Apple Inc.v.Smartflash LLC

Patent Trial and Appeal Board

Sep 25, 2015

12943872 (P.T.A.B. Sep. 25, 2015)

Trials@uspto.gov Paper 52
Tel: 571-272-7822 Entered: September 25, 2015

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

APPLE INC.,
Petitioner,
v.
SMARTFLASH LLC,
Patent Owner.

Case CBM2014-00102
1

Patent 8,118,221 B2

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

BISK, Administrative Patent Judge.

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

1
Case CBM2014-00103 has been consolidated with this proceeding.
CBM2014-00102
Patent 8,118,221 B2
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I. INTRODUCTION
A. Background
Apple Inc., Petitioner, filed two Petitions to institute covered business
method patent review of claims 1, 2, 11–14, and 32 (“the challenged
claims”) of U.S. Patent No. 8,118,221 B2 (Ex. 1001, “the ’221 patent”)
pursuant to § 18 of the Leahy-Smith America Invents Act. CBM2014-
00102 (Paper 2, “102 Pet.”) and CBM2014-00103 (Paper 2, “103 Pet.”).
2

On September 30, 2014, we consolidated CBM2014-00102 and
CBM2014-00103 and instituted a transitional covered business method
patent review (Paper 8, “Decision to Institute” or “Dec.”) based upon
Petitioner’s assertion that claims 1, 2, and 11–14 are unpatentable based on
the following grounds:
Reference[s]
3
Basis Claims Challenged
Stefik ’235
4
and Stefik ’980
5
§ 103(a) 1, 11, and 12
Stefik ’235, Stefik ’980, and Poggio
6
§ 103(a) 2, 13, and 14
Ginter
7
§ 103(a) 1, 2, and 11–14

2
Unless otherwise specified, paper numbers refer to paper numbers in
CBM2014-00102.
3
Exhibits with numbers 1001–1035 were filed in CBM2014-00102 and
those with numbers 1101–1129 were filed in CBM2014-00103. For
purposes of this decision, where the two cases have duplicate exhibits, we
refer to the exhibit filed in CBM2014-00102.
4
U.S. Patent No. 5,530,235 (Ex. 1013, “Stefik ’235”).
5
U.S. Patent No. 5,629,980 (Ex. 1014, “Stefik ’980”).
6
European Patent Application, Publication No. EP 0809221 A2 (Ex. 1016,
“Poggio”).
7
U.S. Patent No. 5,915,019 (Ex. 1015, “Ginter”).
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Dec. 24. Petitioner provides declarations from Anthony J. Wechselberger
(102 Pet., Ex. 1021; 103 Pet., Ex. 1121) and Patent Owner provides a
declaration from Dr. Jonathan Katz (Ex. 2028).
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 Petitioner has shown by a
preponderance of the evidence that claims 1, 2, and 11–14 of the ’221 patent
are unpatentable.
B. The ’221 Patent
The ’221 patent relates to “a portable data carrier for storing and
paying for data and to computer systems for providing access to data to be
stored” and the “corresponding methods and computer programs.”
Ex. 1001, 1:21–25. Owners of proprietary data, especially audio recordings,
have an urgent need to address the prevalence of “data pirates” who make
proprietary data available over the internet without authorization. Id. at
1:29–56. The ’221 patent describes providing portable data storage together
with a means for conditioning access to that data upon validated payment.
Id. at 1:59–2:11. This combination allows data owners to make their data
available over the internet without fear of data pirates. Id. at 2:11–15.
As described, the portable data storage device is connected to a
terminal for internet access. Id. at 1:59–67. The terminal reads payment
information, validates that information, and downloads data into the portable
storage device from a data supplier. Id. The data on the portable storage
device can be retrieved and output from a mobile device. Id. at 2:1–4. The
’221 patent makes clear that the actual implementation of these components
is not critical and may be implemented in many ways. See, e.g., id. at
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25:41–44 (“The skilled person will understand that many variants to the
system are possible and the invention is not limited to the described
embodiments.”).
C. Related Matters
The parties indicate that Smartflash has sued Apple for infringement
of the ’221 patent and identify the following district court case: Smartflash
LLC v. Apple Inc., Case No. 6:13-cv-447 (E.D. Tex.). See, e.g., 102 Pet. 20;
Paper 5, 2. Patent Owner indicates that the ’221 patent and other patents in
the same patent family are the subject of a several other district court cases.
Paper 36, 3–4.
In addition to the 102 and 103 Petitions, Apple and several other
Petitioners have filed numerous other Petitions for covered business method
patent review challenging claims of the ’221 patent and other patents owned
by Smartflash that disclose similar subject matter.
D. The Instituted Claims
As noted above, we instituted review of claims 1, 2, and 11–14. Of
those, claims 1 and 12 are independent. Claims 2 and 11 depend from claim
1 and claims 13 and 14 depend either directly or indirectly from claim 12.
Claims 1 and 12 are illustrative of the claims at issue and recite the
following:
1. A data access terminal for retrieving data from a data
supplier and providing the retrieved data to a data carrier, the
terminal comprising:
a first interface for communicating with the data supplier;
a data carrier interface for interfacing with the data
carrier;
a program store storing code implementable by a
processor; and
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a processor, coupled to the first interface, to the data carrier
interface and to the program store for implementing the
stored code, the code comprising:
code to read payment data from the data carrier and to
forward the payment data to a payment validation
system;
code to receive payment validation data from the
payment validation system;
code responsive to the payment validation data to retrieve
data from the data supplier and to write the retrieved
data into the data carrier.
Ex. 1001, 25:45–61.
12. A method of providing data from a data supplier to a data
carrier, the method comprising:
reading payment data from the data carrier;
forwarding the payment data to a payment validation
system;
retrieving data from the data supplier; and
writing the retrieved data into the date [sic] carrier.
Id. at 26:42–48.

