Apple Inc.v.SightSound Technologies LLC

Patent Trial and Appeal Board

Oct 7, 2014

08471964 (P.T.A.B. Oct. 7, 2014)

Trials@uspto.gov Paper 101
571-272-7822 Entered: October 7, 2014

UNITED STATES PATENT AND TRADEMARK OFFICE
____________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
____________

APPLE INC.,
Petitioner,

v.

SIGHTSOUND TECHNOLOGIES, LLC,
Patent Owner.
____________

Case CBM2013-00023
Patent 5,966,440

Before MICHAEL P. TIERNEY, JUSTIN T. ARBES, and
GEORGIANNA W. BRADEN, Administrative Patent Judges.

ARBES, Administrative Patent Judge.

FINAL WRITTEN DECISION
35 U.S.C. § 328(a) and 37 C.F.R. § 42.73
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I. BACKGROUND
Petitioner Apple Inc. (“Apple”) filed a Corrected Petition (Paper 5,
“Pet.”) seeking covered business method patent review of claims 1, 64, and
95 of U.S. Patent No. 5,966,440 (“the ’440 patent”) pursuant to 35 U.S.C.
§§ 321–29. On October 8, 2013, we instituted a covered business method
patent review of claims 1, 64, and 95 on two grounds of unpatentability
(Paper 12, “Dec. on Inst.”). Patent Owner SightSound Technologies, LLC
(“SightSound”) filed a Patent Owner Response (Paper 38, “PO Resp.”),
Apple filed a Reply (Paper 49, “Reply”), and SightSound filed a Sur-Reply
(Paper 100, “Sur-Reply”). See Paper 96 (authorizing a sur-reply).
Apple filed a Motion to Exclude (Paper 67, “Pet. Mot. to Exclude”)
certain testimony from one of SightSound’s declarants, John Snell.
SightSound filed an Opposition (Paper 75, “PO Exclude Opp.”), and Apple
filed a Reply (Paper 85, “Pet. Exclude Reply”). SightSound filed a Motion
to Exclude (Paper 64, “PO Mot. to Exclude”) certain testimony and evidence
submitted by Apple. Apple filed an Opposition (Paper 76, “Pet. Exclude
Opp.”), and SightSound filed a Reply (Paper 82, “PO Exclude Reply”).
SightSound also filed a Motion for Observation (Paper 72, “Obs.”) on
certain cross-examination testimony of Apple’s declarants, and Apple filed a
Response (Paper 77, “Obs. Resp.”).
The parties moved to seal certain materials in this proceeding, and we
conditionally granted the motions and entered the parties’ proposed
protective order, which was a copy of the Board’s default protective order.
Paper 88. The materials later were unsealed upon agreement of the parties.
Paper 96 at 3–4. Apple subsequently filed an additional Motion to Seal
(Paper 98, “Mot. to Seal”), which is addressed herein.
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A combined oral hearing in this proceeding and related Case
CBM2013-00020 was held on May 6, 2014, and a transcript of the hearing is
included in the record (Paper 97, “Tr.”).
We have jurisdiction under 35 U.S.C. § 6(c). This final written
decision is issued pursuant to 35 U.S.C. § 328(a) and 37 C.F.R. § 42.73.
For the reasons that follow, we determine that Apple has shown by a
preponderance of the evidence that claims 1, 64, and 95 of the ’440 patent
are unpatentable.

A. The ’440 Patent
The ’440 patent1 relates to a “system and associated method for the
electronic sales and distribution of digital audio or video signals.” Ex. 4301,
col. 1, ll. 16–21.2 The ’440 patent describes how three types of media used

1 The ’440 patent issued on October 12, 1999, from U.S. Patent Application
No. 08/471,964, filed June 6, 1995. The ’440 patent is a continuation-in-part
of U.S. Patent Application No. 08/023,398, filed February 26, 1993, and
abandoned subsequently, which is a continuation of U.S. Patent Application
No. 07/586,391, filed September 18, 1990, and issued as U.S. Patent No.
5,191,573 (the “’573 patent”), which is a file wrapper continuation of U.S.
Patent Application No. 07/206,497, filed June 13, 1988. The ’573 patent is
the subject of related Case CBM2013-00020.

2 Apple’s original Exhibits 1301–1347 were not labeled properly. Paper 4 at
2. Apple filed corrected exhibits, but used the same numbers as the
originally filed exhibits. Paper 6. To avoid confusion, we renumbered the
originally filed copies as Exhibits 4301–4347. Rather than referring to the
replacement copies numbered Exhibits 1301–1347, however, the parties in
their subsequent papers continued to refer to the originally filed copies
numbered Exhibits 4301–4347. Apple also filed additional exhibits in the
4000 series. To ensure that the record is clear, we exercise our discretion
and waive the labelling requirements of 37 C.F.R. § 42.63(d), and refer to
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for storing music at the time of the patent—records, tapes, and compact
discs (“CDs”)—did not allow for music to be transferred easily and had
various problems, such as low capacity and susceptibility to damage during
handling. Id. at col. 1, l. 24–col. 2, l. 21. The ’440 patent discloses storing
“Digital Audio Music” (i.e., music encoded into binary code) on a computer
hard disk and selling and distributing such music electronically. Id. at col. 1,
ll. 58–61; col. 2, ll. 22–48.
Figure 1 of the ’440 patent is reproduced below.

As shown in Figure 1 above, an agent authorized to sell and distribute
“Digital Audio Music” has control unit 20 (control panel 20a, control
integrated circuit 20b, and sales random access memory chip 20c) and hard
disk 10, which stores the music to be distributed. Id. at col. 3, l. 62–col. 4,
l. 18. On the other side of the Figure, a user has control unit 50 (control
panel 50a, control integrated circuit 50b, incoming random access memory
chip 50c, and playback random access memory chip 50d), hard disk 60,

Apple’s original exhibits filed as Exhibits 4301–4473. See 37 C.F.R.
§ 42.5(b). Accordingly, Exhibits 1301–1347 should no longer be cited in
this proceeding.
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video display unit 70, and speakers 80. Id. at col. 4, ll. 18–28. The agent
and user are connected via telephone lines 30. Id. at col. 4, ll. 14–18.
According to the ’440 patent, control units 20 and 50 are “designed
specifically to meet the teachings of this invention,” but all other
components shown in Figure 1 were “already commercially available.” Id.
at col. 4, ll. 34–40.
The ’440 patent describes a process by which a user transfers money
“via telecommunications lines” to purchase music from the agent and the
music is transferred electronically “via telecommunications lines” to the user
and stored on the user’s hard disk. Id. at col. 5, ll. 43–62. For example, a
user may provide a credit card number to charge a fee to the user’s credit
card account. Id. at col. 7, ll. 34–56. Control integrated circuits 20b and 50b
regulate the electronic transfer. Id. at col. 4, ll. 45–63. The agent’s sales
random access memory chip 20c stores music temporarily so that it can be
transferred to the user. Id. The user’s incoming random access memory
chip 50c stores music temporarily before storage in hard disk 60, and
playback random access memory chip 50d stores music temporarily so that it
can be played. Id. In addition to “Digital Audio Music,” the ’440 patent
contemplates “Digital Video” being sold and distributed electronically via
the disclosed methods. Id. at col. 6, ll. 16–19.

B. Exemplary Claim
Claim 1 of the ’440 patent recites:
1. A method for transferring desired digital video or
digital audio signals comprising the steps of:
forming a connection through telecommunications lines
between a first memory of a first party and a second memory of
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a second party control unit of a second party, said first memory
having said desired digital video or digital audio signals;
selling electronically by the first party to the second party
through telecommunications lines, the desired digital video or
digital audio signals in the first memory, the second party is at a
second party location and the step of selling electronically
includes the step of charging a fee via telecommunications lines
by the first party to the second party at a first party location
remote from the second party location, the second party has an
account and the step of charging a fee includes the step of
charging the account of the second party; and
transferring the desired digital video or digital audio
signals from the first memory of the first party to the second
memory of the second party control unit of the second party
through telecommunications lines while the second party
control unit with the second memory is in possession and
control of the second party;
storing the desired digital video or digital audio signals in
a non-volatile storage portion the second memory; and
playing through speakers of the second party control unit
the digital video or digital audio signals stored in the second
memory, said speakers of the second party control unit
connected with the second memory of the second party control
unit;
wherein the non-volatile storage portion is not a tape or
CD.

C. Prior Art
Apple relies on the following materials, which Apple contends are
evidence of a publicly disclosed prior art system referred to by Apple as the
“CompuSonics system”:
1. Declaration of David M. Schwartz, founder of
CompuSonics Corp. and CompuSonics Video Corp. (Ex. 4335);
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2. Joint Telerecording Push: CompuSonics, AT&T Link,
BILLBOARD, Oct. 5, 1985 (Ex. 4309);
3. David Needle, From the News Desk: Audio/Digital
Interface for the IBM PC?, INFOWORLD, June 4, 1984, at 9
(Ex. 4310);
4. Larry Israelite, Home Computing: Scenarios for
Success, BILLBOARD, Dec. 15, 1984 (Ex. 4311);
5. Image titled “CompuSonics Digital Audio
Telecommunications System” (Ex. 4315);
6. Letter from David M. Schwartz to CompuSonics
shareholders, July 16, 1984 (Ex. 4316);
7. Hyun Heinz Sohn, A High Speed Telecommunications
Interface for Digital Audio Transmission and Reception,
presented at the 76th Audio Engineering Society (AES)
Convention, Oct. 8-11, 1984 (Ex. 4317);
8. Letter from David M. Schwartz to CompuSonics
shareholders, Oct. 10, 1985 (Ex. 4318);
9. CompuSonics Video Application Notes: CSX Digital
Signal Processing (1986) (Ex. 4319);
10. Image titled “CompuSonics Digital Audio Software
Production/Distribution” (Ex. 4320);
11. U.S. Patent No. 4,682,248, issued July 21, 1987
(Ex. 4323);
12. Brian Dumaine, The Search for the Digital Recorder,
FORTUNE, Nov. 12, 1984 (Ex. 4324);
13. Video excerpts of a lecture given at Stanford
University by David M. Schwartz and John P. Stautner, Feb.
18, 1987 (Ex. 4321);
14. Photograph of CompuSonics equipment (Ex. 4333);
and
15. New Telerecording Method for Audio, BROADCAST
MANAGEMENT/ENGINEERING, Oct. 1985, at 14-15 (Ex. 4342).

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D. Pending Grounds of Unpatentability
The instant covered business method patent review involves the
following grounds of unpatentability:
Reference(s) Basis Claims
CompuSonics system 35 U.S.C. § 102(a) 1, 64, and 95
CompuSonics
publications (Exhibits
4309–4311, 4315–4320,
4323, 4324, and 4342)
35 U.S.C. § 103(a) 1, 64, and 95

II. ANALYSIS
A. Claim Interpretation
The Board interprets claims of unexpired patents using the “broadest
reasonable construction in light of the specification of the patent in which
[they] appear[].” 37 C.F.R. § 42.300(b); see also Office Patent Trial
Practice Guide, 77 Fed. Reg. 48,756, 48,766 (Aug. 14, 2012) (“Trial Practice
Guide”). There is a “heavy presumption” that a claim term carries its
ordinary and customary meaning. CCS Fitness, Inc. v. Brunswick Corp.,
288 F.3d 1359, 1366 (Fed. Cir. 2002). However, a “claim term will not
receive its ordinary meaning if the patentee acted as his own lexicographer
and clearly set forth a definition of the disputed claim term in either the
specification or prosecution history.” Id. “Although an inventor is indeed
free to define the specific terms used to describe his or her invention, this
must be done with reasonable clarity, deliberateness, and precision.” In re
Paulsen, 30 F.3d 1475, 1480 (Fed. Cir. 1994). Also, we must be careful not
to read a particular embodiment appearing in the written description into the
claim if the claim language is broader than the embodiment. See In re Van
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Geuns, 988 F.2d 1181, 1184 (Fed. Cir. 1993) (“[L]imitations are not to be
read into the claims from the specification.”).

