UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00123
`Patent 8,033,458 B2
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`

`
`I.
`
`II.
`
`TABLE OF CONTENTS
`
`INTRODUCTION ........................................................................................... 1
`
`THE KELLY DECLARATION SHOULD BE GIVEN LITTLE OR NO
`WEIGHT .......................................................................................................... 5
`A. Dr. Kelly Admits that His Opinions Are Not Legal Opinions .............. 5
`B.
`There Is No Assurance That Dr. Kelly’s Methodology Is Reliable ...... 6
`C.
`Dr. Kelly Is Simply A Highly Compensated Spokesperson for Apple
` ............................................................................................................. 15
`
`
`III. OVERVIEW OF U.S. PATENT NO. 8,033,458 .......................................... 16
`
`IV. THE INSTITUTED CLAIMS OF THE ‘458 PATENT ARE NOT
`DIRECTED TO AN ABSTRACT IDEA ...................................................... 19
`
`
`V.
`
`C.
`D.
`
`EVEN IF THE INSTITUTED CLAIMS OF THE ‘458 PATENT WERE
`DIRECTED TO AN ABSTRACT IDEA, THE CLAIMS ARE DIRECTED
`TO STATUTORY SUBJECT MATTER ...................................................... 28
`A.
`The Two-Part Test for Statutory Subject Matter ................................ 28
`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 ....................................................................... 28
`The Claims Are Statutory Under Mayo and Alice .............................. 31
`The Instituted Claims Of The ‘458 Patent In Practice Amount To
`Significantly More Than A Patent Upon The Abstract Idea Itself ..... 50
`1.
`Evidence Shows That The Instituted Claims Do Not Amount
`To A Patent On The Abstract Idea Of Payment For And/Or
`Controlling Access To Data Based On Payment Or Rules....... 50
`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/Or
`Controlling Access to Data Based On Payment Or Rules ........ 54
`
`2.
`
`
`
`- i -
`
`

`
`E.
`
`The Instituted Claims Do Not Result In Inappropriate Preemption ... 57
`
`
`VI. A FEDERAL COURT HAS ALREADY FOUND RELATED CLAIMS OF
`THE ‘458 PATENT TO BE STATUTORY UNDER § 101 ........................ 62
`
`
`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 ............................................................................... 64
`
`
`IX. SECTION 101 IS NOT A GROUND THAT MAY BE RAISED IN
`COVERED BUSINESS METHOD PATENT REVIEW ............................. 66
`
`
`X.
`
`CLAIMS 3-5 ARE NOT INDEFINITE ........................................................ 68
`A.
`“The Code” is Definite ........................................................................ 69
`B.
`“The Content Data Memory” is Definite ............................................ 70
`
`
`XI. THE INSTITUTED CLAIMS OF THE ‘458 PATENT ARE NOT
`DIRECTED TO A FINANCIAL PRODUCT OR SERVICE ...................... 70
`
`
`XII. THE INSTITUTED CLAIMS OF THE ‘458 PATENT ARE
`TECHNOLOGICAL INVENTIONS EXEMPT FROM CBM REVIEW .... 75
`
`
`XIII. 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
`
`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
`
`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
`
`2051-2067
`
`Reserved
`
`2068
`
`
`
`Deposition Transcript of Anthony J. Wechselberger dated
`May 28, 2015 in CBM2015-00015, CBM-2015-00016,
`CBM-2015-00017, CBM-2015-00018
`
`- iii -
`
`

`
`2069-2074
`
`Reserved
`
`2075
`
`2076
`
`Order (on Defendants’ Renewed Motion for Judgment as a
`Matter of Law on the Issue of § 101 under Rule 50(b)); Dkt.
`# 585; from Smartflash LLC, et al. v. Apple Inc., et al., Case
`No. 6:13-CV-447 (E.D. Tex.) dated July 8, 2015.
`
`Deposition Transcript of Anthony J. Wechselberger dated
`July 22, 2015 taken in CBM2015-00028, -00029, -00031, -
`00032 and -00033
`
`2077-2081
`
`Reserved
`
`2082
`
`2083
`
`2084
`
`Trial Transcript from Virnetx Inc. v. Apple Inc., Case No.
`6:10-cv-417 (E.D. Tex.) dated November 2, 2012.
`
`Reserved
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Preliminary Response
`
`2085-2104
`
`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
`
`- iv -
`
`

