Takeaway: Even if the Board determines that Petitioner has demonstrated that the challenged claims more likely than not are unpatentable under §101, the Board may decline to institute a CBM proceeding if it has already instituted an earlier CBM proceeding on the same grounds.

In its Decision, the Board instituted a covered business method (“CBM”) patent review of claim 1 of U.S. Patent No. 8,118,221 B2 and declined to institute a CBM patent review of claims 2, 11, and 32. 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.” It describes providing portable data storage together with a means for conditioning access to that data upon validated payment.

The Board began by addressing Petitioner’s motion to consolidate this proceeding with CBM2014-00102, in which the Board instituted trial on claims 1, 2, and 11-14 of the ’221 patent under 35 U.S.C. § 103. Petitioner argued that consolidating the two proceedings would “secure the just, speedy, and inexpensive resolution of these proceedings” because it involves “the same patent, same parties, same counsel, same expert, and the same primary prior art references as CBM2014-00102.” Patent Owner argued that “Petitioner has filed a total of twenty-one petitions—‘three, four[,] or five per patent’—over an eight month period and, therefore, not even consolidation will secure the just, speedy, and inexpensive resolution of these proceedings” and that discovery will not be streamlined because Petitioner “has filed five additional petitions for covered business method patent review that will not be entitled to consolidation with the earlier-filed proceedings,” assuming they are instituted. The Board determined that the proceedings involve “non-overlapping grounds” because it instituted under §103 in CBM2014-00102 and instituted only under §101 in this proceeding. It therefore declined to consolidate the proceedings. It also declined to exercise its discretion to coordinate the schedules for the two proceedings because it had instituted trial in CBM2014-00102 more than six months earlier.

The Board then turned to claim construction and construed the term “access rule” as “a rule specifying a condition under which access to content is permitted.”

Next the Board analyzed whether the ’221 patent is a covered business method patent and whether the claims fall within the exclusion for “technological inventions.” The Board agreed with Petitioner that “the subject matter recited by claim 32 is directed to activities that are financial in nature, namely data access conditioned on payment validation.” The Board also agreed that “claim 32 as a whole does not recite a technological feature that is novel and unobvious over the prior art.” For example, although claim 32 recites a “payment validation system,” the specification “discloses that the required payment validation system may be one that is already in use or otherwise commercially available.” The Board also concluded that “the ’221 patent makes clear that the asserted novelty of the invention is not in any specific improvement of software or hardware, but in the method of controlling access to data.” After considering the parties’ arguments, the Board ultimately concluded that “claim 32 does not recite a technological invention and is eligible for a covered business method patent review.”

The Board then considered whether claims 1, 2, 11, and 32 are directed to patent ineligible subject matter under 35 U.S.C. § 101. Petitioner argued that the challenged claims are directed to the abstract idea of “payment for something, and/or of controlling access to something.” The Board was persuaded, on the record before it, that the claimed “data access terminal,” is directed to an abstract idea. It further determined that there was no evidence that the claimed hardware was anything other than “purely conventional.” Thus, the Board was persuaded that Petitioner had demonstrated that it is more likely than not that claims 1, 2, 11, and 32 are unpatentable under 35 U.S.C. § 101. However, because the Board had already instituted a CBM patent review of claims 2, 11, and 32 under 35 U.S.C. § 101 in CBM2014-00194, and because whether the claims are directed to patent-eligible subject matter is an issue of law, the Board decided to exercise its discretion under 35 U.S.C. § 325(d) to decline to institute a CBM patent review of claims 2, 11, and 32 under § 101 in this case.

The Board then considered Petitioner’s argument that claim 32 is unpatentable as obvious. It determined that Petitioner had not shown that it is more likely than not that it would prevail in showing that claim 32 is unpatentable as obvious over either of the identified combinations. In particular, “[f]or each of the challenged claims, Petitioner has not identified sufficiently the differences between the claimed invention and each reference, or how the teachings of the references are to be combined, if at all.” Accordingly, the Board did not institute trial on this ground.

Apple Inc. v. Smartflash LLC, CBM2015-00015
Paper 23: Decision on Institution of Covered Business Method Patent Review and Denying Motion for Joinder
Dated: April 10, 2015
Patent: 8,118,221 B2
Before: Jennifer S. Bisk, Rama G. Elluru, Jeremy M. Plenzler, and Matthew R. Clements
Written by: Bisk
Related Proceedings: Smartflash LLC v. Apple Inc., Case No. 6:13-cv-447 (E.D. Tex. 2014); Smartflash LLC v. Samsung Elecs. Co., Case No. 6:13-CV-448 (E.D. Tex. 2014); CBM2014-00102; CBM2014-00103; CBM2014-00194; CBM2014-00199