II. ANALYSIS
A. Wechselberger Declarations
In its Preliminary Response, Patent Owner argued that we should
disregard Mr. Wechselberger’s testimony, but we determined that Patent
Owner did not offer any evidence that Mr. Wechselberger “used incorrect
criteria, failed to consider evidence, or is not an expert in the appropriate
field.” Dec. 4 n.8. Patent Owner renews this contention, arguing in its
Response that both declarations by Mr. Wechselberger (Ex. 1021; Ex. 1121)
should be given little or no weight because they do not state the evidentiary
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standard that he used in arriving at his conclusions and, therefore, he “used
incorrect criteria.” Paper 26 (“PO Resp.”) 4–7. In addition, referring to
excerpts from Mr. Wechselberger’s deposition, Patent Owner contends that
Mr. Wechselberger “could neither articulate what the difference was
between ‘substantial evidence’ and ‘preponderance of the evidence,’ nor
could he articulate which standard he was supposed to use when alleging
invalidity of claims in a patent.” Id. at 5. Thus, according to Patent Owner,
should we afford any weight to Mr. Wechselberger’s testimony, we would
be accepting his opinion without knowing “‘the underlying facts . . . on
which the opinion is based’ (i.e., how much evidence he thinks show any of
his opinions discussed therein).” Id. at 7.
In its Reply, Petitioner argues that “Mr. Wechselberger is a highly-
qualified expert,” that Patent Owner offers no evidence disputing that he is a
qualified expert, and that an expert is not required to recite or apply the
“preponderance of evidence” standard expressly in order for the expert
testimony to be accorded weight.” Paper 34 (“Reply”), 24–25.
Patent Owner has not articulated a persuasive reason for giving Mr.
Wechselberger’s declarations, as a whole, little or no weight in our analysis.
Patent Owner has not cited any authority requiring an expert to recite or
apply the “preponderance of the evidence” standard in order for the expert
opinion to be accorded weight. Under 37 C.F.R. § 42.1(d), we apply the
preponderance of the evidence standard in determining whether Petitioner
has established unpatentability. In doing so, it is within our discretion to
determine the appropriate weight to be accorded the evidence presented,
including expert opinion, based on the disclosure of the underlying facts or
data upon which that opinion is based. Thus, we decline to make a
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determination about Mr. Wechselberger’s opinion, as a whole. Rather, in
our analysis we will consider, as it arises, relevant portions of Mr.
Wechselberger’s testimony and determine the appropriate weight to accord
that particular testimony.
B. Katz Declaration
Petitioner contends that “Dr. Katz’s unsupported opinions, to the
extent they are given any weight at all, should be given far less weight than
Mr. Wechselberger’s.” Reply 20. Specifically, Petitioner argues that Dr.
Katz is not qualified as a person of ordinary skill in the art under either
party’s definition, he repeatedly stated that “he was ‘not sure’ about various
technologies that are indisputably in the relevant prior art, and that he does
not know what a POSITA would have understood about that technology,”
and he repeatedly stated that “he was ‘not sure’ how a POSITA would
interpret several passages of the cited prior art and several passages of the
challenged patent[].” Id. at 20–22. Thus, according to Petitioner, “Dr. Katz
(a) does not know this information and is therefore not a qualified expert;
and/or (b) did not properly consider the scope and content of the prior art or
a POSITA’s understanding of the prior art.” Id. at 24.
We decline to make a determination as to Dr. Katz’s testimony, as a
whole. As noted above, we have the discretion to determine the appropriate
weight to be accorded to the evidence presented, including expert opinion,
based on the disclosure of the underlying facts or data upon which the
opinion is based. Thus, as with Mr. Wechselberger’s opinion, in our
analysis we will consider relevant portions of Dr. Katz’s testimony as it
arises and determine the appropriate weight to accord that particular
testimony.
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C. Claim Construction
We construe all terms, whether or not expressly discussed here, using
the broadest reasonable construction in light of the ’221 patent specification.
37 C.F.R. § 42.300(b). Applying that standard, we interpret the claim terms
of the ’221 patent according to their ordinary and customary meaning in the
context of the ’221 patent’s written description. See In re Translogic Tech.,
Inc., 504 F.3d 1249, 1257 (Fed. Cir. 2007). For purposes of this decision,
we construe the term “payment data.”
Petitioner asserts that “[f]or review purposes, [payment data] is
construed to mean ‘data representing payment made for requested content
data’ and is distinct from ‘access control data.’” 102 Pet. 22; 103 Pet. 24
(emphasis added). Patent Owner disagrees, arguing that the term “payment
data” should be interpreted to mean “data that can be used to make payment
for content.” PO Resp. 8 (emphasis added).
Although Petitioner and Patent Owner disagree on the proper broadest
reasonable construction of the term “payment data,” their proposed
constructions are similar in that they both incorporate an element of timing.
The main dispute between the parties relates to this timing element.
Specifically, the parties’ proposed constructions differ in how “payment
data” relates to the actual payment operation. Petitioner asserts that the
claimed “payment data” “encompasses data relating to either current or past
payment.” Reply 3–4. Patent Owner, on the other hand, argues that the
’221 payment discloses that payment data exists prior to the payment
operation. PO Resp. 8.
We are persuaded that the broadest reasonable interpretation of the
term “payment data,” encompasses both Petitioner’s and Patent Owner’s
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definitions of the term—it encompasses data relating to future, current, and
past payments. In other words, we are persuaded that the ’221 patent does
not incorporate an element of timing into the definition of payment data.
First, the plain and ordinary meaning of the two words that make up the
term—“payment” and “data”—do not incorporate any notion of time and
nothing about their combination changes that determination.
Second, we agree with both parties that language in the ’221 patent
supports “payment data” representing data existing prior to, concurrent with,
and after payment of the requested content. For example, the ’221 patent
states that “payment data for making a payment to the system owner is
received from the smart Flash card by the content access terminal and
forwarded to an e-payment system.” Ex. 1001, 20:59–62. We agree with
Patent Owner that this language indicates that payment data exists prior to
the payment being made for the requested content. See PO Resp. 8.
Petitioner does not address this language. See Reply 3–5. In addition, we
agree with Petitioner that the language in the ’221 patent, “payment data
received may either be data relating to an actual payment made to the data
supplier, or it may be a record of a payment made to an e-payment system,”
(Ex. 1001, 6:60–63) clearly shows that “payment data” includes data for
payments that have already been made. See Reply 3–5.
Moreover, the plain and ordinary meaning of data does not allow for a
change in the character of that data based on when it is used in a transaction.
For example, a credit card number may qualify as “data relating to payment”
before that credit card number is processed, while the credit card number is
being processed, and after the credit card number is processed. Thus,
without an express description to the contrary, we presume that “payment
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data” retains the same meaning before, during, and after the payment
operation. Neither party points to persuasive evidence of any such contrary
description.
In fact, the ’221 patent broadly describes “payment data” in several
places as “comprising data relating to payment for the requested data item.”
Ex. 1001, 6:51–53, 10:26–30, 10:39–41, 10:44–46. This is consistent with
the plain meaning of the term. Thus, we are persuaded that the broadest
reasonable interpretation of “payment data” in light of the specification of
the ’221 patent is “data relating to payment for the requested data item.”
D. Obviousness Over Stefik ’235 and Stefik ’9808
1. Overview of Stefik ’980
Stefik ’980 teaches a system for controlling use and distribution of
digital works by attaching “usage rights” to the work and storing it in a
“secure repository.” Ex. 1014, 3:51–61. Each repository allows for secure
and trusted communications and “has two primary operating modes, a server
mode and a requester mode.” Id. at 4:9–10, 7:41–43. In server mode, a
repository receives access requests for digital works and responds to those
requests by examining the work’s usage rights. Id. at 4:10–24, 7:46–48. In
requester mode, a repository requests access to a digital work from another
repository. Id. at 4:10–13, 7:48–49. Stefik ’980 discloses that “a repository

8
Petitioner refers to Stefik ’235 and Stefik ’980, collectively, as “Stefik.”
Pet. 27. Petitioner contends that “[b]ecause Stefik ’235 incorporates Stefik
’980 by reference, they should be considered a single reference,” and
additionally provides rationale for the combination the combination of the
teachings of Stefik ’235 and Stefik ’980. 102 Pet. 26 n.13. In its Response,
Patent Owner does not dispute Petitioner’s contentions regarding “Stefik”
being a single reference, or Petitioner’s rationale for combining the
teachings of Stefik ’235 and Stefik ’980. See PO Resp. 10–22.
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may be embedded in some other device,” for example, “a ‘card’ that is
inserted into an available slot in a computer system.” Id. at 16:54–58.
Figure 12 of Stefik ’980 is reproduced below.

Figure 12 is a block diagram of the hardware components of a repository.
Id. at 5:4–6. The components include processing means 1200, clock 1205,
external interface 1206, and storage system 1207. Id. at 14:11–13.
Processing means 1200 is comprised of processor element 1201, which may
be a microprocessor or other suitable computing component, and processor
memory 1202, which typically contains the software instructions used by
processor element 1201 in performing the functions of the repository. Id. at
14:13–27.
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Figure 1 of Stefik ’980 is reproduced below.

