Washington, DC 20005
`jkushan@sidley.com
`(202) 736-8914
`Attorney for Petitioner Apple Inc.
`
`
`
`4
`
`
`
`Trials@uspto.gov
`571-272-7822
`
` Paper 48
`
`Entered: February 19, 2019
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`GOOGLE INC. and APPLE INC.,
`Petitioners,
`
`v.
`
`CONTENTGUARD HOLDINGS, INC.,
`Patent Owner.
`____________
`
`Case CBM2015-000401
`Patent 7,774,280 B2
`____________
`
`
`Before MICHAEL R. ZECHER, BENJAMIN D. M. WOOD, and
`GEORGIANNA W. BRADEN, Administrative Patent Judges.
`
`ZECHER, Administrative Patent Judge.
`
`
`
`DECISION ON REMAND
`Covered Business Method Patent Review
`35 U.S.C. § 144 and 37 C.F.R. § 42.5(a)
`
`
`
`
`
`1 Case CBM2015-00160 has been joined with this proceeding.
`
`
`
`CBM2015-00040
`Patent 7,774,280 B2
`
`I. BACKGROUND
`A. Introduction
`We address this case on remand after a decision by the U.S. Court of
`Appeals for the Federal Circuit in Apple Inc. v. ContentGuard Holdings,
`Inc., 740 F. App’x 714 (Fed. Cir. 2018) (Paper 39, “ContentGuard”).
`As background, Google Inc. (“Google”) filed a Petition requesting a
`review under the transitional program for covered business method patents
`of claims 1, 5, 11, 12, and 22 of U.S. Patent No. 7,774,280 B2 (“the ’280
`patent,” Ex. 1001). Paper 1 (“Pet.”). ContentGuard Holdings, Inc. (“Patent
`Owner”) filed a Preliminary Response. Paper 8 (“Prelim. Resp.”). Taking
`into account the arguments presented in the Preliminary Response, we
`determined that the information presented in the Petition establishes that
`claims 1, 5, and 11 of the ’280 patent are more likely than not unpatentable
`under 35 U.S.C. §§ 102(b) and 103(a). We, however, determined that the
`information presented in the Petition did not establish that claims 1, 5, 11,
`12, and 22 are more likely than not directed to non-statutory subject matter
`under 35 U.S.C. § 101, or that claims 12 and 22 are more likely than not
`unpatentable under §§ 102(b) and 103(a). Pursuant to 35 U.S.C. § 324 and
`§ 18(a) of the Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125
`Stat. 284, 329–31 (2011) (“AIA”),2 we instituted this covered business
`
`
`2 Section 18(a)(1) of the AIA provides that the transitional program for
`covered business method patents will be regarded as a post-grant review
`under chapter 32 of title 35 United States Code and will employ the
`standards and procedures of a post-grant review, subject to certain
`exceptions.
`
`2
`
`
`
`CBM2015-00040
`Patent 7,774,280 B2
`method patent review proceeding on June 24, 2015, only as to claims 1, 5,
`and 11 of the ’280 patent and only on the grounds based on §§ 102(b) and
`103(a). Paper 9 (“Dec. on Inst.”).
`After instituting this proceeding, we considered a Petition filed by
`Apple Inc. (“Apple”) in Case CBM2015-00160 that challenged the same
`claims of the ’280 patent at issue in this proceeding based on the same
`grounds of unpatentability. The Petition in Case CBM2015-00160 was
`accompanied by a Motion for Joinder that requested we join Apple as a party
`to this proceeding. Pursuant to § 324 and § 18(a) of the AIA, we instituted
`another covered business method patent review proceeding only as to claims
`1, 5, and 11 of the ’280 patent and only on the grounds based on §§ 102(b)
`and 103(a), and granted Apple’s Motion for Joinder. Paper 14.
`During the course of trial, Patent Owner filed a Response to the
`Petition (Paper 15, “PO Resp.”), and a Motion to Amend (Paper 16, “Mot. to
`Amend”). Google and Apple (collectively, “Petitioners”) filed a Reply to
`the Patent Owner Response (Paper 21, “Pet. Reply”), and an Opposition to
`the Motion to Amend (Paper 22, “Opp. to Mot.”). Thereafter, Patent Owner
`filed a Reply to the Opposition to the Motion to Amend. Paper 25 (“Reply
`to Mot.”). Patent Owner also filed Observations regarding certain cross-
`examination testimony of Petitioners’ rebuttal witness, Benjamin Goldberg,
`Ph.D. (Paper 28, “Obs.”), and Petitioners filed a Response (Paper 30, “Obs.
