Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 1 of 21 PageID #: 24096
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`TYLER DIVISION
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`§§§§§
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`§§§§ §
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`§§§§§
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`§§§§§
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`SMARTFLASH LLC, et al.,
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`Plaintiffs,
`
`v.
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`APPLE, INC., et al.,
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`Defendants.
`
`SMARTFLASH LLC, et al.,
`
`Plaintiffs,
`
`v.
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`SAMSUNG ELECTRONICS CO. LTD,
`et al.,
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`Defendants.
`
`CASE NO. 6:13-CV-447-JRG-KNM
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`CASE NO. 6:13-CV-448-JRG-KNM
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`
`
`
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`REPORT AND RECOMMENDATION
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`Defendants filed Motions for Summary Judgment of Invalidity Pursuant to 35 U.S.C. §
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`101 (6:13CV447, Doc. No. 266; 6:13CV448, Doc. No. 320). For the reasons set forth below, the
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`Court recommends that the Motions be DENIED.
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`BACKGROUND
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`Plaintiffs Smartflash LLC and Smartflash Technologies Limited
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`(collectively
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`“Smartflash”) filed these actions against Apple, Inc. (“Apple”), Samsung Electronics Co., Ltd.,
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`Samsung Electronics America, Inc., Samsung Telecommunications America, LLC (collectively
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`“Samsung”), HTC Corporation, HTC America, Inc., and Exedea, Inc. (collectively “HTC”)
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`(collectively “Defendants”) alleging infringement of the following patents: U.S. Patent No.
`Smartflash - Exhibit 2049
`Google v. Smartflash
`CBM2015-00143
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`

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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 2 of 21 PageID #: 24097
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`7,334,720 (“the ’720 Patent”); U.S. Patent No. 7,942,317 (“the ’317 Patent”); U.S. Patent No.
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`8,033,458 (“the ’458 Patent”); U.S. Patent No. 8,061,598 (“the ’598 Patent”); U.S. Patent No.
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`8,118,221 (“the ’221 Patent”); and U.S. Patent No. 8,336,772 (“the ’772 Patent”).
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`The patented technology relates generally to data storage and access systems for paying
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`for and downloading digital content such as audio, video, text, software, games and other types
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`of data. The asserted patents share a common specification. The ’720 patent issued from a
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`continuation of U.S. Patent Application No. 10/111716. The ’317 Patent issued from a
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`continuation of the application that led to the ’720 Patent. The ’458 Patent, the ’598 Patent, and
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`the ’221 Patent all issued from continuations of the application that led to the ’317 Patent. The
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`’772 Patent issued from a continuation of U.S. Application No. 12/943,872, which was also a
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`continuation of the application that led to the ’317 Patent.
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`Across both cases, Smartflash asserts the following claims: Claims 1, 13, 14, and 15 of
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`the ’720 Patent; Claim 18 of the ’317 Patent; Claims 8, 10, and 11 of the ’458 Patent; Claims 2,
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`7, 15, and 31 of the ’598 Patent; Claims 2, 11, and 32 of the ’221 Patent; and Claims 5, 10, 14,
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`22, 26, 32 of the ’772 Patent.
