Apple Inc v. Smartflash LLC

1. Case Identification

• Case #: CBM2014-00102
• Patent #: 8,118,221
• Filed: March 28, 2014
• Petitioner(s): Apple Inc.
• Patent Owner(s): Smartflash LLC
• Challenged Claims: 1, 2, 11-14, and 32

2. Patent Overview

• Title: Data Storage and Access Systems
• Brief Description: The ’221 patent describes methods and systems for controlling access to digital content. The invention involves using a portable data carrier to store and pay for data, wherein payment data is read from the carrier and forwarded to a validation system, which then authorizes the retrieval and writing of content from a data supplier to the carrier.

3. Grounds for Unpatentability

Ground 1: Claims 1, 11, 12, and 32 are anticipated by Stefik

• Prior Art Relied Upon: Stefik, which collectively refers to Stefik (’235 patent) and Stefik (’980 patent), which is incorporated by reference into the ’235 patent.
• Core Argument for this Ground:
  • Prior Art Mapping: Petitioner argued that Stefik discloses every element of the challenged claims. Stefik describes a comprehensive system for controlling the distribution and use of digital works using "repositories" (equivalent to the ’221 patent's "data access terminals") that transfer content to portable "DocuCards" (equivalent to "data carriers"). These repositories process access requests by examining usage rights attached to the digital works, which can require fee acceptance. Stefik’s system uses credit servers and billing clearinghouses (equivalent to "payment validation systems") to process transactions, where fee payment confirmation ("payment validation data") is a prerequisite to accessing content. Petitioner asserted Stefik’s disclosure of repositories communicating with each other to transfer content after validating usage rights and payments directly reads on the limitations of the challenged claims.

Ground 2: Claims 1, 2, 11-14, and 32 are obvious over Stefik in view of Poggio

• Prior Art Relied Upon: Stefik (Patents 5,530,235 and 5,629,980) and Poggio (European Patent Application, Publication No. EP0809221A2).
• Core Argument for this Ground:
  • Prior Art Mapping: Petitioner asserted that to the extent Stefik does not explicitly teach every limitation, Poggio supplies the missing elements. Poggio discloses a "virtual vending machine" system for distributing licensed electronic data over a distributed computer system. It explicitly teaches receiving electronic payment, communicating with client computers to deliver content, and transmitting payment validation data (e.g., confirmation from a banking network) to a data supplier to track purchases. These teachings, when combined with Stefik's repository and usage rights framework, render the claims obvious. For example, Poggio’s method of reading credit card information and forwarding it for validation directly informs the corresponding steps in claims 1, 12, and 32.
  • Motivation to Combine: Petitioner argued a POSITA would combine Stefik and Poggio to improve the commercial viability and efficiency of Stefik’s digital rights management system. Both references address the same problem of secure content distribution with compensation for providers. A POSITA would have recognized the benefit of incorporating Poggio's streamlined electronic payment and confirmation mechanisms into Stefik’s repository framework to create a more robust and automated system for selling and distributing digital content.
  • Expectation of Success: The combination involved applying known e-commerce payment techniques (Poggio) to a known digital rights management system (Stefik), which would have been a predictable and straightforward integration for a POSITA.

Ground 3: Claims 1, 2, 11-14, and 32 are obvious over Stefik in view of Sato

• Prior Art Relied Upon: Stefik (Patents 5,530,235 and 5,629,980) and Sato (JP Patent Application Publication No. H11-164058).

• Core Argument for this Ground:

  • Prior Art Mapping: Petitioner argued that Sato provides specific teachings on the use of portable devices that render the claims obvious in combination with Stefik. Sato discloses a "Portable Music Selection and Viewing System" where music is downloaded and stored on a removable IC card (a "data carrier") for playback on a mobile phone. This provides a concrete, well-understood implementation of the "data carrier" and "data access terminal" (the mobile phone) recited in the ’221 patent.
  • Motivation to Combine: A POSITA would have been motivated to implement Stefik's sophisticated security and payment system on the type of mobile device platform disclosed by Sato. As mobile devices became more prevalent, it would have been obvious to adapt Stefik’s system to this growing distribution channel to increase market reach. Combining Stefik's rights management with Sato's mobile platform would allow content owners to securely sell digital works to a wider audience while ensuring they were compensated.
  • Expectation of Success: Programming Sato's mobile device, which already possessed processing capabilities, to function as a Stefik repository would have been a routine task for a POSITA, presenting no technical hurdles and leading to the predictable result of secure content distribution on a mobile platform.

• Additional Grounds: Petitioner asserted an additional obviousness challenge based on the combination of Stefik, Poggio, and Sato, arguing this combination further reinforces the unpatentability of the challenged claims.

4. Key Claim Construction Positions

• "payment data": Petitioner proposed, for the purpose of the CBM review, that this term be construed as "data representing payment made for requested content data." Petitioner argued this construction is consistent with the specification and noted it is the only term for which the Patent Owner asserted a specific construction in related district court litigation. Petitioner contended that even under potentially narrower constructions for other terms (e.g., "data carrier" as "memory card"), the cited prior art would still fall squarely within the claims' scope.

5. Key Technical Contentions (Beyond Claim Construction)

• Covered Business Method (CBM) Qualification: Petitioner contended that the ’221 patent is a CBM patent because its claims are directed to a financial activity. The core of the invention was argued to be a method of selling content, where providing data is contingent on validating payment information—an activity financial in nature.
• Not a "Technological Invention": Petitioner argued the patent does not fall under the "technological invention" exception to CBM review. The petition asserted that the patent addresses the business problem of data piracy, not a technical problem. Furthermore, it claimed the solution—combining known elements like smart cards and payment validation systems—does not recite a novel and unobvious technological feature, but rather uses conventional technology to implement an abstract business idea.

6. Relief Requested

• Petitioner requested institution of a Covered Business Method Patent Review and cancellation of claims 1, 2, 11-14, and 32 of the ’221 patent as unpatentable under 35 U.S.C. §§ 102 and 103.