Case: 16-1059 Document: 40 Page: 1 Filed: 03/21/2016
`
`
`UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
`_______________
`
`2016-1059
`_______________
`
`SMARTFLASH LLC, SMARTFLASH TECHNOLOGIES LIMITED,
`
`
`Plaintiffs-Appellees,
`
`v.
`
`APPLE INC.,
`
`
`Defendant-Appellant.
`_______________
`
`Appeal from the United States District Court for the Eastern District of Texas
`in Case No. 6:13-cv-00447-JRG, Judge J. Rodney Gilstrap
`_______________
`
`BRIEF FOR PLAINTIFFS-APPELLEES SMARTFLASH LLC
`AND SMARTFLASH TECHNOLOGIES LIMITED
`_______________
`
`
`Bradley W. Caldwell
`Jason D. Cassady
`John Austin Curry
`Hamad M. Hamad
`John F. Summers
`CALDWELL CASSADY & CURRY
`2101 Cedar Springs Road
`Suite 1000
`Dallas, Texas 75201
`(214) 888-4848
`
`
`Aaron M. Panner
`Nicholas O. Hunter
`KELLOGG, HUBER, HANSEN, TODD,
` EVANS & FIGEL, P.L.L.C.
`1615 M Street, N.W., Suite 400
`Washington, D.C. 20036
`(202) 326-7900
`
`
`Counsel for Plaintiffs-Appellees Smartflash LLC
`and Smartflash Technologies Limited
`
`
`March 21, 2016
`
`
`
`Apple Exhibit 1049
`Apple Inc. v. Smartflash LLC
`CBM2015-00121
`Page 00001
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`

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`
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`CERTIFICATE OF INTEREST
`
`Counsel for Plaintiffs-Appellees Smartflash LLC and Smartflash
`
`Technologies Limited certifies the following:
`
`1.
`
`The full name of every party or amicus represented by me is:
`
`Smartflash LLC and Smartflash Technologies Limited.
`
`
`
`
`
`2.
`
`The name of the real party in interest represented by me is:
`
`None.
`
`3.
`
`All parent corporations and any publicly held companies that own
`
`10% or more of the stock of the party or amicus curiae represented by me are:
`
`Smartflash LLC is a wholly owned subsidiary of Smartflash Technologies
`
`Limited. The following entities own 10% or more of the shares of Smartflash
`
`Technologies Limited: Latitude Investments Limited, Celtic Trust Company
`
`Limited, and Eastbrook Business Inc.
`
`4.
`
`The names of all law firms and the partners or associates that
`
`appeared for the party or amicus now represented by me in the trial court or agency
`
`or are expected to appear in this Court are:
`
`Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. – Aaron M. Panner,
`
`Nicholas O. Hunter.
`
`Law Office of Aaron M. Panner, PLLC – Aaron M. Panner (no longer with
`
`firm).
`
`
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`Page 00002
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`Case: 16-1059 Document: 40 Page: 3 Filed: 03/21/2016
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`
`
`Caldwell Cassady & Curry – Bradley W. Caldwell, Jason D. Cassady, John
`
`
`
`Austin Curry, Daniel R. Pearson, Hamad M. Hamad, Justin T. Nemunaitis,
`
`
`Christopher S. Stewart, John F. Summers, Jason S. McManis, Warren J.
`
`McCarthy, III.
`
`
`Ward, Smith & Hill, PLLC (formerly Ward & Smith Law Firm) – T. John
`
`Ward, T. John Ward, Jr., Claire A. Henry.
`
`
`
`March 21, 2016
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` /s/ Aaron M. Panner
` Aaron M. Panner
`KELLOGG, HUBER, HANSEN, TODD,
` EVANS & FIGEL, P.L.L.C.