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`Asserted Claim 26 of the ’772 Patent depends on Claim 25. As one example, Claim 25
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`25. A handheld multimedia terminal for retrieving and accessing protected multimedia
`content, comprising:
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`a wireless interface configured to interface with a wireless network for communicating
`with a data supplier;
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`non-volatile memory configured to store multimedia content, wherein said multimedia
`content comprises one or more of music data, video data and computer game data;
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` a
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` program store storing processor control code;
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`
`
`recites:
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`2
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 3 of 21 PageID #: 24098
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`a processor coupled to said non-volatile memory, said program store, said wireless
`interface and
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` a
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` user interface to allow a user to select and play said multimedia content;
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` a
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` display for displaying one or both of said played multimedia content and data relating
`to said played multimedia content;
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`wherein the processor control code comprises:
`
`
`code to request identifier data identifying one or more items of multimedia content
`available for retrieving via said wireless interface;
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`code to receive said identifier data via said wireless interface, said identifier data
`identifying said one or more items of multimedia content available for retrieving via
`said wireless interface;
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`code to request content information via said wireless interface, wherein said content
`information comprises one or more of description data and cost data pertaining to at
`least one of said one or more items of multimedia content identified by said identifier
`data;
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`code to receive said content information via said wireless interface;
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`code to present said content information pertaining to said identified one or more
`items of multimedia content available for retrieving to a user on said display;
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`code to receive a first user selection selecting at least one of said one or more items of
`multimedia content available for retrieving;
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`code responsive to said first user selection of said selected at least one item of
`multimedia content to transmit payment data relating to payment for said selected at
`least one item of multimedia content via said wireless interface for validation by a
`payment validation system;
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`code to receive payment validation data via said wireless interface defining if said
`payment validation system has validated payment for said selected at least one item
`of multimedia content; and
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`code responsive to said payment validation data to retrieve said selected at least one
`item of multimedia content via said wireless interface from a data supplier and to
`write said retrieved at least one item of multimedia content into said non-volatile
`memory, code to receive a second user selection selecting one or more of said items
`of retrieved multimedia content to access;
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`
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`3
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`

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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 4 of 21 PageID #: 24099
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`code to read use status data and use rules from said non-volatile memory pertaining to
`said second selected one or more items of retrieved multimedia content; and
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`code to evaluate said use status data and use rules to determine whether access is
`permitted to said second selected one or more items of retrieved multimedia content,
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`wherein said user interface is operable to enable a user to make said first user selection
`of said selected at least one item of multimedia content available for retrieving,
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`wherein said user interface is operable to enable a user to make said second user
`selection of said one or more items of retrieved multimedia content available for
`accessing, and
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`wherein said user interface is operable to enable a user to access said second user
`selection of said one or more item of retrieved multimedia content responsive to said
`code to control access permitting access to said second selected one or more items of
`retrieved multimedia content.
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`’772 Patent, Claim 25.
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`Asserted Claim 13 of the ’720 Patent depends on Claim 3. As another example, Claim 3
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`recites:
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`3. A data access terminal for retrieving data from a data supplier and providing the
`retrieved data to a data carrier, the terminal comprising:
`
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`a first interface for communicating with the data supplier;
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` a
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` data carrier interface for interfacing with the data carrier;
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` a
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` program store storing code; and
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` a
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` processor coupled to the first interface, the data carrier interface, and the program
`store for implementing the stored code, the code comprising:
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`code to read payment data from the data carrier and to forward the payment data to a
`payment validation system;
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`code to receive payment validation data from the payment validation system;
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`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
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`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
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`
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`4
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`

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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 5 of 21 PageID #: 24100
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`least one access rule specifying at least one condition for accessing the retrieved data
`written into the data carrier, the at least one condition being dependent upon the
`amount of payment associated with the payment data forwarded to the payment
`validation system.
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`’720 Patent, Claim 3.
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`APPLICABLE LAW
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`Federal Rule of Civil Procedure 56(a) provides for summary judgment when “there is no
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`genuine dispute as to any material fact.” A dispute about a material fact is genuine if “the
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`evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
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`Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When the summary judgment
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`movants demonstrate the absence of a genuine dispute over any material fact, the burden shifts to
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`the non-movant to show there is a genuine factual issue for trial. Celotex Corp. v. Catrett, 477
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`U.S. 317, 323–24 (1986). Mere conclusory allegations are not competent summary judgment
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`evidence, and thus are insufficient to defeat a motion for summary judgment. Eason v. Thaler,
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`73 F.3d 1322, 1325 (5th Cir. 1996). A court must draw all reasonable inferences in favor of the
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`non-moving party. BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378 (Fed. Cir. 2007).
