Apple Inc.v.Smartflash LLC

Patent Trial and Appeal Board

Mar 30, 2016

13012541 (P.T.A.B. Mar. 30, 2016)

Trials@uspto.gov Paper 45
Tel: 571-272-7822 Entered: March 30, 2016
UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

SAMSUNG ELECTRONICS AMERICA, INC., and
SAMSUNG ELECTRONICS CO., LTD.,
Petitioner
and
APPLE INC.,
Petitioner,
v.
SMARTFLASH LLC,
Patent Owner.

Case CBM2014-001931
Patent 8,061,598 B2

Before JENNIFER S. BISK, RAMA G. ELLURU,
JEREMY M. PLENZLER, and MATTHEW R. CLEMENTS,
Administrative Patent Judges.
CLEMENTS, Administrative Patent Judge.

FINAL WRITTEN DECISION
35 U.S.C. § 328(a) and 37 C.F.R. § 42.73

1 CBM2015-00120 (Patent 8,061,598 B2) was consolidated with this
proceeding.
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INTRODUCTION
A. Background
Samsung Electronics America, Inc., Samsung Electronics Co., Ltd.,
and Samsung Telecommunications America, LLC (“Samsung”),2 filed a
Corrected Petition to institute covered business method patent review of
claim 7 (the “challenged claim”) of U.S. Patent No. 8,061,598 B2 (Ex. 1001,
“the ’598 patent”) pursuant to § 18 of the Leahy-Smith America Invents Act
(“AIA”). Paper 2 (“Pet.”). On April 2, 2015, we instituted a covered
business method patent review (Paper 7, “Institution Decision” or “Inst.
Dec.”) based upon Samsung’s assertion that claim 7 (“the challenged
claim”) is directed to patent ineligible subject matter under 35 U.S.C. § 101.
Inst. Dec. 19.
On April 30, 2015, Apple Inc. (“Apple”) filed a Petition to institute
covered business method patent review of the same claim of the ’598 patent
based on the same ground. Apple Inc. v. Smartflash LLC, Case CBM2015-
00120 (Paper 2, “Apple Pet.”). Apple simultaneously filed a “Motion for
Joinder” of its newly filed case with Samsung’s previously instituted case.
CBM2015-00120 (Paper 3, “Apple Mot.”). On August 6, 2015, we granted
Apple’s Petition and consolidated the two proceedings.3 Paper 29; Apple
Inc. v. Smartflash LLC, Case CBM2015-00120, (Paper 13).

2 Samsung Telecommunications America, LLC, a petitioner at the time of
filing, merged with and into Samsung Electronics America, Inc. as of
January 1, 2015. Paper 6.
3 For purposes of this decision, we will cite only to Samsung’s Petition.
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Subsequent to institution, Smartflash LLC (“Patent Owner”) filed a
Patent Owner Response (Paper 20, “PO Resp.”) and Petitioner filed a Reply
(Paper 31, “Pet. Reply”) to Patent Owner’s Response.
An oral hearing was held on November 9, 2015, and a transcript of the
hearing is included in the record. Paper 43 (“Tr.”).
This Final Written Decision is issued pursuant to 35 U.S.C. § 328(a)
and 37 C.F.R. § 42.73. For the reasons that follow, we determine that
Petitioner has shown by a preponderance of the evidence that claim 7 of the
’598 patent is directed to patent ineligible subject matter under 35 U.S.C.
§ 101.
B. Related Matters and Estoppel
In a previous covered business method patent review, CBM2014-
00108, we issued a Final Written Decision determining claim 26 of the ’598
patent unpatentable under 35 U.S.C. § 103. Apple Inc. v. Smartflash LLC,
Case CBM2014-00108, (PTAB Sept. 25, 2015) (Paper 50).
C. The ’598 Patent
The ’598 patent relates to “a portable data carrier for storing and
paying for data and to computer systems for providing access to data to be
stored,” and the “corresponding methods and computer programs.”
Ex. 1001, 1:21–25. Owners of proprietary data, especially audio recordings,
have an urgent need to address the prevalence of “data pirates” who make
proprietary data available over the Internet without authorization. Id. at
1:29–55. The ’598 patent describes providing portable data storage together
with a means for conditioning access to that data upon validated payment.
Id. at 1:59–2:11. This combination allows data owners to make their data
available over the Internet with less fear of piracy. Id. at 2:11–15.
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As described, the portable data storage device is connected to a
terminal for Internet access. Id. at 1:59–67. The terminal reads payment
information, validates that information, and downloads data into the portable
storage device from the data supplier. Id. The data on the portable storage
device can be retrieved and output from a mobile device. Id. at 2:1–5. The
’598 patent makes clear that the actual implementation of these components
is not critical and may be implemented in many ways. See, e.g., id. at
25:49–52 (“The skilled person will understand that many variants to the
system are possible and the invention is not limited to the described
embodiments . . . .”).
D. Challenged Claim
Petitioner4 challenges claim 7 of the ’598 patent. Claim 7 depends
from claim 1, which is not explicitly challenged in this proceeding. Claims
1 and 7 recite the following:
1. A portable data carrier comprising:
an interface for reading and writing data from and to the portable data
carrier;
content data memory, coupled to the interface, for storing one or more
content data items on the carrier;
use rule memory to store one or more use rules for said one or more
content data items;
a program store storing code implementable by a processor;
and a processor coupled to the content data memory, the use rule
memory, the interface and to the program store for implementing
code in the program store,
wherein the code comprises code for storing at least one content data
item in the content data memory and at least one use rule in the use
rule memory.

