Trials@uspto.gov
`Tel: 571-272-7822
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`_
`
`'
`
`‘
`
`Paper 22
`Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`APPLE INC.,
`
`Petitioner,
`
`V.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`Case CBM2015—OOOI7
`
`Patent 8,061,598 B2
`
`.
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`CLEMENTS, Administrative Patent Judge. I
`
`DECISION
`
`Instituting Covered Business Method Patent Review
`and Denying Motion for Joinder
`37 C.F.R. § 42.208
`3 7 CER. § 42. 222(1))
`
`
`Tel: 571-272-7822
`
`_
`
`'
`
`‘
`
`Paper 22
`Entered: April 10, 2015
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`APPLE INC.,
`
`Petitioner,
`
`V.
`
`SMARTFLASH LLC,
`
`Patent Owner.
`
`Case CBM2015—OOOI7
`
`Patent 8,061,598 B2
`
`.
`Before JENNIFER S. BISK, RAMA G. ELLURU,
`JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
`Administrative Patent Judges.
`
`CLEMENTS, Administrative Patent Judge. I
`
`DECISION
`
`Instituting Covered Business Method Patent Review
`and Denying Motion for Joinder
`37 C.F.R. § 42.208
`3 7 CER. § 42. 222(1))
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`INTRODUCTION
`
`A. Background
`
`Apple Inc. (“Petitioner”), filed a Corrected Petition requesting
`
`coVered business method patent review of claims 1, 2, 7, 15, and 31 (the
`
`“challenged claims”) of US. Patent No. 8,061,598 (Ex. 1201, “the ’598
`
`patent”) pursuant to § 18 of the Leahy-Smith America Invents Act (“AIA”).l
`
`Paper 9 (“Pet”). Petitioner also filed a Motion for Joinder. Paper 3
`(“Mot”). Patent Owner, Smartflash LLC (“Patent Owner”), filed a
`
`I
`
`Preliminary Response (Paper 18, “Prelim. Resp.”) and an Opposition to the
`
`Motion for Joinder (Paper 10, “Opp.”). Petitioner filed a Reply in support of ‘
`
`its Motion for Joinder. Paper‘17 (“Reply”). We have jurisdiction under 35
`
`- U.S.C. § 324(a), which provides that a covered business method patent
`
`review may not be instituted “unless .
`
`.
`
`. it is more likely than not that at
`
`least 1 of the claims challenged in the petition is unpatentable.”
`Upon consideration of the Petition and Preliminary Response, we
`determine that Petitioner has demonstrated that it is more likely than not that
`
`at least one of the challenged claims are unpatentable. Accordingly, we
`
`institute a .covered business method review of claims 1, 2, 15, and 31 of the
`
`’598 patent. Petitioner’s Motion for Joinder is denied.
`
`B. Asserted Grounds
`
`Petitioner argues that the challenged claims are unpatentable based on
`
`the following grounds:
`
`I Pub. L. No. 112-29, 125 Stat. 284, 296—07 (2011).
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 BZ
`
` manages
`
`
`
`m ClaimsChallen ed
`
`u
`
`
`
`
`
`
`
`
`
`Petitioner also provides a declaration from Anthony J. Wechselberger.
`
`' Ex. 1219.
`
`C. Related Matters
`
`The parties indicate that the ’598 patent is 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 Electronics Co. , Case No.
`6:13-cv-448 (ED. Tex. 2014). Pet. 20—21; Paper 8, 2—3. Patent Owner also
`
`indicates that the ’598 patent is the subject of a third district court case:
`Smartflash LLC v. Google, Inc, Case'No. 6: 14-cv—435 (ED. Tex. 2014).
`
`Paper 8, 3.
`
`Petitioner previously filed two Petitions for covered business method
`patent review of the ’598 patent: ICBM2014-00108 and CBM2014-00109.
`
`Those petitions were instituted under 35 U.S.C. § 103 with respect to claim
`26, and consolidated into a single proceeding. Apple Inc. v. Smart/lash LLC,
`
`2 US. Patent No. 5,530,235 (Ex. 1212) (“Steflk ’235”), and US. Patent No.
