Samsung Electronics America, Inc.v.Smartflash LLC

Patent Trial and Appeal Board

Jun 10, 2016

12943872 (P.T.A.B. Jun. 10, 2016)

Trials@uspto.gov Paper 51
Tel: 571-272-7822 Entered: March 29, 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 CBM2014-001941
Patent 8,118,221 B2

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

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

1 CBM2015-00117 (Patent 8,118,221 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
claims 2, 11, and 32 of U.S. Patent No. 8,118,221 B2 (Ex. 1001, “the ’221
patent”) pursuant to § 18 of the Leahy-Smith America Invents Act (“AIA”).
Paper 4 (“Pet.”). On March 30, 2015, we instituted a covered business
method patent review (Paper 9, “Institution Decision” or “Inst. Dec.”) based
upon Petitioner’s assertion that claims 2, 11, and 32 are directed to patent
ineligible subject matter under 35 U.S.C. § 101. Inst. Dec. 20.
On April 30, 2015, Apple Inc. filed a Petition to institute covered
business method patent review of the same claims of the ’221 patent based
on the same grounds. Apple Inc. v. Smartflash LLC, Case CBM2015-00117
(Paper 2, “Apple Pet.”). Apple simultaneously filed a “Motion for Joinder”
of its newly filed case with Samsung’s previously instituted case.
CBM2015-00117 (Paper 3, “Apple Mot.”). On August 8, 2015, we granted
Apple’s Petition and consolidated the two proceedings.3 Paper 32; Apple
Inc. v. Smartflash LLC, Case CBM2015-00117, slip. op. at 6–7 (PTAB Aug.
8, 2015) (Paper 11).
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

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 8.
3 For purposes of this decision, we will cite only to Samsung’s Petition.
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Petitioner has shown by a preponderance of the evidence that claim 32 of the
’221 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-
00102, we issued a Final Written Decision determining claims 1, 2, and 11–
14 unpatentable under 35 U.S.C. § 103. Apple Inc. v. Smartflash LLC, Case
CBM2014-00102, (PTAB Sept. 25, 2015) (Paper 52). On March 18, 2016,
however, Patent Owner filed an authorized motion to terminate this
proceeding as to claims 2 and 11 stating that “[o]n March 4, 2016, pursuant
to Fed. R. App. P. 42(b), the United States Court of Appeals for the Federal
Circuit dismissed [Patent Owner’s] appeal of [the final written decision in
CBM2014-00102 determining] that claims 2 and 11 of the ’221 Patent are
unpatentable.” Paper 50, 2. 4
We are persuaded that the particular facts of this proceeding now
counsel termination of our consideration of claims 2 and 11. 37 C.F.R.
§ 42.72. Claims 2 and 11 of the ’221 patent have been finally cancelled and
any decision we might reach in this proceeding regarding the patentability of
these claims would be moot and purely advisory. We do not see how the
just, speedy, and inexpensive resolution of every proceeding (37 C.F.R.
§ 42.1(b)) would be secured by rendering a final written decision regarding
these claims. Accordingly, we terminate this review as to claims 2 and 11
and consider below only the remaining challenged claim—claim 32.

