Trials@uspto.gov
`571-272-7822
`
`Paper 105
`Entered: October 7, 2014
`
`
`
`
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`SIGHTSOUND TECHNOLOGIES, LLC,
`Patent Owner.
`____________
`
`Case CBM2013-00020
`Patent 5,191,573
`
`
`
`Before MICHAEL P. TIERNEY, JUSTIN T. ARBES, and
`GEORGIANNA W. BRADEN, Administrative Patent Judges.
`
`ARBES, Administrative Patent Judge.
`
`FINAL WRITTEN DECISION
`35 U.S.C. § 328(a) and 37 C.F.R. § 42.73
`
`

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`CBM2013-00020
`Patent 5,191,573
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`
`I. BACKGROUND
`Petitioner Apple Inc. (“Apple”) filed a Corrected Petition (Paper 6,
`“Pet.”) seeking covered business method patent review of claims 1, 2, 4, and
`5 of U.S. Patent No. 5,191,573 (“the ’573 patent”) pursuant to 35 U.S.C.
`§§ 321–29. On October 8, 2013, we instituted a covered business method
`patent review of claims 1, 2, 4, and 5 on two grounds of unpatentability
`(Paper 14, “Dec. on Inst.”). Patent Owner SightSound Technologies, LLC
`(“SightSound”) filed a Patent Owner Response (Paper 41, “PO Resp.”),
`Apple filed a Reply (Paper 52, “Reply”), and SightSound filed a Sur-Reply
`(Paper 104, “Sur-Reply”). See Paper 100 (authorizing a sur-reply).
`Apple filed a Motion to Exclude (Paper 71, “Pet. Mot. to Exclude”)
`certain testimony from one of SightSound’s declarants, John Snell.
`SightSound filed an Opposition (Paper 79, “PO Exclude Opp.”), and Apple
`filed a Reply (Paper 88, “Pet. Exclude Reply”). SightSound filed a Motion
`to Exclude (Paper 68, “PO Mot. to Exclude”) certain testimony and evidence
`submitted by Apple. Apple filed an Opposition (Paper 80, “Pet. Exclude
`Opp.”), and SightSound filed a Reply (Paper 86, “PO Exclude Reply”).
`SightSound also filed a Motion for Observation (Paper 76, “Obs.”) on
`certain cross-examination testimony of Apple’s declarants, and Apple filed a
`Response (Paper 81, “Obs. Resp.”).
`The parties moved to seal certain materials in this proceeding, and we
`conditionally granted the motions and entered the parties’ proposed
`protective order, which was a copy of the Board’s default protective order.
`Paper 92. The materials later were unsealed upon agreement of the parties.
`Paper 100 at 3–4. Apple subsequently filed an additional Motion to Seal
`(Paper 102, “Mot. to Seal”), which is addressed herein.
`
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`
`A combined oral hearing in this proceeding and related Case
`CBM2013-00023 was held on May 6, 2014, and a transcript of the hearing is
`included in the record (Paper 101, “Tr.”).
`We have jurisdiction under 35 U.S.C. § 6(c). This final written
`decision is issued pursuant to 35 U.S.C. § 328(a) and 37 C.F.R. § 42.73.
`For the reasons that follow, we determine that Apple has shown by a
`preponderance of the evidence that claims 1, 2, 4, and 5 of the ’573 patent
`are unpatentable.
`
`
`A. The ’573 Patent
`The ’573 patent1 relates to a “method for the electronic sales and
`distribution of digital audio or video signals.” Ex. 4101, col. 1, ll. 9–14.2
`The ’573 patent describes how three types of media used for storing music at
`
`1 The ’573 patent issued on March 2, 1993, from U.S. Patent Application
`No. 07/586,391 (“the ’391 application”), filed September 18, 1990, which is
`a file wrapper continuation of U.S. Patent Application No. 07/206,497, filed
`June 13, 1988. The ’573 patent has expired. U.S. Patent No. 5,966,440
`(“the ’440 patent”) is a continuation-in-part of the ’573 patent, and is the
`subject of related Case CBM2013-00023.
`
` 2
`
` Apple’s original Exhibits 1101–1146 were not labeled properly. Paper 5 at
`2. Apple filed corrected exhibits, but used the same numbers as the
`originally filed exhibits. Paper 7. To avoid confusion, we renumbered the
`originally filed copies as Exhibits 4101–4146. Rather than referring to the
`replacement copies numbered Exhibits 1101–1146, however, the parties in
`their subsequent papers continued to refer to the originally filed copies
`numbered Exhibits 4101–4146. Apple also filed additional exhibits in the
`4000 series. To ensure that the record is clear, we exercise our discretion
`and waive the labelling requirements of 37 C.F.R. § 42.63(d), and refer to
`Apple’s original exhibits filed as Exhibits 4101–4274. See 37 C.F.R.