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`Patentable Subject Matter
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`Section 101 of the Patent Act defines patentable subject matter: “Whoever invents or
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`discovers any new and useful process, machine, manufacture, or composition of matter, or any
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`new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and
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`requirements of this title.” 35 U.S.C. § 101. “Congress took this permissive approach to patent
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`eligibility to ensure that ingenuity should receive liberal encouragement.” Bilski v. Kappos, 561
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`U.S. 593, 601 (2010) (internal quotations omitted). Supreme Court precedent carves out three
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`specific exceptions to § 101’s broad patentability principles: laws of nature, physical phenomena,
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`and abstract ideas. Id. These exceptions represent “the basic tools of scientific and
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`5
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 6 of 21 PageID #: 24101
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`technological work.” Alice Corp. Pty. v. CLS Bank Int'l, 134 S. Ct. 2347, 2354, (2014) (quoting
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`Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013)).
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`“‘Monopolization of those tools through the grant of a patent might tend to impede innovation
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`more than it would tend to promote it,’ thereby thwarting the primary object of the patent laws.”
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`Id. (quoting Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289,
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`1303 (2012). Accordingly, courts must distinguish between patents that claim the “building
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`blocks of human ingenuity and those that integrate the building blocks into something more.” Id.
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`(quoting Mayo, 132 S. Ct. at1303).
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`The Supreme Court set forth a two part test for patent eligibility. Id. at 2355. First, the
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`court determines whether the claims at issue are directed towards one of the patent-ineligible
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`concepts. Id. If so, then the court asks “what else is there in the claims before us?” Id. (quoting
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`Mayo, 132 S. Ct. at 1296–97). To answer the question, the court considers “the elements of each
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`claim both individually and as an ordered combination to determine whether the additional
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`elements transform the nature of the claim into a patent-eligible application.” Id. (internal
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`quotations omitted). The Court has described the second step as a search for an “inventive
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`concept”—“an element or combination of elements that is ‘sufficient to ensure that the patent in
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`practice amounts to significantly more than a patent upon the [ineligible concept] itself.’” Id.
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`(quoting Mayo, 132 S. Ct. at 1298).
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`DISCUSSION
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`The Supreme Court’s most recent and relevant guidance comes from its Alice decision.
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`Although the Court extended the test it set forth in Mayo, Alice dealt with computer implemented
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`inventions as does the present case.
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`6
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 7 of 21 PageID #: 24102
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`Alice
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`In Alice, the asserted patent claimed a computer-implemented means of mitigating
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`settlement risk by using a third-party intermediary. Id. at 2351–52. The Supreme Court affirmed
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`a divided Federal Circuit holding that the asserted method, system, and computer-readable media
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`claims were not directed toward eligible subject matter under § 101. Id. at 2352. The Court held
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`that the claims at issue were drawn to an abstract idea, and implementing the idea on a computer
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`failed to “transform that abstract idea into a patent-eligible invention.” Id. The Court
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`determined that the two-step test from Mayo governed eligibility questions. Id. at 2355. The
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`Court explained that the second step cannot be satisfied by implementing an abstract idea on a
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`computer. Id. at 2358 (“[M]ere recitation of a generic computer cannot transform a patent-
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`ineligible abstract idea into a patent-eligible invention”.) Further, the Court clarified that
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`restating method claims as apparatus claims similarly fails to cure eligibility problems when the
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`apparatus includes only generic computer components. Id. at 2360 (citing CLS Bank Int'l v.
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`Alice Corp. Pty., 717 F.3d 1269, 1290 (Fed. Cir. 2013) (Lourie, J., concurring) (“[N]one of the
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`hardware recited by the system claims ‘offers a meaningful limitation beyond generally linking
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`the use of the [method] to a particular technological environment that is, implementation via
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`computers.’”) (internal quotations omitted)). However, the Court confirmed that “many
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`computer-implemented claims are formally addressed to patent-eligible subject matter” and left
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`open the possibility that claims which “improve the functioning of the computer itself” or “any
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`other technology” are patent eligible. Id. at 2359.