Figure 1 is a flowchart demonstrating the basic operation of the system
disclosed by Stefik ’980. Id. at 4:38–40, 7:6–8. First, in step 101, a digital
work is created and, in step 102, its creator attaches the appropriate usage
rights and fees to the work and stores it in a first repository—Repository 1
(i.e., a supplying repository). Id. at 7:8–11. Later, in step 103, a second
repository—Repository 2—operating in requester mode (i.e., a requesting
repository), requests access to the stored digital work by initiating a session
with Repository 1 and includes with its request, a stated purpose for the
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digital work corresponding to a specific usage right—step 104. Id. at 7:11–
24. In step 105, Repository 1, operating in server mode, checks the usage
rights associated with the requested digital work to determine if access may
be granted to Repository 2. Id. at 7:24–29. If access is denied, Repository 1
terminates the session with an error message—step 106. Id. at 7:29–31. If
access is granted, Repository 1 transmits the digital work to Repository 2—
step 107—followed by each of Repository 1 and 2 generating billing
information to transmit to a credit server—step 108. Id. at 7:31–37.
2. Overview of Stefik ’235
Stefik ’235 teaches a portable Document Card (“DocuCard”) for
storing information in a digital form, storing usage rights for that
information, processing user-initiated functions and requests to access the
stored information, interfacing to external devices for reading and writing
digital information, and allowing a user to directly interact with the
DocuCard. Ex. 1013, 2:29–40, 7:35–42.
As noted above, the repositories described in Stefik ’980 may be
embedded in a card. Ex. 1014, 16:54–58. In fact, Stefik ’235 discloses that
“[t]he currently preferred embodiment of a DocuCard is an instance of a
repository, as defined in [Stefik ’980].” Ex. 1013, 2:47–53. Stefik ’235,
thus, states that the “user interface of the present invention enables a user to
interact with a DocuCard to manage the contents contained therein, as well
as to obtain Documents stored in other repositories” and describes the
“general steps for accessing a document stored in another repository.” Id. at
2:53–67.
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Figure 3 of Stefik ’235 is reproduced below.

Figure 3 is a “flowchart describing the interaction between a DocuCard anti
a repository in the course of accessing a document stored in the repository.”
Ex. 1013, 6:45–47. The establishment of an electrical connection between
the DocuCard and repository triggers automatic registration process 301, by
which the two establish a secure and trusted session. Id. at 6:47–59.
Following registration, login transaction 302 is performed by a user,
typically by entering a Personal Identification Number (PIN). Id. at 6:60–
65. Step 302 “may also activate credit accounts.” Id. Next, in step 303, the
user “uses the user interface to assign payment of any fees associated with
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the transaction to be executed” and “the acceptance of fees by the repository
may be a prerequisite to the continuation of the process.” Id.at 6:66–7:4.
The following steps, 304–307, allow the user of the DocuCard to select
documents and functions from the repository. Id. at 7:5–16.
3. Claims 1, 11, and 12
Petitioner asserts that claims 1, 11, and 12 would have been obvious
over the combination of Stefik ’235 and Stefik ’980. 102 Pet. 40–69.
Specifically, Petitioner asserts that Stefik ’980 describes a system of
multiple repositories, acting in different capacities, which are in
communication and transporting data amongst each other. 102 Pet. 41
(citing Ex. 1014, Abstract, Figs. 1–4b, 13:43–46). Pointing to Figure 2 of
Stefik ’980, Petitioner asserts that a repository may act as an exchange
medium for digital works—the claimed data access terminal—with one
repository acting as a data supplier and another repository acting as a data
carrier. Id. at 41–42. Petitioner relies on Stefik ’235 for its disclosure that
the portable device called a DocuCard is a type of repository. See, e.g., id. at
26 n.13.
In the Decision to Institute, we determined that Petitioner had shown a
likelihood of prevailing on this proposed ground of unpatentability. Dec. 15.
In particular, we determined that Petitioner was more likely than not to
prevail on its assertions that the combination of Stefik ’235 and Stefik ’980
disclosed every limitation of claims 1, 11, and 12. Id. We also found
reasonable Petitioner’s asserted rationale that a person of ordinary skill
would have combined the teachings of Stefik ’235 and Stefik ’980 based on
the explicit teachings in both references. Id. (citing Ex. 1013, 2:47–52;
Ex. 1014, 16:56–58; Ex. 1021 ¶ 56).
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We have reviewed Petitioner’s obviousness arguments and supporting
evidence, including the disclosure of both Stefik references and the detailed
claim chart appearing on pages 41–69 of the Petition. Despite the counter-
arguments in Patent Owner’s Response, and the evidence cited therein,
which we also have considered, for the reasons discussed below, Petitioner
has shown, by a preponderance of the evidence, that each of claims 1, 11,
and 12 is unpatentable under 35 U.S.C. § 103 as having been obvious over
the combination of Stefik ’235 and Stefik ’980.
a. “data carrier”
Rather than challenging the merits of Petitioner’s theory of
obviousness based on the disclosures of the prior art references, Patent
Owner takes the position that the Petition is flawed because it “is
inconsistent with regard to those elements of Stefik that it alleges correspond
to the ‘data carrier’ of the ’221 patent.” PO Resp. 11, 17.
We are not persuaded that Petitioner’s position as to which component
of Stefik teaches the claimed “data carrier” is unclear such that it has not
shown by a preponderance of the evidence that claims 1, 11, and 12 would
have been obvious over the combination of Stefik ’235 and Stefik ’980.
Petitioner replies that Stefik ’980 discloses multiple embodiments and
argues that the Petition explains that several of those embodiments would
have made the claimed subject matter obvious to a person of ordinary skill in
the art. 102 Pet. 44 n.14; Reply 10. We agree that the Petition sufficiently
describes how at least one embodiment described by Stefik ’980 teaches the
claimed “data carrier.”
For example, Petitioner explains that it would have been obvious to a
person of ordinary skill in the art to implement the operation described by
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Figure 1 of Stefik ’980 using the hardware components described by Figure
12 of Stefik ’980. 102 Pet. 42; Reply 10 (citing Ex. 1021, (App’x D) 61–
62). Specifically, the Petition maps processing means 1200, depicted in
Stefik ’980’s Figure 12, used in Repository 2, depicted in Stefik ’980’s
Figure 1 (the requesting repository), to the claimed “data access terminal,”
which, as taught by Stefik ’235, may be implemented using a DocuCard.
Reply 10 (citing 102 Pet. 42–45); see also, Pet. 44 n.14. The Petition further
maps Stefik ’980’s storage system 1207, depicted in Stefik ’980’s Figure 12,
used in Repository 2, depicted in Stefik ’980’s Figure 1, to the claimed “data
carrier.” Id. In this example, content is retrieved from Repository 1 (the
supplying repository). Id.
We agree with Petitioner that the Petition is sufficiently clear in
explaining, and shows by a preponderance of the evidence, that a person of
skill in the art would understand that the storage system of a repository
operating in requesting mode discloses the claimed data carrier and that any
such repository could be embedded in a removable card, such as the
DocuCard described by Stefik ’235. 102 Pet. 42–45; Ex. 1021, (App’x D)
61–65.
9

b. “payment data”
Patent Owner argues that the Petition “does not prove how the alleged
‘payment data’ is being transferred.” PO Resp. 13. Patent Owner asserts
that the Petition does not specify “which DocuCard is being read from and
which is allegedly acting as a data carrier” nor does it identify “what the
‘transaction identifiers, identifiers for repositories involved in the

