PTAB

IPR2019-01627

Square Inc v. 4361423 Canada Inc

Log In
Key Events
Petition
petition

1. Case Identification

2. Patent Overview

  • Title: Apparatus for Effecting Commercial Transactions
  • Brief Description: The ’998 patent relates to a system for conducting mobile financial transactions. The system uses a card reader apparatus to capture transaction card data, convert it into an audio signal, and transmit it via a mobile communication device's hands-free jack to a remote transaction server for processing.

3. Grounds for Unpatentability

Ground 1: 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 system of the ’998 patent: a card reader terminal that plugs into a mobile phone's hands-free jack to transmit transaction data as a modulated audio signal to a remote verification facility. Proctor’s system included an input device (card reader), a mobile communication device (cellular phone), a remote server (verification facility), and a communication link (cable to hands-free jack).
    • Motivation to Combine: While Proctor described a complete system, it was silent on the specific internal circuitry, such as a controller or encryption method. Vrotsos disclosed an enhanced system for wireless transactions where a card reader attachment included a processor (a type of controller) to manage operations and encrypt card data for security. Petitioner contended a person of ordinary skill in the art (POSITA) would be motivated to combine Vrotsos’s processor and encryption techniques with Proctor’s system. This represented the application of a known technique (using a controller and encryption for security) to a known device (Proctor's card reader) to yield the predictable result of a more secure and functional mobile payment system.
    • Expectation of Success: A POSITA would have had a reasonable expectation of success in this combination, as processors and encryption methods were staple, well-understood components in electronic transaction devices at the time.

Ground 2: Claims 10, 12, 14-17, and 19 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 again used Proctor as the primary reference for the overall mobile payment architecture. Petitioner asserted that Hart supplied the specific teachings for a magnetic stripe reader that Proctor described only as "conventional." Hart taught a card reader with a magnetic read head for swiping a card, a microcontroller with an encryption engine to encrypt the captured data, and a tamper-resistant housing. These features directly map to limitations in the dependent claims, such as those reciting a read head that produces an encrypted signal.
    • Motivation to Combine: Petitioner argued that a POSITA seeking to implement Proctor’s conceptual system would have consulted known, practical card reader designs like Hart for implementation details. Incorporating Hart's read head and encryption engine into Proctor's reader was a predictable design choice to add necessary functionality and enhance security. The benefit of encrypting data at the reader, as taught by Hart, was well-known to prevent interception on the mobile device.
    • Expectation of Success: A POSITA would have had a high expectation of success because encryption schemes like Triple DES (mentioned in Hart) were industry standards, and the mechanics of magnetic read heads were well-established.

Ground 3: Claims 1-3, 6, 10, 12, 14-17, and 19 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 presented Eisner as teaching a card reader that captured card data, encrypted it, and converted it into dual-tone multi-frequency (DTMF) audio tones for transmission over a standard telephone network via an RJ-11 jack. Eisner thus established the concept of conducting secure financial transactions using encrypted audio signals.
    • Motivation to Combine: Eisner’s system was limited to use with a landline telephone network. Proctor, in contrast, taught a solution specifically for mobile and remote environments by using a cellular phone and its hands-free jack. A POSITA would have been motivated to modify Eisner's landline-based audio transaction system by incorporating Proctor’s mobile communication method. This would improve Eisner’s device by adding wireless functionality, addressing the known problem of conducting transactions in locations without landline access with a known solution.
    • Expectation of Success: A POSITA would have had a reasonable expectation of success in reconfiguring Eisner's device to output its audio signal to a hands-free jack instead of an RJ-11 jack. Both were well-known, standard interfaces for transmitting analog audio signals, making the modification a routine design choice.

  • Additional Grounds: Petitioner asserted an additional obviousness challenge for claim 15 over Eisner in view of Proctor and Hart, relying on similar combination logic and adding Hart’s explicit teaching of containing the read head within a housing to satisfy the final limitation of claim 15.

4. Relief Requested

  • Petitioner requested institution of an inter partes review and cancellation of claims 1-3, 6, 10, 12, 14-17, and 19 of the ’998 patent as unpatentable.