4361423 CANADA INC.

Patent Trials and Appeals Board

May 6, 2021

IPR2019-01654 (P.T.A.B. May. 6, 2021)

Trials@uspto.gov Paper 32
571.272.7822 Date: May 6, 2021

UNITED STATES PATENT AND TRADEMARK OFFICE
____________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________

SQUARE, INC.,
Petitioner,

v.

4361423 CANADA INC.,
Patent Owner.
____________

IPR2019-01654
Patent 9,818,107 B2
____________

Before JAMESON LEE, ROBERT J. WEINSCHENK, and
KEVIN C. TROCK, Administrative Patent Judges.

TROCK, Administrative Patent Judge.

JUDGMENT
Final Written Decision
Determining All Challenged Claims Unpatentable
35 U.S.C. § 318(a)

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INTRODUCTION
We have authority to hear this inter partes review under 35 U.S.C.
§ 6. This Final Written Decision issues pursuant to 35 U.S.C. § 318(a) and
37 C.F.R. § 42.73. For the reasons discussed herein, we determine that
Square, Inc. (“Petitioner”) has shown by a preponderance of the evidence
that claims 8–21 and 29–42 (the “challenged claims”) of U.S. Patent No.
9,818,107 B2 (Ex. 1001, “the ’107 patent”) are unpatentable. See 35 U.S.C.
§ 316(e) (2018); 37 C.F.R. § 42.1(d) (2019).
A. Procedural History
Petitioner filed a Petition, Paper 2 (“Pet.” or “Petition”), to institute an
inter partes review of the challenged claims of the ’107 patent. 4361423
Canada, Inc. (“Patent Owner”) filed a Preliminary Response. Paper 8
(“Prelim. Resp.”). We instituted inter partes review on all challenged
claims on the grounds presented in the Petition. Paper 9 (“Institution
Decision” or “Dec.”).
After institution, Patent Owner filed a Response to the Petition. Paper
18 (“PO Resp.”). Petitioner thereafter filed a Reply to Patent Owner’s
Response. Paper 23 (“Pet. Reply”). Patent Owner filed a Sur-reply to
Petitioner’s Reply. Paper 24 (“PO Sur-reply”). An oral hearing was held on
February 10, 2021. A transcript of the hearing is included in the record.
Paper 31 (“Tr.”).
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B. Related Proceedings
According to the parties, the ’107 patent is the subject of the
following action: 4361423 Canada Inc. v. Square, Inc., 4:19-cv-04311-JSW
(N.D. Cal.) filed July 26, 2019. Pet. 1; Paper 4, 2.
Petitioner notes one other petition (IPR2019-01653) filed by
Petitioner against the ’107 patent. Pet. 2. Petitioner also lists petitions it has
filed against other family members of the ’107 patent (IPR2019-01625 and
IPR2019-01626 (U.S. Patent No. 8,286,875 B2); IPR2019-01627 and
IPR2019-01628 (U.S. Patent No. 8,281,998 B2); IPR2019-01629 and
IPR2019-01630 (U.S. Patent No. 9,269,084 B2) IPR2019-01649 (U.S.
Patent No. 9,016,566 B2); IPR2019-01650 (U.S. Patent No. 9,311,637 B2);
IPR2019-01651 (U.S. Patent No. 9,443,239 B2); IPR2019-01652 (U.S.
Patent No. 9,613,351 B2)). Pet. 2.
C. The ’107 Patent (Ex. 1001)
The ’107 patent describes commercial transactions using a transaction
card via a communication device in audio communication with a remote
processor assembly. Ex. 1001, 2:31–34. Figure 1 of the ’107 patent is
shown below.
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Figure 1, above, is a diagram showing a transaction network including
a transaction device 12 and communication device 14 which together form a
transaction and communication assembly 16. Id. at 7:10–13. “The
transaction apparatus 12 captures transaction data and, in some
implementations, provides a user with feedback.” Id. at 7:13–15.
Transaction server 18 and a remote processor/issuer 20 together form a
remote processor assembly 22. Id. at 7:15–17.
The ’107 patent describes the operation of the system as follows:
The transaction apparatus 12 captures information from the
transaction card and converts this information into an audio
signal. The audio signal is transmitted to the communication
device 14 for transmission to the transaction server 18 via a
communication network 26 (e.g. Internet, GSM/GPRS network).
At the transaction server 18, the audio signal is converted into a
digital signal and transmitted to the remoter processor/issuer 20
via a communication or payment network 28 (e.g. Internet, Visa-
Net, BankNet). The remoter processor/issuer 20 validates this
request by accepting or denying the request and sends this
validation information to the transaction server 18 which then
converts this digital signal into an audio signal and transmits it
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back to the assembly 16 providing the seller and buyer with a
confirmation or a rejection message. As such, the
communication device 12 acts as a receiver of the transaction
data in analog audio format and also as a conduit to transmit the
transaction data to a transaction server 18 via the communication
network 26.
Id. at 7:19–37.
Figure 2 of the ’107 patent is shown below.

Figure 2, above, depicts a transaction and communication assembly
16 including a portable transaction apparatus 12 in the form of a point of
sale (POS) device linked to a communication device in the form of mobile
phone via a communication link in the form of a cable 30. Id. at 7:38–43.
The POS device 12 includes a display screen 36 and an input device 38 such
as card reader slot 39 for swiping or inserting a transaction card and
capturing information therefrom. Id. at 7:47–54. The POS device 12 can
also include an additional input device 40 in the form of a control pad
including a PIN pad 42, and other control buttons 44 allowing the user to
enter transaction information which is also captured by the POS device 12
and converted into an audio signal for transmission to the communication
device 14. Id. at 7:54–60.
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Figure 5 of the ’107 patent is reproduced below.

Figure 5, above, is a block diagram depicting transaction device 12
which includes a controller 50 in the form of a microcontroller unit (MCU).
Id. at 7:63–65. The input device 38 can be in the form of an analog signal
reader 52 such as a magnetic stripe reader and/or a digital signal reader 54
such as an Integrated Circuit (IC) or Smart Card or EMV reader. Id. at
7:65–8:1.
D. Challenged Claims
Petitioner challenges claims 8–21 and 29–42 of the ’107 patent. Pet.
1. Claims 8, 15, 29, and 36 are independent. Claims 8 and 29 are
substantially similar to each other, with each reciting a “smart card,” except
that claim 8 is written as an apparatus claim and claim 29 is written as a
method claim. Ex. 1001, 12:60–13:16, 15:10–36. Claims 15 and 36 are also
substantially similar to each other, but here each recites a “payment device”
instead of a “smart card,” with claim 15 written as an apparatus claim and
claim 36 written as a method claim. Id. at 13:42–67, 16:4–31. Claim 8 is
generally illustrative.
8. [Preamble] An apparatus for effecting commercial transactions
between an input device and a remote transaction server using a
communication device, said apparatus comprising:
[8.A] an input device for capturing recorded information from a
smart card;
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[8.B] a sensor incorporated into said input device for reading said
recorded information stored on an integrated circuit incorporated
into said smart card;
[8.C] a controller coupled to said sensor for converting the recorded
information stored on said smart card into a format suitable for
transmission to a communication device; and
[8.D] a communication link for coupling said controller to a
communication device for the transmission of said recorded
information therebetween;
[8.E] wherein the said sensor reads the recorded information stored
on said smart card,
[8.F] said controller converts said recorded information read by said
sensor into a format suitable for transmission to said
communication device and transmits said recorded information
via the communication link to said communication device,
[8.G] and said communication device transmits said recorded
information to a remote transaction server for processing a
commercial transaction.

Id. at 12:60–13:16 (numbering and formatting designated by Petitioner; see
Ex. 1002, 1).
E. Evidence
Petitioner relies upon the following evidence:
(1) U.S. Patent No. 6,234,389 B1, issued May 22, 2001 (“Valliani”)
(Ex. 1005);
(2) U.S. Patent Publication No. 2005/0236480 A1, published October
27, 2005 (“Vrotsos”) (Ex. 1006);
(3) U.S. Patent Publication No. 2006/0032905 A1, published Feb. 16,
2006 (“Bear”) (Ex. 1007);
(4) U.S. Patent Publication No. 2003/0183691 A1, published October
2, 2003 (“Lahteenmaki”) (Ex. 1009);
(5) U.S. Patent No. 6,278,779 B1, issued August 21, 2001 (“Bryant”)
(Ex. 1010); and
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(6) Declaration and Rebuttal Declaration of Michael Shamos, Ph.D.
(Exs. 1003, 1017).
Patent Owner relies on the Declaration of Mr. Ivan Zatkovich (Ex.
2004).
F. Asserted Grounds of Unpatentability
Claims Challenged 35 U.S.C. § References
8–13, 15–20, 29–34, 36–41 103 Valliani/Vrotsos
14, 21, 35, 42 103 Valliani/Vrotsos/Bryant
8, 9, 11, 13, 15, 16, 18, 20,
29, 30, 32, 34, 36, 37, 39, 41
103 Bear/Lahteenmaki
10, 12, 17 19, 31, 33, 38, 40 103 Bear/Lahteenmaki/Vrotsos
14, 21, 35, 42 103 Bear/Lahteenmaki/Bryant
8–13, 15–20, 29–34, 36–41 103 Vrotsos
14, 21, 35, 42 103 Vrotsos/Bryant

ANALYSIS
A. Level of Ordinary Skill
In determining whether an invention would have been obvious at the
time it was made, we consider the level of ordinary skill in the pertinent art
at the time of the invention. Graham v. John Deere Co., 383 U.S. 1 (1966).
“The importance of resolving the level of ordinary skill in the art lies in the
necessity of maintaining objectivity in the obviousness inquiry.” Ryko Mfg.
Co. v. Nu-Star, Inc., 950 F.2d 714, 718 (Fed. Cir. 1991).
Petitioner describes a person of ordinary skill in the art as a person
having “a Bachelor of Science Electrical Engineering, Computer Science, or
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an analogous field, or equivalent experience, and at least two years of
relevant experience and familiarity with the fields of embedded system
implementation, mobile communications, electronic payments and
encryption.” Pet. 15 (citing Ex. 1003 ¶¶ 17–24). Petitioner’s declarant,
Dr. Shamos, testifies that a person of ordinary skill in the art “would have
had bachelor’s degree in electrical engineering, computer science, or an
analogous field, or equivalent experience, and at least two years of relevant
experience and familiarity with embedded system implementation, mobile
communications, electronic payments and encryption.” Ex. 1003 ¶ 24.
Patent Owner’s expert, Mr. Zatkovich, agrees with Dr. Shamos that a
person of ordinary skill in the art “in the field of the challenged claims
would have been someone with good working knowledge of device
interfaces and the integration of devices involving digital and analog
signals.” Ex. 2004 ¶ 14. Mr. Zatkovich testifies that a person of ordinary
skill in the art “may have a Bachelor of Science in Electrical Engineering or
Computer Engineering, or the equivalent and have at least one to two years
of relevant experience in the fields of embedded systems and mobile
communication device interfaces, or otherwise equivalent industry
experience in the relevant field.” Id.
The parties’ description of a person of ordinary skill is essentially the
same and is consistent with the subject matter of the ’107 patent. We agree
with the parties’ description of a person of ordinary skill in the art at the time
of the claimed invention, with the exception of the qualifier “at least” to
keep the description from extending to a level beyond that of ordinary skill.
Accordingly, for purposes of this Final Written Decision, a person of
ordinary skill in the art is a person with a bachelor’s degree in electrical or
computer engineering or equivalent having two years of relevant experience
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in the fields of embedded systems and mobile communication device
interfaces, or otherwise equivalent industry experience in the field.
B. Claim Construction
In an inter partes review, we apply the same claim construction
standard that would be used in a civil action under 35 U.S.C. § 282(b),
following the standard articulated in Phillips v. AWH Corp., 415 F.3d 1303
(Fed. Cir. 2005) (en banc). 37 C.F.R. § 42.100(b). In applying such
standard, claim terms are generally given their ordinary and customary
meaning, as would be understood by a person of ordinary skill in the art, at
the time of the invention and in the context of the entire patent disclosure.
Phillips, 415 F.3d at 1312–13. “In determining the meaning of the disputed
claim limitation, we look principally to the intrinsic evidence of record,
examining the claim language itself, the written description, and the
prosecution history, if in evidence.” DePuy Spine, Inc. v. Medtronic
Sofamor Danek, Inc., 469 F.3d 1005, 1014 (Fed. Cir. 2006) (citing Phillips,
415 F.3d at 1312–17).
Only terms that are in controversy need to be construed, and then only
to the extent necessary to resolve the controversy. Nidec Motor Corp. v.
Zhongshan Broad Ocean Motor Co. Matal, 868 F.3d 1013, 1017 (Fed. Cir.
2017); see Vivid Techs., Inc. v. Am. Sci. & Eng’g, Inc., 200 F.3d 795, 803
(Fed. Cir. 1999) (applying Vivid Techs. in the context of an inter partes
review).
Here, neither party proposes an express construction for any claim
terms. We agree that no claim terms require express construction, and use
the ordinary and customary meaning of the terms. However, to the extent
that the arguments of the parties reflect a particular understanding of the
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claim language, we discuss each party’s understanding in our analysis of the
arguments below.
C. Patentability Challenges
1. Principles of Law on Obviousness
Section 103(a) forbids issuance of a patent when “the differences
between the subject matter sought to be patented and the prior art are such
that the subject matter as a whole would have been obvious at the time the
invention was made to a person having ordinary skill in the art to which said
subject matter pertains.” In Graham, the Supreme Court set out a
framework for applying the statutory language of Section 103: the scope
and content of the prior art are to be determined; differences between the
prior art and the claims at issue are to be ascertained; and the level of
ordinary skill in the pertinent art resolved. See Graham, 383 U.S. at 17–18.
The Supreme Court has made clear that we apply “an expansive and
flexible approach” to the question of obviousness. KSR Int’l Co. v. Teleflex,
Inc., 550 U.S. 398, 415 (2007). Whether a patent claiming the combination
of prior art elements would have been obvious is determined by whether the
improvement is more than the predictable use of prior art elements according
to their established functions. KSR, 550 U.S. at 417. Reaching this
conclusion, however, requires more than a mere showing that the prior art
includes separate references covering each separate limitation in a claim
under examination. Unigene Labs., Inc. v. Apotex, Inc., 655 F.3d 1352,
1360 (Fed. Cir. 2011). Rather, obviousness requires the additional showing
that a person of ordinary skill at the time of the invention would have
selected and combined those prior art elements in the normal course of
research and development to yield the claimed invention. Id.
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2. Grounds Based in part on Valliani
a. Relevant Prior Art
i. Valliani (Ex. 1005)
Valliani describes “a PCMCIA [Personal Computer Memory Card
International Association] compliant generic laptop computer or personal
digital assistant (‘PDA’) device with an add-on module that provides point
of sale functionality,” as illustrated in Figure 1 below. Ex. 1005, 2:42–45.