4 Fed. R. App. P. 42 provides for dismissal of an appeal at the request of the
parties or on motion by the appellant.
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C. The ’221 Patent
The ’221 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
1:29–56. The ’221 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 data piracy. Id. at 2:11–15.
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 2:1–4. The
’221 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
25:41–44 (“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
Petitioner challenges claim 32 of the ’221 patent. Claim 32 is
independent and recites the following:
32. A data access terminal for retrieving data from a data
supplier and providing the retrieved data to a data carrier, the
terminal comprising:
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a first interface for communicating with the data supplier;
a data carrier interface for interfacing with the data
carrier;
a program store storing code; and
a processor coupled to the first interface, the data carrier
interface, and the program store for implementing the stored
code, the code comprising:
code to read payment data from the data carrier and to
forward the payment data to a payment validation system;
code to receive payment validation data from the
payment validation system;
code responsive to the payment validation data to retrieve
data from the data supplier and to write the retrieved data into
the data carrier;
code responsive to the payment validation data to receive
at least one access rule from the data supplier and to write the at
least one access rule into the data carrier, the at least one access
rule specifying at least one condition for accessing the retrieved
data written into the data carrier, the at least one condition
being dependent upon the amount of payment associated with
the payment data forwarded to the payment validation system;
and
code to retrieve from the data supplier and output to a
user-stored data identifier data and associated value data and
use rule data for a data item available from the data supplier.
Id. at 28:23–50.
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
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of the ’221 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 32 as directed to patent-ineligible subject
matter under 35 U.S.C. § 101. Pet. 21–34. According to Petitioner, claim
32 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 by
claim 32 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 digital data piracy.” Paper 24, (“PO Resp.”) 13.
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, each claim 32 recites a “machine,” e.g., a “data access
terminal,” under § 101. Section 101, however, “contains an important