`1615 M Street, N.W., Suite 400
`Washington, D.C. 20036
`(202) 326-7900
`
`Counsel for Plaintiffs-Appellees
`
`
`
`
`
`
`
`ii
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`Page 00003
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`Case: 16-1059 Document: 40 Page: 4 Filed: 03/21/2016
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`
`
`TABLE OF CONTENTS
`
`Page
`
`CERTIFICATE OF INTEREST ................................................................................. i
`
`TABLE OF AUTHORITIES ..................................................................................... v
`
`STATEMENT OF RELATED CASES .................................................................... xi
`
`COUNTERSTATEMENT OF JURISDICTION ...................................................... 1
`
`COUNTERSTATEMENT OF THE ISSUES ............................................................ 4
`
`COUNTERSTATEMENT OF THE CASE ............................................................... 5
`
`A.
`
`B.
`
`The Invention ....................................................................................... 7
`
`Patent Eligibility, Claim Construction, and Indefiniteness
`Rulings ............................................................................................... 13
`
`C. Apple’s Knowing Infringement ......................................................... 16
`
`SUMMARY OF ARGUMENT ............................................................................... 19
`
`STANDARD OF REVIEW ..................................................................................... 21
`
`ARGUMENT ........................................................................................................... 22
`
`I.
`
`THE CLAIMS ARE PATENT ELIGIBLE BECAUSE THEY
`CLAIM SPECIFIC DEVICES THAT SOLVE NOVEL
`PROBLEMS PRESENTED BY DIGITAL COMMERCE .......................... 22
`
`A.
`
`B.
`
`The Claims Are Not Directed to an Abstract Idea .............................. 22
`
`The Claims Contain Inventive Concepts and Are Not
`Limited to Generic Computer Implementation ................................... 28
`
`II.
`
`THE ASSERTED CLAIMS DO NOT CONTAIN MEANS-
`PLUS-FUNCTION LIMITATIONS ............................................................. 35
`
`A.
`
`The “Processor” Running “Code” Connotes Structure ....................... 36
`
`
`
`iii
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`Page 00004
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`
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`B. Apple’s Assertion That a “Processor” Carrying Out
`Specific Functions Is Non-Structural Is Incorrect ............................... 41
`
`C.
`
`If Any Claim Is Governed by § 112(f), a New Trial Is
`Required .............................................................................................. 48
`
`III. APPLE’S CHALLENGES TO THE DISTRICT COURT’S
`CLAIM CONSTRUCTIONS FAIL ............................................................... 50
`
`A.
`
`The District Court Correctly Rejected Apple’s Effort To
`Import Negative Limitations into the Term “Payment
`Data” .................................................................................................... 50
`
`1.
`
`2.
`
`The Language of the Claims and the Specification
`Support the District Court’s Construction ................................ 50
`
`Apple’s Challenge Is Without Merit and Waived in
`Part ............................................................................................ 51
`
`B. Validation of Payment Data Does Not Necessarily Entail
`Payment Authorization ........................................................................ 55
`
`1.
`
`2.