9
In this decision, when referring to Appendix D of Exhibit 1021, page
numbers correspond to the numbers in the bottom, center of each page.
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transaction, and lists of charges for the transaction’ allegedly are such that
one can verify that that [sic] they really are being read from the same data
carrier as the ‘retrieved data’ is eventually written.” Id. at 13–14 (citing 102
Pet. 54; Ex. 2028 ¶ 21). Patent Owner then identifies various alleged
deficiencies in the Petition including that: (1) the Petition cites to, but
doesn’t explain the relevance of “various ‘logging in’ steps” (id. at 14 (citing
102 Pet. 55–56)); (2) the Petition doesn’t clearly define what it means to
“activate credit accounts” (id. (citing 102 Pet. 56)); (3) “how that the bank
account information is allegedly used is unclear” (id. at 15 (citing 102 Pet.
54); (4) fee information is not known in step 303 of Figure 3 “because no
document or function has yet been selected that might incur a fee” (id. at 14–
15); and (5) Stefik’s embodiment with the credit server acting as a debit card
“is not discussing ‘real-time’ transactions” and instead is discussing post-
usage processing (id. at 15–16 (citing 102 Pet. 45, 76–77)).
We are not persuaded that any of Patent Owner’s alleged
“deficiencies” in the Petition make Petitioner’s position unclear such that it
has not shown by a preponderance of the evidence that claims 1, 11, and 12
would have been obvious over the combination of Stefik ’235 and Stefik
’980. First, it is clear from the disclosure of Stefik ’235 that logging steps,
activating credit accounts, and using bank account information are simply a
part of a payment processing and validation scheme used by a particular
embodiment of Stefik’s disclosed system. See, e.g., Ex. 1013 6:60–7:4;
Ex. 1014, 29:58–30:36.
Second, although Patent Owner does not explain the relevance of its
arguments that “fee information is not known is step 303 of Figure 3,” or
that “Stefik’s embodiment with the credit server acting as a ‘debit card’ is
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not discussing ‘real-time’ transactions,” we presume these arguments refer
to Patent Owner’s proposed construction of “payment data,” which would
limit that term to data existing prior to the payment operation. See, e.g.,
Paper 51 (“Tr.”), 77:10–78:14 (Patent Owner discussing Stefik’s teaching of
“payment data” at the hearing in virtually the same context in the IPR2015-
00112 and conceding that if we do not adopt its construction of “payment
data” proceeding and instead adopt Petitioner’s construction, it has no
remaining argument as to why Stefik does not teach “payment data.”). As
explained above, we do not adopt this limited construction, but instead
construe “payment data” as “data relating to payment for the requested data
item.” Using this construction, we are not persuaded that Patent Owner’s
arguments related to the timing of “payment data” in relation to the actual
payment operation are relevant.
More importantly, Patent Owner does not persuasively address the
ultimate issue here. The relevant inquiry is whether the transfer of payment
data, as claimed, would have been obvious to those of ordinary skill in the
art in light of the combined teachings of Stefik ’235 and Stefik ’980. See
Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1162 (Fed. Cir.
2007). Petitioner asserts that a person of ordinary skill in the art would have
understood the Stefik references to teach the acceptance of fees and
payments for digital works and, to support this assertion, points to the
express disclosure that “billing transactions were well understood in the state
of the art.” 102 Pet. 54–55 n.26; Ex. 1014, 29:61–64; see also Ex. 1021,
(App’x D) 79–82. Indeed, Patent Owner’s expert, Dr. Katz, acknowledged
that a person of ordinary skill would have understood the basics of payment
validation. See, e.g., Ex. 1031, 16:15–27:9. Patent Owner does not point to
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anything in the claim language indicating that such basic payment
processing and validation is outside the scope of the claims. Thus, we are
persuaded that a person of ordinary skill would find the Stefik references
sufficiently teach payment processing and validation such that the claimed
subject matter relating to transferring payment data would have been
obvious.
4. Conclusion
We conclude that Petitioner has shown by a preponderance of the
evidence that claims 1, 11, and 12 of the ’221 Patent would have been
obvious over Stefik ’235 and Stefik ’980.
E. Obviousness Over Stefik ’235, Stefik ’980, and Poggio
Petitioner asserts that claims 2, 13, and 14 would have been obvious
over the Stefik references combined with Poggio. 102 Pet. 73–79.
Petitioner asserts that “Poggio teaches that facilitating the content
transactions can advantageously be done with minimal action from the
vendor, and payment validation processes that are automatically executed
from stored code, as taught by Poggio, would contribute this additional
benefit to Stefik’s repository system.” 102 Pet. 34 (citing Ex. 1014 2:66–
3:1; Ex. 1016 2:32–36; Ex. 1021 ¶¶ 59–62).
In the Decision to Institute, we determined that Petitioner had shown a
likelihood of prevailing on this proposed ground of unpatentability. Dec.
16–17. In particular, we determined that Petitioner was more likely than not
to prevail on its assertions that the combination of Stefik ’235, Stefik ’980,
and Poggio disclosed every limitation of claims 2, 13, and 14. Id. We also
found reasonable Petitioner’s asserted rationale that a person of ordinary
skill would have combined the teachings of Stefik ’235, Stefik ’980, and
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Poggio based on the benefit to Stefik’s system of Poggio’s teaching that
content transactions can be done with minimal action from the vendor and
also that payment validation processes can be automatically executed from
stored code. 102 Pet. 34 (citing Ex. 1014, 2:66–3:1; Ex. 1016, 2:32–36; Ex.
1021 ¶¶ 59–62).
We have reviewed Petitioner’s obviousness arguments and supporting
evidence, including the disclosure of both Stefik references and Poggio and
the detailed claim chart appearing on pages 74–79 of the Petition. Despite
the counter-arguments in Patent Owner’s Response, and the evidence cited
therein, which we also have considered, for the reasons discussed below,
Petitioner has shown, by a preponderance of the evidence, that each of
claims 2, 13, and 14 is unpatentable under 35 U.S.C. § 103 as having been
obvious over the combination of Stefik ’235, Stefik ’980, and Poggio.
1. Overview of Poggio
Poggio discloses a “[v]irtual vending system and method for
managing the distribution, licensing and rental of electronic data.” Ex. 1016,
Title. Figure 1 of Poggio is reproduced below.
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Figure 1 is a block diagram of an embodiment of a distributed computer
system incorporating Poggio’s system. Virtual vending machine 122
includes several components, including vending information database 110,
web server 114, digital cash interface 116, and electronic invoices 222.
Ex. 1016, 4:57–5:13. Digital cash interface 116 is connected to electronic
banking network 118, which is a communications link to “financial
institutions such as banks, automatic clearing houses, and the like.” Id. at
6:17–20.
To order a particular digital work, a user selects the desired license
and adds a credit card number (or other form of payment authorization),
which is encrypted and forwarded to web server 114. Id. at 9:20–10:4. Web
server 114 attaches a confirmation number and transmits the invoice to
digital cash interface 116, which reformats the invoice and transmits to
electronic banking network 118 for processing of the transaction. Id. at
10:4–10. Digital cash interface 116 awaits an indication from electronic
banking network 118 signifying successful completion of the payment
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transaction, which indication is forwarded to web server 114. Id. at 10:11–
15. The purchased product is then transmitted to the user. Id. at 10:15–25.
2. Claim 2
Claim 2 depends from claim 1 and further includes “code to transmit
at least a portion of the payment validation data to the data supplier or to a
destination received from the data supplier.” Petitioner relies on either
Stefik ’980 or Poggio as teaching this limitation. 102 Pet. 74–76.
Specifically, Petitioner argues that Stefik ’980 discloses examples in which
the credit server is an integrated component of a data supplier, and to which
the payment validation data is sent. Id. at 74. Petitioner also argues that
Poggio’s virtual vending machine transmits payment validation data to a
web server or vending information database—which equate to a data
supplier. Id. at 75.
Patent Owner argues that the Petition maps the term “payment
validation data” in its discussion of claim 2 inconsistently from its
discussion of claim 1. PO Resp. 17–18. According to Patent Owner,
Petitioner maps “payment validation data” to Stefik ’980’s billing
information for claim 2, but maps that same claim element to “acceptance of
assigned fees” for claim 1. Id. at 18. Patent Owner also argues that Stefik
’980 does not disclose a single “credit server to which both repositories in a
transaction report the validation data.” Id. at 18. According to Patent
Owner, because the billing information “is not sent to the same credit server
by both repositories, Stefik does not teach the limitation of claim 2.” Id. at
19. Patent Owner also argues that the Petition has not sufficiently shown
that Poggio sends payment validation data to the data supplier. Id. at 19–21.
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We are persuaded that at least Poggio explicitly discloses the
limitation “code to transmit at least a portion of the payment validation data
to the data supplier or to a destination received from the data supplier.” For
example, Poggio states that it “awaits . . . an indication from the electronic
banking network 118 signifying successful completion of the payment
transaction (i.e., credit card or electronic funds transfer transaction)” and that
“[t]his indication is forwarded to the web server,” which is clearly shown in
Figure 1 as being a component of the virtual vending machine—the data
supplier. Ex. 1016, 10:11–15 (describing step 712 of Figure 7—“Await for
acknowledgment of completed payment transaction”); Reply 11–12.
Further, we are persuaded that the Petition is sufficiently clear in its
description of this ground that Petitioner has shown by a preponderance of
the evidence that claim 2 would have been obvious over the combination of
Stefik ’235, Stefik ’980, and Poggio. Petitioner explains that Poggio
discloses:
The data access terminal (e.g., virtual vending machine)
transmits payment validation data (e.g., indication from the
electronic banking network signifying successful completion of
the payment transaction) received from the payment validation
system (e.g., electronic banking network) to a data supplier (e.g.
web server; vending information database).
102 Pet. 75 (emphases omitted). Moreover, Petitioner’s claim chart for
claim 2 refers specifically to the language of Poggio quoted above. Id. at 76.
This section of the claim chart also refers to both Figure 1 and Figure 7 of
Poggio. Id.
3. Claims 13 and 14
Claim 13 depends from claim 12 and, similar to claim 2, further
recites “transmitting at least a portion of the payment validation data to the
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data supplier.” Claim 14 depends from claim 13. Petitioner relies on the
same portions of Stefik ’980 and Poggio as teaching this limitation as it does
for claim 2. 102 Pet. 76–79. Patent Owner argues that Petitioner has not
made its case regarding this limitation for the same reasons as it argues for
claim 2. PO Resp. 22. For the reasons discussed above, we are not
persuaded by Patent Owner’s arguments.
4. Conclusion
We conclude that Petitioner has shown by a preponderance of the
evidence that claims 2, 13, and 14 of the ’221 Patent would have been
obvious over Stefik ’235, Stefik ’980, and Poggio.
F. Obviousness Over Ginter
Petitioner asserts that claims 1, 2, and 11–14 would have been
obvious over Ginter. 103 Pet. 44–73. In the Decision to Institute, we
determined that Petitioner had shown a likelihood of prevailing on this
proposed ground of unpatentability. Dec. 21. In particular, we determined
that Petitioner was more likely than not to prevail on its assertions that the
person of ordinary skill in the art would have found the claimed subject
matter obvious in light of the teachings of Ginter. Id.
We have reviewed Petitioner’s obviousness arguments and supporting
evidence, including the disclosure of Ginter and the detailed claim chart
appearing on pages 44–73 of the Petition. Despite the counter-arguments in
Patent Owner’s Response, and the evidence cited therein, which we also
have considered, for the reasons discussed below, Petitioner has shown, by a
preponderance of the evidence, that each of claims 1, 2, and 11–14 is
unpatentable under 35 U.S.C. § 103 as having been obvious over Ginter.
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1. Overview of Ginter
Ginter discloses a “virtual distribution environment” (“VDE”) that
secures, administers, and audits electronic information for users of
computers and other electronic appliances. Ex. 1015, 2:21–34. It “allows
the owners and distributors of electronic digital information to reliably bill
for, and securely control, audit, and budget the use of, electronic
information.” Id. at 3:20–22. Figure 8 of Ginter is reproduced below.

