`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`
`
`SMARTFLASH LLC,
`
`
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00130
`Patent 8,118,221 B2
`
`____________
`
`PATENT OWNER’S RESPONSE
`
`
`
`I.
`
`II.
`
`TABLE OF CONTENTS
`
`INTRODUCTION ........................................................................................... 1
`
`THE KELLY DECLARATION SHOULD BE GIVEN LITTLE OR NO
`WEIGHT .......................................................................................................... 6
`A. Dr. Kelly Admits that His Opinions Are Not Legal Opinions .............. 6
`B.
`There Is No Assurance That Dr. Kelly’s Methodology Is Reliable ...... 7
`C.
`Dr. Kelly Is Simply A Highly Compensated Spokesperson for Apple
` ............................................................................................................. 16
`
`
`III. OVERVIEW OF U.S. PATENT NO. 8,118,221 .......................................... 17
`
`IV. THE INSTITUTED CLAIMS OF THE ‘221 PATENT ARE NOT
`DIRECTED TO AN ABSTRACT IDEA ...................................................... 20
`
`
`V.
`
`C.
`D.
`
`EVEN IF THE INSTITUTED CLAIMS OF THE ‘221 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 In Practice Amount To Significantly More Than
`A Patent Upon The Abstract Idea Itself .............................................. 46
`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 ...................................................... 46
`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 ....................................................... 51
`
`2.
`
`
`
`- i -
`
`
`
`E.
`
`The Instituted Claims Do Not Result In Inappropriate Preemption ... 55
`
`
`VI. A FEDERAL COURT HAS ALREADY FOUND RELATED CLAIMS OF
`THE ‘221 PATENT TO BE STATUTORY UNDER § 101 ........................ 62
`
`
`VII. THE USPTO IS ESTOPPED FROM REVISITING THE ISSUES OF
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY SUBJECT
`MATTER AND ARE DEFINITE ................................................................. 64
`
`
`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 ............................. 67
`
`CLAIM 22 IS NOT INDEFINITE ................................................................ 69
`
`
`X.
`
`XI. THE INSTITUTED CLAIMS OF THE ‘221 PATENT ARE NOT
`DIRECTED TO A FINANCIAL PRODUCT OR SERVICE ...................... 71
`
`
`XII. THE INSTITUTED CLAIMS OF THE ‘221 PATENT ARE
`TECHNOLOGICAL INVENTIONS EXEMPT FROM CBM REVIEW .... 76
`
`
`XIII. CONCLUSION .............................................................................................. 77
`
`
`
`
`
`
`
`
`- 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
`
`2051-2057
`
`Reserved
`
`2058
`
`
`
`Memorandum Opinion and Order (on Defendants’ Motions
`for Stay Pending the Outcome of CBMs) from Smartflash
`LLC, et al. v. Apple Inc., et al., Case No. 6:13-CV-447 (E.D.
`Tex.), Smartflash LLC, et al. v. Samsung Electronics Co. Ltd,
`et al., Case No. 6:13-CV-448 (E.D. Tex.), Smartflash LLC, et
`
`- iii -
`
`
`
`Exhibit Number
`
`Exhibit Description
`
`al. v. Google, Inc., et al., Case No. 6:14-CV-435 (E.D. Tex.),
`and Smartflash LLC, et al. v. Amazon, Inc., et al., Case No.
`6:14-CV-992 (E.D. Tex.) dated May 29, 2015
`
`2059-2067
`
`Reserved
`
`2068
`
`Deposition Transcript of Anthony J. Wechselberger dated
`May 28, 2015 taken in CBM2015-00015, -00016, -00017
`and -00018
`
`2069-2072
`
`Reserved
`
`2073
`
`2074
`
`2075
`
`2076
`
`Apple’s Preliminary Claim Constructions and Extrinsic
`Evidence filed in Smartflash LLC, et al. v. Apple Inc., et al.,
`Case No. 6:13-cv-447-MHS-KNM (E.D. Tex.)
`
`Reserved
`
`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
`
`Trial Transcript from Virnetx Inc. v. Apple Inc., Case No.
`
`
`
`- iv -
`
`
`
`Exhibit Number
`
`Exhibit Description
`
`6:10-cv-417 (E.D. Tex.) dated November 2, 2012.