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`Recent Federal Circuit Precedent
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`Since filing these Motions, both Smartflash and Defendants filed notices of supplemental
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`authority and submitted supplemental briefing, drawing the Court’s attention to the following
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`7
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 8 of 21 PageID #: 24103
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`Federal Circuit decisions made in light of Alice: Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709
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`(Fed. Cir. 2014) (“Ultramercial II”); DDR Holdings, LLC v. Hotels.com, L.P., No. 2013-1505,
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`2014 WL 6845152 (Fed. Cir. Dec. 5, 2014); and Content Extraction & Transmission LLC v.
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`Wells Fargo Bank, Nat. Ass'n, No. 2013-1112, 2014 WL 7272219 (Fed. Cir. Dec. 23, 2014).
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`1. Ultramercial II
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`In Ultramercial II, the asserted patent claimed a “method for distributing copyrighted
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`media products over the Internet where the consumer receives a copyrighted media product at no
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`cost in exchange for viewing an advertisement, and the advertiser pays for the copyrighted
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`content.” 772 F.3d at 712.1 The Federal Circuit held that the claims were drawn to the abstract
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`1 Claim 1 of the asserted patent was representative and read as follows:
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`1. A method for distribution of products over the Internet via a facilitator, said method comprising the
`steps of:
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`
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`a first step of receiving, from a content provider, media products that are covered by intellectual
`property rights protection and are available for purchase, wherein each said media product being
`comprised of at least one of text data, music data, and video data;
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` a
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` second step of selecting a sponsor message to be associated with the media product, said sponsor
`message being selected from a plurality of sponsor messages, said second step including accessing
`an activity log to verify that the total number of times which the sponsor message has been
`previously presented is less than the number of transaction cycles contracted by the sponsor of the
`sponsor message;
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` a
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` fifth step of offering to a consumer access to the media product without charge to the consumer on
`the precondition that the consumer views the sponsor message;
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` a
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` sixth step of receiving from the consumer a request to view the sponsor message, wherein the
`consumer submits said request in response to being offered access to the media product;
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` a
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` seventh step of, in response to receiving the request from the consumer, facilitating the display of a
`sponsor message to the consumer;
`an eighth step of, if the sponsor message is not an interactive message, allowing said consumer
`access to said media product after said step of facilitating the display of said sponsor message;
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` a
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` ninth step of, if the sponsor message is an interactive message, presenting at least one query to the
`consumer and allowing said consumer access to said media product after receiving a response to said
`at least one query;
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`
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`8
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` third step of providing the media product for sale at an Internet website;
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` fourth step of restricting general public access to said media product;
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` a
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` a
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 9 of 21 PageID #: 24104
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`idea of using “an advertisement as an exchange or currency” and the claim limitations did not
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`transform the abstract idea into patent eligible subject matter. Id. at 714–15. The court noted
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`that adding “routine additional steps” to the abstract idea did not transform it into patentable
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`subject matter, including “updating an activity log, requiring a request from the consumer to
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`view the ad, restrictions on public access, and use of the Internet.” Id. at 716. Moreover, the
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`court explained that because of the “prevalence of the Internet, implementation of an abstract
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`idea on the Internet . . . is not sufficient to provide any ‘practical assurance that the process is
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`more than a drafting effort designed to monopolize the [abstract idea] itself.’” Id. (quoting Mayo,
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`132 S. Ct. at 1297). Finally, the court determined that the claimed method also failed both
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`prongs of the machine-or-transformation test, which can provide a “useful clue” in the second
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`step of the Alice framework. Id. 716–17. The Internet “is a ubiquitous information-transmitting
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`medium, not a novel machine. And adding a computer to otherwise conventional steps does not
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`make an invention patent-eligible.” Id. The claims also failed the transformation prong because
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`manipulations of “public or private legal obligations or relationships, business risks, or other
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`such abstractions cannot meet the test because they are not physical objects or substances, and
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`they are not representative of physical objects or substances.” Id. (quoting Bilski, 545 F.3d at
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`963).
