PTAB

IPR2014-00312

Square Inc v. REM Holdings 3 LLC

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1. Case Identification

2. Patent Overview

  • Title: Card Reader Device for Cell Phone and Method of Use
  • Brief Description: The ’946 patent describes a magnetic card reader device that connects to a mobile phone's microphone input. The core inventive concept asserted during prosecution was the use of signal conditioning, specifically resistors for attenuation, to adjust the card reader's output signal to a level acceptable for the mobile phone's input.

3. Grounds for Unpatentability

Ground 1: Obviousness over Lekernel and Padilla - Claims 1-3, 6-8, 15, and 16 are obvious over Lekernel in view of Padilla.

  • Prior Art Relied Upon: Lekernel (publication entitled "Reading Magnetic Cards (Almost) for Free") and Padilla (publication entitled "Turning your mobile into a magnetic stripe reader").
  • Core Argument for this Ground:
    • Prior Art Mapping: Petitioner argued that Lekernel disclosed all key structural elements of the challenged claims. Lekernel taught a magnetic card reader that produces an analog signal, conditions that signal using a voltage divider circuit with resistors to limit the signal's amplitude, and outputs the signal through a standard plug for a microphone jack. Petitioner asserted that the only element not explicitly disclosed in Lekernel was connecting the device to a cell phone. This missing element was supplied by Padilla, which explicitly taught providing analog signals from a magnetic card reader to the microphone input of a mobile phone to enhance portability.
    • Motivation to Combine: A POSITA would combine Lekernel and Padilla to gain the benefit of portability explicitly described by Padilla. Modifying Lekernel's card reader, designed for a generic sound card, for use with a mobile phone's microphone input as taught by Padilla was a simple and predictable substitution of one audio input for another to create a portable payment system.
    • Expectation of Success: A POSITA would have a high expectation of success, as both references dealt with standard audio-style analog signals and microphone inputs. Applying Lekernel’s signal conditioning principles to the mobile phone context taught by Padilla would have been a straightforward implementation with predictable results.

Ground 2: Obviousness over Lekernel, Padilla, and Odagiri - Claims 4 and 9 are obvious over Lekernel in view of Padilla and further in view of Odagiri.

  • Prior Art Relied Upon: Lekernel, Padilla, and Odagiri (Application # 2004/0041911).
  • Core Argument for this Ground:
    • Prior Art Mapping: This ground built upon the combination of Lekernel and Padilla to address the limitations of claims 4 and 9, which required the output plug to extend directly from the device's housing. While the device in Lekernel used a short cable between the housing and the plug, Petitioner argued that Odagiri taught a mobile phone peripheral with an output plug extending directly from its housing for insertion into a phone.
    • Motivation to Combine: A POSITA would be motivated to modify the Lekernel/Padilla combination with the teachings of Odagiri to eliminate the cable. This modification was presented as a mere design choice to improve portability, reduce component cost, and prevent signal degradation over a cable, all of which are well-known engineering principles.
    • Expectation of Success: Success was expected because replacing a cabled plug with an integrated plug as shown in Odagiri was a routine design modification in the field of electronic peripherals.

Ground 3: Obviousness over Tang and BPS - Claims 1-3, 5-8, and 10-17 are obvious over Tang in view of BPS.

  • Prior Art Relied Upon: Tang (Patent 8,281,998) and BPS (JP 30008764).

  • Core Argument for this Ground:

    • Prior Art Mapping: Petitioner presented this as an alternative ground, arguing that Tang disclosed a magnetic card reader that connects to a mobile phone's headphone jack to process payments. Tang taught a "read head," receiving an analog signal, and connecting to the phone for processing. However, Tang did not explicitly disclose using "one or more resistors" to attenuate the signal. Petitioner argued that BPS supplied this teaching. BPS described conditioning analog signals from a mobile phone peripheral (a modem) using resistive circuitry to decrease the signal amplitude before sending it to the phone's microphone input.
    • Motivation to Combine: A POSITA would combine Tang and BPS because it was a fundamental principle in signal processing that an output signal must be conditioned to match the input requirements of a receiving device. A POSITA implementing Tang's system would have recognized the need to condition the signal for the phone's microphone input and would have looked to known solutions, such as the simple resistive attenuation circuit taught by BPS.
    • Expectation of Success: The combination was expected to succeed because using resistors to create a voltage drop is one of the simplest and most predictable methods in electronics for signal conditioning.

  • Additional Grounds: Petitioner asserted additional obviousness challenges, including a combination of Lekernel, Padilla, and Wallner to explicitly add the step of performing a card-based transaction, and a combination of Tang, BPS, and Odagiri to add the teaching of a plug extending directly from the housing.

4. Relief Requested

  • Petitioner requested institution of an inter partes review and cancellation of claims 1-17 of the ’946 patent as unpatentable.