4 We refer to Samsung and Apple collectively as “Petitioner.”
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Ex. 1001, 25:54–67.
7. A portable data carrier as claimed in claim 1, further
comprising payment data memory to store payment data and code to
provide the payment data to a payment validation system.
Id. at 26:25–28.
ANALYSIS
A. Claim Construction
In a covered business method patent review, claim terms are given
their broadest reasonable interpretation in light of the specification in which
they appear and the understanding of others skilled in the relevant art. See
37 C.F.R. § 42.300(b). Applying that standard, we interpret the claim terms
of the ’598 patent according to their ordinary and customary meaning in the
context of the patent’s written description. See In re Translogic Tech., Inc.,
504 F.3d 1249, 1257 (Fed. Cir. 2007). For purposes of this Decision, we
need not construe expressly any claim term.
B. Statutory Subject Matter
Petitioner challenges claim 7 as directed to patent-ineligible subject
matter under 35 U.S.C. § 101. Pet. 20–32. According to Petitioner, the
challenged claim is directed to an abstract idea without additional elements
that transform the claim into a patent-eligible application of that idea. Id.
Petitioner submits a declaration from Jeffrey A. Bloom, Ph.D. in support of
its Petition.5 Ex. 1003. Patent Owner argues that the subject matter claimed

5 In its Response, Patent Owner argues that this declaration should be given
little or no weight. PO Resp. 3–4. Because Patent Owner has filed a Motion
to Exclude that includes a request to exclude Dr. Bloom’s Declaration in its
entirety, or in the alternative, portions of the declaration based on essentially
the same argument, we address Patent Owner’s argument as part of our
analysis of the motion to exclude, below.
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by claim 7 is statutory because it is “‘rooted in computer technology in order
to overcome a problem specifically arising in the realm of computer
networks,’” that of “data content piracy on the Internet.” PO Resp. 1
(quoting DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1257
(Fed. Cir. 2014)).
1. Abstract Idea
Under 35 U.S.C. § 101, we must first identify whether an invention
fits within one of the four statutorily provided categories of patent-
eligibility: “processes, machines, manufactures, and compositions of
matter.” Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 713–714 (Fed. Cir.
2014). Here, the challenged claim recites a “machine,” i.e., a “portable data
carrier,” under § 101. Section 101, however, “contains an important implicit
exception [to subject matter eligibility]: Laws of nature, natural phenomena,
and abstract ideas are not patentable.” Alice Corp. Pty. Ltd. v. CLS Bank
Int’l., 134 S. Ct. 2347, 2354 (2014) (citing Assoc. for Molecular Pathology
v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013) (internal quotation
marks and brackets omitted)). In Alice, the Supreme Court reiterated the
framework set forth previously in Mayo Collaborative Services v.
Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1293 (2012) “for
distinguishing patents that claim laws of nature, natural phenomena, and
abstract ideas from those that claim patent-eligible applications of those
concepts.” Alice, 134 S. Ct. at 2355. The first step in the analysis is to
“determine whether the claims at issue are directed to one of those patent-
ineligible concepts.” Id.
According to the Federal Circuit, “determining whether the section
101 exception for abstract ideas applies involves distinguishing between
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patents that claim the building blocks of human ingenuity—and therefore
risk broad pre-emption of basic ideas—and patents that integrate those
building blocks into something more, enough to transform them into specific
patent-eligible inventions.” Versata Dev. Grp., Inc. v. SAP Am., Inc., 793
F.3d 1306, 1332 (Fed. Cir. 2015) (emphasis added); accord id. at 1333–34
(“It is a building block, a basic conceptual framework for organizing
information . . . .” (emphasis added)). This is similar to the Supreme Court’s
formulation in Bilski v. Kappos, 561 U.S. 593, 611 (2010) (emphasis added),
noting that the concept of risk hedging is “a fundamental economic practice
long prevalent in our system of commerce.” See also buySAFE, Inc. v.
Google, Inc., 765 F.3d 1350, 1353–54 (Fed. Cir. 2014) (stating that patent
claims related to “long-familiar commercial transactions” and relationships
(i.e., business methods), no matter how “narrow” or “particular,” are
directed to abstract ideas as a matter of law). As a further example, the
“concept of ‘offer based pricing’ is similar to other ‘fundamental economic
concepts’ found to be abstract ideas by the Supreme Court and [the Federal
Circuit].” OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed.
Cir. 2015) (citations omitted).
Petitioner argues that the challenged claim is directed to the abstract
idea of “enabling limited use of paid-for/licensed content.” Pet. 23.
Although Patent Owner does not concede, in its brief, that the challenged
claim is directed to an abstract idea, it does not persuasively explain how the
claimed subject matter escapes this classification. PO Resp. 9–20; see also
Paper 43 (transcript of oral hearing) 46:21–47:11 (Patent Owner arguing that
the subject matter of the claim is not an abstract idea, but conceding this
argument was not made in the briefs).
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We are persuaded that the challenged claim is drawn to a patent-
ineligible abstract idea. Specifically, the challenged claim is directed to
performing the fundamental economic practice of conditioning and
controlling access to content based on payment. For example, claim 7
