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`Attorney Docket No.:
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`104677-5005-829
`Customer No. 28120
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`Petitioner: Apple Inc.
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`§
`§
`§
`§
`§
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`§
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`Inventor: Racz, et al.
`United States Patent No.: 8,061,598
`Formerly Application No.: 13/012,541
`Issue Date: November 22, 2011
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`Filing Date: January 24, 2011
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`Former Group Art Unit: 2887
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`Former Examiner: Thien Minh Le
`
`
`For: Data storage and access systems
`
`MAIL STOP PATENT BOARD
`Patent Trial and Appeal Board
`United States Patent and Trademark Office
`Post Office Box 1450
`Alexandria, Virginia 22313-1450
`
`
`DECLARATION OF DR. JOHN P. J. KELLY IN SUPPORT OF APPLE
`INC.’S PETITION FOR COVERED BUSINESS METHOD PATENT
`REVIEW OF UNITED STATES PATENT NO. 8,061,598 PURSUANT TO 35
`U.S.C. § 321, 37 C.F.R. § 42.304
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`Apple Exhibit 1019
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`I, John Kelly, hereby declare as follows:
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`
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`I. INTRODUCTION
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`1.
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`I have been retained to provide assistance regarding U.S. Patent No.
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`8,061,598 (“’598 patent”). Attached hereto as Appendix A is a true and correct
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`copy of my Curriculum Vitae describing my background and experience. I have
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`personal knowledge of the facts and opinions set forth in this declaration, and, if
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`called upon to do so, I would testify competently thereto.
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`2.
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`I hold Bachelor of Arts and Master of Arts degrees with Honors in
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`Mathematics from the University of Cambridge, England. I hold a Ph.D. in
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`Computer Science from U.C.L.A. From 1982 through 1986, I was a professor in
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`the Computer Science Department at U.C.L.A. From 1986 through 1997, I was a
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`professor in the Electrical and Computer Engineering Department of the University
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`of California, Santa Barbara, where I held tenure.
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`3.
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`I am the principal of Kelly Computing, Inc. I teach and consult in
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`many different aspects of computer science and engineering, including computer
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`hardware and software architecture and design, software engineering and fault
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`tolerance. My particular areas of expertise include computer architecture, software
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`engineering and “clean-room” development and evaluation, reverse engineering,
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`operating systems (including real-time and embedded), network computing
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`(including Internet computing), storage systems, fault tolerance, parallel and
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`distributed computing systems, transaction processing systems, database systems,
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`and program management.
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`4.
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`As a result of my education and professional experience, I have
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`extensive development experience and knowledge of computer operating systems
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`including access control concepts, data encryption/decryption techniques,
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`networking technologies, database systems, communication protocols including
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`network communication protocols, user interfaces including graphical user
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`interfaces and computer hardware design, and software analysis, design, and
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`development. I have developed computer software and hardware for many
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`different computer systems and applications including programming
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`microprocessors. For more than the last 20 years, I have analyzed software
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`products related to access control, audio and video playback, network transmission
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`of audio and video, storage of audio and video in multimedia databases, and
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`content delivery networks and distribution systems. For example, I have analyzed
`
`databases and repositories used to store and access audio file repositories, network
`
`based distribution of electronic media, set top boxes, and content delivery network
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`architecture of leading content delivery network providers. I have also analyzed
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`the source code for computer operating systems such as Apple’s Mac OS X,
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`Microsoft Windows, Linux, etc. I have also testified in Court on several occasions
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`as a computer science expert to report my analysis and opinions.
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`5.
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`I have worked in the area of computer software, hardware and system
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`design and development for over forty years. I have extensive experience in the
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`design and development of small and large scale software systems. I have been
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`involved in the specification, development, integration, and testing of computer
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`systems with a wide range of requirements, sizes and types. These have included,
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`by way of example, custom hardware and software for a US Air Force fighter
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`plane, a distributed real-time system for US FAA air traffic control, and a
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`distributed geographical information system for the US Department of Energy.
`
`6.
`
`From 1978 to 1995, I specified, designed and implemented distributed
`
`database architectures, systems and applications for Los Alamos National
`
`Laboratory and NASA’s Jet Propulsion Laboratory and database machine design
`
`and implementation at Transaction Technology Incorporated, Ordain, Inc. and
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`Teradata.
`
`7.