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`2. DDR Holdings
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`In DDR Holdings, the asserted patents claimed a system and method of generating a
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`composite web page that combined certain visual elements of a “host” website with content of a
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` a
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` tenth step of recording the transaction event to the activity log, said tenth step including updating
`the total number of times the sponsor message has been presented; and
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`an eleventh step of receiving payment from the sponsor of the sponsor message displayed.
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`Id. (internal citation omitted)
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`9
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 10 of 21 PageID #: 24105
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`third-party merchant. 2014 WL 6845152 at *1.2 The Federal Circuit held that the asserted
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`claims “clear[ed] the § 101 hurdle.” Id. at *8. The court noted that the claims did not recite a
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`mathematical algorithm or a fundamental economic practice. Id. at *10 (“Although the claims
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`address a business challenge (retaining website visitors), it is a challenge particular to the
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`Internet.”). The court determined that even though the asserted claims might be characterized as
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`an allegedly abstract idea, the “claims satisf[ied] Mayo/Alice step two.” Id. Even though the
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`claims involved both the Internet and a computer, they stood “apart because they [did] not
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`merely recite the performance of some business practice known from the pre-Internet world
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`2 Claim 19 of the asserted patent at issue was representative and read as follows:
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`19. A system useful in an outsource provider serving web pages offering commercial opportunities, the system
`comprising:
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`
`
`
`
`
`
`
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`(a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of
`visually perceptible elements, which visually perceptible elements correspond to the plurality of first web
`pages;
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`(i) wherein each of the first web pages belongs to one of a plurality of web page owners;
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`(ii) wherein each of the first web pages displays at least one active link associated with a commerce
`object associated with a buying opportunity of a selected one of a plurality of merchants; and
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`(iii) wherein the selected merchant, the out-source provider, and the owner of the first web page
`displaying the associated link are each third parties with respect to one other;
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`(b) a computer server at the outsource provider, which computer server is coupled to the computer store
`and programmed to:
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`(i) receive from the web browser of a computer user a signal indicating activation of one of the links
`displayed by one of the first web pages;
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`(ii) automatically identify as the source page the one of the first web pages on which the link has been
`activated;
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`(iii) in response to identification of the source page, automatically retrieve the stored data corresponding
`to the source page; and
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`(iv) using the data retrieved, automatically generate and transmit to the web browser a second web page
`that displays: (A) information associated with the commerce object associated with the link that has been
`activated, and (B) the plurality of visually perceptible elements visually corresponding to the source
`page.
`
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`Id. at 2–3.
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`10
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 11 of 21 PageID #: 24106
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`along with the requirement to perform it on the Internet. Instead, the claimed solution is
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`necessarily rooted in computer technology in order to overcome a problem specifically arising in
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`the realm of computer networks.” Id. The claims called for an “outsource provider” that
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`directed a website visitor to a hybrid web-page that combined the “look and feel” elements of the
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`host website and information from a third-party advertiser’s website. Id. at *11. When the
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`visitor clicked the third party’s advertisement, the hybrid page kept the visitor from leaving the
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`host site. Id. There is no “brick and mortar” “analog of what ordinarily occurs in ‘cyberspace’
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`after the simple click of a hyperlink” where a customer could be completely transported outside
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`of a store and relocated to a separate physical venue. Id. The claims addressed “the challenge of
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`retaining control over the attention of the customer in the context of the Internet . . . .” Id. The
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`claims were distinguishable from those in Ultramercial II because they did not “broadly and
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`generically claim ‘use of the Internet’ to perform an abstract business practice” when the
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`limitations were taken together as an ordered combination. Id. at *12. Further, the claims did
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`not preempt every application of an idea, but instead recited a specific way of solving a problem
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`faced by websites on the Internet. Id.