recites “payment data memory to store payment data and code to provide the
payment data to a payment validation system.” Furthermore, as discussed
above, the ’598 patent discusses addressing recording industry concerns of
data pirates offering unauthorized access to widely available compressed
audio recordings. Ex. 1001, 1:20–55. The Specification explains that these
pirates obtain data either by unauthorized or legitimate means and then make
the data available over the Internet without authorization. Id. The
Specification further explains that once data has been published on the
Internet, it is difficult to police access to and use of it by Internet users who
may not even realize that it is pirated. Id. The ’598 patent proposes to solve
this problem by restricting access to data on a portable data carrier based
upon payment validation. Id. at 1:59–2:4. The ’598 patent makes clear that
the crux of the claimed subject matter is restricting access to stored data
based on supplier-defined access rules and validation of payment. Id. at
1:59–2:15.
Although the Specification refers to data piracy on the Internet, the
challenged claim is not limited to the Internet. The underlying concept of
the challenged claim, particularly when viewed in light of the Specification,
is conditioning and controlling access to content based upon payment. As
discussed further below, this is a fundamental economic practice long in
existence in commerce. See Bilski, 561 U.S. at 611.
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We are, thus, persuaded, based on the Specification and the language
of the challenged claim, that claim 7 is directed to an abstract idea. See
Alice, 134 S. Ct. at 2356 (holding that the concept of intermediated
settlement at issue in Alice was an abstract idea); Accenture Global Servs.,
GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1344 (Fed. Cir. 2013)
(holding the abstract idea at the heart of a system claim to be “generating
tasks [based on] rules . . . to be completed upon the occurrence of an event”).
2. Inventive Concept
“A claim that recites an abstract idea must include ‘additional
features’ to ensure ‘that the [claim] is more than a drafting effort designed to
monopolize the [abstract idea].’” Alice, 134 S. Ct. at 2357 (quoting Mayo,
132 S. Ct. at 1297). “This requires more than simply stating an abstract idea
while adding the words ‘apply it’ or ‘apply it with a computer.’ Similarly,
the prohibition on patenting an ineligible concept cannot be circumvented by
limiting the use of an ineligible concept to a particular technological
environment.” Versata, 793 F.3d at 1332 (citations omitted). Moreover, the
mere recitation of generic computer components performing conventional
functions is not enough. See Alice, 134 S. Ct. at 2360 (“Nearly every
computer will include a ‘communications controller’ and ‘data storage unit’
capable of performing the basic calculation, storage, and transmission
functions required by the method claims.”).
Petitioner argues “[t]he claims of the ’598 patent . . . cover nothing
more than the basic financial idea of enabling limited use of paid for and/or
licensed content using ‘conventional’ computer systems and components.”
Pet. Reply 11 (quoting Ex. 1003 ¶ 126). Petitioner persuades us that claim 7
of the ’598 patent does not add an inventive concept sufficient to ensure that
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the patent in practice amounts to significantly more than a patent on the
abstract idea itself. Alice, 134 S. Ct. at 2355; see also Accenture Global
Servs., 728 F.3d at 1344 (holding claims directed to the abstract idea of
“generating tasks [based on] rules . . . to be completed upon the occurrence
of an event” to be unpatentable even when applied in a computer
environment and within the insurance industry). Specifically, we agree with
and adopt Petitioner’s rationale that the additional elements of the
challenged claim are generic features of a computer that do not bring the
challenged claim within § 101 patent eligibility. Pet. 23–27; Pet. Reply 11–
19.
a. Technical Elements
Petitioner argues that the challenged claim is unpatentable because it
is directed to an abstract idea and any technical elements it recites are
repeatedly described by the ’598 patent itself as “both ‘conventional’ and as
being used ‘in a conventional manner.’” Pet. 23 (citing Ex. 1001, 4:4–5,
16:46–49, 21:33–38). Patent Owner disagrees, arguing that the challenged
claim is patentable because it “recite[s] specific ways of using distinct
memories, data types, and use rules that amount to significantly more than
the underlying abstract idea.” PO Resp. 11 (quoting Ex. 2049, 19). We
agree with Petitioner for the following reasons.
The ’598 patent treats as well-known all potentially technical aspects
of the challenged claim, which simply require generic computer components
(e.g., interfaces, memory, program store, and processor). See Pet. Reply 13
(citing Ex. 1003 ¶ 24; Ex. 1001, 4:4–5, 16:46–53, 18:7–11). With respect to
the “portable data carrier” recited in claim 1, for example, the Specification
states it may be a generic device such as “a standard smart card.” Ex. 1001,
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11:27–29; see also id. at 14:25–29 (“[l]ikewise data stores 136, 138 and 140
may comprise a single physical data store or may be distributed over a
plurality of physical devices and may even be at physically remote locations
from processors 128-134 and coupled to these processors via internet 142”),
Fig. 6. With respect to the “payment validation system” recited in claim 7,
the Specification states that it “may be part of the data supplier’s computer
systems or it may be a separate e-payment system.” Id. at 8:63–65); see also
13:36–38 (“an e-payment system according to, for example, MONDEX,
Proton, and/or Visa cash compliant standards”).
