4361423 CANADA INC.

Patent Trials and Appeals Board

Apr 29, 2021

IPR2019-01652 (P.T.A.B. Apr. 29, 2021)

Trials@uspto.gov Paper 33
571-272-7822 Date: April 29, 2021

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

SQUARE, INC.,
Petitioner,
v.
4361423 CANADA INC.,
Patent Owner.

IPR2019-01652
Patent 9,613,351 B2

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

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

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I. INTRODUCTION
We have authority to hear this inter partes review under 35 U.S.C.
§ 6. This Final Written Decision issues pursuant to 35 U.S.C. § 318(a) and
37 C.F.R. § 42.73. We determine that Square, Inc. (“Petitioner”) has proved
by a preponderance of the evidence that claims 1–10 of U.S. Patent
9,613,351 B2 (Ex. 1001, “the ’351 patent”) are unpatentable. See 35 U.S.C.
§ 316(e) (2018); 37 C.F.R. § 42.1(d).
A. Background
Petitioner filed a Petition for inter partes review of claims 1–10
(“challenged claims”) of the ’351 patent. Paper 2 (“Pet.”). 4361423 Canada
Inc. (“Patent Owner”) filed a Preliminary Response. Paper 8. We instituted
review on May 8, 2020. Paper 9 (“Decision on Institution”). Patent Owner
filed a Patent Owner Response. Paper 20 (“PO Resp.”). Petitioner filed a
Reply. Paper 23 (“Reply”). Patent Owner filed a Sur-Reply. Paper 25
(“Sur-Reply”). Oral hearing was consolidated with the oral hearings in
IPR2019-01651, IPR2019-01653, and IPR2019-01654 (Paper 28), and was
held on February 10, 2021. A copy of the hearing transcript has been
entered into the record as Paper 32 (“Tr.”).
B. Real Parties-in-Interest
Each party identifies itself as the only real party in interest. Pet. 1;
Paper 4, 2.
C. Related Matters
The parties indicate the ’351 patent is the subject of: 4361423 Canada
Inc. v. Square, Inc., No. 4:19-cv-04311 (N.D. Cal.). Pet. 1; Paper 4, 2.
Petitioner indicates that related patents are the subject of other petitions for
inter partes review filed by Petitioner in IPR2019-01625, IPR2019-01626,
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IPR2019-01627, IPR2019-01628, IPR2019-01629, IPR2019-01630,
IPR2019-01649, IPR2019-01650, IPR2019-01651, IPR2019-01653,
IPR2019-01654. Pet. 1–2.
D. The ’351 Patent
The ’351 patent relates to an apparatus and system “for commercial
transactions using a transaction card via a communication device in audio
communication with a remote processor assembly.” Ex. 1001, 2:30–36. It
also relates to a method “for commercial transactions using a transaction
card via a communication device.” Id. at 2:37–39. Specifically, the ’351
patent describes a transaction apparatus, such as a portable point of sale
(“POS”) device, linked to a communication device, such as a mobile phone.
Id. at 6:15–18; 6:1–2; 7:37–42. Figure 2 illustrates an embodiment of an
assembly according to the ’351 patent and is reproduced below.

Figure 2 shows a front view of a transaction/communication assembly
according to an embodiment of the ’351 patent. Id. at 5:38–40.

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Assembly 16 includes POS device 12 linked a communication device
in the form of mobile phone 14 via cable 30. Id. at 7:37–42. POS device 12
includes input device 38 such as card reader slot 39 for swiping or inserting
transaction card 24 and capturing information from the transaction card. Id.
at 7:50–53. The ’351 patent explains that a user swipes card 24 through slot
39, and that analog information on magnetic stripe 46 on card 24 is captured
by an analog signal reader such as magnetic stripe reader 52, and transferred
to MCU 50 (microcontroller unit). Id. at 7:62–66, 8:10–13.
MCU 50 converts the information into an analog audio signal and
transmits it via an analog communication link such as cable 30 to the
communication device such as mobile phone 14. Id. at 8:19–25. Optionally,
MCU 50 may encrypt the data. Id. at 8:16–18. Mobile phone 14 then
transmits the information to transaction server 18 for processing. Id.
at 8:26–27. The transaction server decrypts the received signal, converts it
to a digital signal, and sends it to remote processor 20 for validation. Id. at
8:27–29. Remote processor 20 can reject or accept the requested transaction
and send a message to transaction server 18 to indicate that determination.
Id. at 8:30–35. Transaction server 18, after receiving the message from
remote processor 20, converts the received information to an audio signal
and sends it back to mobile phone 14. Id. at 8:36–39.
E. Illustrative Claims
Claims 1 and 6 are independent and reproduced below:
1. [Preamble] A portable reader apparatus for reading a
payment device having information stored on an integrated
circuit incorporated into said payment device, the apparatus
comprising:
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[1.A] a sensor for reading information stored on said
integrated circuit incorporated into said payment
device;
[1.B] a controller coupled to the sensor for converting
said information to a format suitable for transmission
to a mobile communication device; and
[1.C] a communication link for coupling the portable
reader apparatus to said mobile communication device
for the transmission of said information there
between;
[1.D.1] wherein the sensor reads said information,
[1.D.2] the controller converts said information into a
format suitable for transmission to said mobile
communication device and
[1.D.3] transmits said information via the
communication link to said mobile communication
device, and
[1.D.4] said mobile communication device transmits said
information to a remote transaction server for
processing a commercial transaction.
Ex. 1001, 12:7–26 (annotated bracketing added to correspond to Petitioner’s
claim listing (Ex. 1002)).
6. [Preamble] A method for reading a payment device
having information stored on an integrated circuit incorporated
into said payment device, the method comprising the steps of:
[6.A] providing a portable reader apparatus comprising a
sensor for reading information stored on said
integrated circuit incorporated into said payment
device;
[6.B] a controller coupled to the sensor for converting
said information to a format suitable for transmission
to a mobile communication device;
[6.C] a communication link for coupling the portable
reader apparatus to said mobile communication device
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for the transmission of said information there
between;
[6.D] wherein the sensor reads said information,
[6.E] the controller converts said information into a
format suitable for transmission to said mobile
communication device and transmits said information
via the communication link to said mobile
communication device;
[6.F] providing said information to said mobile
communication device for further processing by
circuitry contained in said mobile communication
device; and
[6.G] said mobile communication device transmits said
information to a remote transaction server for
processing a commercial transaction.
Id. at 12:45–67 (annotated bracketing added to correspond to Petitioner’s
claim listing (Ex. 1002)).
F. Evidence — Prior Art References and Declarations
Petitioner relies on the following prior art references and
Declarations:
Evidence Exhibit No.
Declaration of Michael Shamos (“Shamos Declaration”) 1003
U.S. Patent No. 6,234,389 B1, issued May 22, 2001
(“Valliani”) 1005
U.S. Patent Application Publication No. 2005/0236480
A1, published Oct. 27, 2005 (“Vrotsos”) 1006
U.S. Patent Application Publication No. 2006/0032905
A1, published Feb. 16, 2006 (“Bear”) 1007
U.S. Patent Application Publication No. 2003/0183691
A1, published Oct. 2, 2003 (“Lahteenmaki”) 1009
Rebuttal Declaration of Michael Shamos (“Shamos
Rebuttal Declaration”) 1017

Patent Owner relies on the Declaration of Ivan Zatkovich. Ex. 2004.
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G. Asserted Grounds of Unpatentability
Petitioner asserts that the challenged claims are unpatentable on the
following grounds:
Claim(s) Challenged 35 U.S.C. §1 Reference(s)/Basis
1–10 103 Valliani, Vrotsos
1–6 103 Bear, Lahteenmaki
4–10 103 Bear, Lahteenmaki, Vrotsos
1–10 103 Vrotsos

II. ANALYSIS
A. Principles of Law
To prevail in its challenge to Patent Owner’s claims, Petitioner must
demonstrate by a preponderance of the evidence that the claims are
unpatentable.2 35 U.S.C. § 316(e); 37 C.F.R. § 42.1(d). That burden never
shifts to the patentee. Dynamic Drinkware, LLC v. Nat’l Graphics, Inc.,
800 F.3d 1375, 1378 (Fed. Cir. 2015).
A patent claim is unpatentable under 35 U.S.C. § 103 if the
differences between the claimed subject matter and the prior art are such that
the subject matter, as a whole, would have been obvious at the time the
invention was made to a person having ordinary skill in the art to which said

1 The Leahy-Smith America Invents Act, Pub. L. No. 112–29, 125 Stat. 284,
287–88 (2011) (“AIA”), revised 35 U.S.C. §§ 102 and 103 effective
March 16, 2013. Because the effective filing date of the ’351 patent is prior
to March 16, 2013 (Ex. 1001, codes (22), (63)), we apply the pre-AIA
version of § 103.
2 The burden of showing something by a preponderance of the evidence
requires the trier of fact to believe that the existence of a fact is more
probable than its nonexistence before the trier of fact may find in favor of
the party who carries the burden. Concrete Pipe & Prods. of Cal., Inc. v.
Constr. Laborers Pension Tr. for S. Cal., 508 U.S. 602, 622 (1993).
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subject matter pertains. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406
(2007). The question of obviousness is resolved on the basis of underlying
factual determinations including (1) the scope and content of the prior art;
(2) any differences between the claimed subject matter and the prior art;
(3) the level of ordinary skill in the art; and (4) when in evidence, objective
evidence of nonobviousness.3 Graham v. John Deere Co., 383 U.S. 1, 17–
18 (1966).
B. Level of Ordinary Skill in the Art
Petitioner asserts that a person of ordinary skill in the art (“POSITA”),
at the time the ’351 patent was filed, would have been a person with “a
Bachelor of Science in Electrical Engineering or Computer Engineering, or
the equivalent,” and would have had “at least one to two years of relevant
experience in the fields of embedded systems and mobile communication
device interfaces, or otherwise equivalent industry experience in the relevant
field.” Pet. 15 (citing Ex. 1003 ¶¶ 17–25).
Patent Owner’s expert, Ivan Zatkovich, states the level as follows:
The POSITA may have a Bachelor of Science in Electrical
Engineering or Computer Engineering, or the equivalent and
have at least one to two years of relevant experience in the fields
of embedded systems and mobile communication device
interfaces, or otherwise equivalent industry experience in the
relevant field.
Ex. 2004 ¶ 14. The articulations are essentially the same and are treated as
such. We adopt the articulation of the level of ordinary skill in the art, as
proposed by the parties, but delete the qualifier “at least” for the level of
practical experience, to keep that level from being vague and extending to a

3 Patent Owner has not presented any objective evidence of nonobviousness
or any argument in that regard.
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range that corresponds to the level of skill of an expert. Thus, we regard the
level of ordinary skill as being at the level of a person with “a Bachelor of
Science in Electrical Engineering or Computer Engineering, or the
equivalent,” and would have had “one to two years of relevant experience in
the fields of embedded systems and mobile communication device
interfaces, or otherwise equivalent industry experience in the relevant field.”
C. Claim Construction
For petitions filed on or after November 13, 2018, we use the same
claim construction standard that would be used to construe the claim in a
civil action under 35 U.S.C. § 282(b), including construing the claim in
accordance with the ordinary and customary meaning of such claim as
understood by one of ordinary skill in the art and the prosecution history
pertaining to the patent. See 37 C.F.R. § 42.100 (2019). The Petition here
was filed on September 30, 2019. Paper 2. We apply the claim construction
standard from Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en
banc).
Claim terms are generally given their ordinary and customary
meaning as would be understood by one with ordinary skill in the art in the
context of the specification, the prosecution history, other claims, and even
extrinsic evidence including expert and inventor testimony, dictionaries, and
learned treatises, although extrinsic evidence is less significant than the
intrinsic record. Phillips, 415 F.3d at 1312–17. Usually, the specification is
dispositive, and it is the single best guide to the meaning of a disputed term.
Id. at 1315.
The specification may reveal a special definition given to a claim term
by the patentee, or the specification or prosecution history may reveal an
intentional disclaimer or disavowal of claim scope by the inventor. Id.
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at 1316. If an inventor acts as his or her own lexicographer, the definition
must be set forth in the specification with reasonable clarity, deliberateness,
and precision. Renishaw PLC v. Marposs Societa’ per Azioni, 158 F.3d
1243, 1249 (Fed. Cir. 1998). The disavowal of claim scope, if any, can be
effectuated by language in the specification or the prosecution history. Poly-
America, L.P. v. API Indus., Inc., 839 F.3d 1131, 1136 (Fed. Cir. 2016). “In
either case, the standard for disavowal is exacting, requiring clear and
unequivocal evidence that the claimed invention includes or does not include
a particular feature.” Id.
Only those claim terms that are in controversy need to be construed,
and only to the extent necessary to resolve the controversy. Nidec Motor
Corp. v. Zhongshan Broad Ocean Motor Co., 868 F.3d 1013, 1017 (Fed.
Cir. 2017).
In neither the Petition nor the Patent Owner Response has either party
proposed an express full construction for any claim term. However, the
arguments of the parties reflect a certain reading of the claim language. To
the extent necessary to reach a decision, we discuss each party’s proposed
reading in our analysis of the party’s arguments below.
D. Petitioner’s Treatment of Claims 7–10
Although claim 6 is a method claim, each of claims 7–10 begins with
“The portable reader apparatus [of] claim 6.” Ex. 1001, 13:1–16. In that
regard, Petitioner states: “Claims 7–10 each recite ‘The portable reader
apparatus 6.’ For purposes of this Petition, Petitioner assumes this to be a
typographical error and that the phrase ‘The portable reader apparatus claim
6’ should recite ‘The method of claim 6’.” Pet. 45 n.2. Patent Owner has
not addressed this point raised by Petitioner.
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We need not determine whether the discrepancy is so minor that it
qualifies as a typographical error. By assuming that the introductory phrase
of claims 7–10 reads “The method of claim 6,” Petitioner has undertaken to
prove all elements of claim 6, a greater burden than simply having to prove
“The portable reader apparatus [of] claim 6.” Patent Owner has not
opposed. We have no reason to disapprove Petitioner’s proposal.
E. Obviousness of Claims 1–10 over Valliani and Vrotsos
1. Overview of Valliani
Valliani relates to portable computer systems including personal
digital assistants (“PDA”) for performing point of sale transactions.
Ex. 1005, 1:16–20. Specifically, Valliani discloses a PCMCIA-compliant
generic laptop computer or PDA device “with an add-on module that
provides point of sale functionality.” Id. at 2:41–44. “[T]he module
converts the device to a portable inexpensive point of sale transaction
terminal.” Id. at 2:45–47. The module includes a card reader and has a
housing member which slides into the PCMCIA slot of the computer or
PDA. Id. at 2:48–52. The computer or PDA executes software which
allows the device to read and process information read by the module. Id. at
2:52–55.
Valliani describes that typically payment for a transaction is made
with a credit card that includes a magnetic stripe carrying the cardholder’s
information, and such cards are read by a module with a magnetic stripe
reader unit. Id. at 2:56–60. Valliani further describes that transactions may
involve a smartcard instead, in which memory internal to the card retains
data, and such cards are read by a module having a smart card reader/writer
unit. Id. at 2:62–65. Valliani states that when equipped with an appropriate
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module, the computer or PDA device “becomes a portable point of sale
transaction terminal.” Id. at 2:65–67.
Figure 1 of Valliani is a block diagram of Valliani’s system and
reproduced below:

