Apple Inc. v. Smartflash LLC

Takeaway: The Board has discretion to determine the appropriate weight to be accorded to the evidence presented, including expert opinion, based on the disclosure of the underlying facts or data upon which the opinion is based, and this determination can be on a portion-by-portion basis of a single declaration.

In its Final Written Decision, the Board found that claim 1 of the ’458 Patent is unpatentable. In two separate Petitions, which the Board consolidated, Petitioner challenged claims 1, 6-8, 10, and 11. The Board only instituted two obviousness grounds challenging claim 1 based on a combination of Stefik ’235 and Stefik ’980 as well as a ground based on Ginter alone. The ’458 Patent generally relates to “a portable data carrier for storing and paying for data and to computer systems for providing access to data to be stored” and the “corresponding methods and computer programs.”

The Board began by analyzing evidentiary matters. Patent Owner contended in its Preliminary Response and again in its Patent Owner Response that the Wechselberger declaration should be given little or no weight, because Mr. Wechselberger did not state the evidentiary standard that he used in arriving at his conclusions and, therefore, he “used incorrect criteria.” Patent Owner also contended that Mr. Wechselberger “could neither articulate what the difference was between ‘substantial evidence’ and ‘preponderance of the evidence,’ nor could he articulate which standard he was supposed to use when alleging invalidity of claims in a patent,” and thus his opinion is provided without knowing “‘the underlying facts . . . on which the opinion is based’ (i.e., how much evidence he thinks show any of his opinions discussed therein).” The Board noted that there is no authority requiring an expert to recite or apply the “preponderance of the evidence” standard in order for the expert opinion to be accorded weight. Instead, the Board applies the preponderance of the evidence standard in determining patentability and it is within the Board discretion to determine the appropriate weight to be accord the evidence presented. Accordingly, the Board declined to make a determination about the opinion, as a whole, and instead considered and determined the appropriate weight to accord relevant portions of the testimony portion by portion.

Petitioner likewise contended that the Katz declaration should be given little or no weight. Petitioner argued that Dr. Katz is not qualified as a person of ordinary skill in the art and on multiple occasions mentioned that he was “not sure” about various technologies, what a POSITA would have understood, or how a POSITA would interpret certain passages of the cited prior art and challenged patent. Similar to the Wechselberger declaration, the Board declined to make a determination as to Dr. Katz’s testimony, as a whole, and instead used its discretion to determine the appropriate weight to be accorded for relevant portions of the testimony.

The Board then turned to claim construction, stating that claims are given their broadest reasonable interpretation in light of the specification, and that the only term requiring an express construction is “payment data.” Petitioner asserted that “payment data” is construed to mean “data representing payment made for requested content data” and is distinct from “access control data.” Patent Owner argued that “payment data” should be interpreted to mean “data that can be used to make payment for content.” The Board determined that the main dispute between the parties regarding the claim term is the timing of “payment data” in relation to the actual payment operation. Petitioner argued that the term “encompasses data relating to either concurrent or past payment,” and relies on a specific disclosure in the specification that recites that the payment data “may either be data relating to an actual payment made to the data supplied, or it may be a record of a payment made to an e-payment system.” Patent Owner argued that “payment data” exists prior to the payment operation,” and relies on a separate disclosure in the specification that recites that “payment data for making a payment . . . is received from the smart Flash card by the content access terminal and forwarded to an e-payment system.” The Board determined that the broadest reasonable interpretation of “payment data” encompasses both Petitioner’s and Patent Owner’s definitions of the term by encompassing data relating to future, current, and past payments. Accordingly, the Board interpreted “payment data” as “data relating to payment for the requested data item.”