Further, the claimed computer code performs generic computer
functions, such as storing, retrieving, receiving, reading, evaluating, and
enabling access to. See Pet. 23–29; Pet. Reply 14–16. The recitation of
these generic computer functions is insufficient to confer specificity. See
Content Extraction and Transmission LLC v. Wells Fargo Bank, Nat’l
Assoc., 776 F.3d 1343, 1347 (Fed. Cir. 2014) (“The concept of data
collection, recognition, and storage is undisputedly well-known. Indeed,
humans have always performed these functions.”).
Moreover, we are not persuaded that claim 7 “recite[s] specific ways
of using distinct memories, data types, and use rules that amount to
significantly more than” conditioning and controlling access to content
based on payment. See PO Resp. 11. The challenged claim recites several
memories, including “content data memory,” “use rule memory,” “a
program store,” and “payment data memory,” and several data types,
including “data,” “content data items,” “use rules,” “code,” “payment data,”
and “use status data.” We are not persuaded that the recitation of these
memories and data types, by itself, amounts to significantly more than the
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underlying abstract idea. Alice, 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct.
at 1294) (“We have described step two of this analysis as a search for an
‘inventive concept’—i.e., an element or combination of elements that is
‘sufficient to ensure that the patent in practice amounts to significantly more
than a patent on the [ineligible concept] itself.’”) (brackets in original).
Patent Owner does not point to any inventive concept in the ’598 patent
related to the way these memories or data types are constructed or used. In
fact, the ’598 patent simply discloses these memories and data types with no
description of the underlying implementation or programming that results in
these data constructs. See Content Extraction, 776 F.3d at 1347 (“The
concept of data collection, recognition, and storage is undisputedly well-
known. Indeed, humans have always performed these functions.”).
In addition, because the recited elements can be implemented on a
general purpose computer, the challenged claim does not cover a “particular
machine.” Pet. 29–31; see Bilski, 561 U.S. at 604–05 (stating that machine-
or-transformation test remains “a useful and important clue” for determining
whether an invention is patent eligible). And the challenged claim does not
transform an article into a different state of thing. Pet. 31–32.
Thus, we determine, the potentially technical elements of the claim
are nothing more than “generic computer implementations” and perform
functions that are “purely conventional.” Alice, 134 S. Ct. at 2358–59;
Mayo, 132 S. Ct. at 1294.
b. DDR Holdings
Relying on the Federal Circuit’s decision in DDR Holdings, Patent
Owner asserts that the challenged claim is directed to statutory subject
matter because the claimed solution is “necessarily rooted in computer
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technology in order to overcome a problem specifically arising in the realm
of computer networks.’” PO Resp. 1 (quoting DDR Holdings, LLC v.
Hotels.com, L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014)). Patent Owner
contends that the challenged claim is “directed to a particular device that can
download and store digital content into a data carrier along with at least one
use rule,” and that
By using a system that combines on the data carrier the digital
content, at least one use rule, payment data, and “code to provide
the payment data to a payment validation system,” access control
to the digital content can be continuously enforced prior to access
to the digital content, allowing subsequent use (e.g., playback) of
the digital content to be portable and disconnected, and
additional content can be obtained.
Id. at 10.
Petitioner responds that the challenged claim is distinguishable from
the claims in DDR Holdings. Pet. Reply 17–19. The DDR Holdings patent
is directed at retaining website visitors when clicking on an advertisement
hyperlink within a host website. 773 F.3d at 1257. Conventionally, clicking
on an advertisement hyperlink would transport a visitor from the host’s
website to a third party website. Id. The Federal Circuit distinguished this
Internet-centric problem over “the ‘brick and mortar’ context” because
“[t]here is . . . no possibility that by walking up to [a kiosk in a warehouse
store], the customer will be suddenly and completely transported outside the
warehouse store and relocated to a separate physical venue associated with
the third party.” Id. at 1258. The Federal Circuit further determined that the
DDR Holdings claims specify “how interactions with the Internet are
manipulated to yield a desired result—a result that overrides the routine and
conventional sequence of events ordinarily triggered by the click of a
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hyperlink.” Id. The unconventional result in DDR Holdings is the website
visitor is retained on the host website, but is still is able to purchase a
product from a third-party merchant. Id. at 1257–58. The limitation referred
to by the Federal Circuit in DDR Holdings recites “using the data retrieved,
automatically generate and transmit to the web browser a second web page
that displays: (A) information associated with the commerce object
associated with the link that has been activated, and (B) the plurality of
visually perceptible elements visually corresponding to the source page.” Id.
at 1250. Importantly, the Federal Circuit identified this limitation as
differentiating the DDR Holdings claims from those held to be unpatentable
in Ultramercial, which “broadly and generically claim ‘use of the Internet’
to perform an abstract business practice (with insignificant added activity).”