`
`Apple’s Argument Is Waived ................................................... 55
`
`Apple’s Challenge Fails on the Merits ..................................... 55
`
`C. A New Trial Would Be Required ........................................................ 57
`
`IV. APPLE FAILS TO SHOW THAT THE DISTRICT COURT’S
`REFUSAL TO GIVE ITS INCOMPLETE i4i INSTRUCTION
`WAS EITHER ERRONEOUS OR PREJUDICIAL ..................................... 58
`
`CONCLUSION ........................................................................................................ 62
`
`CERTIFICATE OF SERVICE
`
`CERTIFICATE OF COMPLIANCE
`
`
`
`iv
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`Page 00005
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`Case: 16-1059 Document: 40 Page: 6 Filed: 03/21/2016
`
`TABLE OF AUTHORITIES
`
`Page
`
`
`
`CASES
`
`AbbVie Deutschland GmbH v. Janssen Biotech, Inc., 759 F.3d 1285
`(Fed. Cir. 2014) .............................................................................................. 60
`
`Advanced Cardiovascular Sys., Inc. v. Medtronic Vascular, Inc.,
`231 F. App’x 962 (Fed. Cir. 2007) .................................................................. 2
`
`Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) ........................ 22, 23, 24, 27,
`28, 29, 31, 34
`
`Apex Inc. v. Raritan Computer, Inc., 325 F.3d 1364
`(Fed. Cir. 2003) .................................................................................. 38, 39, 46
`
`
`Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (Fed. Cir. 2014),
`overruled in part by Williamson v. Citrix Online, LLC,
`792 F.3d 1339 (Fed. Cir. 2015) ..................................................................... 42
`
`Aristocrat Techs. Australia Pty Ltd. v. International Game Tech.,
`521 F.3d 1328 (Fed. Cir. 2008) ................................................... 41, 42, 45, 46
`
`Atmel Corp. v. Information Storage Devices, Inc., 198 F.3d 1374
`(Fed. Cir. 1999) .............................................................................................. 45
`
`Bankers Life & Cas. Co. v. Holland, 346 U.S. 379 (1953) ....................................... 3
`
`Bettcher Indus., Inc. v. Bunzl USA, Inc., 661 F.3d 629 (Fed. Cir. 2011) .......... 21, 58
`
`Bilski v. Kappos, 561 U.S. 593 (2010) ............................................................... 24, 27
`
`Biomedino, LLC v. Waters Techs. Corp., 490 F.3d 946
`(Fed. Cir. 2007) .............................................................................................. 45
`
`Blackboard, Inc. v. Desire2Learn, Inc., 574 F.3d 1371
`(Fed. Cir. 2009) ........................................................................................ 42, 45
`
`buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014) ........... 25, 26, 27, 31
`
`
`
`v
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`Page 00006
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`

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`
`
`
`Conoco, Inc. v. Energy & Envtl. Int’l, L.C., 460 F.3d 1349
`(Fed. Cir. 2006) ........................................................................................ 52, 54
`
`CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366
`(Fed. Cir. 2011) ........................................................................................ 26, 27
`
`DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245
`(Fed. Cir. 2014) .....................................................................13, 19, 21, 22, 23,
`24, 25, 30, 31,
`32, 33, 34, 35
`
`Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415
`(5th Cir. 1996) ............................................................................................... 53
`
`
`DSU Med. Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) ................................ 59
`
`Eastman Chem. Co. v. Plastipure, Inc., 775 F.3d 230 (5th Cir. 2014).............. 22, 60
`
`Electro Scientific Indus., Inc. v. Dynamic Details, Inc., 307 F.3d 1343
`(Fed. Cir. 2002) ........................................................................................ 37-38
`
`Enzo Biochem, Inc., In re, 2009 WL 405831 (Fed. Cir. Feb. 6,
`2009) ................................................................................................................ 3
`
`Eon Corp. IP Holdings LLC v. AT&T Mobility LLC, 785 F.3d 616
`(Fed. Cir. 2015) .............................................................................................. 41
`
`Eon Corp. IP Holdings LLC v. Silver Spring Networks, Inc.,
`— F.3d —, 2016 WL 766661 (Fed. Cir. Feb. 29, 2016) ............................... 57
`
`Ergo Licensing, LLC v. CareFusion 303, Inc., 673 F.3d 1361
`(Fed. Cir. 2012) .............................................................................................. 42
`
`Fonar Corp. v. General Elec. Co., 107 F.3d 1543 (Fed. Cir. 1997) ....................... 47
`
`Function Media, L.L.C. v. Google, Inc., 708 F.3d 1310
`(Fed. Cir. 2013) .............................................................................................. 45
`
`Greenberg v. Ethicon Endo-Surgery, Inc., 91 F.3d 1580
`(Fed. Cir. 1996) .............................................................................................. 36
`
`HTC Corp. v. IPCom GmbH & Co., 667 F.3d 1270 (Fed. Cir. 2012) ..................... 39
`
`
`
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`Page 00007
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`
`
`Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d
`1363 (Fed. Cir. 2015)......................................................................... 26, 27, 31
`
`Interactive Gift Express, Inc. v. Compuserve Inc., 256 F.3d 1323
`(Fed. Cir. 2001) .............................................................................................. 55
`
`Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343
`(Fed. Cir. 2015) .............................................................................................. 32
`
`K-2 Corp. v. Salomon S.A., 191 F.3d 1356 (Fed. Cir. 1999) ............................. 47-48
`
`Katz Interactive Call Processing Patent Litig., In re, 639 F.3d 1303
`(Fed. Cir. 2011) .................................................................................. 39, 42, 44
`
`KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) ................................................ 34
`
`LG Elecs., Inc. v. Bizcom Elecs., Inc., 453 F.3d 1364 (Fed. Cir.