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Figure 8 is a block diagram of an electronic appliance. Id. at 50:23–24.
Secondary storage 652 stores code and data used by CPU 654 and/or SPU
500 to control overall operation of electronic appliance 600 and may contain
one or more VDE objects 300 (electronic digital information). Id. at 50:63–
64, 62:12–58. SPU 500 “may also perform secure data management
processes including governing usage of, auditing of, and where appropriate,
payment for VDE objects 300 (through the use of prepayments, credits, real-
time electronic debits from bank accounts).” Id. at 63:34–41.
Ginter also describes a “Portable Electronic Appliance” (“PEA”),
which may be the size of a credit card that stores, provides access to, and
maintains digital content. Id. at 228:36–41, 229:18–24.
2. Claims 1 and 11
The only dispute during the trial with respect to claims 1 and 11 was
whether Ginter renders obvious the limitations involving payment data—
“code to read payment data from the data carrier and to forward the payment
data to a payment validation system” (PO Resp. 23), “code to receive
payment validation data from the payment validation system” (PO Resp.
24), and “code responsive to the payment validation data to retrieve data
from the data supplier and to write the retrieved data into the data carrier”
(PO Resp. 26).
For each of these limitations, Patent Owner argues that the timing of
Ginter’s payment system does not make it a suitable obviousness ground.
PO Resp. 22–27. Specifically, Patent Owner argues that “Ginter is
consistently directed to post-usage” tracking of digital purchases and “to
change from post-usage tracking to pre-purchase processing would change
the principle upon which Ginter works.” PO Resp. 23–24. Patent Owner
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adds that Petitioner has not “provided any motivation for modifying the
teachings of Ginter” such that it may be used to pay for currently-requested
digital works. Id. at 26.
We are not persuaded that Ginter’s disclosure is so restricted. At a
minimum, we are persuaded that a person of ordinary skill would have found
it obvious to modify Ginter to use payment in pre-purchase processing. For
example, Ginter teaches processes that include “governing usage of, auditing
of, and where appropriate, payment for VDE objects 300 (through the use of
prepayments, credits, real-time electronic debits from bank accounts and/or
[other deposit accounts]).” Ex.1015, 63:34–41 (emphasis added). Patent
Owner argues that this disclosure relates, not to payments for a particular
VDE content object, but rather to payment “for content at some future time
when a VDE object has actually been selected and the budget has been used
and the metering has occurred.” Tr. 79:13–80:19, 81:19–21 (“it is not an
indication, even if it says real-time, that it is real-time for use of the VDE
object that is being requested.”). Although we agree with Patent Owner that
this is one way of reading the quoted language of Ginter, we are not
persuaded that it is the only reading or even the most natural reading of this
passage.
Nor are we persuaded that it would require a change in the principle
of operation of Ginter to allow for prepayment of content. Patent Owner
does not explain in their brief what they mean by “principle of operation,”
and instead simply cites to In re Ratti, 270 F.2d 810, 812–13 (CCPA 1959).
In Ratti, the court held that it would not be obvious to replace a “cylindrical
sheet metal reinforcing member” in a seal with “an annular set of outwardly
biased spring fingers” because to do so “would require a substantial
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reconstruction and redesign of the elements shown in” the seal “as well as a
change in the basic principles under which the [seal’s] construction was
designed to operate.” The timing of payment in a distribution system such
as Ginter does not “require a substantial reconstruction and redesign,” but
instead is a minor variation in basic payment processing and validation that
would be well within the understanding of a person of ordinary skill. See,
e.g., Ex. 1014, 29:61–64; Ex. 1031, 16:15–27:9. We are, therefore,
persuaded that a skilled artisan would, at a minimum, find prepayment for
digital content obvious based on the explicit teachings of Ginter.
This is especially true given that, as we explained in the Decision to
Institute, Ginter describes significant flexibility of its system stating that
“[a]ll participants of VDE 100 have the innate ability to participate in any
role” and “[r]oyalty payments for the new works may be accessed by the
publisher, distributors, or end-users, and may be tracked and electronically
collected at any stage of the chain.” Dec. 21; Ex. 1015, 255:22–43. We
found this disclosure supported Petitioner’s assertion that “the known
flexibility in such distribution systems, and underscores that one of ordinary
skill would have known that combinations between and among disclosures
of such distribution systems would have been obvious to one of [ordinary]
skill in the art.” Dec. 21 (quoting 103 Pet. 30–31). Patent Owner does not
address this contention, which we continue to find persuasive.
a. “code to read payment data from the data carrier and to
forward the payment data to a payment validation system”
Petitioner asserts that Ginter discloses “audit information” that is used
to process payments. 103 Pet. 51–53; Reply 16–17. In addition, Petitioner
asserts that “Ginter discloses paying for VDE content objects with ‘real-time
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debits from bank accounts.’” 103 Pet. 51–52 n.18 (quoting Ex. 1015, 63:34–
41); Reply 16–18. According to Petitioner, a person of ordinary skill would
have found it obvious to “apply Ginter’s teaching of using audit information
as payment data to a real-time transaction in order to reflect payment for a
currently-requested VDE object.” Id.
Patent Owner argues that Petitioner has not shown obviousness
because “audit information is for tracking post-usage information, not
current purchase information” and the disclosure of “real-time debits from
bank accounts” could be used “in post-usage transactions.” PO Resp. 23–
24, 26 (citing Ex. 2028 ¶¶ 36, 39).
Petitioner responds that Ginter teaches that audit information includes
“an electronic funds transfer against the user’s bank account or some other
bank account” (Ex. 1015, 179:57–60) and “collecting payments, etc.” (id. at
281:33–39).
10
Reply 17. In addition, Petitioner reiterates that Ginter
discloses the use of “prepayments, credits, [and] real-time electronic debits.”
Id. (citing Ex.1015, 63:34–41). Based on these disclosures, we are
persuaded that, at minimum, it would have been obvious to a skilled artisan
to modify Ginter’s audit information to be used prior to the transfer of
content.
Moreover, as noted above, we construe “payment data” as “data
relating to payment for the requested data item,” regardless of when the
payment operation occurs. Thus, even were we to agree with Patent