`5,629,980 (Ex. 1213) (“Steflk ’980”) (collectively, “Stefik”).
`
`3 US. Patent No. 5,925,127 (Ex. 1203).(“Ahmad”)
`4 Although the Petition alleges that all of the challenged claims would have
`been obvious under this ground (Pet. 42), only claims 1, 2, 15, and 31 are
`analyzed (Pet. 45—74).
`5 US. Patent No. 5,940,805 (Ex. 1204) (“Kopp”)
`
`6 Although the Petition alleges that all of the challenged claims would have
`been obvious under this ground (Pet. 42), only claims 1, 2, 15, and 31 are
`analyzed (Pet. 45—74).
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`Case CBM2014—00108 (PTAB Sept. 30, 2014) (Paper18). Petitioner also
`previously filed ten Petitions for covered business method patent review
`challenging c1*aims of patents owned by Patent Owner and disclosing similar
`
`subject matter. CBM2014-00102, CBM2014-00103 CBM2014-00104,
`CBM2014—00105, CBM2014-00106, CBM2014-00107, CBM2014-001 10,
`
`CBM2014-00111, CBM2014-00112, and CBM2014-00113. Pet. 21.
`
`Concurrent with the filing of this Petition, Petitioner filed three other
`
`Petitions for covered business patent review challenging claims of patents
`
`owned by Patent Owner and disclosing similar subject matter: CBM2015-
`
`00015, CBM2015-00016, and CBM2015-00018.
`
`D. The ’598 Patent
`
`The ’598 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, 1:21—25. Owners of proprietary data, especially audio recordings,
`
`have an urgent need to address the prevalence of “data pirates” who make
`proprietary data available over the intemet without authorization. Id. at
`
`1:29—55. The ’598 patent describes providing portable data storage together
`
`with a means for conditioning access to that data upon validated payment.
`
`Id. at 1:59—2:11. This combination allows data owners to make their data
`
`available over the intemet without fear of data pirates. Id. at 2: 11—15.
`
`, As described, the portable data storage device is connected to a
`terminal for intemet access. Id. at 1:59—67. The terminal reads payment
`
`1 information, validates that information, and downloads data into the portable
`storage device from a data supplier. Id. 1 The data on the portable storage
`
`device can be retrieved and output from a mobile device. Id. at 2: 1—5. The
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`’598 patent makes clear that the actual implementation of these components
`
`is not critical and may be implemented in many ways. See, e. 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. Illustrative Claim
`
`Petitioner challenges claims 1, 2, 7, 15, and 31 of the ’598 patent.
`
`. Claims 1 and 31 are independent. Claims 2, 7, and 15 depend from claim 1.
`
`Claim 1 is illustrative of the challenged subject matter and recites the
`
`following:
`
`1‘.
`
`, A portable data carrier comprising:
`
`an interface for reading and writing data from and to the portable data
`carrier;
`'
`
`content data memory, coupled to the interface, for storing one or more
`content data items on the carrier;
`
`use rule memory to store one or more use rules for said one or more
`content data items;
`’
`'
`
`a program store storing code implementable by a processor;
`
`and a processor coupled to the content data memory, the use rule
`memory, the interface and to the program store for implementing
`_ code in the program store,
`
`wherein the code comprises code for storing at least one content data
`item in the content data memory and at least one use rule in the use
`rule memory.
`
`Ex. 1201, 25:54—67.
`
`ANALYSIS
`
`A. Consolidation
`
`The statutory provision governing consolidation of inter partes review '
`
`proceedings .is 35 U.S.C. § 325(c), which reads as follows:
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`(c) JOINDERL —— If more than 1 petition for a post-grant review
`under this chapter is properly filed against the same patent and
`the Director determines that more than 1 of these petitions
`warrants the institution of a post-grant review under section
`324, the Director may consolidate such reviews ‘into a single
`post-grant review.