`Resp.”). An oral hearing was held on February 24, 2016, and a transcript of
`the hearing is included in the record. Paper 33 (“Tr.”).
`On June 21, 2016, we issued a Final Written Decision in this
`proceeding in accordance with 35 U.S.C. § 328(a) and 37 C.F.R. § 42.73.
`3
`
`
`
`CBM2015-00040
`Patent 7,774,280 B2
`Paper 34 (“Final Dec.”). We concluded that Petitioners demonstrated by a
`preponderance of the evidence that claims 1, 5, and 11 of the ’280 patent are
`unpatentable under §§ 102(b) and 103(a). Final Dec. 73. We also granted
`Patent Owner’s Motion to Amend. Id. Petitioners appealed our grant of
`Patent Owner’s Motion to Amend to the Federal Circuit. Papers 35, 36.
`Patent Owner cross-appealed our determination that the ’280 patent is a
`covered business method patent eligible for review. Paper 37.
`In its remand decision that issued on July 11, 2018, the Federal Circuit
`acknowledged that, since we issued the Final Written Decision in this case,
`it had rejected the “incidental to” or “complementary to” standard for
`determining whether a patent qualifies as a covered business method patent
`eligible for review. ContentGuard, 740 F. App’x at 716 (citing Unwired
`Planet, LLC v. Google Inc., 841 F.3d 1376, 1379 (Fed. Cir. 2016)). The
`Federal Circuit then vacated our Final Written Decision because we relied
`on this incorrect legal standard in determining whether the ’280 patent is a
`covered business method patent eligible for review. Id. The Federal Circuit
`remanded this case for us to determine whether the ’280 patent qualifies as a
`covered business method patent eligible for review, without relying on the
`“incidental to” or “complementary to” standard. Id. at 717. The Federal
`Circuit’s mandate issued on September 4, 2018. Paper 40.
`On October 1, 2018, we issued an Order that modified our Decisions
`on Institution in Cases CBM2015-00040 and CBM2015-00160 to include
`review of all challenged claims and all grounds set forth in the respective
`Petitions, we authorized the parties to file a Joint Motion to Limit the
`Petitions by removing the previously non-instituted claims and grounds, and
`4
`
`
`
`CBM2015-00040
`Patent 7,774,280 B2
`we authorized the parties to file a ten-page opening brief narrowly tailored to
`address whether the ’280 patent qualifies as a covered business method
`patent eligible for review followed by a five-page responsive brief. Paper
`41. On October 11, 2018, we granted the parties’ Joint Motion to Limit the
`Petitions by removing the previously non-instituted claims and grounds.
`Paper 43. On October 19, 2018, the parties filed their opening briefs.
`Papers 44, 45. On November 9, 2018, the parties filed their responsive
`briefs. Papers 46, 47.
`We have reconsidered the record anew by reviewing the parties’
`positions on remand as to whether the ’280 patent qualifies as a covered
`business method patent eligible for review, without relying on the
`“incidental to” or “complementary to” standard. For the reasons discussed
`below, we hold that Petitioners have demonstrated by a preponderance of the
`evidence that (1) the ’280 patent is a covered business method patent eligible
`for review; and (2) claims 1, 5, and 11 of the ’280 patent are unpatentable
`under §§ 102(b) and 103(a). We also grant Patent Owner’s Motion to
`Amend.
`
`B. Related Matters
`The parties indicate that the ’280 patent has been asserted in the
`
`following three district court cases: (1) ContentGuard Holdings, Inc. v.
`Google Inc., No. 2:14-cv-00061-JRG-RSP (E.D. Tex.); (2) Google Inc. v.
`ContentGuard Holdings, Inc., No. 3:14-cv-00498-WHA (N.D. Cal.); and
`(3) ContentGuard Holdings, Inc. v. Amazon.com Inc., No. 2:13-cv-01112-
`
`5
`
`
`
`CBM2015-00040
`Patent 7,774,280 B2
`JRG (E.D. Tex.). Pet. 6–7;3 Paper 7, 1–2. In addition to this Petition,
`Google filed another Petition in Case CBM2015-00043 requesting a review
`under the transitional program for covered business method patents of a
`certain subset of claims in U.S. Patent No. 8,001,053 B2 (“the ’053 patent”)
`owned by Patent Owner. Pet. 7; Paper 7, 1. In that related case, another
`panel of the Board denied the Petition as to all challenged claims of the ’053
`patent. Google Inc. v. ContentGuard Holdings, Inc., Case CBM2015-00043
`(PTAB June 26, 2015) (Paper 9).