1. Previously Interpreted Terms
In the Decision on Institution, we interpreted various claim terms of
the ’440 patent as follows:
Term Interpretation
“first party” a first entity, whether a corporation
or a real person
“second party” a second entity, whether a
corporation or a real person
“second party control unit” a control unit of the second party
“second party hard disk” a permanent, rigid, magnetic
storage device of the second party
“telecommunications line” an electronic medium for
communicating between computers
“electronically” through the flow of electrons
“connecting electronically” connecting through devices or
systems which depend on the flow
of electrons
“transferring electronically” transferring through devices or
systems which depend on the flow
of electrons
“charging a fee” requesting payment electronically
“selling electronically” providing a product or service
electronically in exchange for
providing payment electronically
(i.e., through devices or systems
which depend on the flow of
electrons)
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Term Interpretation
“digital audio signal” digital representation of sound
waves
See Dec. on Inst. 9–11. Neither party disputes these interpretations in the
Patent Owner Response, Reply, or Sur-Reply. We incorporate our previous
analysis for purposes of this decision. See id.

2. “Second Memory” (Claims 1, 64, and 95)
SightSound argues that the “only reasonable interpretation of the
claims of the ’440 Patent . . . is that the claims require a hard disk for
storage, not a removable medium.”3 PO Resp. 26–30, 78 (citing Ex. 2353
¶ 28). We agree as to claims 64 and 95, which recite expressly a “second
memory including a second party hard disk,” where the digital video or
digital audio signals are stored in the “second party hard disk.” Claim 1,
however, does not recite a “hard disk” or “non-removable medium.”
Instead, claim 1 recites a “second memory,” where the digital video or
digital audio signals are stored in “a non-volatile storage portion [of] the
second memory” and “the non-volatile storage portion is not a tape or CD.”
Apple disagrees that “second memory” should be interpreted as requiring a
hard disk or non-removable medium. Reply 2–3 (citing Ex. 4420 ¶¶ 4–13).

3 SightSound argued at the hearing that “second memory” should be limited
further to require an “internal hard drive” and exclude “external hard
drives.” Tr. 42:3–16. Because we are not persuaded that “second memory”
in claim 1 requires a hard disk, for the reasons explained below, we need not
determine whether such a device must be internal rather than external.
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a. Ordinary Meaning
The parties do not dispute that the ordinary and customary meaning of
“memory” does not require a hard disk or that the device be non-removable.
One dictionary, for example, defines “memory” as “storage space in a
computer system or medium that is capable of retaining data or
instructions.” S.M.H. COLLIN, ED., DICTIONARY OF COMPUTING (2004)
(Ex. 3001); see also WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
1409 (1986) (Ex. 3002) (defining “memory” as “a component in an
electronic computing machine (as a computer) in which information (as data
or program instructions) may be inserted and stored and from which it may
be extracted when wanted” or “a device external to a computer for the
insertion, storage, and extraction of information”). Thus, the ordinary
meaning of “second memory” is a second storage space in a computer
system or medium that is capable of retaining data or instructions.

b. Other Claims
As Apple correctly points out, the fact that some claims of the ’440
patent, such as claims 10, 64, and 95, expressly recite a “hard disk,” whereas
claim 1 does not, indicates that claim 1 should not be read to require a “hard
disk.” See Reply 2; Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327,
1330 (Fed. Cir. 2004) (refusing to interpret the claim at issue to require
“rotating through 360°” when the claim “has no such explicit limitation,
unlike the other independent claims”). This further supports that the term
“second memory” is not limited to a hard disk or removable media.

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c. Specification of the ’440 Patent
SightSound contends that the ordinary meaning of “second memory”
is disclaimed expressly in the Specification of the ’440 patent. PO Resp.
25–28. SightSound argues that (1) the Specification describes various
disadvantages of records, tapes, and CDs, such as potential damage during
handling, limited capacity, and limited playback capability, and “[f]loppy
disks have the same limitations” according to SightSound, (2) the purpose of
the ’440 patent system was to overcome those disadvantages, and (3) every
embodiment in the Specification overcomes the identified disadvantages in
the prior art. Id. (citing Ex. 4301, col. 1, l. 24–col. 2, l. 21). In particular,
SightSound points to the statement in the Specification that Digital Audio
Music is “stored onto one piece of hardware, a hard disk, thus eliminating
the need to unnecessarily handle records, tapes, or compact discs on a
regular basis.” Ex. 4301, col. 2, ll. 44–48.
We are not persuaded that the Specification limits the recited “second
memory” to a hard disk. The Specification describes the use of a hard disk
in the context of describing a preferred embodiment, not defining the
“second memory” recited in the claims. See, e.g., id. at col. 3, l. 55–col. 4,
l. 28 (describing hard disk 60 of the user in a section titled “Description of
the Preferred Embodiment”); col. 6, ll. 10–16 (stating that the description
and drawings “shall be interpreted as illustrative, and not in a limiting
sense”). We do not see anything in the Specification indicating that the
disclosed method requires a hard disk, as opposed to merely treating it as a
preferred type of memory.
Nor are we persuaded that the Specification limits “second memory”
to only non-removable devices. The Specification does not use the term
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“removable” or state that any memory must be incapable of being removed.
Indeed, hard disks, which are the preferred embodiment disclosed in the
Specification, were available at the time of the ’440 patent as removable and
non-removable devices, as SightSound’s declarant, Mr. Snell,
acknowledges. See Ex. 4366 at 107:20–108:2. Further, the Specification’s
description of disadvantages of certain types of removable storage media
(i.e., records, tapes, and CDs) does not mean necessarily that the term
“second memory” excludes such devices. See Thorner v. Sony Computer
Entm’t Am. LLC, 669 F.3d 1362, 1366 (Fed. Cir. 2012) (“Mere criticism of a
particular embodiment encompassed in the plain meaning of a claim term is
not sufficient to rise to the level of clear disavowal.”). The Specification
does not indicate that the identified disadvantages extend to all removable
media or that the disadvantages occur specifically because the devices are
removable. See Ex. 4301, col. 1, l. 24–col. 2, l. 21. To the contrary, some of
the identified disadvantages, like limited capacity and playback capability,
have nothing to do with whether the device can be removed. See id. at col.
1, ll. 27–44. Thus, we do not see any basis in the Specification for limiting
“second memory” to only non-removable devices.
We also note that the primary case relied upon by SightSound in
support of its proposed interpretation, In re Abbott Diabetes Care Inc., 696
F.3d 1142 (Fed. Cir. 2012), is distinguishable. In Abbott, the Federal Circuit
interpreted the claim term “electrochemical sensor” as excluding cables and
wires, noting that the “claims themselves suggest[ed]” that the sensor does
not include such devices. Id. at 1149. The challenged claims of the ’440
patent, by contrast, do not have anything suggesting that the “second
memory” must be non-removable. Also, the specification of the patent at
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issue in Abbott specifically referenced “cables and wires,” whereas the ’440
patent Specification does not discuss the removability of any memory. See
id. at 1150. Accordingly, we are not persuaded that the Specification shows
a clear disclaimer of the ordinary meaning of “second memory.”

d. Conclusion
For the reasons explained above, we are not persuaded that the full
scope of “second memory” was disclaimed. Thus, we interpret the term
according to its ordinary meaning to mean a second storage space in a
computer system or medium that is capable of retaining data or instructions.
Claim 1 requires that the non-volatile storage portion of the “second
memory” is “not a tape or CD,” but does not limit “second memory” to a
hard disk or non-removable media. Claims 64 and 95, however, require that
the second memory include a “second party hard disk.”

B. Overview of the CompuSonics Prior Art
In its Petition, Apple alleges that a computer system, referred to by
Apple as the “CompuSonics system,” was developed by CompuSonics Corp.
and CompuSonics Video Corp. (collectively, “CompuSonics”) in the 1980s.
Pet. 42–43. Apple provides as supporting evidence a declaration from the
founder of CompuSonics, David M. Schwartz (Ex. 4335), as well as various
printed publications (Exs. 4309–4311, 4315–4320, 4323, 4324, 4342), a
photograph (Ex. 4333), and a videotaped lecture from February 18, 1987
(Ex. 4321), allegedly describing the CompuSonics system. In response,
SightSound provides a declaration from another former CompuSonics
employee, John P. Stautner (Ex. 2321). Before turning to the substance of
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Apple’s allegations of unpatentability, we provide a brief summary of the
evidence submitted by the parties.

1. Mr. Schwartz’s Testimony and the CompuSonics Publications
Mr. Schwartz, founder of CompuSonics and declarant for Apple,
testifies that the CompuSonics system comprised “digital recorder/players,
which CompuSonics referred to as DSPs [Digital Signal Processors].”
Ex. 4335 ¶ 4. According to Mr. Schwartz, a DSP could “download digital
data from a remote source to a local disk” (a process CompuSonics called
“[t]elerecording”) and play back the stored digital data. Id. Mr. Schwartz
provides the following photograph of “a CompuSonics digital
recorder/player” as Exhibit 4333. Ex. 4335 ¶ 18.

Exhibit 4333 is a photograph depicting a “DSP-1000” device with a floppy
disk that can be inserted in the device.
Mr. Schwartz also provides two diagrams allegedly showing the
CompuSonics system.
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The first diagram is Exhibit 4315 shown below.

Exhibit 4315 depicts the transmission of digital audio from one “DSP-2002”
to another “DSP-2002” over an AT&T telephone line or T1 line.
Mr. Schwartz testifies that he created the diagram, which “illustrat[es]
CompuSonics’[s] telerecording technology, dated 1985,” and presented the
diagram to the public at various events. Ex. 4335 ¶ 9.
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The second diagram is Exhibit 4320 shown below.

Exhibit 4320 depicts “Dial-Up Electronic Record Store” user access to a
music performance via a “Local Phone Company” and “AT&T Accunet.”
Mr. Schwartz testifies that he created the diagram and showed it to the
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public at various events, including the videotaped lecture he gave with
Mr. Stautner in 1987 (Ex. 4321). Ex. 4335 ¶ 14.
Mr. Schwartz describes the CompuSonics publications and attests that
they are “public disclosure[s] of features of the CompuSonics system.” Id.
¶¶ 5–14, 16, 17, 19. For example, various publications describe
downloading music electronically over a telephone line and storing it locally
on the user’s device. A June 1984 article in InfoWorld magazine discloses:
Among the new products to be previewed at the
Consumer Electronics Show this month will be a digital / audio
disk player that uses a new 3.3-megabyte floppy drive to store
music in digital form. The player will cost $1,000. The
company behind the product, CompuSonic[s], says it also has
developed a software interface for its new CompuSonic[s]
DS-1000 system that will allow the user to route music through
the IBM PC. The user will supposedly be able to edit the music
by using the computer’s keyboard as a mixer. The firm is also
looking at potential electronic distribution of music whereby
you would be able to download music onto your PC in the same
manner as other digital information. The CompuSonic[s]
system has a built-in communications device that receives
information via an existing phone line.
Ex. 4310 at 1 (emphasis added). A June 1984 letter to CompuSonics
shareholders states:
Testing of the Telerecording system with CMI Labs
began last week. . . . A successful test of the digital
transmission of high fidelity music over telephone lines will be
followed by a joint press conference of CompuSonics, CMI
Labs and AT&T, heralding the dawn of a new era in the music
industry in the not too distant future [when] consumers will be
able to purchase digital recordings of their favorite artists
directly from the production studio’s dial-up data base and
record them on blank SuperFloppies in a DSP-1000.
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Ex. 4316 at 1 (emphases added); see also Ex. 4309 at 3 (“record the
transmission onto a five-and-a-quarter-inch ‘super-floppy’ disk”).
Various publications also describe work that CompuSonics did with
AT&T in the 1980s, including one demonstration of transmitting digital
audio between DSPs in Chicago and New York. An October 1985 article in
Billboard magazine discloses that the two companies entered into an
agreement to jointly promote AT&T’s “Accunet Switched 56 data
transmission service and CompuSonics[’s] digital telerecording system.”
Ex. 4309 at 3. The article states:
At a recent press demonstration hosted by AT&T at its
headquarters here, CompuSonics made use of AT&T’s
land-based telephone data transmission system to digitally
transmit and receive music between Chicago and New York.
. . .
David Schwartz, president of CompuSonics, is a strong
proponent of the “electronic record store” concept, an idea that
has been bandied about for some time, but which Schwartz says
is now poised to “become a reality.” While that is open to
debate, such a system, as seen by Schwartz and CompuSonics,
would utilize the firm’s telerecording process and hard disk
equipment to allow music software dealers to receive an album
master via a digital transmission from the record company.
The retailers would then be able, in turn, to digitally
transmit the music to consumers who would use credit cards to
charge their purchases over the phone lines. The final step
would involve the CompuSonics consumer digital audio
recorder/player (which has yet to see production), which would
record the transmission onto a five-and-a-quarter-inch
“super-floppy” disk.
Id.; see also Ex. 4317 at 2 (describing the use of the AT&T Accunet service
for transmitting digital audio signals at 56,000 bits per second); Ex. 4342.
An October 1985 letter to CompuSonics shareholders describes a “series of
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successful telerecording tests and demonstrations which culminated in
August with New York City to Chicago and back digital audio
communications between two CompuSonics DSP-2002s with AT&T
ACCUNET Switched 56 service providing the channel.” Ex. 4318 at 1.
Finally, the CompuSonics publications discuss using the telerecording
process to sell music to consumers. One article, for instance, contemplates
retailers being able “to digitally transmit the music to consumers who would
use credit cards to charge their purchases over the phone lines.” Ex. 4309 at
3. Another discloses that:
Compusonics is talking to AT&T about setting up a service that
would enable record companies to sell direct to consumers over
the telephone. Symphonies, ordered by credit card, could travel
digitally over phone lines into homes to be recorded by
Compusonics’[s] machine. Movies, which can also be recorded
digitally, might be sent the same way.
Ex. 4324 at 2. Another publication states that:
AT&T’s commitment to telerecording may hasten the arrival of
that day, in the not too distant future, when the technology will
filter down to the consumer level, allowing all-electronic
purchases, transfers and digital recording of high fidelity audio
from any music dealer’s DSP-2000 to the DSP-1000 in your
living room.
Ex. 4318 at 1.

