UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`APPLE INC.,
`
`Petitioner,
`
`v.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`____________
`
`Case CBM2015-00131
`
`Patent 8,061,598 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
` ............................................................................................................. 14
`
`
`III. OVERVIEW OF U.S. PATENT NO. 8,061,598 .......................................... 15
`
`IV. THE INSTITUTED CLAIMS OF THE ‘598 PATENT ARE NOT
`DIRECTED TO AN ABSTRACT IDEA ...................................................... 18
`
`
`V.
`
`C.
`D.
`
`EVEN IF THE INSTITUTED CLAIMS OF THE ‘598 PATENT WERE
`DIRECTED TO AN ABSTRACT IDEA, THE CLAIMS ARE DIRECTED
`TO STATUTORY SUBJECT MATTER ...................................................... 23
`A.
`The Two-Part Test for Statutory Subject Matter ................................ 23
`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 ....................................................................... 23
`The Claims Are Statutory Under Mayo and Alice .............................. 26
`The Instituted Claims In Practice Amount To Significantly More Than
`A Patent Upon The Abstract Idea Itself .............................................. 31
`1.
`Evidence Shows That The Instituted Claims Do Not Amount
`To A Patent On The Abstract Idea Of Payment For And
`Controlling Access To Data ...................................................... 31
`The Existence Of Alternative Technologies That Control
`Access Based On Payment Outside The Scope Of The
`Instituted Claims Show The Claims Do Not Amount To A
`Patent On The Abstract Idea Of Payment For And Controlling
`Access To Data ......................................................................... 34
`
`2.
`
`
`
`- i -
`
`

`
`E.
`
`The Instituted Claims Do Not Result In Inappropriate Preemption ... 35
`
`
`VI. A FEDERAL COURT HAS ALREADY FOUND RELATED CLAIMS OF
`THE ‘598 PATENT TO BE STATUTORY UNDER § 101 ........................ 39
`
`
`VII. THE USPTO IS ESTOPPED FROM REVISITING THE ISSUE OF
`WHETHER THE CLAIMS ARE DIRECTED TO STATUTORY SUBJECT
`MATTER ....................................................................................................... 40
`
`
`VIII. INVALIDATING PATENT CLAIMS VIA CBM REVIEW IS
`UNCONSTITUTIONAL ............................................................................... 41
`
`
`IX. SECTION 101 IS NOT A GROUND THAT MAY BE RAISED IN
`COVERED BUSINESS METHOD PATENT REVIEW ............................. 43
`
`
`X.
`
`THE INSTITUTED CLAIMS ARE NOT DIRECTED TO A FINANCIAL
`PRODUCT OR SERVICE ............................................................................ 46
`
`
`XI. THE INSTITUTED CLAIMS OF THE ‘598 PATENT ARE
`TECHNOLOGICAL INVENTIONS EXEMPT FROM CBM REVIEW .... 51
`
`
`XII. CONCLUSION .............................................................................................. 52
`
`
`
`
`
`- 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
`al. v. Google, Inc., et al., Case No. 6:14-CV-435 (E.D. Tex.),
`
`- iii -
`
`

`
`Exhibit Number
`
`Exhibit Description
`
`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
`
`2069-2074
`
`Reserved
`
`2075
`
`Order (on Defendants’ Renewed Motion for Judgment as a
`Matter of Law on the Issue of § 101 under Rule 50(b)); Dkt.
`# 585; from Smartflash LLC, et al. v. Apple Inc., et al., Case
`No. 6:13-CV-447 (E.D. Tex.) dated July 8, 2015.
`
`2076-2081
`
`Reserved
`
`2082
`
`Trial Transcript from Virnetx Inc. v. Apple Inc., Case No.
`6:10-cv-417 (E.D. Tex.) dated November 2, 2012.
`
`2083-2089
`
`Reserved
`
`2090
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Preliminary Response
`
`2091-2104
`
`Reserved
`
`2105
`
`Transcript of Deposition of Justin Douglas Tygar, Ph.D.
`dated January 19, 2016 taken in CBM2015-00126 and -
`
`
`
`- iv -
`
`

`
`Exhibit Number
`
`Exhibit Description
`
`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
`
`2109-2112
`
`Reserved
`
`2113
`
`Declaration of Emily E. Toohey in Support of Patent
`Owner’s Response
`
`2114
`
`Reserved
`
`
`
`
`
`- v -
`
`