`
`C. Standing
`Section 18 of the AIA governs the transitional program for covered
`
`business method patent reviews. Section 18(a)(1)(B) of the AIA limits such
`reviews to persons, or their privies, that have been sued or charged with
`infringement of a covered business method patent. Petitioners assert—and
`we agree—that they have standing to file their respective Petitions because
`they have been sued for infringement of the ’280 patent. Pet. 8 (citing
`Ex. 1004).
`
`D. The ’280 Patent
`The ’280 patent, titled “System and Method for Managing Transfer of
`Rights using Shared State Variables,” issued August 10, 2010, from U.S.
`
`
`3 The Petition and supporting evidence filed by Google in Case CBM2015-
`00040 are essentially the same as the Petition and supporting evidence filed
`by Apple in Case CBM2015-00160. For clarity and ease of reference, all
`references to the Petition and supporting evidence throughout this Final
`Written Decision are to the Petition and supporting evidence filed by Google
`in Case CBM2015-00040.
`
`6
`
`
`
`CBM2015-00040
`Patent 7,774,280 B2
`Patent Application No. 10/956,121 (“the ’121 application”), filed on October
`4, 2004. Ex. 1001, [54], [45], [21], [22]. The ’280 patent is a continuation-
`in-part of U.S. Patent Application No. 10/162,701 (“the ’701 application”),
`filed on June 6, 2002. Id. at [63]. The ’280 patent also claims priority to
`numerous provisional applications, the earliest of which includes U.S.
`Provisional Application No. 60/331,624 (“the ’624 provisional application”),
`filed on November 20, 2001. Id. at [60].
`The ’280 patent generally relates to a method and system for
`managing the transfer of rights associated with digital works using shared
`state variables. Ex. 1001, 1:18–20. According to the ’280 patent, one of the
`most important issues impeding the widespread distribution of digital works
`is the current lack of ability to enforce the rights of content owners during
`the distribution and use of their digital works. Id. at 1:24–29. In particular,
`content owners do not have control over downstream parties unless they are
`privy to transactions with the downstream parties. Id. at 2:33–34. The
`concept of content owners simply granting rights to others that are a subset
`of the possessed rights is not adequate for multi-tier distribution schemes.
`Id. at 2:45–48.
`The ’280 patent purportedly addresses these problems by providing a
`method and system for transferring rights associated with items of content—
`presumably digital works—from a supplier to a consumer. Ex. 1001, 2:52–
`55. The consumer obtains a set of rights associated with the digital work,
`which includes meta-rights specifying rights that may be derived therefrom.
`Id. at 2:55–57. If the consumer is entitled to the rights derived from the
`meta-rights, the disclosed invention then derives at least one right from the
`7
`
`
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`CBM2015-00040
`Patent 7,774,280 B2
`meta-rights. Id. at 2:58–60. The rights that may be derived from the meta-
`rights include at least one state variable based on the set of rights, which, in
`turn, may be used to determine a state of the derived right. Id. at 2:62–64.
`E. Illustrative Claim
`Of the challenged claims remaining in this proceeding, only claim 1 is
`independent. Claim 1 is directed to a method for transferring rights
`associated with items from a supplier to a consumer. Claims 5 and 11
`directly depend from independent claim 1. Independent claim 1 is
`illustrative and is reproduced below:
`1.
`A computer-implemented method for transferring
`rights adapted to be associated with items from a rights supplier
`to a rights consumer, the method comprising:
`obtaining a set of rights associated with an item, the set of
`rights including a meta-right specifying a right that can be
`created when the meta-right is exercised, wherein the meta-right
`is provided in digital form and is enforceable by a repository;
`determining, by a repository, whether the rights consumer
`is entitled to the right specified by the meta-right; and
`exercising the meta-right to create the right specified by
`the meta-right if the rights consumer is entitled to the right
`specified by the meta-right, wherein the created right includes at
`least one state variable based on the set of rights and used for
`determining a state of the created right.
`Ex. 1001, 15:7–22.
`
`F. Covered Business Method Patent
`Under § 18(a)(1)(E) of the AIA, we may institute a transitional review
`proceeding only for a patent that is a covered business method patent. A
`“covered business method patent” is a patent that “claims a method or
`corresponding apparatus for performing data processing or other operations
`
`8
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`CBM2015-00040
`Patent 7,774,280 B2
`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 also 37 C.F.R. § 42.301 (defining
`“[c]overed business method patent” and “[t]echnological invention”). The
`Federal Circuit has explained that Ҥ 18(d)(1) directs us to examine the
`claims when deciding whether a patent is a [covered business method]
`patent.” Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1340 (Fed.