2. Mr. Stautner’s Testimony
Mr. Stautner, declarant for SightSound, testifies that he began
working for CompuSonics as its second employee in 1983 or 1984, became
President of CompuSonics Video Corp. in 1985, and remained with the
company until CompuSonics went out of business in 1989 or 1990.
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Ex. 2321 ¶¶ 3–4. Mr. Stautner describes two “series” of DSPs created by
CompuSonics, both of which could record audio in digital form. Id.
¶¶ 6–14. The “2000 series,” which included the DSP-2002 and DSP-2004,
was meant for professional recording studios and used a hard disk for storing
digital audio. Id. ¶¶ 6–7. The “1000 series” was meant for consumers and
“used a floppy disk storage system as well as cartridge floppy storage and
cartridge optical disk storage.” Id. ¶¶ 8–9. Later DSP-1000s used a
“write-once optical disk drive.” Id. ¶ 10. Mr. Stautner states that
CompuSonics “developed and tested software that enabled DSP’s to transmit
digital audio files locally and over distances,” including the software used in
the 1985 demonstration discussed above. Id. ¶¶ 12–14. However,
“[t]elerecording capability never existed on any DSP that was sold or
commercially available by CompuSonics” because of various “challenges
that stood in the way of the adoption of telerecording,” such as the limited
availability and large expense of high-capacity digital connections. Id. ¶ 15.
Mr. Stautner further testifies that “CompuSonics never developed a system
or method for selling digital audio or video signals over telecommunications
lines, nor did CompuSonics ever develop or write software that would
enable DSP’s to be used to transfer money electronically.” Id. ¶ 21.
According to Mr. Stautner, telerecording, and the idea of an “Electronic
Record Store,” were merely aspirational, and not actually put into practice
by CompuSonics. Id. ¶¶ 15–16.

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C. Anticipation Ground
Apple argues that claims 1, 64, and 95 are anticipated by the
CompuSonics system under 35 U.S.C. § 102(a),4 which specifies that a
person shall be entitled to a patent unless “the invention was known . . . by
others in this country . . . before the invention thereof by the applicant for
patent.” See Pet. 42–43; Reply 5. We have reviewed the parties’
submissions and evidence discussed in those papers, and are not persuaded,
by a preponderance of the evidence, that claims 1, 64, and 95 are anticipated.
The basis for Apple’s anticipation argument is its assertion that there
existed a single “CompuSonics system” that was known publicly prior to the
’440 patent. See Pet. 42–43. Apple asserts that “CompuSonics publicly
demonstrated its recorder/players, patented its underlying technology, and
promoted the use of its recorder/player system for facilitating the sale and
distribution of digital audio and video over telephone, T1, and cable lines.”
Id. Apple refers collectively to the “technology and concepts embodied in
CompuSonics’[s] publicly disclosed system,” as evidenced by
Mr. Schwartz’s testimony and the various CompuSonics materials submitted
in this proceeding, as the “CompuSonics system.” Id.
Although the materials contain very similar disclosures, we are not
persuaded that they disclose a single, publicly known system that anticipates
the challenged claims. Anticipation requires that every limitation of the
claim at issue be disclosed in a prior art disclosure and “arranged or
combined in the same way as recited in the claim.” Net MoneyIN, Inc. v.

4 Section 18(a)(1)(C) of the Leahy-Smith America Invents Act, Pub. L. No.
112-29, 125 Stat. 284 (2011) (“AIA”), provides that a covered business
method patent review may be based on “prior art that is described by section
102(a)” as in effect before March 16, 2013.
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VeriSign, Inc., 545 F.3d 1359, 1371 (Fed. Cir. 2008). “[I]t is not enough
that the prior art reference . . . includes multiple, distinct teachings that the
artisan might somehow combine to achieve the claimed invention.” Id.; see
also Kyocera Wireless Corp. v. ITC, 545 F.3d 1340, 1351–52 (Fed. Cir.
2008) (concluding that a set of eleven specifications pertaining to the same
telecommunication standard did not constitute a “single prior art reference”).
Apple does not argue that a single prior art reference discloses all
limitations of the challenged claims, instead relying on different materials as
allegedly disclosing different limitations. See Pet. 50–64. The cited
materials undoubtedly are similar, as they all describe technology developed
by CompuSonics and pertain generally to the recording of digital audio or
video. There are differences, however. For example, the materials describe
different models of DSPs with slightly different features and capabilities.
Certain materials discuss the recording of digital audio on DSP-1000 series
devices with floppy disks, e.g., Ex. 4316, whereas others disclose storage on
DSP-2000 series devices with a hard disk, e.g., Ex. 4324. Given that the
prior art teachings and suggestions are found in references describing a
family of device models, as opposed to a single device model, we find that
one skilled in the art would not have at once envisaged the claimed
arrangement of known components in a manner consistent with anticipation
under 35 U.S.C. § 102(a). Apple has not demonstrated, by a preponderance
of the evidence, that claims 1, 64, and 95 of the ’440 patent are anticipated
by the CompuSonics system.

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D. Obviousness Ground
In the Decision on Institution, we found that Apple had shown, more
likely than not, that the printed publications it submitted regarding
CompuSonics (Exs. 4309–4311, 4315–4320, 4323, 4324, 4342) teach all of
the limitations of claims 1, 64, and 95 of the ’440 patent. Dec. on Inst.
27–28. We also determined that Apple’s analysis and supporting evidence
demonstrated, more likely than not, that the claims would have been obvious
to a person of ordinary skill in the art based on the CompuSonics
publications. Id. Upon review of all of the parties’ papers and supporting
evidence discussed in those papers, we are persuaded, by a preponderance of
the evidence, that claims 1, 64, and 95 are unpatentable over the
CompuSonics publications under 35 U.S.C. § 103(a).

1. The Board Has Jurisdiction to Review Whether the Claims
Would Have Been Obvious
As an initial matter, SightSound argues that we exceeded the scope of
our jurisdiction in instituting a covered business method patent review of the
challenged claims based on obviousness over the CompuSonics publications.
PO Resp. 54–57. SightSound contends that Apple did not assert explicitly a
ground of obviousness based on the CompuSonics publications in its
Petition and, therefore, the Decision on Institution was improper under
37 C.F.R. § 42.208(c). Id. SightSound further contends that the Decision
violated its due process rights because it does not know what arguments
Apple would make regarding obviousness in reply to the Patent Owner
Response, and SightSound would not have “an opportunity to respond to
[Apple’s] arguments directly in writing.” Id. Apple responds that the
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Decision was proper because Apple’s Petition supported the ground of
obviousness and because Dr. John P. J. Kelly’s supporting declaration
explained his view that the claims are anticipated and would have been
obvious. Reply 7–8; see Ex. 4341 ¶ 47, App. C.
SightSound’s arguments are not persuasive. “Post-grant review shall
not be instituted for a ground of unpatentability, unless the Board decides
that the petition supporting the ground would, if unrebutted, demonstrate
that it is more likely than not that at least one of the claims challenged in the
petition is unpatentable.” 37 C.F.R. § 42.208(c) (emphasis added). As
stated in our Decision on Institution, Apple’s Petition supported a ground of
obviousness based on the CompuSonics publications. Dec. on Inst. 27–28.
Apple explained in detail in its Petition how the publications teach every
limitation of the claims, and how the publications describe similar features
and relate to each other. See Pet. 42–64. The allegations in the Petition
were supported by the declarations of Mr. Schwartz, who testified that the
CompuSonics publications were disclosed publicly, and Dr. Kelly, who
testified regarding how the CompuSonics publications teach every limitation
of the challenged claims. See Ex. 4334 ¶¶ 32–40, 47, App. C; Ex. 4335
¶¶ 5–14, 16, 17, 19. SightSound did not rebut Apple’s allegations in its
Preliminary Response, arguing only that the ’440 patent is not a covered
business method patent. See Dec. on Inst. 24–28. We are not persuaded that
the Decision on Institution was improper under 37 C.F.R. § 42.208(c).
SightSound further does not contend that we lacked jurisdiction to
institute a covered business method patent review on the ground of
anticipation. See PO Resp. 54–57. Once a covered business method patent
review is instituted, the Board’s mandate is to “issue a final written decision
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with respect to the patentability of any patent claim challenged by the
petitioner.” 35 U.S.C. § 328(a). We do so based on the instituted grounds
and full record before us. Thus, we proceed to determine the patentability of
the challenged claims based on the existing record, including a
determination of whether the claims would have been obvious based on the
CompuSonics publications.
Finally, we are not persuaded that instituting a covered business
method patent review on the ground of obviousness violated SightSound’s
due process rights. The Petition supported the ground of obviousness, as
explained above, and the Decision on Institution explained the basis for that
determination. See Dec. on Inst. 24–28. Further, SightSound was permitted
to file a Sur-Reply and new declaration testimony in response to Apple’s
Reply, and availed itself of that opportunity. See Paper 96 at 2–4;
Sur-Reply.5

2. Level of Ordinary Skill in the Art
The parties’ declarants apply similar definitions for the level of
ordinary skill in the art at the time of the ’440 patent (June 13, 1988, when
parent U.S. Patent Application No. 07/206,497 was filed), and neither party
contends that the minor differences between those definitions impact the
obviousness analysis. Apple’s declarant, Dr. Kelly, testifies that a person of

5 SightSound also argues that “[f]or the reasons previously stated, none of
the claims under review is a ‘covered business method,’” citing pages 28–45
of its Preliminary Response. PO Resp. 10 n.2. Doing so was improper, and
we do not consider arguments SightSound attempts to incorporate by
reference from its previous filing. See 37 C.F.R. § 42.6(a)(3) (“Arguments
must not be incorporated by reference from one document into another
document.”).
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ordinary skill would have had “a bachelor’s degree or equivalent in
computer engineering or computer science and approximately two years of
experience in developing software and hardware that transmit and receive
files over a network.” Ex. 4334 ¶ 11. SightSound’s declarant, Mr. Snell,
testifies that a person of ordinary skill would have had “an undergraduate
degree in electrical engineering or computer science and/or approximately
2–4 years of industry experience in the design of systems and methods for
storing and transmitting digital information.” Ex. 2353 ¶ 30. The district
court in SightSound Techs., LLC v. Apple Inc., Case No. 2:11-cv-01292-
DWA (W.D. Pa.), applied the same level of ordinary skill as Mr. Snell.
See Ex. 4336 at 12 n.12; Ex. 4337.
Based on our review of the ’440 patent, the types of problems and
solutions described in the ’440 patent and cited prior art, and the testimony
of the parties’ declarants, we agree with Dr. Kelly’s assessment and
conclude that a person of ordinary skill in the art would have had a
bachelor’s degree or equivalent in computer engineering or computer
science and approximately two years of experience in developing software
and hardware that transmit and receive files over a network. See, e.g.,
Ex. 4301, col. 1, l. 16–col. 2, l. 13 (describing alleged problems in the prior
art, and stating that the ’440 patent describes “a method [by] which a user
may purchase and receive digital audio or video signal[s] from any location
which the user has access to telecommunications lines”); col. 4, ll. 34–38
(stating that certain components, such as hard disks 10 and 60, telephone
lines 30, compact disc player 40, video display unit 70, and stereo speakers
80, were “already commercially available”); Ex. 4334 ¶¶ 2–7 (describing the
background of Dr. Kelly); Ex. 2353 ¶¶ 3–13 (describing the background of
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Mr. Snell). In particular, Dr. Kelly’s definition is appropriate because it
requires some level of specific experience with transmitting and receiving
data over a network, consistent with the recitation in the claims of
connecting electronically and transmitting data over a telecommunication
line.