`2006), rev’d sub nom. Quanta Computer, Inc. v. LG Elecs.,
`Inc., 553 U.S. 617 (2008) .............................................................................. 38
`
`Linear Tech. Corp. v. Impala Linear Corp., 379 F.3d 1311
`(Fed. Cir. 2004) ........................................................................................ 14, 46
`
`Massachusetts Inst. of Tech. & Elecs. for Imaging, Inc. v. Abacus
`Software, 462 F.3d 1344 (Fed. Cir. 2006) ..................................................... 46
`
`Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
`132 S. Ct. 1289 (2012) ...........................................................22, 26, 27, 28, 31
`
`Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913
`(2005) ............................................................................................................. 23
`
`Microprocessor Enhancement Corp. v. Texas Instruments Inc.,
`520 F.3d 1367 (Fed. Cir. 2008) ..................................................................... 47
`
`Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238 (2011) ......................... 58, 59, 60
`
`Nazomi Communications, Inc. v. Nokia Corp., 739 F.3d 1339
`(Fed. Cir. 2014) .............................................................................................. 38
`
`Noah Sys., Inc. v. Intuit Inc., 675 F.3d 1302 (Fed. Cir. 2012) ........................... 42, 44
`
`
`
`vii
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`Page 00008
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`
`
`Northern Telecom, Inc. v. Datapoint Corp., 908 F.2d 931
`(Fed. Cir. 1990) .............................................................................................. 47
`
`NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005) ........... 58, 60
`
`OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359
`(Fed. Cir. 2015) ............................................................................ 26, 27, 21, 33
`
`
`Pause Tech. LLC v. TiVo Inc., 401 F.3d 1290 (Fed. Cir. 2005) ................................ 3
`
`Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) ............................. 20, 50, 56
`
`PODS, Inc. v. Porta Stor, Inc., 484 F.3d 1359 (Fed. Cir. 2007) ............................... 3
`
`Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc.,
`711 F.3d 1348 (Fed. Cir. 2013) ......................................................... 38, 46, 49
`
`Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008)................................... 57
`
`Rehler v. Beech Aircraft Corp., 777 F.2d 1072 (5th Cir. 1985) .............................. 59
`
`Robotic Vision Sys., Inc. v. View Eng’g, Inc., 112 F.3d 1163
`(Fed. Cir. 1997) .............................................................................................. 47
`
`Shum v. Intel Corp., 633 F.3d 1067 (Fed. Cir. 2010) .............................................. 61
`
`Skinner & Eddy Corp., In re, 265 U.S. 86 (1924) ..................................................... 3
`
`Smartflash LLC v. Apple Inc., 621 F. App’x 995 (Fed. Cir. 2015) ....................... 1, 5
`
`SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312
`(Fed. Cir. 2006) .............................................................................................. 52
`
`Stamicarbon, N.V. v. Escambia Chem. Corp., 430 F.2d 920
`(5th Cir. 1970) ................................................................................................. 3
`
`Sulzer Textil A.G. v. Picanol N.V., 358 F.3d 1356 (Fed. Cir. 2004) ................. 60, 61
`
`Typhoon Touch Techs., Inc. v. Dell, Inc., 659 F.3d 1376
`(Fed. Cir. 2011) ............................................................................ 37, 38, 47, 48
`
`
`
`
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`Page 00009
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`
`
`Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014) ......... 24, 25, 27, 28,
`31, 33
`
`United States v. Lavergne, 805 F.2d 517 (5th Cir. 1986) ........................................ 61
`
`Warsaw Orthopedic, Inc. v. NuVasive, Inc., 515 F. App’x 882