`
`Petitioner moves to consolidate this proceeding with CBM2014-
`
`00108.7 Mot. 1. In CBM2014—00108, we instituted trial on claim 26 of the
`
`.
`
`.
`
`’598 patent under 35 U.S.C. § 103. Apple Inc. v. Smartflash LLC,
`
`CBM2014-00108, Paper 8, 24 (PTAB Sept. 30, 2014). We declined to
`institute trial on claims 1, 2, 7, 13, 15, and 31 based on the prior art cited in
`that petition. Id. A Patent Owner Response was filed on February 27, 2015.
`
`CBM2014-00108, Paper 23.
`Petitioner argues that consolidating this proceeding with CBM2014-
`
`00108 will secure the just, speedy, and inexpensive resolution of these
`
`proceedings. MOt. 4. Petitioner argues that this Petition involves the same
`
`patent, same parties, same counsel, same expert, and one of the same prior
`
`»
`
`art references as CBM2014-00108. Id. at 5—6. Petitioner argues that the
`
`“significant overlap in subject matter and prior art” lead to significant
`
`' efficiencies in briefing, discovery (i.e., depositions), and argument. 1d. at 7.
`
`Petitioner also argues that “[i]oinder .
`
`.
`
`. need not have any appreciable
`
`effect on the trial schedule of [CBM2014-00108]” because the due dates in
`
`this proceeding could be compressed without unfairly prejudicing either
`
`party. Id. at 8. Finally, Petitioner requests, in the event consolidation is
`
`7 Petitioner refers to Section 325(c) and seeks “joinder.” Although that
`provision is titled “Joinder,” it grants the Director authority only to
`“consolidate.” Thus, we treat Petitioner’s request as a request to consolidate
`pursuant to Section 325(c).
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`denied, that we coordinate the schedule in this proceeding with CBM2014-
`
`00108 such that, at minimum, oral arguments in the two proceedings occur
`
`together. Id. at 9.
`
`Patent Owner'argues that Petitioner has filed a total of twenty-one
`petitions—“three, four[,] or five per patent”—over an eight month period
`and, therefore, not even consolidation will secure the just, speedy, and
`
`inexpensive resolution of these proceedings. Opp. 3—4. According to Patent
`
`Owner, the Petitioner’s motion to consolidate is untimely because the
`
`changes made in the Corrected Petition were extensive enough to warrant
`
`according a new filing date of-November 21, 2014 (the date of the Corrected
`
`Petition), which is more than one month after September 30, 2014, the date
`
`on which CBM2014-00108 was instituted. Opp. 5—7. Patent Owner also
`
`points out that consolidation will not streamline discovery because Petitioner
`has filed five additional petitions for covered business method patent review
`
`that will not be entitled to consolidation with the earlier-filed proceedings
`
`and, therefore, at least those five Petitions, assuming they are instituted, will
`not be on the same schedule. Id at 8—9. Patent Owner argues that
`
`Petitioner’s request for coordinated schedules should be denied for the same
`reasons. Id. at 8.
`
`Petitioner replies that it timely filed the instant Petition and Motion
`
`for Joinder. Reply 3—4. Petitioner also argues that the later-filed petitions
`
`for covered business method patent review identified by Patent Owner are
`
`i not relevant to whether to consolidate this proceeding with an earlier
`
`proceeding involving the ’598 patent because those later-filed petitions
`
`relate to two different patents for which no trial has been instituted yet. Id.
`
`at 4—5.
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`We have considered Petitioner’s arguments in support of
`
`consolidation and Patent Owner’s arguments in opposition.
`
`In CBM2014-
`
`00108, we instituted under 35 U.S.C. § 103 whereas, in this proceeding, we
`institute only under 35 U.S.C. § 101. We determine that the proceedings
`
`involve non-overlapping grounds, and thus, we are not persuaded that
`
`consolidation is warranted or justified on the facts presented. As discussed
`above, consolidation of two or more proceedings for covered business
`
`method patent review is discretionary. See 35 U.S.C. § 325(c). We decline
`
`to exercise that discretion to consolidate these proceedings. Likewise, we do
`
`not exercise our discretion to coordinate the schedule in this case with that of
`
`CBM2014-00108 given that we instituted trial in CBM2014-00108 on
`
`September 30, 2014, more than six months ago. See 37 CPR. § 42.222(a).