3. The CompuSonics Publications Are Prior Art
We are persuaded that all of the CompuSonics publications qualify as
prior art under 35 U.S.C. § 102. Exhibits 4309–4311, 4316–4319, 4324, and
4342 are publicly available printed publications that are prior art under
35 U.S.C. §§ 102(a) and 102(b), and Exhibit 4323 is a patent that is prior art
under 35 U.S.C. § 102(a). See Ex. 4335 ¶¶ 6–8, 10–13, 16, 17, 19
(testimony of Mr. Schwartz regarding the public availability of the
publications). SightSound does not dispute that these documents qualify as
prior art.
SightSound argues that the two diagrams shown above, Exhibits 4315
and 4320, do not qualify as prior art printed publications because they only
were displayed for a few seconds in slide show format at trade shows.
PO Resp. 38–40; see Ex. 2321 ¶¶ 23–24 (testimony from Mr. Stautner that
he believes the diagrams were not provided to the public, but shown briefly
during a slide show). We disagree. Mr. Schwartz testifies that the diagrams
were “shown to the public via presentation at businesses, conferences,
lectures, and industry events,” such as the 1987 lecture with Mr. Stautner.
See Ex. 4335 ¶¶ 9, 14; Ex. 2324 at 46:9–11. Mr. Schwartz further testifies
that he presented Exhibit 4315 at trade shows, including National
Association of Broadcasters trade shows and the Consumer Electronics
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Show. Ex. 2324 at 45:11–46:20. At those shows, a slide show would be
“running all the time” to accompany Mr. Schwartz’s “discussions with
people who visited the booth,” and the slide would be on the screen for 30
seconds at a time. Id. Similarly, Mr. Schwartz states that he displayed
Exhibit 4320 at trade shows and used it in pitches to various companies. Id.
at 64:19–68:8.
The determination of whether a document is a “printed publication”
under 35 U.S.C. § 102 involves a case-by-case inquiry into the facts and
circumstances surrounding its disclosure to members of the public. In re
Klopfenstein, 380 F.3d 1345, 1350 (Fed. Cir. 2004). To qualify, a document
must have been sufficiently accessible to the public interested in the art.
Kyocera, 545 F.3d at 1350–51 (a “reference is publicly accessible ‘upon a
satisfactory showing that such document has been disseminated or otherwise
made available to the extent that persons interested and ordinarily skilled in
the subject matter or art exercising reasonable diligence, can locate it’”)
(citation omitted). The evidence of record indicates that the diagrams were
displayed, publicly and repeatedly, at trade shows, lectures, and similar
events, and that those events were of the type that would have been attended
by persons of ordinary skill in the art. The diagrams were displayed
multiple times at multiple events, unlike the situation where a slide is
displayed only one time at an oral presentation. See Klopfenstein, 380 F.3d
at 1349 n.4. Further, each diagram is a relatively simple display of
components on a single page, and there is no indication in the record that
attendees at the various events could not have copied the diagrams. See id.
at 1351 (“The more complex a display, the more difficult it will be for
members of the public to effectively capture its information. The simpler a
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display is, the more likely members of the public could learn it by rote or
take notes adequate enough for later reproduction.”). Apple has established
that Exhibits 4315 and 4320 qualify as prior art printed publications under
35 U.S.C. § 102(a).

4. Claim 1
a. The CompuSonics Publications Teach Every Limitation of Claim 1
Apple explains in detail in its Petition how the CompuSonics
publications teach every limitation of claim 1, relying on the testimony of
Dr. Kelly in support. See Pet. 42–63; Ex. 4334 ¶¶ 17–40, App. C at 1–9.
For example, the two CompuSonics diagrams shown above depict an
arrangement of first party and second party “control unit” DSPs connected
via a telephone or T1 “telecommunications line,” and other publications
describe how digital audio could be downloaded from one device to another
and stored locally on a floppy disk. See Pet. 50–63 (citing Exs. 4309–4311,
4315–4320, 4323, 4324, 4342); Ex. 4334, App. C at 1–9. Apple identifies as
a “first memory of a first party” a seller database of music, which Apple
contends is stored necessarily on a memory device, and identifies as a
“second memory of a second party control unit” the floppy disk in the user’s
device. See id. at 53–54 (citing Exs. 4316, 4318); Ex. 4334, App. C at 1–4.
Apple’s analysis, supported by the testimony of Dr. Kelly, is persuasive.
In its Patent Owner Response, SightSound “does not dispute that the
components needed to practice the claims were available prior to 1988,”
when parent U.S. Patent Application No. 07/206,497 was filed. PO Resp.
34. Thus, there is no dispute that all of the physical components recited in
the claimed methods (i.e., first memory, second memory,
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telecommunications lines, speakers) were known in the prior art. Rather,
SightSound argues that the CompuSonics publications fail to teach certain
steps of the method of claim 1, as well as the specific combination of steps
recited in the claim.6 Id. at 22–36, 42–54.
First, SightSound argues that the CompuSonics publications do not
teach “storing the desired digital video or digital audio signals in a
non-volatile storage portion [of] the second memory” that is “not a tape or
CD” because they describe storage on a floppy disk, not a hard disk. Id. at
24–33, 52–53. SightSound’s argument is based on its proposed
interpretation of “second memory,” with which we disagree for the reasons
explained above. See supra Section II.A.2. We interpret the term to mean a
second storage space in a computer system or medium that is capable of
retaining data or instructions. Id. A floppy disk, as disclosed in the

6 SightSound also argues that CompuSonics’s technology already was
considered by the Office during an ex parte reexamination of the ’440
patent, Reexamination Control No. 90/007,407 (“the ’407 reexamination”),
and that the 1985 demonstration was considered by the district court in
denying a motion for summary judgment of invalidity because the
CompuSonics system “‘was not configured to accept credit card information
and transmit it to the seller’s mainframe as a preliminary step to
downloading the signals.’” PO Resp. 12–14; see Ex. 4303 at 4–5, 265,
270–71, 524–25, 527–28. The particular evidence and arguments presented
by Apple in this proceeding, however, were not considered by the Office
previously. Although some of the CompuSonics publications were
submitted during the ’407 reexamination, at least three important
disclosures—the two CompuSonics diagrams shown above (Exs. 4315,
4320) and the 1985 Billboard magazine article describing retailers “digitally
transmit[ting] the music to consumers who would use credit cards to charge
their purchases over the phone lines” (Ex. 4309 at 3)—were not. See
Ex. 4301 at 13–27; Reply 5 n.1. Nor is there any indication that the
CompuSonics publications, including those disclosing telephone payment,
ever were considered as a group.
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CompuSonics publications, meets that definition. See Pet. 51–54, 61–63;
Ex. 4334, App. C at 3–4, 7–8 (citing Exs. 4309, 4319, 4323, 4324); Ex. 4420
¶¶ 4–13.
Second, SightSound argues that the CompuSonics publications do not
teach the step of “selling electronically by the first party to the second party
through telecommunications lines,” where the selling step includes
“charging a fee via telecommunications lines,” the second party has an
“account,” and the charging step “includes the step of charging the account
of the second party,” as recited in claim 1. PO Resp. 6–7, 22–25, 35, 48–50.
SightSound asserts that no CompuSonics device ever was “programmed to
process payments,” relying on the testimony of Mr. Stautner. Id. at 6–7, 24,
35 (citing Ex. 2321 ¶¶ 20–21). For purposes of assessing whether the claim
would have been obvious based on the CompuSonics publications, however,
the issue is not whether CompuSonics created a product that sold digital
video or digital audio signals electronically, but rather what “the combined
teachings of the references would have suggested to those having ordinary
skill in the art.” See In re Mouttet, 686 F.3d 1322, 1333 (Fed. Cir. 2012).
We agree with Apple, and Dr. Kelly, that the CompuSonics
publications teach the “selling electronically” step of claim 1. See Pet.
55–60; Ex. 4334, App. C at 4–6; Ex. 4420 ¶¶ 14–25. Exhibit 4309 describes
retailers “digitally transmit[ing] . . . music to consumers who would use
credit cards to charge their purchases over the phone lines.” Ex. 4309 at 3
(emphasis added). Exhibit 4324 discloses allowing “record companies to
sell direct to consumers over the telephone,” where “[s]ymphonies, ordered
by credit card, could travel digitally over phone lines into homes to be
recorded by Compusonics’[s] machine.” Ex. 4324 at 2 (emphasis added).
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Exhibit 4318 discloses “allowing all-electronic purchases, transfers and
digital recording of high fidelity audio from any music dealer’s DSP-2000 to
the DSP-1000 in your living room.” Ex. 4318 at 1 (emphasis added).
SightSound does not dispute that the “selling electronically” step
encompasses a person charging a purchase over the telephone. See Tr.
38:16–39:5 (acknowledging that a similar “transferring money
electronically” step recited in claim 1 of the ’573 patent could be “a person
picking up their phone, calling in a credit card number over the phone”).
Indeed, claim 4, which depends from claim 1, recites that “the step of
charging the account of the second party includes the steps of telephoning
the first party” and “providing a credit card number of the second party
. . . so the second party is charged money.” See also claims 65, 96 (reciting
the same limitations); Ex. 4301, col. 7, ll. 34–56. Further, during
prosecution of the application that issued as the parent ’573 patent, the
named inventor declared that “[o]ne skilled in the art would know that an
electronic sale inherently assumes a transferring of money by providing a
credit or debit card number (since this is the only way for electronic sales to
occur) coupled with a transferring of a service or product.” Ex. 4305 at 170.
The named inventor also acknowledged, during prosecution of U.S. Patent
Application No. 08/023,398 (a continuation of the ’573 patent), that
electronic sales include telephone purchases, and that such purchases were
well-known at the time:
One skilled in the art would know that an electronic sale
inherently assumes a transferring of money by providing an
account number or a credit or debit card number which then
allows for access to or a transferring of a service or product
through telecommunications lines.
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One skilled in the art would know that an electronic sale
inherently assumes a charging of a fee to an account which then
allows for access to or a transferring of a product or service
through telecommunications lines.
The use of transferring money across telecommunication
connections, such as by telephoning over the phone lines the
agent who has a first party’s hard disk, or charging a fee to a
purchaser or “second party” preferably at a location remote
from a purchaser or “second party,” for obtaining data on the
first party’s hard disk through telecommunications lines is well
known to one skilled in the art to be part of electronic sales.7
Ex. 4338 at 109–10; see also Ex. 4305 at 163 (citing the “well known
process of ‘providing a credit card number’ over a telephone line and
‘telephoning’ to make the connection”); Ex. 4366 at 59:13–61:22,
74:5–75:24 (SightSound’s declarant, Mr. Snell, acknowledging during his
deposition that telephone purchases were well-known). Thus, a person of
ordinary skill in the art would have understood the CompuSonics
publications that describe music purchases over the telephone (e.g., with a
credit card) to teach the “selling electronically” step of claim 1.