Valliani’s Figure 1, above, is a block diagram depicting a generic
PCMCIA-compliant device 10 such as a laptop computer or PDA, a module
200 mechanically and electrically coupled to device 10 via connectors 90
and 265, a card 230, and a remote host 75. Id. at 3:51–54; 4:62–65.
Valliani’s module 200 includes “a magnetic stripe reader 210 that reads
information encoded and stored on at least one magnetic stripe (or track) 220
on a credit card (or other card) 230.” Id. at 4:38–42. “Module 200 may
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provide a pinpad unit 240, a printer unit 245, a fingerprint reader unit 250, a
signature capture unit and/or virtual pinpad unit 255, and/or a smartcard
reader unit 260.” Id. at 4:42–45. “Smartcard reader unit 260 is utilized if
card 230 is a smartcard storing data in memory 225.” Id. at 4:45–47. Using
wireless unit 65 and/or serial and/or parallel ports 70, device 10 can
communicate with remote host system 75 using an internal modem. Id. at
4:13–21. “Software-memory within circuitry 240 encrypts user-input PIN
data and, using device 10 as an interface [35] terminal, causes such
encrypted data to be sent by device 10 to a host system 75.” Id. at 6:33–36.
ii. Vrotsos (Ex. 1006)
Vrotsos describes “[a]n attachment that may be coupled to a wireless
communication device, such as a cellular telephone, personal digital
assistant (PDA), or the like, to perform commercial or other information
transactions” as illustrated in Figure 10 below. Ex. 1006, Abstr.

Vrotsos’ Figure 10, above, is a block diagram that illustrates
components of the wireless communication device and the attachment. Id.
¶ 24.
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Vrotsos discloses that “the system may be used to transmit credit card
information during a point-of-sale transaction, transmit fingerprint
information during a traffic stop, transmit bar code information during a tour
of a warehousing facility or retail location, or the like.” Id. ¶ 26. The
attachment 21 may include one or more input devices, such as a magnetic
stripe reader, a smartcard reader, a fingerprint scanner, an optical scanner, a
signature pad, an alphanumeric keypad (such as, a PIN pad), a proximity
detector, an audio recording device, or a camera (such as, a digital or charge-
coupled device (CCD) camera). Id. ¶ 28. The attachment 21 may also
include an independent processor located on printed circuitboard (PCB) 25.
Id. ¶ 33.
Vrotsos describes the function of processor 303 as follows:
The attachment 21 may also include a processor 303, a memory
307 and an input device 308. The processor may execute a
software application (which may be stored in the attachment
memory 307) allowing the processor to receive input information
from the input device 308 and process the input information to
generate data for transmission to a remote computer 101 via the
antenna 5 of the wireless communication device 1. By executing
the software application, the attachment may determine from
which input device 308 it is receiving input information (if
multiple input devices are provided), encrypt the input
information, append additional information indicating the
identity or location of the user (using locator 302, which may be
a GPS position sensor and/or processor or a processor for
measuring signal strength from multiple base stations of the
communication network to determine the attachments location
by triangulation), divide the input information into data packets
suitable for transmission over the communication network 102,
etc.
Id. ¶ 75.
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Figure 11 of Vrotsos is reproduced below.

Vrotsos’ Figure 11, above, is a block diagram that “illustrates a
second embodiment of an attachment according to an embodiment of the
present invention.” Id. ¶ 24.
Vrotsos further describes the function of processor 303 in its second
embodiment as follows:
Generally, the processor 303 is responsible for controlling the
hardware components located within the attachment 21. The
processor 303 may also include software or code that enables or
executes encryption processing on any transaction data or
identification data. In an embodiment of the invention, the
encryption is performed before the data is transmitted to the
communication interface 311. In an embodiment of the
invention, encryption is performed before storage of any
transaction, measurement, or identification data in the removable
memory 315 or the internal memory 307. The internal memory
307 may be a volatile memory that is utilized by the processor
303 as workspace for its processing. The internal memory 307
may also have a non-volatile section. The non-volatile section
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of the internal memory may store the encryption key currently
utilized by the attachment 21.
Id. ¶ 80.
Vrotsos’ Figure 1E is shown below.

Vrotsos’ Figure 1E, above, is a diagram depicting a combined
magnetic stripe reader and smartcard reader, with card 51 having magnetic
stripe 52 and smartchip 53. Vrotsos explains that:
card 51 having a magnetic stripe 52 and/or smartchip 53 may be
inserted into the slot 22. The slot may be shaped so as to include
a shallow channel portion 54 of a depth suitable for reading a
magnetic stripe 52 positioned parallel to a lateral surface of the
card 51 as well as a deeper channel portion 55 of a suitable depth
and width such that substantially all of the card 51 may be
inserted into the slot 22 when a portion of the card 51 is inserted
into the deeper channel portion 55. As shown, the deeper channel
portion 55 is of a width substantially identical to the width of the
card 51, such that lateral surfaces of the deeper channel portion
55 may contact the lateral surfaces of the card 51 to ensure that
the smartchip 53 is in a desired location. A magnetic stripe reader
head may be located within a surface of the shallow channel
portion 54 so that the magnetic stripe 52 can be read as the card
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51 is swiped through the shallow channel portion 54. A
smartcard read/write head may be positioned within a surface of
the deeper channel portion 55 of the slot 22 so that information
may be read from or written to the smartchip 53 when the card is
positioned within the deeper channel portion 55.
Id. ¶ 41.
iii. Bryant (Ex. 1010)
Bryant describes an “[a]n accessory device for a wireless telephone or
handset” that “functions as either a shoulder rest or a stand” as illustrated in
Figure 1 below. Ex. 1010, Abstr.

Bryant’s Figure 1, above, is an illustration showing “a telephone
shoulder rest and stand 100 attached to a cordless telephone handset 10.” Id.
at 2:66–67. In Figure 1, support 100 is configured to operate as a stand. Id.
at 3:5–6. As shown in Figure 1, “support 100 comprises a sliding arm 110, a
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body 120, a locking pin 130, a foot 140, an attaching extension 150, a pair of
attaching arms 160 and a shoulder rest surface 170.” Id. at 3:11–14.
Figure 4A of Bryant, reproduced below, depicts a front perspective
view of telephone shoulder rest 100.

Bryant’s Figure 4A, above, shows an attaching pin 162 on one of the
attaching arms 160. Id. at 4:4–5. “There is an opposing attaching pin 162
(not shown) on the other attaching arm 160.” Id. at 4:5–6. Bryant describes
how support 100 is attached to a telephone handset as follows:
The support 100 is attached to the handset 10 by inserting the
attaching pins 162 into corresponding openings (not shown) on
the sides of the handset 10, with the front surface of the base 122
touching the rear surface of the handset 10. The attaching arm
160 is flexible so that the attaching pins 162 can easily be
inserted into and removed from the corresponding openings in
the handset 10, so that the support 100 is easily removed from
the handset 10.
Id. at 4:14–21.
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b. Obviousness over Valliani and Vrotsos
Petitioner asserts claims 8–13, 15–20, 29–34, 36–41 are unpatentable
as obvious under 35 U.S.C. § 103 over the combination of Valliani and
Vrotsos. Pet. 17–45.
i. Independent Claim 8
Preamble
Claim 8 recites the following preamble: “An apparatus for effecting
commercial transactions between an input device and a remote transaction
server using a communication device.” 1 Ex. 1001, 12:60–64. Petitioner
provides an annotated version of Figure 1 of Valliani, reproduced below.
Pet. 17.

1 Petitioner does not take a position as to whether the preamble of claim 8 is
limiting, but addresses the preamble only “[t]o the extent it is deemed
limiting.” See Pet. 17.
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Petitioner’s annotated Figure 1, above, depicts a block diagram of a
generic PCMCIA compliant device 10 (bordered in purple), connected to a
module 200 (bordered in red) including smart card reader/writer 260
(bordered in blue). Device 10 is in communication with remote host 75
(bordered in green).
Petitioner asserts Valliani teaches the preamble because:
Valliani discloses an apparatus for effecting commercial
transactions as a module 200, shown in red. The smart card
reader/writer 260 is an input device in communication with host
server 75 (green), the remote transaction server. The module
200 plugs into a device 10 (purple), which is a personal digital
assistant (“PDA”), a communication device, which
“communicates with host 75” to send card data.
Pet. 17 (citing Ex. 1005, 3:51–54; Ex. 1003 ¶¶ C1–24).2
Patent Owner asserts that Valliani does not disclose “effecting
commercial transactions between an input device and a remote transaction
server.” PO Resp. 11–14. Patent Owner argues that “[m]atching PINs or
authenticating the card owner’s identity is not the same thing as effecting a
commercial transaction. Ex. 2004 ¶ 32. A [person of ordinary skill in the
art] would understand that a commercial transaction is any transaction that
involves some form of payment, or money transfer, in exchange for goods
and services.” PO Resp. 12. Patent Owner argues that “Valliani uses
remote host 75 for retrieving and verifying PIN and signature data—not for
processing a commercial transaction.” Id. at 13 (citing Ex. 2004 ¶ 33).