`
`2109
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`2110-2114
`
`Reserved
`
`
`
`
`
`- v -
`
`

`
`I.
`
`INTRODUCTION
`
`Covered business method review (“CBM review”) was instituted for U.S.
`
`Patent 8,033,458 (“the ‘458 Patent”) claims 2-5, 7, 9, and 12 (“the instituted
`
`claims”) as being directed to patent ineligible subject matter under 35 U.S.C. § 101
`
`and on claims 3-5 as being indefinite under 35 U.S.C. § 112, second paragraph.
`
`Decision - Institution of Covered Business Method Patent Review 37 C.F.R. §
`
`42.208, Paper 7 at 23 (PTAB November 10, 2015).
`
`Claims 2-5, 7, 9, and 12 of the ‘458 Patent, should be found to be eligible
`
`under § 101 because claims 2-5, 7, 9, and 12 of the ‘458 Patent are not directed to
`
`an abstract idea. The instituted claims are directed to machines, patent eligible
`
`subject matter under § 101. Claims 2-5, 7, 9, and 12 are directed to machines
`
`comprised of various structural components - a portable data carrier (claims 2-5),
`
`and a data access device (claims 7, 9, and 12) with specifically defined elements.
`
`Even if claims 2-5, 7, 9, and 12 could be said, at some level of generality, to
`
`be directed to an abstract idea, claims 2-5, 7, 9, and 12 have an “inventive concept”
`
`sufficient to ensure that claims 2-5, 7, 9, and 12 in practice “amount[] to
`
`significantly more than a patent on the [abstract idea] itself.” Mayo Collaborative
`
`Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1294 (2012)
`
`Moreover, claims 2-5, 7, 9, and 12 of the ‘458 Patent are directed to
`
`statutory subject matter because the inventions they claim are solutions
`
`
`
`- 1 -
`
`

`
`“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 2-5
`
`claim a portable data carrier, and claims 7, 9, and 12 claim a data access device
`
`that provides for secure and convenient acquisition, storage, and use of data and
`
`thus address the problem of data content piracy on the Internet. Claims 2-5
`
`accomplish this by having code to output payment data from payment memory in
`
`the portable data carrier the data carrier (Exhibit 1001, ‘458 Patent at 26:1-3);
`
`claim 3 includes memory to store data use rules in the portable data carrier (id. at
`
`26:27-28); claim 4 includes memory to store supplemental data (id. at 26:48-49);
`
`and claim 5 includes synthesis code to receive and combine portions of data in the
`
`data carrier (id. at 27:1-4). Claims 7, 9, and 12 accomplish this by having in the
`
`data access device code to retrieve use status data, as well as code to evaluate use
`
`status data to determine whether access is permitted to the stored data. Id. at
`
`27:17-22. In so doing, the invention makes it easy for users to acquire, store, and
`
`use content data legitimately and effectively prevents data piracy.
`
`As demonstrated below, claims 2-5, 7, 9, and 12 do not result in
`
`inappropriate preemption of the idea of “payment for and/or controlling access to
`
`data based on payment or rules.” Petition, Paper 2 at 5-6; Exhibit 1020 at ¶ 75.
`
`Such lack of preemption is shown by the elements of claims 2-5, 7, 9, and 12 that
`
`
`
`- 2 -
`
`

`
`are not necessary to be in a system that practices “payment for and/or controlling
`
`access to data based on payment or rules” as well as existing alternative
`
`technologies that practice that idea that do not have the required claim elements of
`
`claims 2-5, 7, 9, and 12.
`
`Further, to prevail in this CBM, Petitioner Apple must show that claims 2-5,
`
`7, 9, and 12 of the ‘458 Patent in practice do not amount to significantly more than
`
`a patent upon the abstract idea of payment for and/or controlling access to data
`
`based on payment or rules itself. As set out below, the evidence shows that
`
`Apple’s expert did not even 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.
`
`Additionally, in February 2015, The United States District Court for the
`
`Eastern District of Texas examined the purely legal issue of whether claims 8, 10
`
`and 11 (which like claims 7, 9, and 12 at issue here ultimately depend from claim
`
`6), are directed to statutory subject matter under 35 U.S.C. § 101, and found those
`
`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.
`
`
`
`- 3 -
`
`

`
`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
`
`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
`
`questions of whether the instituted claims comport with 35 U.S.C. § 101 and § 112
`
`¶2, which are questions of law, during the prosecution of the ‘458 Patent. The
`
`USPTO is estopped from re-litigating these purely legal issues 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
`
`
`
`- 4 -
`
`

