UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00121
`
`Patent 8,794,516
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`

`
`TABLE OF CONTENTS
`
`INTRODUCTION ........................................................................................... 1
`
`THE KELLY DECLARATION SHOULD BE GIVEN LITTLE OR NO
`WEIGHT .......................................................................................................... 7
`A. Dr. Kelly Admits that His Opinions Are Not Legal Opinions .............. 7
`B.
`There Is No Assurance That Dr. Kelly’s Methodology Is Reliable ...... 8
`C.
`Dr. Kelly Is Simply A Highly Compensated Spokesperson for Apple
` ............................................................................................................. 17
`
`
`III. OVERVIEW OF U.S. PATENT NO. 8,794,516 .......................................... 18
`
`IV. THE INSTITUTED CLAIMS OF THE ‘516 PATENT ARE NOT
`DIRECTED TO AN ABSTRACT IDEA ...................................................... 21
`
`
`I.
`
`II.
`
`
`V.
`
`
`VI. A FEDERAL COURT HAS ALREADY FOUND CLAIMS IN THE
`SAME PATENT FAMILY AS THE ‘516 PATENT TO BE STATUTORY
`UNDER § 101 ................................................................................................ 62
`- i -
`
`EVEN IF THE INSTITUTED CLAIMS OF THE ‘516 PATENT WERE
`DIRECTED TO AN ABSTRACT IDEA, THE CLAIMS ARE DIRECTED
`TO STATUTORY SUBJECT MATTER ...................................................... 29
`A.
`The Two-Part Test for Statutory Subject Matter ................................ 29
`B.
`Petitioner Cannot Meet Its Burden Of Proving That The Instituted
`Claims Do Not Amount To Significantly More Than A Patent Upon
`The Abstract Idea Itself ....................................................................... 30
`The Claims Are Statutory Under Mayo and Alice .............................. 32
`The Instituted Claims In Practice Amount To Significantly More Than
`A Patent Upon The Abstract Idea Itself .............................................. 48
`1.
`Evidence Shows That The Instituted Claims Do Not Amount
`To A Patent On The Abstract Idea Of Payment For And
`Controlling Access To Data ...................................................... 48
`The Existence Of Alternative Technologies That Control
`Access Based On Payment Outside The Scope Of The
`Instituted Claims Show The Claims Do Not Amount To A
`Patent On The Abstract Idea Of Payment For And Controlling
`Access To Data ......................................................................... 53
`The Instituted Claims Do Not Result In Inappropriate Preemption ... 55
`
`C.
`D.
`
`2.
`
`E.
`
`
`
`

`
`VII. THE USPTO IS ESTOPPED FROM REVISITING THE ISSUE OF
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY
`SUBJECT MATTER ..................................................................................... 63
`
`VII.
`
`THE USPTO IS ESTOPPED FROM REVISITING THE ISSUE OF
`
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY
`
`SUBJECT MATTER ................................................................................... ..63
`
`VIII.
`
`INVALIDATING PATENT CLAIMS VIA CBM REVIEW IS
`
`UNCONSTITUTIONAL ............................................................................. . .65
`
`
`VIII. INVALIDATING PATENT CLAIMS VIA CBM REVIEW IS
`UNCONSTITUTIONAL ............................................................................... 65
`
`IX.
`
`SECTION 101 IS NOT A GROUND THAT MAY BE RAISED IN
`
`COVERED BUSINESS METHOD PATENT REVIEW ........................... ..67
`
`
`IX. SECTION 101 IS NOT A GROUND THAT MAY BE RAISED IN
`COVERED BUSINESS METHOD PATENT REVIEW ............................. 67
`
`
`X.
`
`THE INSTITUTED CLAIMS OF THE ‘516 PATENT ARE NOT
`DIRECTED TO A FINANCIAL PRODUCT OR SERVICE ...................... 70
`
`THE INSTITUTED CLAIMS OF THE ‘516 PATENT ARE NOT
`
`DIRECTED TO A FINANCIAL PRODUCT OR SERVICE .................... ..70
`
`
`XI. THE INSTITUTED CLAIMS OF THE ‘516 PATENT ARE
`TECHNOLOGICAL INVENTIONS EXEMPT FROM CBM REVIEW .... 74
`
`XI.
`
`THE INSTITUTED CLAIMS OF THE ‘5 16 PATENT ARE
`
`TECHNOLOGICAL INVENTIONS EXEI\/[PT FROM CBM REVIEW....74
`
`
`XII. CONCLUSION .............................................................................................. 76
`
`XII.
`
`CONCLUSION ............................................................................................ . .76
`
`
`
`
`
`- ii -
`
`
`
`