`
`From 1985 to 1998, I consulted for AT&T GIS, NCR, Symbios Logic,
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`and LSI Logic, including working as a member of the AT&T GIS Science
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`Advisory Committee (“SAC”). The SAC evaluated AT&T’s organization,
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`technical direction and product strategy and made recommendations to the Vice
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`President of Technology and Development.
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`8.
`
`A listing of testimony that I have provided in the last four years and
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`my compensation is attached hereto as Appendix B. I am being compensated for
`
`my time spent in connection with this case. I have no financial interest in the
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`outcome of this case.
`
`9.
`
`In preparing my opinions, I have considered the following materials:
`
`1018
`
`
`Exhibit Document
`1001 U.S. Patent No. 8,061,598
`1003 U.S. Patent No. 5,925,127
`1004 U.S. Patent No. 5,940,805
`1006 U.S. Patent No. 4,999,806
`1007 U.S. Patent No. 5,675,734
`1008 U.S. Patent No. 4,878,245
`1009 U.S. Patent No. 7,334,720
`1010 U.S. Patent No. 7,942,317
`1011 U.S. Patent No. 5,103,392
`1012 U.S. Patent No. 5,530,235
`1013 U.S. Patent No. 5,629,980
`1014 U.S. Patent No. 5,915,019
`1015
`European Patent Application, Publication No. EP0809221A2
`1016
`International Publication No. WO 99/43136
`1017
`JP Patent Application Publication No. H11-164058 (translation)
`Eberhard von Faber, Robert Hammelrath, and Frank-Peter Heider,
`“The Secure Distribution of Digital Contents,” IEEE (1997)
`1020 U.S. Patent No. 8,033,458
`Claim Construction Memorandum Opinion from Smartflash LLC v.
`Apple Inc., No. 6:13cv447 (Dkt. 229)
`File History for U.S. Patent No. 8,061,598
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`1023
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`1024
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`Page 00005
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`1031
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`Exhibit Document
`1025 U.S. Patent No. 4,337,483
`1027
`International Publication No. WO 95/34857
`1029 U.S. Patent No. 5,646,992
`J. Taylor, “DVD-Video: Multimedia for the Masses,” IEEE Multimedia,
`Vol. 6, No. 3, July-September 1999, pp. 86-92
`1032 U.S. Patent No. 5,903,721
`R. Mohan, J.R. Smith, C.S. Li, “Adapting Multimedia Internet Content
`for Universal Access,” IEEE Transactions on Multimedia, Vol. 1, No.
`1, 1999, pp. 104-114
`JP Patent Application Publication No. H10-269289 (translation)
`1034
`1035 U.S. Patent No. 5,761,485
`1036
`International Publication No. WO99/13398
`1037 U.S. Patent No. 5,953,005
`
`1033
`
`
`
`II. LEGAL STANDARDS
`
`A.
`
`UNPATENTABLE SUBJECT MATTER
`
`10.
`
`I understand that claims of a patent may be unpatentable if they are
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`directed to an abstract idea. If a claim is directed to an abstract idea, I understand
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`that to be patentable, it must contain other elements or combination of elements,
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`sometimes referred to as an “inventive concept,” that are sufficient to ensure that
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`the patent in practice amounts to significantly more than a patent upon the abstract
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`idea itself. Even if the claims limit an abstract idea to one field of use or add
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`insignificant extra-solution elements or computer-based limitations, they are not
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`patentable if the abstract idea is combined with nothing more than well-
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`understood, routine, conventional activities. I further understand that mere
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`implementation of an abstract idea with a general purpose computer or in the
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`context of the Internet does not make the abstract idea patentable.
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`11.
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`I also understand that the “machine or transformation” test can be an
`
`important tool in determining the patentability of claims. The “machine or
`
`transformation” test examines whether the claims are tied to a particular machine
`
`or apparatus, or transform a particular article into a different state or thing. If
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`neither, then the test points to unpatentability. I understand that a general purpose
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`computer is not a “particular machine or apparatus” under this test. I understand
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`that the mere manipulation or reorganization of data does not satisfy the
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`transformation prong.
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`12.
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`I also understand that to determine whether a claim recites patentable
`
`subject matter, the claim must be analyzed as a whole.
`
`13.
`
`I understand that the “inquiry on preemption is not whether the
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`patents directed at building blocks of human ingenuity would preempt an entire
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`field, but, instead, whether such patents would risk disproportionately tying up the
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`use of the underlying ideas.”