10
We are not persuaded that Petitioner introduced new argument in its
Reply, as asserted by Patent Owner. See Tr. 91:2–94:24. In response to
Patent Owner’s argument that Ginter’s “audit information” is post-usage
information (id. at 91:20–22; PO Resp. 24–25), Petitioner explained its
original assertion by referring to specific audit information (Reply 16–17).
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Owner’s characterization of Ginter, we are persuaded that Petitioner has
shown by a preponderance of the evidence that a person of ordinary skill
would find the limitation “code to read payment data from the data carrier
and to forward the payment data to a payment validation system” obvious in
light of Ginter’s disclosure.
b. “code to receive payment validation data from the payment
validation system”
As evidence that a person of ordinary skill in the art would have found
this limitation obvious in view of Ginter, Petitioner cites to Ginter’s
disclosure of sending an “administrative object” to a clearinghouse, which
then may “check the end user’s credit, financial records, business
agreements and/or audit histories to determine whether the requested . . .
permissions should be given” and then may “send one or more responsive
administrative objects which cause the end user’s electronic appliance 600 to
update its secure database in response.” 103 Pet. 55–56 (quoting Ex. 1015,
162:38–61). Further, Petitioner asserts that a person of ordinary skill in the
art would have at least found this limitation obvious from Ginter’s
“disclosure of receiving data indicating that the payment validation system
has validated the purchase of a VDE content object.” 103 Pet. 55 n.22
(citing Ex. 1121 ¶ 52).
Patent Owner argues that an “administrative response” is not a
response to the sending of audit information because it relates not to
permission pertaining to a current VDE object, but to budgeting for the
future. PO Resp. 24–25. In addition, Patent Owner argues that the section
describing administrative objects quoted above “does not describe
purchases, nor does the 00103 Petition explain why absent the disclosure of
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purchases an administrative reply itself would render a purchase obvious.”
Id. at 25.
Petitioner replies that Ginter’s administrative response is equivalent to
the claimed “payment validation data.” In support, Petitioner points to
Ginter’s disclosure that a financial provider may receive an administrative
object (Ex. 1015, 179:39–42), communicate with credit card networks using
the administrative object (id. at 180:5–7), and return an administrative object
back to the user with responsive information (id. at 180:8–12). Reply 18.
We agree with Petitioner. Even were we to agree with Patent
Owner’s characterizations of Ginter’s disclosure as it relates to the
administrative response and administrative objects, which we do not, we are
persuaded that a person of ordinary skill would find these differences
obvious variants of basic payment processing and validation—well within
their understanding. See, e.g., Ex. 1014, 29:61–64; Ex. 1031, 16:15–27:9.
We are persuaded, therefore, that a person of ordinary skill would find the
limitation “code to receive payment validation data from the payment
validation system” obvious in light of Ginter’s disclosure.
c. “code responsive to the payment validation data to retrieve
data from the data supplier and to write the retrieved data
into the data carrier”
As evidence that a person of ordinary skill in the art would have found
this limitation obvious in view of Ginter, Petitioner cites to Ginter’s
disclosure that “payment for VDE objects” may be made “through the use of
prepayments, credits, real-time electronic debits from bank accounts and/or
VDE node currency token deposit accounts.” 103 Pet. 57–58 (quoting Ex.
1015, 63:34–41). Further, Petitioner asserts that a person of ordinary skill in
the art would have at least found this limitation obvious based on Ginter’s
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disclosure that “‘sufficient credit from an authorized source must be
confirmed as available’ before a transaction occurs.” 103 Pet. 58 n.24
(quoting Ex. 1015, 20:23–29).
Patent Owner reiterates its arguments that “the cited section (162:38–
61) does not relate to audit information, as alleged, or disclose this
limitation” and that Ginter operates using different principles than “real-time
debits.” PO Resp. 26. For the reasons described above, we do not find these
arguments persuasive.
In addition, Patent Owner argues that “the disclosure of ‘sufficient
credit’ would teach away from using a ‘real-time debit system’” because
sufficient credit would obviate the need for real-time debits “as the credit
could be relied upon in post-usage processing.” Id. at 27.
We are not persuaded that Ginter’s disclosure of sufficient credit
teaches away from using a real-time debit system. According to Ginter,
“VDE ensures that certain prerequisites necessary for a given transaction to
occur are met,” including that modules and data might “specify that
sufficient credit from an authorized source must be confirmed as available.”
Ex. 1015, 20:23–29. Directly after this statement, Ginter continues that “[i]t
might further require certain . . . modules execute as processes at an
appropriate time to ensure that such credit will be used in order to pay for
user use of the content.” Id. at 20:29–32. We are persuaded that in light of
this disclosure, a skilled artisan would not be discouraged from, but, indeed,
would find it obvious to, execute such processes and forward the notification
of ensured credit to the data supplier prior to transfer of the requested
content. Thus, we do not agree with Patent Owner that Ginter teaches away
from using a real-time debit system.
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3. Claims 2, 12, 13, and 14
Patent Owner reiterates the arguments it made with respect to claims 1
and 11 for claims 2, 12, 13, and 14. PO Resp. 27–30. For the reasons
discussed above, we are not persuaded by Patent Owner’s arguments.
4. Conclusion
We conclude that Petitioner has shown by a preponderance of the
evidence that claims 1, 2, and 11–14 of the ’221 Patent would have been
obvious over Ginter.