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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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
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
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(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 Tech., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed.
Cir. 2015) (citations omitted).
Petitioner argues that claim 32 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 claim 32 is directed to an
abstract idea, it does not persuasively explain how the claimed subject
matter escapes this classification. PO Resp. 11–28; see also Paper 47
(transcript of oral hearing) 46:21–47:11 (Patent Owner arguing that the
subject matter does not claim an abstract idea, but conceding this argument
was not made in the briefs).
We are persuaded that claim 32 is drawn to a patent-ineligible abstract
idea. Specifically, claim 32 is directed to performing the fundamental
economic practice of conditioning and controlling access to content based on
payment. For example, claim 32 recites “the at least one access rule
specifying at least one condition for accessing the retrieved data written into
the data carrier, the at least one condition being dependent upon the amount
of payment associated with the payment data forwarded to the payment
validation system.” Furthermore, as discussed above, the ’221 patent
discusses addressing recording industry concerns of data pirates offering
unauthorized access to widely available compressed audio recordings. Ex.
1001, 1:20–55. The patent specification explains that these pirates obtain
data either by unauthorized or legitimate means and then make the data
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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 ’221 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 ’221 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, claim
32 is not limited to the Internet. Claim 32 recites code to “read payment
data from the data carrier,” “forward the payment data to a payment
validation system,” “receive payment validation data from the payment
validation system,” “retrieve data from the data supplier,” and “write the
retrieved data into the data carrier.” The underlying concept of claim 32,
particularly when viewed in light of the ’221 patent 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.
We are, thus, persuaded, based on the ’221 patent specification and
the language of claim 32 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”).
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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 ’221 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.”
Paper 31, (“Reply 11”) (quoting Ex. 1003 ¶ 126). Petitioner persuades us
that claim 32 of the ’221 patent 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. 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
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claim 32 are generic features of a computer that do not bring claim 32 within
§ 101 patent eligibility. Pet. 24–29; Reply 11–21.
a. Technical Elements
Petitioner argues that claim 32 is unpatentable because it is directed to
an abstract idea and any technical elements it recites are repeatedly
described by the ’221 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 claim 32 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. 18 (quoting Ex. 2049, 19). We agree with Petitioner for the
following reasons.
The ’221 patent specification treats as well-known all potentially
technical aspects of claim 32, including the “data carrier,” “data supplier,”
“payment validation system,” and “mobile communication device.” See
Reply 13 (citing Ex. 1003 ¶ 24; Ex. 1001, 4:4–5, 16:46–50, 18:7–11). For
example, the specification states the recited “data access terminal may be a
conventional computer,” that the terminal memory “can comprise any
conventional storage device,” and that a “data device . . . such as a portable
audio/video player . . . comprises a conventional dedicated computer system
including a processor . . . program memory . . . and timing and control logic
. . . coupled by a data and communications bus.” Id. (quoting Ex. 1001, 4:4–
5, 16:46–50, 18:7–11). In addition, the specification notes that the “data
carrier” may be a generic device such as a “standard smart card.” Ex. 1001,
11:28–30; 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
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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. The specification further indicates that that the “payment system”
may be “a signature transporting type e-payment system” or “a third party e-
payment system.” Id. at 7:11–16, 8:18–22, 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 reading, receiving, transmitting, and outputting data. See
Pet. 24–29; 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 32 “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. 18. Claim 32 does not recite any
particular or “distinct memories.” To the extent Patent Owner contends that
the claimed “data carrier” is a “distinct memory,” as noted above, the
specification makes clear that the “data carrier” may be a generic device
such as a “standard smart card.” 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.”).
The recitation of generic memory, being used to store data in the
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conventional manner is insufficient to confer the specificity required to
elevate the nature of the claim into a patent-eligible application.
Claim 32 also recites several generic data types including, “data,”
“retrieved data,” “code,” “payment data,” “payment validation data,”
“access rule,” “use rule data,” “user-stored data identifier data,” and
“associated value data.” We are not persuaded that the recitation of these
data types, by itself, amounts to significantly more than the 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 ’221 patent related to the way
the recited data types are constructed or used. In fact, the ’221 patent simply
recites these data types with no description of the underlying implementation
or programming that results in these data constructs.
In addition, because the recited elements can be implemented on a
general purpose computer, claim 32 does not cover a “particular machine.”
Pet. 31–33; 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 claim 32 does not transform an
article into a different state of thing. Pet. 33–34.
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.
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b. DDR Holdings
Relying on the Federal Circuit’s decision in DDR Holdings, Patent
Owner asserts that claim 32 is directed to statutory subject matter because
the claimed solution is “necessarily rooted in computer technology in order
to overcome a problem specifically arising in the realm of computer
networks.’” PO Resp. 12 (quoting DDR Holdings, LLC v. Hotels.com, L.P.,