Figure 1 is a block diagram of a computer or PDA combined with a module
to implement a point of sale transaction terminal system. Id. at 3:17–20.
Device 10 shows a generic portable computer or PDA device. Id. at
4:34–37. The righthand portion of Figure 1 shows module 200 the housing
of which includes projecting snout-like member 280 that includes connector
edge 265 which slides into and matingly engages slot socket 90 in device 10.
Id. at 4:51–54. Module 200 includes magnetic stripe reader 210 that reads
information encoded and stored on magnetic stripe 220 on credit card 230,
and optionally may provide “a pinpad unit 240, a printer unit 245, a
fingerprint reader unit 250, a signature capture unit and/or virtual pinpad
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unit 255, and/or a smartcard reader unit 260.”4 Id. at 4:41–44 (emphasis
added). “Smartcard reader unit 260 is utilized if card 230 is a smartcard
storing data in memory 225.” Id. at 4:45–47.
Figure 2 of Valliani illustrates an embodiment in which only a
magnetic stripe reader is provided in module 200. Id. at 5:1–2. Figure 3 of
Valliani illustrates an embodiment including both a magnetic stripe reader
and a pinpad unit. Id. at 6:16–18. Valliani describes that typically,
information embedded in magnetic stripe 220 of the card includes at least
the card owner’s credit account company and account number, and owner
identification information. Id. at 5:25–28. Valliani also describes that
software routines, either provided through module 200 or made available
through another source, would be loaded into device 10. Id. at 6:4–7.
Regarding such software, Valliani specifically states:
These routines would include point of sale software and
software driver(s) fir the PCMCIA-implemented magnetic stripe
reader 210 and can further include driver(s) for pinpad unit 240,
printer unit 245, fingerprint unit 250, signature capture unit 255,
and smartcard reader/writer unit 260. Such routines can also
provide DES encryption, signature capture and signature
compression, among other useful functions. These routines
would be executed by central processor unit 20 within device 10.
Id. at 6:8–16.
Device 10 communicates with host 75 through port 75, a modem, and
telephone lines, or such communication may be by infrared or wireless
telephony, “which further promotes portability.” Id. at 6:47–50. If a card is
stolen, an individual attempting to transact business with module 200 will be

4 Sometimes Valliani refers to “smartcard reader/writer unit 260” and not
“smart card reader unit 260.” Ex. 1005, 6:11, 8:9. For consistency, we refer
to unit 260 as smart card reader/writer unit 260 as shown in Figure 1 above.
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unable to have a PIN confirmed by the remote host system communicating
with device 10. Id. at 6:49–53. Absent such confirmation, for example as
shown on a display in device 10, the transaction would not be allowed.
Id. at 6:54–57.
2. Overview of Vrotsos
Vrotsos is directed to a system and method for transmitting
transaction data over a wireless communication network. Ex. 1006 ¶ 26. In
an embodiment, the system is used to transmit credit card information during
a point-of-sale transaction. Id. An “attachment” is coupled to a wireless
communication device having a transceiver for establishing a
communication link with a wireless communication network. Id. Vrotsos
states that the “attachment” may also be referred to “as a peripheral or
peripheral device.” Id.
The “attachment” includes a processor and an input device. Id. When
the attachment device receives data from the input device, it transmits that
data over the wireless communication network using the transceiver in the
wireless communication device. Id. Vrotsos describes that the input device
may be a magnetic stripe reader or a smart card reader. Id. ¶ 28. In one
embodiment, the attachment includes a combined magnetic stripe reader and
smart card reader. Id. ¶ 41. In that embodiment, “[a] card 51 having a
magnetic stripe 52 and/or smartchip 53 may be inserted into the slot 22 [of
the attachment].” Id. The slot has a shallow channel portion suitable for
reading a magnetic stripe on a card, and also a deeper channel portion. Id.
Vrotsos describes as follows: “A smartcard read/write head may be
positioned within a surface of the deeper channel portion 55 of the slot 22 so
that information may be read from or written to the smartchip 53 when the
card is positioned within the deeper channel portion 55.” Id.
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When input information is received at the input device, it is sent to a
processor in the attachment device for processing and transmission to the
remote computer through the communication device. Id. ¶ 26. The remote
computer may process the received data and generate a response to be sent
back to the processor in the attachment device. Id.
Figure 10 is a block diagram of the system of Vrotsos and reproduced
below:

Figure 10 illustrates the components of the wireless communication device
and attachment (peripheral device) disclosed in Vrotsos. Id. ¶ 23. The
attachment includes processor 303, memory 307, and input device 308. Id.
¶ 75. Processor 303 receives input information from input device 308 and
processes that information to generate data for transmission to a remote
computer via antenna 5 of the communication device. Id. Vrotsos also
describes that processor 303 operates to encrypt the input information. Id.
3. Independent Claim 1
a) Preamble
Claim 1’s preamble recites “[a] portable reader apparatus for reading a
payment device having information stored on an integrated circuit
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incorporated into said payment device.” Ex. 1001, 12:7–9. Petitioner
identifies Valliani’s module 200 as the portable reader device and card 230
as the payment device. Pet. 17. Petitioner cites to Valliani’s disclosure
which states that smart card reader/writer unit 260 “is utilized if card 230 is
a smartcard storing data in memory 225.” Id. (citing Ex. 1005, 4:45–46).
Petitioner explains that card 230 is a smart card and that memory 225 on
card 230 corresponds to the claimed integrated circuit. Id. Michael Shamos,
Petitioner’s declarant, identifies Valliani’s memory 225 as an integrated
circuit. Ex. 1003 ¶ C1.5 Petitioner further asserts that information stored in
memory 225, such as user account number, maximum dollar limit of the
account, user identification, and a PIN, corresponds to information stored on
an integrated circuit incorporated into the smart card. Pet. 17 (citing
Ex. 1003 ¶ C7, Ex. 1005, 6:27–29, 7:62–64).
Valliani states that “a card owner’s PIN is not stored, encrypted or
otherwise, in magnetic stripe(s) 220 but may be stored in memory 225.” Ex.
1005, 6:27–29. Petitioner also cites to the following text in Valliani: “Such
point of sale transaction systems should be portable, small in size.” (Ex.
1005, 2:33–34, cited at Pet. 18).
To the extent Patent Owner asserts an argument with regard to the
preamble, it is merged with its argument directed to limitation [1.A]
discussed below and related to a sensor for reading recorded information
stored on an integrated circuit incorporated into the card. Notwithstanding
Patent Owner’s argument, discussed below in the context of limitation [1.A],
Petitioner’s assertion is supported by the cited evidence and we are