`(Fed. Cir. 2012) ................................................................................................ 2
`
`Williamson v. Citrix Online, LLC, 792 F.3d 1339
`
`(Fed. Cir. 2015) ....................................................................... 5, 15, 21, 36, 37,
`40, 41, 42, 43, 44
`
`WMS Gaming Inc. v. International Game Tech., 184 F.3d 1339
`(Fed. Cir. 1999) .............................................................................................. 42
`
`
`
`CONSTITUTION, STATUTES, AND RULES
`
`U.S. Const. amend. VII .............................................................................................. 1
`
`28 U.S.C. § 1292(c)(2) ....................................................................................... 1, 2, 3
`
`28 U.S.C. § 1651(a) .................................................................................................... 3
`
`35 U.S.C. § 101 .................................................................................... 4, 6, 21, 22, 31
`
`35 U.S.C. § 112 ........................................................................................................ 48
`
`35 U.S.C. § 112(a) .................................................................................................... 45
`
`35 U.S.C. § 112(b) ................................................................................................... 44
`
`35 U.S.C. § 112(f) ................... 4, 5, 14, 15, 20, 35, 36, 39, 40, 41, 42, 43, 44, 45, 49
`
`35 U.S.C. § 282 ........................................................................................................ 58
`
`Fed. Cir. R. 27(f) ........................................................................................................ 2
`
`Fed. R. App. P. 4(a)(2) ............................................................................................... 3
`
`
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`ix
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`Page 00010
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`OTHER MATERIALS
`
`Kevin E. Collins, Bilski and the Ambiguity of “an Unpatentable
`Abstract Idea,” 15 Lewis & Clark L. Rev. 37 (2011) ................................... 27
`
`Manual of Patent Examining Procedure (9th ed. rev. Nov. 2015) .......................... 59
`
`
`
`
`
`x
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`Page 00011
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`
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`STATEMENT OF RELATED CASES
`
`Pursuant to Federal Circuit Rule 47.5, counsel for Smartflash LLC and
`
`Smartflash Technologies Limited states that a previous appeal in this action,
`
`Smartflash LLC v. Apple Inc., 621 F. App’x 995 (Fed. Cir. 2015), was decided by a
`
`panel of this Court comprised of Judges Newman, Linn, and O’Malley. The cases
`
`known to counsel that will directly affect or be directly affected by this Court’s
`
`decision in the pending appeal are:
`
`Smartflash LLC v. Samsung Elecs. Co., No. 6:13-cv-448-JRG-KNM
`
`(E.D. Tex. filed May 29, 2013).
`
`Smartflash LLC v. Google, Inc., No. 6:14-cv-435-JRG-KNM (E.D. Tex. filed
`
`May 7, 2014).
`
`Smartflash LLC v. Amazon.com, Inc., No. 6:14-cv-992-JRG-KNM (E.D. Tex.
`
`filed Dec. 29, 2014).
`
`Smartflash LLC v. Apple Inc., No. 6:15-cv-145-JRG-KNM (E.D. Tex. filed
`
`Feb. 25, 2015).
`
`xi
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`Page 00012
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`COUNTERSTATEMENT OF JURISDICTION
`
`After trial, Apple sought a stay of district court litigation pending CBM
`
`review by the Patent and Trademark Office (“PTO”); the district court denied the
`
`stay, and this Court affirmed. See Smartflash LLC v. Apple Inc., 621 F. App’x 995
`
`(Fed. Cir. 2015). After post-trial motions were resolved and a new trial on
`
`damages ordered, Apple appealed pursuant to 28 U.S.C. § 1292(c)(2), which
`
`provides for review of a district court judgment that is “final except for an
`
`accounting.” See id. at 1001 n.2. Apple sought and received a stay of the damages
`
`retrial based on Apple’s implicit representation that it was taking a proper appeal.
