Square, Inc.v.REM Holdings 3, LLC

Patent Trial and Appeal Board

Nov 20, 2015

13065931 (P.T.A.B. Nov. 20, 2015)

Trials@uspto.gov Paper 68
Tel: 571-272-7822 Entered: November 20, 2015

UNITED STATES PATENT AND TRADEMARK OFFICE
_______________
BEFORE THE PATENT TRIAL AND APPEAL BOARD
_______________
SQUARE, INC.,
Petitioner,

v.
REM HOLDINGS 3, LLC,
Patent Owner.
_______________

Case IPR2014-00312
Patent 8,584,946 B2
_______________

Before DENISE M. POTHIER, JENNIFER S. BISK, and
PATRICK R. SCANLON, Administrative Patent Judges.

BISK, Administrative Patent Judge.

DECISION
Request for Rehearing
37 C.F.R. § 42.71(d)

IPR2014-00312
Patent 8,584,946 B2

2

I. INTRODUCTION
Petitioner, Square, Inc., filed a request for rehearing (Paper 62, “Req. Reh’g”
or “Request”) of our Final Decision (Paper 58, “Final Dec.”). Patent Owner filed
an opposition to Patent Owner’s Request. Paper 64 (“Opp.”). Petitioner filed a
reply in support of its Request. Paper 66 (“Reply”).
In our Final Decision, we concluded that Petitioner had demonstrated, by a
preponderance of the evidence, that claims 1, 2, 6, 7, and 10–17 of U.S. Patent No.
8,584,946 B2 (“the ’946 patent”) are unpatentable. Final Dec. 38. We found that
Petitioner had not demonstrated, by a preponderance of the evidence, that claims
3–5, 8, and 9 of the ’946 patent are unpatentable. Id. Petitioner requests rehearing
as to our holding that Petitioner has not demonstrated that claims 3–5, 8, and 9 are
unpatentable. Req. Reh’g 1.
For reasons that follow, we grant Petitioner’s Request for Rehearing with
respect to claims 4 and 9, but deny the Request with respect to claims 3, 5, and 8.
We modify our analysis in determining that Petitioner has demonstrated by a
preponderance of the evidence that claims 4 and 9 of the ’946 patent would have
been obvious over the combination of Lekernel,
1
Padilla,
2
and Odagiri.
3

1
Sébastien Bourdeauducq, Reading Magnetic Cards (Almost) for Free 1–2 (January
26, 2009), available at http://lekernel.net/blog/2009/01/reading-magnetic -cards-
almost-for-free (“Lekernel”) (Ex. 1009).
2
Luis Padilla Visdómine, Turning Your Mobile Into a Magnetic Stripe Reader 1–4
(2007), available at http://classic-
web.archive.org/web/20041027001715/http://www.gae.ucm.es/~padilla/extrawork/
mobilesoundtrack.html (“Padilla”) (Ex. 1010).
IPR2014-00312
Patent 8,584,946 B2

3

II. ANALYSIS
A. Background
Petitioner in this case challenged claims 1–17 of the ’946 patent based on the
following five obviousness grounds:
References Challenged Claims
Lekernel and Padilla 1–3, 6–8, 15, and 16
Lekernel, Padilla, and Odagiri 4 and 9
Lekernel, Padilla, and Wallner
4
5, 10–14, and 17
Tang
5
and BPS
6
1–3, 5–8, and 10–17
Tang, BPS, and Odagiri 4 and 9
Paper 1 (“Pet.”). We instituted inter partes review on all the challenged claims and
all the asserted grounds except that we did not institute trial on claims 3 and 8 on
the ground that they were obvious over Lekernel and Padilla. Paper 12 (“Inst.
Dec.”) 27. We agreed with Patent Owner that, for this ground, the Petition referred
only to Lekernel’s Figure 3 for a teaching the limitation “the read head and said one
or more resistors are contained within a housing”
7
(“the enclosed housing
limitation”), and we were not persuaded that Lerkernel taught that limitation. Inst.
Dec. 17–19.