`
`2083-2088
`
`Reserved
`
`2089
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Preliminary Response
`
`2090-2104
`
`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
`
`2109-2111
`
`Reserved
`
`2112
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`2113-2114
`
`Reserved
`
`
`
`
`
`- v -
`
`
`
`I.
`
`INTRODUCTION
`
`Covered business method review (“CBM review”) was instituted for U.S.
`
`Patent 8,118,221 (“the ‘221 Patent”) claims 3–10, 15–31, and 33 (“the instituted
`
`claims”) as being directed to patent ineligible subject matter under 35 U.S.C. § 101
`
`and on claim 22 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 9 at 25 (PTAB November 16, 2015).
`
`Claims 3–10, 15–31, and 33 of the ‘221 Patent should be found to be eligible
`
`under § 101 because claims 3–10, 15–31, and 33 of the ‘221 Patent are not directed
`
`to an abstract idea. The instituted claims are directed to machines or processes,
`
`both patent eligible subject matter under § 101. Claims 3-5, 17-23, 28-31, and 33
`
`are directed to machines comprised of various structural components - a data
`
`access terminal (claims 3-5 and 33), a data access device (claims 17-23), and a data
`
`access system (claims 28-31) with specifically defined elements. Claims 15-16
`
`and 24-27 are directed to processes with specifically defined steps.
`
`Even if claims 3–10, 15–31, and 33 could be said, at some level of
`
`generality, to be directed to an abstract idea, claims 3–10, 15–31, and 33 have an
`
`“inventive concept” sufficient to ensure that claims 3–10, 15–31, and 33 in practice
`
`“amount[] to significantly more than a patent on the [abstract idea] itself.” Mayo
`
`
`
`- 1 -
`
`
`
`Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1294
`
`(2012)
`
`Moreover, claims 3–10, 15–31, and 33 of the ‘221 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 3-5
`
`and 33 claim a data access terminal, claims 17-23 claim a data access device, and
`
`claims 28-31 claim a data access system that provides for secure and convenient
`
`acquisition of content data and thus address the problem of data content piracy on
`
`the Internet. Claims 3-5 accomplish this by having code to read payment data from
`
`a data carrier and to forward the payment data to a payment validation system,
`
`code to receive the payment validation data from the payment validation system;
`
`and code responsive to the payment validation data to retrieve data from the data
`
`supplier and to write the retrieved data into the data carrier. Exhibit 1001, ‘221
`
`Patent at 25:54-61. Claims 17-23 accomplish this by having code to retrieve use
`
`status data indicating a use status of data stored on the carrier, and use rules data
`
`indicating permissible use of data stored on the carrier; code to evaluate the use
`
`status data using the use rules data to determine whether access is permitted to the
`
`stored data; and code to access the stored data when access is permitted. Id. at
`
`
`
`- 2 -
`
`
`
`27:10-15. Claims 28-31 accomplish this by forwarding data from the data provider
`
`to the data carrier only on validation of payment data provided from the data
`
`carrier. Id. at 28:7-9. Claim 33 accomplishes this by having code to receive
`
`payment validation data from the payment validation system; code responsive to
`
`the payment validation data to retrieve data from the data supplier and to write the
`
`retrieved data into the data carrier; and code responsive to the payment validation
`
`data to receive at least one access rule from the data supplier and to write the at
`
`least one access rule into the data carrier, the at least one access rule specifying at
`
`least one condition for accessing the retrieved data. Id. at 28:34-41. Claims 15-16
`
`and 24-27 claim processes to securely and conveniently provide data to a data
`
`carrier. Claims 15-16 accomplish this by reading payment data from a data carrier,
`
`validating the payment, and after validation, retrieving the data from the data
`
`supplier and writing it into the data carrier. Id. at 26:44-48. Claims 24-27
`
`accomplish controlling access to data from a data carrier by retrieving use rules
`
`from the data carrier; evaluating the use status data using use rules to determine
`
`whether access to data stored on the carrier is permitted; and permitting access to
`
`the data on the data carrier dependent on the result the evaluation. Id. at 27:38-45.
`
`In so doing, the invention makes it easy for users to acquire content data
`
`legitimately and effectively prevents data piracy.