`
`See Appx10901 (stating that Apple had “chosen to promptly pursue such an appeal
`
`. . . pursuant to 28 U.S.C. § 1292(c)(2) . . . . See Robert Bosch, LLC v. Pylon
`
`Mfg.”); Appx10905 (asserting that “[a] stay of the damages retrial here would be
`
`consistent with the long-established ‘object’ of § 1292(c)(2) to enable an appeal
`
`before final accounting”). Having obtained the stay, however, Apple began to
`
`backtrack: its docketing statement in this Court – while first reciting (without
`
`qualification) that the appeal was taken pursuant to § 1292(c)(2) – also stated that
`
`Apple would seek dismissal of its own appeal for want of jurisdiction. See Doc.
`
`No. 20, at 1, 2; see also Doc. No. 24, at 1; cf. Appx10886 (arguing that bifurcation
`
`may violate the Seventh Amendment). Then, in its merits brief, Apple insisted that
`
`this Court was required to dismiss its appeal, explicitly declaring, for the first time,
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`Page 00013
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`that the Court lacks jurisdiction under § 1292(c)(2), because the district court’s
`
`order “bifurcated liability from all remedial issues, including the requested royalty
`
`and injunctive relief.” Br. 2-3; cf. Fed. Cir. R. 27(f) (requiring a motion to dismiss
`
`for lack of jurisdiction be brought “as soon after docketing as the grounds for the
`
`motion are known”).
`
`
`
`It appears that no precedential decision of this Court has determined whether
`
`jurisdiction under § 1292(c)(2) lies in a case, like this one, where all liability issues
`
`are resolved, but remedial issues in addition to damages remain pending. But see
`
`Advanced Cardiovascular Sys., Inc. v. Medtronic Vascular, Inc., 231 F. App’x
`
`962, 963 (Fed. Cir. 2007); Warsaw Orthopedic, Inc. v. NuVasive, Inc., 515
`
`F. App’x 882, 882 (Fed. Cir. 2012). To avoid a dispute on this question,
`
`Smartflash filed a motion in the district court to dismiss unconditionally its
`
`requests for relief other than damages and potential enhancements. See Dist. Ct.
`
`Dkt. No. 622.1 The district court denied the motion without prejudice, stating that
`
`it would not act without “direction” from this Court. See Dist. Ct. Dkt. No. 624.
`
`Smartflash sought reconsideration, and Apple opposed, taking the odd position (for
`
`
`1 Apple argued in the district court that, even if the district court grants
`Smartflash’s motion, it would not resolve the jurisdictional issue because of the
`failure to use the words “with prejudice.” That is incorrect, because Smartflash
`would be giving up its requests for equitable relief in the action “unconditionally.”
`If the district court were to enter Smartflash’s proposed order, there would be
`nothing left to adjudicate except damages and available enhancements.
`
`2
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`Page 00014
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`
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`a defendant and appellant) that the district court should not narrow the potential
`
`relief available to Smartflash and, in the process, simultaneously remove
`
`uncertainty about the validity of Apple’s own appeal. See Stamicarbon, N.V. v.
`
`Escambia Chem. Corp., 430 F.2d 920, 930 (5th Cir. 1970) (noting that it is
`
`“extraordinary” for an appellant to take the position “that the order from which it
`
`appeals is not appealable”).
`
`
`
`In our view, the most sensible solution to this jurisdictional back-and-forth is
`
`for this Court to issue an order directing the district court to limit Smartflash’s
`
`relief to damages and any available enhancements as Smartflash has asked. The
`
`Court plainly has authority to do so. 28 U.S.C. § 1651(a); Bankers Life & Cas. Co.