`
`B. Claim Construction
`
`In a covered business method patent review, claim terms are given
`
`their broadest reasonable interpretation in light of the specification in which
`
`they appear and the understanding of others skilled in the relevant art. See
`
`37 C.F.R‘. § 42.200(b); see also In re Cuozzo Speed Techs, LLC,
`
`778 F.3d 1271, 1281 (Fed. Cir. 2015) (“We conclude that Congress
`
`implicitly adopted the broadest reasonable interpretation standard in
`
`enacting the AIA.”). Applying that standard, we interpret the claim terms of
`the ’598 patent according to their ordinary and customary meaning in the
`
`context of the patent’s written description. See In re Translogic Tech, Inc,
`
`504 F.3d 1249, 1257 (Fed. Cir. 2007). For purposes of this decision, we
`construe the claim term “use rule.”
`1
`
`The term “use rule” is recited in independent claim 1. Petitioner
`
`proposes that “use rule” be construed to mean “a rule specifying a condition
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`under which access to content is permitted.” Pet. 23 (citing Apple Inc. v.
`
`Smartflash LLC, Case CBM2014-00108/ 109 (PTAB Sept. 30, 2014) (Paper
`
`8, 7) (construing “use rule”)). The ’598 patent describes “use rules” as “for
`
`controlling access to the stored content” (Ex. 1201, Abstract) and as
`
`“indicating permissible use of data stored on the carrier” (id. at 9:14—16).
`
`The ’598 patent also describes “evaluating the use status data using the use
`
`rules to determine whether access to the stored data is permitted.” Id. at
`
`6:38—40; see also id. at 21 148—53 (“[E]ach content data item has an
`associated use rule to specify under what conditions a user of the smart Flash
`
`card is allowed access to the content data item.”). Accordingly, for purposes
`
`of this decision, we construe “use rule” as “a rule specifying a condition
`
`under which access to content is permitted.” ~
`
`C. Covered Business Method Patent
`
`Section 18 of the AIA provides for the creation of a transitional
`
`program for reviewing covered business method patents. A “covered
`
`business method patent” is a patent that “claims a method or corresponding
`apparatus for performing data processing or other operations used in the
`
`practice, administration, or management of a financial product or service,
`
`except that the term does not include patents 'for technological inventions.”
`
`AIA § 18(d)(1); see 37 C.F.R. § 42.301(a). A patent needhave only one
`
`claim directed to a covered business method to 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”) (Comment 8);
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`1. Financial Product or Service
`
`Petitioner asserts that claim 7 “clearly concerns a computer system .
`
`.
`
`.
`
`for performing data processing and other operations used in the practice,
`administration, or management of a financial activity and service” because it
`
`“describes storing and providing payment data to a payment validation
`
`system.” Pet. 13. Based on this record, we agree with Petitioner that the
`
`subject matter recited by claim 7 is directed to activities that are financial in
`nature, namely data access conditioned on payment validation. Claim 7
`
`recites “payment data memory to store payment data and code to provide the
`payment data to a payment validation system.” We are persuaded that
`
`payment validation is a financial activity, and conditioning data access based
`
`on payment validation amounts to a financial service._ This is consistent with
`
`the Specification of the ’598 patent, which confirms claim 7’s connection to
`
`financial activities by stating that the invention “relates to a portable data
`
`carrier for storing and paying for data.” Ex. 1201, 1:21—23. The
`
`Specification also states repeatedly that the disclosed invention involves
`
`managing access to data based on payment validation. See, e. g, Ex. 1201,
`
`1:59—67, 6:60—64, 20:50~54.