`Cir. 2016).
`Based on the parties’ arguments and evidence presented on remand,
`we conclude that the ’280 patent both (1) claims a method for performing
`data processing or other operations used in the practice, administration, or
`management of a financial product or service, and (2) is not for a
`“technological invention.”
`1. Financial Product or Service
`“[T]he definition of ‘covered business method patent’ is not limited to
`products and services of only the financial industry, or to patents owned by
`or directly affecting activities of financial institutions,” but rather it “covers
`a wide range of finance-related activities.” Versata Dev. Grp., Inc. v. SAP
`Am., Inc., 793 F.3d 1306, 1325 (Fed. Cir. 2015). The Federal Circuit has
`determined that a patent that claims activities that are “financial in nature” is
`eligible for covered business method patent review under § 18(d)(1).
`Unwired Planet, 841 F.3d at 1380 n.5 (Fed. Cir. 2016) (endorsing the
`“financial in nature” standard set forth in Blue Calypso).
`
`In its opening brief, Petitioners contend that independent claim 1 of
`the ’280 patent is “financial in nature” because it is directed to a business
`9
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`CBM2015-00040
`Patent 7,774,280 B2
`model of distributing digital content that entails a supplier granting rights to
`consumer downstream in a distribution chain. Paper 44, 3–4 (citing
`Ex. 1001, 1:36–39, 2:24–48, 5:39–43, 6:1–13, 15:7–8). To support their
`argument, Petitioners assert that the specification of the ’280 patent is
`replete with examples of the financial nature of the claimed exchange
`between the supplier and consumer. Id. at 4. As one example, Petitioners
`argue that the specification discloses a license that provides rights for a
`consumer to view content in exchange for paying a fee. Id. at 4–5 (citing
`Ex. 1001, 4:3–14, Fig. 4). Petitioners also argue that U.S. Patent No.
`5,634,012 (“Stefik”), which is incorporated by reference into the ’280
`patent, is replete with examples demonstrating the financial activities
`inherent in the commercial distribution of digital content. Id. at 4–6. As one
`example, Petitioners direct us to a disclosure in Stefik that states “the billing
`for use of a digital work is fundamental to a commercial distribution
`system.” Id. at 7 (quoting Ex. 1002, 24:48–49).
`
`Petitioners further contend that independent claim 1 is “financial in
`nature,” regardless of whether the specification of the ’280 patent includes
`some non-financial embodiments. Paper 44, 7. Petitioners maintain that
`independent claim 1 defines the claimed invention in economic terms (i.e.,
`“consumer” and “supplier”) to support a multi-tiered distribution scheme or
`business model, and the specification makes clear that financial transactions
`are fundamental to this business model. Id. Petitioners acknowledge that
`the specification includes a few embodiments that do not require payment of
`a fee during the transfer of rights associated with an item from a supplier to a
`consumer, but nonetheless assert that these embodiments should not
`10
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`CBM2015-00040
`Patent 7,774,280 B2
`preclude the multi-tiered distribution scheme of independent claim 1 from
`being considered “financial in nature.” Id. at 8–9 (citing Ex. 1001, 7:6–22,
`13:60–62, 14:8–10, Fig. 11).
`
`In its opening brief, Patent Owner contends that the challenged claims
`of the ’280 patent “are context-neutral, can be used in numerous non-
`financial settings, and do not recite any financial activity.” Paper 45, 2. To
`support its argument, Patent Owner asserts that the challenged claims are
`“plainly non-financial” because they only refer to “transferring rights”—not
`selling or re-selling rights. Id. at 4. Patent Owner further argues that the
`claim terms “supplier” and “consumer” recited in independent claim 1 are
`defined generically in the specification and, therefore, preclude any
`argument that these claim terms limit independent claim 1 to a financial
`activity. Id. at 4–5 (citing Ex. 1001, 6:10–13, 7:6–17). Patent Owner also
`argues that the “obtaining,” “determining,” and “exercising” method steps
`recited in independent claim 1 do not supply the missing financial activity
`element because they do not relate to a financial product or service. Id. at 5–
`6 (citing Ex. 1001, 15:10–22). Lastly, Patent Owner contends that the
`examples in the specification of payment of a fee or processing by a
`clearinghouse do not limit the challenged claims. Id. Patent Owner then
`directs us to an example highlighted in the Federal Circuit’s remand
`decision, as well as other examples that purportedly do not require the
`payment of a fee. Id. at 6–7 (citing Ex. 1001, 6:61–67, 7:6–22, 11:52–12:2,
`12:22–32, 12:39–50, 12:57–13:8, 13:18–33, 14:11–18, 14:22–31, 14:41–44,
`Figs. 9–12, 14–16).