3
US 2004/0041911 A1, published Mar. 4, 2004 (“Odagiri”) (Ex. 1014).
4
US 2010/0243732 A1 (published Sept5. 30, 2010) (“Wallner”) (Ex. 1011).
5
US 8,281,998 B2 (issued Oct. 9, 2012 and claiming priority to Provisional App.
No. 61/151,459, filed Feb. 10, 2009) (“Tang”) (Ex. 1006).
6
JP 3008764B (published Dec. 28, 1994) (Ex. 1008) (“BPS”) (an English
translation begins on page 8 of the exhibit).
7
This is the language recited by claim 3. Claim 8 similarly recites “the read head
and said one or more resistors are included in a housing.”
IPR2014-00312
Patent 8,584,946 B2

4

In the Final Decision, we concluded that Petitioner had not demonstrated, by
a preponderance of the evidence, that claims 1–17 were unpatentable over Tang and
BPS alone or in combination with Odagiri. Final Dec. 33–34. Petitioner has not
requested rehearing on this portion of the Final Decision. See Req. Reh’g.
We also concluded that Petitioner had not demonstrated, by a preponderance
of the evidence, that claims 4 and 9 were obvious over Lekernel, Padilla, and
Odagiri or that claim 5 was obvious over Lekernel, Padilla, and Wallner. Final
Dec. 38. As mentioned above, we did not institute inter partes review on claims 3
and 8 over the only asserted ground challenging these claims remaining after our
conclusion on the Tang/BPS grounds—obviousness over Lekernel and Padilla. The
Final Decision, therefore, found only claims 1, 2, 6, 7, and 10–17 of the ’946 patent
to be unpatentable. Id.
B. Burden on Request for Rehearing
According to 37 C.F.R. § 42.71(d), “[t]he burden of showing a decision
should be modified lies with the party challenging the decision” and the “request
must specifically identify all matters the party believes the Board misapprehended
or overlooked.” The burden here, therefore, lies with Petitioner to show we
misapprehended or overlooked the matters it requests that we review.
C. Claims 4 and 9
In our Final Decision, we noted that “[f]or the very first time at oral hearing,
Patent Owner addressed the dependency of claims 4 and 9 to claims 3 and 8
respectively” arguing that “because we did not institute review for claims 3 and 8
based on Lekernel and Padilla, we should not have instituted review of dependent
IPR2014-00312
Patent 8,584,946 B2

5

claims 4 and 9 based on Lekernel, Padilla, and Odagiri.” Final Dec. 31. We also
agreed with Patent Owner that “the grounds for instituting review of claims 4 and 9
did not rely on Odagiri to teach the concept of the resistors and read head contained
within a housing” because the Petition “relied on Lekernel for this feature in claim
3 and turns to Odagiri to teach the output plug extends out the housing as recited in
claim 4.” Id. at 31–32 (citing Pet. 25, 27). Although we agreed with Petitioner that
Odagiri also teaches a housing for enclosing components, we concluded that we
were constrained by “insufficient facts in the record to support that claims 4 and 9
are unpatentable over Lekernel, Padilla, and Odagiri as proposed by Petitioner.” Id.
at 32.
Petitioner argues that the Board overlooked or misapprehended Petitioner’s
independent discussion of the housing feature in Odagiri when addressing the
limitations of claims 4 and 9, including the limitations in claims 3 and 8
respectively, from which claims 4 and 9 respectively depend. Req. Reh’g. 11–15.
Petitioner explains that in the Petition’s claim chart for claims 4 and 9, “Petitioner
notes that Lekernel and Padilla teach a housing, but goes on to explain that Odagiri
independently teaches a housing.” Id. at 12. According to Petitioner, it
“emphasized that this is an independent teaching of the feature of claim 3 by stating
that Odagiri also illustrates the limitation of claim 4.” Id. Moreover, Petitioner
asserts that the Petition “referred to and included Fig. 2 of Odagiri, which clearly
illustrates a housing enclosing electronic components.” Id. Thus, Petitioner argues
that the Board “incorrectly determined Petitioner did not rely on Odagiri to teach
IPR2014-00312
Patent 8,584,946 B2