2 Although we are unable to find an explanation in the Petition, we assume,
for example, the notation “Ex. 1003 ¶ C1” in the Petition refers to paragraph
1 of Appendix C of Exhibit 1003, the Declaration of Dr. Shamos.
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Patent Owner argues, “Valliani provides no indication as to how the final
commercial transaction would be conducted.” PO Resp. 13.
We disagree with Patent Owner that Valliani does not disclose
“effecting commercial transactions between an input device and a remote
transaction server.” Patent Owner’s argument that authenticating a card
owner’s identity is not the same thing as effecting a commercial transaction
is unavailing, because authentication is a necessary and integral part of
electronic commercial transactions. For example, if authentication were to
fail (by determining that the user is not the card owner), an attempted
commercial transaction would likely be rejected, and its purpose frustrated.
See, e.g., Ex. 1005, 6:39–46.
Patent Owner’s argument that Valliani does not specify how a
commercial transaction would be conducted is equally unavailing.
Valliani’s invention is directed to “a portable point of sale transaction
terminal.” Ex. 1005, Abstr. Valliani’s “device can communicate . . . with a
remote host system to further process a transaction for which [a] card is
being used.” Id. In discussing the background of the invention, Valliani
explains that “[s]uch systems are commonly used when a consumer (or user)
pays for a purchase.” Ex. 1005, 1:30–31. Valliani further explains, “there is
a need for a method and mechanism by which generic computing/PDA
devices can be made to perform point of sale transaction functions.” Id. at
2:32–34. “The present invention,” Valliani states, “provides such a method
and system to implement point of sale transaction terminals.” Id. at 2:38–39.
Valliani also explains that its device is for credit card transactions,
reads the information from the magnetic stripe (or a smart card), and
communicates with a remote host system to process a transaction. Id. at
2:56–3:4. Valliani also discusses vendors who transact business “at a flea
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market or a garage sale” (id. at 2:25–28), and “a library . . . conducting a
used book sale, and some patrons wish to purchase books with credit cards”
(id. at 5:65–66). Indeed, Patent Owner’s expert, Mr. Zatkovich,
acknowledges that commercial transactions may occur at flea markets,
garage sales, and yard sales. See Ex. 1019, 136:13–23. We also credit
Petitioner’s expert, Dr. Shamos, who credibly testifies that a person of
ordinary skill in the art “would have understood Valliani as effecting a
commercial transaction between the module 200 and the remote host server
75 via the mobile device 10.” Ex. 1017 ¶ 50.
We are persuaded by Petitioner’s evidence and arguments that
Valliani teaches an apparatus (module 200) for effecting commercial
transactions between an input device (smart card reader/writer 260) and a
remote transaction server (remote host 75) using a communication device
(device 10).
Based on the complete record and for the reasons discussed herein, we
are persuaded that Petitioner has demonstrated that Valliani teaches “[a]n
apparatus for effecting commercial transactions between an input device and
a remote transaction server using a communication device” as recited in the
preamble of claim 1.3
[8.A] “an input device for capturing recorded
information from a smart card”
Petitioner asserts that Valliani teaches this limitation. Referring to
Valliani’s annotated Figure 1, infra, Petitioner argues:

3 We do not reach the issue of whether the preamble is limiting. Regardless
of whether the preamble is limiting, we are persuaded that Petitioner
demonstrates that the recitation of the preamble is met by Valliani.
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smart card reader/writer unit 260 (red), corresponding to the
input device “is utilized if card 230 is a smartcard storing data in
memory 225.” Ex. 1005, 4:45–46. Card 230 (blue), is the smart
card. The data (green) stored in memory 225 (purple)
corresponds to the recorded information stored on an integrated
circuit incorporated into the smart card. That recorded
information includes “user account number, present maximum
dollar limit of the account, [and] user identification,” as well as
“a card owner’s PIN . . . stored in memory 225.” Id. 6:27–29;
7:62–64; Ex. 1003 ¶¶ C25–28.
Pet. 18 (emphasis in original).
Valliani’s Figure 1, annotated by Petitioner, is shown below.

Valliani’s annotated Figure 1, above, is a block diagram depicting
device 10 connected to module 200 with smartcard reader/writer 260 (red)
and smartcard 230 (blue) with memory 225 (purple).
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Patent Owner does not respond substantively to Petitioner’s
arguments or evidence with respect to this limitation of claim 8. See PO
Resp. 11–24.
We are persuaded by Petitioner’s evidence and arguments that
Valliani teaches an input device (smartcard reader/writer 260) for capturing
recorded information (e.g., user account number, present maximum dollar
limit of the account, and user identification, as well as card owner’s PIN
stored in memory 225) from a smartcard (card 230 with memory 225). See
Pet. 18–20 (citing Ex. 1003 ¶¶ C25–36; Ex. 1005, 3:43–46, 4:45–46, 6:27–
29, 7:62–64).
Based on the complete record and for the reasons discussed herein, we
are persuaded that Petitioner has demonstrated that Valliani teaches “an
input device for capturing recorded information from a smartcard,” as
recited in claim 8.
[8.B]: “a sensor incorporated into said input
device for reading said recorded information
stored on an integrated circuit incorporated
into said smart card”
Petitioner asserts that Valliani teaches this limitation, arguing
Valliani’s:
unit 260 includes a sensor to sense the recorded information.
Thus, Valliani’s unit 260 includes a sensor that reads a smart card
that has recorded information stored on an integrated circuit
incorporated into said smart card. Ex. 1005, 7:61–8:6; Ex. 1003
¶¶ C41–42. Valliani also discloses data stored in memory on that
smart card (id. 4:45–46), corresponding to recorded information
stored on said integrated circuit incorporated into said card. Id.
¶¶ C43–47.
Pet. 20–21.
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Petitioner also argues, “[t]o the extent that Valliani does not explicitly
describe a sensor that reads recorded information stored on an integrated
circuit, a [a person of ordinary skill in the art] would have found it obvious
to consider other prior art, such as Vrotsos, for how to read a smart card.”
Pet. 21 (citing Ex. 1003 ¶¶ C47–49).
Petitioner argues:
Vrotsos discloses a smart card reader that communicates with a
mobile device over a physical connection. In Vrotsos, the smart
card reader includes a portion 55 for reading information from
the smart chip 53 of a credit card (Ex. 1006, ¶41, see Figure 1E,
reproduced below, showing the card reader in red, the smart card
in blue, and the integrated circuit in purple).
Pet. 21.
Vrotsos’ Figure 1E, annotated by Petitioner, is shown below. Pet. 21.

Vrotsos’ Figure 1E (annotated), shown above, depicts card 51 (blue)
having smartchip 53 (purple) inserted into deeper channel portion 55 where
“a smartcard read/write head may be positioned within a surface of the
deeper channel portion 55 of the slot 22 [red] so that information may be
read from or written to the smartchip 53 when the card is positioned within
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the deeper channel portion 55.” See Ex. 1006 ¶ 41; Ex. 1003 ¶¶ C48–49.
Petitioner argues that in Vrotsos, “the smartcard read/write head is a sensor
incorporated into said input device for reading said recorded information
stored on an integrated circuit incorporated into said smart card.” Pet. 22.
Patent Owner argues, “Petitioner does not identify any component of
Valliani that might qualify as the claimed sensor for reading the integrated
circuit of a smart card or any other payment device.” PO Resp. 14. Patent
Owner argues:
nowhere does Valliani or Petitioner identify any component of
Valliani that could qualify as the claimed sensor. Instead,
Valliani references unit 210, a magnetic stripe reader. Ex. 2004,
¶ 41–42. This is not a smart card reader, nor is it a
device/component that reads the integrated circuit of a smart
card.
PO Resp. 15. Patent Owner also argues,
despite the mention of a smart card and a reference to memory,
a [person of ordinary skill in the art] would understand that
Valliani describes a magnetic stripe reader performing [] only
“sensing” activity and offers no disclosure of a sensor that would
actually have the ability to read an integrated circuit of a smart
card.
Id. at 16 (citing Ex. 2004 ¶¶ 43–45).
Patent Owner further argues that “Vrotsos does not supply the sensor
for reading an integrated circuit that is missing from Valliani,” because a
person of ordinary skill in the art “would understand that a read/write ‘head’
refers to a magnetic read head used for magnetic tape.” PO Resp. 16 (citing
Ex. 2004 ¶ 49).
Patent Owner also argues that a person of ordinary skill in the art
“would understand that Vrotsos’ mention of a ‘smartcard’ that is inserted
into a slot, Ex. 1006, [0041], could only refer to an EMV-type smart card,”
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and that “Vrotsos’ teachings contradict normal smart card or EMV card
standards.” PO Resp. 17 (citing Ex. 2004 ¶¶ 51–52).
Patent Owner further argues that a person of ordinary skill in the art:
would understand that the disclosed read/write head would only
be appropriate for reading magnetically sensed information, such
as from a magnetic stripe. [Ex. 1006] ¶¶ 21–22, 56. A [person of
ordinary skill in the art] would find no disclosure of a sensor for
reading either an NFC or contactless smart card or electronically
recorded information on an EMV smart card.
PO Resp. 18 (citing Ex. 1006 ¶ 57).
We disagree with Patent Owner. Valliani teaches a sensor for reading
a smartcard because Valliani’s card reader module 200 has a “smartcard
reader/writer unit 260 [that] can both read and write to memory 225.” See
Ex. 1005, Fig. 1, 4:45–49, 7:13–15, 7:49–53, 8:1–3. Petitioner’s expert, Dr.
Shamos, provides testimony that is consistent with this understanding of
Valliani. See Ex. 1017 ¶¶ 12–16. Indeed, in related proceedings, Patent
Owner’s expert, Mr. Zatkovich, testified that smart card readers “would
necessarily contain circuitry for reading [a] smart card.” See Ex. 1018,
98:8–13.4 Mr. Zatkovich testified that the term “smart card reader” used in
the ’459 provisional application “would necessarily contain sensors, and
circuitry as a part of that would be the secure microprocessor and the
memory.” See id. at 98:15–19; see also Ex. 1020, 5. A person of ordinary
skill in the art would understand that Valliani’s smart card reader has similar
features.

4 Exhibit 1018 is the deposition transcript of Mr. Zatkovich in related
proceedings IPR2019-01625, IPR2019-01627, IPR2019-01629
IPR2019-01649, and IPR2019-01650.
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Petitioner’s proposed combination of Valliani and Vrotsos also
teaches a sensor for reading a smartcard. We agree with Dr. Shamos’
testimony that Vrotsos’ smartcard read/write head teaches a sensor for
reading the integrated circuit of a smart card. See Ex. 1017 ¶¶ 26–31; see
also Ex. 1003 ¶¶ C47–53. Vrotsos’ attachment 21 has a “smartcard reader”
with a “smartcard read/write head” “so that information may be read from or
written to the smartchip 53” of [smart]card 51. See Ex. 1006 ¶¶ 28, 41, Fig.
1E.
We are persuaded by Petitioner’s evidence and arguments that
Valliani teaches a sensor incorporated into an input device (smartcard
reader/writer 260) for reading recorded information (e.g., user account
number, present maximum dollar limit of the account, and user
identification) stored on an integrated circuit (memory 225) incorporated
into a smart card (card 230). See Pet. 20–23 (citing Ex. 1003 ¶¶ C41–50;
Ex. 1005, 3:18–21, 4:42–47, 5:30–40, 6:33–43, 7:61–8:6, 8:1–3).
We are also persuaded by Petitioner’s evidence and arguments that
Vrotsos teaches a sensor incorporated into an input device (smartcard reader
with smartcard read/write head) for reading recorded information
(identification data, credit card information) stored on an integrated circuit
(smartchip 53) incorporated into a smart card (card 51). See Pet. 21–23
(citing Ex. 1003 ¶¶ 48–50; Ex. 1006 ¶¶ 28–31, 41, 43, 51–53, Fig. 1E).
Based on the complete record and for the reasons discussed herein, we
are persuaded that Petitioner has demonstrated that each of Valliani,
Vrotsos, and the combination thereof, teaches “a sensor incorporated into
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said input device for reading said recorded information stored on an
integrated circuit incorporated into said smart card,” as recited in claim 8.5
[8.C]: “a controller coupled to said sensor for
converting the recorded information stored on
said smart card into a format suitable for
transmission to a communication device”