7 SightSound argues that the statements made during prosecution are
irrelevant, citing our decision denying institution on Apple’s asserted ground
based on the Synth-Bank article. Sur-Reply 13–14 (citing Dec. on Inst.
30–31). The Synth-Bank article, however, merely discloses an “on-line
shopping service” where users can “purchase” sound files, without
describing how the user provides payment. See Dec. on Inst. 29–31. By
contrast, the CompuSonics publications specifically describe a consumer
making a credit card purchase over the telephone. See, e.g., Ex. 4309
(consumers “would use credit cards to charge their purchases over the phone
lines”); Ex. 4324 (record companies would “sell direct to consumers over
the telephone,” with symphonies “ordered by credit card”). The prosecution
statements regarding credit card purchases over the telephone, therefore, are
relevant.
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With respect to one of the CompuSonics publications, Exhibit 4324,
Mr. Snell contends that a person of ordinary skill in the art would have
understood the document’s reference to selling “over the telephone” to mean
“placing an order by telephone to be invoiced on a monthly bill,” and the
reference to symphonies “ordered by credit card” to mean that “a credit card
payment would be made in writing in advance of purchase, for instance by
writing down a code for a recording and a credit card number and mailing it
to the seller.” Ex. 2353 ¶ 55. We are not persuaded that a person of
ordinary skill in the art would have read the document in that manner, as the
publication does not discuss doing anything via mail and doing so would be
inconsistent with the full disclosure of the document. Exhibit 4324
discloses: “Compusonics is talking to AT&T about setting up a service that
would enable record companies to sell direct to consumers over the
telephone. Symphonies, ordered by credit card, could travel digitally over
phone lines into homes to be recorded by Compusonics’[s] machine.”
Ex. 4324 at 2 (emphasis added). Reading both sentences together, a skilled
artisan would have understood Exhibit 4324 to be referring to a consumer
telephoning a record company and providing a credit card number so that the
consumer could purchase music. See Ex. 4420 ¶¶ 18–19.
Finally, SightSound argues that the CompuSonics publications do not
teach the “selling electronically” step, because (1) CompuSonics controlled
the DSP on both ends of the communication, as shown in the Exhibit 4315
diagram, and (2) “no DSP was ever configured to transmit payment
information.” PO Resp. 2, 6–7, 35, 37–38, 48–50 (citing Ex. 2353 ¶ 48).
As explained above, the CompuSonics publications describe a consumer
purchasing music from a music seller (e.g., by charging a purchase over the
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telephone), which amounts to selling electronically as recited in claim 1.
See Pet. 55–60; Ex. 4334, App. C at 4–6. We interpret “first party” and
“second party” to encompass both a corporation and a real person. See
supra Section II.A.1. The claims do not require that either be any particular
type of party (e.g., a consumer). See Reply 6. In addition, there is no
requirement in the claims that the device that stores the digital video or
digital audio signals in a “second memory” also be used to transmit payment
information. See id. at 4–5; Ex. 4420 ¶ 25.
Thus, we are persuaded that the CompuSonics publications teach
every limitation of claim 1.

b. A Person of Ordinary Skill in the Art Would Have Had Reason to
Combine the Teachings of the CompuSonics Publications
Having found that the CompuSonics publications teach all of the
limitations of claim 1, we turn to whether a person of ordinary skill in the art
would have had reason to combine the teachings of the references to achieve
the claimed method. We are guided by the Supreme Court’s decision in
KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007). “Section 103(a) forbids
issuance of a patent when ‘the differences between the subject matter sought
to be patented and the prior art are such that the subject matter as a whole
would have been obvious at the time the invention was made to a person
having ordinary skill in the art to which said subject matter pertains.’” Id. at
405. “[W]hen a patent ‘simply arranges old elements with each performing
the same function it had been known to perform’ and yields no more than
one would expect from such an arrangement, the combination is obvious.”
Id. at 417 (citation omitted). “If a person of ordinary skill can implement a
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predictable variation, § 103 likely bars its patentability. . . . [A] court must
ask whether the improvement is more than the predictable use of prior art
elements according to their established functions.” Id. A determination of
obviousness, though, requires identifying “‘some articulated reasoning with
some rational underpinning to support the legal conclusion of obviousness.’”
Id. at 417–18 (citation omitted).
The evidence of record demonstrates that the CompuSonics
publications describe prior art elements operating according to their known
functions and yielding predictable results. See supra II.B; Pet. 42–63;
Ex. 4334 ¶¶ 17–40, App. C at 1–9; PO Resp. 34 (acknowledging that “the
components needed to practice the claims were available prior to 1988”).
The disclosed DSPs would store digital signals and communicate digital
signals electronically over a telephone line in a known manner. A floppy
disk used by a DSP would function for its known purpose of storing digital
data. Allowing the user to telephone the music provider and provide a credit
card number for payment would have functioned just like other known
payment systems of the time. See Ex. 4334 ¶¶ 26–27; Ex. 4420 ¶¶ 14–25.
A person of ordinary skill in the art, having the educational background and
work experience described above, see supra Section II.D.2, would have
recognized that the predictable result of using these elements was a system
that allowed users to purchase and download music, as expressly
contemplated by the references themselves.
Importantly, SightSound admits that the CompuSonics publications
describe prior art elements working according to their established functions
in a predictable manner:
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Despite the prior art elements working according to their
established functions and predictability, no ordinary skilled
artisan, and certainly not CompuSonics, saw the problem with
removable hardware units until the ’440 Patent specification
was published. CompuSonics taught the use of a hard disk for
an “electronic record store,” but specifically disclosed a floppy
disk for the consumer.
PO Resp. 62–63 (emphasis added). Mr. Snell similarly acknowledges “the
prior art elements working according to their established functions and
predictability.” Ex. 2353 ¶ 74. The fact that the disclosed elements would
operate in known ways to achieve predictable results supports a conclusion
of obviousness. Additionally, based on the record presented, we do not see
sufficient reason why providing for the purchase of digital audio over the
telephone, and using CompuSonics DSPs to transmit digital audio and store
it on a floppy disk, would have achieved an unexpected result or would have
been uniquely challenging or otherwise beyond the level of skill of an
ordinarily skilled artisan. See KSR, 550 U.S. at 416, 421; Leapfrog Enters.,
Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1161-62 (Fed. Cir. 2007).
As to a particular reason why a person of ordinary skill in the art
would have combined the teachings of the CompuSonics publications, the
references expressly contemplate that it would be commercially desirable to
have a system that allowed users to buy music electronically. Exhibit 4324,
for instance, describes CompuSonics’s technology for storing digital audio
and video on a floppy disk or hard disk, and states that “future applications
could be dazzling,” noting the potential CompuSonics-AT&T “service that
would enable record companies to sell direct to consumers over the
telephone.” Ex. 4324 at 2. Exhibit 4319 states that “[d]igital music video
distribution offers customers two significant benefits: high fidelity digital
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audio and video, and convenient purchasing via electronic distribution
directly to the home.” Ex. 4319 at 2. Other CompuSonics publications
include similar statements. See, e.g., Ex. 4316 at 1 (describing “a new era in
the music industry in the not too distant future [when] consumers will be
able to purchase digital recordings of their favorite artists directly from the
production studio’s dial-up data base and record them on blank
SuperFloppies in a DSP-1000”); Ex. 4318 at 1 (projecting that telerecording
“technology will filter down to the consumer level, allowing all-electronic
purchases, transfers and digital recording of high fidelity audio”); Ex. 4309
at 3 (recounting Mr. Schwartz’s statement that the “‘electronic record store’
concept” is “poised to ‘become a reality’”); Ex. 4311 at 4 (“in the not-too-
distant future consumers will be able to buy music at home, over telephone
lines or through cable television hookups, and play it back through an audio
device resembling a microcomputer”); Ex. 4317 at 11 (contemplating “great
potential for expanding the music market through digital technology” where
“a large database of the latest music chart successes [could] exist only a
phone call away” and “[v]ideo music services which broadcast over cable
networks can simultaneously release [a] new album and have it ready for
immediate sale without first having filled the distribution pipeline”).
Thus, the references themselves demonstrate that a person of ordinary
skill in the art would have been led to create a system for users to purchase
and download music. See Brown & Williamson Tobacco Corp. v. Philip
Morris Inc., 229 F.3d 1120, 1125 (Fed. Cir. 2000) (evidence of a motivation
to combine prior art references “may flow from the prior art references
themselves”).
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SightSound makes two main arguments that the challenged claims
would not have been obvious. First, SightSound contends that the specific
combination of selling music (the “selling electronically” step) and using a
hard disk to store the music (the “storing” step) would not have been
obvious based on the CompuSonics publications, which teach away from the
use of a hard disk. PO Resp. 23–25, 31, 52, 57–64. Specifically,
SightSound contends that CompuSonics used floppy disks and optical disks,
not hard disks, in the DSP-1000 series devices meant for users, and did not
recognize or address the problems that the ’440 patent allegedly solved by
using a hard disk. Id. at 62–63; see Sur-Reply 6–13. As explained above,
however, claim 1 does not require the “second memory” to be a hard disk.
See supra Section II.A.2. Thus, SightSound’s purported distinctions based
on the use of a hard disk for storage are without merit.
Second, SightSound argues that the record does not show sufficiently
how or why the different CompuSonics publications would be combined by
a person of ordinary skill in the art. Sur-Reply 4–6. We disagree. Apple
explained in its Petition which publications teach which claim limitations,
and Dr. Kelly’s testimony supports that analysis. See Pet. 42–63; Ex. 4334
¶¶ 17–40, App. C at 1–9. The references themselves also suggest combining
their teachings to create a system for allowing users to buy music
electronically, as explained above.
Further, as the Supreme Court held in KSR, to determine whether
there was an apparent reason to combine known elements in the manner
claimed, it often will be necessary to “look to interrelated teachings of
multiple patents,” as “in many cases a person of ordinary skill will be able to
fit the teachings of multiple patents together like pieces of a puzzle.” 550
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U.S. at 418–20. “A person of ordinary skill is . . . a person of ordinary
creativity, not an automaton.” Id. at 421; see Randall Mfg. v. Rea, 733 F.3d
1355, 1362 (Fed. Cir. 2013) (holding that the Supreme Court in KSR
“[r]eject[ed] a blinkered focus on individual documents,” instead
“requir[ing] an analysis that reads the prior art in context, taking account of
‘demands known to the design community,’ ‘the background knowledge
possessed by a person having ordinary skill in the art,’ and ‘the inferences
and creative steps that a person of ordinary skill in the art would employ’”)
(quoting KSR, 550 U.S. at 418). Although we are not persuaded that the
CompuSonics publications disclose a solitary, publicly known “system,” see
supra Section II.C, they certainly have interrelated teachings, as all of the
publications describe technology developed by the same company
(CompuSonics), use similar terminology, and pertain generally to the
recording of digital audio or video. Based on the evidence of record, we are
persuaded that a person of ordinary skill in the art would have considered the
publications collectively to achieve a system for selling music electronically,
as expressly contemplated by the references. See In re Hyon, 679 F.3d 1363,
1366 (Fed. Cir. 2012) (affirming an obviousness determination where two
“references both teach processes directed to making the same class of
products” and minor differences between the disclosures did not “negate the
motivation to combine”); Medichem, S.A. v. Rolabo, S.L., 437 F.3d 1157,
1166 (Fed. Cir. 2006) (explaining that in an obviousness analysis, “the prior
art must be considered as a whole for what it teaches”).
Accordingly, we are persuaded that the CompuSonics publications
teach all of the limitations of claim 1, and that a person of ordinary skill in
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the art would have had reason to combine those teachings to achieve the
method of claim 1.

c. Secondary Considerations of Non-Obviousness
As part of our obviousness analysis, we consider the evidence and
arguments submitted by SightSound regarding secondary considerations of
non-obviousness. See Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966).
In particular, SightSound argues that commercial success, copying, industry
praise, and long-felt need demonstrate that the challenged claims would not
have been obvious to a person of ordinary skill in the art.8 PO Resp. 64–78.

i. Commercial Success
SightSound bases its commercial success argument on Apple’s iTunes
Music Store (“iTMS”), an “‘online music store that lets customers quickly
find, purchase and download the music they want for just 99 cents per song,
without subscription fees.’” PO Resp. 18 (citing Ex. 2337). SightSound
contends that the iTMS is “the most successful download music store of all
time,” embodies the methods recited in the challenged claims, and is
coextensive with the claims. Id. at 18–21, 66–75. Apple does not dispute
that the iTMS has been commercially successful; the only dispute is whether
SightSound has shown a nexus between the claimed methods and that
success, and if so, whether that showing has been rebutted. See Reply
10–14.