5 The letter “C” in the citation to paragraph numbers in Ex. 1003 designates
the paragraph numbers within Appendix C of Exhibit 1003.
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persuaded that Valliani discloses “[a] portable reader apparatus for reading a
payment device having information stored on an integrated circuit
incorporated into said payment device.” We need not determine whether
this preamble is limiting.
b) Limitation [1.A] — a sensor
Claim 1 further recites that the reader apparatus comprises “a sensor
for reading information stored on said integrated circuit incorporated into
said payment device.” Ex. 1001, 12:11–12. Petitioner asserts that Valliani’s
smart card reader/writer unit 260 includes a sensor that reads a smart card
that has recorded information stored on said integrated circuit incorporated
into said payment device. Pet. 19 (citing Ex. 1003 ¶¶ C14–15; Ex. 1005,
7:61–8:6). Petitioner also explains that data stored in the memory of the
card corresponds “to information stored on said integrated circuit
incorporated into said payment device.” Pet. 19–20 (citing Ex. 1003
¶¶ C14–16; Ex. 1005, 4:45–47). Further, as noted above in the context of
the preamble, Petitioner cites to Valliani’s disclosure which states that smart
card reader/writer unit 260 “is utilized if card 230 is a smartcard storing data
in memory 225.” Pet. 17 (citing Ex. 1005, 4:45–46). Petitioner’s declarant,
Michael Shamos, testifies that Valliani’s smart card reader/writer 260 is the
claimed sensor, and is used for reading card data stored in memory 225 on
card 230. Ex. 1003 ¶ C14–16 (citing Ex. 1005, 7:61–8:6, 4:45–47).
Valliani describes:
Memory 225 within smartcard 230 can store substantially
more data than can one or even three magnetic stripes. An
appropriate smartcard 230 may store user account number,
present maximum dollar limit of the account, user identification
as well as preferably encrypted PIN data. Generally, when a user
purchases a smartcard 230, memory 225 is programmed to store
the dollar value of the card, e.g., the value of the card. In a
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preferred embodiment, smartcard reader/writer unit 260 can both
read and write to memory 225. Thus, if prior to the present
transaction memory 225 stored $1,000 as the present card
balance and if the present transaction is $200 debit, unit 260 can
so debit memory 225 such that the new present card balance is
$800.
Ex. 1005, 7:61–8:6.
Notwithstanding Patent Owner’s arguments to the contrary,
discussed below, Petitioner’s assertions are fully supported by the cited
evidence and we are persuaded that Valliani’s module 200 includes “a
sensor for reading information stored on said integrated circuit incorporated
into said payment device.” That sensor is within smart card reader/writer
260. Further, smart card reader/writer 260 itself may be deemed the sensor.
Patent Owner asserts that “[a]lthough Petitioner identifies Valliani’s
mention of a ‘smart card’ reader, Petitioner does not identify any component
of Valliani that might qualify as the claimed sensor for an integrated circuit
of any payment device.” PO Resp. 11. That is incorrect. Petitioner’s
declarant, Michael Shamos, testifies that Valliani’s smart card reader/writer
260 is the claimed sensor, and is used for reading card data stored in
memory 225. Ex. 1003 ¶ C14–16 (citing Ex. 1005, 7:61–8:6, 4:45–47).
Even if the sensor is contained within Valliani’s smart card reader/writer
260, the Petition states that Valliani’s smart card reader/writer unit 260
within module 200 “includes a sensor that reads a smart card that has
recorded information stored on an integrated circuit incorporated into said
payment device.” Pet. 19 (citing Ex. 1005, 7:61–8:6; Ex. 1003 ¶¶ C 14–15).
Patent Owner argues:
Nothing in the cited passage from Valliani, however,
mentions any kind of sensor. In fact, nowhere does Valliani or
Petitioner identify any component of Valliani that could qualify
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as the claimed sensor. Ex. 2004, ¶¶27–31. Instead, Valliani
references the unit 210, a magnetic stripe reader. This is not a
smart card reader, nor is it a device/component that reads the
integrated circuit of a smart card or any other payment device. []
Valliani proves as much when it specifies that “as magnetic stripe
220 moves through slot 290, a read head associated with unit 210
senses magnetic charge embedded in stripe(s) 220.[”]
PO Resp. 12–13.
Patent Owner has misread the Petition. Petitioner does not rely on
magnetic stripe reader 210 either as the sensor or as containing the sensor,
but, rather, on smart card reader/writer 260 as either being the sensor or
containing the sensor. Pet. 19; Ex. 1003 ¶¶ C14–15. Petitioner’s declarant,
Michael Shamos, testifies persuasively in his rebuttal declaration:
Petitioner and I never asserted that electronic[s] 210 possessed
the ability to access information from the integrated circuit, but
it is clear that smart card reader/writer 260 (the smartcard
sensor) has that ability, or it would not be able to function as a
smart card reader/writer. Patent Owner then goes on to
denigrate the capabilities of “electronics 210,” but electronics
210 is not the basis of Petitioner’s sensor argument.
Ex. 1017 ¶ 11.
Although it is true, as Patent Owner asserts, that Valliani nowhere
mentions, literally, a “sensor,” Michael Shamos persuasively testifies that
the claimed sensor “is precisely the unit in Valliani that senses and reads the
smart card.” Id. ¶ 12. The law does not require that the prior art describe a
claim limitation in ipsis verbis in order to meet it. Cf. In re Lukach,
442 F.2d 967, 969 (CCPA 1971) (“[T]he invention claimed does not have to
be described in ipsis verbis in order to satisfy the description requirement of
§ 112.”). Patent Owner misdirects the issue by not addressing what in
Valliani is reading integrated circuit memory 225 on card 230, and why
smart card reader/writer 260 is not or does not include such a sensor.
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To the extent Patent Owner also argues that Valliani does not provide
a detailed disclosure of the specific structure of smart card reader/writer unit
260, no more specific disclosure is necessary to meet the sensor limitation.
Only a generic sensor is claimed, not a specific sensor having a particular
structure. Even the ’351 patent itself does not provide detailed disclosure of
the structure of the sensor that reads an integrated circuit memory on a card.
Further, Patent Owner does not contend that one with ordinary skill in the
art, given Valliani’s disclosure of smart card reader/writer unit 260, would
not have known how to construct such a sensor for reading an integrated
circuit memory on a card. Michael Shamos has testified that sensors for
reading recorded information on an integrated circuit memory of a smart
card were well known to one with ordinary skill in the art in 2009. Ex. 1017
¶¶ 23, 26, 27; see also Ex. 1003 ¶ D23. Patent Owner’s declarant, Ivan
Zatkovich, does not contend otherwise. Even according to Patent Owner,
at the time of the invention, there already were industry standards which
“defined the methods for reading IC chips embedded in these types of smart
cards.” PO Resp. 14. We find that sensors for reading recorded information
on an integrated circuit memory of a smart card were well known to one
with ordinary skill in the art in 2009.
Alternatively, Petitioner asserts that to the extent that Valliani does
not explicitly describe a specific configuration of a sensor, it would have
been obvious to one with ordinary skill in the art, in light of Vrotsos, to
implement Vallani’s sensor with Vrotsos’s sensor. Pet. 21 Petitioner
asserts: “To the extent Valliani does not provide a specific configuration of
a sensor, a POSITA would have looked to another reference that provides
details of how to implement that sensor. Ex. 1003, ¶¶23–26.” Id. Petitioner
also explains that one with ordinary skill in the art would have known to
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look to Vrotsos for a specific implementation, because Vrotsos, like
Valliani, “is portable and reads information stored on a credit card (Ex.
1006, ¶ 41), processes that information (id. ¶ 52), and transmits it to the
phone (id. ¶ 43), which transmits the data to a remote computer to process
the credit card information and facilitate the transaction (id. ¶ 53). Ex. 1003,
¶¶C17–20.” Pet. 21–22.
Petitioner further explains:
[U]sing a smartcard read/write head was known to read
information stored on a smart card. A POSITA applying
Vrotsos’s teaching to Valliani would have expected to yield the
predictable result of success. Ex. 1003, ¶C25. Applying a
smartcard read/write head to Valliani’s smart card read/write unit
260 would have enabled the unit 260 to read the data encoded by
the smartcard’s memory 225. Id., Ex. 1006, ¶41.
Pet. 22.
Patent Owner asserts:
A POSITA would recognize that Vrotsos’s cryptic mention of a
“smartcard read/write head” does not disclose a smart card reader
capable of reading an integrated circuit at all, and certainly not at
any level of detail that would teach one how to integrate
Vrotsos’s card reader into Valliani’s device. Ex. 2004, ¶¶33-34.
PO Resp. 25. The argument does not defeat or undermine Petitioner’s
assertions. We address and reject a similar argument in Section II.F.1.b.
We determined that the smart card read/write head as described in Vrotsos is
a “sensor for reading recorded information stored on an integrated circuit
incorporated into a smart card.” As for the contention that there is
insufficient teaching on how to integrate Vrotsos’s read/write head into
Valliani’s device, the contention is without persuasion. Petitioner simply
proposes to implement Valliani’s smart card reader/writer unit 260 with
Vrotsos’s smart card read/write head. Patent Owner has identified nothing
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complex to be coordinated or intermixed. The smard card reader/writer unit
260 is described in Valliani at a relatively high level that Petitioner’s merely
proposing to implement it with Vrotsos’s smart card read/write head requires
no additional detail for incorporating the read/write head.
Notwithstanding Patent Owner’s arguments, discussed below,
regarding lack of motivation to combine teachings, we find that Petitioner’s
reasoning is based on rational underpinning and supports the assertion that
one with ordinary skill would have had sufficient reason and motivation to
use Vrotsos’s read/write head as Valliani’s smart card reader/writer unit 260.
First, Patent Owner asserts that Petitioner’s approach “is classic
hindsight misadventure,” for “saying that a POSITA would have been
motivated to incorporate beneficial elements of the patent claims because,
well, those elements would have been beneficial.” PO Resp. 25. We do not
find that Petitioner has engaged in such circular reasoning. Petitioner,
instead, as we discussed above, articulated a reason why one with ordinary
skill in the art would have known to use Vrotsos’s smart card read/write
head as a specific implementation of Valliani’s smart card reader/writer unit
260, i.e., because Valliani itself does not provide more detail on the specific
implementation. Also, as discussed above, Petitioner reasoned that one with
ordinary skill would have used Vrotsos’s smart card read/write head so that
in Valliani’s device information can be read from a smart card as Valliani
describes. Such reasoning is not circular. Nor is it based on hindsight.
Second, Petitioner argues that “[a] POSITA would understand that no
aspects of Vrotsos’ converting or communicating data between its reader
and cell phone (e.g., RS232 link) are compatible with Valliani’s reader and
communication device (PCMCIA Bus). Ex. 2004, ¶¶85-92.” PO Resp. 26.
According to Patent Owner, Valliani’s disclosure “mentions PCMCIA-
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compliance throughout,” and “the central premise and, indeed, entire point
of Valliani is to develop a mobile POS device under the PCMCIA standard -
not just a POS device that happens to use [a] PCMCIA interface. Ex. 2004,
¶¶ 87–89.” Id. at 26–27. Patent Owner further observes: “Every figure [of
Valliani] is described as disclosing a PCMCIA-compliant interface, and
every described disclosed embodiment is described as being PCMCIA
based.” Id. at 27. Based on the foregoing, Patent Owner argues:
Valliani teaches-away from any solution that does not utilize a
PCMCIA interface. Ex. 2004, ¶¶89. Therefore, a POSITA
would not consider combining Valliani with any reference that
does not disclose a PCMCIA compatible solution. Id. And as
mentioned above, no aspect of the Vrotsos reference is
compatible with the PCMCIA standard. Ex. 2004, ¶¶85.
As an example of Vrotsos incompatibility, Valliani’s
PCMCIA interface requires a 68 pin electrical connection using
a parallel communbication protocol. Vrotsos teaches a 4 pin RS-
232 connection and a serial communication protocol. . . . Vrotsos
neither mentions nor implies the use of any device standards or
architecture, and none of its disclosed embodiments or figures
appear to be PCMCIA-compliant. . . .
Because of the PCMCIA compliance requirements, any
attempt to integrate Valliani’s PCMCIA interface with the
Vrotsos card reader would require an overhaul to the Vrotsos
card reader or any of Vrotsos’ components that would “convert
information suitable for communication,” provide
“communication link with” or “transmit data to” a mobile
communication device. Ex. 2004, ¶¶92. In other words, to
combine almost any aspect of Vrotsos with Valliani would
require significant overhaul of the Vrotsos design in order to
comply with the limitations of the ‘351 claims. Id. Therefore,
this is clearly an endeavor based on hindsight. Id.
PO Resp. 27–29.
The argument is misplaced, for several reasons. First and foremost is
that Valliani’s smart card reader/writer 260, the sensor, has not been shown
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to operate according to PCMCIA standard or interface. The PCMCIA
interface pertains to the connection between Valliani’s module 200 and
PCMCIA-compliant device 10, i.e., the laptop or PDA. Ex. 1005, 3:50–65,
Fig. 1. Patent Owner incorrectly states that “all 20 claims of Valliani require
both a “PCMCIA-compliant card slot” and a “PCMCIA-compliant
connector,” erroneously suggesting that reading from a smart card is also
governed by PCMCIA. PO Resp. 27. No claim in Valliani refers to a
“PCMCIA-compliant card slot” in the sense of a transaction card slot in the
card reader. The claims refer to a “PCMCIA-compliant card slot connector”
which is the interface between module 200 and laptop/PDA 10, consistent
with Valliani’s disclosure. Further, the record does not support that the
standard governing reading of smart cards is PCMCIA. Ivan Zatkovich
testifies regarding Vrotsos’s card as follows: “As a card that requires
physical connection to a reader, it would be the EMV type of card as, at the
time of the invention, there were these two types of smart cards. As stated
above, an EMV type card would require a sensor which could access the
contact pad of the IC chip. The International Standard that applies to EMV
cards is ISO 7816.” Ex. 2004 ¶ 36 (footnote omitted).
Second, Vrotsos does not teach away from using the PCMCIA
standard or interface. It simply does not refer to it, which is not the same as
“criticize, discredit, or otherwise discourage” anything about a PCMCIA
standard or interface. See In re Fulton, 391 F.3d 1195, 1201 (Fed. Cir.
2004).
Third, Petitioner has not proposed direct body incorporation of the
physical components of Vrotsos into Valliani, without appropriate and
necessary adaptations, into Valliani. If, as Patent Owner asserts, that
Valliani is all about having a PCMCIA interface between module 200 and
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laptop/PDA 10, then one with ordinary skill in the art would have known,
based on Valliani’s disclosure, to implement a PCMCIA interface for
whatever component sourced from Vrotsos for incorporation into Valliani’s
system. Patent Owner has not asserted that it would be beyond the skill
level of one with ordinary skill in the art to add a PCMCIA interface to
components sourced from Vrotsos that are relied on by Petitioner.
For the foregoing reasons, we are persuaded that Valliani’s module
200 includes “a sensor for reading information stored on said integrated
circuit incorporated into said payment device.” Alternatively, we are
persuaded that one with ordinary skill in the art would have known to use
Vrotsos’s smart card read/write head in Valliani’s smart card reader/writer
260, and thus the combined teachings of Valliani and Vrotsos account for
the claimed sensor. Either position leads to satisfaction of limitation [1.A].
c) Limitation [1.B] — a controller
Claim 1 further recites “a controller coupled to the sensor for
converting said information to a format suitable for transmission to a mobile
communication device.” Ex. 1001, 12:13–15.
Petitioner identifies “electronics 210” in Valliani as the claimed
controller. Pet. 23. According to Petitioner, it is this “electronics 210 that
convert[s] a card owner’s PIN data, corresponding to information stored on
said integrated circuit, into a format suitable for transmission to a
communication device.” Id. at 22. Thus, the “electronics 210” relied on by
Petitioner is that referred to in the following description of Valliani: “For
security reasons, a card owner’s PIN is not stored magnetically on stripe 220
but may be stored electronically in memory 225. To promote security,
electronics 210 provides any card 230-provided PIN information to device
10 in encrypted form using only internally stored encryption keys.” Ex.
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1005, 5:29–34. Electronics 210 is not Valliani’s magnetic stripe reader 210
because the PIN is not stored on a magnetic stripe. Petitioner’s declarant,
Michael Shamos, makes a similar distinction between electronics 210 and
magnetic stripe reader 210 through the following testimony:
As Valliani explains, the module 200 may include only one
device i.e. only a smart card reader unit 260 or magnetic stripe
reader 210 [4:47–49]. In a case when only the smartcard
reader/writer 260 is present in the module 200, a POSITA would
have understood that electronics must be present to convert [the]
data to a PCMCIA-compliant format or, indeed, whatever format
is expected by the mobile communication device (or
transmission would be impossible.) Additional, whether the
controller is coupled to the smart card reader, or another unit is a
matter of design choice.
Ex. 1003 ¶ C32 (emphasis omitted).
Valliani does not specifically describe the location of its electronics
210. However, based on its description that electronics 210 “provides any
card 230-provided PIN information to device 10 in encrypted form using
only internally stored encryption keys” (Ex. 1005, 5:29–34), it is implicit
that electronics 210 is within module 200 and is coupled to smart card
reader/writer 260. Further, Michael Shamos persuasively testifies:
A POSITA would have found it obvious to couple the controller
[electronics 210] to the reader/writer unit 260 so that the
controller could directly receive the smartcard data from the unit
for processing. Accordingly, Valliani discloses a controller
coupled to a sensor for reading information stored on the memory
225 of a smartcard 230.
Ex. 1003 ¶ C32 (emphasis omitted).
Notwithstanding Patent Owner’s arguments to the contrary, discussed
below, we are persuaded that Valliani discloses and also would have
rendered obvious a portable smart card reader device comprising “a
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controller coupled to the sensor for converting said information to a format
suitable for transmission to a mobile communication device.”
Patent Owner asserts that “Petitioner does not identify anything in
Valliani capable of filling these roles [of the claimed controller].” PO Resp.
15. We disagree. Petitioner has identified “electronics 210” in a specific
manner and with firm support from the testimony of Michael Shamos, as we
discussed above.
Patent Owner asserts:
[T]he purported controller, “electronics 210,” is a component of
the magstripe reader – not a reader for smart cards and
specifically not having a controller coupled to a sensor for
reading and converting information stored on the integrated
circuit of a smart card. Ex. 2004, ¶45. There is no reason to
believe that electronics 210 has the ability to even access
information from the card’s integrated circuit, as discussed above
or even has the characteristics of a controller. Ex. 2004, ¶¶45–
48.
PO Resp. 16. We disagree that “electronics 210” as described in Valliani is
a component of Valliani’s magnetic stripe reader 210 such that it does not
read and convert information stored on the integrated circuit of a smart card.
That position is expressly contradicted by Valliani’s disclosure that PIN
information is not stored on a magnetic stripe but is stored on the memory of
a smart card and that the purpose and usage of electronics 210 is to provide
to device 10 card-provided PIN information in encrypted form using only
internally stored encryption keys. Ex. 1005, 5:29–34.
Patent Owner and Patent Owner’s declarant, Ivan Zatkovich, misread
Petitioner’s position. Mr. Zatkovich testifies: “Petitioner accuses the
electronics in 210, which is the Magnetic stripe reader. The Magstripe
reader 210 cannot access the integrated circuit on the payment device,
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therefore the magstripe reader 210 cannot be used for converting the data
from the integrated circuit.” Ex. 2004 ¶ 45. But Petitioner identified
“electronics 210,” not “the electronics in 210,” and Petitioner’s declarant,
Michael Shamos, made clear distinction between “electronics 210” and
“magnetic stripe reader 210.” Pet. 22; Ex. 1003 ¶¶ C32.
We credit the testimony of Michael Shamos over that of Ivan
Zatkovich. Ivan Zatkovich’s testimony is non-responsive to the position
expressed by Petitioner and Michael Shamos. Also, as explained above,
Petitioner’s position is more consistent with the express disclosure of
Valliani, i.e., that “electronics 210” is to provide to device 10 card-provided
PIN information in encrypted form using only internally stored encryption
keys, and that PIN information is not stored on magnetic stripe but on the
memory of a smart card. Ex. 1005, 5:29–34. Ivan Zatkovich does not
explain how his reading is consistent with the express disclosure of Valliani.
Patent Owner argues that “‘electronics 210’ does not perform any
kind of conversion, or processing of information from the integrated circuit
as required for the claimed controller.” PO Resp. 16. But that requirement
has been adequately accounted for by Petitioner. Indeed, we reiterate that in
Valliani, “electronics 210” provides device 10, the mobile communication
device, card-provided PIN information in encrypted form using only
internally stored encryption keys, and that PIN information is not stored on a
magnetic stripe but on the memory of a smart card. Ex. 1005, 5:29–34.
Regarding characteristics of a “controller,” Ivan Zatkovich testifies:
A POSITA would also understand that in order to convert
the card information retrieved from the card reader input device
38 to a format suitable for transmission it would require a
microprocessor, microcontroller, or a controller with similar
processing power. This is because the data signals from the
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magnetic stripe or Integrated Circuit of the payment card must
be received and validated before being passed to the mobile
communication device. For example, the data fields that would
need validation include the Primary account number format
(which is different for different card types), a check digit to
identify data transmission errors, as well as a valid country code
and service code.
Ex. 2004 ¶ 47. The testimony supports Petitioner’s identification of
“electronics 210” as a controller.
A patent specification need not describe what is already well known.
Patent Owner does not purport to have invented a microprocessor or a
microcontroller. The above-quoted testimony of Patent Owner’s declarant,
Ivan Zatkovich, establishes that one with ordinary skill in the art would have
known that Valliani’s “electronics 210,” the component which encrypts PIN
information taken from the integrated circuit memory of a smart card and
provides it to device 10, would have to include a microprocessor,
microcontroller, or a controller with similar processing power. This means
Valliani does not have to mention the word “controller” for one with
ordinary skill in the art to understand that “electronics 210” includes a
microprocessor, microcontroller, or a controller with similar processing
power. Further, it also establishes that it would have been obvious to one
with ordinary skill in the art that Valliani’s “electronics 210” includes a
microprocessor, a microcontroller, or a controller with similar processing
power.
Ivan Zatkovich notes that inside Valliani’s device 10 there is a
controller which executes software routines 35 and/or 45. Ex. 2004 ¶ 49.
That is true. We agree with Patent Owner that software routines 35 and/or
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45 are executed by device 10 and not by anything in module 200.6 But that
fact does not undermine “electronics 210” in Valliani’s module 200 from
being a controller that satisfies the limitation “a controller coupled to the
sensor for converting said information to a format suitable for transmission
to a mobile communication device” as discussed above. For the limitation at
issue, it is sufficient that only the PIN information read from the memory of
the smart card is converted by “electronics 210” located within module 200.
The claim does not require that all data read from integrated circuit memory
225 on smart card 230 by smart card reader/writer 260 be converted by
“electronics 210.”7
Alternatively, Petitioner asserts that the limitation of “a controller
coupled to the sensor for converting said information to a format suitable for
transmission to a mobile communication device” would have been
reasonably suggested by the combined teachings of Valliani and Vrotsos.
Pet. 26–28. We do not reach this alternative argument, because Valliani
itself describes, and also reasonably would have suggested, the limitation
that the portable smart card reader device comprises “a controller coupled to
the sensor for converting said information to a format suitable for
transmission to a mobile communication device.”

