Trials@uspto.gov
`Tel: 571-272-7822
`
`Paper 15
`‘Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE |
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`APPLEINC.,
`Petitioner,
`
`V.
`
`SMARTFLASH LLC,
`Patent Owner.
`
`Case CBM2015-00018
`Patent 7,942,317 B2
`
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`“ELLURU,Administrative Patent Judge.
`
`DECISION
`
`Institution of Covered Business Method Patent Review
`37 C.F.R. § 42.208
`
`
`Tel: 571-272-7822
`
`Paper 15
`‘Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE |
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`APPLEINC.,
`Petitioner,
`
`V.
`
`SMARTFLASH LLC,
`Patent Owner.
`
`Case CBM2015-00018
`Patent 7,942,317 B2
`
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`“ELLURU,Administrative Patent Judge.
`
`DECISION
`
`Institution of Covered Business Method Patent Review
`37 C.F.R. § 42.208
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`INTRODUCTION
`
`|
`A. Background
`Petitioner, Apple Inc. (“Apple”), filed a Petition (Paper 1, “Pet.”) to
`institute a covered business methodpatent review of claim 18 (‘the
`
`challenged claim”) of U.S. Patent No. 7,942,317 B2 (Ex. 1201, “the °317
`patent”) pursuantto § 18 of the Leahy-Smith America Invents Act (“AIA”),
`Patent Owner, Smartflash LLC (“Smartflash”), filed a Preliminary Response
`
`.
`(Paper 11, “Prelim. Resp.”).
`Wehave jurisdiction under 35 U.S.C. § 324(a), which provides that a
`covered business method patent review maynot beinstituted “unless. . . it is
`
`morelikely than notthatat least 1 of the claims challengedin thepetition is
`
`unpatentable.”
`
`B. Asserted Ground
`
`Apple contendsthat claim 18 is unpatentable under 35 U.S.C. § 101
`(Pet. 1).
`a
`After considering the Petition and Preliminary Response, we
`determinethat the ’317 patent is a covered business method patent. We
`further determine that Apple has demonstratedthat it is more likely than not
`that the challenged claim is unpatentable. Therefore, we institute a covered
`
`business method patent review of claim 18 of the 317 patent.
`
`C. Related Matters
`
`Theparties indicate that the ’317 patentis the subject of the following
`
`district court cases: Smartflash LLC v. Apple Inc., Case No. 6:13-cv-447
`
`(E.D. Tex. 2014); Smartflash LLC v. Samsung Elecs Co., Case No. 6:13-cv-
`
`' Pub. L. No. 112-29, 125 Stat. 284, 296-07 (2011).
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`448 (E.D.Tex. 2014). Pet. 19; Paper 6, 3. Smartflash also indicates that the
`°317 patentis the subject ofa third district court case: Smartflash LLCv.
`
`Google, Inc., Case No. 6:14-cv-435 (E.D. Tex.). Paper6, 3.
`Apple previously filed two Petitions for covered business method
`patent review of the °317 patent: CBM2014-00112 and CBM2014-00113.
`Those petitionswere instituted under 35 U.S.C. § 103 with respect to claims
`1, 6-8, 12, 13, 16, and 18, and consolidated into a single proceeding. Apple
`Inc. v. Smartflash LLC, Case CBM2014-001 12, slip op. at 22 (PTAB Sept.
`30, 2014) (Paper 7). Related patents claiming priority back to a common
`series of applications currently are the subject of CBM2014-00102,
`CBM2014-00106, and CBM2014-00108, filed by Apple.
`~ Concurrentwith the filing of this Petition, Apple filed three other
`
`Petitions for covered business patent review challenging claimsof patents
`
`owned by Smartflash and disclosing similar subject matter: CBM2015-
`
`00015, CBM2015-00016, and CBM2015-00017.
`
`D. The ’317 Patent
`The ’317 patent relates to “a portable data carrier for storing and
`paying for data and to computer systems for providing access to data to be
`stored” and the “corresponding methods and computer programs.”
`Ex. 1201, 1:18-23. Owners ofproprietary data, especially audio recordings,
`have an urgent needto address the prevalence of “data pirates,” who make
`proprietary data available over the internet without authorization.
`/d. at
`1:38-51. The ’317 patent describes providing portable data storage together
`with a meansfor conditioning access to that data upon validated payment.
`Id. at 1:55-2:3. This combination allows data owners to maketheir data
`
`available over the internet without fear of data pirates. /d. at 2:3-11.