Petitioner argues that Valliani’s device includes electronics 210 that
converts recorded information from card 230’s memory 225 into a format
suitable for transmission to communication device 10. Pet. 23–24 (citing
Ex. 1003 ¶¶ C54–55). The recorded information, Petitioner argues, includes
“a card owner’s PIN . . . stored in memory 225,” and “user account number,
[present] maximum dollar limit of the account, [and] user identification.”
Pet. 24 (quoting Ex. 1005, 6:27–29; 7:63–65). Petitioner argues that the
“electronics within the input device provide that recorded information to the
device 10 for processing a commercial transaction.” Pet. 24 (citing Ex. 1003
¶¶ C56–57).
Petitioner explains that “[t]he only interface between the module 200
and the device 10 in Valliani is a PCMCIA interface.” Pet. 24 (citing Ex.
1005, Abstr.). Petitioner argues that in order for module 200 to transmit the
recorded information to the device 10, “the electronics within the module
200 convert[] the recorded information into a format suitable for
transmission, such as the PCMCIA interface format.” Pet. 24. “As a
[person of ordinary skill in the art] would have appreciated,” Petitioner
argues, “the controller would have convert[ed] that recorded information

5 We discuss the rationale for combining Valliani and Vrotsos in Section
II.C.2.b.ii, infra.
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into the PCMCIA interface format, for transmission to the device 10.” Id.
(citing Ex. 1003 ¶¶ C58–64).
Petitioner’s expert, Dr. Shamos, points out that in Valliani,
“[a]lthough FIG 1 depicts module 200 as including all of these units, module
200 may include one of these units, or any desired combination of these
units.” Ex. 1003 ¶ C57 (quoting Ex. 1005, 4:47–49). Based on this, Dr.
Shamos testifies, “it would have been obvious to a [person of ordinary skill
in the art] to use the electronics 210 to process smart card data when the data
received is not magnetic stripe data.” Id. ¶ C56. Dr. Shamos testifies that a
person of ordinary skill in the art “would have understood the read head
electronics 210 to correspond to the controller to process the recorded
information read from the memory 225 of smart card 230.” Id.
“The electronics in unit 210,” Dr. Shamos testifies, or “other
electronics within the module 200[,] provide that recorded information to the
device 10.” Id. (citing Ex. 1005, 6:27–29). “This would have enabled the
device 10,” Dr. Shamos testifies, “to transmit that transaction data from the
card to the remote host 75 for validation of the transaction.” Ex. 1003
¶ C56. Dr. Shamos testifies that a person of ordinary skill in the art “would
have found it obvious to couple the controller to the sensor within the
smartcard reader/writer unit 260 so that the controller could directly receive
the smartcard data from the unit for processing.” Id. ¶ C59.
Petitioner also argues that “[t]o the extent the module 200 does not
include a controller for converting said recorded information, a [person of
ordinary skill in the art] would have found it obvious to consider other prior
art, such as Vrotsos.” Pet. 24.
Petitioner provides an annotated version of Vrotsos’ Figure 3, shown
below.
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Vrotsos’ annotated Figure 3, shown above, is a block diagram
illustrating a wireless Communications Device connected to an Attachment.
Petitioner argues the Attachment includes processor 303 (bordered in red),
corresponding to the recited controller, coupled to input device 308
(bordered in blue), which includes a smartcard read/write head, i.e., the
recited sensor. Pet. 25 (citing Ex. 1006 ¶ 41).
Petitioner argues that:
Vrotsos discloses that when the input device 308 receives input,
“the processor 303 of the attachment may . . . begin to execute
instructions to receive the input information . . . [and] may then
process this input information.” Id. ¶ 93. Because the processor
303 receives the input information provided by the reader head,
the processor 303 is a controller coupled to the sensor.
Pet. 25 (citing Ex. 1003 ¶¶ C65–66).
Petitioner also argues that:
Vrotsos further discloses processor 303 as performing
convert[ion] [of] the recorded information stored on said
transaction card into a format suitable for transmission to the
communication device. Vrotsos describes the processor 303 as
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converting smartchip information into a format suitable for
transmission to the cellular telephone in at least two ways.
See Pet. 25–27 (citing Ex. 1006 ¶¶ 35, 43, 75. 94; Ex. 1003 ¶¶ 67–61).
Patent Owner argues that “Valliani does not disclose the claimed
controller, and Petitioner does not identify anything in Valliani capable of
filling these roles.” PO Resp. 18 (citing Ex. 2004 ¶ 60). Patent Owner
argues that “‘electronics 210,’ is a component of the Valliani reader’s
magstripe reader – not a reader for smart cards and specifically not having a
controller coupled to a sensor for reading and converting information stored
on the integrated circuit of a smart card.” PO Resp. 19–20 (citing Ex. 2004
¶¶ 21–22, 41–42, 55–56). Patent Owner also argues that “‘electronics 210’
does not perform any kind of conversion, or processing of information from
the integrated circuit as required for the claimed controller.” PO Resp. 20.
“Instead,” Patent Owner argues, “Valliani contemplates that any processing
of information from an integrated circuit would be carried out, if at all, in
mobile device 10 rather than module 200.” Id. (citing Ex. 1005, 6:1–15).
We disagree with Patent Owner that Valliani’s “electronics 210” is a
component of Valliani’s magnetic stripe reader 210 and that it does not read
and convert information stored on the integrated circuit of a smart card.
Patent Owner’s argument is expressly contradicted by Valliani’s disclosure
that PIN information is not stored on a card 230’s magnetic stripe 220, but
instead is stored in memory 225 of smart card 230. Valliani’s “electronics
210” provides mobile communication device 10 with card-provided PIN
information in encrypted form using only internally stored encryption keys.
Ex. 1005, 5:30–35, 6:27–29.
Patent Owner and Patent Owner’s declarant, Mr. Zatkovich, misread
Petitioner’s position. Mr. Zatkovich testifies: “Petitioner accuses the
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electronics in 210, which is the Magnetic stripe reader. The Magstripe
reader 210 cannot access the integrated circuit on the payment device,
therefore the magstripe reader 210 cannot be used for converting the data
from the integrated circuit.” Ex. 2004 ¶ 60. But Petitioner identified
“electronics 210,” not “the electronics in 210,” and Petitioner’s declarant,
Dr. Shamos, makes a clear distinction between “electronics 210” and
“magnetic stripe reader 210.” See Ex. 1003 ¶¶ C56–58.
We credit the testimony of Dr. Shamos over that of Mr. Zatkovich.
Mr. Zatkovich’s testimony is non-responsive to the position expressed by
Petitioner and Dr. Shamos. Petitioner’s position is consistent with the
express disclosure of Valliani, i.e., that “electronics 210” provides mobile
communication device 10 with card-provided PIN information stored in
memory 225 of smart card 230. Ex. 1005, 5:30–35, 6:27–29. Mr. Zatkovich
does not explain how his reading is consistent with the express disclosure of
Valliani.
Patent Owner also argues that “‘electronics 210’ does not perform any
kind of conversion, or processing of information from the integrated circuit
as required for the claimed controller.” PO Resp. 20. We disagree. In
Valliani, “electronics 210” provides PIN information stored in memory 225
of smartcard 230 to mobile communication device 10 over the PCMIA
interface in encrypted form using only internally stored encryption keys.
See Ex. 1005, 5:30–35, 6:27–29; see also Ex. 1003 ¶¶ C33–37, C54–64.
Moreover, as Mr. Zatkovich testifies, a person of ordinary skill in the
art would “understand that in order to convert the card information retrieved
from the card reader input device 38 to a format suitable for transmission it
would require a microprocessor, microcontroller, or a controller with similar
processing power.” Ex. 2004 ¶ 62. This testimony actually supports
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Petitioner’s identification of “electronics 210” as a controller. A person of
ordinary skill in the art would have known that Valliani’s “electronics 210,”
the component that encrypts PIN information taken from the integrated
circuit memory 225 of smartcard 230 and provides it to mobile
communication device 10, would have to include a microprocessor,
microcontroller, or a controller with similar processing power. Valliani does
not have to use the word “controller” for one with ordinary skill in the art to
understand that “electronics 210” incorporates a microprocessor,
microcontroller, or a controller with similar processing power.
Mr. Zatkovich also notes that Valliani’s mobile communication
device 10 contains a controller that executes software routines. Ex. 2004
¶ 64. While true, that does not preclude “electronics 210” in Valliani’s
module 200 from being a controller that satisfies the claim limitation. To
meet this limitation, it is sufficient for “electronics 210” to be coupled to the
sensor in reader/writer 260 and read the PIN information stored in integrated
circuit memory 225 of smartcard 230 and convert the PIN information to a
format suitable for transmission to mobile communications unit 10. The
claim does not require that all data read from integrated circuit memory 225
on smart card 230 by reader/writer 260 be converted by “electronics 210.”
Patent Owner also argues that “Vrotsos also cannot disclose the
controller with the functionality required in the claims.” PO Resp. 21.
Patent Owner argues Vrotsos “does not disclose the controller claimed in the
’107 patent that is either coupled to the claimed ‘sensor’ or performs the
functions of taking information stored on an integrated circuit, converting
that information into format suitable for transmission to a mobile
communication device, and transmitting that information.” Id. (citing Ex.
2004 ¶ 68).
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We disagree with Patent Owner. Dr. Shamos testifies, and we agree,
that in Vrotsos, “attachment 21 includes a processor 303 (the claimed
controller) coupled to an input device 308 (including a smartcard read/write
head, or the claimed sensor). The processor 303 receives input information
provided by the smartcard read/write head and processes the information.”
Ex. 1003 ¶ C65–66 (emphasis added) (citing Ex. 1006 ¶ 93).
With respect to converting card information, Dr. Shamos testifies that
Vrotsos:
describes at least two different ways of converting information
read from a smartchip card into a format suitable for transmission
to the wireless communication device. First, in describing FIG.
10, Vrotsos states that processing of the information involves
dividing it into data packets, which is a conversion into a format
suitable for transmission to the mobile communication device.
Moreover, Vrotsos states that the connector 27 of the attachment
includes an RS-232 serial interface connector, such that the
attachment processor 303 would format the information
according to the RS-232 standard. Either step of (1) dividing into
data packets, or (2) formatting according to RS-232 is converting
to a format suitable for transmission to a mobile communication
device.
Ex. 1003 ¶¶ C67–69 (citing Ex. 1006 ¶ 75).
Dr. Shamos also testifies, and we agree, that a person of ordinary skill
in the art:
would have known that transmission to a mobile communication
device would have been impossible if the information to be
transmitted were not converted to a format suitable for
transmission to that device and therefore would have known to
use a controller (e.g., a software program implemented in
EEPROM or a suitable customized circuit) to perform the
claimed conversion.
Ex. 1003 ¶ C72.
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Based on the complete record and for the reasons discussed herein, we
are persuaded that Petitioner has demonstrated that each of Valliani,
Vrotsos, and the combination thereof, teaches “a controller coupled to said
sensor for converting the recorded information stored on said smart card into
a format suitable for transmission to a communication device,” as recited in
claim 8.6
[8.D]: “a communication link for coupling said
controller to a communication device for the
transmission of said recorded information
therebetween”
Petitioner asserts that Valliani teaches this limitation because, in
Valliani:
the PCMCIA interface is a communication link for coupling said
controller to the device 10, corresponding to a communication
device. Specifically, the module 200 has a projecting member
280 that plugs into socket 90 (“mounted in a so-called PCMCIA-
slot in the housing of unit 10”) in the device 10 to effectuate
transmission there between.
Pet. 28 (citing Ex. 1005, 4:50–54; Ex. 1003 ¶¶ C74–77).
Petitioner argues that “[t]he only connection between the card reader
module 200 (which includes smart card reader/writer 260, and the controller)
and the device 10 (corresponding to a PDA) of Valliani is that physical
PCMCIA interface.” Pet. 29 (citing Ex. 1005, Figs. 1, 7). “Any data
transmission from the card reader module to the PDA (and vice versa),”
Petitioner argues, “occurs over that PCMCIA interface.” Pet. 29 (citing Ex.
1003 ¶¶ C78–81). “Accordingly,” Petitioner argues, “that PCMCIA