`
`claims 2-5, 7, 9, and 12 of the ‘458 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 7 at 9) is correct and claims 2-5,
`
`7, 9, and 12 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.
`
`II. THE KELLY DECLARATION SHOULD BE GIVEN LITTLE OR NO
`WEIGHT
`
`A.
`
`Dr. Kelly Admits that His Opinions Are Not Legal Opinions
`
`Whether claims are directed to statutory subject matter is “an issue of law.”
`
`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
`
`
`
`- 5 -
`
`

`
`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 2-5, 7,
`
`9, and 12 of the ‘458 Patent are directed to statutory subject matter, a question of
`
`law, are irrelevant, and his Declaration should be given little or no weight.
`
`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).
`
`
`
`- 6 -
`
`

`
`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
`
`
`
`- 7 -
`
`

`
`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
`
`
`
`- 8 -
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`

`
`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/or
`
`controlling access to data based on payment or rules] is not patentable and was
`
`widely known in the art” (Exhibit 1020 at ¶ 75); that “[e]ach of these [‘458 Patent]
`
`limitations is a routine, generic computer-based limitation that was well-known in
`
`the prior art” (id. at ¶ 78); and “claims … of the ’458 patent are directed to only a
`
`general abstract idea of payment for and controlling access to data based on
`
`payment or rules, combined with well-understood, routine, conventional activities”
`
`(id. at ¶ 80, ¶ 85) 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 (Chernow, Subler, Ahmad, Ginter, Smith, Poggio, 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
`
`
`
`- 9 -
`
`

`
`prior 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/or controlling access
`
`to data based on payment or rules” (Exhibit 1020, 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 the related CBM2015-00121
`
`instituted on U.S. Patent 8,794,516 (which is the same methodology he used for 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/or 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
`
`
`
`- 10 -
`
`

`
`cases (CBM2015-00121, -00124, and -00127) it is “payment for and controlling
`
`access to data,” whereas in three cases (CBM-2015-00130, -00131, and -00133) it
`
`is “payment for and/or controlling access to data” and here in 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 formulated
`
`for U.S. Patent 8,794,516 in CBM2015-00121 versus for U.S. Patent 8,033,458 in
`
`CBM2015-00123).
`
`Dr. Kelly acknowledged that “providing access to data” “is another abstract
`
`idea in the patent” (id. at 41:7-16), but when asked if the abstract idea could have
`
`been formulated to be simply “providing access to data,” Dr. Kelly testified that
`
`“there are many places throughout the specification and the claims, which address
`
`payment, and I … think that leaving that out of the abstract idea would … be a
`
`mistake in my view.” Id. at 35:20-36:18 (emphasis added). Dr. Kelly admitted that
`
`“the general idea of providing access to data is more general than the idea of
`
`providing payment for and controlling access to data” in the sense that “if you had
`
`a … claim that was directed to payment for and controlling access to data and you
`
`had a different claim that was directed to controlling access to data … and payment
`
`wasn't involved at all, then … that would be different, potentially broader…” Id.
`
`at 37:4-16. In other words the abstract idea formulated by Dr. Kelly while looking
`
`
`
`- 11 -
`
`