`
`11
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`CBM2015-00040
`Patent 7,774,280 B2
`
`In its responsive brief, Petitioners contend that Patent Owner ignores
`the overwhelming evidence that the claimed invention is “financial in
`nature” and disregards its purpose—namely, to enable a digital rights
`management (“DRM”) business model. Paper 46, 1. Petitioners argue that
`the hospital example, highlighted by both the Federal Circuit and Patent
`Owner, is the only example where “consumer” is used in a non-financial
`setting. Id. at 2. According to Petitioners, the specification of the ’280
`patent consistently uses “consumer” in a financial context to refer to a
`participant in a multi-tiered distribution scheme or business model. Id.
`(citing Ex. 1001, 5:39–43, 6:1–17). Petitioners also argue that Patent
`Owner’s reliance on a few non-financial embodiments should fail because
`the specification of the ’280 patent repeatedly refers to the preferred
`embodiment as “financial in nature.” Id. at 3–4 (citing Ex. 1001, 3:15–16,
`3:21–23, 4:8–12, 5:36–38, Fig. 4). Petitioners assert that Patent Owner
`ignores the context of the business model disclosed and claimed in the ’280
`patent, which only makes sense when the multi-tiered distribution scheme
`includes financial transactions. Id. at 3–4 (citing Ex. 1001, 6:14). Lastly,
`Petitioners do not agree with Patent Owner’s argument that the method steps
`of independent claim 1 do not relate to a financial product or service because
`this argument improperly reads independent claim 1 in isolation from the
`specification. Id. at 5 (citing Ex. 1001, 4:11–14, 9:9–13, 15:7–14).
`
`In its responsive brief, Patent Owner maintains that the ’280 patent is
`not eligible for a covered business method patent review merely because the
`specification of the ’280 patent discloses embodiments that involve
`distributing digital content for payment of a fee. Paper 47, 1. According to
`12
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`CBM2015-00040
`Patent 7,774,280 B2
`Patent Owner, the challenged claims require creating and transferring rights
`to digital content—there is no mention of a business model, a sale, a fee
`transaction, or any other financial activity. Id. at 1–2. Patent Owner argues
`that the disclosure regarding business models and payment of fees in the
`specification does not limit the challenged claims. Id. at 2. According to
`Patent Owner, the Federal Circuit did not endorse an argument that the
`challenged claims of the ’280 patent describe an exchange that is “financial
`in nature,” but rather they merely made observations regarding certain
`aspects of the specification. Id. Patent Owner asserts that the claim terms
`“supplier” and “consumer” are generic, non-economic terms that do not
`define parties to a business transaction. Id. at 2–3 (citing Ex. 1001, 6:10–
`13). Patent Owner recognizes that dependent claim 11 recites “generating a
`license,” but argues that this claim does not recite a fee condition and it has a
`non-financial meaning. Id. at 3. Lastly, Patent Owner argues that the
`specification does not support Petitioners’ attempt to characterize certain
`embodiments, such as sharing digital content within an enterprise,
`transferring medical records, or loaning digital content at a library, as being
`“financial in nature.” Id. at 4–5.
`Upon considering the parties’ arguments and evidence on remand, we
`agree with Petitioners’ arguments and evidence that independent claim 1 of
`the ’280 patent satisfies the “financial product or service” component of the
`definition for a covered business method patent set forth in § 18(d)(1) of the
`AIA. We begin our analysis by focusing on the language of independent
`claim 1. The preamble of this claim requires “[a] computer-implemented
`method for transferring rights adapted to be associated with items from a
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`Patent 7,774,280 B2
`rights supplier to a rights consumer.” Ex. 1001, 15:7–9. The method steps
`in the body of this claim further require “obtaining a set of rights associated
`with an item, the set of rights including a meta-right specifying a right that
`can be created when the meta-right is exercised, wherein the meta-right . . .
`is enforceable by a repository,” “determining, by a repository, whether the
`rights consumer is entitled to the right specified by the meta-right,” and, if
`so, “exercising the meta-right to create the right specified by the meta-right.”