6 We discuss the rationale for combining Valliani and Vrotsos in Section
II.C.2.b.ii, infra.
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interface is for the transmission of said recorded information.” Pet. 29. Dr.
Shamos provides credible testimonial evidence supporting Petitioner’s
argument. See Ex. 1003 ¶¶ C74–80.
Patent Owner does not respond substantively to Petitioner’s
arguments or evidence with respect to this limitation. See PO Resp. 11–35.
Based on the complete record and for the reasons discussed herein, we
are persuaded that Petitioner has demonstrated that Valliani teaches a
communication link (PCMCIA interface) for coupling a controller
(electronics 210) to a communication device (10) for the transmission of
recorded information, as recited in claim 8.
[8.E]: “wherein the said sensor reads the recorded
information stored on said smart card”
For this limitation, Petitioner relies on the same arguments and
evidence it relied upon for limitation [8.B] (the “sensor” limitation). See
Pet. 29. Dr. Shamos provides support for Petitioner’s arguments. See Ex.
1003 ¶¶ C83–84.
Patent Owner does not provide any additional arguments or evidence
with respect to limitation [8.E]. See PO Resp. 11–35.
Based on the complete record, and for the reasons discussed supra in
Section II.C.2.b.i.[8.B], we are persuaded that Petitioner has demonstrated
that Valliani teaches a sensor (in reader/writer 260) that reads recorded
information stored on smart card (card 230), as recited in claim 8.
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[8.F]: “said controller converts said recorded
information read by said sensor into a format
suitable for transmission to said
communication device and transmits said
recorded information via the communication
link to said communication device”
Petitioner argues that “[t]he controller[s] of Valliani and Vrotsos
transmit the information read from the smart card via the PCMCIA interface
to the device 10, citing the arguments and evidence Petitioner presents with
respect to limitation [8.C]. See Pet. 30 (citing Ex. 1003 ¶¶ C85–93). Dr.
Shamos provides credible testimonial evidence supporting Petitioner’s
arguments. See Ex. 1003 ¶¶ C85–93.
Patent Owner does not provide any additional arguments or evidence
with respect to limitation [8.F]. See PO Resp. 11–35.
Based on the complete record and for the reasons discussed supra in
Section II.C.2.b.i.[8.C], we are persuaded that Petitioner has demonstrated
that each of Valliani, Vrotsos, and the combination thereof, teaches a
controller that converts recorded information read by a sensor into a format
suitable for transmission to a communication device and transmits the
recorded information via a communication link to the communication
device, as recited in claim 8.7

7 We discuss the rationale for combining Valliani and Vrotsos in Section
II.C.2.b.ii, infra.
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[8.G]: “said communication device transmits said
recorded information to a remote transaction
server for processing a commercial
transaction”
Petitioner first asserts that Valliani teaches this limitation. Petitioner
argues:
Valliani’s device 10 is a communication device that receives card
data from module 200. See Ex. 1005, 5:32–35. Valliani further
describes the device 10 transmits information to a host server 75,
which then validates that information, and is accordingly a
remote transaction server for processing a commercial
transaction. Specifically, the device 10 “communicates with host
75” to send the card data, such as “user account number, present
maximum dollar limit of the account, user identification as well
as preferably encrypted PIN data”, to host 75. Id. 7:63–65, Ex.
1003 ¶¶ C96–97. The host system 75 “will have available PIN
data from the true owner of card 230 and can rapidly confirm
whether the pinpad input PIN and known valid PIN agree.” Id.
6:36–49, Ex. 1003 ¶ C97. The known valid PIN corresponds to
the PIN provided by the card 230. Id. Accordingly, in Valliani,
the device 10 is a communication device that transmits the
recorded information to the host 75, which is a remote
transaction server for processing a commercial transaction. Ex.
1003 ¶¶ C94–100.
Pet. 30–31 (citing Ex. 1003 ¶¶ C94–100).
Petitioner also asserts that “[t]o the extent Valliani does not describe
how its communication device transmits the recorded information to a
remote transaction server for processing a commercial transaction in
sufficient detail, a [person of ordinary skill in the art] would have found it
obvious to consider other prior art, such as Vrotsos, for how to process a
transaction by transmitting card data to a remote server. Pet. 31 (citing Ex.
1003 ¶ C101).
Petitioner points to Vrotsos’ Figure 7 and Paragraph 53, arguing:
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the wireless communication device 1 [] sends a transaction
transmission to a server 101 [] over a wireless communications
network 550, using a wireless communications protocol such as
“CDMA, PCS, GSM, 802.11, or any wireless protocol utilized
by any wireless device.” The transaction transmission includes
the “transaction data,” from the card.
Pet. 31 (citing Ex. 1006 ¶¶ 52–53; see also Ex. 1003 ¶¶ C101–106).
Petitioner also argues that Vrotsos’ remote transaction server performs
processing of a commercial transaction because:
Vrotsos discloses the server 101 “analyze[s] the transaction
transmission . . . to verify authenticity of the user and other server
101 requirements.” Ex. 1006 ¶ 54. The server 101 also “send[s]
a transaction response to the wireless communications device 1.”
Id. That response “may be a confirmation number or approval
number, a transaction denied request, or a request asking a user
or the wireless communication device 1 for additional
information.” Id. Accordingly, the server 101 processes a
commercial transaction. See Ex. 1003 ¶¶ C107–C109.
Pet. 32.
Petitioner also argues that a person of ordinary skill in the art would
have been motivated to combine the teachings of Valliani and Vrotsos for
purposes of transmitting information to the remote transaction server
for processing a commercial transaction. Pet. 32–33. We consider
Petitioner’s arguments and evidence concerning the reasons to combine
Valliani and Vrotsos in this manner in Section II.C.2.b.ii, infra.
Patent Owner argues that “Valliani does not disclose this claim
element,” because Petitioner and its expert “make[] the same baseless
conclusion that Valliani’s PIN authentication transaction is the same as a
commercial transaction.” PO Resp. 22 (citing Ex. 1003 ¶ C96). Patent
Owner argues that Valliani “does not mention transmitting an account
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number to the host system,” and “only suggests the token PIN is sent to the
host system 75.” PO Resp. 23 (citing Ex. 2004 ¶ 74; Ex. 1005, 7:13–21).
Patent Owner argues that a person of ordinary skill in the art “would
understand that a commercial transaction is any transaction that involves
some form of payment, or money transfer, in exchange for goods and
services.” PO Resp. 23 (citing Ex. 2004 ¶¶ 32, 75). Patent Owner also
argues that Valliani’s “remote host 75 is not used for processing of the
transaction at all, but only used for retrieving and verifying PIN and
signature data.” PO Resp. 23 (citing Ex. 2013; Ex. 2004 ¶¶ 32, 75). Beyond
this authentication function, Petitioner argues, “Valliani provides no
indication that it processes any commercial transaction.” PO Resp. 24
(citing Ex. 2004 ¶ 76).
Patent Owner does not respond to Petitioner’s evidence and argument
that Vrotsos, or the combination of Valliani and Vrotsos, teaches the recited
limitation. See PO Resp. 11–35.
We disagree with Patent Owner that Valliani does not teach
transmitting recorded information to a remote transaction server for
processing a commercial transaction. Contrary to Patent Owner’s
arguments, Valliani’s invention is directed to performing commercial
transactions. Valliani expressly states that “[t]he invention relates generally
to data-capture systems used to transact business, and more particularly to
enabling PCMCIA-equipped generic portable computer systems including
personal digital assistants ("PDA") to perform such point of sale
transactions.” Ex. 1005, 1:16–20 (emphasis added). Valliani further
explains that “such systems are designed and intended to be used [] as point
of sale transaction terminals, to be used to facilitate transactions. Such
systems are commonly used when a consumer (or user) pays for a purchase,
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or is to receive a credit-back, typically in conjunction with the consumer's
credit card or debit card.” Id. at 1:26–33 (emphasis added).
Patent Owner narrowly focuses on one aspect of processing a
commercial transaction, the payment or transfer of money, to the exclusion
of other essential aspects of a commercial transaction, such as the validity of
the transaction card, verification of the card holder’s identity, the
identification of the financial institution, the account number, and the
availability of adequate funds for the transaction. Indeed, as Valliani clearly
explains:
[a]n appropriate smartcard 230 may store user account number,
present maximum dollar limit of the account, user identification
as well as preferably encrypted PIN data. Generally when a user
purchases a smartcard 230, memory 225 is programmed to store
the dollar value of the card, e.g., the value of the card. In a
preferred embodiment, smartcard reader/writer unit 260 can both
read and write to memory 225. Thus, if prior to the present
transaction memory 225 stored $1,000 as the present card
balance and if the present transaction is a $200 debit, unit 260
can so debit memory 225 such that the new present card balance
is $800.
Ex. 1005, 7:61–8:6. Valliani also explains that PIN information may be
transferred from transaction card 230 to remote host system 75 to facilitate
secure transactions. See Ex. 1005, 5:32–35, 7:13–25.
The claim limitation at issue reads in relevant part “transmit[ting] said
recorded information to a remote transaction server for processing a
commercial transaction.” The limitation does not specify what particular
recorded information is transferred to a remote transaction server to process
a commercial transaction. Information recorded on a transaction card, such
as the information identified by Valliani, when transferred to a remote
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transaction server for processing a commercial transaction, would meet the
limitation.
As Dr. Shamos testifies, “Valliani discloses that its device is for credit
cards transactions, in which the device reads the information from the
magnetic stripe (or smartcard) and communicates with a remote host system
via a mobile device to process a transaction for which the card is being
used.” Ex. 1017 ¶ 50 (citing Ex. 1005, 2:55–3:5). Dr. Shamos further
testifies, and we agree, “[a] credit card transaction is a commercial
transaction. From this description of Valliani’s purpose and process, [a
person of ordinary skill in the art] would have understood Valliani as
effecting a commercial transaction between the module 200 and the remote
host server 75 via the mobile device 10.” Ex. 1017 ¶ 50.
Based on the complete record and for the reasons discussed herein, we
are persuaded that Petitioner has demonstrated that Valliani teaches a
communication device (device 10) that transmits recorded information (user
account number, present maximum dollar limit of the account, user
identification, encrypted PIN data) to a remote transaction server (remote
host system 75) for processing a commercial transaction (credit card
transaction) as recited in claim 8. We are also persuaded that Vrotsos
teaches a communication device (wireless communication device 1) that
transmits recorded information (transaction data) to a remote transaction
server (remote computer/server 101) for processing a commercial
transaction.8