`
`at the claims, “payment for and/or controlling access to data,” has elements
`
`(payment and control) not present in another abstract idea Dr. Kelly conceded was
`
`in the patent: “providing access to data”. Similarly, Dr. Kelly testified that “in
`
`order to implement the abstract idea that has payment for and controlling access to
`
`data, you would need more than you would for implementing the abstract idea of
`
`… controlling access to data.” Id. at 231:10-24 (emphasis added); see also, id. at
`
`232:9-17 (“if we're comparing the ideas of controlling access to data on the one
`
`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 ‘458 Patent claim elements relating to payment1 and/or control2
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`1 E.g., Exhibit 1001 at 25:59-62, 26:1-3 (claim 2 – “payment data memory,”
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`“payment data”, and “code to output payment data from the payment data
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`memory”); 26:33-34 (claim 3- “code to output payment data from the payment
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`data memory”); 26:53-55 (claim 4 - “code to output payment data from the
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`payment data memory”); 25:5-7 (claim 5 - “code to output payment data from the
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`payment data memory”).
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`would “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 instituted claims to
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`formulate the abstract idea of “payment for and/or controlling access to data based
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`on payment or rules.” Id. at 35:2-19; 234:11-236:1; 291:12-16. He included the
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`concept of “payment” because the claims address payment. Id. at 35:20-36:18;
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`41:7-16. He included “controlling access” because the claims address control. Id.
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`at 41:7-16. The abstract idea of “payment for and/or controlling access to data
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`based on payment or rules,” therefore, came from what was in the claims. Id. at
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`234:11-236:1. Dr. Kelly then compared each of the claims to the abstract idea he
`
`formulated using the claims, to see if there was anything left to be an inventive
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`concept. Id. at 44:20-45:17. Such a circular approach prejudices the Mayo step-2
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`2 E.g., Exhibit 1001 at 26:27-32 (claim 3- “data use rules,” and “code to
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`provide external access to the data item in accordance with the use rule”); 26:48-55
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`(claim 4- “code to output the supplementary data … in response to an external
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`request”); 27:17-22 (claims 7, 8, and 12 “code to retrieve use status data indicating
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`a use status of data stored on the carrier,” “use rules data indicating permissible use
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`of data stored on the carrier,” and “code to evaluate the use status data using the
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`use rules data to determine whether access is permitted to the stored data”).
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`analysis because it results in comparing the claims to the claims to determine if
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`there is anything left.
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`C.
`
`Dr. Kelly Is Simply A Highly Compensated Spokesperson for
`Apple
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`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 1020 at 82
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`(emphasis added). This is an increase of $150 per hour since 2012 when he
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`previously testified for Petitioner at $800 per hour. See Exhibit 2082 at 29,
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`112:13-14. Dr. Kelly also appears to have been a regular witness for Petitioner
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`Apple recently. See Exhibit 1020 at 81-82. Moreover, his company had already
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`been paid in excess of $6.5 million from Apple by November, 2012. See Exhibit
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`2082 at 30, 113:15-23. See also, Exhibit 2108, Kelly Deposition at 7:16-8:21; 9:5-
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`10 (more than $6 million paid by Apple to Kelly’s firm in last 7-10 years wouldn’t
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`surprise Dr. Kelly); 8:25-9:2 (Dr. Kelly is a principal in Kelly Computing, Inc.).
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`At the time Dr. Kelly did his analysis, he knew it was on behalf of Apple
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`and knew Smartflash was suing Apple for patent infringement. Id. at 15:3-14. He
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`had every reason to opine that the Smartflash patents are ineligible under § 101.
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`For these reasons, Dr. Kelly’s declaration, Exhibit 1020, should be given
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`little or no weight.
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`III. OVERVIEW OF U.S. PATENT NO. 8,033,458
`Although the claims define the actual scope of coverage of the patent, as
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`described in the first paragraph of the BACKGROUND OF THE INVENTION,
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`the patent-at-issue, the ‘458 Patent, generally describes “data storage and access
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`systems ... [and] is particularly useful for managing stored audio and video data,
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`but may also be applied to storage and access of text and software, including
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`games, as well as other types of data.” Ex. 1001, ‘458 Patent at 1:20-28.
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`Preferred embodiments described in the ‘458 Patent at 15:53-62 illustrate
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`this further: “FIG. 7 ... shows a variety of content access terminals for accessing
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`data supply computer system 120 over internet 142. The terminals are provided
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`with an interface to a portable data carrier or ‘smart Flash card’ (SFC) as generally
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`described with reference to FIG. 2 and as described in more detail below. In most
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`embodiments of the terminal the SFC interface allows the smart Flash card data
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`carrier to be inserted into and removed from the terminal, but in some
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`embodiments the data carrier may be integral with the terminal.” Exemplary
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`terminals include, but are not limited to, set-top boxes 154, CD/DVD Players 170
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`and mobile communications devices 152. Id. at 15:65-16:15.
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`Referring to preferred embodiments, the ‘458 Patent discloses that a data
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`supply system may provide users with a seamless purchase and content delivery
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`experience. Id. at 23:63-24:1. Users are able to purchase content from a variety of
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`different content providers even if they do not know where the content providers
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`are located or how the content is delivered. See id. The exemplary system is
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`operated by a “content data supply ‘system owner,’” who may act as an
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`intermediary between a user seeking to purchase content and content providers,
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`such as record labels, movie studios, and software providers. See id. at 13:60-67.
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`When a user accesses the system, he or she is able to select content to purchase or
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`rent from a variety of dif