6 Valliani describes: “Software routine(s) 35 and/or 45, which can be
provided with module 200 or may be available from other sources including
the manufacturer of device 10, would be loaded into device 10. . . . These
routines would be executed by central processor unit 20 within device 10.”
Ex. 1005, 6:4–16.
7 We do not reach Petitioner’s contention (Pet. 23) that it would have been
obvious to one with ordinary skill in the art for module 200 to process other
information read from the smart card in similar manner, such as card number
and expiration date.
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For the foregoing reasons, we are persuaded that Valliani discloses
and also would have rendered obvious a portable smart card reader device
comprising “a controller coupled to the sensor for converting said
information to a format suitable for transmission to a mobile communication
device.”
d) Limitation [1.C] — a communication link
Claim 1 further recites “a communication link for coupling the
portable reader apparatus to said mobile communication device for the
transmission of said information there between.” Ex. 1001, 12:16–18.
Petitioner explains that in Valliani, module 200 plugs into device 10 over a
PCMCIA interface, and that the PCMCIA interface or connection “is a
communication link for coupling the portable reader apparatus to the device
10, corresponding to a mobile communication device.” Pet. 28–30 (citing
Figures 1 and 7). Petitioner states that “[t]he module 200 plugs into the
device 10 to effectuate transmission there between.” Pet. 28 (citing Ex.
1003 ¶¶ C47–50; Ex. 1005, 3:51–54, 4:23–32, 4:50–57). Petitioner further
explains that the only connection between module 200 and device 10 in
Valliani is the physical PCMCIA interface depicted in Figure 1. Pet. 29.
These assertions are supported by the cited evidence.
We already have discussed above how Petitioner has adequately
accounted for the requirement of a controller within Valliani’s module 200
which takes PIN information from memory 225 on smart card 230 and
encrypts it to provide an encrypted PIN to device 10 which is the mobile
communication device. The communication link discussed by Petitioner
here constitutes the physical channel through which that encrypted
information gets provided from “electronics 210” to device 10.
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For this limitation, Patent Owner does not make any argument
additional to those it presents in the context of limitations [1.A] and [1.B].
Those arguments have been discussed and rejected above. They do not
defeat or undermine Petitioner’s assertions.
For the foregoing reasons, we are persuaded that Valliani describes “a
communication link for coupling the portable reader apparatus to said
mobile communication device for the transmission of said information there
between.”
e) Limitation [1.D.1], [1.D.2] — wherein clause, parts 1, 2
Claim 1 further recites “wherein the sensor reads said information, the
controller converts said information into a format suitable for transmission
to said mobile communication device.” Ex. 1001, 12:19–21. For this
limitation, Petitioner relies on the same arguments it presents for limitations
[1.A] and [1.B]. Pet. 30–31 (citing Ex. 1003 ¶¶ C54–59).
Patent Owner presents no argument additional to those it has asserted
in connection with limitations [1.A] and [1.B]. Those arguments have been
discussed and rejected above. They do not defeat or undermine Petitioner’s
assertions. We are persuaded that the limitation “wherein the sensor reads
said information, the controller converts said information into a format
suitable for transmission to said mobile communication device” is met by
Petitioner’s reliance on Valliani.
f) Limitation [1.D.3] — wherein clause, part 3
Claim 1 further recites “[the controller . . . ] transmits said information
via the communication link to said mobile communication device.” Ex.
1001, 12:22–23. Petitioner explains that Valliani describes that electronics
210 provides any card 230-provided PIN information to device 10 in
encrypted form. Pet. 31 (citing Ex. 1005, 5:32–35). Petitioner further
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explains that the only connection between card reader module 200 and
device 10 is the PCMCIA interface serving as the communication link, and
thus any data transmission from module 200 to the PDA (device 10), and
from the PDA to module 200, occurs over that PCMCIA interface. Pet. 31–
32. We are persuaded as there is no other described means for getting that
encrypted data from smart card reader/writer unit 260 to device 10.
Petitioner asserts:
It would have been obvious to implement Valliani’s
system to transmit the card data (e.g., PIN information) to the
device 10 over the PCMCIA interface. One practical benefit of
transmitting the encrypted card data over the physical connection
is that the transmission would be secure, and would protect the
card data from unwanted access during transmission. See Ex.
1006 ¶¶75, 78; Ex. 1003, ¶ C81.
Pet. 33. Petitioner additional notes Vrotsos’s disclosure of transmitting
encrypted transaction data from attachment 21 to wireless communication
device 1 through a physical connection, i.e., an RS-232 connection, and
asserts that one of ordinary skill in the art would have looked to a reference
such as Vrotsos for further details. Id. at 32–33.
We agree with Petitioner that given Valliani’s disclosure of
electronics 210 providing any card 230-provided PIN information to device
10 in encrypted form, and of the PCMCIA interface serving as the only
connection between card reader module 200 and device 10, it would have
been obvious to one with ordinary skill in the art to transmit card data (e.g.,
PIN information) to device 10 over the PCMCIA interface. Petitioner also
explained practical benefits for doing so, i.e., making the transmission and
protecting the card data from unwanted access during transmission. Id. at 33
(citing Ex. 1003 ¶ C81). The reasoning is based on rational underpinning.
For this limitation, there is no need for Petitioner to rely on any teaching
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from Vrotsos, and we do not consider the teachings from Vrotsos in
assessing Petitioner’s position for this limitation.
Patent Owner presents no argument additional to those it has asserted
in connection with limitations [1.A], [1.B], and [1.C]. Those arguments
have been discussed and rejected above. They do not defeat or undermine
Petitioner’s assertions. In particular, we note Valliani’s description that
“electronics 210” encrypts the PIN information read from the memory of
smart card 230 to provide the encrypted information to device 10. Ex. 1005,
5:32–35. We are persuaded that the limitation “[the controller . . .] transmits
said information via the communication link to said mobile communication
device” is met by Petitioner’s reliance on Valliani.
g) Limitation [1.E] — transmission to remote server
Claim 1 further recites “said mobile communication device transmits
said information to a remote transaction server for processing a commercial
transaction.” Ex. 1001, 12:23–26. Petitioner explains as follows:
Valliani further describes the device 10 transmitting information
to a host server 75, which is a remote transaction server for
processing a commercial transaction. Ex. 1003, ¶¶ C64–70.
Specifically, the device 10 “communicate[s] with host 75” to
send the card data, such as “user account number, present
maximum dollar limit of the account, user identification as well
as preferably encrypted PIN data”, corresponding to the
information. [Ex. 1005,] 7:63–65. The host system 75 “will
have available PIN data for the true owner of card 230 and can
rapidly confirm whether the pinpad input PIN and the known
valid PIN agree.” Id. 6:36–49, Ex. 1003, ¶¶ C66–67. The known
valid PIN corresponds to the encrypted PIN provided by the card
230. Id. The host system then determines whether the “pinpad
input PIN and the known valid PIN agree” (Ex. 1003, ¶ C67,
Ex. 1005, 6:33–50) and allows the transaction to proceed.
Accordingly, in Valliani, the device 10 is a mobile
communication device that transmits said information to the host
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75, which is a remote transaction server for processing a
commercial transaction. Ex. 1003, ¶ C70.
Pet. 34 (alteration in original). These assertions are supported by the cited
evidence. Notwithstanding Patent Owner’s contrary arguments, discussed
below, we are persuaded that Valliani’s device 10 satisfies the limitation
“said mobile communication device transmits said information to a remote
transaction server for processing a commercial transaction.”
Patent Owner argues that “Petitioner’s reliance on the transmission of
PIN data is misplaced and mistakes the authentication of the Valliani card
user’s identity for the actual processing of a commercial transaction.” PO
Resp. 19. Patent Owner explains:
A POSITA would understand that a commercial
transaction is any transaction that involves some form of
payment, or money transfer, in exchange for goods and services.
This is consistent with the sue of the term within the ’351 patent
and virtually all other usage of the term at the time of the
invention. Ex. 2004, ¶59 (citing intrinsic and extrinsic evidence).
But the cited portions of Valliani do not describe the exchange
of payment for goods and services. Valliani’s remote host 75 is
only used for retrieving and verifying PIN and signature data—
not for processing of the payment transaction. Id., ¶60.
Id. at 19–20. Patent Owner’s argument is unpersuasive, as explained below.
Patent Owner and its declarant Ivan Zatkovich focus on one aspect of
commercial transaction to the exclusion of everything else that also relate to
the performance of a commercial transaction. The claim phrase at issue
simply is “for processing a commercial transaction.” That coverage is
broad. Verifying the identity of a person with whom a transaction would be
completed is as much a part of the commercial transaction to be completed
as the transfer of money between accounts. The claim limitation at issue
does not specify which aspect of the commercial transaction must be tied
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directly to the encrypted data that has been transmitted. Further, Valliani
discloses that PIN verification leads to learning whether the proposed sale
transaction should proceed or be aborted. Ex. 1005, 6:24–46. Michael
Shamos testifies that notifying a seller/buyer of an acceptance or rejection of
a transaction is an example of “processing a commercial transaction.” Ex.
1017 ¶ 41. We agree. The claim does not require completion of a
commercial transaction by the remote transaction server. We find that “for
processing a commercial transaction” as recited in limitation [1.E]
encompasses authenticating the identity of a person with whom a
commercial transaction is proposed or contemplated.
For the foregoing reasons, we are persuaded that Valliani’s device 10
“transmits said information to a remote transaction server for processing a
commercial transaction.”
h) Conclusion
Petitioner has proved by a preponderance of the evidence that claim 1
is unpatentable over Valliani and Vrotsos.
4. Independent Claim 6
Claim 6 recites “[a] method for reading a payment device having
information stored on an integrated circuit incorporated into said payment
device.” Ex. 1001, 12:45–47. Petitioner relies on its discussion of the
preamble of claim 1. Pet. 42. Patent Owner has not presented counter-
arguments additional to those it asserts in the context of claim 1. For
essentially the same reasons discussed above with respect to the preamble of
claim 1, we are persuaded that this preamble in claim 6 is met by the applied
prior art. We need not determine whether this preamble is limiting.
Claim 6 recites a step of “providing a portable reader apparatus
comprising a sensor for reading information stored on said integrated circuit
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incorporated into said payment device.” Ex. 1001, 12:48–50. Petitioner
relies on its discussion of the preamble and limitation [1.A] of claim 1. Pet.
42. Patent Owner has not presented counter-arguments additional to those it
asserts in the context of claim 1. For essentially the same reasons discussed
above with respect to the preamble and limitation [1.A] of claim 1, we are
persuaded that this step is met by the applied prior art.
Claim 6 recites a step of “[providing . . .] a controller coupled to the
sensor for converting said information to a format suitable for transmission
to a mobile communication device.” Ex. 1001, 12:51–53. Petitioner relies
on its discussion of limitation [1.B] of claim 1. Pet. 42. Patent Owner has
not presented counter-arguments additional to those it asserts in the context
of limitation [1.B]. For essentially the same reasons discussed above with
respect to limitation [1.B] of claim 1, we are persuaded that this step is met
by the applied prior art.
Claim 6 recites a step of “[providing . . .] a communication link for
coupling the portable reader apparatus to said mobile communication device
for the transmission of said information there between.” Ex. 1001, 12:54–
56. Petitioner relies on its discussion of limitation [1.C] of claim 1. Pet. 42.
Patent Owner has not presented counter-arguments additional to those it
asserts in the context of limitation [1.C]. For essentially the same reasons
discussed above with respect to limitation [1.C] of claim 1, we are persuaded
that this step is met by the applied prior art.
Claim 6 recites “wherein the sensor reads said information.” Ex.
1001, 12:57. Petitioner relies on its discussion of limitation [1.D.1] of claim
1. Pet. 42. Claim 6 recites “the controller converts said information into a
format suitable for transmission to said mobile communication device and
transmits said information via the communication link to said mobile
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communication device.” Ex. 1001, 12:57–61. Petitioner relies on its
discussion of limitations [1.D.2] and [1.D.3] of claim 1. Pet. 42.
Patent Owner presents no argument additional to those it has asserted
in connection with limitations [1.D.1], [1.D.2], and [1.D.3], which we
already have addressed and rejected above. They do not defeat or
undermine Petitioner’s assertions. We are persuaded that the limitations
“wherein the sensor reads said information” and “the controller converts said
information into a format suitable for transmission to said mobile
communication device and transmits said information via the
communication link to said mobile communication device” are met by
Petitioner’s reliance on Valliani.
Claim 6 recites “providing said information to said mobile
communication device for further processing by circuitry contained in said
mobile communication device.” Ex. 1001, 12:62–64. Petitioner asserts that
Valliani discloses the claimed “further processing by circuitry contained in
said mobile communication device.” Pet. 43. Petitioner explains as follows:
Valliani discloses further processing by circuitry contained in
said mobile communication device. The device 10 includes a
central processor unit 20, corresponding to circuitry. Ex. 1005,
4:4–12. “Software routine(s) 35 and/or 45 . . . may be loaded
into device 10.” Id. 6:5–7. “These routines would include point
of sale software, software driver(s) for . . . smart card
reader/writer unit 260 . . . DES encryption, signature capture and
signature compression.” See id. 6:8–13. The software routines
“would be executed by central processing unit 20 within device
10.” Id. 6:14–15. Thus, the mobile communication device in
Valliani is equipped with software 35 and 45 that can process the
encrypted signal from the card reader. It was necessary to
process that data into a form suitable for transmission via the
appropriate communication protocols. Ex. 1003, ¶¶ C136–141.
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Id. (alterations in original). These assertions are rational and supported by
the cited evidence. Patent Owner has not presented counter-arguments for
this limitation. We are persuaded that this limitation is met by Valliani.
There is no need for Petitioner to rely on any teaching from Vrotsos in this
regard.
Claim 6 recites a step of “said mobile communication device transmits
said information to a remote transaction server for processing a commercial
transaction.” Ex. 1001, 12:65–67. Petitioner relies on its discussion of
limitation [1.D.4] of claim 1. Pet. 43. Patent Owner presents no argument
additional to those it has asserted in connection with limitation [1.D.4],
which we already have addressed and rejected above. For reasons discussed
above with respect to limitation [1.D.4], we are persuaded that the limitation
of “said mobile communication device transmits said information to a
remote transaction server for processing a commercial transaction” is met by
Petitioner’s reliance on Valliani.
For the foregoing reasons, Petitioner has proved by a preponderance
of the evidence that claim 6 is unpatentable over Valliani and Vrotsos.
5. Dependent Claims 4 and 9
Claim 4 depends from claim 1 and further recites “wherein said
information transmitted via the communication link to said mobile
communication device is encrypted.” Ex. 1001, 12:38–40. Claim 9 depends
from claim 6 and adds essentially the same limitation to the portable reader
apparatus of claim 6. Id. at 12:11–13. This limitation already is accounted
for by Petitioner when addressing limitations [1.A], [1.B], and [1.C], and
limitations [6.A], [6.B], and [6.C], as discussed above in the context of
claims 1 and 6. Indeed, as discussed above, the encrypted PIN is transmitted
from the controller to the mobile communication device. Specifically,
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Valliani describes: “For security reasons, a card owner’s PIN is not stored
magnetically on stripe 220 but may be stored electronically in memory 225.
To promote security, electronics 210 provides any card 230-provided PIN
information to device 10 in encrypted form using only internally stored
encryption keys.” Ex. 1005, 5:29–34.
Patent Owner argues:
Valliani does not disclose broad encryption of information
from the integrated circuit on the payment device in module 200
of the transaction terminal. There is only discussion that
“additional software can also provide data encryption and
decoding” somewhere in Valliani’s system. The only encryption
that is explicitly described as happening in module 200 is when
PIN data is manually entered by the user at the keypad and then
encrypted. Ex. 1005, 6:25–35.
PO Resp. 22. The argument is misplaced. Petitioner is not relying on
manually entered PIN but smart card provided PIN. See Pet. 24.
Valliani states: “To promote security, electronics 210 provides any
card 230-provided PIN information to device 10 in encrypted form using
only internally stored encryption keys.” Ex. 1005, 5:31–34 (emphasis
added). Valliani also describes that a card owner’s PIN is not stored on
magnetic stripe 220 “but may be stored electronically in memory 225.” Id.
at 5:29–31. Although the card owner also may be asked to manually input
the PIN, so that device 10 may check the manually entered PIN with the PIN
read from the card, Ex. 1005, 5:34–39, that does not change Valliani’s
disclosure that the stored PIN on the card is read and provided to device 10
in encrypted form.
For the limitation at issue, it is sufficient that only the PIN
information read from the memory of the smart card is encrypted by
“electronics 210” located within module 200. The claims do not require all
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data read from integrated circuit memory 225 on smart card 230 by smart
card reader/writer 260 be encrypted.
Patent Owner argues that software 35/45 in Valliani appears to be
loaded on device 10 and run by the CPU in device 10. PO Resp. 22. That
may be true, but it does not change the fact that electronics 210 in Valliani’s
module 200 encrypts the PIN read from memory 225 of card 230, which is
enough to meet the claim limitation. It is not necessary for Petitioner to rely
on any teaching from Vrotsos to meet the encryption requirement.
Patent Owner additionally argues that Valliani does not disclose a
sensor for reading an integrated circuit on a payment device, and does not
disclose a controller for receiving, converting, and transmitting information
derived from the integrated circuit. PO Resp. 23. These arguments already
have been addressed and rejected above in the context of the limitations of
claims 1 and 6 and need not be discussed again here.
For the foregoing reasons, Petitioner has proved that claims 4 and 9
would have been obvious over Valliani and Vrotsos.
6. Dependent Claims 5 and 10
Claim 5 depends from claim 1 and further recites “wherein said
mobile communication device receives transaction validation information
from said remote transaction server.” Ex. 1001, 12:41–44. Claim 10
depends from claim 6 and adds the same limitation to the portable reader
apparatus of claim 6. Id. at 13:14–16. Petitioner asserts:
When the host system validates the user’s PIN, the device
10 receives transaction validation information from the host
system 75 indicating the transaction is allowed to proceed.
Specifically, as stated in Section VII.A.1.g., the host system
compares the PIN data received from the device 10 to the known
valid PIN. Ex. 1005, 6:33–46; Ex. 1003, ¶¶C113–115. The
known valid PIN corresponds to the PIN provided by the card
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230. Ex. 1003, ¶C116. If the PINs match, “the comparison
outcome can be sent by the host system 75 to device 10,
whereupon an individual using device and module 210 to
transact a sale rapidly learns whether the sale should proceed.”
Ex. 1005, 6:39–42.
Pet. 40, 46. Petitioner’s reasoning has rational basis and the assertion is
supported by the cited evidence. Notwithstanding Patent Owner’s contrary
argument, discussed below, we are persuaded that this limitation is met by
the disclosure of Valliani.
Patent Owner argues:
Petitioner asserts that “validat[ing] the user’s PIN” is
equivalent to transaction validation information. Petition, 33–
34. Petitioner is incorrect, because there is much more
information that must be exchanged and processed for a
commercial transaction to be deemed validated and completed.
Ex. 2004, ¶¶79–82.
As described above, Valliani does not disclose processing
a commercial transaction because a commercial transaction
would require some form of payment in exchange for goods and
services. The asserted remote host 75 in Valliani is used for
retrieving and verifying PIN and signature data—not for
processing a commercial transaction. Although Valliani
mentions that the results of this PIN or signature verification may
inform the user “whether the sale should proceed,” there is no
mention of transaction processor, processing a commercial
transaction, or of receiving verification from a commercial
transaction.
PO Resp. 21 (emphasis added, alteration in original). The argument does
not undermine Petitioner’s showing, because the claim recitation
“transaction validation information” is read too restrictively by Patent
Owner. A preliminary identity check that allows the proposed commercial
transaction to proceed still constitutes a form of transaction validation.
Patent Owner reads “transaction validation” as though it requires completion
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of the commercial transaction. But such a narrow reading of “transaction
validation” is unreasonable. Patent Owner does not sufficiently explain why
a preliminary identity check that would allow or disallow continuation of the
transaction is not a form of transaction validation. Execution and
completion of the commercial transaction simply are not required for
“transaction validation.” Although the ’351 patent describe embodiments in
which the transaction server interacts with a remote processor/issuer 20 of
the financial institution that issued the card, to accept or refuse the
commercial transaction, thus completing or rejecting the transaction (Ex.
1001, 9:19–36, 10:24–44, 11:8–35, 11:40–60), the Specification nowhere
specially defined validation of transaction to mean “completion” of
transaction. “A particular embodiment appearing in the written description
may not be read into a claim when the claim language is broader than the
embodiment.” SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870,
875 (Fed. Cir. 2004); see also In re Van Geuns, 988 F.2d 1181, 1184 (Fed.
Cir. 1993).
For the foregoing reasons, Petitioner has shown by a preponderance of
the evidence that claims 5 and 10 would have been obvious over Valliani
and Vrotsos.
7. Dependent Claims 2, 3, 7, and 8
Claim 2 depends from claim 1, and recites: “The portable card reader
apparatus from claim 1, in which said payment device is selected from a
group consisting of a chip card, EMV card, proximity detector or NFC card,
contactless card, mobile NFC device, or any combination thereof.”
Ex. 1001, 12:27–31. Claim 7 depends from claim 6, and adds the same
limitation to the portable reader apparatus of claim 6. Id. at 13:1–4. For
claims 2 and 7, Petitioner identifies Valliani’s card as a chip card. Pet. 37,
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45 (citing Ex. 1003 ¶¶ C83–89, C153–154; Ex. 1005, 1:39–45, 7:61–65,
5:30–32). Petitioner also identifies Vrotsos’s card as a chip card. Pet. 37–
38. However, Petitioner need not rely on any teaching from Vrotsos for this
limitation. We find that Valliani’s smart card is a chip card. Patent Owner
does not present argument additional to those it asserts for claims 1 and 6,
which we already have discussed and rejected above. Petitioner has proved
by a preponderance of the evidence that claims 2 and 7 would have been
obvious over Valliani and Vrotsos.
Claim 3 depends from claim 1, and recites: “The portable card reader
apparatus from claim 1, wherein the communication link comprises a link
selected from the group consisting of a wired connection, a wireless
connection, an analog channel, a digital channel, a hands-free interface, a
Bluetooth connection, a USB connection, a Wi-Fi connection and any
combination thereof.” Ex. 1001, 12:32–37. Claim 8 depends from claim 6,
and adds the same limitation to the portable reader apparatus of claim 6. Id.
at 12:5–10. For claims 3 and 8, Petitioner identifies Valliani’s PCMCIA
port as a wired connection. Pet. 38, 45 (citing Ex. 1003 ¶¶ 94–99, 155–156;
Ex. 1005, 4:23–28, 4:50–57, 4:29–32). Patent Owner does not present
argument additional to those it asserts for claims 1 and 6, which we already
have discussed and rejected above. We find that Valliani’s PCMCIA port is
a wired connection. Petitioner has proved by a preponderance of the
evidence that claims 3 and 8 would have been obvious over Valliani and
Vrotsos.