`
`'
`
`Patent Owner disagrees that Claim 7 satisfies the financial-in-nature'
`
`requirement of AIA § 18(d)(1), arguing that section should be interpreted
`narrowly to cover only technology used specifically in the financial or
`I
`banking industry. Prelim. Resp. 5—10. Patent OWner cites to various
`
`portions of the legislative history as support for its proposed interpretation.
`
`1d.
`
`Although we agree with Patent Owner that the statutory language
`controls whether a patent is eligible for a covered business method patent
`
`10
`
`
`
`CBM2015—00017
`
`Patent 8,061,598 B2
`
`review, we do not agree that the phrase “financial product or service” is as
`
`limited as Patent Owner proposes. The AIA does not include as a
`
`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 management of a financial product or service.” AIA
`
`§ 18(d)(1). Further, contrary to Patent Owner’s View of the legislative
`
`history, the legislative history indicates that the phrase “financial product or
`
`service” is not limited to the products or services of the “financial services
`
`industry,” and is to be interpreted broadly. CBM Rules, 77 Fed. Reg. at
`48,73 5—36. For example, the “legislative history explains that the definition
`
`of covered business method patent was drafted to encompass patents
`
`‘claiming activities that are financial in nature, incidental to a financial
`
`activity or complementary to a financial activity.” 1d. (citing157 Cong.
`
`Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer)).
`
`In addition, Patent Owner asserts that claim 7 is not directed to an
`
`apparatUs or method that is financial in nature because claim 7 “omits the
`
`specifics of how payment is made.” Prelim. Resp. 9. We are not persuaded
`
`by this argument because § 18(d)(1) of the AIA does not include such a
`requirement, nor does Patent Owner point to any other authority that makes
`
`such a requirement. Id. We determine that because payment is required by
`claim 7, as Patent Owner acknowledges, the financial in nature requirement
`
`of § 18(d)(1) is satisfied:
`
`For the reasons stated above, and based on the particular facts of this
`
`proceeding, we conclude that the ’598 patent includes at least one claim that
`
`meets the financial in nature requirement of § 18(d)(l) of the AIA.
`
`11
`
`
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`CBM2015-00017
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`Patent 8,061,598 B2
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`2. Exclusion for Technological Inventions
`
`Petitioner asserts that claim 7 does not fall within § 18(d)(1)’s
`
`exclusion for “technological inventions.” Pet. 15—20. In particular,
`
`Petitioner argues that claim 7 does not recite a technological feature that is
`
`novel and unobvious or solve a technical problem using a technical solution.
`
`Id. Patent Owner disagrees and argues that claim 7, as a whole, recites at
`least one technological feature that is novel and. unobvious over the prior art.
`
`Prelim. Resp. 10—11.
`
`We are persuaded that claim 7 as a whole does not recite a
`
`technological feature that is novel and unobvious over the prior art. For
`
`example, claim 1, on which claim 7 depends, recites only limitations such as
`97 (C
`33 ‘6
`39 ‘6
`
`“interface,
`
`content data memory,
`
`use rule memory,
`
`program store,”
`
`“processor,” “code for storing,” and “code to provide” data, which are not
`
`novel and‘unobvious. Claim 7 also recites a “payment validation system.”
`The Specification, however, discloses that the required payment validation
`
`system may be one that is already in use or otherwise commercially
`
`available. For example, “[t]he payment validation system may be part of the
`
`data supplier’s computer systems or it may be a separate e-payment system.”
`Ex. 1201, 8:63—65; see also id. at 133547.
`'
`
`In addition, the ’598 patent makes clear 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 ,’.598 patent
`
`states that “there is an urgent need to find a way'to address the problem of
`
`data piracy” (id. at 1252—55), 'while acknowledging that the “physical
`
`embodiment of the system is not critical and a skilled person will understand
`
`that the terminals, data processing systems and the like can all take a variety
`
`12
`
`
`
`CBM2015—00017
`
`Patent 8,061,598 B2
`
`of forms” (id. at 12:29—32). Thus, we determine that claim 7 is merely the
`
`recitation of a combination of known technologies, which indicates that it is
`
`not a patent for a technological invention. See Office Patent Trial Practice
`
`Guide, 77 Fed. Reg. 48,756, 48,764 (Aug. 14, 2012).
