Samsung Electronics America, Inc. v. Smartflash LLC (PTAB 2016)

PTAB Not Bound by Prior District Court Ruling on § 101

By Joseph Herndon --

On March 30, 2016, the U.S. Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB) issued a Final Written Decision in a case captioned Samsung Electronics America, Inc., Samsung Electronics Co., LTD., and Apple, Inc. v. Smartflash LLC (Patent Owner), in which the challenged claim was found to be directed to patent ineligible subject matter under 35 U.S.C. § 101.  Despite the Petitioner having already lost a Motion for Summary Judgment of Invalidity under § 101 in its related district court litigation with Patent Owner, the PTAB sided with the Petitioner.

Samsung initially filed a Petition to institute covered business method (CBM) patent review of claim 11 of U.S. Patent No. 8,033,458 based upon the assertion that claim 11 is directed to patent ineligible subject matter under 35 U.S.C. § 101.  Later, Apple filed a Petition to institute CBM review of claim 11 based on the same ground, and Apple simultaneously filed a "Motion for Joinder" of their newly filed case with Samsung's previously instituted case.  The PTAB granted Apple's Petition and consolidated the two proceedings.

The '458 Patent

Owners of proprietary data, especially audio recordings, have a need to address the prevalence of "data pirates" who make proprietary data available over the internet without authorization.  The '458 patent describes providing portable data storage together with a means for conditioning access to that data upon validated payment.  This combination allows data owners to make their data available over the internet without fear of data pirates.  The portable data storage device is connected to a terminal for internet access that reads payment information, validates that information, and downloads data into the portable storage device from a data supplier.  The data on the portable storage device can be retrieved and output from a mobile device.

The '458 patent discusses addressing recording industry concerns of data pirates offering unauthorized access to widely available compressed audio recordings.  The '458 patent proposes to solve this problem by restricting access to data on a device based upon satisfaction of use rules linked to payment data.  The challenged claim (claim 11) depends from independent claim 6.  Claims 6 and 11 are reproduced below:

6.  A data access device for retrieving stored data from a data carrier, the device comprising:
    a user interface;
    a data carrier interface;
    a program store storing code implementable by a processor; and
    a processor coupled to the user interface, to the data carrier interface and to the program store for implementing the stored code, the code comprising:
        code to retrieve use status data indicating a use status of data stored on the carrier, and use rules data indicating permissible use of data stored on the carrier;
        code to evaluate the use status data using the use rules data to determine whether access is permitted to the stored data; and
        code to access the stored data when access is permitted.

11.  A data access device according to claim 6 wherein said use rules permit partial use of a data item stored on the carrier and further comprising code to write partial use status data to the data carrier when only part of a stored data item has been accessed.

1.  Abstract Idea

The PTAB followed the Supreme Court's framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of these concepts.  The first step in the analysis is to determine whether the claims at issue are directed to one of those patent-ineligible concepts.

The Petitioner argued that the challenged claim is directed to the abstract idea of "regulating authorized use of information."  The PTAB noted that the Patent Owner did not explain in its briefs how the claimed subject matter escapes this classification.  The PTAB thus made short work on step one, and found claim 11 to be drawn to a patent-ineligible abstract idea as proposed by Petitioner.

2.  Inventive Concept

A claim that recites an abstract idea must include additional features so as to survive a challenge under section 101.  This second part of the test has been referred to as a search for an inventive concept.

The Petitioner argued that the claims of the '458 patent cover nothing more than the basic financial idea of enabling limited use of paid for and/or licensed content using conventional computer systems and components.  The PTAB agreed with and adopted the Petitioner's rationale that the additional elements of the challenged claims are generic features of a computer that do not bring the challenged claim within § 101 patent eligibility.

The specification of the '458 patent treats as well-known all potentially technical aspects of the claims, which simply require generic computer components (e.g., interfaces, program store, and processor).  Further, the claimed computer code simply performs generic computer functions, such as retrieving, accessing, evaluating, and writing.  The PTAB noted that the recitation of these generic computer functions is insufficient to confer specificity.

Because the Patent Owner did not provide any argument as to how the claimed "program store" recited in claim 6 is constructed or implemented in an unconventional manner, the PTAB did not find any inventive concept in the '458 patent related to the way these data types are constructed or used.  The '458 patent claim simply recites data types with no description of the underlying implementation or programming that results in these data types.

In addition, because the recited elements can be implemented on a general purpose computer, the challenged claim does not cover a "particular machine."  Thus, the PTAB determined that the potentially technical elements of the claim are nothing more than "generic computer implementations" and perform functions that are "purely conventional."

Relying on the Federal Circuit's decision in DDR Holdings, the Patent Owner asserted that the challenged claim is directed to statutory subject matter because "the claims are rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks."  Specifically, the Patent Owner contended that the challenged claim is "directed to particular devices that can download and store digital content into a data carrier."