6

the enclosed housing limitation in addition to the limitations of claims 4 and 9.” Id.
at 13.
Patent Owner argues that Petitioner did not independently rely on Odagiri to
teach the enclosed housing limitation. Opp. 7. Although Patent Owner does not
dispute that Odagiri illustrates a housing (id. at 7 n.2), Patent Owner contends that
“[n]owhere in the petition does Petitioner ever state that Odagiri—alone or in
combination with another reference—teaches the [housing limitation]” (id.). Patent
Owner also argues, in a footnote, that Petitioner does not explain whether or how
Lekernel and Odagiri could be combined to teach that “the read head and said one
or more resistors are contained within” Odagiri’s housing. Id. at 7–8 n.2.
We agree that we overlooked the Petitioner’s reliance on Odagiri for the
housing aspect of the enclosed housing limitation in the Petition. The import of this
aspect of the Petition becomes clear, however, upon consideration of Petitioner’s
Request.
Below is a reproduction of the Petition’s claim chart for claims 4 and 9.
IPR2014-00312
Patent 8,584,946 B2

7

IPR2014-00312
Patent 8,584,946 B2

8

Pet. 29–30. The claim chart for claim 4 states that “Odagiri illustrates a ‘housing’:
mound section 12 of a mobile phone peripheral. Exh. 1014 at Fig. 3 (below).” Id.
at 29. We agree with Petitioner that we overlooked that this particular sentence
reasonably implies that the housing in Odagiri may be referred to as teaching the
housing portion of the enclosed housing limitation recited by claim 3. Id. We also
agree that Odagiri Figure 2 reproduced following this statement in the claim chart
quite clearly shows electronic components enclosed by this same housing. Id.
Although described explicitly to demonstrate the limitation “the output plug extends
out of the housing,” we find this Figure also clearly shows all electronic
components enclosed in a housing. Because Figure 2 is contained in the same cell
of the claim chart and follows the general statement about housing, we are
persuaded that, Figure 2 also supports the enclosed housing limitation. We are,
therefore, persuaded that the Petition relied on Odagiri independently for the
enclosed housing limitation when it proposed that claims 4 and 9 were unpatentable
based on the combination of Lekernel, Padilla, and Odagiri.
In its Response to the Petition, Patent Owner did not argue the patentability
of claims 4 and 9 separately. Paper 32 (“PO Resp.”). In fact, the only argument
relating to Odagiri in the Response is that Odagiri does “not teach or suggest the
‘provide the attenuated read head signal to the cell phone’ limitation” and “[t]he
Odagiri reference is only used for the ‘housing’ limitations of dependent Claims 4
and 9.” PO Resp. 29. In its Opposition to the Request for Rehearing, however,
Patent Owner appears to argue that Petitioner has not shown that a person of
IPR2014-00312
Patent 8,584,946 B2

9

ordinary skill would combine the housing of Odagiri to enclose the read head and
said one or more resistors taught by the other references. Opp. at 7–8 n.2.
We are persuaded that Petitioner has shown by a preponderance of the
evidence that a person of ordinary skill in the art would have found this
combination obvious. The Petition explains that it would have been obvious to
combine Lekernel and Padilla with Odagiri because the combination is simply a
design choice that has been made in a variety of related contexts for the benefit of
reducing the number and cost of physical components, eliminating signal
degradation, and increasing portability. Pet. 28–29; Ex. 1015 ¶ 45. Although this
explanation explicitly relates to using Odagiri’s output plug in place of a cable, it is
clear that this modification also may encompass placing the electronic components
inside Odagiri’s housing. KSR Int’l Co. v Teleflex Inc., 550 U.S. 398, 417 (2007)
(“When a work is available in one field, design incentives and other market forces
can prompt variations of it, either in the same field or a different one. If a person of
ordinary skill can implement a predictable variation, § 103 likely bars its
patentability.”). Moreover, Petitioner’s expert testifies that “[f]or decades, it has
been standard practice in electronics design to use a housing to protect electronic
components in order to protect electronic components in order to protect them from
the elements, especially those incurred during use of the device in transit, as most
portable devices are used.” Ex. 1015 ¶ 37 (cited to in the claim chart for claim 3 in
Section VI(A) of the Petition, which in turn is referred to by the claim chart for
claim 4 (Pet. 28)).
IPR2014-00312
Patent 8,584,946 B2