8 We discuss the rationale for combining Valliani and Vrotsos in Section
II.C.2.b.ii, infra.
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ii. Rationale to Combine Valliani and Vrotsos
For limitations [8.B] (“sensor”), [8.C] (“controller”), and [8.G]
(“remote transaction server”), Petitioner argues a combination of Valliani
and Vrotsos in addition to the arguments Petitioner provides for Valliani and
Vrotsos separately. See Pet. 22–23, 27, 32–33; see also Ex. 1003 ¶¶ C48–
53, 65–73, 101–112.
Limitation [8.B] recites “a sensor incorporated into said input device
for reading said recorded information stored on an integrated circuit
incorporated into said smart card.” Ex. 1001, 12:65–67. Petitioner argues,
“[t]o the extent that Valliani does not explicitly describe a sensor that reads
recorded information stored on an integrated circuit, a [person of ordinary
skill in the art] would have found it obvious to consider other prior art, such
as Vrotsos, for how to read a smart card. Pet. 21 (citing Ex. 1003 ¶¶ C47–
49).
Specifically, Petitioner argues, a person of ordinary skill in the art
“would have found it obvious to incorporate Vrotsos’ teachings into Valliani
in order to implement the smart card reader/writer unit 260 to include [a]
sensor incorporated into said input device for reading said recorded
information stored on an integrated circuit incorporated into said smart
card.” Pet. 22.
“First,” Petitioner argues, “both Valliani and Vrotsos need to read data
stored on a smartcard’s chip.” Id. (citing Ex. 1005, 4:42–47, Ex. 1006
¶¶ 28–31, 41). “Thus,” Petitioner argues, a [person of ordinary skill in the
art] would have been motivated by Vrotsos, which discloses a smartcard
read/write head within the slot to read information from the smartchip. Pet.
22 (citing Ex. 1006 ¶ 41; Ex. 1003 ¶ C50). “It would have been obvious,”
Petitioner argues, “for a [person of ordinary skill in the art] to apply to
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Valliani Vrotsos’ teachings of a smartcard read/write head to read recorded
information from the smartcard.” Pet. 22.
“Second,” Petitioner argues, “Vrotsos complements Valliani.” Pet.
22. Petitioner argues:
Valliani’s system reads card data from a smart card (Ex. 1005,
3:18–21, 8:1–3), processes it (id. 5:30–40), and sends the data to
the portable computing device (id.), which communicates with a
remote server to verify information from the smart card (id.
6:33–43). Vrotsos’s system likewise reads information stored on
a credit card (Ex. 1006 ¶ 41), processes that information (id.
¶ 52), and transmits it to the phone (id. ¶ 43), which transmits the
data to a remote computer to process the credit card information
and facilitate the transaction (id. ¶ 53). Thus, to the extent that
Valliani does not disclose the precise configuration of how its
smartcard reader/writer unit reads the smart card, Vrotsos
discloses a specific configuration that provides the same function
described by Valliani. Ex. 1003 ¶ C51. Accordingly, a [person of
ordinary skill in the art] would have looked to Vrotsos. Id.
Pet 22–23.
“Third,” Petitioner argues:
using a smartcard read/write head was known to read recorded
information stored on an integrated circuit incorporated into
said smart card. Thus, a [person of ordinary skill in the art]
applying Vrotsos’s teaching to Valliani would have expected to
yield the predictable result of success. Specifically, applying a
smartcard read/write head to Valliani’s smart card read/write unit
260 would have enabled the unit 260 to read the data encoded by
the smartcard’s memory 225.
Pet. 23 (citing Ex. 1006 ¶ 41; Ex. 1003 ¶ C52).
Limitation [8.C] recites “a controller coupled to said sensor for
converting the recorded information stored on said smart card into a format
suitable for transmission to a communication device.” Ex. 1001, 13:1–4.
Petitioner argues a person of ordinary skill in the art:
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would have known that transmission to a communication device
would not have been realistic if the transmitted information was
not converted to a format suitable for transmission to that device,
and therefore [a person of ordinary skill in the art] would have
known to use a controller to perform that conversion. [Ex. 1003]
¶ C72. Thus, [a person of ordinary skill in the art] applying
Vrotsos’s teaching to Valliani would have expected to yield the
predictable result of success. Id. A [person of ordinary skill in
the art] would have been motivated to combine Vrotsos’s
specific disclosure of a processing card data with Valliani’s
system, at least because Vrotsos generally complements Valliani,
as explained in [the Petition] Section IX.A.1.b.ii. Accordingly,
Petitioner refers to the motivation to combine Valliani and
Vrotsos’s teachings in [that Section].
Pet. 27.
Limitation [8.G] recites “said controller converts said recorded
information read by said sensor into a format suitable for transmission to
said communication device and transmits said recorded information via the
communication link to said communication device.” Ex. 1001, 13:9–13.
Petitioner argues a person of ordinary skill in the art:
would have been motivated to implement Valliani’s system to
transmit said information to a remote transaction server for
processing a commercial transaction. The device 10 provides
card data to the host server 75, which validates that information.
[Ex. 1003] ¶ C110; see [Pet.] Section IX.A.1.g. Thus, [a person
of ordinary skill in the art] would have been motivated to look
for another reference that provides further details of how to
transmit said information to the remote transaction server for
processing a commercial transaction. Vrotsos provides those
details.
It would have been obvious to implement Valliani’s
system to transmit the card data (e.g., PIN information, or
account information) to the host server 75 for processing a
commercial transaction, such that the host server 75 would
analyze the data to verify the user’s authenticity. Such an
implementation was known, as disclosed by Vrotsos. As such, [a
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person of ordinary skill in the art] would have expected that
applying the teaching of Vrotsos to Valliani would yield
predictable and successful results. Id.
Pet. 32–33.
Patent Owner argues that Petitioner has not demonstrated that a
person of ordinary skill in the art would be motivated to combine Valliani
and Vrotsos. See PO Resp. 29–35. Patent Owner argues that Petitioner
“supplies only conclusory, hindsight-based observations suggesting that [a
person of ordinary skill in the art] would have been motivated to search out
elements from the prior art that would provide the same benefits as the ’107
patent claims.” Id. at 30.
Patent Owner argues that a person of ordinary skill in the art
would recognize that Vrotsos’s cryptic mention of a “smartcard
read/write head” does not disclose a smart card reader capable of
reading an integrated circuit at all, and certainly not at any level
of detail that would teach one how to integrate Vrotsos’s card
reader into Valliani’s device. See Ex. 2004 ¶¶ 49–56. Neither
Valliani nor Vrotsos would teach [a person of ordinary skill in
the art] anything of substance about reading, converting,
encrypting data, and/or transmitting data from an integrated
circuit, and [a person of ordinary skill in the art] would not see
the value in consulting either reference in the reading and
encryption of information from the integrated circuit of a
payment device.
PO Resp. 32–33.
Patent Owner also argues that:
[t]he combination of Vrotsos and Valliani would present
numerous practical problems. [A person of ordinary skill in the
art] would understand that no aspects of Vrotsos’ converting or
communicating data between its reader and cell phone (e.g.,
RS232 link) are compatible with Valliani’s reader and
communication device (PCMCIA Bus).
PO Resp. 33 (citing Ex. 2004 ¶ 104).
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Patent Owner further argues that
Valliani teaches-away from any solution that does not utilize a
PCMCIA interface. Ex. 2004 ¶¶ 106, 108. Therefore, [a person
of ordinary skill in the art] would not consider combining
Valliani with any reference that does not disclose a PCMCIA
compatible solution. Ex. 2004 ¶ 108. And as mentioned above,
no aspect of the Vrotsos reference is compatible with the
PCMCIA standard.
PO Resp. 34 (citing Ex. 2004 ¶¶ 102–108).
As an example of Valliani’s purported incompatibility with Vrotsos,
Patent Owner argues that “Valliani’s PCMCIA interface requires a 68-pin
electrical connection using a parallel communication protocol,” while
“Vrotsos can use a 4 pin RS-232 connection and a serial communication
protocol.” PO Resp. 34 (citing Ex. 2004 ¶ 109). Patent Owner argues,
“Valliani’s PCMCIA devices must adhere to international standards for
device system architecture, software drivers, device identification, and
command protocols. PO Resp. 34 (citing Ex. 2015 (PCMCIA System); see
also Ex. 1005, 4:61–67). Patent Owner argues, “Vrotsos doesn’t mention
standards and none of its disclosed embodiments appear to be PCMCIA-
compliant.” PO Resp. 34–35 (citing Ex. 2004 ¶ 110).
We disagree with Patent Owner that Petitioner fails to explain
sufficiently how and why a person of ordinary skill in the art would have
combined the teachings of Valliani and Vrotsos. Patent Owner criticizes the
asserted combination proffered by Petitioner, but largely ignores the
evidence that many of these concepts and technologies, including point of
sale (POS) devices, transaction and smart cards, portable card readers,
sensors, integrated circuits, control processors, signal processing and
conversion, encryption, communication links, networks, mobile phones, and
wireless transmission, were pre-existing and well-known technologies in the
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art at the time of the invention. See, e.g., Ex. 1001, 1:30–2:27; Ex. 1003
¶¶ 35–37, 48–68. For example, the ’107 patent points out that “[e]lectronic
fund transfer over mobile phones is growing popular. Many systems include
combining a point of sale (POS) device with a wireless communication
device such as a cell phone.” Ex. 1001, 1:41–44. The ’107 patent goes on
to explain that:
These [prior art] POS devices include a processor as well as an
input device to receive and process information from a
transaction card such as a debit card, a credit card, a cash card, a
stored value card, an ATM card or combinations thereof and the
like. The input device may include a bar code reader, a magnetic
stripe reader, an integrated circuit reader, a smartcard reader, a
fingerprint scanner, an optical scanner, a signature pad, an
alphanumeric keypad (including a PIN pad), a proximity
detector, an audio recording device, a camera or combinations
thereof and the like.
Id. at 1:45–54.
The ’107 patent even explains how these prior art systems largely
work:
The processor of the POS device receives information from the
transaction card and sends it to a remote computer via a
communication network. This information can be transmitted by
the processor via the wireless communication device. The
wireless communication device includes a transceiver, a
communication port or any other type of similar communication
device capable of transmitting information received by the
portable transaction device processor from the transaction card
to the remote computer. The communication link between the
remote computer and the wireless communication device can be
provided by the processor of the wireless communication device.
Id. at 1:54–66.
Moreover, Patent Owner does not appear to take into account the level
of skill of someone of ordinary skill in the art, here, a person with a
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bachelor’s degree in electrical or computer engineering or equivalent having
two years of relevant experience in the fields of embedded systems and
mobile communication device interfaces, or otherwise equivalent industry
experience in the field. See Section II.A, supra.
Given this background in the art and the level of ordinary skill, Patent
Owner’s criticism that Petitioner has not sufficiently explained how to
combine Valliani and Vrotsos or how the two references would work
together is unavailing. For example, Patent Owner argues that “Valliani’s
PCMCIA interface requires a 68-pin electrical connection using a parallel
communication protocol,” while “Vrotsos can use a 4 pin RS-232
connection and a serial communication protocol” (id. at 27–28). Patent
Owner’s argument is nonresponsive to Petitioner’s proposed combination.
Petitioner is not proposing to physically combine Vrotsos’ 4-pin connector
and serial communication protocol with Valliani’s 86-pin connector and
parallel communication protocol. “[I]t is not necessary that the inventions of
the references be physically combinable to render obvious the invention
under review.” In re Sneed, 710 F.2d 1544, 1550, 218 USPQ 385, 389 (Fed.
Cir. 1983). “Combining the teachings of references does not involve an
ability to combine their specific structures.” In re Nievelt, 482 F.2d 965, 179
USPQ 224, 226 (CCPA 1973).
With respect to the recited sensor in limitation [8.B], Petitioner
proposes combining Vrotsos’ teaching of a smartcard read/write head with
Valliani’s teaching of a smart card reader/writer unit. See Pet. 21–23; Ex.
1003 ¶¶ C48–50. Dr. Shamos testifies that a person of ordinary skill in the
art:
would have found it obvious to implement the smartcard
reader/writer unit in Valliani to make the reader include a
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smartcard read head [as in Vrotsos]. Valliani necessarily
recognizes that the smart card device should include a smart card
read head as Valliani contemplates a smartcard reader/writer unit
reading data from and writing data to the memory 225 of a card
230 (Valliani at 8:1–3). Adding the read head would result in a
predictable result of a successful portable transaction device.
Ex. 1003 ¶ C52.
With respect to the recited controller in limitation [8.C], Petitioner is
proposing combining the functionality of Vrotsos’ processor 303 with the
controller of Valliani’s electronics 210 to convert the recorded information
into a format suitable for transmission to Valliani’s device 10. See, e.g., Pet.
25–27; see also Ex. 1003 ¶¶ C54–73. Dr. Shamos testifies that “Vrotsos
describes at least two different ways of converting information read from a
smartchip card into a format suitable for transmission to [a] wireless
communication device.” See Ex. 1003 ¶ C67, see also id. ¶¶ 68–73.
Dr. Shamos also testifies that a person of ordinary skill in the art “would
have known to use a controller (e.g., a software program implemented in
EEPROM or a suitable customized circuit) to perform the claimed
conversion.” Ex. 1003 ¶ C72. Vrotsos discloses a specific configuration
that provides the same function described by Valliani that includes such a
controller.
With respect to the recited remote transaction server in limitation
[8.G], Petitioner is proposing, to the extent necessary, incorporating Vrotsos’
teaching of a communication device transmitting recorded information to a
remote transaction server with Valliani’s teaching of device 10 in order to
enable Valliani’s remote host system 75 to process a commercial transaction.
See Pet. 31–33; see also Ex. 1003 ¶¶ 94–112. As Dr. Shamos testifies,
“Vrotsos’s system sends transaction transmission to a server over a wireless
communications network using wireless protocols and such transaction
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transmission include encrypted transaction data from the card 230.” Id.
¶ C103. Dr. Shamos also testifies that a person of ordinary skill in the art:
would have been motivated to apply the teachings of Vrotsos to
Valliani’s system so that Valliani’s host system 75 could verify
the card’s PIN data. Valliani suggests that the device 10 provides
the transaction data to the host server, which validates the
transaction. This would be impossible without a transmission
from the mobile device to the remote server. The application of
Vrotsos’s teachings would have been straightforward to [a
person of ordinary skill in the art] and would have achieved
predictable results (i.e., allowing the remote host to verify the
card data while protecting that card data from the user of the
PDA). Transmission of card data to a remote server for
authorizing (processing) a transaction was a necessary step in
credit card processing. Thus, this limitation would have been
obvious in view of Valliani and Vrotsos.
Ex. 1003 ¶ C110.
We note that “[u]nder the correct [obviousness] analysis, any need or
problem known in the field of endeavor at the time of invention and
addressed by the patent can provide a reason for combining the elements in
the manner claimed.” KSR, 550 U.S. at 420. Often, the strongest rationale
for combining references is a recognition that some advantage or expected
beneficial result would have been produced by their combination. See, e.g.,
Novartis AG v. Torrent Pharms. Ltd., 853 F.3d 1316, 1326 (Fed. Cir. 2017);
Dystar Textilfarben GmbH & Co. Deutschland KG v. C.H. Patrick, 464 F.3d
1356 (Fed. Cir. 2006); In re Sernaker, 702 F.2d 989, 994–95 (Fed. Cir.
1983).
Here, we find that Petitioner’s explanation of combining the teachings
of Vrotsos and Valliani to 1) incorporate Vrotsos’ smartcard read head with
Valliani’s smartcard reader/writer unit to create a more predictable and
successful portable transaction device; 2) combine the functionality of
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Vrotsos’ processor 303 with Valliani’s electronics 210 to convert the stored
smart card information into a format suitable for transmission to Valliani’s
device 10; and 3) incorporate Vrotsos’ teaching of a communication device
transmitting recorded information to a remote transaction server with
Valliani’s teaching of device 10 to enable Valliani’s remote host system 75
to successfully process a commercial transaction, articulate sufficient
rationales for combining the teachings of Valliani and Vrotsos in the manner
proffered by Petitioner.
We therefore find that Petitioner has shown persuasively by a
preponderance of the evidence that one of ordinary skill in the art at the time
of the invention would have been motivated to combine the teachings of
Valliani and Vrotsos in the manner proffered by Petitioner.
iii. Conclusion as to Claim 8
Based upon consideration of the entire record, we are persuaded by
Petitioner’s arguments and evidence, notwithstanding Patent Owner’s
arguments and evidence, and determine that Petitioner has demonstrated by
a preponderance of the evidence that independent claim 8 is unpatentable
under 35 U.S.C. § 103(a) as obvious over Valliani and Vrotsos.
iv. Dependent Claim 9
Claim 9 recites, “[a]n apparatus according to claim 8, wherein said
smart card is selected from a group consisting of a chip card, EMV card,
proximity detector or NFC card, contactless card, or any combination
thereof.” Ex. 1001, 13:17–20.
Petitioner argues that “Valliani discloses reading data from a smart
card using a contact reader. A [person of ordinary skill in the art] would
have known that a contact reader reads a chip on the smart card, such that
the smart card is a chip card.” Pet. 33 (citing Ex. 1003 ¶¶ C113–123). Dr.
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Shamos testifies that a person of ordinary skill in the art “would have
understood the smartcard 230 in Valliani to be a chip card because the
memory 225 stores data electronically and a [person of ordinary skill in the
art] would have known the memory is electronic memory, i.e. an IC or a
chip.” Ex. 1003 ¶ C119.
Patent Owner does not respond to Petitioner’s arguments and
evidence with respect to claim 9. See PO Resp. 11–35.
We are persuaded that Valliani (smartcard 230 with memory 225)
teaches “wherein said smart card is selected from a group consisting of a
chip card, EMV card, proximity detector or NFC card, contactless card, or
any combination thereof,” as recited in dependent claim 9.
Based upon consideration of the entire record, we are persuaded by
Petitioner’s arguments and evidence and determine that Petitioner has
demonstrated by a preponderance of the evidence that dependent claim 9 is
unpatentable under 35 U.S.C. § 103(a) as obvious over Valliani.
v. Dependent Claim 10
Claim 10 recites, “[a]n apparatus according to claim 8, wherein said
recorded information transmitted via the communication link to said
communication device is encrypted.” Ex. 1001, 13:21–23.
Petitioner argues that:
Valliani discloses a communication link for transmission of
information stored on a smart card. Valliani further discloses
that the information is converted into a format suitable for
transmission before transmission. Specifically, Valliani’s system
“provides any card 230-provided PIN information to device 10
in encrypted form.” Ex. 1005, 5:32–34. In Valliani, the module
200 includes “[a]dditional software [that] can also provide data
encryption.” Ex. 1005 3:7–8, see also id. Abstract.
Pet. 34 (citing Ex. 1003 ¶¶ C124–134).
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Patent Owner asserts that “Valliani does not disclose a device that
encrypts the recorded information before sending it on to the communication
device.” PO Resp. 24. Patent Owner argues that in Valliani, “[t]he only
encryption that is explicitly described as happening in module 200 is when
PIN data is manually entered by the user at the keypad and then encrypted.
PO Resp. 25 (citing Ex. 1005, 6:25–35). Patent Owner also argues that
“Valliani does not disclose the ability to encrypt information derived from
the integrated circuit required in the independent claims, from which the
encryption claims respectively depend.” PO Resp. 26 (citing Ex. 2004 ¶ 85).
We disagree with Patent Owner. Valliani explains that there is a need
for point of sale transaction systems that can “perform the necessary
functions required to securely transact business.” Ex. 1005, 2:34–37.
Valliani also explains that “[a]dditional software can also provide data
encryption.’” Ex. 1005, 3:7–8. Valliani expressly states that “[t]o promote
security, electronics 210 provides any card 230-provided PIN information to
device 10 in encrypted form only using internally stored encryption keys.”
Id. at 5:32–35 (emphasis added).
A person of ordinary skill in the art reading these disclosures in
Valliani would understand that Valliani’s invention addresses a need for
point of sale transaction systems to perform secure business transactions.
One way Valliani addresses this need is to provide “[a]dditional software
[that] can also provide data encryption.” Ex. 1005, 3:7–8. Valliani’s data
encryption software “provides any card 230-provided PIN information to
device 10 in encrypted form only using internally stored encryption keys.”
Id. at 5:32–35.
This understanding of Valliani is confirmed by Dr. Shamos, who
testifies that:
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Valliani discloses storing PIN data in memory 225 on a card 230.
The smart card reader/writer 260 (the claimed sensor) reads the
data from the memory 225 (4:45–47), and the electronics 210,
which is coupled to the smart card reader/writer 260, converts
that data into an encrypted signal indicative of the PIN data.
Further, Valliani teaches a module 200 plugged into a PDA 10
over a physical connection (e.g., the PCMCIA interface), and the
module transmits encrypted PIN data to the PDA.
Ex. 1003 ¶ C128.
We are persuaded that Valliani teaches recorded information (PIN
data stored in memory 225 on card 230) transmitted via the communication
link (PCMCIA interface) to the communication device (device 10) is
encrypted as recited in dependent claim 10.
Based upon consideration of the entire record, we are persuaded by
Petitioner’s arguments and evidence and determine that Petitioner has
demonstrated by a preponderance of the evidence that dependent claim 10 is
unpatentable under 35 U.S.C. § 103(a) as obvious over Valliani.
vi. Dependent Claim 11
Claim 11 recites, “[a]n apparatus according to claim 8, wherein the
communication link comprises a link selected from the group consisting of a
wired connection, a wireless connection, an analog channel, a digital
channel, Bluetooth connection, a USB connection, a Wi-Fi connection and
any combination thereof.” Ex. 1001, 13:24–29.
Petitioner asserts that:
Valliani discloses a physical connection via a PCMCIA port, the
wired connection between the PCMCIA compliant device, the
portable reader apparatus, and the PCMCIA interface port of
the device 10, the mobile communication device.
Pet. 34 (citing Ex. 1005, 4:23–28, 4:50–57; Ex. 1003 ¶¶ C135–144).
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Patent Owner does not respond to Petitioner’s arguments and
evidence with respect to claim 4. See PO Resp. 11–35.
We are persuaded that Valliani teaches a communication link (a wired
connection in the form of a PCMCIA interface) that comprises a link
selected from the group consisting of a wired connection, a wireless
connection, an analog channel, a digital channel, Bluetooth connection, a
USB connection, a Wi-Fi connection and any combination thereof, as recited
in dependent claim 4.
Based upon consideration of the entire record, we are persuaded by
Petitioner’s arguments and evidence and determine that Petitioner has
demonstrated by a preponderance of the evidence that dependent claim 11 is
unpatentable under 35 U.S.C. § 103(a) as obvious over Valliani.
vii. Dependent Claim 12
Claim 12 recites, “[a]n apparatus according to claim 8, wherein said
communication device receives transaction validation information from said
remote transaction server.” Ex. 1001, 13:30–32.
Petitioner argues:
In Valliani, when the host system, the remote transaction server,
validates the user’s PIN, the device 10, corresponding to said
communication device, receives transaction validation
information from the host system 75 indicating the transaction is
allowed to proceed. Specifically, further to Section IX.A.1.h, the
host system 75 compares the PIN data received from the device
10 to the known valid PIN. Ex. 1005, 6:33–46. The known valid
PIN corresponds to the PIN provided by the card 230. The host
system then determines whether the “pinpad input PIN and the
known valid PIN agree” (id.) and allows the transaction to
proceed. Ex. 1003 ¶ C146. If the PINs match, “the comparison
outcome can be sent by host system 75 to device 10, whereupon
an individual using device and module 210 to transact a sale
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rapidly learns whether the sale should proceed.” [Ex. 1005]
6:39–42.
Pet. 35 (citing Ex. 1003 ¶¶ C145–147).
Petitioner also argues:
[t]o the extent Valliani does not explicitly disclose this element,
Vrotsos does. Vrotsos describes a server or remote computer 101
transmitting a transaction response to a wireless communication
device 1. Ex. 1006, ¶54. The transaction response can be a
“confirmation number or approval number.” Id. The response
may also be “that the transaction could not be completed . . . or
that additional information is required from the purchaser or
user.” Id. ¶ 96. That transaction response corresponds to
transaction validation information that is received by the phone
from the server. Accordingly, Vrotsos discloses this claim
element.
Pet. 35–36 (citing Ex. 1003 ¶¶ C148–151).
Petitioner further argues a person of ordinary skill in the art:
would have been motivated to look for another reference in the
mobile payment processing space that provides details of a
process that provides a receipt of transaction validation to the
user. Vrotsos provides those details. Thus, a POSITA would have
found it obvious to incorporate Vrotsos’ teachings into Valliani
in order to inform the user that the transaction has been validated
and is allowed to proceed. [Ex. 1003] ¶ C152.
Vrotsos discloses a specific configuration in which the
wireless communication device receives transaction validation
information. It would have been obvious and straightforward to
a POSITA to provide that transaction validation information to
Valliani’s device 10, both because it was usual and customary at
the time to do so, and because Vrotsos explicitly discloses
providing a transaction response to the wireless device. Id.
¶ [C]153. One practical benefit of the wireless communication
device receiving transaction validation is the ability for the
phone’s user to know whether the transaction was validated or
not. If validated, the user may complete the transaction. If not,
the user may need to retry inserting the user’s smart card into the
slot. As such, a POSITA would have expected that applying the
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teaching of Vrotsos to Valliani would yield predictable and
successful results. Id. ¶ C154.
Pet. 36–37.
Patent Owner argues that Valliani does not teach this limitation
because Petitioner incorrectly “asserts that PIN validation is equivalent to
transaction validation information.” PO Resp. 28. Patent Owner argues that
“[t]here is much more information that must be exchanged and processed for
a commercial transaction to be deemed validated and completed.” Id. (citing
Ex. 2004 ¶ 96). Patent Owner argues that “Valliani does not process a
commercial transaction, which would require some form of payment in
exchange for goods and services. PO Resp. 29 (citing Ex. 2004 ¶ 97; Ex.
2013).
Patent Owner does not respond directly to Petitioner’s arguments and
evidence that Vrotsos teaches the recited limitation.9 Id. at 22–23.
We disagree with Patent Owner. The limitation recites in relevant
part, “wherein said communication device receives transaction validation
information from said remote transaction server.” It does not recite
“wherein said communication device receives transaction validation and
completion information from said remote transaction server.” Indeed, the
’107 patent explains that “validation information” is sent when a “remoter
[sic] processor/issuer 20… accept[s] or den[ies] the request and sends this
validation information to the transaction server 18 which then… provid[es]
the seller and buyer with a confirmation or a rejection message.” Ex. 1001,
7:24–30. This description of validation information is comparable to the