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`14.
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`I understand that the PTAB applies the “more likely than not”
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`standard in determining whether to institute a CBM proceeding, and the
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`preponderance of the evidence standard when ultimately determining patentability
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`under § 101.
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`III. PERSON OF ORDINARY SKILL IN THE ART
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`15.
`
`In determining the characteristics of a hypothetical person of ordinary
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`skill in the art of the ’598 patent at the time of Smartflash’s asserted priority date, I
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`considered several things, including the type of problems encountered in the field,
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`the solutions to those problems, the rapidity with which innovations are made, the
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`sophistication of the technology, and the education level and experience of active
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`workers in the field. Finally, I placed myself back in the year 1999, and
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`considered the engineers whom I had taught and with whom I had worked.
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`16.
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`In my opinion a person of ordinary skill in the art relating to the
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`technology of the ’598 patent at the time of Smartflash’s asserted priority date of
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`October 25, 1999 would have had at least a B.S. in E.E., C.S., or a
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`telecommunications related field, and at least 3 years industry experience including
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`client-server data/information distribution and management architectures. I
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`understand that Smartflash asserts that a person of ordinary skill in the art would
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`have had a bachelor’s degree in electrical engineering or its equivalent, or at least 5
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`years of experience in manufacturing or engineering, with significant exposure to
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`the digital content distribution and/or ecommerce industries.
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`17.
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`In 1999, I would have exceeded the level of skill required by either
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`definition, and I am in a position to opine on the understanding of a person of
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`ordinary skill in the art. In addition, my opinions herein are the same under both
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`definitions.
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`IV.
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`CLAIM CONSTRUCTION
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`18. For the purposes of this declaration, I have been asked to assume
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`constructions for certain claim terms as presented in the following table. For all
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`remaining claim terms, I have assumed their plain and ordinary meaning consistent
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`with the specification.
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`ac e
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`use rule(s)
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`payment data
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`A rule specifying a condition under which access to
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`content is permitted
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`Data representing payment made for requested
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`content data; distinct from access control data1
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`1 I understand that, in district court litigation, Petitioner has previously proposed
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`that the term “payment data” should be construed more narrowly to mean “data,
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`distinct from access control data and user identity data, representing either actual
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`payment made or record of payment made for requested content data.” I also
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`understand that the District Court defined the term as “data that can be used to
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`make a payment for content.” My opinions contained herein remain the same
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`under all of these constructions of “payment data.”
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`V. THE ’598 PATENT
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`Figure 1. Overview of the system of the ’598 patent. Data carriers (the
`content access terminals) communicate over the Internet with e-payment
`systems and with a data provider (content access web server and associated
`servers). [See Ex. 1001 (’598 patent) at Fig. 6]
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`19. The ’598 patent issued on Oct. 11, 2011, from U.S. Patent Application
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`No. 12/943,847 (“’847 application”), which was filed on Nov. 10, 2010. For the
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`purpose of this declaration only, I have been asked to assume that the priority date
`
`of the ’598 patent is October 25, 1999.
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`20. The ’598 patent is directed to “a portable data carrier for storing and
`
`paying for data and to computer systems for providing access to data to be stored.”
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`[See, e.g., Ex. 1001 (’598 patent) at 1:21-23.] The ’598 patent says that its systems
`
`and methods can be applied to the sale of audio and video data, text, software
`
`(including games) as well as other types of data. [See, e.g., Ex. 1001 (’598 patent)
`
`at 1:25-28.] The data carrier communicates with payment processors and data
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`providers over a network such as the Internet. [See, e.g., Figure 1; Ex. 1001 (’598
`
`patent) at 11:54-15:52.] The data carrier downloads and displays items available
`
`from the data provider; the user selects an item for purchase; the data carrier pays
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`for the item; and the data carrier downloads the item from the data provider. [See,
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`e.g., Ex. 1001 (’598 patent) at 20:25-21:32, 22:23-24:4.]
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`21. The multimedia content may also be accompanied by content use
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`rules that specify the permitted level of usage such as the number of times that the
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`content may be played. These use rules are transferred from the server to the client
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`during purchase of an item. [See, e.g., Ex. 1001 (’598 patent) at 14:65-15:4,
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`21:48-53, 23:32-44.]