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`3. Content Extraction
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`In Content Extraction, the four asserted patents claimed a method of extracting and
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`digitizing data from hard copy documents, recognizing specific information in the data, and
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`storing that information in memory.3 2014 WL 7272219 at *1. The Federal Circuit held that the
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`3 Claim 1 of the first of the four asserted patents recited:
`
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`1. A method of processing information from a diversity of types of hard copy documents, said method
`comprising the steps of:
`
`(a) receiving output representing a diversity of types of hard copy documents from an automated
`digitizing unit and storing information from said diversity of types of hard copy documents into a
`memory, said information not fixed from one document to the next, said receiving step not preceded by
`scanning, via said automated digitizing unit, of a separate document containing format requirements;
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`11
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 12 of 21 PageID #: 24107
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`asserted claims were drawn to patent-ineligible subject matter. Id. at *5. As an example of one
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`embodiment, automated teller machines that accept and scan checks for deposit practice the
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`claimed method. Id. at *1. Applying step one of Mayo/Alice, the court found that the asserted
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`patents claimed the well-known and long-practiced abstract idea of collecting data, recognizing
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`certain data with the collected set, and storing that data in memory. Id. at *3. The court rejected
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`the plaintiff’s argument that the claims were not abstract because they required a scanner and
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`human minds cannot process the stream of bits output by a scanner. Id. The court likened the
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`claims to similar requirements in Alice. Id. Applying step two, the court found no limitations
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`that transformed the claims into a patent-eligible application, individually or as an ordered
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`combination. Id. The court noted that the plaintiff conceded that using a scanner or other device
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`to extract data from documents and using computers to transform shapes on a page into typeface
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`characters were well-known practices. Id. at *4. Therefore, the court determined these were
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`routine, conventional activities insufficient to “save a claim in this context.” Id. Further, the
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`court stated that addressing each asserted claim was unnecessary where the district court
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`identified two as representative and the plaintiff never identified claims that were not fairly
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`represented. Id.
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`The Parties’ Positions
`
`Defendants argue that the claims at issue are directed towards an abstract idea.
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`6:13CV447, Doc. No. 266 at 2. According to Defendants, patent claims for “long-familiar
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`commercial transactions” and relationships, no matter how narrow, are directed to abstract ideas
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`as a matter of law. Id. at 3. (citing buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1353–55 (Fed.
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`(b) recognizing portions of said hard copy documents corresponding to a first data field; and
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`
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`Id.
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`
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`(c) storing information from said portions of said hard copy documents corresponding to said first data
`field into memory locations for said first data field.
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`12
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 13 of 21 PageID #: 24108
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`Cir. 2014)). Defendants assert that the two concepts at the heart of the asserted claims are
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`payment and controlling access. Id. at 3–4. Further, Defendants assert that these are age-old
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`concepts and the combination of the two—exchanging payment for access—is a building block
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`of the modern economy. Id. at 4. Accordingly, Defendants assert that the claims recite an
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`abstract idea under the first step of the Mayo/Alice test. Id. at 5.
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`For step two of Mayo/Alice, Defendants argue the asserted claims do not disclose an
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`“inventive concept” that is “significantly more” than the abstract idea. Id. Defendants assert that
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`limits on the claims to the ideas of payment for data and controlling access to data are field of
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`use limitations that do no transform abstract ideas into patent eligible inventions. Id. at 5–6
`
`(citing Bilski, 130 S.Ct. at 3230–31; Parker v. Flook, 98 S.Ct. 2522, 2528–29 (1978); Loyalty
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`Conversion Sys. Corp. v. Am. Airlines, Inc., No. 2:13-CV-655, 2014 WL 4364848, at *5 (E.D.