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F. Obviousness of Claims 1–6 over Vrotsos
1. Independent Claim 1
a) Preamble
Claim 1 recites “[a] portable reader apparatus for reading a payment
device having information stored on an integrated circuit incorporated into
said payment device.” Ex. 1001, 12:7–9. Petitioner identifies in Vrotsos a
smart card reader having portion 55 for reading information from smartchip
53 of a credit card. Pet. 20, 76. Petitioner regards smartchip 53 as an
integrated circuit and the credit card as the payment device. Id. (citing Ex.
1006 ¶ 41). Petitioner explains that the smart card reader reads information
from smartchip 53 of the credit card. Pet. 20–21, 76 (citing Ex. 1006 ¶ 41;
Ex. 1003 ¶¶ C21–22 ¶¶ E1–2). Petitioner reasons that the smart card reader
is portable because it is part of attachment 21 secured to a mobile phone.
Pet. 77 (citing Ex. 1006 ¶ 46, Fig. 1D; Ex. 1003 ¶¶ E3–4). The assertions
are supported by the cited evidence.
Patent Owner does not specifically address this preamble recitation
and Vrotsos. However, Patent Owner argues that Vrotsos does not disclose
another claim limitation, i.e., limitation [1.A] — “a sensor for reading
information stored on said integrated circuit incorporated into said payment
device.” Ex. 1001, 12:11–12. To the extent that argument applies to this
preamble recitation as well, we note that that argument, as we discuss below,
does not undermine Petitioner’s showings that Vrotsos does disclose such a
sensor. For the same reasons, we are persuaded that Vrotsos describes this
preamble.
b) Limitation [1.A] — a sensor
Claim 1 recites “a sensor for reading information stored on said
integrated circuit incorporated into said payment device.” Ex. 1001, 12:11–
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12. Petitioner asserts that in Vrotsos, a smart card read/write head is
positioned within slot 22 of portion 55 of the smart card reader to read
information from smartchip 53 on a the credit card, and Petitioner regards
the smart card read/write head as a sensor for reading information stored on
smartchip 53 incorporated into the credit card. Pet. 20–21, 77 (citing
Ex. 1006 ¶ 41; Fig. 1E; Ex. 1003 ¶¶ C21–22, E5–6). The assertion is
supported by the cited evidence.
Paragraph 41 of Vrotsos describes:
In embodiments of the invention, the attachment 21 may
have a combined magnetic stripe reader and smartcard reader. In
such embodiments, the slot 22 may be as shown in FIG. 1E. A
card 51 having a magnetic stripe 52 and/or smartchip 53 may be
inserted into the slot 22. The slot may be shaped so as to include
a shallow channel portion 54 of a depth suitable for reading a
magnetic stripe 52 positioned parallel to a lateral surface of the
card 51 as well as a deeper channel portion 55 of a suitable depth
and width such that substantially all of the card 51 may be
inserted into the slot 22 when a portion of the slot 51 is inserted
into the deeper channel portion 55. As shown, the deeper
channel portion 55 is of a width substantially identical to the
width of the card 51, such that lateral surfaces of the deep channel
portion 55 may contact the lateral surfaces of the card 51 to
ensure that the smartchip 53 is in a desired position. A magnetic
stripe reader head may be located within a surface of the shallow
channel portion 54 so that the magnetic stripe 52 can be read as
the card 51 is swiped through the shallow channel portion 54. A
smartcard read/write head may be positioned within a surface of
the deeper channel portion 55 of the slot 22 so that information
may be read from or written to the smartchip 53 when the card
is positioned within the deeper channel portion 55.
Ex. 1006 ¶ 41 (emphasis added). Petitioner identifies Vrotsos’s smartchip
53 as the claimed “integrated circuit incorporated into the payment device.”
Pet. 20. For the claimed sensor, Petitioner states: “In Vrotsos, the smartcard
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read/write head is a sensor for reading said recorded information stored on
said integrated circuit incorporated into said payment device.” Id. at 20–21.
Patent Owner does not dispute that Vrotsos refers to a payment device
inserted into a slot. Patent Owner does not dispute that the referenced
payment device has incorporated thereon an integrated circuit for storing
information. In that regard, Patent Owner states:
A POSITA would understand that Vrotsos’s mention of a
“smartcard” that is inserted into a slot, Ex. 1006, ¶41 could only
refer to an EMV-type smart card. Ex. 2004, ¶36. EMV
standards defined the methods for reading IC chips embedded
in these types of smart cards, including the sensors for
accessing the contacts on the card’s IC chip. Id.
PO Resp. 14.8 Nonetheless, Patent Owner still argues that Vrotsos does not
disclose a sensor for reading an integrated circuit on the card. Id. Patent
Owner asserts:
A POSITA would understand that a read/write “head”
refers to a magnetic read head used for magnetic stripe. Ex.
2004, ¶¶ 33–34. This is consistent with how Vrotsos itself refers
to the magnetic stripe sensor as “reader head 23,” which is a
standard industry term for a magnetic read head. Id. A magnetic
read head would not be compatible with a sensor required to read
an integrated circuit within a smart card, specifically “consisting
of a chip card, EMV card, proximity detector or NFC card,
contactless card, mobile NFC device, or any combination
thereof.” Ex. 1001, claims 2 and 5; Ex. 2004, ¶¶34–35.
Id. Patent Owner further asserts:
Vrotsos does not refer to industry standards, a specific
type of smart card, or to any specific type of sensor other than