8 The parties refer to the challenged claims collectively in their arguments
regarding secondary considerations, and we do the same. See PO Resp.
64–78; Reply 10–15; Sur-Reply 14–15.
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Evidence of commercial success “is only significant if there is a nexus
between the claimed invention and the commercial success.” Ormco Corp.
v. Align Tech., Inc., 463 F.3d 1299, 1311–12 (Fed. Cir. 2006). To establish
a proper nexus between a claimed invention and the commercial success of a
product, a patent owner must offer “proof that the sales [of the allegedly
successful product] were a direct result of the unique characteristics of the
claimed invention—as opposed to other economic and commercial factors
unrelated to the quality of the patented subject matter.” In re Huang, 100
F.3d 135, 140 (Fed. Cir. 1996). In addition, “if the commercial success is
due to an unclaimed feature of the device,” or “if the feature that creates the
commercial success was known in the prior art, the success is not pertinent.”
Ormco, 463 F.3d at 1312; see also In re Kao, 639 F.3d 1057, 1070 (Fed. Cir.
2011) (requiring a determination of “whether the commercial success of the
embodying product resulted from the merits of the claimed invention as
opposed to the prior art or other extrinsic factors”). If a patent owner is able
to show a sufficient nexus, “the burden shifts to the challenger to prove that
the commercial success is instead due to other factors extraneous to the
patented invention, such as advertising or superior workmanship.” J.T.
Eaton & Co., Inc. v. Atlantic Paste & Glue Co., 106 F.3d 1563, 1571 (Fed.
Cir. 1997).
Further, if a product both “embodies the claimed features” and is
“coextensive” with the claim at issue, “a nexus is presumed and the burden
shifts to the party asserting obviousness to present evidence to rebut the
presumed nexus.” Brown & Williamson, 229 F.3d at 1130. When a product
is not “coextensive with the patented invention,” however, such as when
“the patented invention is only a component of a commercially successful
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machine or process, . . . the patentee must show prima facie a legally
sufficient relationship between that which is patented and that which is
sold.” Demaco Corp. v. F. Von Langsdorff Licensing Ltd., 851 F.2d 1387,
1392–93 (Fed. Cir. 1988).
SightSound argues that the challenged claims “cover a method for a
customer to purchase and download digital audio and video signals over the
internet for future playback as selected by the end user,” which is
“coextensive with both digital downloads generally to non-removable media
and sales of audio and video content from the ITMS.” PO Resp. 70.
SightSound relies on the testimony of Mr. Snell in support of its position.
Id. (citing Ex. 2353 ¶¶ 98–102).
Even assuming (without deciding) that the iTMS embodies the
claimed methods, we are not persuaded that the iTMS is coextensive with
the claims. First, the issue is whether the claims are coextensive with the
specific iTMS product alleged to be successful, not whether the claims are
coextensive with digital downloads “generally” as SightSound suggests. See
id. The present facts differ significantly from cases where a discrete product
or composition was found to be coextensive with a claim directed to the
same product or composition. See, e.g., Teva Pharms. USA, Inc. v. Sandoz,
Inc., 723 F.3d 1363, 1367, 1372–73 (Fed. Cir. 2013) (claim and product
both were a drug); Brown & Williamson, 229 F.3d at 1123–24, 1130 (claim
and product both were a cigarette); Demaco, 851 F.2d at 1389, 1394 (claim
and product both were a paving stone).
As Apple points out, the iTMS is a complex computer system
embodying numerous inventions. See Reply 10–11. Jeffrey Robbin, an
Apple employee and “one of the leaders of the initial development team for
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the [iTMS],” testifies that “[t]he iTunes client and [iTMS] include many
technological features developed by Apple” (other than the general
purchasing and downloading of music and video). Ex. 4413 ¶¶ 1, 6, 7. For
instance, Mr. Robbin cites the “Genius” feature that “provide[s]
recommendations based on past purchases,” as well as patented features
relating to “user interface technology, playlist management, presentation of
media on a device, secure access to content, and assigning ratings.” Id. ¶ 7
(citing nine specific Apple patents on which he is a named inventor).
Dr. Kelly also identifies Apple patented technology pertaining to other
features of the iTMS. Ex. 4420 ¶¶ 67–82. The testimony of Mr. Robbin and
Dr. Kelly is persuasive, and demonstrates that the iTMS embodies numerous
inventions other than the general purchasing and downloading of music
relied upon by SightSound. See Therasense, Inc. v. Becton, Dickinson &
Co., 593 F.3d 1289, 1299 (Fed. Cir. 2010) (finding no presumption of nexus
where the success of the product at issue “embodied at least two patents,”
one of which was the asserted patent), vacated for en banc rehearing on
inequitable conduct, 374 F. App’x 35 (Fed. Cir. 2010); Demaco, 851 F.2d at
1392 (a product is not “coextensive” with a claim when the claimed
invention is “only a component of a commercially successful machine or
process”).
Second, Mr. Snell’s analysis is of limited probative value because,
although he explains why he believes that the iTMS practices the claimed
methods, he does not explain in any detail why they allegedly are
coextensive with each other. See Ex. 2353 ¶¶ 88–98. The two issues are not
the same. See Brown & Williamson, 229 F.3d at 1130; Demaco, 851 F.2d at
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1392. SightSound, therefore, has not established that the iTMS is
coextensive with the claims, and we do not presume a nexus.
Nevertheless, even if the iTMS is not coextensive with the claims,
SightSound may still be able to demonstrate a prima facie nexus by showing
that the success of the iTMS is due specifically to novel features of the
challenged claims. See In re DBC, 545 F.3d 1373, 1384 (Fed. Cir. 2008)
(finding no nexus absent evidence that “the driving force behind [the
allegedly successful product’s sales] was the claimed combination”); Ormco,
463 F.3d at 1312. SightSound argues that “the decision by consumers to
purchase digital downloads generally, and to purchase from the ITMS
specifically, rather than obtain digital content through other means (such as
buying removable media or subscribing to a streaming service) establishes a
nexus between the commercial success of the product and the unique
features” of the claims. PO Resp. 70. This circular reasoning is not
persuasive, however. The fact that customers decide to buy music and
video through the iTMS is the alleged commercial success itself, not a
connection between such success and any claimed features. If all that was
necessary to prove a nexus was to show that customers bought more of the
identified product than other products, a nexus would exist for every product
that exhibits success in the marketplace. Rather, a patent owner must show
proof that the success is “the direct result of the unique characteristics of the
claimed invention.” Huang, 100 F.3d at 140.
We also note that Apple presents persuasive evidence that the
commercial success of the iTMS is due to features other than those of the
claimed methods. See Reply 11–14. Specifically, we have reviewed the
testimony of Lawrence Kenswil, a former employee of the Universal Music
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Group and board member of the Recording Industry Association of America
with over 25 years of experience in the music industry, and find it
persuasive. See Ex. 4414 ¶¶ 5–18. Mr. Kenswil explains in detail his
opinion that the iTMS’s success is due to factors not attributable to the
challenged claims. Id. ¶¶ 66–98. We note two factors in particular: content
selection and the iTMS user interface.
Mr. Kenswil states that an important reason for the iTMS’s success
was “Apple’s ability to secure licenses with the major record labels,” which
“was an attractive feature for consumers because it gave them a store with a
full catalog of offerings to browse and from which to select.” Id. ¶ 69.
Citing to evidence in the record, Mr. Kenswil explains the history of how
Apple was able to alleviate record label concerns over piracy and copyright
protection, thereby ensuring that Apple would be able to offer a wide
selection of content on the iTMS. Id. ¶¶ 70–74, 80 (citing Exs. 4396, 4398,
4399, 4402, 4403, 4406–4408). Further, as Mr. Kenswil points out, even
SightSound in its own documentation recognized the importance of having
broad content available to users. Id. ¶¶ 75–80; see Ex. 4358 at 9–10 (stating
that the company’s success is “dependent” on its ability to obtain content);
Ex. 4361 at 5 (describing content as the “key missing ingredient”). We are
persuaded by Mr. Kenswil’s explanation attributing the success of the iTMS
to its content selection. We do not agree with SightSound that the existence
of a choice for users as to whether to purchase music on a CD or via the
iTMS by itself demonstrates the requisite link to the claimed methods. See
PO Resp. 70; Ex. 2353 ¶ 101.
With respect to the iTMS user interface, Mr. Kenswil opines that its
features, such as “the five-star rating system, lists of music videos by the
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band being viewed, lists of movies and books about the band being viewed,
concert tour information for the band being viewed, the ‘genius’
recommendation feature, and the song-by-song ‘Popularity’ rating,” are
important factors in the iTMS’s success. Ex. 4414 ¶¶ 92–93; see Exs.
4370–4377 (showing various features of the user interface). Mr. Kenswil
also explains why, in his experience, “features related to popularity,
recommendations, and lists of what other content was often purchased by
people who bought the song/movie being viewed” would contribute to the
success of the iTMS. Ex. 4414 ¶ 94.
Relying on the testimony of Mr. Snell, SightSound asserts that the
iTMS user interface cannot be a driver for sales, because (1) the iTMS user
interface is “substantially similar” to the SightSound.com user interface, and
(2) the cited features of the iTMS user interface are not specific to
purchasing music and video through the iTMS. PO Resp. 70–72. Mr. Snell,
however, only compared the SightSound.com website to the iTMS, and did
not account for any technical details of the SightSound.com website or
address the specific features cited by Mr. Kenswil. See Ex. 2353 ¶ 101
(citing Exs. 2312, 2313, 2319, 2350, 2351); Ex. 4366 at 127:20–128:11;
Reply 13. Mr. Snell also acknowledged during his deposition that his
“expertise is in the engineering and the computer side,” not in sales. Ex.
4366 at 213:24–214:14. Given Mr. Kenswil’s lengthy background in the
music industry and testimony regarding specific features of the iTMS user
interface, we find his testimony regarding the causes of the iTMS’s
commercial success to be more convincing.
Finally, SightSound argues that Apple’s alleged reasons for the
iTMS’s commercial success are immaterial because commercial success
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may be shown even when the success is due to multiple factors. Sur-Reply
14–15. As explained above, though, SightSound has not met its burden to
establish a nexus between the claims and the alleged commercial success.
Even if it had, Apple has provided persuasive evidence in rebuttal
demonstrating that the success of the iTMS is due to other features, not
features of the claimed methods. Consequently, the commercial success of
the iTMS does not support a conclusion of nonobviousness of the claims.9

ii. Copying
SightSound argues that Apple copied the claimed methods of the ’440
patent. PO Resp. 16–19, 75–76. SightSound points to a 1993 letter from
Arthur R. Hair, the named inventor of the ’440 patent and parent ’573
patent, to John Sculley, the Chairman and Chief Executive Officer (“CEO”)
of Apple, informing Apple of the issuance of the ’573 patent and stating that
the patent “will revolutionize the video rental industry and the prerecorded
music industry.” Ex. 2311; see PO Resp. 16 n.7. SightSound also provides
a declaration from Scott Sander, one of the founders of SightSound’s
predecessor companies along with Mr. Hair. Ex. 2310 ¶ 2. Mr. Sander
testifies that on January 15, 1999, he sent a letter to Steve Jobs, the
Chairman and CEO of Apple at the time, stating that “we believe that the
download sale of movies and music will become the consumers’ method of
choice,” and including a schematic showing SightSound’s system. Id. ¶ 8
(citing Ex. 2317). According to Mr. Sander, he and Mr. Hair met with two