`
`
`
`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
`
`2003-2048
`
`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
`
`2051-2074
`
`Reserved
`
`2075
`
`
`
`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.
`
`- iii -
`
`

`
`2076
`
`Deposition Transcript of Anthony J. Wechselberger dated
`July 22, 2015 taken in CBM2015-00028, -00029, -00031, -
`00032 and -00033
`
`2077-2081
`
`Reserved
`
`2082
`
`Trial Transcript from Virnetx Inc. v. Apple Inc., Case No.
`6:10-cv-417 (E.D. Tex.) dated November 2, 2012.
`
`
`
`2083
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Preliminary Response
`
`2084-2104
`
`Reserved
`
`2105
`
`Transcript of Deposition of Justin Douglas Tygar, Ph.D.
`dated January 19, 2016 taken in CBM2015-00126 and -
`00129
`
`2106-2107
`
`Reserved
`
`2108
`
`Transcript of Deposition of John P. J. Kelly, Ph.D. dated
`February 3-4, 2016 taken in CBM2015-00121, -00123, -
`00124, -00127, -00130, -00131, and -00133
`
`2109-2114
`
`Reserved
`
`2115
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`
`
`
`
`- iv -
`
`

`
`I.
`
`INTRODUCTION
`
`Covered business method review (“CBM review”) was instituted for U.S.
`
`Patent 8,794,516 (“the ‘516 Patent”) claims 1-28 (“the instituted claims”) as being
`
`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 8
`
`at 24 (PTAB November 10, 2015).
`
`The ‘516 Patent application was filed on April 3, 2012. The patent was
`
`allowed on April 14, 2014 and issued on August 5, 2014. The Mayo Collaborative
`
`Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) case, which sets
`
`forth the two-part test for statutory subject matter under 35 U.S.C. § 101, was
`
`decided on March 20, 2012. Thus, the ‘516 Patent was applied for, examined,
`
`allowed, and issued while Mayo was controlling precedent. There has been no
`
`substantive change in the law to warrant revisiting whether the ‘516 Patent is
`
`directed to statutory subject matter. As such, the Petition should be dismissed.
`
`Claims 1-28 of the ‘516 Patent should be found to be eligible under § 101
`
`because claims 1-28 are not directed to an abstract idea. The instituted claims are
`
`directed to machines or useful processes, both patent eligible subject matter under
`
`§ 101. Claims 1-4, 5-13, and 21-24 are directed to machines comprised of various
`
`structural components - a handheld multimedia terminal (claims 1-4 and 17), a
`
`content data supply server (claims 5-13) and a computer system for providing
`
`
`
`- 1 -
`
`

`
`multimedia data items (claims 21-24) with specifically defined elements. Claims
`
`14-20 and 25-28 are directed to useful processes with specifically defined steps.
`
`Even if claims 1-28 could be said, at some level of generality, to be directed
`
`to an abstract idea, claims 1-28 have an “inventive concept” sufficient to ensure
`
`that the claims practice “amount[] to significantly more than a patent on the
`
`[abstract idea] itself.” Mayo, 132 S. Ct. 1289, 1294 (2012).
`
`Moreover, claims 1-28 of the ‘516 Patent are directed to statutory subject
`
`matter because the inventions they claim are solutions “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 1-4 claim a handheld
`
`multimedia terminal, claims 5-13 claim a content data supply server, and claims
`
`21-24 claim a computer system for providing multimedia data items, that provide
`
`for secure and convenient acquisition of multimedia content and thus address the
`
`problem of data content piracy on the Internet. Claims 1-4 accomplish this by
`
`having a processor specialized with processor control code that includes code to
`
`receive a user selection to select multimedia content; code responsive to the user
`
`selection of multimedia content to transmit payment data (user identification data
`
`identifying the user to a payment validation system) relating to payment for the
`
`multimedia content; code to receive the payment validation data; and code to
`
`
`
`- 2 -
`
`