`
`v. Holland, 346 U.S. 379, 382 (1953); In re Skinner & Eddy Corp., 265 U.S. 86,
`
`93-94 (1924); In re Enzo Biochem, Inc., 2009 WL 405831, at *1-2 (Fed. Cir. Feb.
`
`6, 2009). And that action will eliminate any dispute regarding whether the district
`
`court’s judgment is final except for an accounting. See Fed. R. App. P. 4(a)(2);
`
`PODS, Inc. v. Porta Stor, Inc., 484 F.3d 1359, 1365 & n.4 (Fed. Cir. 2007); see
`
`also Pause Tech. LLC v. TiVo Inc., 401 F.3d 1290, 1295 (Fed. Cir. 2005). The
`
`Court will then unquestionably have jurisdiction over Apple’s appeal under 28
`
`U.S.C. § 1292(c)(2).
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`3
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`Case: 16-1059 Document: 40 Page: 16 Filed: 03/21/2016
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`COUNTERSTATEMENT OF THE ISSUES
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`I. Whether claims that cover novel devices that enable consumers to
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`make convenient purchases of digital content over the Internet, while protecting
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`against piracy and allowing only permitted uses of downloaded proprietary
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`content, are patent eligible under 35 U.S.C. § 101.
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`
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`II. Whether claim limitations requiring a “processor” – an electronic
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`component found in computers – running software “code” to carry out defined and
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`ordered functions convey sufficient structure such that 35 U.S.C. § 112(f) does not
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`apply.
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`
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`III. Whether Apple preserved its challenges to the claim constructions
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`adopted by the district court and, to the extent it did, whether the district court
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`(a) correctly construed “payment data” to mean “data that can be used to make a
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`payment for content” and (b) correctly rejected Apple’s argument that a “payment
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`validation system” must not only validate payment data but also authorize
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`payment.
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`
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`IV. Whether the district court acted within its discretion when it declined
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`to instruct the jury that it could give “greater weight” to prior art that the PTO did
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`not consider where the proposed instruction was unwarranted by the evidence and
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`incomplete.
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`4
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`Case: 16-1059 Document: 40 Page: 17 Filed: 03/21/2016
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`COUNTERSTATEMENT OF THE CASE
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` Smartflash sued Apple (and other defendants who settled) for infringement
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`of six patents; before trial, it limited the asserted claims to claim 13 of U.S. Patent
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`No. 7,334,720 (the ’720 patent) (Appx149-82), claim 32 of U.S. Patent No.
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`8,118,221 (the ’221 patent) (Appx283-315), and claims 26 and 32 of U.S. Patent
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`No. 8,336,772 (the ’772 patent) (Appx316-50). All patents are entitled “Data
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`Storage and Access Systems.”
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`The magistrate judge construed disputed claim terms; rejected defendants’
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`argument that certain limitations were means-plus-function terms governed by 35
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`U.S.C. § 112(f); and recommended denial of defendants’ motion for summary
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`judgment based on indefiniteness.2 Appx1-42. The district court (Schneider, J.)
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`adopted the Report and Recommendation and overruled defendants’ objections.
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`Appx43-52. The court (Gilstrap, J.) denied Apple’s motion for reconsideration in
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`light of Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015).
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`Appx85-94.
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`The magistrate judge rejected Apple’s argument that Smartflash’s claims
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`cover ineligible subject matter. Appx53-73. The district court adopted the Report
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`2 Pre-trial proceedings were consolidated with pre-trial proceedings in Smartflash’s
`separate case against Samsung Electronics Co., Ltd., No. 6:13-cv-00448. The case
`against Samsung was stayed by this Court before trial. See Smartflash LLC v.
`Apple Inc., 621 F. App’x 995, 1006 (Fed. Cir. 2015).
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`5
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`and Recommendation over Apple’s objection, Appx74-75, and, after trial,
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`reaffirmed that ruling, Appx95-96.