9 Although based on a different evidentiary record, we note that
SightSound’s arguments regarding Apple’s commercial success were
rejected by the Examiner in the ’407 reexamination. See Ex. 4303 at
301–03.
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Apple employees, Mark Gavini and Tom Weyer, in February 1999. Id. ¶ 10.
During the meeting, Mr. Sander and Mr. Hair discussed SightSound’s
patents, “expressed [their] belief in the superiority of [SightSound’s]
download purchase model versus streaming subscription services,” and
“discussed in more detail the written schematic previously provided to Steve
Jobs.” Id. Mr. Sander recalls Mr. Gavini and Mr. Weyer indicating that “it
would take an entire re-write of the Mac operating system to adequately
support the level of encryption that would be needed to satisfy the media and
entertainment industry.” Id. Apple subsequently introduced its iTunes
software in 2001 and the iTMS in 2003. See Exs. 2331, 2337.
Apple responds that it did not copy any of SightSound’s code or
specific details of SightSound’s commercial system, and provides testimony
from a number of individuals. Reply 14–15 (citing Exs. 4413, 4415, 4416,
4420). Mr. Weyer, one of the Apple employees who met with Mr. Sander,
testifies that (1) he did not take any documents from SightSound’s
representatives, (2) he does not remember taking any notes at the meeting,
(3) he does not recall “having any further interactions with [SightSound] or
discussing any details about [the meeting] with others at Apple,”
(4) “nothing from the early 1999 meeting was communicated to anyone who
was involved with the development of iTunes or the [iTMS],” and (5) he
was not involved personally in the development of iTunes or the iTMS.
Ex. 4416 ¶¶ 2–9. Marco Mazzoni (formerly known as Mark Gavini), the
other Apple employee at the meeting, similarly testifies that (1) he does not
remember receiving any documents from SightSound’s representatives,
(2) he does not recall “ever communicating about SightSound or anything
related to SightSound to anyone at Apple, including anyone who was
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involved with the development of iTunes or the [iTMS],” and (3) he was not
involved personally in the development of iTunes or the iTMS. Ex. 4415
¶¶ 2–3. Mr. Robbin, one of the leaders of the iTMS development team,
testifies unequivocally that the iTMS was developed independently of any
information received from SightSound. Ex. 4413 ¶¶ 6, 8–9. He does not
remember hearing of SightSound before 2003 or recall communicating with
Mr. Weyer or Mr. Mazzoni about SightSound, and is not aware of anyone on
the development team who knew anything about SightSound prior to 2003.
Id. ¶ 8. Mr. Robbin further states that based on his personal involvement
with the development of iTunes and the iTMS, he believes that “Apple
developed those technologies based on the predecessor product SoundJam
MP that it acquired in September 2000” and based on Apple’s own
development work. Id. ¶ 9.
The testimony submitted by Apple persuasively rebuts SightSound’s
assertions of copying. The statements of Mr. Weyer, Mr. Mazzoni, and
Mr. Robbin are unequivocal and we see no reason based on the record
before us to doubt their veracity. In its Motion for Observation, SightSound
points to deposition testimony from Mr. Weyer and Mr. Mazzoni allegedly
showing that they do not remember everything they may have learned or
been provided at the 1999 meeting. Obs. 14–15. Regardless, absent some
demonstrated connection between the specific details that were discussed at
the 1999 meeting and the actual development of the iTMS, we are not
persuaded that there is sufficient evidence of copying. Similarly, with
respect to Mr. Hair’s 1993 letter and Mr. Sander’s 1999 letter to Mr. Jobs,
although SightSound points to testimony from Mr. Robbin regarding
Mr. Jobs’s involvement in developing the iTMS, id. at 13–14, SightSound
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does not cite evidence linking the letters to the actual development of the
iTMS years later. SightSound has not shown proof of copying that would
support a conclusion of nonobviousness as to the challenged claims.

iii. Industry Praise
SightSound argues that it “received press and media coverage praising
the innovative new method for selling digital content,” citing three magazine
articles from 1998–2000. PO Resp. 76–77 (citing Exs. 2310 ¶ 7,
2314–2316). We have reviewed the materials and find that although they
describe various aspects of SightSound’s system for purchasing music and
videos online, they also express skepticism that the business would be
successful. See, e.g., Ex. 2314 at 1–2 (stating that it “may not be easy” to
market the service to record companies that are “against the online sale of
music,” consumers “may not be hip to the idea” that downloaded songs “can
only be played on the computers they’re downloaded to,” and selling the
existing songs in the service “has not been easy”); Ex. 2315 at 1 (stating that
“[s]ince movie files are so big, downloading is an option only for people on
high-speed connections”). Further, as Apple points out, SightSound’s
service did not end up being successful in the industry. See Reply 12, 15;
Ex. 4414 ¶¶ 32–50. Thus, the evidence of industry praise submitted by
SightSound is of limited probative value.10

10 We also note that CompuSonics’s technology, in the prior art, likewise
received industry praise. See, e.g., Ex. 4324 at 1–2 (“If the technology does
take hold, future applications could be dazzling. . . . Enough speculators
have been taken with these prospects to push Compusonics’[s] stock up
525% to a recent price of 12 1/2 cents.”); Ex. 4342 at 2 (“CompuSonics
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iv. Long-Felt Need
SightSound contends that there was a long-felt need in the art to
“instantaneously cue and arrange music selections as a form of digital ‘mix
tape.’” PO Resp. 77–78. As support, SightSound points to the
CompuSonics patent expressing a desire for an “efficient digital recording
and playback system,” and a CompuSonics publication stating that
CompuSonics’s video database computer permitted records (video/audio
segments) to be played back in any order. See Ex. 4323, col. 14, ll. 40–42;
Ex. 4319 at 1. The general statements in these references do not show that
there was a long-felt need for the ability to create digital “mix tapes” that the
’440 patent solved. Moreover, both were in the prior art, and to the extent
the references show any need at all, they suggest that the need would have
been met by CompuSonics’s devices. Thus, SightSound’s evidence of
long-felt need is not persuasive.

v. Conclusion
Based on all of the evidence of record, including evidence of
secondary considerations of nonobviousness submitted by SightSound, we
determine that claim 1 would have been obvious based on the CompuSonics
publications under 35 U.S.C. § 103(a).

5. Claims 64 and 95
Claims 64 and 95 recite limitations similar to those of claim 1. Apple
explains in detail in its Petition how the CompuSonics publications teach

made audio history recently when the company sponsored a telerecording
demonstration along with AT&T, which provides the high-speed lines.”).
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every limitation of claims 64 and 95, again relying on the testimony of
Dr. Kelly in support. See Pet. 42–64; Ex. 4334 ¶¶ 17–40, App. C at 1–16.
Apple’s analysis is persuasive.
The primary difference between claim 1 and claims 64 and 95 is that,
unlike claim 1, claims 64 and 95 expressly require that the digital video or
digital audio signals be stored in a “second party hard disk.” As explained
above, we interpret “second party hard disk” to mean a permanent, rigid,
magnetic storage device of the second party. See supra Section I.A.1.
SightSound argues that the CompuSonics publications only teach storing
digital video or digital audio signals on a floppy disk, not a hard disk, and
storing on a hard disk would not have been obvious to a person of ordinary
skill in the art. See PO Resp. 4, 24–31, 52–53, 57–64; Sur-Reply 7–13. We
have reviewed SightSound’s arguments but, based on the record before us,
do not find them persuasive.
The CompuSonics publications teach that a hard disk can be used for
storing digital video or digital audio signals. Exhibit 4324 discloses the use
of a hard disk in the DSP-2000 series devices for storing digital audio
signals. Ex. 4324 at 1 (“Music recorded digitally can be cued on a disk and
called up almost instantly, without all the rewinding necessary with tapes.
The professional model uses a hard disk, but next spring Compusonics plans
to launch a $1,200 digital recorder for the home that will make recordings on
a floppy disk.”). CompuSonics’s patent discloses the use of any type of data
storage medium, such as a floppy disk or hard disk, in the user’s device that
records and plays back digital video and digital audio signals. Ex. 4323, col.
14, ll. 31–40 (“The digital recording and playback system of the present
invention . . . utilizes a data storage medium . . . such as flexible or rigid
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magnetic disks, magneto-optical disks or optical disks.”). Exhibit 4319
similarly discloses a “home disk-based digital video decoder/recorder”:
The proposed music video distribution chain has three
principle components that depend on CSX [CompuSonics
compression technology] technology: a video database
computer, a broadcast digital encoder, and a home disk-based
digital video decoder/recorder. A consumer enjoying music
television who chooses to purchase his own digital copy calls
the distributor with his request. The distributor enables the
video database computer to access the consumer’s selection and
transfer the video/audio data to the broadcast digital encoder.
This encoder modulates the data onto a cable television
subcarrier or other transmission format. The home
decoder/recorder receives the digital video/audio data over the
cable link and copies it to disk.
Ex. 4319 at 2–3 (emphasis added).11 Given that the CompuSonics
publications generally describe using a hard disk (as well as a floppy disk)
for storing digital video or digital audio signals, the next question is whether
a person of ordinary skill in the art would have been led to use a hard disk to
store received digital video or digital audio signals, as recited in claims 64
and 95.
Similar to claim 1, a person of ordinary skill in the art would have had
reason to combine the teachings of the CompuSonics publications to achieve
the methods recited in claims 64 and 95, including the use of a hard disk.
The disclosed DSPs would store digital signals and communicate digital

11 We do not agree with SightSound’s argument that the teachings of
Exhibits 4319 and 4324 are irrelevant because the documents are directed
primarily to a “compression technique.” See PO Resp. 33; EWP Corp. v.
Reliance Universal Inc., 755 F.2d 898, 907 (Fed. Cir. 1985) (a prior art
“reference must be considered for everything it teaches by way of
technology and is not limited to the particular invention it is describing and
attempting to protect”).
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signals electronically over a telephone line in a known manner. A hard disk
in the DSP would function for its known purpose of storing digital data.
Thus, the CompuSonics publications describe prior art elements working
according to their established functions to achieve a predictable result, which
supports a conclusion of obviousness. See supra Section II.D.4.b; KSR, 550
U.S. at 417; see Tr. 55:1–13, 62:14–21 (acknowledging that hard disks were
“known in the art for storing data” and SightSound is “not disputing the fact
that the hard drive doesn’t or isn’t capable of storing the signal”). Also,
similar to our analysis above regarding claim 1, we do not see sufficient
reason why using a hard disk rather than a floppy disk would have achieved
an unexpected result or would have been uniquely challenging or otherwise
beyond the level of skill of an ordinarily skilled artisan, who would have
been aware of both types of storage at the time. See, e.g., Ex. 4301, col. 4,
ll. 34–38 (the ’440 patent stating that hard disk 60 was “already
commercially available”).
Further, one of the CompuSonics publications (Ex. 4324) would have
suggested to a person of ordinary skill in the art to use a hard disk, rather
than a floppy disk, to store digital video or digital audio signals due to the
greater storage capacity of a hard disk. Exhibit 4324 states:
CompuSonics, based in Denver, has invented a digital
machine that records music on ordinary magnetic disks.
. . .
The technological hurdle was finding a way to pack a lot
of music on a magnetic disk. When translated into computer
lingo, music is so data-intensive that one side of a typical
floppy could hold only about four or five seconds’ worth, and a
hard disk about 20 minutes. The patented CompuSonics
system uses a kind of electronic shorthand. A long note from a
flute, for example, or a few seconds of silence, becomes a
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computer symbol that takes up less room on a disk than the
whole stretch of sound or silence. CompuSonics has put an
hour of music on a hard disk and three minutes—which it hopes
to raise to 45—on one side of a floppy.
Ex. 4324 at 1 (emphasis added). Dr. Kelly also testifies as to the state of the
art and knowledge of a person of ordinary skill in the art at the time: “In
1988, a person of ordinary skill in the art would have also expected the
observed trend of increased capacity and lower prices for memory devices to
continue and would have expected improved memory devices to be
incorporated into consumer devices.” Ex. 4420 ¶ 6.
We also are not persuaded by SightSound’s argument that the
CompuSonics publications teach away from the use of a hard disk in
particular. See PO Resp. 4, 52, 60, 62. The “mere disclosure of more than
one alterative” does not constitute a teaching away from one of the
alternatives where the reference does not “criticize, discredit, or otherwise
discourage the solution claimed.” In re Fulton, 391 F.3d 1195, 1201 (Fed.
Cir. 2004). The CompuSonics publications teach the storage of digital video
or digital audio signals on multiple types of devices (e.g., floppy disk,
optical disk, hard disk), each with their own advantages and disadvantages.
The publications, however, do not criticize the use of a hard disk for storing
received signals or indicate that doing so would have been undesirable. To
the contrary, at least Exhibit 4324 discloses a benefit to using a hard disk
rather than other types of storage (i.e., greater storage capacity), as discussed
above. See Ex. 4324 at 1.
Finally, with respect to secondary considerations of non-obviousness,
SightSound’s arguments are the same for all of the challenged claims, and
the parties do not make any separate arguments regarding claims 64 and 95.
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See PO Resp. 64–78; Reply 10–15; Sur-Reply 14–15. The evidence and
arguments submitted by SightSound do not overcome the evidence of
obviousness. See supra Section II.D.4.c. Thus, based on the evidence of
record, we determine that claims 64 and 95 would have been obvious based
on the CompuSonics publications under 35 U.S.C. § 103(a).