III. MOTIONS TO EXCLUDE
A. Petitioner’s Motions to Exclude
Petitioner’s Motion to Exclude seeks to exclude: (1) the testimony of
Dr. Katz (Ex. 2028); and (2) the portions of the Patent Owner’s Response
(Paper 26) that refer to, or rely on, that testimony. Paper 39, 3. As movant,
Petitioner has the burden of proof to establish that it is entitled to the
requested relief. See 37 C.F.R. § 42.20(c). For the reasons stated below,
Petitioner’s Motion to Exclude is denied.
Petitioner argues that Dr. Katz’s testimony should be excluded under
Federal Rule of Evidence (“FRE”) 702 because he was unable to opine on
what a person of ordinary skill in the art would have understood as of the
priority date of the ’221 patent. Paper 39, 5. Specifically, Petitioner refers
to Dr. Katz’s deposition testimony that he was “not sure” as to (1) what a
person of ordinary skill in the art would have known; (2) the operation of the
embodiments described in the ’598 patent; and (3) how a person of ordinary
skill in the art would have interpreted various passages from the cited prior
art. Id. at 5–9.
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Patent Owner counters that Dr. Katz was not sure how to answer the
questions in deposition because “Petitioner never established whose
definition of a POSITA Dr. Katz was to use.” Paper 45, 4.
Petitioner replies that Dr. Katz confirmed at the outset of his
deposition that he understood the meaning of counsel’s reference to “what a
person of ordinary skill in the art would have understood,” and that Patent
Owner’s counsel objected to almost none of the questions that it now claims
are unclear. Paper 50, 2–4.
We have reviewed the deposition testimony of Dr. Katz and determine
that excluding the testimony, in its entirety, is not warranted. We assess
Petitioner’s arguments with respect to the weight to be given to relevant
portions of Dr. Katz’s testimony, rather than to its admissibility. 37 C.F.R.
§ 42.65.
B. Patent Owner’s Motion to Exclude
Patent Owner’s Motion to Exclude seeks to exclude (1) Exhibit 1002;
(2) Exhibits 1003, 1004, 1010, 1019, and 1027–1029; (3) Exhibits 1005–
1007, 1012, 1017, 1018, and 1020; (4) Exhibits 1021 and 1121; (6) portions
of Exhibit 1031; and (7) Exhibits 1101–1120 and 1122–1129. Paper 42. As
movant, Patent Owner has the burden of proof to establish that it is entitled
to the requested relief. See 37 C.F.R. § 42.20(c). For the reasons stated
below, Patent Owner’s Motion to Exclude is granted-in-part, denied-in-part,
and dismissed-in-part as moot.
1. Exhibit 1002
Patent Owner seeks to exclude Exhibit 1002—the First Amended
Complaint filed by it in the co-pending litigation—as inadmissible other
evidence of the content of a writing (FRE 1004), irrelevant (FRE 401), and
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cumulative (FRE 403). Paper 42, 2–3; Paper 49, 1–2. Specifically, Patent
Owner argues that Petitioner does not need to cite Patent Owner’s
characterization of the ’221 patent in the complaint because the ’221 patent
itself is in evidence. Moreover, according to Patent Owner, its
characterization of the ’221 patent is irrelevant and, even if relevant,
cumulative to the ’221 patent itself. Id.
Petitioner counters that it relies on Exhibit 1002 not as evidence of the
content of the ’221 patent, but to show that Patent Owner’s characterization
of the ’221 patent supports Petitioner’s contention that the ’221 patent
relates is a covered business method patent. Paper 46, 2. Thus, according to
Petitioner, it is highly relevant to the issue of whether the ’221 patent is a
covered business method patent. Id. Moreover, contends Petitioner, Patent
Owner’s characterization of the ’221 patent in another proceeding is not in
the ’221 patent itself, and, therefore, Exhibit 1002 is not cumulative to the
’221 patent and FRE 1004 is not applicable. Id.
We are persuaded by Petitioner that Exhibit 1002 is offered not for the
truth of the matter asserted (i.e., the content of the ’221 patent), but as
evidence of how the Patent Owner has characterized the ’221 patent. Patent
Owner has not persuaded us that Exhibit 1002 is irrelevant, at least because
its characterization of the ’221 patent in prior proceedings are relevant to the
credibility of its characterization of the ’221 patent in this proceeding.
Accordingly, we decline to exclude this exhibit.
2. Exhibits 1003, 1004, 1010, 1019, and 1027–1029
Patent Owner seeks to exclude Exhibits 1003, 1004, 1010, 1019, and
1027–1029 as irrelevant under FRE 401 and 402 because they are not cited
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in the Petition, the Wechselberger Declaration, or our Decision to Institute.
Paper 42, 3–4; Paper 49, 2.
Petitioner counters that all of these exhibits except Exhibit 1010 (see
Paper 46, 3 n.4) were cited in the Wechselberger Declaration as “Materials
Reviewed and Relied Upon.” Paper 46, 3. Petitioner also points out that
Patent Owner similarly filed exhibits not relied upon in its substantive
papers. Id.
Because Mr. Wechselberger attests that he reviewed these exhibits in
reaching the opinions he expressed in this case, Patent Owner has not shown
that they are irrelevant under FRE 401 and 402. Accordingly, we decline to
exclude Exhibits 1003, 1004, 1019, and 1027–1029. We grant the motion as
to Exhibit 1010.
3. Exhibits 1005–1007, 1012, 1017, 1018, and 1020
Patent Owner seeks to exclude Exhibits 1005–1007, 1012, 1017, and
1020 as irrelevant under FRE 401 and 402 because, while cited, they either
were not asserted by Petitioner as invalidating prior art or were not instituted
upon by the Board. Paper 42, 4–5; Paper 49, 2–3.
Petitioner counters that all of these exhibits are evidence of the state
of the art and knowledge of a person of ordinary skill in the art at the
claimed priority date, and are relied upon in both the Petition and the
Wechselberger Declaration as evidence of that knowledge. Paper 46, 3–5.
Because these exhibits are evidence relied upon by Petitioner to
support its assertions with respect to the state of the art and to knowledge of
a person of ordinary skill in the art, which are relevant to obviousness, we
are not persuaded that they are irrelevant under FRE 401 and 402.
Accordingly, we decline to exclude these exhibits.
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4. Exhibits 1021 and 1121
Patent Owner seeks to exclude Exhibits 1021 and 1121—the
Declarations of Mr. Wechselberger in the 102 case and 103 case,
respectively—under FRE 602 as lacking foundation because they “do[] not
state the relative evidentiary weight (e.g., substantial evidence versus
preponderance of the evidence) used in arriving at his conclusions” and
because they “do[] not sufficiently state the criteria used to assess whether
one of ordinary skill in the art at the time of the invention would have been
motivated to modify a reference or combine two references.” Paper 42, 5–8,
14–15; Paper 49, 3–4. Patent Owner also seeks to exclude this testimony
under FRE 702 because it “does not prove that Mr. Wechselberger is an
expert whose testimony is relevant to the issue of what is taught and/or
suggested by the cited references.” Paper 42, 7–8.
Petitioner counters that FRE 602 is not a basis for excluding Mr.
Wechselberger’s expert testimony because FRE 602 plainly states that it
“does not apply to a witness’s expert testimony under Rule 703” and,
therefore, Patent Owner’s objections are improper challenges to the
sufficiency of the opinions presented rather than challenges to their
admissibility. Paper 46, 5–8. Petitioner also argues that experts are not
required to recite the “preponderance of the evidence” standard expressly.
Id. at 7 (citing IPR2013-00172, Paper 50 at 42). With respect to FRE 702,
Petitioner notes that Patent Owner offers no evidence disputing that Mr.
Wechselberger is a qualified expert and notes that he qualifies as an expert
under both parties’ definitions of a person of ordinary skill in the art. Id.
Petitioner also notes that Patent Owner did not object to its offer of Mr.
Wechselberger as an expert in the co-pending district court litigation. Id.
