PTAB

IPR2019-01649

Square Inc v. 4361423 Canada Inc

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Petition
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1. Case Identification

2. Patent Overview

  • Title: Portable Smart Card Reader Device
  • Brief Description: The ’566 patent describes a portable smart card reader that connects to a mobile communication device, such as a cell phone, via an audio jack. The reader captures information from a smart card's integrated circuit, converts it into an analog audio signal, and transmits it through the jack to the mobile device for transaction processing.

3. Grounds for Unpatentability

Ground I: Claims 1-4 are obvious over Proctor in view of Vrotsos.

  • Prior Art Relied Upon: Proctor (Application # 2002/0091633), Vrotsos (Application # 2005/0236480).
  • Core Argument for this Ground:
    • Prior Art Mapping: Petitioner argued that Proctor disclosed the core system of a smart card verification terminal that reads data from a card’s memory chip and includes a modem to convert that data into a modulated analog audio signal. This signal is then provided to a converter that formats it for transmission to a mobile phone's hands-free jack. To the extent Proctor’s device was not explicitly portable, Vrotsos was cited for its teaching of a smart card reader housed in an attachment that physically couples to a mobile phone, making the combined system portable.
    • Motivation to Combine: A POSITA would combine Proctor's transaction system with Vrotsos's portability feature to create a more commercially desirable device. Proctor itself suggested that its components could be "combined or integrated," motivating a skilled artisan to look to references like Vrotsos for known methods of creating a single, portable unit. The practical benefit would be enabling merchants to conduct transactions in any location, not just fixed points.
    • Expectation of Success: Combining a known card reading system with a known method for making such readers portable was a predictable application of existing technologies, and a POSITA would expect a successful outcome.

Ground II: Claims 1-4 are obvious over Colnot in view of Vrotsos.

  • Prior Art Relied Upon: Colnot (Application # 2007/0067833), Vrotsos (Application # 2005/0236480).
  • Core Argument for this Ground:
    • Prior Art Mapping: Petitioner asserted that Colnot taught a portable "sound pass token" for secure transactions, which constituted a portable smart card reader. The token contained an EEPROM (the integrated circuit), circuitry to read data from it, and a tip/ring/sleeve (TRS) audio plug to connect to a mobile device's headset jack. The circuitry generated a modulated analog signal (using frequency-shift keying) containing authentication data for transmission to the phone.
    • Motivation to Combine: While Colnot disclosed a portable reader, Petitioner argued that Vrotsos was relevant for teaching a reader configured to accept a conventional, credit card-shaped smart card. A POSITA would combine Colnot's audio jack interface technology with Vrotsos's form factor to increase the reader's versatility, allowing it to process transactions from the vast number of smart cards already in circulation that conform to standard credit card dimensions.
    • Expectation of Success: Modifying the form factor of Colnot's device to include a standard card slot as taught by Vrotsos would have been a simple design choice with a high expectation of success.

Ground III: Claims 1-4 are obvious over Eisner in view of Vrotsos and Proctor.

  • Prior Art Relied Upon: Eisner (Patent # 5,838,773), Vrotsos (Application # 2005/0236480), and Proctor (Application # 2002/0091633).

  • Core Argument for this Ground:

    • Prior Art Mapping: Petitioner argued that Eisner disclosed a card reader that converted card data into DTMF (dual-tone multi-frequency) analog tones for transmission over a telephone line. Although Eisner primarily focused on magnetic stripe cards, it expressly contemplated modifying the reader for IC cards (smart cards).
    • Motivation to Combine: A POSITA would combine Eisner's system with Proctor and Vrotsos to create a modern, portable device. First, Vrotsos provided the specific teachings for making Eisner's contemplated smart card reader portable. Second, Proctor taught how to adapt Eisner's landline-based system for use with a mobile phone by connecting the reader to a cellular phone's hands-free audio jack. The motivation was to overcome the limitations of a landline-tethered device and enable mobile, wireless transactions.
    • Expectation of Success: Combining these elements—Eisner’s DTMF signaling, Vrotsos’s portability, and Proctor’s mobile audio jack interface—was a predictable convergence of known technologies to meet the market demand for mobile payment processing.

  • Additional Grounds: Petitioner asserted an additional obviousness challenge (Ground IV) based on Proctor, Vrotsos, and Morley (Patent # 7,810,729), which was contingent on arguments that the ’566 patent was not entitled to its earliest priority date.

4. Key Technical Contentions (Beyond Claim Construction)

  • Priority Date Challenge: A central contention of the petition, primarily supporting Ground IV, was that the ’566 patent was not entitled to the February 10, 2009 priority date of its provisional application. Petitioner argued the provisional failed to provide adequate written description support under 35 U.S.C. §112 for key limitations of the challenged claims, including:
    • A single "sensor" performing the dual functions of "producing" an analog signal and "converting" it to a format suitable for a mobile jack.
    • The concept of information being stored on an "integrated circuit" within the smart card.
  • Petitioner contended that these concepts were first adequately disclosed in a later-filed PCT application, rendering intervening art like Morley applicable.

5. Relief Requested

  • Petitioner requests institution of IPR and cancellation of claims 1-4 of the ’566 patent as unpatentable.