The Board then turned to the obviousness grounds. For the first ground, the parties’ arguments focused on the “payment data” and “subscriber identity module (SIM) portion” limitations recited in claim 1. Based on the Board’s interpretation of “payment data,” the arguments based on a timing element of “payment data” presented by Patent Owner was unpersuasive. With regard to “subscriber identity module (SIM) portion,” Patent Owner argued that “[n]either patent identifies anything that indicates that a DocuCard or a repository could be a mobile or cellular phone in which such a memory card would be used.” As a result, Patent Owner argued, “there is no reason to change from the ‘unique number assigned to the DocuCard upon manufacture’ to some other identifying information,” and that no other evidence explained way such a change would be necessary. The Board agreed with Petitioner that the function of the recited “SIM portion” is “to identify a user of said portable data carrier to a network operator,” and that it would have been obvious to substitute the DocuCard’s unique identifying information with the user identification means of a SIM card in order to perform the recited function of “identify[ing] a user of said portable data carrier to a network operator,” because such a substitution would involve nothing more than the simple substitution of one known element for another or the mere application of a known technique to a piece of prior art ready for improvement.

For the second ground, the parties’ arguments focused on the “code to output payment data from the payment data memory . . . and code to provide external access to the data memory” and the “subscriber identity module (SIM) portion.” As with the first ground, based on the Board’s interpretation of “payment data,” the arguments by Patent Owner based on a timing element of “payment data” were unpersuasive. The Board was also not persuaded by Patent Owner’s argument regarding “subscriber identity module (SIM) portion” for reasons similar to those for the first ground.

Finally, the Board addressed Motions to Exclude filed by both parties. Petitioner’s Motion to Exclude sought to exclude: (1) the testimony of Dr. Katz; and (2) the portions of the Patent Owner Response that refers to, or relies on, that testimony. Specifically, Petitioner argued that Dr. Katz’s testimony should be excluded under Federal Rule of Evidence (“FRE”) 702 because he was unable to opine on what a person of ordinary skill in the art would have understood as of the priority date of the ’458 Patent. Petitioner based this argument on statements by Dr. Katz that he was “not sure” as to “(1) what a person of ordinary skill in the art would have known; (2) the operation of the embodiments described in the ’458 patent; and (3) how a person of ordinary skill in the art would have interpreted various passages from the cited prior art” during deposition testimony. The Board reviewed the deposition testimony and determined that it was not necessary to exclude the testimony in its entirety, and noted that it is able to assess Petitioner’s arguments with respect to the weight to be given to relevant portions of Dr. Katz’s testimony, rather than to its admissibility.

Patent Owner’s Motion to Exclude sought to exclude a number of Petitioner’s exhibits. The Board granted parts, denied parts, and dismissed parts of the Motion. The Board declined to exclude an exhibit providing the first amended complaint filed by Patent Owner in the co-pending litigation, because the Board agreed with Petitioner that the exhibit was offered not for the truth of the matter asserted, but as evidence of how the Patent Owner has characterized the ’458 patent, and that such evidence is relevant to the credibility of its characterization of the ’458 patent in this proceeding. The Board also declined to exclude exhibits that were only cited in the Wechselberger Declaration as “Materials Reviewed and Relied Upon” without further discussion in any other paper, because these exhibits were reviewed in reaching his opinions and Patent Owner failed to show why they are irrelevant. In contrast, the Board did exclude an exhibit that was not cited in any of the documents, including the Wechselberger Declaration. The Board also declined to exclude the Wechselberger Declaration, because Patent Owner requested exclusion solely on the basis that the expert did not expressly recite the “preponderance of the evidence” standard, which is not a requirement.

The Board also declined to exclude certain cross-examination deposition testimony of Patent Owner’s declarant. First, the Board noted that a motion to exclude is not a proper vehicle for a party to raise the issue of cross-examination exceeding the scope of the direct testimony, and that Patent Owner should not seek to exclude questions and answers that were not objected to during the deposition. Second, the Board did not believe that the questions and answers were outside the scope of direct testimony. Additionally, the Board dismissed Patent Owner’s Motion to Exclude with respect to some of the exhibits as moot, because the Board did not rely on those exhibits.

Apple Inc. v. Smartflash LLC, CBM2014-00106

Paper 52: Final Written Decision

Dated: September 25, 2015

Patent 8,033,458 B2

Before: Jennifer S. Bisk, Rama G. Elluru, Jeremy M. Plenzler, and Matthew R. Clements

Written by: Plenzler

Related Proceedings: Smartflash LLC v. Apple, Inc., Case No. 6:13-cv-447 (E.D. Tex.); CBM2014-00107 (Consolidated with CBM2014-00106)