`
`1
`
`Patent Owner also argues that claim 7 falls within § 18(d)(1)’s
`
`exclusion for “technological inventions” because it is directed towards
`solving the technological problem of “storing at least one content data item
`in the content data memory and at least one use rule in the use rule memory”
`
`with the technological solution of “code for storing at least one content data
`
`item in the content data memory and at least one use rule in the use rule
`
`I memory.” Prelim. Resp. 10—1 1. We are not persuaded by this argument
`
`because, as Petitioner argues, the problem being solved by claim 7 is a
`
`business problem—data piracy. Pet. 18—19. For example, the Specification
`
`states that “[b]inding the data access and payment together allows the
`
`legitimate owners of the data to make the data available themselves over the
`Internet without fear of loss of revenue, thus undermining the position of
`
`data pirates.” Ex. 1201, 2:11—15. Thus, based on the particular facts of this
`
`proceeding, we conclude that claim 7 does not recite a technological
`
`invention and is eligible for a covered business method patent review.
`
`3. Conclusion
`
`Inview of the foregoing, we conclude that the ’598 patent is a covered
`
`business methodpatent under AIA § 18(d)(1) and is eligible for review
`
`using the transitional covered business method patent program.
`
`D. 35 U.S..C. §101
`
`Petitioner challenges claims 1, 2, 7, 15, and 31 as directed to patent—
`
`ineligible subject matter under 35 U.S.C. § 101. Pet. 26—38. Analyzing the
`
`13
`
`
`
`CBM2015-00017
`
`Patent 8,061,598 B2
`
`challenged claims using the two-step process applied recently in Alice Corp.
`Pty, Ltd. v. CLS Bank Int ’1, 134 S. Ct. 2347 (2014), Petitioner asserts that all
`the challenged claims are directed to an abstract idea without additional
`
`elements that transform the claims into a patent-eligible application of that
`
`idea. Id. Specifically, Petitioner argues that the challenged claims are
`directed to the abstract idea of “payment for something, and/or of controlling
`
`access to something.” Pet. 28.
`We agree with Petitioner that the challenged claims of the ’598 patent '
`
`are more likely 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 ofpatent-eligibility; “processes,
`
`machines, manufactures, and compositions of matter.” Ultramercial, Inc. v.
`Hulu, LLC, 772 F.3d 709, 713—714 (Fed. Cir. 2014). Here, each ofthe
`
`challenged claims recites a “machine,” i.e., a “portable data carrier,” 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 S. Ct. at 2354 (citing Assoc. for
`Molecular Pathology v. Myriad Genetics, Inc, 133 S. Ct. 2107, 2116 (2013)
`(internal quotation marks and brackets omitted».
`.
`I
`
`We are persuaded that the challenged claims are more likely than not
`
`drawn to a patent-ineligible abstract idea.
`
`In Alice, the Supreme Court
`
`reiterated the- framework set forth 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 abstract ideas
`from those that claim patent-eligible applications of those concepts.” Alice,-
`
`134 S. Ct. at 2355. The first step in the-analysis is to “determine whether the
`
`14
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`CBM2015-00017
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`Patent 8,061,598 B2
`
`claims at issue are directed to one of those patent-ineligible concepts.” Id.
`
`If so, the second step in the analysis is to consider the elements of the claims
`
`“individually and ‘as an ordered combination” to determine whether there
`are additional elements that “‘transform the nature of the claim’ into a
`
`patent-eligible application.” Id. (quoting Mayo, 132 S. Ct. at 1291, 1297).
`
`In other words, the second step is to “search for an ‘inventive concept’~—i.e.,
`
`an element or combination of elements that is ‘sufficient to ensure that the
`patent in practice amounts to significantly more than a.patent upon the
`
`[ineligible concept] itself.” 1d. (brackets in original) (quoting Mayo, 132 S.