`
`
`
`- 3 -
`
`
`
`As demonstrated below, claims 3–10, 15–31, and 33 do not result in
`
`inappropriate preemption of the idea of “payment for and/or controlling access to
`
`data.” Petition, Paper 2 at 6; Exhibit 1021 at ¶ 75. Such lack of preemption is
`
`shown by the elements of claims 3–10, 15–31, and 33 that are not necessary to be
`
`in a system that controls access based on payment, as well as existing alternative
`
`technologies that control access based on payment that do not have the elements of
`
`claims 3–10, 15–31, and 33.
`
`Further, to prevail in this CBM, Petitioner Apple must show that claims 3–
`
`10, 15–31, and 33 of the ‘221 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 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.
`
`Additionally, in February 2015, The United States District Court for the
`
`Eastern District of Texas examined the purely legal issue of whether claims 2 and
`
`11 (which, like claims 3-5 at issue here, depend from independent claim 1) 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)
`
`
`
`- 4 -
`
`
`
`(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
`
`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 ‘221 Patent. The
`
`USPTO is estopped from re-litigating these purely legal issues already considered
`
`and adjudicated by the USPTO.
`
`
`
`- 5 -
`
`
`
`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 3–10, 15–31, and 33 of the ‘221 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 9 at 9) is correct
`
`and claims 3–10, 15–31, and 33 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
`
`
`
`- 6 -
`
`
`
`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 3–10,
`
`15–31, and 33 of the ‘221 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
`
`
`
`- 7 -
`
`
`
`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).
`
`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
`
`
`
`- 8 -
`
`
`
`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
`
`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
`
`
`
`- 9 -
`
`
`
`“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
`
`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] is not patentable and was widely known in the prior art”
`
`(Exhibit 1021 at ¶ 75); that “[e]ach of these [‘221 Patent] limitations is a routine,
`
`generic computer-based limitation that was well-known in the prior art” (id. at
`
`¶ 79, ¶84, ¶ 91); and “claims … of the ‘221 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 ¶ 80, ¶ 86, ¶ 89, ¶ 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 ¶ 79,
`
`¶84, and ¶ 91 (e.g., Peterson, Poggio, Chernow, Hair, Subler, Ahmad, Ginter, and
`
`
`
`- 10 -
`
`
`
`Stefik ’980 patent in ¶ 79). 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 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” (Exhibit 1021, 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
`
`
`
`- 11 -
`
`
`
`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 cases
`
`(CBM2015-00121, -00124, and -00127) it is “payment for and controlling access
`
`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
`
`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
`
`
`
`- 12 -
`
`
`
`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
`
`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
`
`would say that … one idea has … more in it than the other, certainly, the providing
`
`payment … has got additional parts to … the abstract idea.”)
`
`The problem with Dr. Kelly tailoring the purported abstract idea to the
`
`claims, is that it leads to a complete overlay of the abstract idea over the claims,
`
`prejudicing the Mayo step 2 analysis of whether the claims “amount[] to
`
`
`
`- 13 -
`
`
`
`significantly more than a patent on the [abstract idea] itself.” Mayo, 132 S. Ct. at
`
`1294. Dr. Kelly’s admission that he based the formulation of the abstract idea on
`
`the claims themselves should give the Board pause. Dr. Kelly testified “it doesn’t
`
`matter where you draw the precise contours of the abstract idea because all of the
`
`elements that are left … are not inventive” (Exhibit 2108, Kelly Deposition at
`
`39:2-7), “I think the precise boundaries of the abstract idea … in this case … is not
`
`important” (id. at 60:8-12) and “the precise wording of the abstract idea is not
`
`important” (id. at 298:6-22). But where does one draw the line between the “parts”
`
`of the abstract idea and claim elements that might “amount[] to significantly more
`
`than a patent on the [abstract idea] itself?” How does one define the abstract idea
`
`such that it is not so narrowly drawn to the claims that the “alleged abstract idea is
`
`swallowed whole by” the claim? Global Tel*Link Corporation v. Securus
`
`Technologies, Inc., PGR2015-00013, Institution Decision, Paper 18 at 11 (PTAB
`
`December 8, 2015). As the Supreme Court recognized in Alice, “we tread
`
`carefully in construing this exclusionary principle lest it swallow all of patent law.
`
`At some level, ‘all inventions ... embody, use, reflect, rest upon, or apply laws of
`
`nature, natural phenomena, or abstract ideas.’” 134 S.Ct. 2347, 2354 (citing Mayo,
`
`132 S.Ct. at 1293-1294).