Id. at 1258.
We agree with Petitioner that the challenged claim is distinguishable
from the claims at issue in DDR Holdings. As an initial matter, we are not
persuaded by Patent Owner’s argument that the challenged claim “[is]
rooted in computer technology in order to overcome a problem specifically
arising in the realm of computer networks,” that of “data content piracy on
the Internet.” PO Resp. 1. Data piracy exists in contexts other than the
Internet. See Pet. Reply 16–17 (identifying other contexts in which data
piracy is a problem). For example, data piracy was a problem with compact
discs. See Ex. 1001, 5:9–12 (“where the data carrier stores . . . music, the
purchase outright option may be equivalent to the purchase of a compact
disc (CD), preferably with some form of content copy protection such as
digital watermarking”). Further, whatever the problem, the solution
provided by the challenged claim is not rooted in specific computer
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technology, but is based on conditioning and controlling access to content
only when payment is validated. See Pet. Reply 16–19.
Even accepting Patent Owner’s assertion that the challenged claim
addresses data piracy on the Internet (PO Resp. 1), we are not persuaded that
it does so by achieving a result that overrides the routine and conventional
use of the recited devices and functions. In fact, the differences between the
challenged claim and the claims at issue in DDR Holdings are made clear by
comparing the challenged claim of the ’598 patent to claim 19 of the patent
at issue in DDR Holdings. For example, claim 7 of the ’598 patent recites
“code to provide the payment data to a payment validation system.” There
is no language in this claim, in claim 1 from which it depends, or in the
Specification, that demonstrates that the generic computer components—
“code to provide the payment data” and “payment validation system”—
function in an unconventional manner or employ sufficiently specific
programming. Instead, unlike the claims in DDR Holdings, these
limitations, like all the other limitations of the challenged claim, are
“specified at a high level of generality,” which the Federal Circuit has found
to be “insufficient to supply an ‘inventive concept.’” Ultramercial, Inc., 772
F.3d at 716. They merely rely on conventional devices and computer
processes operating in their “normal, expected manner.” OIP Techs., 788
F.3d at 1363 (citing DDR Holdings, 773 F.3d at 1258–59).
On the other hand, the claims at issue in Ultramercial, like the
challenged claim, were also directed to a method for distributing media
products. Instead of conditioning and controlling access to data based on
payment, as in the challenged claim, the Ultramercial claims condition and
control access based on viewing an advertisement. 772 F.3d at 712. Similar
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to the claims in Ultramercial, the majority of limitations in the challenged
claim comprise this abstract concept of conditioning and controlling access
to data. See id. at 715. Adding routine additional steps such as
communicating with the data supplier, reading payment data, forwarding
payment data, receiving payment validation data, retrieving data from the
data supplier, writing data to a data carrier, and transmitting a portion of the
payment validation data does not transform an otherwise abstract idea into
patent-eligible subject matter. See id. at 716 (“Adding routine additional
steps such as updating an activity log, requiring a request from the consumer
to view the ad, restrictions on public access, and use of the Internet does not
transform an otherwise abstract idea into patent-eligible subject matter.”).
We are, therefore, persuaded that the challenged claim is closer to the
claims at issue in Ultramercial than to those at issue in DDR Holdings.
c. Patent Owner’s Alleged Inventive Concept
To the extent Patent Owner argues the challenged claim includes an
“inventive concept” because of the specific combination of elements in the
challenged claim, we disagree. Specifically, Patent Owner refers to the
following disclosure from the ’598 patent: “[b]y combining digital rights
management with content data storage using a single carrier, the stored
content data becomes mobile and can be accessed anywhere while retaining
control over the stored data for the data content provider or data copyright
owner.” PO Resp. 8 (quoting Ex. 1001, 5:29–33). Referring to this
disclosure, Patent Owner argues that “[b]y using a system that combines on
the data carrier the digital content, the use rules, and payment data, access
control to the digital content can be continuously enforced prior to access to
the digital content.” Id. Patent Owner concludes that “[b]y comparison,
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unlike a system as claimed, when a DVD was physically rented for a rental
period, there was no mechanism associated with the DVD to purchase
additional content.” Id. at 8–9.
The concept of storing two different types of information in the same
place or on the same device is an age old practice. For example, storing
names and phone numbers (two different types of information) in the same
place, such as a book, or on a storage device, such as a memory device was
known. That Patent Owner alleges two specific types of information—
content and the conditions for providing access to the content—are stored in
the same place or on the same storage device does not alter our
determination. The concept was known and Patent Owner has not persuaded
us that applying the concept to these two specific types of information
results in the claim reciting an inventive concept. Furthermore, the prior art
discloses products that could store both the content and conditions for