10

On the other hand, Patent Owner does not direct us to persuasive evidence
that deciding where and how the electronic components of the claimed subject
matter are housed was uniquely challenging or difficult for one of ordinary skill in
the art. See KSR, 550 U.S. at 417 (“[I]f a technique has been used to improve one
device, and a person of ordinary skill in the art would recognize that it would
improve similar devices in the same way, using the technique is obvious unless its
actual application is beyond his or her skill.”); Leapfrog Enters., Inc. v. Fisher-
Price, Inc., 485 F.3d 1157, 1161 (Fed. Cir. 2007) (finding alleged invention
obvious in view of what “common sense” would tell the skilled artisan). We are
persuaded that the combination of Odagiri’s housing with the electronic
components of Lekernel/Padilla is no “more than the predictable use of prior art
elements according to their established functions.” KSR, 550 U.S. at 417. The
preponderance of the evidence, thus, shows that an ordinary skilled artisan would
have known to enclose the read head and one or more resistors taught by Lekernel
and Padilla in the housing taught by Odagiri.
D. Claim 5
Petitioner says very little in its Request specifically about claim 5. The only
explanation regarding Petitioner’s assertion that the Petition adequately
demonstrated claim 5’s unpatentability over Lekernel, Padilla, and Wallner is made
in a footnote that states: “As to claim 5, housing 120 of Wallner (Ex. 1011) is
referenced (the internal circuitry of which is shown in Fig. 2a of this reference).
This citation to Wallner is likewise an independent showing of the housing of
claims 3 and 8.” Req. Reh’g 14 n.4.
IPR2014-00312
Patent 8,584,946 B2

11

We do not agree that we overlooked anything in the Petition with respect to
claim 5. Below is a reproduction of the Petition’s claim chart for claim 5.

Pet. 32–33. The claim chart for claim 5 does not refer to a housing in the
right-hand column at all. With respect to Wallner, the claim chart simply states
“Wallner states that ‘[t]he audio/acoustically coupled card reader 120 reads a
magnetic stripe card 110 by swiping the card through the card reader slot 115.’ Exh.
1011 at ¶ 19; see Exh. 1012 at Fig. 2, element 120.” Figure 2 of Exhibit 1012 is
reproduced below:

IPR2014-00312
Patent 8,584,946 B2

12

Figure 2 of Wallner shows a diagram including a circuit with microcontroller 122
and arrow 120 pointing to the entire circuit. It is unclear from this diagram how the
circuit is enclosed. We find nothing in this claim chart, nor anywhere else in the
Petition, that describes where the enclosed housing limitation is taught by Wallner.
We are, thus, not persuaded that we misapprehended or overlooked anything in
concluding that Petitioner has not demonstrated, by a preponderance of the
evidence, that claim 5 is unpatentable over the combination of Lekernel, Padilla,
and Wallner.
E. Claims 3 and 8
Petitioner argues that we should find claims 3 and 8 to be unpatentable for
several reasons, including: (1) Dr. Morley, the named inventor of the ’946 patent,
has admitted in several places on the record that housings for containing electronic
components are well known (Req. Reh’g 3–4); (2) Patentee’s attorneys have
represented to the USPTO, in other proceedings, that “housings were well known in
the art” (id. at 4–6); and (3) the Board agrees that housings are well known (id. at
6). Petitioner does not point to where, in any of its papers prior to this request for
hearing, it directed our attention to any of these alleged admissions. Because we
could not have misapprehended or overlooked something not adequately explained
in its papers, these are not appropriate arguments for a request for rehearing.
Petitioner also asserts that because it has always maintained that Odagiri
independently discloses housings, meeting all limitations of claims 4 and 9, the
Board is allowed under the statute, and expected in the public interest, to cancel
claims 3 and 8 (id. at 14–15). Petitioner, however, does not point to any previous
IPR2014-00312
Patent 8,584,946 B2

13

argument in any of its papers, where it made the argument that Odagiri is evidence
of the knowledge that ordinary skilled artisans would have when reading Lekernel
and Padilla. Instead, in the Petition, Odagiri was asserted as one of the pieces of
prior art defining a combination for obviousness in combination with Lekernel and
Padilla—solely for claims 4 and 9. Again, Petitioner’s new argument, that we may
rely on Odagiri for the enclosed housing limitation no matter the combination-
asserted references, is not appropriate for a request for rehearing.
Anticipating our conclusion that its new arguments are inappropriate,
Petitioner urges that, even if we classify these arguments as made for the first time
in the Request, we should waive the requirements of 37 C.F.R. § 42.71(d) in “the
interests of justice” and “to prevent the Federal Circuit from being forced to reverse
and remand this case.” Id. at 6–11. We decline Petitioner’s invitation to waive our
rule. Even were we to consider Petitioner’s untimely arguments, we are not
persuaded that claims 3 and 8 are properly subject to being found unpatentable
based on Lekernel and Padilla given we explicitly did not institute inter partes
review of these claims based on this ground. Inst. Dec. 17–18, 27; see Office
Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,757 (Aug. 14, 2012) (“Any
claim or issue not included in the authorization for review is not part of the trial.”).
Petitioner had a fair opportunity to file a request for rehearing of that decision in
July of 2014. See 37 C.F.R. 42.71(d)(1) (“A party dissatisfied with a decision may
file a request for rehearing, without prior authorization from the Board . . . (1)
Within 14 days of the entry of a . . . decision to institute a trial as to at least one
IPR2014-00312
Patent 8,584,946 B2