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`As described, the portable data storage device is connected to a
`terminal for internet access. Id. at 1:55-63. The terminalreads payment
`information, validates that information, and downloads data into the portable
`
`/d. The data on the portable storage
`storage device from a data supplier.
`device can beretrieved and output from a mobile device. Jd. at 1:64-67.
`The ’317 patent makes clear that the actual implementationof these
`componentsis not critical and the alleged invention may be implementedin
`many ways. See, é.g., id. at 25:49—-52 (“The skilled person will understand
`that many variants to the system are possible and the invention is not limited
`to the described embodiments.”).
`
`E. Challenged Claim
`Apple challenges claim 18 of the ’317 patent, which recites the
`following.
`|
`18..A method ofproviding data to a data requester comprising:
`
`receiving a request for a data item from the requester;
`
`receiving paymentdata from the requester relating to payment
`for the requested data;
`
`transmitting the requested data to the requester;
`
`reading paymentdistribution information from a data store; and
`
`outputting paymentdata to a payment system for distributing
`the paymentfor the requested data.
`
`A. Claim Construction —
`
`ANALYSIS
`
`Wedeterminethat no claim term requires express construction for
`
`purposes of this Decision.
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`B. Covered Business Method Patent
`Section 18 of the AIA providesfor the creation ofa transitional
`program for reviewing covered business method patents. A “covered
`business methodpatent”is a patent that “claims a method or corresponding
`apparatus for performing data processing or other operations used in the
`practice, administration, or managementofa financial productorservice,
`except that the term doesnotincludepatents for technological inventions.”
`AIA § 18(d)(1); see 37 C.F.R. § 42.301(a). A patent need have only one
`
`claim directed to a covered business methodto be eligible for review. See
`Transitional Program for Covered Business Method Patents-—Definitions of
`Covered Business Method Patent and Technological Invention; Final Rule,
`
`77 Fed. Reg. 48,734, 48,736(Aug. 14, 2012) (“CBM Rules”) (Comment8).
`
`1. Financial Product or Service
`
`Apple asserts that “because claim 18 explicitly describes receiving
`
`andresponding to paymentdata, as well as outputting paymentdata,it
`clearly relates to afinancial activity and providing a financial service.”
`Pet. 14. Based on this record, we agree with Apple that the subject matter
`
`recited by claim 18 is directed to activities that are financialin nature,
`
`namely “receiving payment data from the requester relating to payment for
`
`the requested data,” “reading paymentdistribution information from a data
`
`store,” and “outputting payment data to a payment system for distributing
`
`the paymentfor the requested data,” limitations whichare recited in the
`claim. Electronic transfer of moneyis a financial activity, and providing for
`such a transfer amountsto a financial service. This is consistent with the
`Specification of the ’317 patent, which confirms claim 18’s connection to
`financial activities by stating that the invention “relates to a portable data
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`carrier for storing and paying for data.” Ex. 1201, 1:18-20. The
`
`Specification also states repeatedly that the disclosed invention involves
`managing access to data based on paymentvalidation. See, e.g., id. at 1:55-
`63, 2:12—26, 3:22-30, 3:51—-56, 7:59-8:6, 8:18-31.
`
`Smartflash disagrees that claim 18 satisfies the financial in nature
`requirement ofAIA § 18(d)(1), arguing thatthat section should be
`interpreted narrowly to coveronly technology used specifically in the
`financial or banking industry. Prelim. Resp. 5-8. Smartflash cites to
`variousportions of the legislative history as support for its proposed
`interpretation.
`/d.
`
`Although we agree with Smartflash that the statutory language
`
`controls whethera patent is eligible for a covered business methodpatent
`
`review, we do notagree that the phrase “financial product or service”is as
`
`limited as Smartflash proposes. The AIA doesnotincludeasa prerequisite
`
`for covered business method patent review, a “nexus”to a “financial
`business,” but rather a “method or corresponding apparatus for performing
`data processing or other operations used in the practice, administration,or
`managementofa financial productor service.” AIA § 18(d)(1). Further,
`contrary to Smartflash’s view ofthe legislative history, the legislative
`
`history indicates that the phrase “financial product or service”is not limited
`
`to the products or services ofthe “financial services industry” andis to be
`
`interpreted broadly. CBM Rules, 77 Fed. Reg: at 48,735—36. For example,
`
`the “legislative history explains that the definition of covered business
`
`method patent was drafted to encompasspatents ‘claiming activities that are
`
`financial in nature, incidentalto a financial activity or complementary to a
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`financialactivity.’” Id. (citing 157 Cong. Rec. $5432 (daily ed.-Sept. 8,
`2011) (statement of Sen. Schumer)).