providing access to the content. See, e.g., Pet. 35 (citing Ex. 1006, 11:25–27
(“The application embeds a digital code in every copy of the Content that
defines the allowable number of secondary copies and play backs.”), 37–38
(citing Ex. 1004, Abstract (describing a transportable unit storing both
content and a control processor for controller access to that content)).
Because the concept of combining the content and conditions for providing
access to the content on the same device was known, it does not make the
claim patent eligible under § 101.
d. Preemption
Petitioner argues that the challenged claim “preempts all effective
uses of the abstract idea of enabling limited use of paid-for/licensed
content.” Pet. 27. Patent Owner responds that the challenged claim does not
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result in inappropriate preemption. PO Resp. 12–17. According to Patent
Owner, the challenged claim does not attempt to preempt every application
of the idea, but rather recites a “‘specific way . . . that incorporates elements
from multiple sources in order to solve a problem faced by [servers] on the
Internet.’” Id. at 12–13 (citing DDR Holdings, 773 F.3d at 1259). Patent
Owner also asserts that the existence of a large number of non-infringing
alternatives shows that the challenged claim does not raise preemption
concerns. Id. at 15, 17.
Patent Owner’s preemption argument does not alter our § 101
analysis. The Supreme Court has described the “pre-emption concern” as
“undergird[ing] [its] § 101 jurisprudence.” Alice, 134 S. Ct. at 2358. The
concern “is a relative one: how much future innovation is foreclosed
relative to the contribution of the inventor.” Mayo, 132 S. Ct. at 1303.
“While preemption may signal patent ineligible subject matter, the absence
of complete preemption does not demonstrate patent eligibility.” Ariosa
Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015).
Importantly, the preemption concern is addressed by the two-part test
considered above. See id. After all, every patent “forecloses . . . future
invention” to some extent, Mayo, 132 S. Ct. at 1292, and, conversely, every
claim limitation beyond those that recite the abstract idea limits the scope of
the preemption. See Ariosa, 788 F.3d at 1379 (“The Supreme Court has
made clear that the principle of preemption is the basis for the judicial
exception to patentability. . . . For this reason, questions on preemption are
inherent in and resolved by the § 101 analysis.”).
The two-part test elucidated in Alice and Mayo does not require us to
anticipate the number, feasibility, or adequacy of non-infringing alternatives
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to gauge a patented invention’s preemptive effect in order to determine
whether a claim is patent-eligible under § 101. See Pet. Reply 19–22
(arguing that Patent Owner’s position regarding non-infringement and
existence of non-infringing alternatives to the challenged claim are
immaterial to the patent eligibility inquiry).
The relevant precedents simply direct us to ask whether the claim
involves one of the patent-ineligible categories, and, if so, whether
additional limitations contain an “inventive concept” that is “sufficient to
ensure that the claim in practice amounts to ‘significantly more’ than a
patent on an ineligible concept.” DDR Holdings, 773 F.3d at 1255. This is
the basis for the rule that the unpatentability of abstract ideas “cannot be
circumvented by attempting to limit the use of the formula to a particular
technological environment,” despite the fact that doing so reduces the
amount of innovation that would be preempted. Diamond v. Diehr, 450 U.S.
175, 191 (1981); see also Alice, 134 S. Ct. at 2358; Mayo, 132 S. Ct. at
1303; Bilski, 561 U.S. at 612; Parker v. Flook, 437 U.S. 584, 593 (1978).
The Federal Circuit spelled this out, stating that “[w]here a patent’s claims
are deemed only to disclose patent ineligible subject matter under the Mayo
framework, as they are in this case, preemption concerns are fully addressed
and made moot.” Ariosa, 788 F.3d at 1379.
As described above, after applying this two-part test, we are
persuaded that Petitioner has shown by a preponderance of the evidence that
the challenged claim is drawn to an abstract idea and does not add an
inventive concept sufficient to ensure that the patent in practice amounts to
significantly more than a patent on the abstract idea itself. The alleged
existence of a large number of non-infringing, and, thus, non-preemptive
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alternatives does not alter this conclusion because the question of
preemption is inherent in, and resolved by, this inquiry.
e. Patent Owner’s Remaining Arguments
Patent Owner also asserts that (1) Petitioner has already lost a Motion
for Summary Judgment of Invalidity under § 101 in its related district court
litigation with Patent Owner (PO Resp. 19); and (2) the Office is estopped
from revisiting the issue of § 101, which was inherently reviewed during
examination (id. at 20).
We are not persuaded by either argument. Patent Owner does not
provide any authority that precludes us from deciding the issue of patent
eligibility under § 101 in the context of the present AIA proceeding, even
where a non-final district court ruling on § 101 exists. See Fresenius USA,
Inc. v. Baxter Int’l, Inc., 721 F.3d 1330, 1340–42 (Fed. Cir. 2013). Patent
Owner also does not provide any authority for its assertion that “[t]he
question of whether claim 7 is directed to statutory subject matter has
already been adjudicated by the USPTO, and the USPTO is estopped from
allowing the issue to be raised in the present proceeding.” PO Resp. 20.
3. Conclusion
For the foregoing reasons, we are persuaded that Petitioner has
established, by a preponderance of the evidence, that claim 7 of the ’598
patent is unpatentable under § 101.