`
`Ct. at 1294).
`
`'
`
`As discussed above, the ’598 patent discusses addressing recording
`
`industry concerns of data pirates offering unauthorized access to widely
`available compressed audio recordings. Ex. 1201, 1:20—55. The ’598 patent
`proposes to solve this problem by restricting access to data on a portable
`
`data carrier based upon payment validation. Ex. 1201, 1:59—2:4. The ’598
`
`patent makes clear that the heart of the claimed subject matter is restricting
`
`, access to stored data based on supplier—defined access rules and validation of
`
`payment. Id.; id.-at 1:59—2:15. We are, thus, persuaded, on this record, that
`
`the claimed “portable data carrier,” isdirected to an abstract idea. See Alice,
`
`134 S. Ct. at 2356 (holding that the concept of intermediated settlement at
`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 .
`.
`. to be 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
`
`15
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`U
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`CBM2015—00017
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`Patent 8,061,598 B2
`
`application of an abstract idea. Mayo, 132 S. Ct. at 1297. On this record,
`
`we are not persuaded that the challenged claims of the ’598 patent add an
`
`inventive concept sufficient to ensure that the patent in practice amounts to
`
`significantly more than a patent on the abstract idea 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 environment and within the insurance industry).
`
`'
`
`As discussed above, the Specification treats as well—known all
`’3 C6
`
`potentially technical additions to the claims, including “interface,
`9, CC
`39 6G
`3,
`”.66
`
`content
`
`‘6
`
`‘ data memory,
`
`use rule memory,
`
`program store,
`
`processor,
`
`code for
`
`storing,” and “code to provide” data. The linkage of existing hardware
`
`devices to existing payment validation processes and supplier-defined access -
`
`rules appear to be “‘well-understood, routine, conventional activit[ies]’
`
`previously known to the industry.” Alice, 134 S. Ct. at 2359; Mayo, 132 S.,
`
`Ct. at 1294.
`4
`Having considered the information provided in the Petition and the.
`Preliminary Response, we are persuaded that Petitioner has demonstrated
`that it is more likely than not that the challenged claims are unpatentable
`
`under 35 U.S.C. § 101. HoWever, because we already instituted a covered
`
`business method patent review of claim 7 under 35 U.S.C. § 101 in"
`CBM2014-00193 (Samsung Elecs..Am. Inc. v.-Smartflash LLC, CBM2014-
`
`00193, Paper 7, 19 (PTAB April 2, 2015)), and because whether claim 7 is
`
`directed to patent—eligible subject matter is an issue of law, we exercise our
`
`discretion under 35 U.S.C. § 325(d) to decline to institute a covered business
`
`method patent review of claim 7 under this ground in this case.
`
`16
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`CBM2015-00017
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`Patent 8,061,598 B2
`
`Patent Owner argues that Petitioner’s assertion of this ground is
`
`untimely because “[t]here is no reason [Petitioner] could not have raised its
`
`§ 101 challenge in its initial filings.” Prelim. Resp. 12. According to Patent
`
`Owner,
`
`‘
`
`[A]llowing Apple to raise a new ground of invalidity that it
`could have and should have raised in its April 1, 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 method challenges to the ‘598 Patent.
`
`1d. at 13. Patent Owner, however, cites no statutory or regulatory authority
`
`precluding Petitioner from asserting this ground. Moreover, Patent Owner
`acknowledges that the Supreme Court’s June 19, 2014, decision in Alice was
`
`decided after Petitioner’s original petitions were filed on April 1, 2014.
`
`Thus, on this record, we are not persuaded that Petitioner’s assertion of a
`
`new ground based on 35 U.S.C. § 101 is untimely.
`
`Conclusion
`
`On this record, Petitioner has established that it is more likely than. not
`
`that claims 1, 2, 15, and 31 are unpatentable under 35 U.S.C. § 101.