`
`22. The specification of the ’598 patent says that this system can be
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`implemented using, for example, conventional computers, conventional storage
`
`devices, standard smart cards, standard transmission protocols, conventional
`
`encryption systems and standard e-payment systems. For instance, the patent
`
`explains that the following were known:
`
`• Internet users paying for goods and/or services by credit card transaction
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`[see, e.g., Ex. 1001 (’598 patent) at 2:17-18; 19:5-9];
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`• Encrypting/decrypting content for security [see, e.g., Ex. 1001 (’598 patent)
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`at 2:64-3:7, 18:65-19:2, 21:33-38];
`
`• Data access terminal or content access terminal hardware: “conventional
`
`computer” or “mobile phone,” “home personal computer, “mobile
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`communications device,” or “set top box” [see, e.g., Ex. 1001 (’598 patent)
`
`at 4:4-5, 15:63-16:5];
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`• WAP and i-mode allowing mobile phones to access the Internet and
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`download data [see, e.g., Ex. 1001 (’598 patent) at 4:5-9];
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`• SIM cards including a user identification means [see, e.g., Ex. 1001 (’598
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`patent) at 4:9-13];
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`• Non-volatile memory, including EEPROM, flash memory, and optical
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`memory [see, e.g., Ex. 1001 (’598 patent) at 4:41-47, 17:22-27];
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`• Purchasing digital music equivalent to the purchase of a CD [see, e.g., Ex.
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`1001 (’598 patent) at 5:9-12];
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`• Data carrier hardware: “IC card,” “smart card,” “memory stick,” “standard
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`smart card” [see, e.g., Ex. 1001 (’598 patent) at 6:28-30, 11:28-31, 17:6-27];
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`• Electronics Point of Sale Systems (EPoSS) functionality for smart cards
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`[see, e.g., Ex. 1001 (’598 patent) at 11:37-41];
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`• E-payment systems and standards [see, e.g., Ex. 1001 (’598 patent) at 13:35-
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`38];
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`• Data access terminal: a “general purpose computer” with standard
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`components [see, e.g., Ex. 1001 (’598 patent) at 16:31-53; Fig. 8];
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`• Data access device hardware: “portable audio/video player,” “conventional
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`dedicated computer system” with standard components [see, e.g., Ex. 1001
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`(’598 patent) at 18:5-26];
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`• Use control routines including digital watermarking and content protection
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`from the SDMI specification [see, e.g., Ex. 1001 (’598 patent) at 18:29-35];
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`• “Standard transmission protocols,” which are used to transmit content data
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`items [see, e.g., Ex. 1001 (’598 patent) at 21:44-47];
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`• Communications technology (no particular technology is essential): for
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`example, “internet,” “web-based technology,” “any electronic
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`communications network,” “wide area network,” “local area network,”
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`“wireless network,” “conventional land line network,” and “extranet” [see,
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`e.g., Ex. 1001 (’598 patent) at 25:41-48].
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`In addition, “[t]he physical embodiment of the system is not critical and a skilled
`
`person will understand that the terminals, data processing systems and the like can
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`all take a variety of forms.” [See Ex. 1001 (’598 patent) at 12:29-32.]
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`VI.
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`OVERVIEW OF THE STATE OF THE ART
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`23. By Smartflash’s claimed priority date of Oct. 25, 1999, the elements
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`of the challenged claims – including, e.g., electronic payment for merchandise,
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`digital data; storing data at a remote server; downloading data from a remote server
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`to a local computer; controlling access to digital content; smartcards, and portable
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`devices that could access the Internet – were already well known in the art.
`
`24. Computer scientists, engineers and users have long recognized the
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`advantages of connecting computers together so that they can share information.
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`Personal communication (e.g., e-mail), file sharing and electronic commerce are
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`just a few applications of computer networking, all of which were available many
`
`years prior to 1999. Many systems for providing these applications were also
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`known including online services – such as America Online (AOL), CompuServe,
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`GEnie and Prodigy – and the Internet – including the World Wide Web.
`
`25. Electronic sale of goods and services was well known. For example,
`
`in 1991, U.S. Patent No. 4,999,8062 (“Chernow”) described a system for the sale
`
`and distribution of digital data, specifically computer software, by telephone. The
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`seller’s system includes at least a computer (the “central computer”) and a modem:
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`“The computer can be as simple as an IBM PC or as complex as a
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`mainframe. The hardware requirements are that the computer must be
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`capable of utilizing modems, have a large rapid access storage
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`capacity (e.g.. a hard disk). meet the processing power requirements
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`and have the ability to back up stored files.” [See Ex. 1006
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`(Chernow) at 10:27-32.]