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MOTIONS TO EXCLUDE
A. Petitioner’s Motion to Exclude
Petitioner seeks to exclude portions of Exhibits 2056 and 2057, the
cross-examination testimony of Dr. Jeffrey Bloom as submitted by Patent
Owner. Paper 36, 3. As movant, Petitioner has the burden of proof to
establish that it is entitled to the requested relief. See 37 C.F.R. § 42.20(c).
For the reasons stated below, Petitioner’s Motion to Exclude is denied.
Petitioner seeks to exclude Dr. Bloom’s cross-examination testimony
recorded in Exhibit 2056 at 179:1–20 and in Exhibit 2057 at 193:17–194:8
and 195:5–16 as (1) irrelevant under Federal Rules of Evidence (“FRE”) 401
and 402 (Paper 36, 4–6); and (2) outside the scope of direct examination
under FRE 611(b) (id. at 7–8). Petitioner argues that this testimony, all
directed to the workings of a product offered by Dr. Bloom’s employer, is
“unrelated to the instant CBM proceeding” and “is of no consequence to the
validity of the patent claims at issue.” Id. at 4. Petitioner adds that
“[Petitioner], during its direct examination of Dr. Bloom, never opened [the]
door to such questions.” Id. at 8.
We are not persuaded by Petitioner’s argument. Patent Owner
proffered this particular testimony not for purposes of showing validity of
the patent claim at issue, but for purposes of challenging the credibility of
Petitioner’s expert. Although we were not persuaded by this evidence, we
did consider it for the purpose of deciding an issue of credibility. We,
therefore, decline to exclude this testimony under FRE 401, 402, or 611(b).
In addition, Petitioner seeks to exclude the excerpts of testimony from
Exhibit 2057 as lacking proper foundation under FRE 701 and 702. Id. at 6–
7. Petitioner argues that in these excerpts, “[Patent Owner] attempted to
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solicit testimonies from Dr. Bloom as to whether ‘the SiriusXM Internet
Radio product that allows off-line playback [is] a subscription-based
product’” and that “[Patent Owner] further asserted that . . . ‘Dr. Bloom
refused to testify about its operation alleging the information was
confidential.’” Id. at 6 (citing PO Resp. 6). According to Petitioner,
because “Dr. Bloom has not been advanced as an expert with regard to
subscription-based business practice of a third-party company” and “no
foundation has been laid with regard to Dr. Bloom’s personal knowledge of
such subscription-based business practice,” this testimony should be
excluded under FRE 701 and 702. Id. at 6–7.
We also are not persuaded by this argument. Petitioner does not
explain, for example, why Rules 701 and 702 apply to the excerpts at issue.
It is unclear that Dr. Bloom was being asked for his opinion, either expert or
otherwise, with these questions. Instead, it appears that he was being
questioned as a fact witness. Moreover, as explained by Petitioner, the
cross-examination did not actually elicit any substantive responses, let alone
opinion, from Dr. Bloom. Id. at 6. We, therefore, decline to exclude this
testimony under FRE 701 or 702.
B. Patent Owner’s Motion to Exclude
Patent Owner seeks to exclude Exhibits 1003–1006, 1028, and 1039.
Paper 31, 1. As movant, Patent Owner has the burden of proof to establish
that it is entitled to the requested relief. See 37 C.F.R. § 42.20(c). For the
reasons stated below, Patent Owner’s Motion to Exclude is denied.
1. Exhibit 1003
Patent Owner seeks to exclude the entirety of Dr. Bloom’s testimony
in Exhibit 1003 and additionally seeks to exclude specific paragraphs under
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various Board and Evidentiary rules. Paper 31, 1–9. First, Patent Owner
seeks to exclude Exhibit 1003 in its entirety as not disclosing the underlying
facts or data on which the opinions contains are based as required by 37
C.F.R. § 42.54(a). Id. at 2. According to Patent Owner, this is because Dr.
Bloom’s declaration “does not state the relative evidentiary weight (e.g.,
substantial evidence versus preponderance of the evidence) used by Dr.
Bloom in arriving at his conclusions.” Id. at 2. Patent Owner also seeks to
exclude this testimony under FRE 702 because “the Board cannot assess
under FRE 702 whether Dr. Bloom’s opinion testimony is ‘based on
sufficient facts or data,’ is ‘the product of reliable principles and methods,’
or if Dr. Bloom ‘reliably applied the principles and methods to the facts of
the case.’” Id. at 3–4.
Petitioner counters that consistent with the requirements of 37 C.F.R.
§ 42.65, “Dr. Bloom’s testimony discloses underlying facts and data on
which his opinions were based.” Paper 38, 4. Petitioner also argues that
experts are not required to recite the “preponderance of the evidence”
standard expressly. Id. at 3–4 (citing IPR2013-00172, Paper 50 at 42). With
respect to FRE 702, Petitioner notes that Patent Owner did not rely on FRE
702 to object to Dr. Bloom’s Declaration in its entirety and has, thus, waived
this particular argument. Id. at 5. Moreover, Petitioner asserts that although
Patent Owner had the opportunity to cross-examine Dr. Bloom, it failed to
question him as to any reliable principles and methods that he used to render
his opinion. Id. at 4–5.
We are not persuaded by Patent Owner’s arguments. Dr. Bloom has a
Bachelor in Electrical Engineering, and a Masters and Ph.D. in Electrical
and Computer Engineering. Ex. 1003 ¶¶ 15–17. He also has decades of
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experience in relevant technologies. Id. ¶¶ 5–14. We are, therefore, not
persuaded by Patent Owner’s argument that he has not provided sufficient
proof that he is an expert. And as Petitioner correctly points out, an expert is
not required to recite the “preponderance of the evidence” standard
expressly in order for the expert testimony to be accorded weight, much less
admissibility. Accordingly, we decline to exclude this testimony under FRE
702.
Patent Owner also seeks to exclude paragraphs 23–112 of Exhibit
1003 as irrelevant and inadmissible under FRE 401 and 402 because they
address grounds challenging the claims that were not instituted upon by the
Board. Paper 31, 5–6. Because these paragraphs also support Petitioner’s
assertions with respect to the underlying factual issues related to patent