`
`control access to the multimedia content on the handheld multimedia terminal that
`
`is responsive to the payment validation data. Ex. 1001, ‘516 Patent at 26:12-37.
`
`Claims 5-13 accomplish this by having a processor specialized with code to
`
`receive payment validation data validating a user purchase of an item of
`
`multimedia content; and code responsive to the payment validation data validating
`
`the user purchase to retrieve the purchased item of multimedia content data from a
`
`multimedia content store and transmit the purchased item of multimedia content
`
`via the communications interface to the handheld multimedia terminal.. Id. at
`
`27:10-18. Claims 21-24 accomplish this by having a processor specialized with
`
`code to receive a request for a multimedia data item from a handheld multimedia
`
`terminal; code to receive payment validation data confirming payment for the
`
`requested multimedia data item; code responsive to the request for the multimedia
`
`data item and responsive to the received payment validation data, to read the
`
`requested multimedia data item from a content provider; and code to transmit the
`
`read multimedia data item to the handheld multimedia terminal.
`
`Claims 14-20 and 25-28 entail useful processes (methods) that provide for
`
`secure and convenient acquisition of multimedia content and thus similarly address
`
`the problem of data content piracy on the Internet. In the case of claims 14-20, the
`
`requested multimedia content data is only retrieved from a multimedia content
`
`store and transmitted to the handheld multimedia terminal in response to receiving
`
`
`
`- 3 -
`
`

`
`payment validation data. Id. at 28:4-9. In the case of claims 25-28, the requested
`
`multimedia content is similarly only retrieved from a content data supply server
`
`and written to the handheld multimedia terminal in response to receiving payment
`
`validation data. Id. at 30:6-16. In so doing, the invention makes it easy for users
`
`to acquire multimedia content data legitimately and effectively prevents data
`
`piracy.
`
`As demonstrated below, claims 1-28 do not result in inappropriate
`
`preemption of the “idea of payment for and controlling access to data.” Petition,
`
`Paper 2 at 4; Exhibit 1019 at ¶ 75. Such lack of preemption is shown by the
`
`elements of claims 1-28 that are not necessary to be in a system that practices the
`
`idea of payment for and controlling access to data, as well as existing alternative
`
`technologies that control access based on payment that do not have the elements of
`
`claims 1-28.
`
`Further, to prevail in this CBM, Petitioner Apple must show that claims 1-28
`
`of the ‘516 Patent in practice do not amount to significantly more than a patent
`
`upon the abstract idea of “payment for and controlling access to data” itself. As set
`
`out below, the evidence shows that Apple’s expert did not do the analysis required
`
`to draw this conclusion because he never reduced the abstract idea to its minimum
`
`essential elements to compare to the claims. As such, Petitioner cannot meet its
`
`burden of proof.
`
`
`
`- 4 -
`
`

`
`Additionally, in February 2015, The United States District Court for the
`
`Eastern District of Texas examined the purely legal issue of whether numerous
`
`claims from five patents in the same patent family as the ‘516 Patent, and relating
`
`to similar technology, are directed to statutory subject matter under
`
`35 U.S.C. § 101, and found the claims to be statutory. 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.
`
`On July 8, 2015 the same 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
`
`
`
`- 5 -
`
`

`
`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) (emphasis added).
`
`Patent Owner submits that the USPTO has already adjudicated the threshold
`
`question of whether the instituted claims comport with 35 U.S.C. § 101, which is a
`
`question of law, during the prosecution of the ‘516 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.
`
`Patent Owner also submits that § 101 is not a ground on which CBM review
`
`may be instituted. In fact, CBM review under § 101 is unwarranted here, because
`
`claims 1-28 of the ‘516 Patent are not directed to a financial product or service.
`
`Even if the Board’s conclusion that “financial product or service” “is to be
`
`interpreted broadly” (Institution Decision, Paper 8 at 8) is correct, and claims 1-28
`
`qualify for CBM review, the claims fall within the “technological invention”
`
`exception to CBM review. The Board therefore lacks authority to conduct this
`
`covered business method review and should terminate it.
`
`- 6 -
`
`
`
`
`
`