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Patent Owner acknowledges that FRE 602 does not apply to expert
witnesses, but argues that Mr. Wechselberger never states that he is an
expert in the subject matter of the challenged claims. Paper 49, 3.
We are not persuaded by Patent Owner’s arguments. Mr.
Wechselberger has a Bachelor and Master in Electrical Engineering, and has
decades of experience in relevant technologies. Ex. 1021 ¶¶ 2–12; App’x A.
We are, therefore, not persuaded by Patent Owner’s argument that he has not
provided sufficient proof that he is an expert. And as Petitioner correctly
points out, an expert is not required to recite the “preponderance of the
evidence” standard expressly in order for the expert testimony to be
accorded weight, much less admissibility. Moreover, FRE 602 expressly
recites that it “does not apply to a witness’s expert testimony under Rule
703.” The testimony sought to be excluded by Patent Owner is expert
testimony under Rule 703. Accordingly, we decline to exclude this
testimony under either FRE 602 or FRE 702.
5. Exhibit 1031
Patent Owner seeks to exclude portions of Exhibit 1031 on the
grounds that the questions asked were outside the scope, and, therefore,
should be excluded as irrelevant under FRE 402. Paper 42, 8–13; Paper 49,
4–5.
Petitioner counters that the Patent Owner cannot move to exclude this
testimony because it failed to object to the questions during the deposition
and, therefore, waived any such objection under Rule 42.64(a). Paper 46, 8
(citing Westlake Servs., LLC v. Credit Acceptance Corp., CBM2014-00008,
Paper 48 (“Patent Owner objected to many, but not all, . . . questions . . . ,
indicating its belief that at least some of the questioning was proper.”).
CBM2014-00102
Patent 8,118,221 B2
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Petitioner further contends that the testimony is relevant to issues in this
proceeding. Paper 46, 8–15.
Patent Owner replies that, unlike Westlake Services, here Patent
Owner seeks to exclude discrete portions of the deposition testimony as
opposed to “114 pages of the deposition,” and that “[a] fair reading of the
record demonstrates that Patent Owner’s objections were made and
preserved at the deposition.” Paper 49, 4.
As an initial matter, a motion to exclude is not a proper vehicle for a
party to raise the issue of cross-examination exceeding the scope of the
direct testimony. Moreover, as Petitioner correctly points out, many of the
questions and answers that Patent Owner now seeks to exclude were not
objected to during the deposition, even giving the transcript the “fair
reading” that Patent Owner suggests. “An objection to the admissibility of
deposition evidence must be made during the deposition.” 37 C.F.R.
§ 42.64(a).
Nevertheless, we turn to the merits. Even assuming that exceeding
the scope of direct testimony was a proper basis for a Motion to Exclude and
that Patent Owner had objected to every question now sought to be
excluded, we still would not be persuaded that exclusion of this testimony,
in its entirety, is the proper remedy. Based on our review of the arguments
made in the Patent Owner Response, as well as the relevant portions of the
deposition transcript, we are not persuaded that the questions asked were
outside the scope of Dr. Katz’s declaration. For example, Patent Owner
argues that the testimony at page 36, line 10 to page 37, line 11 is “not
relevant because it relates to conditional access and none of the claims at
issue relate to conditional access to stored data.” Paper 42, 9. Patent Owner
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Patent 8,118,221 B2
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adds that the question uses the term “payment validation” instead of
“payment validation data.” Id. As Petitioner points out, however, claim 1
recites “code responsive to the payment validation data,” and both the ’221
patent and the prior art involve controlling access to data based on payment.
Paper 46, 9. Moreover, Dr. Katz testifies, in testimony that Patent Owner
has not moved to exclude, that a skilled artisan would have “understood that
payment validation could be made a condition of providing content that was
electronically sold.” Paper 46, 9 (quoting Ex. 1031, 27:4–9). As a result,
we are not persuaded that questions about what a person of ordinary skill in
the art would know about conditional access are outside the scope of Dr.
Katz’s direct testimony. We are not persuaded that because the question did
not include the word “data,” that the entire passage should be stricken.
Instead, we are persuaded that Dr. Katz understood the question in the
context in which it was asked.
For similar reasons, we are not persuaded that any of the other
portions of Dr. Katz’s deposition should be excluded. Patent Owner argues
that some of the testimony is not directly relevant to Dr. Katz’s direct
testimony or is only relevant to related proceedings. Paper 42, 9–13. Much
of the testimony Patent Owner objects to relates to Dr. Katz’s understanding
of the ’221 patent and the prior art references. See, e.g., id. at 9–10
(objecting to testimony relating to “whether the Stefik ’235 reference would
exclude the use of a credit card”), 10–11 (objecting to testimony relating to
differences between embodiments of the ’221 patents), 11–12 (objecting to
testimony relating to “prepurchase processing” in Ginter), 12 (objecting to
testimony relating to Poggio’s disclosure of a time stamp). We are not
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Patent 8,118,221 B2
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persuaded that this testimony is irrelevant to Dr. Katz’s declaration and the
issues in this case.
Moreover, the deposition of Dr. Katz covered his testimony in four
related proceedings involving four different patents: CBM2014-00102 (US
Patent No. 8,118,221 B2), CBM2014-00106 (US Patent No. 8,033,458 B2),
CBM2014-00108 (US Patent No. 8,061,598 B2), and CBM2014-00112 (US
Patent No. 7,942,317 B2). Ex. 1031, 1. Although some of the questions
posed may have not related directly to this proceeding (see Paper 42, 12–13;
Paper 46, 15 n.6) we are not persuaded that the answers elicited are
irrelevant to the issues in this proceeding. The patents in these cases
disclose similar subject matter and the proceedings include overlapping prior
art references. Accordingly, we decline to exclude these portions of
Exhibit 1031.
6. Exhibits 1101–1120 and 1122–1129
Patent Owner seeks to exclude Exhibits 1101–1120 and 1122–1129
(filed in the 103 case) under FRE 403 on the grounds that they are identical
to Exhibits 1001–1020 and 1022–1029 (filed in the 102 case), and are,
therefore, “needless cumulative evidence.” Paper 42, 13; Paper 49, 5.
Petitioner counters that these exhibits should not be excluded for the
same reasons that Exhibits 1001–1020 and 1020–1029 should not be
excluded. Paper 46, 2 n.3.
We do not rely on these exhibits. Accordingly, Patent Owner’s
Motion to Exclude is moot as to these exhibits.
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Patent 8,118,221 B2
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IV. CONCLUSION
Petitioner has shown, by a preponderance of the evidence, that claims
1, 2, and 11–14 of the ’221 patent are unpatentable under 35 U.S.C. § 103.

V. ORDER
Accordingly, it is:
ORDERED that claims 1, 2, and 11–14 of the ’221 patent are
determined to be unpatentable;
FURTHER ORDERED that Petitioner’s motion to exclude is denied;
FURTHER ORDERED that Patent Owner’s motion to exclude is
denied-in-part and dismissed-in-part;
FURTHER ORDERED that Exhibit 1010 shall be expunged; and
FURTHER ORDERED that, because this is a Final Written Decision,
parties to the proceeding seeking judicial review of the decision must
comply with the notice and service requirements of 37 C.F.R. § 90.2.

CBM2014-00102
Patent 8,118,221 B2
44
PETITIONER:
J. Steven Baughman
Ching-Lee Fukuda
Megan F. Raymond
Ropes & Gray LLP
steven.baughman@ropsegray.com
ching-lee.fukuda@ropsegray.com
megan.raymond@ropsegray.com

PATENT OWNER:

Michael R. Casey
Davidson Berquist Jackson & Gowdey, LLP
smartflash-cbm@dbjg.com
mcasey@dbjg.com