`
`I.
`
`INTRODUCTION
`
`Covered business method review (“CBM review”) was instituted on claims
`
`3-6, 8-14, 16-25, 27-30, and 32-41 (“the instituted claims”) of U.S. Patent No.
`
`8,061,598 (“the ‘598 Patent”). Decision - Institution of Covered Business Method
`
`Patent Review 37 C.F.R. § 42.208, Paper 8 at 23 (PTAB November 16, 2015).
`
`Claims 3-6, 8-14, 16-25, 27-30, and 32-41 of the ‘598 patent should be
`
`found to be eligible under § 101 because the instituted claims of the ‘598 patent are
`
`not directed to an abstract idea. The instituted claims are directed to articles of
`
`manufacture or processes, both patent eligible subject matter under § 101. Claims
`
`3-6, 8-14, 16-25, and 27-30 are directed to portable data carriers, and claims 39-41
`
`are directed to data access terminals (i.e., machines) comprised of various
`
`structural components. Claims 32-38 are directed to processes with specifically
`
`defined steps.
`
`Even if the instituted claims could be said, at some level of generality, to be
`
`directed to an abstract idea, the instituted claims have an “inventive concept”
`
`sufficient to ensure that the instituted claims 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, the instituted claims of the ‘598 patent are directed to statutory
`
`subject matter because the inventions they claim are solutions “necessarily rooted
`
`
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`- 1 -
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`

`
`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, the instituted claims all claim use rules,
`
`use rule memories and/or use status data, such as would be used to control access
`
`to data items, and thus address the problem of data content piracy. In so doing, the
`
`invention makes it easy for users to acquire content data legitimately and/or
`
`address data piracy issues.
`
`As demonstrated below, the instituted claims do not result in inappropriate
`
`preemption of the idea of “payment for and/or controlling access to data.” Petition,
`
`Paper 2 at 6; Exhibit 1019 at ¶ 75. Such lack of preemption is shown by the
`
`elements of the instituted claims that are not necessary to be in a system or process
`
`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 the instituted
`
`claims.
`
`Further, to prevail in this CBM, Petitioner Apple must show that the
`
`instituted claims of the ‘598 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
`
`
`
`- 2 -
`
`

`
`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, 7,
`
`and 15 (which, like claims 3-6, 8-14, 16 and 17 at issue here, depend from
`
`independent claim 1) and claim 31 (from which claims 32-34 at issue here depend)
`
`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.
`
`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’
`
`
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`- 3 -
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`

`
`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, which is
`
`a question of law, during the prosecution of the ‘598 patent. The USPTO is
`
`estopped from re-litigating this purely legal issue already considered and
`
`adjudicated by the USPTO.
`
`Patent Owner further submits that the CBM review process is an
`
`unconstitutional violation of Separation of Powers principles.
`
`Patent Owner also submits that § 101 is not a ground on which CBM review
`
`may be instituted. In fact, CBM review under § 101 is unwarranted here, because
`
`the instituted claims of the ‘598 patent are not directed to a financial product or
`
`service. Even if the Board’s conclusion that “financial product or service” “is to be
`
`interpreted broadly” (Institution Decision, Paper 8 at 10) is correct and the
`
`instituted claims 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.
`
`
`
`
`
`- 4 -
`
`

`
`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 at 18. When asked on cross
`
`examination what he understood he was to do in providing his opinions in this
`
`CBM, Dr. Kelly stated “I was asked to examine the … background prior art, and
`
`then based on that, determine whether or not I thought that the … Smartflash
`
`claims were patent eligible, and I'm not a legal expert. I'm not a lawyer, and so I'm
`
`providing a technical analysis based on my understanding of the legal standards.”
`
`Exhibit 2108, Kelly Deposition at 9:19-10:14. When asked if he intended any of
`
`his opinions in his declaration to be considered legal opinions, Dr. Kelly responded
`
`“It seems to me that that is a legal question in and of itself. I'm not here to answer
`
`-- to provide legal testimony.” Id. 10:15-21 (emphasis added). Further, when
`
`asked about what kinds of things he understood the USPTO “believes makes a
`
`claim inventive,” Dr. Kelly reiterated “Well, there's a … statute that lays out the
`
`requirements. I'm not a lawyer. I'm not here to give a legal opinion…” Id. at
`
`134:11-17 (emphasis added). Thus, Dr. Kelly’s opinions on whether the instituted
`
`claims of the ‘598 patent are directed to statutory subject matter, a question of law,
`
`are irrelevant, and his Declaration should be given little or no weight.
`
`
`
`
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`- 5 -
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`
`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, 113 S.Ct. at 2796, 509 U.S. at 592-93 (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
`
`
`
`- 6 -
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`

`
`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
`
`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
`
`
`
`- 7 -
`
`

`
`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
`
`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.
`
`
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`- 8 -
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`