`
`II. THE KELLY DECLARATION SHOULD BE GIVEN LITTLE OR NO
`
`WEIGHT
`A.
`Whether claims are directed to statutory subject matter is “an issue of law.”
`
`Dr. Kelly Admits that His Opinions Are Not Legal Opinions
`
`Institution Decision, CBM2015-00129, Paper 8, page 18. When asked on cross
`
`examination what he understood he was to do in providing his opinions in this
`
`CBM, Dr. Kelly stated “I was asked to examine the … background prior art, and
`
`then based on that, determine whether or not I thought that the … Smartflash
`
`claims were patent eligible, and I'm not a legal expert. I'm not a lawyer, and so I'm
`
`providing a technical analysis based on my understanding of the legal standards.”
`
`Exhibit 2108, Kelly Deposition at 9:19-10:14. When asked if he intended any of
`
`his opinions in his declaration to be considered legal opinions, Dr. Kelly responded
`
`“It seems to me that that is a legal question in and of itself. I'm not here to answer
`
`-- to provide legal testimony.” Id. 10:15-21 (emphasis added). Further, when
`
`asked about what kinds of things he understood the USPTO “believes makes a
`
`claim inventive,” Dr. Kelly reiterated “Well, there's a … statute that lays out the
`
`requirements. I'm not a lawyer. I'm not here to give a legal opinion…” Id. at
`
`134:11-17 (emphasis added). Thus, Dr. Kelly’s opinions on whether claims 1-28
`
`of the ‘516 Patent are directed to statutory subject matter, a question of law, are
`
`irrelevant, and his Declaration should be given little or no weight.
`
`
`
`- 7 -
`
`

`
`B.
`
`There Is No Assurance That Dr. Kelly’s Methodology Is
`Reliable
`
`In Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S.Ct. 2786, 509 U.S.
`
`579 (1993), the Supreme Court set forth standards for the admissibility of expert
`
`testimony. The Supreme Court noted that:
`
`Faced with a proffer of expert scientific testimony … the
`trial judge must determine at the outset, pursuant to Rule
`104(a), whether the expert is proposing to testify to (1)
`scientific knowledge that (2) will assist the trier of fact to
`understand or determine a fact in issue. This entails a
`preliminary assessment of whether the reasoning or
`methodology underlying the testimony is scientifically
`valid and of whether that reasoning or methodology
`properly can be applied to the facts in issue. We are
`confident that federal judges possess the capacity to
`undertake this review. Many factors will bear on the
`inquiry, and we do not presume to set out a definitive
`checklist or test. But some general observations are
`appropriate. Ordinarily, a key question to be answered
`in determining whether a theory or technique is
`scientific knowledge that will assist the trier of fact will
`be whether it can be (and has been) tested.
`
`Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S.Ct. 2786, 2796, 509 U.S.
`
`579, 592-93 (1993) (emphasis added).
`
`
`
`- 8 -
`
`

`
`Dr. Kelly did not employ any scientifically valid reasoning or methodology
`
`in reaching his opinions. In fact, when asked “[u]sing your methodology for
`
`determining subject matter eligibility under 101, what is your false positive rate
`
`finding a claim to be not eligible when it was,” Dr. Kelly could not give a rate, but
`
`could only predict that the claims here are unpatentable. Exhibit 2108, Kelly
`
`Deposition at 26:7-19. Similarly, when asked “what is your false negative rate,”
`
`Dr. Kelly stated “I don't have a number for you.” Id. at 26:21-27:12. Dr. Kelly’s
`
`testimony did not employ any scientific reasoning or methodology, but simply put
`
`Dr. Kelly in the position of a tribunal making the same legal assessment.
`
`Dr. Kelly also did nothing to test the method he used in arriving at his
`
`opinions in this case to ensure that his method was repeatable and reliable. For
`
`example, Dr. Kelly did not test his method against known decisions finding subject
`
`matter either eligible or ineligible under § 101. Dr. Kelly did not read any
`
`Supreme Court opinions on what constitutes statutory subject matter in formulating
`
`his opinions for his declarations in this case. Exhibit 2108, Kelly Deposition at
`
`16:12-17:8. Nor did he look at any Federal Circuit Court of Appeals decisions. Id.
`
`at 19:3-15. Dr. Kelly did not look at any PTAB decisions post- Alice Corp. Pty.
`
`Ltd. v. CLS Bank Intern., 134 S.Ct. 2347 (2014) to examine what claims are
`
`computer implemented but not directed to abstract ideas. Id. at 137:2-10. Nor did
`
`Dr. Kelly look at any PTAB decisions or other court decisions that evaluated
`
`
`
`- 9 -
`
`