`In addition, Smartflash asserts that claim 18 is not directed to an -
`apparatus or methodthatis financialin nature because claim 18 “omits the
`specifics of how paymentis made.” Prelim. Resp. 8. Weare not persuaded
`by this argument because § 18(d)(1) of the AIA does not include such a
`requirement, nor does Smartflash point to any other authority that makes
`such arequirement. Jd. We determine that because claim 18 recites
`payment data, as Smartflash acknowledges, the financial in nature
`requirement of § 18(d)(1) is satisfied.
`For the reasonsstated above, and based onthe particular facts of this
`proceeding, we concludethat the ’317 patent includesat least one claim that
`meets the financial in nature requirementof § 18(d)(1) of the AIA.
`
`2. Exclusionfor Technological Inventions
`Apple asserts that claim 18 does notfall within § 18(d)(1)’s exclusion
`for “technological inventions.” Pet. 14-19. In particular, Apple contends
`that claim 18 “involves no ‘technology’atall other than, at most, the use of
`a data store and payment system.” /d. at 15 (citations omitted). Smartflash
`disagrees. Prelim. Resp. 8-10.
`Weare persuadedthat claim 18 as a wholedoesnotrecite a
`technological feature that is novel and unobviousoverthe prior art. Claim:
`
`18 recites a “payment system.” The Specification, however, discloses that
`
`the required payment system maybeonethat is already in use or otherwise
`
`commercially available. For example, the payment validation system “may
`
`be part of the data supplier’s computer systemsorit may be a separate
`
`system such as an e-payment system.” Ex. 1201, 8:18-22; see alsoid. at
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`8:60-63. Claim 18 also recites a “data store.” This component, however,is
`
`described as generic memory. Pet. 15-16. The Specification discloses, for
`instance, that “[t]he data storage meansis based on a standard smart card.”
`’ Ex. 1201, 11:28-30; see also id. at 14:25-29 (“[lJikewise data stores 136,
`138 and 140 may comprise a single physical data store or may be distributed
`over a plurality of physical devices and may even be atphysically remote
`locations from processors 128-134 and coupled to these processorsvia
`
`internet 142.”),Fig.6.
`In addition, the °317 patent makesclear that the asserted novelty of
`the invention is not in any specific improvement of software or hardware,
`but in the method of controlling access to data. For example, the ’317 patent
`states that “there is an urgent need to find a way to address the problem of
`data piracy”(id. at 1:50-51), while acknowledgingthat the “physical
`embodimentof the system is not critical and a skilled person will understand
`that the terminals, data processing systemsandthe like can all take a variety
`
`of forms”(id. at 12:29-32). Thus, we determine that claim 18 is merely the
`~ recitation of a combination of known technologies, which indicates that it is
`not a patentfor a technological invention. See Office Patent Trial Practice
`
`Guide, 77 Fed. Reg. 48,756, 48,764 (Aug. 14, 2012)
`
`Smartflash also argues that claim 18 falls within § 18(d)(1)’s
`
`exclusion for “technological inventions” becauseit is directed towards
`
`solving the technological problem of“transmitting requested data to a
`requester, e.g., as part of a convenient, legitimate acquisition of data from a
`data supplier” with the technological solution of “a data store, from which
`paymentdistribution information is read, in combination with a payment
`
`system.” Prelim. Resp. 9. We are not persuaded by this argument because,
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`as Apple argues, the problem being solved by claim 18 is a business
`problem—data piracy. Pet. 17-19. For example, the Specification states
`that “[b]inding the data access and payment together allowsthe legitimate
`owners of the data to make the data available themselves overthe internet
`
`without fear of loss of revenue, thus underminingthe position of data
`
`pirates.” Ex. 1201, 2:7-11. Therefore, based on the particular facts of this
`proceeding, we conclude that claim 18 doesnot recite a technological
`inventionandiseligible for a covered business method patent review.
`
`3. Conclusion
`In view of the foregoing, we conclude that the 317 patent is a covered
`business method patent under AIA § 18(d)(1) and is eligible for review
`
`using the transitional covered business method patent program.
