Apple Inc v. Smartflash LLC

1. Case Identification

• Case #: CBM2015-00029
• Patent #: 7,334,720
• Filed: November 24, 2014
• Petitioner(s): Apple Inc.
• Patent Owner(s): Smartflash LLC
• Challenged Claims: 3, 13-15

2. Patent Overview

• Title: Data Storage and Access Systems
• Brief Description: The ’720 patent describes systems and methods for controlling access to digital data based on payment. The invention involves using a portable data carrier to store both content and access rules, where the rules define conditions for accessing the content based on payment information validated by a separate system.

3. Grounds for Unpatentability

Ground 1: Patent Ineligibility under §101 - Claims 3 and 13-15 are directed to an abstract idea.

• Core Argument:
  • Prior Art Mapping: Petitioner argued that the challenged claims are directed to the abstract, long-standing economic practice of "paying for and controlling access to data." The claims recite generic steps such as reading payment data, retrieving content, and writing access rules based on payment amount. These steps, according to Petitioner, represent a fundamental commercial concept applied using conventional technology.
  • Inventive Concept: Petitioner contended that implementing this abstract idea on generic computer components (e.g., "data access terminal," "processor," "program store") does not transform it into a patent-eligible invention. The patent allegedly fails to disclose any specific improvement to computer functionality or solve a technical problem, instead merely using a computer as a tool to perform a well-known business practice. This approach, Petitioner argued, lacks an "inventive concept" sufficient to satisfy the two-step framework from Alice Corp. v. CLS Bank Int'l.

Ground 2: Obviousness over Stefik, Poggio, and Kopp - Claims 3 and 13-15 are obvious over Stefik in view of Poggio and Kopp.

• Prior Art Relied Upon: Stefik (collectively Patent 5,530,235 and Patent 5,629,980), Poggio (European Application # EP0809221), and Kopp (’805 patent).
• Core Argument for this Ground:
  • Prior Art Mapping: Petitioner asserted that Stefik taught a foundational system for managing digital rights through "repositories" (data terminals) that store and distribute "digital works" (content) subject to "usage rights" (access rules). Poggio disclosed a "virtual vending machine" (VVM), a distributed client-server system for marketing, distributing, and receiving payment for licensed electronic data. Kopp described a vending apparatus that makes data records available for a fee, allowing a user to specify a "predetermined extent" of use, with payment amount dictating the scope of access. Petitioner argued that Stefik's repositories map to the claimed "data access terminal" and "data carrier," Poggio's VVM provided the network architecture for payment validation, and Kopp taught the core concept of an access rule being dependent on the payment amount.
  • Motivation to Combine: A POSITA would combine these references to create a more robust and flexible commercial system for distributing digital content. A POSITA would have been motivated to implement Stefik's DRM system using Poggio's efficient VVM architecture to handle transactions. Further, incorporating Kopp's teachings for user-specified, payment-dependent utilization limits would have been a predictable way to enhance the commercial appeal and flexibility of the combined Stefik/Poggio system, allowing for customized pricing based on desired usage.
  • Expectation of Success: The combination involved applying known transaction management techniques (Poggio, Kopp) to a known DRM framework (Stefik), using conventional components. A POSITA would have had a reasonable expectation of success in integrating these compatible systems to achieve the predictable result of a networked system for selling variable-access rights to digital content.

Ground 3: Obviousness over Stefik, Poggio, Kopp, and Smith - Claims 3 and 13-15 are obvious over the combination in Ground 2 further in view of Smith.

• Prior Art Relied Upon: Stefik (collectively Patent 5,530,235 and Patent 5,629,980), Poggio (European Application # EP0809221), Kopp (’805 patent), and Smith (WO 95/34857).
• Core Argument for this Ground:
  • Prior Art Mapping: This ground builds upon the combination of Stefik, Poggio, and Kopp from Ground 2. The additional reference, Smith, disclosed a "SoftMeter" system for "metered usage of software products." Smith’s system allowed a user to pre-pay for a specified number of "units-of-use" (e.g., time, number of plays), with a counter metering down usage. This provided a concrete mechanism for tying access rules (the remaining use counter) directly to payment (the prepaid amount).
  • Motivation to Combine: A POSITA, having already combined Stefik, Poggio, and Kopp, would have been motivated to incorporate Smith's metering technology to further enhance the system. Smith's teachings provided a well-defined method for selling content with usage proportional to payment, which Petitioner argued was a key object of the invention. Adding Smith's flexible payment and metering scheme would have been an obvious improvement to the combined system, offering a more convenient point-of-sale process for tailoring product purchases to expected use.
  • Expectation of Success: Integrating Smith's software-based metering into the broader hardware and network system of Stefik/Poggio/Kopp was presented as a straightforward application of known software licensing models to a digital content distribution platform.

4. Key Claim Construction Positions

• "payment data": Petitioner proposed construing this term to mean "data representing payment made for requested content data." This construction was intended to distinguish payment information from other types of access control data.
• "access rule": Petitioner proposed construing this term to mean a "rule specifying a condition under which access to content is permitted." This construction aligns with the Board’s finding in a prior related proceeding and was central to mapping the "usage rights" of Stefik and usage limitations of Kopp and Smith to the claimed invention.

5. Arguments Regarding Discretionary Denial

• Petitioner argued that discretionary denial under §325(d) would be inappropriate. This petition was filed after a previous petition on the same patent (CBM2014-00104/105) was denied institution. Petitioner contended that the present petition was not substantially the same because it raised new grounds under §101 based on the intervening Alice decision, which post-dated the original petitions. Furthermore, it presented new prior art references (Kopp and Smith) that explicitly disclosed the "access rules" limitation that the Board found lacking in the prior art asserted in the earlier petitions, thereby directly addressing the Board's previous reasoning for denial.

6. Relief Requested

• Petitioner requested institution of a Covered Business Method patent review and cancellation of claims 3 and 13-15 of the ’720 patent as unpatentable under 35 U.S.C. §§ 101 and 103.