`
`claims under § 101 and ruled that the claims were not directed to an abstract idea.
`
`Id. at 299:7-17. Nor did Dr. Kelly look at any guidelines on subject matter
`
`eligibility under § 101 from the U.S. Patent and Trademark Office while preparing
`
`his declaration for this case. Id. at 25:9-17.
`
`Importantly, Dr. Kelly did not review any patent that was the subject of a
`
`§ 101 decision by a court or the USPTO and use it to test his method. He did not
`
`ever take “a claim for which a court or the patent office made a ruling as to
`
`statutory subject matter, analyze[] the claim [him]self without knowing the answer
`
`in advance, and then check[] [his] answer against the court or the patent office's
`
`ruling on whether or not that claim was … patentable subject matter under
`
`[section] 101.” Id. at 24:14-25:8. More specifically, Dr. Kelly did not “apply [his]
`
`methodology to the patent at issue in DDR Holdings” (id. at 27:13-18), nor did he
`
`“apply [his] methodology to the patent at issue in [Ultramercial, Inc. v. Hulu, LLC,
`
`772 F.3d 709 (Fed. Cir. 2014)]” (id. at 27:20-25).
`
`Despite rendering opinions that the claims at issue are directed to an abstract
`
`idea, on cross examination, Dr. Kelly could not even define what an abstract idea
`
`is. Id. at 30:9-10 (“I don’t know that I have a definition of an abstract idea…”); at
`
`31:16-17 (“I’m not sure that I can provide for you a formal definition of an abstract
`
`idea…”); at 32:4-5 (“And I don’t have a formal definition in mind…”). Nor could
`
`
`
`- 10 -
`
`

`
`Dr. Kelly articulate what level of abstraction would be appropriate in determining
`
`whether a claim is directed to an abstract idea. Id. at 297:8-298:22.
`
`Further, Dr. Kelly’s opinions that “this basic idea [of payment for and
`
`controlling access to data] is not patentable and was widely known in the art”
`
`(Exhibit 1019 at ¶ 75); that “[e]ach of these [‘516 Patent] limitations is a routine,
`
`generic computer-based limitation that was well-known in the prior art” (id. at
`
`¶ 78, ¶ 83, ¶ 88, ¶ 89); and “claims … of the ’516 patent are directed to only a
`
`general abstract idea of payment for and controlling access to data, combined with
`
`well-understood, routine, conventional activities” (id. at ¶ 81, ¶ 85, ¶ 86, ¶ 92) miss
`
`the mark, because they reflect an analysis that looks for an inventive concept over
`
`the prior art, rather than over the abstract idea itself. Dr. Kelly cites to prior art as
`
`supporting examples in ¶ 75 (Guillou, Bradley, Mori, Chernow and Hair) and ¶ 78
`
`(e.g., Peterson, Poggio, Chernow, Hair, Subler, Ahmad, Ginter, and the Stefik ’980
`
`patent). When Dr. Kelly was asked what he utilized in preparing his declaration
`
`“to come to the conclusion that a particular element was well understood, routine,
`
`or conventional,” he cited his “review of the state of the art” along with his
`
`background and experience and the patent specifications. Exhibit 2108, Kelly
`
`Deposition at 304:1-15. But patentability over the prior art is an issue under 35
`
`U.S.C. §§ 102 and 103. What is relevant here, under § 101, is subject matter
`
`eligibility, which turns on inventiveness over the abstract idea, not over the prior
`
`
`
`- 11 -
`
`