14

ground of unpatentability asserted in the petition.”). Petitioner did not file a request
for rehearing of the Decision to Institute.
Instead, Petitioner cites to Cuozzo for the proposition that, regardless of our
Decision to Institute, we “must” now rely on the independent teaching of Odagiri to
hold claims 3 and 8 unpatentable. Req. Reh’g 14 (citing In re Cuozzo Speed
Technologies, LLC, 793 F.3d 1268 (Fed. Cir. 2015)). According to Petitioner, the
situation in this petition is exactly the same as in Cuozzo. Reply 3. We agree that
in both cases a dependent claim is challenged on an obviousness ground and the
question is whether the Board can, using the same ground, declare a broader claim
from which the challenged claim depends unpatentable. In Cuozzo, the Federal
Circuit stated that “it is at least beyond dispute there is no clear and indisputable
right that precludes institution of the IPR proceeding” as to the unchallenged
broader claims. Cuozzo, 793 F.3d at 1275 (emphasis added). In Cuozzo, the
institution decision gave the patent owner notice that the independent claim was
part of the trial, and the patent owner accordingly had a full opportunity to brief the
issue. This case is the exact opposite situation. Here, the Decision to Institute
explicitly stated that the issue of whether claims 3 and 8 are unpatentable over
Lekernel and Padilla would not be at issue in the trial, leaving Patent Owner with
no reason to address that issue in its briefing.
Although we agree with the proposition quoted by Petitioner that “a
patentability challenge to a dependent claim implicitly involves a patentability
challenge to the broader claims from which the dependent claim depends,” (Reply
3) we also are cognizant that this is an adversarial proceeding and our rules have
IPR2014-00312
Patent 8,584,946 B2

15

been set up to respect procedural fairness. “Within this structure . . . Congress
assigned to the challenger the burden of persuasion in the dispute. That burden,
together with the procedural rules, impartially applied, means that, in some cases, a
challenge can fail even if different evidence and arguments might have led to
success.” Ariosa Diagnostics v. Verinata Health, Inc., 2015 WL 7148267, at *8
(Fed. Cir. Nov. 16, 2015). We decided upon reviewing the Petition that Petitioner
had not shown properly where each element of claims 3 and 8 were found in the
prior art patents or printed publications relied upon for the ground at issue. Inst.
Dec. 17–18, 27; see 37 C.F.R. § 42.104(b)(4). Petitioner did not timely contest that
Decision. We decline, at the last moments of this proceeding, to short circuit Patent
Owner’s rights to a full and fair opportunity to respond by waiving our rules and
declaring unpatentable claims based on a ground that explicitly was excluded from
the inter partes review.
III. ORDER
Accordingly, it is
ORDERED that the Request for Rehearing is granted-in-part;
FURTHER ORDERED that a preponderance of the evidence supports the
conclusion that claims 4 and 9 of the ’496 patent are unpatentable;
FURTHER ORDERED that the Final Decision is modified to include our
analysis herein regarding whether claims 4 and 9 would have been obvious over
Lekernel, Padilla, and Odagiri; and
FURTHER ORDERED that the Request for Rehearing is denied as to claims 3, 5,
and 8.
IPR2014-00312
Patent 8,584,946 B2

16

PETITIONER:

Scott McKeown
Greg Gardella
OBLON SPIVAK
cpdocketmckeown@oblon.comcpdocketgardella@oblon.com

For PATENT OWNER:

POLSTER LIEDER
William B. Cunningham
Douglas D. Churovich
wcunningham@PolsterLieder.com ddchurovich@PolsterLieder.com