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`Tex. Sept. 3, 2014) (Bryson, J.)). Defendants further assert that the method steps and “code to”
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`limitations simply instruct that abstract ideas of payment for data and controlling access should
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`be implemented on a generic computer in software code that does not transform the abstract
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`ideas into patent eligible inventions. Id. at 6–7. (citing Alice, 134 S.Ct. at 2358 (“[R]ecitation of
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`a generic computer cannot transform a patent ineligible abstract idea into a patent eligible
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`invention.”); buySAFE, 765 F.3d at 1355 (finding that “sending” and “receiving” data over a
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`network is “not even arguably inventive”); Loyalty, 2014 WL 4354848, at *10 (finding that “data
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`recording, storage, and calculation” are “conventional functions that can be performed by a
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`generic computer”)). Moreover, Defendants contend that the hardware recited in the asserted
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`claims is purely functional and generic because nearly every computer will include “a medium
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`capable of storing information, a processor, a user interface, a display, wireless capabilities,
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`internal and external facing interfaces.” Id. at 8. Defendants argue the claims disproportionately
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`13
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 14 of 21 PageID #: 24109
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`foreclose future innovation (preemption) because the “code to” functional claims do not provide
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`a significant description of the particular means by which the various recited functions are
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`performed. Id. at 11. Defendants’ expert opined that the claims compare to “calling someone up
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`and buying a DVD” in a different context. Id. at 13. Further, Defendants assert that the claims
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`also fail the machine-or-transformation test. Id. at 14.
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`Smartflash responds that the claims are not directed to an abstract idea. Id. at 4.
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`According to Smartflash, the claims are directed to particular devices with payment capabilities
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`for digital content, access control capabilities for stored digital content, and, in some claims, to
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`particular control access capabilities based on particular payment. Id. at 4–5 (citing Ultramercial
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`Inc. v. Hulu LLC, 772 F.3d 1335, 1344 (Fed. Cir. 2013) (“Ultramercial II”), cert. granted,
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`judgment vacated sub nom. WildTangent, Inc. v. Ultramercial, LLC, 134 S. Ct. 2870 (2014)
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`(“The Court has long-recognized that any claim can be stripped down, simplified, generalized, or
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`paraphrased to remove all of its concrete limitations, until at its core, something that could be
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`characterized as an abstract idea is revealed. A court cannot go hunting for abstractions by
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`ignoring the concrete, palpable, tangible limitations of the invention the patentee actually
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`claims.”). Smartflash points to Claim 26 (dependent on Claim 25) of the ’772 Patent and Claim
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`13 (dependent on Claim 3) of the ’720 Patent and asserts that neither is drawn to the abstract
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`ideas of payment for or controlling access to something. Id. at 5–6. Smartflash further asserts
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`that other claims are directed toward data retrieval only after payment validation data has been
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`received, which is useful to protect distributors from users who cannot pay for purchased content
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`and an advancement over prior art. Id. at 7. Smartflash argues that claims for computer-
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`implemented inventions may be somewhat generic because of the nature of the person having
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`ordinary skill in the art (“PHOSTIA”). Id. at 8. (citing TQP Development, Inc. v. Intuit Inc.,
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`14
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`Case 6:13-cv-00447-JRG Document 423 Filed 01/21/15 Page 15 of 21 PageID #: 24110
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`2014 WL 651935, at *1, *7 (E.D. Tex. Feb. 9, 2014) (Bryson, J.) (noting the generic nature of
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`the claim language and determining it did not “involve a method of doing business that happens
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`to be implemented on a computer; instead, it involves a method for changing data in a way that
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`will affect the communication system itself, by making it more secure.”).
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`Moreover, Smartflash contends that the asserted claims do not give rise to preemption
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`concerns because both Smartflash and Defendants
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`identified numerous non-infringing
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`alternatives, such as those employed by Netflix and Spotify. Id. at 9. As to the machine-or-
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`transformation test, Smartflash contends that its claims are tied to a particular machine and that
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`the invention transforms data. Id. at 12. Smartflash argues that even though generic computers
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`have storage mediums and store data, the asserted claims use the storage in a particular way that
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`ties the invention to a particular machine. Id. On step two of Mayo/Alice, Smartflash maintains
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`that Defendants fail to discharge their burden to show that all the limitations of the asserted