`
`C. Section 101 Unpatentability
`Apple challengesclaim 18 as being directed to patent-ineligible
`subject matter under 35 U.S.C. § 101. Pet. 22-30. Smartflash does not
`address the merits of this challenge. See Prelim. Resp. 10-13. Analyzing
`the challenged claims using the two-step process applied recently in Alice
`Corp. Pty, Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), Apple asserts that
`the challenged claim is directed to an abstract idea without additional
`elements that transform the claimsinto a patent-eligible application of that
`idea. Pet. 22-30. Specifically, Apple argues that the challenged claim is
`.
`directed to the abstract idea of “paymentfor content.” /d. at 24—25.
`Weagreewith Applethat the challenged claim of the 317 patentis _
`morelikely than not directed to patent-ineligible subject matter. Under 35
`U.S.C. § 101, we must first identify whether an invention fits within one of
`the four statutorily provided categories of patent-eligibility: “processes,:
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`machines, manufactures, and compositions of matter.” Ultramercial, Inc. v.
`
`Hulu, LLC, 772 F.3d 709, 713-714 (Fed. Cir. 2014). Here, the challenged
`
`claim recites a “process,”i.e., a “method of providing data to a data
`
`requester,” under § 101. Section 101, however, “contains an important
`
`implicit exception [to subject matter eligibility]: Laws of nature, natural
`phenomena, and abstract ideas are not patentable.” Alice, 134 8. Ct. at 2354
`(2014) (citing Assoc. for Molecular Pathology v. Myriad Genetics, Inc., 133
`
`S. Ct. 2107, 2116 (2013) (internal quotation marks and brackets omitted)).
`Weare persuadedthat the challenged claim is more likely than not
`drawn to a patent-ineligible abstract idea. In Alice, the Supreme Court
`reiterated the frameworksetforth previously in Mayo Collaborative Servs.
`v. Prometheus Labs., 132 S. Ct. 1289, 1293 (2012) “for distinguishing
`
`patents that claim laws of nature, natural phenomena, and abstractideas
`from those that claim patent-eligible applications of these concepts.” Alice,
`134 S. Ct. at 2355. Thefirst step in the analysis is to “determine whetherthe
`claimsat issue are directed to one of those patent-ineligible concepts.” Jd.
`If so, the second step in the analysis is to consider the elements of the claims
`“individually and ‘as an ordered combination’” to determine whetherthere
`are additional elementsthat “‘transform the nature of the claim’ into a
`
`|
`
`patent-eligible application.” Jd. (quoting Mayo, 132 S. Ct. at 1291, 1297).
`In other words,the secondstepis to “search for an ‘inventive concept’—1.e.,
`an element or combination of elementsthatis ‘sufficient to ensure that the
`patent in practice amountsto significantly more than a patent on the
`[ineligible concept] itself.’” Jd. (brackets in original) (quoting Mayo, 132 S.
`
`Ct. at 1294).
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`Asdiscussed above, the "317 patent discusses addressing recording
`industry concernsof data pirates offering unauthorized access to widely
`available compressed audio recordings. Ex. 1201, 1:27-51. The °317 patent
`proposesto solve this problem byrestricting access to data on a device based
`“upon checked and validated payment being made for the data.” /d. at 2:3—
`
`11. The ?317 patent makesclearthat the heart of the claimed subject matter
`is restricting access to stored data based on validated payment information.
`Id. at 1:55~2:11, Abstract. We are, thus, persuaded, on this record, that the
`claimed processis directed to an abstract idea. See Alice, 134 S. Ct. at 2356
`(holding that the concept of intermediated settlementat issue in Alice was an
`abstract idea); Accenture Global Servs., GmbH v. Guidewire Software, Inc.,
`
`.
`
`728 F.3d 1336, 1344 (Fed. Cir. 2013) (holding the abstract idea at the heart
`of a system claim to be “generating tasks [based on]
`rules... tobe
`completed upon the occurrence of an event”).
`
`Turning to the second step of the analysis, we look for additional
`elements that can “transform the nature of the claim”into a patent-eligible
`application of an abstract idea. Mayo, 132 S. Ct. at 1297. Onthis record,
`weare not persuadedthat the challenged claim of the ’317 addsan inventive
`
`conceptsufficient to ensure that the patent in practice amounts to
`
`significantly more than a patent on the abstractidea itself. Alice, 134 S. Ct.