8 Ivan Zatkovich testifies: “As a card that requires physical connection to a
reader, it would be the EMV type of card as, at the time of the invention,
there were these two types of smart cards. As stated above, an EMV type
card would require a sensor which could access the contact pad of the IC
chip.” Ex. 2004 ¶ 36.
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the lone reference to a read/write head, and Vrotsos’ teachings
contradict normal smart card or EMV card standards. Ex. 2004,
¶¶37–42. Instead of an EMV or smart card sensor, or any type
of sensor that would read an integrated circuit, Vrotsos proposes
“a card 51 having a magnetic stripe 52 and/or smartchip 53” to
be read by a “smartcard read/write head . . . positioned within a
surface of the deeper channel portion 55 of the slot 22 so that
information may be read from or written to the smartchip 53
when the card is positioned within the deeper channel portion
55,” Ex. 1006, ¶ 41, with the only thing described about the
purported smartcard reader being the size and width, and the
inclusion of a smartcard read/write head. Id.; Ex. 2004, ¶37.
Based on the entirety of Vrotsos’s disclosure and
knowledge in the art, a POSITA would understand that the
disclosed read/write head would only be appropriate for reading
magnetically sensed information, such as from a magnetic stripe.
Id., ¶ 41. A POSITA would find no disclosure of a sensor for
reading either an NFC or contract less smart card or
electronically recorded information on an EMV card. Id., ¶42.
Accordingly, Vrotsos does not meet the claim limitations
requiring that the card reader device include a sensor for reading
information from the integrated circuit of a smart card. Id., ¶43.
Id. at 14–15.
These arguments do not sufficiently undermine Petitioner’s showing.
Patent Owner’s arguments stretch beyond reason. They have an inflexible
focus on the literal wording used in Vrotsos, to the exclusion of the
substantive content Vrotsos would have disclosed to one with ordinary skill
in the art. They overstate the consequence of Vrotsos’s not using the words
Patent Owner contends should have been used to describe a sensor that reads
information from an integrated circuit incorporated into a smart card.
First, however, we address Patent Owner’s contention, relying on
testimony of Ivan Zatkovich (Ex. 2004 ¶ 34), that a read/write “head” could
only be used to refer to something that reads magnetically sensed
information, such as a magnetic stripe. PO Resp. 14. We are not persuaded
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that that is true. The testimony of the party’s declarants conflict in that
regard. Michael Shamos, Petitioner’s declarant, testifies as follows:
26. A POSITA would have understood that like “sensor,” the
word “head” as used in Vrotsos refers to a device that reads,
records, erases, or writes data on the particular storage medium
it interacts with. The word is not limited solely to magnetic
heads, but would include smart card read/write devices as well.
Therefore by using the term “head,” Vrotsos sufficiently
describes to a POSITA that its reference to smartcard read/write
head refers to a sensor that reads form an integrated circuit on a
smart card.
Ex. 1017 ¶ 26. Ivan Zatkovich, Patent Owner’s declarant, testifies:
34. One of ordinary skill in the art would understand
that a read/write “head” refers to a magnetic read head used for
magnetic stripe. This is also consistent with how Vrotsos refers
to their magnetic stripe sensors as “reader head 23”. Again, this
is a standard industry term for a magnetic read head. A magnetic
read head would not be compatible with a sensor required to read
an integrated circuit within a payment device, specifically,
“consisting of a chip card, EMV card, proximity detector or NFC
card, contactless card, or any combination thereof.” [Ex. 1001,
12:29–31 or Claim 2]
35. The asserted Vrotsos “sensor” is not actually a
sensor for reading an integrated circuit since it is referred to as a
smart card read/write head, and then only as a single isolated
reference with no description or indication of what type of smart
card read/write head.
Ex. 2004 ¶¶ 34–35.
On close scrutiny of the testimony of the declarants, there is not much
of a genuine conflict, except for the conclusion on whether Vrotsos
describes a sensor which reads recorded information from an integrated
circuit incorporated into a card. Notably, Ivan Zatkovich does not testify
that a read/write “head” can only refer to a magnetic read head used for
magnetic stripe. His testimony leaves that suggestion but he actually did not
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so testify. We do not assume that that is his testimony. Also, Ivan
Zatkovich states that a read/write head referring to a magnetic read head is
consistent with how Vrotsos refers to its magnetic sensors as “reader head
23.” Ex. 2004 ¶ 34. That is true, but he does not mention that that is not
consistent with Vrotsos’s also referring to a “smartcard read/write head” as
being used to read information from smartchip 53 incorporated into a card
(Ex. 1006 ¶ 41). Ivan Zatkovich does not testify that the more restrictive
reading of “head” as Patent Owner proposes is consistent with all usages
contained in Vrotsos.
Further, although Ivan Zatkovich states that read/write “head” is
industry standard term for a magnetic read head, he does not testify that any
applicable industry standard precludes using “read head” or “read/write
head” to describe a device which reads information from an integrated
circuit incorporated on a card. Ex. 2004 ¶ 34. Ivan Zatkovich testifies that
“[a] magnetic read head would not be compatible with a sensor required to
read an integrated circuit within a payment device,” id., but Petitioner is
relying on Vrotsos’s disclosure of a “smartcard read/write head,” not
Vrotsos’s magnetic read head 23 which is a separate component. Ivan
Zatkovich does not testify that “smartcard read/write head” would not be
compatible with a sensor required to read an integrated circuit incorporated
into a card.
Thus, in all these respects, there is no genuine conflict. We do not see
Ivan Zatkovich as having testified that a read/write “head” simply cannot be
used to describe a device, e.g., a sensor, which reads information recorded
on an integrated circuit incorporated into a card. On the one hand, we have
Michael Shamos’s testimony that to one with ordinary skill in the art, a read
“head” refers to a device that reads, records, erases, or writes data on the
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particular storage medium it interacts with, “and is not limited solely to
magnetic heads, but would include smart card read/write devices as well.”
Ex. 1017 ¶ 26. On the other hand, we do not have Ivan Zatkovich testifying
that a read “head” simply cannot be used to describe a device, e.g., a sensor,
which reads information recorded on an integrated circuit incorporated into a
card.
Also, there is insufficient basis to agree with Patent Owner’s
restrictive reading of a read “head,” particularly when Vrotsos itself uses the
term “smartcard read/write head” to refer to a component that reads
information from smartchip 53 (Ex. 1006 ¶ 41). We credit the testimony of
Michael Shamos (Ex. 1017 ¶ 26) that the word “head” as used in Vrotsos,
would be understood by one with ordinary skill in the art as not limited
solely to magnetic heads, but would include smart card read/write devices as
well, and find that the word “head” would be so understood by one with
ordinary skill in the art.
A genuine conflict does exist with respect to Ivan Zatkovich’s
testimony (Ex. 2004 ¶ 35) that “[t]he asserted Vrotsos ‘sensor’ is not
actually a sensor for reading an integrated circuit since it is referred to as a
smart card read/write head,” and Michael Shamos’s testimony (Ex. 1017
¶ 26) that “Vrotsos sufficiently describes to a POSITA that its reference to
smartcard read/write head refers to a sensor that reads form an integrated
circuit on a smart card.” We credit the testimony of Michael Shamos over
that of Ivan Zatkovich, for several reasons.
First, as discussed above, Ivan Zatkovich never testified that a read
“head” simply cannot be used to describe a device, e.g., a sensor, which
reads information recorded on an integrated circuit incorporated into a card.
Second, as discussed above, we have determined that “head” as used in
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Vrotsos would be understood by one with ordinary skill in the art as not
limited solely to magnetic heads, but would include smart card read/write
devices as well. Ivan Zatkovich’s statement is inconsistent with Vrotsos’s
expressly stating that “[a] smartcard read/write head” is used to read
information from smartchip 53. Ex. 1006 ¶ 41.
Even assuming that Patent Owner’s restrictive reading of “head” is
correct, we still would arrive at the conclusion that Petitioner has shown that
Vrotsos discloses “a sensor for reading said recorded information stored on
said integrated circuit incorporated into said card.” Vrotsos expressly
discloses reading information from smartchip 53 of a transaction card
(Ex. 1006 ¶ 41). If it is incorrect to use the word “head” to describe a sensor
which reads recorded information from the integrated circuit incorporated
into a card, it does not follow that Vrotsos does not disclose a sensor which
reads recorded information from the integrated circuit incorporated into a
card. Patent Owner’s contention focuses inflexibly on the literal wording
used in Vrotsos, to the exclusion of the substantive content Vrotsos would
have disclosed to one with ordinary skill in the art.
Ivan Zatkovich testifies regarding Vrotsos’s card as follows:
As a card that requires physical connection to a reader, it would
be the EMV type of card as, at the time of the invention, there
were these two types of cards. As stated above, an EMV type
card would require a sensor which could access the contact pad
of the IC chip. The International Standard that applies to EMV
cards is ISO 7816.
Ex. 2004 ¶ 36 (footnote omitted). Thus, one with ordinary skill in the art,
notwithstanding the fact that Vrotsos uses the term “smart card read/write
head,” would have known to use a sensor that indisputably could access the
contact pad of the IC chip to read information from the integrated circuit.
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Michael Shamos testifies that sensors for reading recorded information on an
integrated circuit memory of a smart card were well known to one with
ordinary skill in the art in 2009. Ex. 1017 ¶¶ 23, 26, 27; see also Ex. 1003
¶ D23. Ivan Zatkovich does not dispute that “integrated circuit readers and
smart card readers were known.” Ex. 1018, 25:18–20. Even according to
Patent Owner, at the time of the invention, there already were industry
standards which “defined the methods for reading IC chips embedded in
these types of smart cards.” PO Resp. 14.
Thus, notwithstanding that the term “smart card reader/writer
head” is used in Vrotsos, and even assuming that that term is incorrect
for referring to a device that reads an integrated circuit on a card, one
with ordinary skill in the art still would have understood that Vrotsos
was disclosing “a sensor for reading information stored on said
integrated circuit incorporated into said payment device.”
For the foregoing reasons, we agree with Petitioner that by describing
a “smart card read/write head” which reads recorded information from
smartchip 53, Vrotsos discloses to one with ordinary skill in the art “a sensor
for reading information stored on said integrated circuit incorporated into
said payment device.”
c) Limitation [1.B] — a controller
Claim 1 further recites that the portable reader apparatus comprises “a
controller coupled to the sensor for converting said information to a format
suitable for transmission to a mobile communication device.” Ex. 1001,
12:13–15. Petitioner identifies processor 303 as corresponding to the
claimed controller, and explains that processor 303 processes input received
from input device 308. Pet. 26, 77 (citing Ex. 1006 ¶ 93, Fig. 10; Ex. 1003
¶¶ C38–46, E5–6). Michael Shamos identifies input device 308 as including
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the claimed sensor, and refers to paragraph 93 of Vrotsos, which describes
that the input information processed by processor 303 may be transmitted to
the wireless communication device for transmission to remote computer
101. Ex. 1003 ¶¶ 38–39.
Petitioner cites to (Pet. 27) paragraphs 75 and 94 of Vrotsos,
reproduced below:
The attachment 21 may also include a processor 303, a memory
307 and an input device 308. The processor may execute
software application (which may be stored in the attachment
memory 307) allowing the processor to receive input
information from the input device 308 and process the input
information to generate data for transmission to a remote
computer 101 via the antenna 5 of the wireless communication
device 1. By executing the software application, the attachment
may determine from which input device 308 it is receiving input
information (if multiple input devices are provided), encrypt the
input information.
Ex. 1006 ¶ 75 (emphasis added).
The processing performed by the processor 303 of the
attachment 21 may include encrypting the information, dividing
the input information into data packets, appending header
information to the input information to indicate the identify
and/or location of the user, etc. In embodiments of the invention
in which the attachment 21 includes multiple input devices, the
processor of the attachment 21 may encrypt the information
differently depending on from which input device the input
information was received [from magstripe or smartchip].
Id. ¶ 94 (emphasis added).
Petitioner explains that processor 303 converts the information read
from the card into a format suitable for transmission to Vrotsos’s
communication device, by (1) formatting the information in accordance with
the interface between attachment 21 and the communication device (citing
Ex. 1003 ¶¶ C40–45; Ex. 1006 ¶¶ 35, 43), and by (2) dividing the smart card
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data into data packets suitable for transmission over communication network
102 (citing Ex. 1003 ¶¶ C40–45, E5–6; Ex. 1006 ¶¶ 75, 94). Pet. 27, 77.
Petitioner further explains:
Any data transmitted to the phone would need to be in a format
suitable for transmission so that the phone could receive and
interpret that data, and specifically in accordance with the RS-
232 interface (Ex. 1006, ¶¶35, 43) or another “type[] of serial or
parallel interface connectors” (id. ¶43), such as PCMCIA. Ex.
1003, ¶¶C40–45.
Id. at 27.
The assertions are rational and supported by the cited evidence.
Notwithstanding Patent Owner’s arguments to the contrary, discussed
below, we are persuaded that Vrotsos’s portable reader apparatus comprises
“a controller coupled to the sensor for converting said information to a
format suitable for transmission to a mobile communication device.”
Patent Owner asserts that Vrotsos “cannot disclose the controller with
the functionality required in claims 1 and 6.” PO Resp. 18. Essentially, this
argument is built on the foundation of the other Patent Owner contention
that Vrotsos does not disclose reading information from an integrated circuit
incorporated into a card. Patent Owner states:
As discussed above, Vrotsos’s disclosure does not support
the reading of an integrated circuit. See discussion, supra.
Accordingly, Vrotsos also does not disclose converting the
information read from an integrated circuit as claimed and/or –
as Petitioner itself concedes – transmitting it to the mobile
communication device. See discussion, infra; see also Petition,
77–78 (acknowledging Vrotsos’ failure to disclose transmission
of smart card data from a reader to a mobile communication
device). Based on the non-disclosure of these claim elements, a
POSITA would not find that Vrotsos meets this claim limitation.
Ex. 2004, ¶¶53–54.
PO Resp. 18.
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We have already considered and rejected the argument that Vrotsos
does not disclose reading recorded information from the integrated circuit
incorporated into a card in the context of the sensor limitation discussed
above. Patent Owner’s assertions building on that failed argument as a
foundation are also without merit. Further, Petitioner has not conceded or
acknowledged that Vrotsos does not disclose transmission of smart card data
from a reader to a mobile communication device. Petitioner acknowledges
only that there is no explicit disclosure of smart card data being transmitted
over a particular communication link to a wireless communication device.
Pet. 77–78.
We are persuaded that Vrotsos discloses that its reader apparatus
comprises “a controller coupled to the sensor for converting said information
to a format suitable for transmission to a mobile communication device.”
d) Limitation [1.C] — communication link
Claim 1 recites “a communication link for coupling the portable
reader apparatus to said mobile communication device for the transmission
of said information therebetween.” Ex. 1001, 12:16–18. Petitioner
identifies a first Vrotsos embodiment with attachment 21 including input
device 308 which can be a smart card reader device, where attachment 21
receives input from the smart card reader, processes it, and generates data to
send to the phone, for sending to a remote computer 101. Pet. 77 (citing Ex.
1006 ¶¶ 72–78, 86, Fig. 10). Figure 10 is a block diagram of that
embodiment and is reproduced below:
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Figure 10 shows a block diagram of one embodiment of Vrotsos. Ex. 1006
¶ 23. Vrotsos describes:
The wireless communication device 1 may have a
communication port and the attachment 21 may have a
corresponding connector 27 that mate when the two are coupled
together, permitting electrical signals to be passed from the
attachment 21 to the wireless communication device 1 and vice
versa.
Id. ¶ 42. Petitioner identifies the wired physical connection between
attachment 21 and the cellular phone as the communication link. Pet. 77
(citing Ex. 1006 ¶ 76). Petitioner states, however, that “Vrotsos does not
explicitly refer to smart card data being transmitted over that link.” Id.
Petitioner identifies a second Vrotsos embodiment, which reads card
data from a magnetic stripe on the card and in which attachment 21
communicates with the phone over a wireless connection. Pet. 77–78 (citing
Ex. 1006 ¶¶ 28, 50–55, Fig. 7). Petitioner asserts that in this second
embodiment, when a user swipes the card, attachment 21 captures
transaction data from the magnetic stripe on the card, encrypts it, and
transmits the encrypted transaction data to the wireless communication
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device over the wireless local communications network. Pet. 78 (citing
Ex. 1006 ¶ 52). Figure 7 of Vrotsos is reproduced below:

Figure 7 illustrates implementation of wireless communication between a
wireless communication device and an attachment according to an
embodiment of Vrotsos. Ex. 1006 ¶ 20.
Petitioner explains that one with ordinary skill in the art would have
known to process smart card data the same way as data read from a magnetic
stripe, i.e., send it over a wireless communication link to the phone. Pet. 80.
Petitioner asserts that it would have been obvious to one with ordinary skill
in the art, in the second embodiment of Vrotsos, to transmit smart card data,
rather than data read from the magnetic stripe of a card, to the cellular
phone. Pet. 77–80 (citing Ex. 1003 ¶¶ E7–24). Petitioner asserts that one
with ordinary skill in the art would have been motivated to transmit
transaction data read from smartchip 53 to complete a commercial
transaction. Pet. 80 (citing Ex. 1003 ¶¶ E23–24).
Alternatively, Petitioner explains that one with ordinary skill in the art
would have recognized physical connection as an alternative connection for
sending smart card data. Pet. 79 (citing Ex. 1003 ¶¶ E18–20). Petitioner
further explains that because the two embodiments provide the same
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function, it would have been obvious to one with ordinary skill in the art to
send smart card data to the phone via the physical connection in the first
embodiment, akin to sending magnetic stripe data to the phone a wireless
connection in the second embodiment. Pet. 78–79 (citing Ex. 1003 ¶¶ E16,
17). Petitioner further notes that Vrotsos contemplates different ways that
attachment 21 could connect to and communicate with the phone. Pet. 79
(citing Ex. 1006, Figs. 1A–1D, 3, 7, 10).
Petitioner’s assertions are rational and supported by the cited
evidence. Notwithstanding the contrary arguments of Patent Owner,
discussed below, we are persuaded that Vrotsos reasonably suggests this
limitation of claim 1, under either alternative presented by Petitioner.
Patent Owner makes a number of counter-arguments including the
same arguments we already discussed and rejected above in the context of
the other limitations of claim 1 and Vrotsos, i.e., (1) Vrotsos does not
disclose a sensor for reading recorded information from an integrated circuit
incorporated into a card; (2) Vrotsos does not disclose converting
information read from an integrated circuit incorporated into a card; and
(3) Vrotsos does not disclose transmitting information from the integrated
circuit to the mobile communication device. PO Resp. 59. Our reasoning
and analysis in that regard equally applies here and need not be reiterated.
On pages 59–61 of the Patent Owner Response, Patent Owner
provides additional arguments. PO Resp. 59–61. However, as we discuss
below, those arguments are largely built on the foundation of the already
rejected arguments and are otherwise a mischaracterization of Petitioner’s
arguments.