`
`art. Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S.Ct. 2347, 2355 (2014) (Mayo
`
`step-two analysis is “a 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 upon the [abstract idea] itself’”). Dr.
`
`Kelly’s analysis incorrectly compares the Smartflash claims to the prior art rather
`
`than to the abstract idea. His methodology is wrong, and therefore his opinions are
`
`unreliable.
`
`In describing his methodology on cross examination, Dr. Kelly demonstrates
`
`that his formulation of the abstract idea as “payment for and controlling access to
`
`data” (Exhibit 1019, Kelly Declaration ¶ 75) was driven by the content of the
`
`patent claims themselves. For example, in discussing his methodology in
`
`formulating the abstract idea in this CBM, as well as all seven Smartflash patents
`
`he analyzed (id. at 291:12-16), Dr. Kelly testified how he determined that the
`
`claims are directed to “payment for and controlling access to data” as follows:
`
`“Well, … on their face, I mean that … is clear. I looked at … every asserted claim
`
`and -- every challenged claim and read these claims in light of the …
`
`specification.” Id. at 35:2-19 (emphasis added); See also, id. at 234:11-236:1.
`
`Further, among the seven Smartflash patents he examined, he even modified his
`
`formulation of the abstract idea depending on the claims. In three cases
`
`(CBM2015-00121, -00124, and -00127) it is “payment for and controlling access
`
`
`
`- 12 -
`
`