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`The central computer’s rapid-access storage contains the library of software
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`available for sale. [See, e.g., Ex. 1006 (Chernow) at 2:22-25, 2:30-36, 10:27-32,
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`11:1-11.] The central computer also stores an index so that the purchaser can
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`browse the available software. [See, e.g., Ex. 1006 (Chernow) at 8:62-9:12.]
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`26. The purchaser must also have a computer (containing storage such as
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`hard disk or floppy disk for the downloaded software) and a modem:
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`2 United States Patent No. 4,999,806 to Chernow et al., titled “Software
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`Distribution System,” was filed on September 4, 1987 and issued March 12, 1991.
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`“The modems should have the ability to automatically alter their data
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`rate to accommodate the customer’s modem. The central computer
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`modems should be able to accommodate customer modem data rates
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`from 300 to 9600 baud.” [See Ex. 1006 (Chernow) at 10:34-38.]
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`“When the seller’s computer transmits the software to the purchaser’s
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`computer it also transmits a Storing Program whose sole purpose is to
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`store the transmitted software on either floppy disk or hard disk
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`depending on the purchaser's desires.” [See Ex. 1006 (Chernow) at
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`4:18-22.]
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`[See also Ex. 1006 (Chernow) at Abstract, 4:48-51, 8:17-20, 8:46-47, 10:54-58.]
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`27. The method of selling software according to Chernow is shown in
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`Figure 2. The purchaser connects to the seller’s computer over the telephone line
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`and browses the seller’s library of software. [See, e.g., Ex. 1006 (Chernow) at
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`5:62-6:17.] If the purchaser decides to buy a software program, order information
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`and credit card information are sent from the purchaser’s computer to the central
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`computer over the telephone line:
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`“Once a program is selected for purchase, the Interactive Program
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`must make sure that the customer is able to pay for the purchase. To
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`accomplish
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`this, credit card
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`information as well as customer
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`information must be provided by the customer. The credit card used
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`for the purchase must belong to the customer, and the address and
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`phone number given by the customer must be the same as that to
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`which the purchase is to be delivered.” [See Ex. 1006 (Chernow) at
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`6:50-58.]
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`The seller verifies the credit card information. [See, e.g., Ex. 1006 (Chernow) at
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`6:66-7:13.] If the credit card is declined, the customer is prompted to input an
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`alternate credit card number. [See, e.g., Ex. 1006 (Chernow) at 7:53-63.] If the
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`credit card is approved, the software is downloaded to the purchaser’s computer
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`and stored on disk. [See, e.g., Ex. 1006 (Chernow) at 7:64-8:57.] “The telephone
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`call is terminated, the sale billed to [the] customer’s credit card and some internal
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`information is recorded at the central computer for accounting purposes.” [See Ex.
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`1006 (Chernow) at 8:58-61.]
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`Figure 2. A flow diagram summary of a method for selling and distributing
`computer software. The customer locates a desired program (boxes c and d).
`The payment is made using a credit card (boxes labeled e, f and g). The
`program is transferred and copy-protected in a secure manner (boxes i-r).
`[See Ex. 1006 (Chernow) at Figs. 1A and 1B.]
`
`28. Chernow discloses that the purchaser may lease the software instead
`
`of buying it outright. Chernow also describes that the lease could be for a fixed
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`period of time or a fixed number of uses, and that the terms of use for the leased
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`software could be encrypted and stored within the software along with a record of
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`the remaining time or number of uses. After the lease expires, the software is
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`rendered unusable or even erased from the disk. [See Ex. 1006 (Chernow) at 4:64-
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`5:19.] Given that the software described in Chernow becomes unusable at the
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`conclusion of the leased use, a person of ordinary skill in the art would have
`
`appreciated the need to provide an appropriate warning prior to lease expiration
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`particularly in light of Smith discussed below.