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Patent Owner asserts:
Petitioner asserts that Vrotsos shows two embodiments—one
embodiment disclosing a smart card reader for reading card
information, but not disclosing any encryption of the card
information or a communication link to a mobile device; and
another disclosing a magnetic stripe reader and encryption of the
card information, but not disclosing a smart card reader of any
kind. Petition, 77–80. From there, Petitioner’s view of
obviousness essentially consists of asserting that a POSITA
would have conflated the two embodiments to come up with a
device that read information from a mart card, encrypt it, and
transmitted it to a mobile phone.
Id. at 59 (emphasis added). Petitioner, however, has not represented that in
the first embodiment, where there is a wired physical connection as the
communication link between the attachment and the cellular phone, there is
no encryption of information from a smart card. Petitioner also has not
represented that in that first embodiment, there is no communication link
between the attachment and the cellular phone.
To the contrary, Petitioner cited (Pet. 27) to paragraphs 75 and 94 of
Vrotsos, already reproduced above, which indicate that processor 303
encrypts the information read, whether the information is from a magnetic
stripe or an integrated circuit on a smart card. Petitioner did not represent
that no communication link is provided by Vrotsos, but only that “Vrotsos
does not explicitly refer to smart card data being transmitted over that link.”
Pet. 77.
Patent Owner argues:
[I]f one embodiment purportedly expressly disclosed reading,
converting, encrypting, and transmitting of information read
from a magnetic stripe, but intentionally removed any reference
to these functions with regard to information from the integrated
circuit of a smart card, that does not suggest the desirability of
conflating the two embodiments so much as it suggests that
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Vrotsos viewed the capability to read, process, encrypt and
transmit information from a magnetic stripe as something
different than Vrotsos’s own perception of its device’s
capabilities with regard to an integrated circuit of a smart card.
Ex. 2004, ¶210.
PO Resp. 59–60. But we do not find that Vrotsos has intentionally removed
any reference to the sensing, encryption, and transmission functions with
respect to data from the integrated circuit of a smart card. There are
numerous instances where Vrotsos refers (1) to sensing from the integrated
circuit of a smart card, (2) to encrypting sensed data from the input device
regardless of whether the data comes from a magnetic stripe or an integrated
circuit, and (3) to transmitting encrypted data to the wireless communication
device regardless of whether the data comes from a magnetic stripe or an
integrated circuit. Ex. 1006 ¶¶ 41, 53, 78, 80. The circumstance does not
reflect what Patent Owner suggests. Rather, Vrotsos specifically describes
certain limitations involving reading recorded information from an
integrated circuit of a smart card and otherwise uses broad description to
cover both data read from an integrated circuit and data read from a
magnetic stripe where there is no need for distinction.
For example, Vrotsos describes: “A smartcard read/write head may
be positioned within a surface of the deeper channel portion 55 of the slot 22
so that information may be read from or written to the smartchip 53 when
the card is positioned within the deeper channel portion 55.” Ex. 1006 ¶ 41.
We have determined above that Vrotsos discloses to one with ordinary skill
in the art “a sensor for reading information stored on said integrated circuit
incorporated into said payment device.”
For example, Vrotsos describes: “The processor 303 may also include
software or code that enables or executes encryption processing on any
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transaction data or identification data.” Ex. 1006 ¶ 80. The description
covers data read from the integrated circuit of a smart card. Vrotsos also
describes: “[T]he processor 303 of the attachment 21 may encrypt input
information received from the attachment’s input device 308 so that the
resulting attachment-processed data cannot be read off the antenna by the
processor of the wireless communication device 1 (or the logical bus) for
misuse by the user.” Id. ¶ 78. That description also covers data read from
the integrated circuit of a smart card.
For example, Vrotsos describes: “The wireless communication device
1 may package the encrypted transaction data in a transaction transmission
and may send the transaction transmission including the encrypted
transaction data to the server 101 over the wireless communication network
550.” Id. ¶ 53. That description covers data read from the integrated circuit
of a smart card.
Patent Owner’s contention that Vrotsos viewed the capability to read,
process, encrypt and transmit information from a magnetic stripe as
something different than Vrotsos’s own perception of its device’s
capabilities with regard to an integrated circuit of a smart card simply is not
supported by the record. Similarly, we also disagree with Patent Owner’s
characterization that “even Vrotsos itself drew a stark distinction between a
magnetic stripe embodiment and a smart card embodiment.” PO Resp. 61.
Patent Owner additionally argues:
Second, Petitioner’s entire argument rests on the premise
that magnetic stripe readers and smart card readers use “similar
reader devices to provide the same function of reading recorded
information from a credit card and sending that information to a
mobile phone.” Petition, 78–79. They do not. To the contrary,
the technologies for reading and working with information from
a magnetic stripe are actually very different from those for
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information on the integrated circuit of a smart card as evidenced
at least by the very different physical components, the different
ways information is stored on the cards, the different types of
signals, and very different industry standards. Ex. 2004, ¶211.
Id. at 60.
Patent Owner has read too much into Petitioner’s quoted statement
and thus taken it out of context. Petitioner’s focus is on similarity of the
broader function of reading recorded information from a credit card and
sending that information to a phone, not on similarity of the technology used
for reading from a magnetic stripe versus for reading from an integrated
circuit. Indeed, Petitioner states: “Accordingly, regardless of the source of
the data (i.e., whether it comes from a magnetic stripe or an integrated
circuit), a POSITA would have recognized that Vrotsos’s card reader
processes the data read from the card in a similar manner.” Pet. 80.
Petitioner is referring to the sensing of data, encrypting of data, and sending
of encrypted data to the wireless communication device for further sending
to a remote server, not the actual technology regarding how information is
read from a magnetic stripe versus how information is read from an
integrated circuit. For Petitioner to prevail, it is not necessary that the
technology used for reading recorded information from an integrated circuit
is or is not similar to the technology used for reading recorded information
from a magnetic stripe.
Patent Owner further argues:
Based on Vrotsos alone, it is more logical to assume that
Vrotsos would suggest virtually nothing to a POSITA about the
reading and encryption of card information from an integrated
circuit because Vrotsos itself does not even demonstrate the
ability to read an integrated circuit from a smart card, let alone
teach a POSITA how to read, encrypt, and transmit information
from an integrated circuit. Ex. 2004, ¶213.
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PO Resp. 61. The argument does not undermine Petitioner’s assertions,
given the testimony of Michael Shamos that sensors for reading recorded
information on an integrated circuit memory of a smart card were well
known to one with ordinary skill in the art in 2009. Ex. 1017 ¶¶ 23, 26, 27;
see also Ex. 1003 ¶ D23. Ivan Zatkovich does not dispute that “integrated
circuit readers and smart card readers were known.” Ex. 1018, 25:18–20.
Even according to Patent Owner, at the time of the invention, there already
were industry standards which “defined the methods for reading IC chips
embedded in these types of smart cards.” PO Resp. 14. Vrotsos does not
have to specifically describe what already was well known.
Similarly, neither Patent Owner nor Ivan Zatkovich contends that
once information is read from the integrated circuit of a smart card, one with
ordinary skill in the art would not have possessed sufficient skill to effect
encryption of the information and transmission of the encrypted information.
Furthermore, Michael Shamos testifies: “To protect sensitive credit card
information, the [Payment Card Industry] standards required card readers to
perform encryption on card information before transmitting it to the mobile
device. The [Payment Card Industry] standards required encryption,
regardless of whether the [data] was read from a magnetic card or from a
smart card.” Ex. 1017 ¶ 28. Ivan Zatkovich provides no rebuttal testimony
in that regard. The existence of such requirements in a standard indicates
that encrypting information read from a card was well known. We find that
it was. The record also does not support any assertion that one with ordinary
skill in the art would not have known how to transmit information, once
encrypted, from one device to another.
For the foregoing reasons, we are persuaded by Petitioner that Vrotsos
reasonably would have suggested “a communication link for coupling the
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portable reader apparatus to said mobile communication device for the
transmission of said information therebetween.”
e) Limitations [1.D.1], [1.D.2] — wherein clause, parts 1, 2
Claim 1 recites “wherein the sensor reads said information, the
controller converts said information into a format suitable for transmission
to said mobile communication device.” Ex. 1001, 12:19–21. Petitioner
relies on the same arguments and evidence it presents for limitations [1.A]
and [1.B]. Pet. 20–21, 26–27, 30–31, 80. Patent Owner does not present
arguments additional to those it presents for limitations [1.A] and [1.B].
Those arguments have been discussed and rejected above in the context of
the analysis for limitations [1.A] and [1.B] and need not be reiterated here.
We are persuaded that Vrotsos discloses limitations [1.D.1] and [1.D.2].
f) Limitation [1.D.3] — wherein clause, part 3
Claim 1 recites “[the controller . . .] transmits said information via the
communication link to said mobile communication device.” Ex. 1001,
12:22–23. Petitioner asserts that this limitation is met by Vrotsos and cites
to paragraph 93 of Vrotsos which, in pertinent part, describes:
If input is received at the input device (decision block 404), the
processor 303 of the attachment may be awoken from a “sleep state
(e.g., a lower-power wait mode) and begin to execute instructions to
receive the input information. The processor 303 of the attachment 21
may then process this input information (block 405) and the resulting
data may be directly transmitted to the antenna 5 of the wireless
communication device for transmission to the remote computer 101.
Ex. 1006 ¶ 93 (cited at Pet. 81) (emphasis added). Petitioner further cites to
the following disclosure of Vrotsos: “The wireless communication device 1
may package the encrypted transaction data in a transaction transmission and
may send the transaction transmission including the encrypted transaction
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data to the server 101 over the wireless communications network 550.” Ex.
1006 ¶ 53 (cited at Pet. 81).
Patent Owner does not present arguments additional to those it
presents for limitation [1.C]. Those arguments have been discussed and
rejected above in the context of the analysis for limitation [1.C] and need not
be reiterated here. We are persuaded that Vrotsos discloses limitation
[1.D.3].
g) Limitation [1.D.4] — wherein clause, part 4
Claim 1 recites “said mobile communication device transmits said
information to a remote transaction server for processing a commercial
transaction.” Ex. 1001, 12:23–26. Petitioner explains that in Vrotsos,
wireless communication device 1 sends a transaction transmission to server
101 over wireless communication network 550, using a wireless
communication protocol, and that the transmission includes transaction data
from the card. Pet. 35–36, 81 (citing Ex. 1006 ¶¶ 52–54; Ex. 1003 ¶¶ C72–
77, E28; Fig. 7). Petitioner further asserts that the remote transaction server
performs processing of a commercial transaction by analyzing the
transmission to verify authenticity of the user and then sends a response
back, which response may be a confirmation number or an approval number,
a transaction denied indication, or a request for additional information. Pet.
36 (citing Ex. 1006 ¶ 54, Fig. 7; Ex. 1003 ¶¶ C78–82). The assertions are
supported by the cited evidence. Patent Owner does not present counter-
argument for this limitation. We are sufficiently persuaded that Vrotsos
discloses limitation [1.D.4].
For the foregoing reasons, Petitioner has proved by a preponderance
of the evidence that claim 1 would have been obvious over Vrotsos.
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2. Independent Claim 6
Claim 6 is very similar to claim 1. For instance, while claim 1 recites
“[a] portable reader apparatus for reading a payment device . . . the
apparatus comprising: [a] sensor for reading said recorded information
stored on said integrated circuit incorporated into said card,” claim 6 recites
“[a] method for reading a payment device having information stored on an
integrated circuit incorporated into said payment device, the method
comprising the steps of: providing a portable reader apparatus comprising a
sensor for reading information stored on said integrated circuit incorporated
into said payment device.” Ex. 1001, 12:7–9, 12:45–47. While claim 1
recites “[the apparatus comprising . . .] a controller coupled to the sensor for
converting said information to a format suitable for transmission to a mobile
communication device, claim 6 recites a step of “[providing . . .] a controller
coupled to the sensor for converting said information to a format suitable for
transmission to a mobile communication device.” Id. at 12:13–15, 12:51–
53. Claim 6 essentially is the method counterpart to the apparatus of claim
1, performing steps which are the functions of the elements of claim 1.
Our discussion of claim 1 above with respect to the disclosure of
Vrotsos equally applies to the preamble and limitations [6.A] through [6.E]
and also [6.G] of claim 6. In that regard, Patent Owner presents no
argument additional to those it asserts for limitations [1.A], [1.B], [1.C],
[1.D.1], [1.D.2], [1.D.3], and [1.D.4], which we already rejected above.
Limitation [6.F], however, has no corresponding counterpart in claim
1. However, how that limitation is met by Vrotsos is discussed in Sections
VII.C.4.b.i and VII.A.6.g.i of the Petition. Although Petitioner did not
expressly cite to these sections, given that this material is expressly labeled
for limitation [6.F] and Vrotsos, it is appropriate to consider them, as we
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have in the Decision on Institution. Decision on Institution 44.
Limitation [6.F] reads as follows: “providing said information to said
mobile communication device for further processing by circuitry contained
in said mobile communication device.” Ex. 1001, 12:62–64. Petitioner
explains that Vrotsos’s wireless communication device, the phone,
“packages the transaction data indicative of the recorded information for
sending to the server 101.” Pet. 43, 74 (citing Ex. 1006 ¶ 53). The assertion
is supported by the disclosure of Vrotsos. Vrotsos states: “The wireless
communication device 1 may package the encrypted transaction data in a
transaction transmission and may send the transaction transmission
including the encrypted transaction data to the server 101 over the wireless
communications network 550.” Ex. 1006 ¶ 53.
Patent Owner asserts:
Petitioner refers only to processing of input received from
a user (e.g., PIN, fingerprint, signature). But [these] do not
identify the processing of information stored on the card. Ex.
2004, ¶¶176–184. The rest of Petitioner’s argument merely
relies on the repackaging of data received from the input device
into a format in which it can be sent across a wireless network to
a remote server. . The limitation of “further processing” is not
just reformatting, repackaging or relaying the information to the
transaction server. The claimed processing requires at a
minimum that the information from the card must be extracted
from the encrypted signal in order to be processed. Ex. 2004,
¶¶181–183.
The ‘351 patent explains how a mobile communication
device is equipped with a “software application . . . used to
convert between audio and digital signal.” See Ex. 1001, 10:66–
11:3, Figs. 7-8. Specifically, “[t]he analog signal from the
magnetic card 24 is sent via the hands-free interface 41 where
the software application of the controller 51 [in the cell phone]
converts the received signal back to binary data for example as
stored on the magnetic card 34.” Id., 11:12–15. In fact, this
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embodiment was also cited by Square to the Board as an example
of “further processing by circuitry contained in the cell phone.”
[citing Ex. 2001, 52–53 (Corrected Petition in IPR2019-00312)]
PO Resp. 52 (alterations in original). Thus, it is Patent Owner’s position
that the claimed further processing requires at a minimum that the
information from the card must be extracted from the encrypted signal in
order to be further processed.
Patent Owner’s arguments do not persuade us that “further
processing” as recited in claim 6 requires extracting the original data from
the encrypted signal. That is an unreasonably restrictive reading of “further
processing” in light of the Specification. Indeed, the cited portion of the
Specification is describing only an embodiment, and the introductory
sentence, omitted in the above quotation provided by Patent Owner,
referring to the software applications identified by Patent Owner, is this:
“As such, in this embodiment, installation of a software application
controller 51 is necessary.” Ex. 1001, 10:66–67 (emphasis added). Nothing
indicates that extraction of original data from encrypted data is required to
meet the “further processing” limitation. Further, even according to Patent
Owner, Petitioner no more than identified the embodiment as an example of
what can meet the “further processing” limitation. PO Resp. 52.
We see nothing in the Specification to support the restrictive reading
of “further processing” as urged by Patent Owner. “A particular
embodiment appearing in the written description may not be read into a
claim when the claim language is broader than the embodiment.”
SuperGuide Corp., 358 F.3d at 875; see also Van Geuns, 988 F.2d at 1184.
For the foregoing reasons, Petitioner has proved by a preponderance
of the evidence that claim 6 is unpatentable over Vrotsos.
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3. Dependent Claims 2, 3, 7, and 8
Claim 2 depends from claim 1, and recites: “The portable card reader
apparatus from claim 1, in which said payment device is selected from a
group consisting of a chip card, EMV card, proximity detector or NFC card,
contactless card, mobile NFC device, or any combination thereof.”
Ex. 1001, 12:27–31. Claim 7 depends from claim 6, and adds the same
limitation to the subject matter of claim 6. Id. at 13:1–4. For claims 2 and 7,
Petitioner also identifies Vrotsos’s card as a chip card because it
incorporates smartchip 53. Pet. 37–38 (citing Ex. 1003 ¶¶ C90–91). Patent
Owner does not present arguments additional to those it asserts for claims 1
and 6, which we already have discussed and rejected above. We find that
Vrotsos’s card is a chip card. Petitioner has proved by a preponderance of
the evidence that claims 2 and 7 would have been obvious over Vrotsos.
Claim 3 depends from claim 1, and recites: “The portable card reader
apparatus from claim 1, wherein the communication link comprises a link
selected from the group consisting of a wired connection, a wireless
connection, an analog channel, a digital channel, a hands-free interface, a
Bluetooth connection, a USB connection, a Wi-Fi connection and any
combination thereof.” Ex. 1001, 12:32–37. Claim 8 depends from claim 6,
and adds the same limitation to the subject matter of claim 6. Id. at 12:5–10.
For claims 3 and 8, Petitioner relies on its accounting for limitation [1.C].
Pet. 77, 82. Specifically, Petitioner identifies the wired connection in
Vrotsos’s Figure 7 as well as the wireless connection in Vrotsos’s Figure 10.
Id. at 82. Patent Owner does not present arguments additional to those it
asserts for claims 1 and 6, which we already have discussed and rejected
above. We find that either Vrotsos’s wired connection or Vrotsos’s wireless
connection satisfies the limitation of claims 3 and 8. Petitioner has proved
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by a preponderance of the evidence that claims 3 and 8 would have been
obvious over Vrotsos.
4. Dependent Claims 5 and 10
Claim 5 depends from claim 1 and further recites “wherein said
mobile communication device receives transaction validation information
from said remote transaction server.” Ex. 1001, 12:41–44. Claim 10
depends from claim 6 and adds the same limitation to the subject matter of
claim 6. Id. at 13:14–16. Petitioner explains:
Vrotsos discloses this element. Ex. 1003, ¶¶C117-119. Vrotsos
describes a remote computer transmitting a transaction response
to a wireless communication device 1. Ex. 1006, ¶54. The
transaction response can be a “confirmation number or approval
number.” Id. The response may also be “that the transaction
could not be completed . . . or that additional information is
required from the purchaser or user.” Id. ¶ 96. That transaction
response corresponds to transaction validation information that
is received by the phone from the server. Ex. 1003, ¶¶C113-120.
Pet. 40–41. The explanation is rational and supported by the cited evidence.
Patent Owner does not present argument additional to those it asserts for
claims 1 and 6, which have already been discussed and rejected above.
Petitioner has proved by a preponderance of the evidence that claims
5 and 10 would have been obvious over Vrotsos.
5. Dependent Claims 4 and 9
Claim 4 depends from claim 1 and further recites “wherein said
information transmitted via the communication link to said mobile
communication device is encrypted.” Ex. 1001, 12:38–40. Claim 9 depends
from claim 6 and adds essentially the same limitation to the subject matter of
claim 6. Id. at 13:11–13. This limitation already is accounted for by
Petitioner when addressing limitations [1.B] and [1.C], as discussed above in
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the context of claim 1. Specifically, Petitioner cites to paragraphs 75 and 94
of Vrotsos (Pet. 27), reproduced below:
The attachment 21 may also include a processor 303, a memory
307 and an input device 308. The processor may execute
software application (which may be stored in the attachment
memory 307) allowing the processor to receive input
information from the input device 308 and process the input
information to generate data for transmission to a remote
computer 101 via the antenna 5 of the wireless communication
device 1. By executing the software application, the attachment
may determine from which input device 308 it is receiving input
information (if multiple input devices are provided), encrypt the
input information, . . . .
Ex. 1006 ¶ 75 (emphasis added).
The processing performed by the processor 303 of the
attachment 21 may include encrypting the information, dividing
the input information into data packets, appending header
information to the input information to indicate the identify
and/or location of the user, etc. In embodiments of the invention
in which the attachment 21 includes multiple input devices, the
processor of the attachment 21 may encrypt the information
differently depending on from which input device the input
information was received [from magstripe or smartchip].
Id. ¶ 94 (emphasis added). Further, Petitioner states: “Vrotsos’s processor
303 encrypts the information stored on a credit card 51. Ex. 1006, ¶ 78, see
also id. ¶¶52, 75, 94, and 80 (‘the encryption is performed before the data is
transmitted to the communication interface 311’). Ex. 1006, ¶52; Ex. 1003
¶¶ C106-111.” Pet. 39. Paragraph 78 of Vrotsos describes:
In embodiments of the invention, the memory 307 of the
attachment may be inaccessible to the user. This may serve to
prevent unscrupulous users from storing and accessing sensitive
information (such as purchaser credit card information) without
authorization. . . . In such embodiments, the wireless
communication device 1 may also be prevented from accessing
the memory 307 of the attachment 21 as well. As discussed
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below, in such embodiments, the processor 303 of the
attachment 21 may encrypt input information received from the
attachment’s input device 308 so that the resulting attachment-
processed data cannot be read off the antenna by the processor of
the wireless communication device 1 (or the logical bus) for
misuse by the user.
Ex. 1006 ¶ 78 (emphasis added).
Petitioner’s contentions are rational and supported by the cited
evidence. Notwithstanding Patent Owner’s arguments, discussed above in
the context of claims 1 and 6, and below, we are persuaded that the
limitation added by claims 4 and 9 is disclosed by Vrotsos.
Patent Owner argues:
As discussed above, Vrotsos does not disclose a smart card
reader capable of reading an integrated circuit, and a POSITA
would not understand Vrotsos’s “smartcard read/write head” to
constitute a reader of a smart card integrated circuit. Because
Vrotsos does not disclose the reading of information from an
integrated circuit, Vrotsos discloses nothing about the
transmission of encrypted information stored on an integrated
circuit.
PO Resp. 23–24. This argument has been discussed and rejected above in
the analysis of limitation [1.A] regarding a “sensor for reading information
stored on said integrated circuit incorporated into said payment device.” We
need not repeat the discussion here.
Patent Owner further argues:
Vrotsos does disclose the encryption of the card information, but
the encrypted information is derived from Vrotsos’s magnetic
stripe reader 23. Petitioner relies on its expert’s declaration for
the argument that Vrotsos discloses the encryption of
information from an integrated circuit, citing multiple Vrotsos
excerpts suggesting that encryption occurs prior to sending
information to the mobile communication device, but always
referring to the mag stripe reader 23 for capturing information
and attachment 21 for encrypting that information. Petitioner’s
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expert asserts, for example, that “[t]he user may move the card
past the reader assembly and transaction data may be captured by
the reader 23 in the attachment 21. The attachment 21 may
encrypt the transaction data captured by the reader 23.” Ex.
1003, ¶ 107 (quoting Vrotsos ¶52). But, again, because there is
nothing in Vrotsos supporting that reader 23 can read an
integrated circuit of a smart card, these arguments do nothing
other than establish that any information being encrypted would
come from Vrotsos’s magstripe reader.
Id. at 24 (emphasis added). This argument is built on the infirm foundation
of Patent Owner’s incorrect assertion that Vrotsos does not disclose a sensor
for reading information stored on the integrated circuit incorporated into a
payment device.
Also, Patent Owner ignores Petitioner’s citation (Pet. 27, 39), and
Michael Shamos’s citation (Ex. 1003 ¶¶ 108–111) to paragraphs 75, 78, and
94 of Vrotsos, reproduced above, which indicates encryption of information
read from a card regardless of whether the information is read from a
magnetic stripe or an integrated circuit on the card.
Patent Owner’s arguments do not defeat or undermine Petitioner’s
showing for claims 4 and 9. Petitioner has proved by a preponderance of the
evidence that claims 4 and 9 would have been obvious over Vrotsos.
G. Alleged Obviousness of Claims 1–6 over Bear and Lahteenmaki
We do not reach the alleged ground of unpatentability of claims 1–6
as obvious under 35 U.S.C. § 103 over Bear and Lahteenmaki, because each
of these claims is already held unpatentable on two other grounds.

