PTAB

IPR2019-01625

Square Inc v. 4361423 Canada Inc

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Petition
petition

1. Case Identification

2. Patent Overview

  • Title: Apparatus for Commercial Transactions Using a Transaction Card
  • Brief Description: The ’875 patent discloses a system for processing commercial transactions in a mobile environment. The system comprises a transaction apparatus (e.g., a card reader) that captures information from a transaction card, converts it into an analog audio signal, and transmits it via a physical link (e.g., cable) to a communication device (e.g., a mobile phone) through an analog port such as a hands-free jack. The communication device then transmits the transaction data over a network to a remote server for processing and authorization.

3. Grounds for Unpatentability

Ground 1: Obviousness over Proctor and Vrotsos - Claims 1-3 and 6 are obvious over Proctor in view of Vrotsos.

  • Prior Art Relied Upon: Proctor (Application # 2002/0091633) and Vrotsos (Application # 2005/0236480).
  • Core Argument for this Ground:
    • Prior Art Mapping: Petitioner argued that Proctor disclosed the core elements of the challenged claims, including a system for credit card verification using a card reader terminal connected to a mobile phone's hands-free jack. Proctor's terminal included a modem that converted scanned card data "from a digital form to a modulated tonal pattern," i.e., an analog audio signal, suitable for transmission over the phone's analog input. The phone then transmitted the data over a cellular network to a remote verification facility. This configuration, Petitioner asserted, met the key limitations of independent claim 1.
    • Motivation to Combine: Petitioner contended that while Proctor taught the overall system, it did not explicitly detail the internal controller circuitry of its terminal. A person of ordinary skill in the art (POSITA) seeking to implement Proctor’s system would have been motivated to look to references like Vrotsos, which taught a card reader attachment for a mobile device that included a processor (a type of controller). Vrotsos's processor managed the reader's operations, including receiving information, encrypting it, and processing it for transmission. A POSITA would combine Vrotsos's processor with Proctor's terminal to provide predictable control and enable enhanced security functions like encryption.
    • Expectation of Success: The proposed modification was the application of a known technique (using a processor for control, from Vrotsos) to a known device (Proctor's card reader) to yield the predictable result of an efficiently managed card reader.

Ground 2: Obviousness over Proctor and Hart - Claims 12, 14-16, 18-26, and 28 are obvious over Proctor in view of Hart.

  • Prior Art Relied Upon: Proctor (Application # 2002/0091633) and Hart (Patent # 7,673,799).
  • Core Argument for this Ground:
    • Prior Art Mapping: This ground focused on specific hardware features of the card reader apparatus recited in the dependent claims. Petitioner argued that while Proctor disclosed a magnetic stripe reader, it was silent on the specific mechanics of the read head and its housing. Hart was cited to supply these details, as it disclosed a magnetic stripe reader that used a "magnetic read head" to swipe a card and produce an analog signal indicative of the stored data. Hart also explicitly taught that the components of its reader were "contained within a housing."
    • Motivation to Combine: A POSITA implementing Proctor’s "conventionally" operating card reader would have necessarily consulted known art like Hart for practical details on constructing a functional magnetic stripe reader. The motivation was simply to implement Proctor’s system with standard, known components. This involved incorporating Hart’s disclosed read head and housing into Proctor's base system to achieve a working device.
    • Expectation of Success: A POSITA would have a high expectation of success, as the combination involved integrating standard, well-understood magnetic card reader components into a compatible system.

Ground 3: Obviousness over Eisner and Proctor - Claims 1-3, 6, 12, 18, 21-22, 24, 26, and 28 are obvious over Eisner in view of Proctor.

  • Prior Art Relied Upon: Eisner (Patent # 5,838,773) and Proctor (Application # 2002/0091633).
  • Core Argument for this Ground:
    • Prior Art Mapping: Petitioner asserted that Eisner taught a card reader device for financial transactions that read a magnetic stripe card and used a DTMF generator to convert card data into analog tones for transmission over a conventional telephone network via an RJ-11 jack. Eisner's system included an input device (magnetic stripe reader), a controller (computer), and a remote server (clearing house) for authorization.
    • Motivation to Combine: Petitioner argued Eisner's system was limited to landline networks. A POSITA would combine Eisner's DTMF-based reader with the mobile communication method taught by Proctor to add wireless functionality and improve portability. Proctor explicitly taught connecting a card reader to a mobile phone’s hands-free jack to enable transactions in remote locations without access to traditional telephone lines. A POSITA would modify Eisner’s device to connect to a mobile phone as taught by Proctor to gain this well-known market advantage.
    • Expectation of Success: A POSITA would have a reasonable expectation of success in configuring Eisner's system to transmit its DTMF analog signals over a standard hands-free jack instead of an RJ-11 jack, as both were well-known, universal connections for analog audio signals.
  • Additional Grounds: Petitioner asserted an additional obviousness challenge (Ground 4) for claims 14-16, 19-20, 23, and 25 based on the combination of Eisner, Proctor, and Hart, relying on similar motivations to add a housing (from Hart) to the combined Eisner/Proctor system.

4. Relief Requested

  • Petitioner requests institution of an inter partes review and cancellation of claims 1-3, 6, 12, 14-16, 18-26, and 28 of the ’875 patent as unpatentable.