`Id. at 15:10–22. These explicit requirements of independent claim 1 directly
`align with the stated objective of the ’280 patent, which is to control the
`distribution or resale of rights associated with an item from a supplier to a
`consumer in a multi-tiered distribution scheme. Id. at 2:22–48.
`We agree with Petitioners that independent claim 1 is “financial in
`nature” because central to the operation of this multi-tiered distribution
`scheme is the billing or payment of a fee that accompanies distributing or
`reselling a set of rights associated with an item from a supplier to a
`consumer. See Blue Calypso, 815 F.3d at 1340 (explaining that the patent at
`issue was eligible for a covered business method patent review because,
`“[a]s the Board noted, the [claimed] ‘subsidy’ [was] central to the operation
`of the claimed invention”). When describing issues such as accounting,
`payment, and financial clearing that should be addressed by a DRM system,
`the ’280 patent incorporates by reference other DRM systems, one of which
`is Stefik. Ex. 1001, 1:36–43; see also id. at 5:43–47 (disclosing how the
`preferred embodiment of the ’280 patent extends the known concept of
`usage rights, such as the usage rights and DRM systems disclosed in Stefik,
`to the concept of meta-rights). Stefik unequivocally states that “[t]he billing
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`CBM2015-00040
`Patent 7,774,280 B2
`for use of a digital work is fundamental to a commercial distribution
`system.” Ex. 1002, 24:48–49 (emphasis added). When applying this
`“fundamental” concept of a DRM system to the ’280 patent, it follows that
`billing or payment of a fee is central to the operation of the multi-tiered
`distribution scheme of independent claim 1.
`Moreover, Stefik further highlights that independent claim 1 of the
`’280 patent is “financial in nature” because this claim requires using a
`“repository,” such as the one disclosed in Stefik, as an enforcement
`mechanism. Ex. 1001, 15:12–14. Stefik, which, as we explain above, is
`incorporated by reference in the ’280 patent, describes itself as “[a] fee
`accounting mechanism for reporting fees associated with the distribution and
`use of digital works.” Ex. 1002, [57]. Stefik further discloses that “[t]he
`digital works and their usage rights and fees are stored in repositories,” each
`of which “control[s] access to the digital works” and, “[u]pon determination
`that the exercise of a usage right requires a fee, the repository generates a fee
`reporting transaction.” Id. Because both Stefik and the ’280 patent use a
`“repository” as an enforcement mechanism (Ex. 1001, 7:36–39), it follows
`that the “repository” recited in independent claim 1 of the ’280 patent is a
`claimed feature that is “financial in nature” because it “generates a fee
`reporting transaction.”
`This is not a case where there is only one of many embodiments
`disclosed in the specification of the ’280 patent that might demonstrate
`independent claim 1 is “financial in nature,” but rather there are an
`overwhelming number of embodiments in the specification of the ’280
`patent supporting a determination that independent claim 1 is “financial in
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`CBM2015-00040
`Patent 7,774,280 B2
`nature.” For example, the specification discloses that, in most embodiments
`covered by independent claim 1, the transfer of rights associated with an
`item from a supplier to a consumer requires the payment of a fee or
`processing by a clearinghouse. See, e.g., Ex. 1001, 2:19–20 (disclosing
`usage rights, including meta-rights, may be contingent on payment), 4:3–14
`(disclosing how a consumer is permitted to view the digital works it
`purchased for a fee of $5 or, alternatively, view and print the digital content
`for a fee of $10), 5:4–11 (disclosing that, when a consumer wishes to obtain
`a digital work, the consumer goes through a series of steps, including paying
`a fee), 5:35–37 (disclosing the use of a clearinghouse to process payment
`transactions). These cited disclosures in the specification reinforce that the
`distribution or resale of rights associated with an item from a supplier to a
`consumer is “financial in nature” because central to the operation of this
`multi-tiered distribution scheme is billing or payment of a fee. See Blue
`Calypso, 815 F.3d at 1339 n.2 (determining patents at issue are eligible for
`covered business method patent review based on claims reciting an
`“incentive program,” where one of the challenged patents “repeatedly, and
`almost exclusively discloses ‘incentive’ and ‘incentive program’ in a
`financial context”).
`Dependent claim 3 recites, in relevant part, “generating a license
`including the created right.” Ex. 1001, 15:49–51. This claim also is
`“financial in nature” because central to generating a license in the context of
`the ’280 patent is billing o
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