Takeaway: The Board may reach a conclusion of patent-ineligibility when it views the claims as closer to those in Ultramercial, Inc. v. Hulu, than to those in DDR Holdings, LLC v. Hotels.Com, L.P.

In its Decision, the Board instituted a covered business method patent review of claims 4-12 and 16-18 of the ‘720 patent on the ground of patent ineligible subject matter under 35 U.S.C. § 101. On the other hand, the Board denied institution of a covered business method review of claim 17 of the ‘720 patent on the ground of indefiniteness under 35 U.S.C. § 112, ¶ 2.

Petitioner had challenged claims 4-12 and 16-18 of the ‘720 patent as being directed to patent-ineligible subject matter under 35 U.S.C. § 101, and claim 17 of the ‘720 patent as being indefinite under 35 U.S.C. § 112, ¶ 2. Petitioner submitted a declaration from its expert, John P.J. Kelly, Ph.D., in support of its positions.

The ‘720 patent is directed to “a portable data carrier for storing and paying for data and to computer systems for providing access to data to be stored[.]” It discloses “providing portable data storage together with a means for conditioning access to that data upon validated payment” and these, in combination, allow “data owners to make their data available over the Internet without fear of data pirates.”

The Board only addressed one claim term in its claim construction analysis: “payment data.” In this connection, the Board construed “payment data” under the broadest reasonable interpretation (BRI) standard to mean “data relating to payment for the requested data item.” Under this construction, according to the Board, “payment data” encompasses data regardless of whether the data relates to future, current, or past payments.

The Board then considered whether the ‘720 patent was a covered business method patent eligible for covered business method patent review. First, the Board concluded that because claim 16 of the ‘720 patent recites payment data (at least by virtue of its depending from claim 14), “the financial in nature” requirement for covered business method patent review was satisfied. Second, the Board determined that claim “claim 16 merely recites “known technological features, which indicates that it is not a patent for a technological invention.” Based on these determinations, the Board concluded that “the ‘720 patent is a covered business method patent under AIA § 18(d)(1) and is eligible for review using the transitional covered business method patent program.”

As for the challenge under 35 U.S.C. § 101, Petitioner had alleged that claims 4-12 and 16-18 “are directed to an abstract idea without additional elements that transform it into a patent-eligible application of that idea[,] triggers preemption concerns[,], and fails the machine-or-transformation test[.]” Patent Owner did not dispute that claims 4-12 and 16-18 are directed to an abstract idea, but instead elected to assert that the claims recite “specific ways of using distinct memories, data types, and use rules that amount[s] to significantly more than the underlying abstract idea.” In doing so, Patent Owner asserted that its claims were much like those found to be patent-eligible in DDR Holdings, LLC v. Hotels.Com, L.P., 773 F.3d 1245 (Fed. Cir. 2014). The Board disagreed with Patent Owner on this issue, concluding that “the challenged claims are closer to the claims at issue in Ultramercial [Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014), in which the Federal Circuit reached a conclusion of patent-ineligibility] than to those at issue in DDR Holdings.”

As for the challenge to claim 17 under 35 U.S.C. § 112, ¶ 2, Petitioner had argued that “said value date” in dependent claim 17 did not have proper antecedent basis and, therefore, was indefinite. The Board disagreed, finding that “given the lack of antecedent basis, a skilled artisan would interpret ‘said value data’ in claim 17 as ‘value data’” and that “the terms ‘value’ and ‘data’ have plain and ordinary meanings that are not indefinite.”

Apple Inc. v. Smartflash LLC, CBM2015-00127
Paper 7: Decision on Institution of Covered Business Method Patent Review
Dated: November 10, 2015
Patent: 7,334,720 B2
Before: Jennifer S. Bisk, Rama G. Elluru, Jeremy M. Plenzler, and Matthew R. Clements
Written by: Elluru
Related Proceedings: Smartflash LLC v. Apple Inc., Case No. 6:15-cv-145 (E.D. Tex.); Smartflash LLC v. Google, Inc., Case No. 6:14-cv-435 (E.D. Tex.); Smartflash LLC v. Apple Inc., Case No. 6:13-cv-447 (E.D. Tex.); Smartflash LLC v. Samsung, Case No. 6:13-cv-448 (E.D. Tex.), and; Smartflash LLC v. Amazon.Com, Inc., Case No. 6:14-cv-992 (E.D. Tex.); CBM2014-00104; CBM2014-00105; CBM2015-00028; CBM2015-00029; CBM2015-00118; CBM2014-00190; and “additional petitions requesting covered business method patent reviews of related patents”