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H. Alleged Obviousness of Claims 4–10 over Bear,
Lahteenmaki, and Vrotsos
We do not reach the alleged ground of unpatentability of claims 1–6
as obvious under 35 U.S.C. § 103 over Bear and Lahteenmaki, because each
of these claims is already held unpatentable on two other grounds.
III. CONSTITUTIONAL CHALLENGE
Patent Owner argues that the appointment of Administrative Patent
Judges still violates the United States Constitution, Article II, § 2, cl. 2
(Appointments Clause), despite the “attempted cure” by the Federal Circuit
in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019)
cert. granted sub nom. United States v. Arthrex, Inc., 2020 WL 6037206
(Oct. 13, 2020). PO Resp. 61–62.
Patent Owner argues that “subjecting a patent filed before September
16, 2012 (date of relevant provisions of AIA), as is the case here, to IPR is
an impermissibly retroactive, unconstitutional taking” and “violates the Due
Process Clause of the Fifth Amendment.” Id. at 62.
We decline to consider Patent Owner’s constitutional challenges. The
Federal Circuit has addressed the issue of APJ appointment status in
Arthrex, Inc., 941 F.3d at 1325, 1337–38 (“This as-applied severance . . .
cures the constitutional violation.”); see also Arthrex, Inc. v. Smith &
Nephew, Inc., 953 F.3d 760, 764 (Fed. Cir. 2020) (Moore, J., concurring in
denial of rehearing) (“Because the APJs were constitutionally appointed as
of the implementation of the severance, inter partes review decisions going
forward were no longer rendered by unconstitutional panels.”). The Federal
Circuit has also addressed the 5th Amendment due process and takings
issues in Celgene Corp. v. Peter, 931 F.3d 1342, 1362–63 (Fed. Cir. 2019).
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IV. CONCLUSION9
Petitioner has proved by a preponderance of the evidence that
claims 1–10 of the ’351 patent are unpatentable on the grounds of
unpatentability as summarized in the following table:
Claims
35
U.S.C.
§
Reference(s)/
Basis
Claim Shown
Unpatentable
Claim Not
Shown
Unpatentable
1–10 103 Valliani, Vrotsos 1–10
1–10 103 Vrotsos 1–10
1–6 103 Bear, Lahteenmaki10

4–10 103
Bear,
Lahteenmaki,
Vrotsos11

Overall
Outcome

1–10

9 Should Patent Owner wish to pursue amendment of the challenged claims
in a reissue or reexamination proceeding subsequent to the issuance of this
decision, we draw Patent Owner’s attention to the April 2019 Notice
Regarding Options for Amendments by Patent Owner Through Reissue or
Reexamination During a Pending AIA Trial Proceeding. See 84 Fed. Reg.
16,654 (Apr. 22, 2019). If Patent Owner chooses to file a reissue application
or a request for reexamination of the challenged patent, we remind Patent
Owner of its continuing obligation to notify the Board of any such related
matters in updated mandatory notices. See 37 C.F.R. § 42.8(a)(3), (b)(2).
10 We do not reach the alleged unpatentability of claims 1–6 as obvious
under U.S.C. § 103 over Bear and Lahteenmaki, because each of these
claims is already held unpatentable on a different ground.
11 We do not reach the alleged unpatentability of claims 4–10 as obvious
under U.S.C. § 103 over Bear, Lahteenmaki, and Vrotsos, because each of
these claims is already held unpatentable on a different ground.
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FOR PETITIONER:
David M. Tennant
Grace Wang
Bijai Vakil
Hallie Kiernan
WHITE & CASE
dtennant@whitecase.com
grace.wang@whitecase.com
bijal@whitecase.com
hallie.kiernan@whitecase.com

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