`
`29. The electronic sale of audio and video data was also known. For
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`example, in 1997, United States Patent No. 5,675,7343 (“Hair”) described a system
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`and method for the sale and transmission of audio and video signals. [See, e.g.,
`
`Ex. 1007 (Hair) at Abstract.] The audio and/or data signals are stored on the
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`system of the seller. [See, e.g., Ex. 1007 (Hair) at 4:8-12.] A buyer can purchase
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`audio or video signals, transfer these signals over telephone lines, and store the
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`signals on the buyer’s system. [See, e.g., Ex. 1007 (Hair) at 3:56-4:61, Fig. 1.]
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`The buyer can then play the audio or video signals stored on the buyer’s system.
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`[See Ex. 1007 (Hair) at 4:66-5:16, 7:54-8:14.] Hair describes that the payment is
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`3 United States Patent No. 5,675,734 to Hair, titled “System for transmitting
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`desired digital video or audio signals,” was filed February 27, 1996, and issued
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`October 7, 1997; claiming priority to application 586,391, which was filed
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`September 18, 1990.
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`sent before the audio or video is downloaded. [See Ex. 1007 (Hair) at Abstract,
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`5:44-56.]
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`30.
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`It was also well-known to protect digital content that was
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`electronically distributed. For example, U.S. Patent Nos. 5,530,235 and 5,629,9804
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`(collectively “Stefik”) described a system for controlling the distribution and/or
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`use of digital works, including audio and video. [See, e.g., Ex. 1012 (’235 patent)
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`at 2:47-61, 4:21-31, 4:47-50; Ex. 1013 (’980 patent) at Abstract, 6:36-41.] Stefik
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`stores the digital works in repositories, which control access to the works, and
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`permanently attaches usage rights to the digital works.
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`“A key feature of the present invention is that usage rights are
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`permanently ‘attached’ to the digital work. Copies made of a digital
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`work will also have usage rights attached. Thus, the usage rights and
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`any associated fees assigned by a creator and subsequent distributor
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`will always remain with a digital work.
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`4 United States Patent No. 5,530,235 to Stefik et al., titled “Interactive contents
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`revealing storage device,” was filed on February 16, 1995 and issued June 25,
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`1996. United States Patent No. 5,629,980 to Stefik et al., titled “System for
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`controlling the distribution and use of digital works,” was filed on November 23,
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`1994 and issued May 13, 1997.
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`The enforcement elements of the present invention are embodied in
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`repositories. Among other things, repositories are used to store digital
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`works, control access to digital works, bill for access to digital works
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`and maintain the security and integrity of the system.” [See Ex. 1013
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`(’980 patent) at 6:51-61.]
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`Consequently, when a repository (Repository 2) needs to access a digital work in a
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`different repository (Repository 1), each repository ensures that the other is
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`trustworthy and then Repository 1 checks the usage rights attached to the digital
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`work. Stefik discloses a number of conditions that may be part of this check
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`including time-based conditions (e.g., a loan period), security conditions,
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`conditions on number of allowed uses, and fee-based conditions. If access is
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`granted, then the digital work is transmitted from Repository 1 to Repository 2 and
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`both repositories generate billing information. [See, e.g., Ex. 1013 (’980 patent) at
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`7:6-37, 31:23-32:43; Figs. 1, 8.] Similarly, when the user wishes to render a digital
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`work, the repository first determines if the usage rights attached to the digital work
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`allow the requested access. [See, e.g., Ex. 1013 (’980 patent) at 8:23-31, 19:12-32,
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`19:46-57.] One example of a repository is a DocuCard, which is a transportable
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`device implemented as a PCMCIA card. The components of the DocuCard are a
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`controller module (including a microprocessor or microcontroller, a clock and
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`memory for storing code), an external interface and a storage subsystem. [See,
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`e.g., Ex. 1012 (’235 patent) at 2:29-61, 4:54-5:12, 5:31-21; Fig. 2.] A DocuCard
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`(or other repository) may also include an integrated credit server for the recording
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`a reporting of fees. [See, e.g., Ex. 1012 (’235 patent) at 6:22-24; Ex. 1013 (’980
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`patent) at 17:34-42.] The user accesses the DocuCard (or a repository in general)
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`by performing a login transaction:
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`“A Login transaction is the process by which a user logs onto a
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`repository, typically by entering a Personal Identification Number
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`(PIN). In this case, the user of the DocuCard is logging onto the
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`DocuCard. This logging in process may also activate credit accounts.”
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`[See Ex. 1012 (’235 patent) at 6:61-65.]