`§ 42.5(b). Accordingly, Exhibits 1101–1146 should no longer be cited in
`this proceeding.
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`the time of the patent—records, tapes, and compact discs (“CDs”)—did not
`allow for music to be transferred easily and had various problems, such as
`low capacity and susceptibility to damage during handling. Id. at col. 1,
`l. 17–col. 2, l. 9. The ’573 patent discloses storing “Digital Audio Music”
`(i.e., music encoded into binary code) on a computer hard disk and selling
`and distributing such music electronically. Id. at col. 1, ll. 53–56; col. 2,
`ll. 10–35.
`Figure 1 of the ’573 patent is reproduced below.
`
`
`
`As shown in Figure 1 above, an agent authorized to sell and distribute
`“Digital Audio Music” has control unit 20 (control panel 20a, control
`integrated circuit 20b, and sales random access memory chip 20c) and hard
`disk 10, which stores the music to be distributed. Id. at col. 3, ll. 44–67. On
`the other side of the Figure, a user has control unit 50 (control panel 50a,
`control integrated circuit 50b, incoming random access memory chip 50c,
`and playback random access memory chip 50d), hard disk 60, video display
`unit 70, and speakers 80. Id. at col. 3, l. 67–col. 4, l. 10. The agent and user
`are connected via telephone lines 30. Id. at col. 3, ll. 63–67. According to
`the ’573 patent, control units 20 and 50 are “designed specifically to meet
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`the teachings of this invention,” but all other components shown in Figure 1
`were “already commercially available.” Id. at col. 4, ll. 16–23.
`The ’573 patent describes a process by which a user transfers money
`“via a telecommunications line” to purchase music from the agent and the
`music is transferred electronically “via a telecommunications line” to the
`user and stored on the user’s hard disk. Id. at col. 5, ll. 29–45. Control
`integrated circuits 20b and 50b regulate the electronic transfer. Id. at col. 4,
`ll. 29–47. The agent’s sales random access memory chip 20c stores music
`temporarily so that it can be transferred to the user. Id. The user’s incoming
`random access memory chip 50c stores music temporarily before storage in
`hard disk 60, and playback random access memory chip 50d stores music
`temporarily so that it can be played. Id. In addition to “Digital Audio
`Music,” the ’573 patent contemplates “Digital Video” being sold and
`distributed electronically via the disclosed methods. Id. at col. 5, l. 67–col.
`6, l. 2.
`
`
`B. Exemplary Claim
`Claim 1 of the ’573 patent recites:
`1. A method for transmitting a desired digital audio
`signal stored on a first memory of a first party to a second
`memory of a second party comprising the steps of:
`a
`via
`transferring
`money
`electronically
`telecommunication line to the first party, at a location remote
`from the second memory and controlling use of the first
`memory, from the second party financially distinct from the
`first party, said second party controlling use and in possession
`of the second memory;
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`connecting electronically via a telecommunications line
`the first memory with the second memory such that the desired
`digital audio signal can pass therebetween;
`transmitting the desired digital audio signal from the first
`memory with a transmitter in control and possession of the first
`party to a receiver having the second memory at a location
`determined by the second party, said receiver in possession and
`control of the second party; and
`storing the digital signal in the second memory.
`
`C. Prior Art
`Apple relies on the following materials, which Apple contends are
`evidence of a publicly disclosed prior art system referred to by Apple as the
`“CompuSonics system”:
`1. Declaration of David M. Schwartz, founder of
`CompuSonics Corp. and CompuSonics Video Corp. (Ex. 4133);
`2. Joint Telerecording Push: CompuSonics, AT&T Link,
`BILLBOARD, Oct. 5, 1985 (Ex. 4106);
`3. David Needle, From the News Desk: Audio/Digital
`Interface for the IBM PC?, INFOWORLD, June 4, 1984, at 9
`(Ex. 4107);
`4. Larry Israelite, Home Computing: Scenarios for
`Success, BILLBOARD, Dec. 15, 1984 (Ex. 4108);
`5.