9 Patent Owner’s arguments with respect to Vrotsos are limited to arguments
concerning a rationale to combine Valliani and Vrotsos, which we discuss in
Section. II.C.2.b.ii, supra.
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PIN validation process described by Valliani. See Ex. 1005, 7:17–21. Dr.
Shamos provides credible testimonial evidence consistent with this
understanding. See Ex. 1003 ¶¶ C145–147.
Dr. Shamos also provides credible testimonial evidence that Vrotsos
teaches transmitting payment authorization information to a user’s wireless
communication device from a remote server (the recited remote transaction
server), which is unrebutted by Patent Owner. See Ex. 1003 ¶¶ C148–154.
We are persuaded that Valliani, Vrotsos, and their asserted
combination teach “wherein said communication device receives transaction
validation information from said remote transaction server,” as recited in
dependent claim 12.
Based upon consideration of the entire record, we are persuaded by
Petitioner’s arguments and evidence and determine that Petitioner has
demonstrated by a preponderance of the evidence that dependent claim 5 is
unpatentable under 35 U.S.C. § 103(a) as obvious over Valliani and Vrotsos.
viii. Dependent Claim 13
Claim 13 recites, “[a]n apparatus according to claim 8, wherein the
communication device comprises a device selected from a wireless
communication device, a landline phone, a mobile phone, a cellular phone, a
personal digital assistant (PDA), a pager computer, a Smart Phone™, a
Blackberry™, an iPhone™, an iPad™ and a tablet.” Ex. 1001, 13:33–38.
Petitioner asserts that “[i]n Valliani, device 10, the mobile
communication device can be a “personal digital assistant (PDA).” Pet. 37
(citing Ex. 1005, 3:54; Ex. 1003 ¶¶ C156–161).
Patent Owner does not respond to Petitioner’s arguments and
evidence with respect to claim 6. See PO Resp. 11–35.
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We are persuaded that Valliani teaches a communication device (PDA
10) that comprises a device selected from a wireless communication device,
a landline phone, a mobile phone, a cellular phone, a personal digital
assistant (PDA), a pager computer, a Smart Phone™, a Blackberry™, an
iPhone™, an iPad™ and a tablet, as recited in dependent claim 13.
Based upon consideration of the entire record, we are persuaded by
Petitioner’s arguments and evidence and determine that Petitioner has
demonstrated by a preponderance of the evidence that dependent claim 13 is
unpatentable under 35 U.S.C. § 103(a) as obvious over Valliani.
ix. Independent Claims 15, 29, and 36
Independent claim 29 substantially similar to independent claim 8,
except that claim 29 is written as a method claim whereas claim 8 is written
as an apparatus claim. Ex. 1001, 12:60–13:16, 15:10–36. Claims 15 and 36
are substantially similar to each other, but here each recites a “payment
device” instead of a “smart card,” with claim 15 written as an apparatus
claim and claim 36 written as a method claim. Id. at 13:42–67, 16:4–31.
Both Petitioner and Patent Owner rely on the same evidence and
arguments for independent claims 15, 29, and 36 as they did for claim 8.
See Pet. 37–41, 43–44; PO Resp. 11–35; Pet. Reply 5–18; PO Sur-reply 3–
16.
Based upon consideration of the entire record we are persuaded by
Petitioner’s arguments and evidence, notwithstanding Patent Owner’s
arguments and evidence. For the reasons discussed with respect to claim 8,
we determine that Petitioner has demonstrated by a preponderance of the
evidence that independent claims 15, 29, and 36 are unpatentable under
35 U.S.C. § 103(a) as obvious over Valliani and Vrotsos.
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x. Dependent Claims 16–20, 30–34, and 37–41
Claims 16–20, 30–34, and 37–41 are substantially similar to claims 9–
13, except that claims 16–20 depend from independent claim 15, claims 30–
34 depend from independent claim 29, and claims 37–41 depend from
independent claim 36.
Both Petitioner and Patent Owner rely on the same evidence and
arguments for dependent claims 16–20, 30–34, and 37–41 as they did for
dependent claims 9–13. See Pet. 39–45; PO Resp. 11–35; Pet. Reply 5–18;
PO Sur-reply 3–16.
Based upon consideration of the entire record, and for the reasons
stated, supra, with respect to dependent claims 9–13, we are persuaded by
Petitioner’s arguments and evidence, notwithstanding Patent Owner’s
arguments and evidence, and determine that Petitioner has demonstrated by
a preponderance of the evidence that dependent claims 16–20, 30–34, and
37–41 are unpatentable under 35 U.S.C. § 103(a) as obvious over Valliani
and Vrotsos.
c. Obviousness over Valliani, Vrotsos, and Bryant
Dependent claim 14 recites, “[t]he apparatus according to claim 8,
further comprising a stand operative to support the input device and
communication device.” Ex. 1001, 13:39–41. Claims 21, 35, and 42 are
substantially similar.
Petitioner asserts the combination of Valliani, Vrotsos, and Bryant
teaches or suggests the recited limitations of claims 14, 21, 35, 42. See Pet.
46–49. Petitioner argues that Bryant discloses a telephone stand with
flexible attaching arms that, when combined with the teachings Valliani and
Vrotsos, teaches or suggests the limitations of these claims. Id. at 46–47
(citing Ex. 1003 ¶¶ C162–166; Ex. 1010, Figs. 1, 3, 4A, 3:12–14, 4:18).
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Petitioner provides argument and evidence for a reason to combine the
teachings of Bryant with that of Valliani and Vrotsos. See Pet. 48–49. For
example, Petitioner argues it would have been obvious to a person of
ordinary skill in the art “to use Bryant’s stand to support the device 10 and
module 200 by causing the attaching arms 160 to clinch the long edges of
Valliani’s device 10, while the module 200 is positioned either at the base or
at the top of the device 10. This way, the credit card could be swiped
horizontally without any obstruction.” Id. at 48 (citing Ex. 1003 ¶ C168).
Petitioner also argues that “it would have allowed the user to ‘easily and
quickly read the telephone display at any time’ as contemplated by Bryant
(Ex. 1010, 1:43–44), and access both the display on the device 10 as well as
the card reader slot on the module 200 without obstruction.” Pet. 48 (citing
Ex. 1003 ¶ C169). “[S]ecuring Valliani’s combined unit to a stand that
supports both the input device as well as the communication device,”
Petitioner argues, “would have enabled the user to comfortably view and
access the screen on the device 10 as well as the card reader.” Pet. 48–49
(citing Ex. 1003 ¶ C170).
Patent Owner argues that “[f]or the same reasons that claims 8, 15, 29,
and 36 are not obvious over Valliani and Vrotsos, claims 14, 21, 35, and 42
are not obvious over those references combined with Bryant.” PO Resp. 35.
Patent Owner’s argument is unavailing for the reasons discussed
supra with respect to independent claims 8, 15, 29, and 36.
We are persuaded that Bryant teaches a stand (Bryant’s stand 100)
operative to support an input device (Valliani’s module 200) and a
communication device (Valliani’s device 10), as recited in dependent claims
14, 21, 35, and 42.
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Based upon consideration of the entire record, and for the reasons
discussed directly above, as well as those discussed with respect to
independent claims 8, 15, 29, and 36, we are persuaded by Petitioner’s
arguments and evidence and determine that Petitioner has demonstrated by a
preponderance of the evidence that dependent claims 14, 21, 35, and 42 are
unpatentable under 35 U.S.C. § 103(a) as obvious over the combination of
Valliani, Vrotsos, and Bryant.
3. Other Asserted Grounds
Petitioner asserts that the challenged claims are also obvious over
Bear, Lahteenmaki, Bryant, and Vrotsos in various combinations. See Pet.
49–83. However, because Petitioner has already shown that all of the
challenged claims are unpatentable as discussed supra, we do not reach
these additional asserted grounds. See Beloit Corp. v. Valmet Oy, 742 F.2d
1421, 1423 (Fed. Cir. 1984) (“The Commission . . . is at perfect liberty to
reach a ‘no violation’ determination on a single dispositive issue.”); Boston
Sci. Scimed, Inc. v. Cook Grp. Inc., 809 F. App’x 984, 990 (Fed. Cir. 2020)
(recognizing that “[t]he Board has the discretion to decline to decide
additional instituted grounds once the petitioner has prevailed on all its
challenged claims”).
D. Appointments Clause
Patent Owner argues that the appointment of Administrative Patent
Judges (“APJs”) of the Patent Trial and Appeal Board by the Secretary of
Commerce “is unconstitutional under the Appointments Clause.” PO
Resp. 62. Patent Owner also argues that the Federal Circuit’s “attempted
cure of the Constitutional violation” in Arthrex, Inc. v. Smith & Nephew,
Inc., 941 F.3d 1320 (Fed. Cir. 2019), “is insufficient, because it does not
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give a constitutionally appointed principal officer the power to review APJ
decisions.” PO Resp. 63. We decline to consider Patent Owner’s
constitutional challenge as the Federal Circuit addressed this issue in
Arthrex, 941 F.3d at 1325.
E. Due Process
Patent Owner argues that “subjecting a patent effectively filed before
September 16, 2012 (when the relevant provisions of the AIA went into
effect), as is the case here, to IPR is an impermissibly retroactive,
unconstitutional taking” and “violates the Due Process Clause of the Fifth
Amendment.” PO Resp. 63. We decline to consider Patent Owner’s
constitutional challenge as the Federal Circuit addressed this issue in
Celgene Corp. v. Peter, 931 F.3d 1342, 1362–63 (Fed. Cir. 2019).
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CONCLUSION
For the foregoing reasons, we determine that Petitioner has
demonstrated by a preponderance of the evidence that claims 8–21 and 29–
42 of the ’107 patent are unpatentable on the bases set forth in the following
table.10

