Samsung Electronics Co Ltd v. Dynamics Inc

1. Case Identification

• Case #: IPR2020-00504
• Patent #: 10,223,631
• Filed: January 31, 2020
• Petitioner(s): Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Research America, Inc.
• Patent Owner(s): Dynamics Inc.
• Challenged Claims: 1-7, 9-13, 19, 21-22

2. Patent Overview

• Title: Cards and Devices with Multifunction Magnetic Emulators and Methods for Using Same
• Brief Description: The ’631 patent relates to devices that emulate magnetic stripe data for payment transactions. The technology involves an apparatus with a dynamic magnetic stripe communication device that generates electromagnetic fields to electrically couple with and transmit card data to a conventional magnetic stripe reader, even when the device is held outside the reader.

3. Grounds for Unpatentability

Ground 1: Obviousness over Moullette - Claims 1-3, 9-10, 12-13, 19, and 21 are obvious over Moullette.

• Prior Art Relied Upon: Moullette (Patent 7,114,652).
• Core Argument for this Ground:
  • Prior Art Mapping: Petitioner argued that Moullette taught all limitations of the challenged claims. Moullette described an adaptor system that allows a conventional magnetic stripe Point of Sale (POS) reader to receive information from wireless or contact-based sources. Petitioner asserted that Moullette’s adaptor, which included an inductor to generate a magnetic field, constituted the claimed "dynamic magnetic stripe communication device." This inductor was described as capable of generating a magnetic field of sufficient power to couple with a reader's head "through the housing of the reader device," thus teaching the key limitation of operating "outside and within proximity" of the payment terminal. Moullette was also alleged to disclose serial communication by halting current to a first coil (for Track 1) before flowing current to a second coil (for Track 2).
  • Key Aspects: The core of this ground centered on Moullette’s disclosure of an external adaptor that could communicate with a standard reader, directly contradicting arguments made by the patent applicant during prosecution to overcome prior art rejections.

Ground 2: Obviousness over Zellner in view of Moullette - Claims 1, 4-7, 10-11, and 22 are obvious over Zellner in view of Moullette.

• Prior Art Relied Upon: Zellner (Patent 7,097,108) and Moullette (Patent 7,114,652).
• Core Argument for this Ground:
  • Prior Art Mapping: Petitioner asserted that Zellner taught the core apparatus: a portable electronic device such as a "cell phone" or "PDA" designed to replace credit cards by emulating magnetic stripe information. Zellner included a processor for controlling the emulation, a display for showing a "full size image of a credit card," and a "dynamic magnetic encoder." Moullette was cited for providing the specific implementation of an inductor-based system capable of generating a magnetic field strong enough to couple with a reader externally, a detail not explicitly described in Zellner.
  • Motivation to Combine: A POSITA would combine the references to integrate Moullette’s effective external communication technology directly into Zellner's all-in-one portable device. This combination would achieve the known goal of allowing a cell phone to communicate directly with legacy payment terminals, eliminating the need for a separate intermediary adapter like Moullette's and resulting in a more streamlined and commercially desirable product.
  • Expectation of Success: Petitioner argued that since both references addressed magnetic emulation and using inductors for this purpose was well-known, a POSITA would have had a high expectation of success in incorporating Moullette's inductor design into Zellner's device with no more than routine optimization.

Ground 3: Obviousness over Doughty - Claims 1-3, 9, 12, 19, and 21-22 are obvious over Doughty.

• Prior Art Relied Upon: Doughty (Application # 2006/0161789).

• Core Argument for this Ground:

  • Prior Art Mapping: Petitioner argued that Doughty, standing alone, rendered the claims obvious. Doughty disclosed a secure personal communication device (e.g., a PDA) containing a "magnetic field generator" with an induction coil to emulate a programmable magnetic stripe. Petitioner mapped Doughty's magnetic field generator to the "dynamic magnetic stripe communication device" limitation. Because the device was a handheld PDA, it necessarily operated outside of a payment terminal while its induction coil was placed in "physical proximity" of the reader heads. Doughty was also alleged to teach the serial communication of multiple data tracks, as its use of a single inductive coil would only permit the transmission of one track's data at a time.

• Additional Grounds: Petitioner asserted additional obviousness challenges based on Doughty in view of Zellner (for claims 4-7, 10-11) and Doughty in view of Francini (for claim 13), relying on similar design modification theories to improve device functionality and ensure reliable data transmission.

4. Key Claim Construction Positions

• While Petitioner asserted that no claim construction was strictly necessary to resolve the challenge, it highlighted constructions proposed in a co-pending ITC case to demonstrate that the prior art was invalidating under any reasonable interpretation.
• For the key term "dynamic magnetic stripe communication device," Petitioner proposed "a device in a magnetic stripe form that can communicate dynamic magnetic information."
• Petitioner contended that the prior art disclosed the challenged limitations under either its own or the Patent Owner's proposed constructions, making a definitive ruling on construction unnecessary for the IPR.

5. Arguments Regarding Discretionary Denial

• Petitioner argued that discretionary denial under 35 U.S.C. §325(d) would be inappropriate because the asserted prior art (Moullette, Zellner, Doughty, and Francini) was not substantively considered by the Examiner during prosecution.
• The petition asserted that although the references were listed in an Information Disclosure Statement (IDS), they were effectively "buried" among nearly 500 other references submitted across two IDS filings, making it highly unlikely the Examiner performed a detailed review.
• Because the Examiner never applied, discussed, or based any rejection on these specific references or the combinations presented in the petition, Petitioner argued the Board would be considering the art and arguments for the first time.

6. Relief Requested

• Petitioner requests institution of an IPR and cancellation of claims 1-7, 9-13, 19, and 21-22 of the ’631 patent as unpatentable.