`
`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 1019 at ¶ 75); that “[e]ach of these [‘598 Patent] limitations is a routine,
`
`generic computer-based limitation that was well-known in the prior art” (id. at
`
`¶ 78, ¶ 92); and “claims … of the ‘598 patent are directed to only a general abstract
`
`idea” of payment for and\or controlling access to data, or controlling access to
`
`data, “combined with well-understood, routine, conventional activities” (id. at ¶ 84,
`
`¶ 90, ¶ 94, ¶ 96) 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 and ¶ 92 (e.g., Chernow, Ginter, Smith, Stefik ’235
`
`patent, Rydbeck, Sato, Munyan, and Maari in ¶ 78). 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
`
`
`
`- 9 -
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`

`
`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 1019, Kelly Declaration ¶ 75) was driven by the content of the
`
`patent claims themselves. For example, in discussing his methodology in
`
`formulating the abstract idea in 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 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
`
`
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`- 10 -
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`

`
`“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 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
`
`
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`- 11 -
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`
`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
`
`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
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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 claim elements relating to payment and control would “amount[] to
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`significantly more than a patent on the abstract idea” of merely “providing access
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`to data.”
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`Based on Dr. Kelly’s testimony, his methodology was circular and driven by
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`the content of the patent claims themselves. He looked at the challenged claims to
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`formulate the abstract idea of payment for and controlling access to data. Id. at
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`35:2-19; 234:11-236:1; 291:12-16. He included the concept of “payment” when
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`the claims of the patent at issue address payment. Id. at 35:20-36:18; 41:7-16;
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`291:12-16. He included “controlling access” when the claims address control. Id.
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`at 41:7-16; 291:12-16. The abstract idea of payment for and/or controlling access
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`to data, therefore, came from what was in the claims. Id. at 234:11-236:1; 291:12-
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`16. Dr. Kelly then compared each of the claims to the abstract idea he formulated
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`using the claims, to see if there was anything left to be an inventive concept. Id. at
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`44:20-45:17. Such a circular approach prejudices the Mayo step-2 analysis
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`because it results in comparing the claims to the claims to determine if there is
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`anything left.
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`
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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 1019 at 83
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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 has been a regular witness for Petitioner Apple recently.
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`See Exhibit 1019 at 82-83. Moreover, his company had already been paid in
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`excess of $6.5 million from Apple by November, 2012. See Exhibit 2082 at 30,
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`113:15-23. See also, Exhibit 2108, Kelly Deposition at 7:16-8:21; 9:5-10 (more
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`than $6 million paid by Apple to Kelly’s company 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 1019, should be given
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`little or no weight.
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`
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`III. OVERVIEW OF U.S. PATENT NO. 8,061,598
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`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 ‘598 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, ‘598 Patent at 1:20-28.
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`Preferred embodiments described in the ‘598 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 15:65-16:17.
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`Referring to preferred embodiments, the ‘598 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 different content providers. See id. at 4:64-5:8. If the user
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`finds a content item to buy, his or her device will transmit stored “payment data” to
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`a “payment validation system” to validate the payment data. See id. at 8:3-6. The
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`payment validation system returns proof that the payment data has been validated,
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`in the form of “payment validation data,” and the user is able to retrieve the
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`purchased content from the content provider. See id. at 8:6-9.
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`The ‘598 Patent discloses that “FIG. 13 ... shows a flow chart for user access
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`of stored data on a smart Flash card using a data access device such as the MP3
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`player of FIG. 1.” Id. at 24:16-18. “The data access device uses the use status data
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`and use rules to determine what access is permitted to data stored on the data
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`carrier.” Id. at 9:20-22. “The carrier may ... store content use rules pertaining to
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`allowed use of stored data items. These use rules may be linked to payments made
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`from the card to provide payment options such as access to buy content data
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`outright; rental access to content data for a time period or for a specified number of
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`access events; and/or rental/purchase, for example where rental use is provided
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`together with an option to purchase content data at the reduced price after rental
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`access has expired.” Id. at 4:67-5:8. Further, “use status data [is retrieved] from
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`the data carrier [to] indicat[e] past use of the stored data.” Id. at 9:33-35. Thus, as
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`described in the ‘598 Patent at 5:29-33, “[b]y combining digital rights management
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`with content data storage using a single carrier, the stored content data becomes
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`mobile and can be accessed anywhere while retaining control over the stored data
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`for the data content provider or data copyright owner.”
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`By using a system that combines on the data carrier both the digital content
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`and the use rules/use status data, access control to the digital content can be
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`continuously enforced prior to access to the digital content. By comparison, unlike
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`a system that uses use rules/use status data as claimed, when a DVD was
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`physically rented for a rental period, there was no mechanism to write partial use
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`status data to the DVD when only part of the DVD had been accessed (e.g., to
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`track whether a renter had “finished wit