`
`E. Obviousness based Stefik ’235, Stefik ’980, and Ahmadl
`
`Petitioner argues that claims 1,2, 15, and 31 are unpatentable under
`35 U.S.C. § 103(a) as obvious over Stefik ’235, Stefik ’980, and Ahmad.
`Pet. 38—74. Petitioner also argues that claims 1, 2, 15, and 31 are
`unpatentable under 35 U.S.C. § 103(a) as obvious over Stefik ’235, Stefik
`’980, Ahmad, and Kopp. Id.
`A patent claim is unpatentable, under 35 U.S.C. § 103(a), if the
`
`differences between the claimed subject matter and the prior art are such that
`
`the subject matter, as a whole, would have been obvious at the time the
`
`17
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`CBM2015-00017
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`Patent 8,061,598 B2
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`invention was made to a person having ordinary skill in the art to which said
`
`subject matter pertains. KSR Int ’1 Co. v. Teleflex In'c., 550 US. 398, 406
`
`(2007). The question of obviousness is resolved on the basis of underlying
`
`factual determinations, including:
`
`(1) the scope and content of the prior art,
`
`(2) any differences between the claimed subject matter and the prior art, (3)
`
`the level of skill in the art, and (4) where in evidence, so-called secondary
`
`considerations. Graham v. John Deere C0., 383 US. 1, 17—18 (1966).
`
`After carefully considering the Petition and Preliminary Response, we
`
`determine that Petitioner has not shown that it is more likely than not that it
`
`would prevail in showing that claims 1, 2, 15, and 31 are unpatentable as
`obvious over any of the combinations listed above. An obviousness inquiry
`is based on factual inquiries including the difference between the claimed
`
`invention and the prior art. Graham, 383 US. at 17—18. For each of the
`challenged claims, Petitioner has not identified sufficiently the differences
`
`between the claimed invention and each reference, or how the teachings of
`
`the two references are to be combined, if at all. Pet. 45—74.
`
`With respect to independent claim 1, for example, Petitioner cites
`
`Stefik for every element. Id. at 45—58. With respect to the recited “use
`
`_ rules,” Petitioner identifies “enumerated types of associated right
`
`restrictions” in a parenthetical, but appears to rely on Stefik’s Grammar
`
`Elements 1501 and 1502, which define digital work rights. 1d. at 51—52.
`Petitioner argues that “[t]hese rules .
`.
`. include some of the same content
`
`rules disclosed in the ’598 patent,” such as a predetermined number of plays
`
`or time-limited access. 1d. at 51. Petitioner then suggests, however, that
`
`Stefik’s digital work rights are not “use rules” by arguing the following:
`
`At a minimum, a POSA would have found it obvious to
`implement the limitations and conditions in the contents of
`
`18
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`CBM2015-00017
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`Patent 8,061,598 B2
`
`Stefik’s rights as access rules. A POSA would at a minimum
`have been motivated and found it obvious
`to encode a
`
`conditional statement with the encoded contents of the right that
`dictates that the conditions must be checked and met before the
`
`A POSA would have
`digital wOrk could be accessed.
`understOod
`that
`such
`conditional
`statement
`could
`
`advantageously ensure the conditions are checked even if the
`digital work is transferred and stored on a device other than a '
`repository that does not process the rights of a digital work in
`the same manner as a repository in a repository transaction
`protocol when access is requested.
`
`Id. at 52—53, n.24. As a result, it is not clear whether Petitioner is alleging
`that Stefik’s digital work rights are “use rules,” or whether they merely
`render obvious “use rules,” or both in the alternative. Compounding the
`
`ambiguity, Petitioner also argues that Ahmad’s disclosure of time-limited
`
`rental restrictions teaches “use rules.” Id. at 53. With respect to how
`Ahmad’s teachings would have been combined with Stefik, Petitioner argues ,
`
`the following:
`
`in the art] would have been
`A [person of ordinary skill
`motivated and found it obvious to store the rental monitoring
`modules taught by Ahmad 'in the repository memory taught by
`Stefik that stores limitations on the
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