The PTAB did not agree that the challenged claims "are rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks -- that of digital data piracy" and "address . . . a challenge particular to the Internet."  The PTAB noted that data piracy exists in contexts other than the Internet, such as data piracy of CDs being addressed by copyright protection.  Whatever the problem, the PTAB found that the solution provided by the challenged claim is not rooted in specific computer technology.

Although the specification discusses data piracy on the Internet, the challenged claims are not limited to the Internet.  The underlying concept of the challenged claims, particularly when viewed in light of the '458 patent specification, is controlling access to content, which the PTAB found to be a fundamental economic practice long in existence in commerce.

After applying this two-part test, the PTAB found that Petitioner had shown by a preponderance of the evidence that the challenged claims are drawn to an abstract idea that does not add an inventive concept sufficient to ensure that the patent in practice amounts to significantly more than a patent on the abstract idea itself, and thus, claim 11 of the '458 patent is unpatentable under § 101.

Lastly, the Patent Owner asserted that (1) Petitioner has already lost a Motion for Summary Judgment of Invalidity under § 101 in its related district court litigation with Patent Owner; and that (2) the Office is estopped from revisiting the issue of § 101, which was inherently reviewed during examination.

But the PTAB noted that the Patent Owner did not provide any authority that precluded the PTAB from deciding the issue of patent eligibility under § 101 in the context of the present AIA proceeding, even where a non-final district court ruling on § 101 exists.  Similarly, the Patent Owner did not provide any authority for its assertion that the question of whether the claims are directed to statutory subject matter has already been adjudicated by the USPTO, and the USPTO is estopped from allowing the issues to be raised in the present proceeding.

Samsung Electronics America, Inc. v. Smartflash LLC (Case CBM2014-00192) (PTAB 2016)
Before Jennifer S. Bisk, Rama G. Elluru, Jeremy M. Plenzler, and Matthew R. Clements, Administrative Patent Judges
Final Written Decision by Jeremy M. Plenzler

Comments

[GrzeszDeL]

"[T]he PTAB noted that the Patent Owner did not provide any authority that precluded the PTAB from deciding... eligibility under § 101... where a non-final district court ruling on § 101 exists."

I doubt that they could cite any such authority. The authority that I find suggests exactly the opposite. Invalidity in an Art. III court must be proven by clear-&-convincing evidence because of the § 282 presumption of validity. By contrast, invalidity in a CBM must only be proven by preponderance of the evidence (35 U.S.C. § 326(e)). Therefore, there is no reason why a district court decision against invalidity should preclude the PTAB from finding unpatentability. The evidentiary standards are different, in such a way as to make issue preclusion inapplicable here.

If the PTAB holds for § 101 patentability, that might preclude a district court from ruling the claims invalid. And if the district court were to hold the claims invalid under § 101, that would preclude the PTAB from finding them patentable under § 101. There is nothing out of order, however, in the district court saying "the challenger has not shown these claims invalid by clear-&-convincing evidence," but the PTAB looking at the same evidence and saying "the challenger has shown these claims unpatentable by a preponderance of the evidence."

[skeptical]

GrzeszDel points out quite clearly how one of the sticks in the bundle of property rights within a granted patent has a very real and material effect, and that the initiation point at which that stick is taken without recompense or chance of Article III review is a material violation of constitutional protections afforded the property that is a granted patent.

This defect appears to be NOT fixable by either the executive or judicial branches, as this is a clear and unambiguous intent of the law as written by the legislative branch.

I will leave the necessary results of such a situation up to the reader's critical thinking...

[Paul F. Morgan]

This PTAB CBM 101 decision contrary to the D.C. S.J decision on the same claims will be interesting to see on appeal at the Fed. Cir. since [assuming the BRI vs Phllips claim scope is not also a factor in issue] this should be the same Alice-101 test for a CBM as for the D.C.?

But note that this was not a final decision of the D.C., and in the D.C. the defendant had at least two additional hurdles to get S.J. granted that did not apply in the CBM: a burden of clear and convincing evidence AND the absence of disputed facts requiring a trial precluding S.J.

[Also, without having seen either the PTAB or the D.C. S.J. decision I would take a bet that the PTAB did a more though job of documenting its Alice-101 decision than the D.C. did in simply denying S.J. They have a lot of experience with it.]

[Atari Man]

Showing yet again why it's absurd to have different standards for IPRs and PGRs at the PTO versus proceedings before real courts.

[QuasiCommenter]

Skeptical points out that this taking-effect of a property right "is a clear and unambiguous intent of the law as written by the legislative branch." But says the judicial branch cannot resolve it. If this is the taking of private property without compensation, it violates the fifth amendment's takings clause, and could be stricken by a court as unconstitutional.

Of course any court refusing to recognize such a violation of the takings clause would probably say something about patents being quasi-property, and thus not qualifying for fifth amendment protection in this particular case.