`
`at 2355; see also Accenture Global Servs., 728 F.3d at 1345 (holding claims
`- directed to the abstract idea of “generating tasks [based on] rules .. . to be
`completed upon the occurrence of an event” to be unpatentable even when
`
`applied in a computer environmentand within the insurance industry).
`
`The Specification, as discussed above,treats as well-knownall
`potentially technical aspects ofthe claim, including “data store” and
`
`1]
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`“payment system”limitations recited in the challenged claim. For example,
`the Specification states that the paymentvalidation system “may bepart of
`the data supplier’s computer systemsor it may be a separate system such as
`an e-payment system.” Ex. 1201, 8:18—22; see id. at 8:60-63. Further, with
`respectto the recited data store, the Specification discloses that “[t]he data
`storage meansis based on a standard smart card.” Ex. 1201, 11:28-30; see
`also id. at 14:25—29 (“[lJikewise data stores 136, 138 and 140 may comprise
`a single physical data store or may bedistributed over a plurality of physical
`devices and may evenbeat physically remote locations from processors
`128-134 and coupled to these processors via internet 142.”), Fig. 6. The use
`of a data store and thelinkage of existing hardware devicesto existing
`paymentvalidation processes appear to be “well-understood, routine,
`conventional activit[ies]’ previously knownto the industry.” Alice, 134 S.
`
`.
`
`Ct. at 2359; Mayo, 132 S. Ct. at 1294.
`
`Having considered the information providedin the Petition and the
`Preliminary Response, we are persuaded that Apple has demonstrated thatit
`is more likely than not that challenged claim 18 is unpatentable under
`35 U.S.C. § 101.
`Smartflash argues that Apple’s assertion of this groundis untimely
`because Apple “provides no valid reason whyit did notraise this purely
`legal issue as groundsfor invalidity in its twopriorpetitions filed long
`before the instant Petition.” Prelim. Resp. 11. According to Smartflash,
`
`[A]llowing Apple to raise a new ground of invalidity that it
`could have and should haveraised in its April 3, 2014 petitions
`encourages Apple’s piecemeal invalidity challenges to’ Patent
`Owner’s patent claims and runs afoul of the Board’s charge to
`‘secure the just, speedy, and inexpensive resolution’ of Apple’s
`covered business methodchallengesto the ‘317 Patent.
`
`12.
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`Id. at 12. Smartflash, however,cites no statutory or regulatory authority
`precluding Apple from asserting this ground. Moreover, Smartflash
`acknowledgesthat the Supreme Court’s June 19, 2014, decision in Alice was
`
`decided after Apple’s original petitions were filed on April 3, 2014. Jd. at
`
`11. Thus, on this record, we are not persuaded that Apple’s assertion of a
`new groundbased on 35 U.S.C. § 101 is untimely.
`~
`.
`Onthis record, Apple has established thatit is more likely than not
`that claim 18 is unpatentable under 35 U.S.C. § 101.
`|
`
`|
`
`CONCLUSION
`
`For the foregoing reasons, we determinethat the information
`presented in the Petition establishes that it is more likely than not that Apple
`would prevail in establishing the unpatentability of claim 18 of the 7317
`
`patent.
`
`,
`
`The Board has not madea final determination on the patentability of
`
`any challenged claims.
`
`‘For the reasons given, it is: -
`
`ORDER
`
`ORDEREDthat a covered business methodpatent review is instituted
`
`as to claim 18 under 35 U.S.C. § 101 as being directed to patent-ineligible
`
`subject matter under;
`
`FURTHER ORDEREDthatno other groundraised in the Petition is
`
`authorized for covered business method patent review; and
`
`FURTHER ORDEREDthatpursuant to 35 U.S.C. § 324(d) and
`
`37 C.F.R. § 42.4, notice is hereby given ofthe institution ofa trial on the
`grounds of unpatentability authorized above;thetrial commencing onthe
`entry date of this Decision.
`
`13
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`
`
`CBM2015-00018
`Patent 7,942,317 B2
`
`PETITIONER:
`
`J. Steven Baughman
`Ching-Lee Fukuda
`“ROPES & GRAY LLP
`steven. baughman@ropesgray.com
`ching-lee.fukuda@ropesgray.com
`
`PATENT OWNER:
`
`Michael R. Casey
`- J. Scott Davidson
`DAVIDSON BERQUIST JACKSON & GOWDEY LLP
`mcasey(@dbjg.com
`. jsd@dbjg.com
`
`.
`
`'
`
`15
`
`
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