773 F.3d 1245, 1257 (Fed. Cir. 2014)). Patent Owner contends that claim 32
is “directed to particular devices that can download and store digital content
into a data carrier” and “[b]y using a system that combines on the data
carrier both the digital content and payment data that can be forwarded to a
payment validation system, and by responding to payment validation data
when obtaining digital content, the claimed data access terminals enable
digital content to be obtained effectively and legitimately.” Id. at 12–13.
Patent Owner further argues that because claim 32 also “utilizes at least one
access rule, also written to the data carrier,” “access control to the digital
content can be continuously enforced prior to access to the digital content
and allowing subsequent use (e.g., playback) of the digital content to be
portable and disconnected.” Id. at 13.
Petitioner responds that claim 32 is distinguishable from the claims in
DDR Holdings. Reply 19–21. 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
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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 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 claim 32 is distinguishable from the
claims at issue in DDR Holdings. As an initial matter, we are not persuaded
by Patent Owner’s argument that claim 32 is “rooted in computer technology
in order to overcome a problem specifically arising in the realm of computer
networks—that of digital data piracy” and “address[es] . . . a challenge
particular to the Internet.” PO Resp. 13. Data piracy exists in contexts other
than the Internet. See Reply 17 (identifying other contexts in which data
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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 claim 32 is not rooted in specific computer technology, but is
based on conditioning and controlling access to content only when payment
is validated. See Reply 15–16.
Even accepting Patent Owner’s assertion that claim 32 addresses data
piracy on the Internet (PO Resp. 13), 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 claim 32 and
the claims at issue in DDR Holdings are made clear by Patent Owner in its
table mapping claim 32 of the ’221 patent to claim 19 of the patent at issue
in DDR Holdings. PO Resp. 14–17. For example, Patent Owner compares
the limitation highlighted by the Federal Circuit in DDR Holdings with 3
limitations recited by claim 32: (1) “code to retrieve from the data supplier
and output to a user-stored data identifier data and associated value data and
use rule data for a data item available from the data supplier”; (2) “code
responsive to the payment validation data to . . . to write the retrieved data
into the data carrier”; and (3) “code responsive to the payment validation
data to receive at least one access rule from the data supplier and to write the
at least one access rule into the data carrier, the at least one access rule
specifying at least one condition for accessing the retrieved data written into
the data carrier, the at least one condition being dependent upon the amount
of payment associated with the payment data forwarded to the payment
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validation system.” PO Resp. 16–17. Patent Owner, however, fails to
identify how these limitations of claim 32, like the corresponding DDR
Holdings limitation, do not “adher[e] to the routine, conventional
functioning” of the technology being used. PO Resp. 14–24; DDR
Holdings, 773 F.3d at 1258. Instead, unlike the claims in DDR Holdings,
these limitations, like all the other limitations of claim 32, are “specified at a
high level of generality,” which the Federal Circuit has found to be
“insufficient to supply an ‘inventive concept.’” Ultramercial, 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 claim 32,
were also directed to a method for distributing media products. Instead of
conditioning and controlling access to data based on payment, as in claim
32, the Ultramercial claims condition and control access based on viewing
an advertisement. 772 F.3d at 712. Similar to the claims in Ultramercial,
the majority of limitations in claim 32 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,
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and use of the Internet does not transform an otherwise abstract idea into
patent-eligible subject matter.”).
We are, therefore, persuaded that claim 32 is closer to the claims at
issue in Ultramercial than to those at issue in DDR Holdings.
c. Smartflash’s Alleged Inventive Concept
To the extent Patent Owner argues claim 32 includes an “inventive
concept” because of the specific combination of elements in claim 32, we
disagree. Specifically, Patent Owner refers to the following disclosure from
the ’221 patent specification: “[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. 8–9 (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
both the digital content and the use rules/use status data, access control to
the digital content can be continuously enforced prior to access to the digital
content.” Id. at 9. Thus, Patent Owner concludes that “[b]y comparison,
unlike a system that uses use rules/use status data as claimed, when a DVD
was physically rented for a rental period, the renter could continue to play
the DVD, even if the renter kept the DVD past the rental period because the
use rules were not associated with the DVD” and “there was no way to track
a use of the DVD such that a system could limit its playback to [a] specific
number of times (e.g. three times) or determine that the DVD had only been
partially used.” Id.
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
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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 content and conditions for providing
access to the content. See, e.g., Pet 39–40 (citing Ex. 1004, Abstract
(describing a transportable unit storing both content and a control processor
for controller access to that content)); Pet 66 (citing Ex. 1005, 18:9–16
(“Defining usage rights in terms of a language in combination with the
hierarchical representation of a digital work enables the support of a wide
variety of distribution and fee schemes. An example is the ability to attach
multiple versions of a right to a work. So a creator may attach a PRINT
right to make 5 copies for $10.00 and a PRINT right to make unlimited
copies for $100.00. A purchaser may then choose which option best fits his
needs.”)). To the extent Patent Owner argues that claim 32 covers storing,
on the same device, both content and a particular type of condition for
providing access to content or information necessary to apply that condition
(e.g., “track[ing] a use of the DVD such that a system could limit its
playback to specific number of times” (PO Resp. 9)), we do not agree that
this, by itself, is sufficient to elevate claim 32 to patent-eligible subject
matter. Because the concept of combining the content and conditions for
providing access to the content on the same device was known, claiming a