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`A person of skill in the art would have understood that the PIN could be stored in
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`memory. The user can then specify the account to be charged for using the digital
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`works on the DocuCard. Finally, the user selects the desired digital work and the
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`function to be performed on that work (e.g., copy or play). The usage rights
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`attached to the document determine whether the user can access the digital work in
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`the specified way. [See, e.g., Ex. 1012 (’235 patent) at 2:47-61, 6:60-7:13; Fig. 3.]
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`Stefik also discloses a “demo version” scenario, in which a user can access a
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`limited version of the work for free but can only access the full-functionality after
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`paying a fee to purchase. [See, e.g., Ex. 1013 (’980 patent) at 46:43-61.]
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`31. The repositories charge for use of the digital works based on fee
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`specifications coded in the usage rights attached to the content. Fees can be
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`charged per use, per amount of time, etc. The fee specifications also allow
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`incentives or best price features that accommodate discounts for preferred
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`customers, special deals and rebates (e.g., supplementary data or reward data).
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`[See, e.g., Ex. 1013 (’980 patent) at 17:8-17, 23:45-25:8.] A person having
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`ordinary skill in the art would have also understood that these incentives or best
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`price features could be modified in response to other data. The repositories
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`distribute proceeds for selling the digital works in accordance with the usage
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`rights. Several scenarios are discussed including using unpaid distributors (fees
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`paid to creator), allowing anyone to redistribute digital works (fees paid to content
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`creator and distributor), using licensed distributors (fees paid to content creator and
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`licensed distributor), and many multi-tiered arrangements (fees paid to content
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`creator and one or more entities in the distribution chain). [See, e.g., Ex. 1013
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`(’980 patent) at 43:45-45:63.] Credit servers and billing clearinghouses are used
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`for authorizing, recording and clearing payments, which requires various billing
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`transactions between repositories and credit servers, and between credit servers and
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`billing clearinghouses. [See, e.g., Ex. 1013 (’980 patent) at 17:1-61, 29:57-30:35;
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`Fig. 3.]
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`32. The storage system of a repository comprises descriptor storage and
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`content storage, which need not be the same physical storage devices. [See, e.g.,
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`Ex. 1013 (’980 patent) at 14:28-39.] Each descriptor block in the descriptor
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`storage includes the identifier for the associated digital work and a pointer to the
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`location of the digital work in content storage. [See, e.g., Ex. 1013 (’980 patent) at
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`9:54-66; Fig. 7.] A person having ordinary skill in the art would have understood
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`that the pointer can also be a URL, particularly in light of Ginter discussed below.
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`33. The usage rights attached to a digital work may include a “next set of
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`rights” that can be used to change the usage rights as the work is moved
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`(transferred, copied, loaned) to another repository. [See, e.g., Ex. 1013 (’980
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`patent) at 11:40-44, 19:14-15, 19:58-20:2, 20:55-67; Fig. 15.] In addition, like the
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`claimed synthesis code, the usage rights may allow the user to extract a portion of
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`a digital work to create a new work; embed a first digital work into a second digital
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`work; and to edit the contents of a digital work. These features support the
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`creation of a composite digital work: “A digital work comprised of distinguishable
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`parts. Each of the distinguishable parts is itself a digital work which have [sic]
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`usage rights attached.” [See, e.g., Ex. 1013 (’980 patent) at 6:39-43, 39:56-41:39,
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`50:41-44.]
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`34. As another example, in 1997, European Patent Application
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`EP08092215 (“Poggio”) described a virtual vending machine for distributing
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`electronic data to client devices:
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`“The virtual vending machine provides client computers with the
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`capability to obtain information regarding the available products and
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`the associated license fees and rental periods, to receive the product
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`upon receipt of a corresponding electronic payment, and to reload the
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`product during the term of the license.” [See Ex. 1015 (Poggio) at
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`Abstract.]
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`An overview of the functioning of the virtual vending machine is shown
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`graphically in Figure 3.
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`5 European Patent Application EP0809221A2 to Poggio et al., titled “Virtual
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`vending system and method for managing the distribution, licensing and rental of
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`electronic data,” was filed May 6, 1997, and published November 26, 1997.
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`Figure 3. Virtual vending machine sales process. [See Ex. 1015 (Poggio) at
`Fig. 7.]
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`35. The electronic data distributed by the virtual vending mach