eligibility, we are not persuaded that they are irrelevant under FRE 401 and
402. Accordingly, we decline to exclude these paragraphs.
Patent Owner also seeks to exclude paragraphs 23–26 and 113–128 of
Exhibit 1003 as lacking foundation and providing legal opinions on which
the lay witness is not competent to testify. Paper 31, 6. According to Patent
Owner, these paragraphs “relate to the strictly legal issue of statutory subject
matter under § 101, an issue for which Dr. Bloom is not an expert” and
should be excluded under FRE 401, 402, 62, 701, and 702. Id. Because
these paragraphs also relate to the underlying factual issues related to patent
eligibility, we are not persuaded that they are irrelevant under FRE 401 and
402. Accordingly, we decline to exclude these paragraphs.
Patent Owner also seeks to exclude paragraphs 129–137 of Exhibit
1003 under 37 C.F.R. § 42.65(a) as impermissibly relating to legal concepts.
Paper 31, 6–7. We understand that in these paragraphs, Dr. Bloom is not
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giving expert testimony about the law, but simply indicating his
understanding of the law as background foundation for the declaration. See
Ex. 1003 ¶ 129. As such, we decline to exclude these paragraphs.
Patent Owner also seeks to exclude paragraphs 102–107, 122, 123–
125, and 128 of Exhibit 1003 as inadmissible hearsay under FRE 801 and
802. Paper 31, 7–10. Petitioner responds to these objections by filing, as
supplemental evidence, previously-served supporting documents comprising
the underlying publications referred to by Dr. Bloom in these paragraphs.
Paper 38, 9–11 (citing Ex. 1043). Patent Owner does not appear to object to
the contents of this evidence, but merely the form in which it was filed—that
each individual document was not filed as a separate exhibit, that the
individual documents were not numbered sequentially, and that they were
not filed with the first document in which each is cited. Paper 41, 4–5. To
the extent that Exhibit 1043 does not comply with §§ 42.6 or 42.63, we
waive those deficiencies, which relate not to the ultimate substance of this
issue, but to procedural formalities. Moreover, because Patent Owner does
not explain further why the actual contents of Exhibit 1043 do not overcome
its hearsay objections, we decline to exclude these paragraphs under FRE
801 and 802.
2. Exhibits 1004–1006
Patent Owner seeks to exclude Exhibits 1004–1006 as irrelevant
under FRE 401 and 402 because, while cited, they were not instituted upon
by the Board. Paper 31, 10–11.
Petitioner counters that all of these exhibits “speak to the well-known
and conventional aspects of ‘appl[ying] generic computer technology
towards the solution of a financial problem: enabling limited use of paid-
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for/licensed content’” and, thus, are relevant to the question of patent
eligibility. Paper 38, 11.
Because these exhibits are evidence relied upon by Petitioner to
support its assertions with respect to the underlying factual issues related to
patent eligibility, we are not persuaded that they are irrelevant under FRE
401 and 402. Accordingly, we decline to exclude these exhibits.
3. Exhibit 1028
Patent Owner seeks to exclude Exhibit 1028, cited by both the Petition
and the Bloom Declaration, as irrelevant and inadmissible under FRE 401
and 402. Paper 31, 11. According to Patent Owner, the document, which
describes the planned establishment of credit facilities into retail
establishments is not relevant to the technological solution embodied in the
’598 patent. Id.
Petitioner responds that Exhibit 1028 is “directed to well-known
historic credit operations in support of Dr. Bloom’s observation that the ’598
Patent mimics such payment operations” and is, therefore, not irrelevant.
Paper 38, 12.
Because Exhibit 1028 is relied upon by Petitioner to support its
assertions with respect to the underlying factual issues related to patent
eligibility, we are not persuaded that it is irrelevant under FRE 401 and 402.
Accordingly, we decline to exclude Exhibit 1028.
4. Exhibit 1039
Patent Owner seeks to exclude Exhibit 1039, cited by both the Petition
and Petitioner’s Reply, as irrelevant and inadmissible under FRE 401 and
402. Paper 31, 12. According to Patent Owner, the document has an alleged
publication after the effective filing date of the ’598 patent. Id. Patent
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Owner also argues that Exhibit 1039 should be excluded under FRE 901
because Petitioner has not produced evidence sufficient to support a finding
that Exhibit 1039 is what the proponent claims it is.
Petitioner does not address Exhibit 1309 in its opposition to Patent
Owner’s Motion to Exclude. See Paper 38. Petitioner does, however,
address the relevance of this document in its Pet. Reply (Paper 28), stating
that Exhibit 1039 was replied upon, notwithstanding the publication date,
“because the cited passages are consistent with and corroborate [Dr.
Bloom’s] expert understanding, and are relevant to his explanation of the
fact that human beings, long before the ’598 Patent’s effective filing date,
traditionally engaged in mental activities aimed at enabling limited use of
paid for and/or licensed content.” Pet. Reply 9.
Because Exhibit 1039 is relied upon by Petitioner to support its
assertions with respect to the underlying factual issues related to patent
eligibility, we are not persuaded that it is irrelevant under FRE 401 and 402.
Accordingly, we decline to exclude Exhibit 1039.
ORDER
Accordingly, it is:
ORDERED that claim 7 of the ’598 patent is determined to be
unpatentable;
FURTHER ORDERED that Petitioner’s motion to exclude is denied;
FURTHER ORDERED that Patent Owner’s motion to exclude is
denied;
FURTHER ORDERED that, because this is a final written decision,
parties to the proceeding seeking judicial review of the decision must
comply with the notice and service requirements of 37 C.F.R. § 90.2.
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FOR PETITIONER:

Walter Renner
Thomas Rozylowicz
FISH & RICHARDSON P.C.
axf@fr.com
CBM39843-0006CP1@fr.com

FOR PATENT OWNER:

Michael R. Casey
J. Scott Davidson
DAVIDSON BERQUIST JACKSON & GOWDEY LLP
mcasey@dbjg.com
jsd@dbjg.com
SmartFlash-CBM@dbjg.com