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`The district court declined to instruct the jury that “[p]rior art differing from
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`the prior art considered by the Patent Office may carry more weight in meeting the
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`clear and convincing standard than the prior art that was previously considered by
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`the Patent Office.” Appx28759. The court denied Apple’s new-trial motion on
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`that ground. Appx111-12.
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`The jury returned a verdict finding that Apple infringed each of the asserted
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`claims; that Smartflash had proven by clear and convincing evidence that Apple’s
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`infringement was willful; that Apple had failed to prove invalidity by clear and
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`convincing evidence; and that damages of $532,900,000 would compensate
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`Smartflash. Appx10192-96.
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`The district court granted Apple’s motion for JMOL on willfulness, Appx76-
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`77; granted a new trial on damages, Appx78-84; and otherwise denied Apple’s
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`motions for JMOL or new trial, Appx95-96 (§ 101); Appx97-114 (other grounds).
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`The district court entered judgment on liability, bifurcating the damages retrial.
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`Appx115-16. The district court granted Apple’s motion for a stay of the damages
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`retrial, and Apple appealed.
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`6
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`A.
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`1.
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`The Invention
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`Patrick Racz is an inventor who, in the late 1990s, began to seek a
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`solution to problems he recognized with distribution of digital content, especially
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`music. Appx27382-86. Based on his experience with early digital music players
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`and discussions with close friends who were senior recording-industry executives,
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`Racz saw that it was easy to copy music files from CDs and share them over the
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`Internet illegitimately – that is, to “steal music” without payment to artists or
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`record companies. At the same time, however, there was “no easy way for paying
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`for content . . . over the Internet . . . in a secure way.” Appx27387. In short, “it
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`was easier to steal music than it was to pay for it.” Appx27386.
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`
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`Racz described the “eureka moment” when he recognized that he could
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`address these problems by combining storage, payment, and usage-control on a
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`single device. Early digital music players had “dumb memory” and no security.
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`Appx27389. By contrast, Racz recognized that mobile phones had technology that
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`could identify a phone to a service provider and that credit cards had chips that had
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`“authentication data for payment functionality.” Id. Racz realized that if a single
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`device combined the ability (1) to download and store content; (2) to download and
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`store associated use rules (which can, among other things, protect against
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`unauthorized copying); and (3) to allow user-authentication and payment –
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`“everything in one place on one portable device you can carry with you” – then he
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`7
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`Page 00019
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`“would have the solution for the music industry.” Id. Such a device would
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`improve upon then-available systems and reduce data piracy by ensuring that “use
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`rules” accompanying legally downloaded content would protect against
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`redistribution or use beyond the rights conferred and by making the purchase of
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`media content easier than downloading pirated versions. See, e.g., Appx168 (’720
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`patent, 2:2-3); Appx27399-400 (invention gives “honest people a simple and easy
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`way to access content and remain honest”).
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`
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`Racz prepared a drawing of a media player that could be used with his
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`invention for his Great Britain patent application:
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`Appx25606; see also Appx151 (’720 patent, fig. 1A) (similar). In this figure, a
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`removable smart card stores the content, use rules, and payment data. See
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`Appx152 (’720 patent, fig. 2). In other embodiments, the memory for storing the
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`various categories of data – the “data carrier” – is integrated with the terminal used
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`for downloading the content. See Appx175 (’720 patent, 16:9-10); see also
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`8
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`Page 00020
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`
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`Appx169 (4:43-44) (“The data carrier may also be integrated into other apparatus,
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`such as a mobile communications device.”).
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`2.
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`Racz founded two companies to develop his invention, Internet plc
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`and Smartflash Ltd. By early 2000, his companies had 10-20 employees, including
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`co-inventor Hermen Hulst, a former employee at Philips Semiconductors with
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`expertise in encryption and electronic commerce. Appx27402. A patent
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`application was filed in Great Britain on October 25, 1999 – the application to
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`which the patents-in-suit claim priority. Appx25590-633 (PX198). Internet plc
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`found “two main partners” in consumer electronics manufacturing – the U.S.
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`electronic design engineering f