`
`
`
`- 14 -
`
`
`
`If Dr. Kelly had defined the abstract idea as simply “providing access to
`
`data,” then the ‘221 Patent claim elements relating to payment1 and/or control2
`
`would “amount[] to significantly more than a patent on the abstract idea” of merely
`
`“providing access to data.”
`
`
`1 E.g., Exhibit 1001 at 25:54-62 (claims 3-5 - “code to read payment data”
`
`“code to receive payment validation data,” and “code responsive to the payment
`
`validation data”); 26:44-47 (claims 15-16 - “reading payment data…” and
`
`“forwarding the payment data”); 28:6-10 (claims 28-31 - “data carrier for storing
`
`… payment data” and “validation of payment data”); 28:31-41 (claim 33 - “code to
`
`read … payment data;” “code to receive payment validation data,” and “code
`
`responsive to the payment data”).
`
`2 E.g., Exhibit 1001 at 25:59-61 (claims 3-5 - “code responsive to payment
`
`validation data…”); 26:45-46 (claims 15-16 - “payment validation”); 27:10-16
`
`(claims 17-23 - “use status data,” use rules data,” “code to access the stored data
`
`when access is permitted”); 27:38-43 (claims 24-27 - “use status data,” use rules
`
`data,” “evaluating the use status data using the use rules,” “permitting access …
`
`dependent on the result of …evaluating”); 28:8-10 (claims28-31 -“data is
`
`forwarded … on validation of payment data”); and 28:36-42 (claim 33 - “code
`
`responsive to payment validation data…”).
`
`
`
`- 15 -
`
`
`
`Based on Dr. Kelly’s testimony, his methodology was circular and driven by
`
`the content of the patent claims themselves. He looked at the challenged claims to
`
`formulate the abstract idea of “payment for and/or controlling access to data.” Id.
`
`at 35:2-19; 234:11-236:1; 291:12-16. He included the concept of “payment”
`
`because the claims address payment. Id. at 35:20-36:18; 41:7-16. He included
`
`“controlling access” because the claims address control. Id. at 41:7-16. The
`
`abstract idea of “payment for and/or controlling access to data,” therefore, came
`
`from what was in the claims. Id. at 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 concept. Id. at 44:20-45:17. Such a circular
`
`approach prejudices the Mayo step-2 analysis because it results in comparing the
`
`claims to the claims to determine if there is anything left.
`
`C.
`
`Dr. Kelly Is Simply A Highly Compensated Spokesperson for
`Apple
`
`Not only does Dr. Kelly’s circular analysis make his opinions suspect, but so
`
`does the frequency of his work on behalf of Apple and his compensation. Dr.
`
`Kelly is essentially a highly compensated spokesperson for Apple who has been an
`
`expert for Apple “on the order of 10 times” over the last seven to ten years.
`
`Exhibit 2108, Kelly Deposition at 7:16-22. It is remarkable to note the last
`
`sentence of the last page of the Declaration that states, “For my work in connection
`
`with the analysis reflected in this report and for any time I spend testifying about
`
`
`
`- 16 -
`
`
`
`that study and my opinions, Kelly Computing, Inc. is being compensated at a rate
`
`of $950 per hour and I am being reimbursed for my expenses.” Exhibit 1021 at 96
`
`(emphasis added). This is an increase of $150 per hour since 2012 when he
`
`previously testified for Petitioner at $800 per hour. See Exhibit 2082 at 29,
`
`112:13-14. Dr. Kelly also appears to have been a regular witness for Petitioner
`
`Apple recently. See Exhibit 1021 at 95-96. Moreover, his company had already
`
`been paid in excess of $6.5 million from Apple by November, 2012. See Exhibit
`
`2082 at 30, 113:15-23. See also, Exhibit 2108, Kelly Deposition at 7:16-8:21; 9:5-
`
`10 (more than $6 million paid by Apple to Kelly’s firm in last 7-10 years wouldn’t
`
`surprise Dr. Kelly); 8:25-9:2 (Dr. Kelly is a principal in Kelly Computing, Inc.).
`
`At the time Dr. Kelly did his analysis, he knew it was on behalf of Apple
`
`and knew Smartflash was suing Apple for patent infringement. Id. at 15:3-14. He
`
`had every reason to opine that the Smartflash pate