`
`to data,” whereas in three other cases (CBM2015-00130, -00131, and -00133) it is
`
`“payment for and/or controlling access to data,” and in one case (CBM2015-
`
`00123) it is “payment for and/or controlling access to data based on payment or
`
`rules.” Even though he “did the … same analysis,” the abstract idea he came up
`
`with “is not identical.” Id. at 214:1-215:8 (discussing different abstract ideas he
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`formulated here for U.S. Patent 8,794,516 in CBM2015-00121 versus for U.S.
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`Patent 8,033,458 in CBM2015-00123).
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`Dr. Kelly acknowledged that “providing access to data” “is another abstract
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`idea in the patent” (id. at 41:7-16), but when asked if the abstract idea could have
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`been formulated to be simply “providing access to data,” Dr. Kelly testified that
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`“there are many places throughout the specification and the claims, which address
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`payment, and I … think that leaving that out of the abstract idea would … be a
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`mistake in my view.” Id. at 35:20-36:18 (emphasis added). Dr. Kelly admitted that
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`“the general idea of providing access to data is more general than the idea of
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`providing payment for and controlling access to data” in the sense that “if you had
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`a … claim that was directed to payment for and controlling access to data and you
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`had a different claim that was directed to controlling access to data … and payment
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`wasn't involved at all, then … that would be different, potentially broader…” Id.
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`at 37:4-16. In other words the abstract idea formulated by Dr. Kelly while looking
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`at the claims, “payment for and controlling access to data,” has elements (payment
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`and control) not present in another abstract idea Dr. Kelly conceded was in the
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`patent: “providing access to data”. Similarly, Dr. Kelly testified that “in order to
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`implement the abstract idea that has payment for and controlling access to data,
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`you would need more than you would for implementing the abstract idea of …
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`controlling access to data.” Id. at 231:10-24 (emphasis added); see also, id. at
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`232:9-17 (“if we're comparing the ideas of controlling access to data on the one
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`hand and payment for and controlling access to data on the other hand, then I
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`would say that … one idea has … more in it than the other, certainly, the providing
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`payment … has got additional parts to … the abstract idea.”)
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`The problem with Dr. Kelly tailoring the purported abstract idea to the
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`claims, is that it leads to a complete overlay of the abstract idea over the claims,
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`prejudicing the Mayo step 2 analysis of whether the claims “amount[] to
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`significantly more than a patent on the [abstract idea] itself.” Mayo, 132 S. Ct. at
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`1294. Dr. Kelly’s admission that he based the formulation of the abstract idea on
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`the claims themselves should give the Board pause. Dr. Kelly testified “it doesn’t
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`matter where you draw the precise contours of the abstract idea because all of the
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`elements that are left … are not inventive” (Exhibit 2108, Kelly Deposition at
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`39:2-7), “I think the precise boundaries of the abstract idea … in this case … is not
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`important” (id. at 60:8-12) and “the precise wording of the abstract idea is not
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`important” (id. at 298:6-22). But where does one draw the line between the “parts”
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`of the abstract idea and claim elements that might “amount[] to significantly more
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`than a patent on the [abstract idea] itself?” How does one define the abstract idea
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`such that it is not so narrowly drawn to the claims that the “alleged abstract idea is
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`swallowed whole by” the claim? Global Tel*Link Corporation v. Securus
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`Technologies, Inc., PGR2015-00013, Institution Decision, Paper 18 at 11 (PTAB
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`December 8, 2015). As the Supreme Court recognized in Alice, “we tread
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`carefully in construing this exclusionary principle lest it swallow all of patent law.
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`At some level, ‘all inventions ... embody, use, reflect, rest upon, or apply laws of
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`nature, natural phenomena, or abstract ideas.’” 134 S.Ct. 2347, 2354 (citing Mayo,
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`132 S.Ct. at 1293-1294).
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`If Dr. Kelly had defined the abstract idea as simply “providing access to
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`data,” then the ‘516 Patent claim elements relating to payment1 and control2 would
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`1 E.g., Exhibit 1001 at 26:23-37 (claims 1-4 - “code responsive to … user
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`selection … to transmit payment data;” “code to receive payment validation data”
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`and “code to control access … responsive to … payment validation data”); 27:10-
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`18 (claims 5-13 - “code to receive payment validation data;” “code responsive to
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`payment validation data … to … transmit the …multimedia content … to the
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`handheld multimedia terminal”); 28:5-9 (claims 14-20 – “responsive to the
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`payment validation data … retrieving the purchased item of multimedia content”);
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`28:55-61 (claims 21-24 - “code responsive to … received payment validation data
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`“amount[] to significantly more than a patent on the abstract idea” of merely
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`“providing access to data.”
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`Based on Dr. Kelly’s testimony, his methodology was circular and driven by
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`the content of the patent claims themselves. He looked at the challenged claims to
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`formulate the abstract idea of “payment for and controlling access to data.” Id. at
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`35:2-19; 234:11-236:1; 291:12-16. He included the concept of “payment” because
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`the claims address payment. Id. at 35:20-36:18; 41:7-16. He included “controlling
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`… to read the requested multimedia data item” and “code to transmit the read
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`multimedia data item”); and 30:6-16 (claims 25-28 - “receiving payment validation
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`data…” and “responsive to the payment validation data retrieving the …
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`multimedia content”).
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`2 E.g., Exhibit 1001 at 26:35 (claims 1-4 - “code to control access …”);
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`27:12-17 (claims 5-13 - “code responsive to payment validation data … to …
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`transmit the …multimedia content … to the handheld multimedia terminal”); 28:5-
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`9 (claims 14-20 – “responsive to the payment validation data … retrieving the
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`purchased item of multimedia content”); 28:55-61 (claims 21-24 - “code
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`responsive to … received payment validation data … to read the requested
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`multimedia data item” and “code to transmit the read multimedia data item”); and
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`30:6-16 (claims 25-28 - “receiving payment validation data…” and “responsive to
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`the payment validation data retrieving the … multimedia content”).
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`access” because the claims address control. Id. at 41:7-16. The abstract idea of
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`“payment for and controlling access to data,” therefore, came from what was in the
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`claims. Id. at 234:11-236:1. Dr. Kelly then compared each of the claims to the
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`abstract idea he formulated using the claims, to see if there was anything left to be
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`an inventive concept. Id. at 44:20-45:17. Such a circular approach prejudices the
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`Mayo step-2 analysis because it results in comparing the claims to the claims to
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`determine if there is anything left.
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`C.
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`Dr. Kelly Is Simply A Highly Compensated Spokesperson for
`Apple
`
`Not only does Dr. Kelly’s circular analysis make his opinions suspect, but so
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`does the frequency of his work on behalf of Apple and his compensation. Dr.
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`Kelly is essentially a highly compensated spokesperson for Apple who has been an
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`expert for Apple “on the order of 10 times” over the last seven to ten years.
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`Exhibit 2108, Kelly Deposition at 7:16-22. It is remarkable to note the last
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`sentence of the last page of the Declaration that states, “For my work in connection
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`with the analysis reflected in this report and for any time I spend testifying about
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`that study and my opinions, Kelly Computing, Inc. is being compensated at a rate
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`of $950 per hour and I am being reimbursed for my expenses.” Exhibit 1019