Square, Inc. v. REM Holdings 3, LLC

Takeaway: More than mere copying is necessary to make the action significant to the determination of obviousness.

In its Final Written Decision, the Board held that claims 1, 2, 6, 7, and 10-17 of the ’946 patent are unpatentable and that Petitioner had not shown the requisite burden of proof regarding the unpatentability of claims 3-5, 8, and 9.

The ’946 patent relates to a card reader device for use with a cellular phone. The device can plug into the microphone input socket of a cellular phone. It can be used to read credit card data. Inter partes review was instituted on obviousness challenges to claims 1-17 based on two or more of Lekernel, Padilla, Odagiri, Wallner, Tang, and BPS. In its Decision on Institution, the Board interpreted “output plug” as including those plugs discussed in the Specification. It interpreted “a 3.5 mm plug” and “a 2.5 mm plug” as further limiting the recitation of “output plug” by reciting a given dimension. Lastly, the Board interpreted “housing” as “something that protects, such as a support.”

Petitioner challenged claims 1, 2, 6, 7, 15, and 16 as obvious over Lekernel and Padilla. Petitioner argued that Lekernel discloses a read head configured to produce an analog signal indicative of data stored on a magnetic stripe of card in response to the magnetic stripe being passed by the read head as recited in claim 1. Petitioner also asserted that Lekernel discloses teaches an output plug adapted to be inserted into a jack associated with a microphone input. Patent Owner did not specifically address these assertions. Thus, the Board adopted the Petitioner’s reasoning as applied to claims 1 and 7.

Patent Owner argued that Petitioner’s expert is not qualified to opine on the ’946 patent or the prior art. Patent Owner argued for a narrower interpretation of the qualifications of a person of ordinary skill in the art. The Board noted that Patent Owner’s definition was too narrow and would disqualify one of Patent Owner’s experts. Based on Petitioner’s expert testimony and Lekernel, the Board held that use of resistors to drop voltage and attenuate signal would have been known to a person of ordinary skill.

The Board stated that Padilla discloses the phrase “adapted to be inserted into a jack associated with a microphone input associated with a cell phone.” Patent Owner offered no argument against combining the Lekernel and Padilla. In its Decision on Institution, the Board made several conclusions regarding its findings about the teachings of Lekernel and Padilla. Patent Owner did not respond to any of the Board’s conclusions in its Response. Thus, the Board concluded that a person of ordinary skill would know that some cell phones have characteristics that may require signal conditioning, including attenuation of the signal between the read head and cell phone’s microphone input.

Patent Owner argued that a read head that would produce sufficient amplitude without requiring amplification in Lekernel would necessarily be large, thereby rendering the challenged claims nonobvious over Lekernel and Padilla. But, Patent Owner’s expert did not specifically state that all read heads would require amplification.

Patent Owner advanced evidence of secondary considerations allegedly showing (1) that Petitioner’s reader and methods embody the features of the challenged claims, (2) that Petitioner copied the ’946 patent, and (3) Petitioner’s card reader device was commercially successful. The Board determined that there was evidence of at least an inference of copying, but more than mere copying is needed to make the action significant to a determination of obviousness. The Board held there was insufficient evidence to render the purported copying significant to the obviousness determination.

The Board also disagreed with Patent Owner’s contention that when a product embodies the claimed features, a secondary consideration factor can be attributed to the claimed invention (e.g., commercial success). Rather, commercial success is relevant in the obviousness context only if there is proof that the sales were a direct result of the unique characteristics of the claimed invention. The Board concluded that Patent Owner had not presented the requisite showing to outweigh the case for obviousness. Further, Patent Owner failed to establish to what features of its claims that Square’s commercial success is attributed. Thus, the requisite nexus was not established. Thus, the Board found claims 1, 2, 6, 7, 15, and 16 to be unpatentable over Lekernel and Padilla.

Regarding the obviousness challenge to claims 4 and 9 over Lekernel, Padilla, and Odagiri, Patent Owner argued that because review was not instituted on claims 3 and 8 that review of claims 4 and 9, which depend on claims 3 and 8, respectively, should not have been instituted. The Board agreed with Patent Owner.

Turning to the obviousness challenge of claims 5, 10-14, and 17 based on a combination of Lekernel, Padilla, and Wallner, the Board concluded that there was insufficient evidence to find claim 5, which depends upon claim 3, unpatentable for the same reasoning as claims 4 and 9 above. Claims 10-14 and 17, however, do not depend on claims 3 or 8. Patent Owner argued Wallner does not disclose an electrical connection between the reader and the cell phone and has no description of a microphone input. The Board agreed with Petitioner that Wallner is not relied upon for such features and concluded that claims 10-14 and 17 were unpatentable.

Petitioner argued claims 1-17 were unpatentable over two or more of Tang, BPS, and Odagiri. The Board concluded that the figures in BPS are prior art. The Board determined there was insufficient evidence as to whether an ordinary artisan would have looked to BPS’s teachings concerning hardware and combined its teachings with Tang. Thus, the Board was not persuaded by Petitioner’s challenge to claims 1-17 on these grounds.

Patent Owner moved to exclude three exhibits. The Board excluded Exhibit 1008, which is a machine translation of a Japanese application, because Petitioner failed to provide an affidavit attesting to the translation’s accuracy. The Board dismissed Exhibit 1068, which contained the declaration of Mr. Bobby Lee because the Board did not rely on the declaration to render its decision. The Board determined that Exhibit 2030 contained admissible hearsay and that Petitioner’s use thereof was not improper.

SQUARE, INC. v. REM HOLDINGS 3, LLC, IPR2014-00312

Paper 58: Final Written Decision

Dated: July 7, 2015

Patent 8,584,946

Before: Denise M. Pothier, Jennifer S. Bisk, and Patrick R. Scanlon

Written by: Pothier