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particular type of condition does not make the claim patent eligible under
§ 101.
d. Preemption
Petitioner argues that “the ’221 patent claims preempt all effective
uses of the abstract idea of enabling limited use of paid-for/licensed
content.” Pet. 29. Patent Owner responds that claim 32 does not result in
inappropriate preemption. PO Resp. 25–36. According to Patent Owner,
claim 32 does not attempt to preempt every application of the idea, but
rather recite a “‘specific way . . . that incorporates elements from multiple
sources in order to solve a problem faced by [servers] on the Internet.’” Id.
at 25 (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
claim 32 does not raise preemption concerns. Id. at 30–35.
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
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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
to gauge a patented invention’s preemptive effect in order to determine
whether a claim is patent-eligible under § 101. See Reply 21–24 (arguing
that Patent Owner’s position regarding non-infringement and existence of
non-infringing alternatives to the challenged claim is 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.
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As described above, after applying this two-part test, we are
persuaded that Petitioner has shown by a preponderance of the evidence that
claim 32 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 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. 36–37); and (2) the Office is
estopped from revisiting the issue of § 101, which was inherently reviewed
during examination (id. at 37–38).
As a preliminary matter, 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). Moreover, Patent Owner does not
provide any authority for its assertion that “[t]he question of whether the
claims are 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. 37.
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3. Conclusion
For the foregoing reasons, we are persuaded that Petitioner has
established, by a preponderance of the evidence, that claim 32 of the ’221
patent is unpatentable under § 101.
MOTIONS TO EXCLUDE
A. Samsung’s Motion to Exclude
Samsung seeks to exclude portions of Exhibits 2056 and 2057, the
cross-examination testimony of Dr. Jeffrey Bloom as submitted by Patent
Owner. Paper 38, 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, Samsung’s Motion to Exclude is denied.
Samsung 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 38, 4–6); and (2) outside the scope of direct examination
under FRE 611(b) (id. at 7–8). Samsung 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. Samsung adds that
“Samsung, during its direct examination of Dr. Bloom, never opened [the]
door to such questions.” Id. at 8.
We are not persuaded by Samsung’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
Samsung’s expert. Although we were not persuaded by this evidence, we
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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, Samsung seeks to exclude the excerpts of testimony from
Exhibit 2057 as lacking proper foundation under FRE 701 and 702. Id. at 6–
7. Samsung argues that in these excerpts, “Smartflash attempted to solicit
testimonies from Dr. Bloom regarding operation of a SiriusXM Internet
Radio 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 Samsung, 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. Samsung 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 Samsung, 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, 1004, 1005, 1006,
1028, and 1039. Paper 34, 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.
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§ 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
various Board and Evidentiary rules. Paper 34, 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.” Paper 34, 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.’” Paper 34, 3–4.
Petitioner counters that consistent with the requirements of 37 C.F.R.
§ 42.65, “Dr. Bloom’s testimony disclosed underlying facts and data on
which his opinions were based.” Paper 41, 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
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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
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 34, 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 34, 6, 7–9. 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
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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 34, 7. We understand that in these paragraphs, Dr. Bloom is not
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 34, 7–9. Petitioner responds to these objections by filing, as
supplemental evidence, supporting documents comprising the underlying
publications referred to by Dr. Bloom in these paragraphs. Paper 41, 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 44, 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.
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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 34, 9–10.
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-
for/licensed content’” and, thus, are relevant to the question of patent
eligibility. Paper 41, 11–12.
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 34, 10. 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
’221 patent. Id. at 10–11.
Petitioner responds that Exhibit 1028 is “directed to well-known
historic credit operations in support of Dr. Bloom’s observation that the ’221
patent mimics such payment operations” and is, therefore, not irrelevant.
Paper 41, 12.
Because Exhibit 1028 is relied upon by Petitioner to support its
assertions with respect to the underlying factual issues related to patent
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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 brief, as irrelevant and inadmissible under FRE 401
and 402. Paper 34, 11. According to Patent Owner, the document has an
alleged publication after the effective filing date of the ’221 patent. Id.
Patent 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 41. Petitioner, however, does
address the relevance of this document in its reply brief (Paper 31), 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 ’221 patent’s effective filing date,
traditionally engaged in mental activities aimed at enabling limited use of
paid for and/or licensed content.” Paper 31, 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.
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ORDER
Accordingly, it is:
ORDERED that claim 32 of the ’221 patent is determined to be
unpatentable;
FURTHER ORDERED that Samsung’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.

PETITIONER:

Walter Renner
Thomas Rozylowicz
FISH & RICHARDSON P.C.
axf@fr.com
CBM39843-0003CP1@fr.com

PATENT OWNER:

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