E. Motions to Exclude
The party moving to exclude evidence bears the burden of proof to
establish that it is entitled to the relief requested—namely, that the material
sought to be excluded is inadmissible under the Federal Rules of Evidence.
See 37 C.F.R. §§ 42.20(c), 42.62(a). For the reasons discussed below,
Apple’s Motion to Exclude is denied, and SightSound’s Motion to Exclude
is denied-in-part and dismissed-in-part.

1. Apple’s Motion to Exclude
Apple moves to exclude Mr. Snell’s declaration (Ex. 2353) under
Federal Rule of Evidence 702. Pet. Mot. to Exclude 3. Federal Rule of
Evidence 702 provides:
A witness who is qualified as an expert by knowledge,
skill, experience, training, or education may testify in the form
of an opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand the evidence
or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and
methods; and
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(d) the expert has reliably applied the principles and
methods to the facts of the case.
Apple argues that Mr. Snell is not qualified to offer opinions on the alleged
commercial success of the iTMS, and does not provide a sufficient factual
“basis” for his opinions. Pet. Mot. to Exclude 3–5. For instance, Apple
contends that Mr. Snell applied an erroneous interpretation of “second
memory” in the claims, and gave opinions that contradict the prosecution
history of the application that issued as the parent ’573 patent. Id. at 12–15.
We have reviewed the cited portions of Mr. Snell’s testimony and see no
basis on which they would warrant the extreme remedy of exclusion.
Apple’s arguments indicate a mere disagreement with Mr. Snell’s testimony
and pertain to the weight to be given to that testimony, which we are able to
assess without excluding it, as explained above. Apple’s Motion to Exclude
is denied.

2. SightSound’s Motion to Exclude
Mr. Robbin’s Declaration (Ex. 4413): SightSound argues that two
statements in the declaration should be excluded because Mr. Robbin lacks
sufficient personal knowledge to make them: (1) Mr. Robbin’s statement in
paragraph 9 that the idea of selling music and video files over computer
networks was “prevalent in the industry since the mid-1980s,” and
(2) Mr. Robbin’s statement in paragraph 7 that the iTMS embodies
numerous inventions, many the subject of Apple’s own patents. PO Mot. to
Exclude 1–3.
With respect to the first statement, although we rely on other
statements by Mr. Robbin in paragraph 9 pertaining to his knowledge of the
development of the iTMS, we do not rely on his statement regarding what
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allegedly was prevalent in the industry. SightSound’s request to exclude
that statement, therefore, is dismissed as moot.
With respect to the second statement, SightSound argues that the
material should be excluded under Federal Rules of Evidence 602, 701, 702,
703, 704, or 705, but does not provide specific analysis directed to any of
those rules or case law support explaining why the material is inadmissible.
See id. Moreover, we are not persuaded that Mr. Robbin, as an Apple
employee, one of the leaders of the iTMS development team, and a named
inventor on the identified patents, lacks sufficient personal knowledge to
testify regarding the matters in paragraph 7. See Ex. 4413 ¶¶ 1, 6; Pet.
Exclude Opp. 2–4. SightSound’s request to exclude Mr. Robbin’s statement
in paragraph 7, therefore, is denied.
Mr. Weyer’s Declaration (Ex. 4416): SightSound argues that
Mr. Weyer’s statement that “[i]f we had been impressed with the technology
offered by [SightSound], Apple would have followed up with additional
meetings,” should be excluded under Federal Rules of Evidence 402, 403,
601, or 602 as speculative and not based on sufficient personal knowledge.
PO Mot. to Exclude 3–4. Mr. Weyer was an Apple employee and explains
in his declaration what he did in connection with the 1999 meeting and what
he did at the company in general; we are not persuaded that he lacks
sufficient personal knowledge to testify on the matter. See Ex. 4416 ¶¶ 1–9;
Pet. Exclude Opp. 4–5. Further, his testimony is corroborated by the
testimony of Mr. Robbin and Mr. Mazzoni. See Ex. 4413 ¶ 8; Ex. 4415
¶¶ 2–3; Pet. Exclude Opp. 5. SightSound’s request is denied.
Two Patents (Exs. 4410, 4411): SightSound moves to exclude two
patents cited by Apple in its Reply. PO Mot. to Exclude 4. As we do not
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rely on the materials for our decision, SightSound’s request to exclude them
is dismissed as moot.
Mr. Kenswil’s Declaration (Ex. 4414) and Dr. Kelly’s Declaration
(Ex. 4420): SightSound argues that Mr. Kenswil’s opinions on technology
in the 1980s/1990s, alleged reasons for commercial success of the iTMS,
SightSound’s business operations, and other issues should be excluded
because Mr. Kenswil “lacks the requisite expertise for his testimony and his
declaration lacks ‘sufficient facts or data’ to support his opinions.” PO Mot.
to Exclude 5–11. Similarly, SightSound contends that Dr. Kelly’s opinions
regarding the iTMS and CompuSonics are conclusory and unsupported, and
ignore contrary evidence, such as an expert report on infringement from the
related litigation between the parties and Mr. Stautner’s declaration. Id. at
11–15. SightSound cites numerous bases for excluding the declarations,
including Federal Rules of Evidence 402, 403, 602, 603, 701, 702, 703, 704,
705, 801, 802, and 901. Id. at 5–15.
We have reviewed SightSound’s arguments and Apple’s responses,
and are not persuaded that the declarations should be excluded. See id.; Pet.
Exclude Opp. 6–15; PO Exclude Reply 3–5. SightSound does not explain
sufficiently why the declarations would be inadmissible under any of the
cited rules—as opposed to being merely incorrect or insufficiently supported
in SightSound’s view. SightSound’s arguments pertain more to the merits of
the parties’ arguments and the weight to be given to the opposing declarants
than to any issue of admissibility. Just as we are able to assess Mr. Snell’s
testimony and assign it the appropriate weight, we are able to do so for the
testimony of Mr. Kenswil and Dr. Kelly. Also, with respect to SightSound’s
argument that numerous documents cited by Mr. Kenswil and Dr. Kelly are
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hearsay, SightSound does not identify specifically the textual portions of the
documents that allegedly are being offered for the truth of the matter
asserted, or provide sufficient explanation for why the material would be
inadmissible. PO Mot. to Exclude 9–12, 14. We also are not persuaded by
SightSound’s assertion that the documents “are not the types of facts or data
typically relied upon by experts” in forming their opinions under Federal
Rule of Evidence 703, particularly when Mr. Snell relied on similar
materials for his opinions. See id. at 9; Pet. Exclude Opp. 9–11 & n.3.
SightSound’s request is denied.
Other Patents (Exs. 4421–4459): SightSound argues that various
patents submitted by Apple as allegedly embodied by the iTMS are
inadmissible under 37 C.F.R. § 42.61(c). PO Mot. to Exclude 15. We
disagree, as Apple offers the patents only to prove what the patents
“describe[],” not for the “truth of the data” under 37 C.F.R. § 42.61(c).
SightSound also asserts that the patents should be excluded under Federal
Rules of Evidence 402 or 403 because Apple does not provide sufficient
evidence establishing that the patents are embodied by the iTMS. Id. We
disagree, and are able to assign all of the materials and testimony of record
on commercial success the appropriate weight, as explained above. See
supra Section II.D.4.c.i. SightSound’s request is denied.

F. Motion for Observation
SightSound’s observations are directed to the cross-examination
testimony of Mr. Mazzoni (Ex. 2373), Mr. Weyer (Ex. 2374), Mr. Kenswil
(Ex. 2375), Dr. Kelly (Ex. 2376), and Mr. Robbin (Ex. 2377), who were
cross-examined after Apple filed its Reply. We have considered
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SightSound’s observations and Apple’s responses in rendering our decision,
and have accorded the testimony the appropriate weight as explained above.
See Obs. 1–15; Obs. Resp. 1–15.

G. Motion to Seal
On November 22, 2013, Apple filed an opposition (Paper 33) to
SightSound’s motion for additional discovery in this proceeding, and filed
with the opposition a declaration from an Apple employee, Arthur Rangel
(Ex. 4356). Apple filed the declaration in the Patent Review Processing
System (PRPS) as “Parties and Board Only,” but did not file a motion to seal
or otherwise alert the Board that it requested the material to be sealed. After
being contacted by Board administrative staff regarding the error, Apple
filed a Motion to Seal and a redacted, public version of the declaration
(Ex. 4473). In its Motion, Apple argues that the redacted material contains
confidential “information regarding the type and nature of customer
information and feedback gathered by Apple relating to Apple products and
services in the course of its competitive business operations,” and
“additional analysis of customer information and feedback, such as
marketing studies conducted with gathered data and the design of Apple
surveys,” the disclosure of which “would be beneficial to Apple’s
competitors and harmful to Apple.” Mot. to Seal 2–3. SightSound did not
file an opposition to Apple’s Motion to Seal.
There is a strong public policy in favor of making information filed in
a covered business method patent review open to the public, especially
because the proceeding determines the patentability of claims in an issued
patent and, therefore, affects the rights of the public. Under 35 U.S.C.
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§ 326(a)(1) and 37 C.F.R. § 42.14, the default rule is that all papers filed in a
covered business method patent review are open and available for access by
the public; a party, however, may file a concurrent motion to seal and the
information at issue is sealed pending the outcome of the motion. It is,
however, only “confidential information” that is protected from disclosure.
35 U.S.C. § 326(a)(7); see Trial Practice Guide, 77 Fed. Reg. at 48,760. The
standard for granting a motion to seal is “for good cause.” 37 C.F.R.
§ 42.54(a). The party moving to seal bears the burden of proof in showing
entitlement to the requested relief, and must explain why the information
sought to be sealed constitutes confidential information. 37 C.F.R.
§ 42.20(c).
We have reviewed the redacted material in Mr. Rangel’s declaration,
and are persuaded that good cause exists to have it remain under seal. The
redacted portions contain confidential information pertaining to Apple’s
business, and are narrowly tailored to redact only confidential information.
We also note that the decision on SightSound’s motion for additional
discovery cited material from the declaration that is not redacted, and we do
not rely on the declaration in this decision. See Paper 36 at 8; Ex. 4473 ¶ 9.
The declaration will be maintained under seal under the terms of the
protective order entered in this proceeding. See Ex. 4468; Paper 88 at 8.

III. ORDER
Apple has not demonstrated, by a preponderance of the evidence, that
claims 1, 64, and 95 of the ’440 patent are anticipated by the CompuSonics
system under 35 U.S.C. § 102(a), but has demonstrated, by a preponderance
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of the evidence, that the claims are unpatentable over the CompuSonics
publications under 35 U.S.C. § 103(a).
In consideration of the foregoing, it is hereby:
ORDERED that claims 1, 64, and 95 of the ’440 patent have been
shown to be unpatentable;
FURTHER ORDERED that Apple’s Motion to Exclude (Paper 67) is
denied;
FURTHER ORDERED that SightSound’s Motion to Exclude (Paper
64) is denied-in-part and dismissed-in-part; and
FURTHER ORDERED that Apple’s Motion to Seal (Paper 98) is
granted, and the declaration of Arthur Rangel (Ex. 4473, redacted; Ex. 4356,
unredacted) will be kept under seal under the terms of the protective order
entered in this proceeding (Ex. 4468).
This is a final decision. Parties to the proceeding seeking judicial
review of the decision must comply with the notice and service requirements
of 37 C.F.R. § 90.2.
Certain material has been sealed in this proceeding, but has not been
relied upon in this final written decision. See supra Section II.G. The
record will be maintained undisturbed pending the outcome of any appeal
taken from this decision. At the conclusion of any appeal proceeding, or if
no appeal is taken, the materials will be made public. See Trial Practice
Guide, 77 Fed. Reg. at 48,760–61. Further, either party may file a motion to
expunge the sealed materials from the record pursuant to 37 C.F.R. § 42.56.
Any such motion will be decided after the conclusion of any appeal
proceeding or the expiration of the time period for appealing.
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PETITIONER:

J. Steven Baughman
Ching-Lee Fukuda
James R. Batchelder
ROPES & GRAY LLP
steven.baughman@ropesgray.com
ching-lee.fukuda@ropesgray.com
james.batchelder@ropesgray.com

PATENT OWNER:

David R. Marsh
Kristan L. Lansbery
Jennifer A. Sklenar
ARNOLD & PORTER LLP
david.marsh@aporter.com
kristan.lansbery@aporter.com
jennifer.sklenar@aporter.com