Claims 35 U.S.C. § References Claims
Shown
Unpatentable
Claims Not
Shown
Unpatentable
8–13, 15–20,
29–34, 36–41
103 Valliani
Vrotsos
8–13, 15–20,
29–34, 36–41

14, 21, 35, 42 103 Valliani
Vrotsos
Bryant
14, 21, 35, 42
8, 9, 11, 13,
15, 16, 18,
20, 29, 30,
32, 34, 36,
37, 39, 41
103 Bear11
Lahteenmaki

10, 12, 17 19,
31, 33, 38, 40
103 Bear
Lahteenmaki
Vrotsos

14, 21, 35, 42 103 Bear
Lahteenmaki
Bryant

8–13, 15–20,
29–34, 36–41
103 Vrotsos
14, 21, 35, 42 103 Vrotsos
Bryant

Overall
Outcome
8–21, 29–42

10 Should Patent Owner wish to pursue amendment of the challenged claims
in a reissue or reexamination proceeding subsequent to the issuance of this
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ORDER
In consideration of the foregoing, it is hereby
ORDERED that Petitioner has demonstrated by a preponderance of
the evidence that claims 8–21 and 29–42 of U.S. Patent No. 9,818,107 B2
are unpatentable; and
FURTHER ORDERED that because this is a Final Written Decision,
any party to the proceeding seeking judicial review of this Decision must
comply with the notice and service requirements of 37 C.F.R. § 90.2.

Final Decision, we draw Patent Owner’s attention to the April 2019 Notice
Regarding Options for Amendments by Patent Owner Through Reissue or
Reexamination During a Pending AIA Trial Proceeding. See 84 Fed. Reg.
16,654 (Apr. 22, 2019). If Patent Owner chooses to file a reissue application
or a request for reexamination of the challenged patent, we remind Patent
Owner of its continuing obligation to notify the Board of any such related
matters in updated mandatory notices. See 37 C.F.R. § 42.8(a)(3), (b)(2).
11 Because each of the challenged claims is already held unpatentable on the
grounds combining Valliani and Vrotsos as a basis for unpatentability, we
do not reach any of the other asserted grounds in the Petition.
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PETITIONER:
David M. Tennant
Grace I. Wang
WHITE & CASE LLP
dtennant@whitecase.com
grace.wang@whitecase.com

PATENT OWNER:

Jason S. Jackson
Niall A. MacLeod
KUTAK ROCK LLP
jason.jackson@kutakrock.com
niall.macleod@kutakrock.com