`Image
`titled
`“CompuSonics Digital Audio
`Telecommunications System” (Ex. 4112);
`6. Letter from David M. Schwartz to CompuSonics
`shareholders, July 16, 1984 (Ex. 4113);
`7. Hyun Heinz Sohn, A High Speed Telecommunications
`Interface for Digital Audio Transmission and Reception,
`presented at the 76th Audio Engineering Society (AES)
`Convention, Oct. 8-11, 1984 (Ex. 4114);
`8. Letter from David M. Schwartz to CompuSonics
`shareholders, Oct. 10, 1985 (Ex. 4115);
`
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`9. CompuSonics Video Application Notes: CSX Digital
`Signal Processing (1986) (Ex. 4116);
`10. Image titled “CompuSonics Digital Audio Software
`Production/Distribution” (Ex. 4117);
`11. U.S. Patent No. 4,682,248, issued July 21, 1987
`(Ex. 4118);
`12. Brian Dumaine, The Search for the Digital Recorder,
`FORTUNE, Nov. 12, 1984 (Ex. 4119);
`13. Video excerpts of a lecture given at Stanford
`University by David M. Schwartz and John P. Stautner, Feb.
`18, 1987 (Ex. 4120);
`14. Photograph of CompuSonics equipment (Ex. 4131);
`
`and
`
`15. New Telerecording Method for Audio, BROADCAST
`MANAGEMENT/ENGINEERING, Oct. 1985, at 14-15 (Ex. 4140).
`
`
`D. Pending Grounds of Unpatentability
`The instant covered business method patent review involves the
`following grounds of unpatentability:
`Reference(s)
`Basis
`CompuSonics system
`35 U.S.C. § 102(a)
`
`Claims
`1, 2, 4, and 5
`
`CompuSonics
`publications (Exhibits
`4106–4108, 4112–4119,
`and 4140)
`
`35 U.S.C. § 103(a)
`
`1, 2, 4, and 5
`
`
`II. ANALYSIS
`A. Claim Interpretation
`The Board interprets claims of unexpired patents using the “broadest
`reasonable construction in light of the specification of the patent in which
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`[they] appear[].” 37 C.F.R. § 42.300(b); see also Office Patent Trial
`Practice Guide, 77 Fed. Reg. 48,756, 48,766 (Aug. 14, 2012) (“Trial Practice
`Guide”). For claims of an expired patent, however, the Board’s claim
`interpretation analysis is similar to that of a district court. See In re Rambus
`Inc., 694 F.3d 42, 46 (Fed. Cir. 2012). Claim terms are given their plain and
`ordinary meaning as would be understood by a person of ordinary skill in the
`art at the time of the invention and in the context of the entire patent
`disclosure. Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005)
`(en banc). “There are only two exceptions to this general rule: 1) when a
`patentee sets out a definition and acts as his own lexicographer, or 2) when
`the patentee disavows the full scope of a claim term either in the
`specification or during prosecution.” Thorner v. Sony Computer Entm’t Am.
`LLC, 669 F.3d 1362, 1365 (Fed. Cir. 2012). Prosecution disclaimer or
`disavowal must be clear and unmistakable. Omega Eng’g, Inc. v. Raytek
`Corp., 334 F.3d 1314, 1325–26 (Fed. Cir. 2003). We apply this standard to
`the claims of the expired ’573 patent.
`
`
`1. Previously Interpreted Terms
`In the Decision on Institution, we interpreted various claim terms of
`the ’573 patent as follows:
`
`Term(s)
`“first party”
`
`“second party”
`
`Interpretation
`a first entity, whether a corporation
`or a real person
`a second entity, whether a
`corporation or a real person
`
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`
`Term(s)
`“telecommunication line”
`(claim 1)
`“telecommunications line”
`(claims 1 and 4)
`“electronically”
`
`“connecting electronically”
`
`“transferring money
`electronically”
`
`“digital audio signal”
`
`Interpretation
`an electronic medium for
`communicating between computers
`
`through the flow of electrons
`
`connecting through devices or
`systems which depend on the flow
`of electrons
`providing payment electronically
`(i.e., through devices or systems
`which depend on the flow of
`electrons)
`digital representation of sound
`waves
`
`See Dec. on Inst. 8–9. Neither party disputes these interpretations in the
`Patent Owner Response, Reply, or Sur-Reply. We incorporate our previous
`analysis for purposes of this decision. See id.
`
`
`2. “Second Memory” (Claims 1 and 4)
`SightSound argues that one additional term requires interpretation:
`“second memory.” PO Resp. 24–27. Independent claims 1 and 4 recite
`transferring money electronically from a “second party controlling use and
`in possession of [a] second memory” to a first party having a first memory,
`connecting the first memory with the second memory, transmitting the
`second party’s desired digital signal, and “storing the digital signal in the
`second memory.” In its Patent Owner Response, SightSound proposes two
`interpretations for “second memory.” First, SightSound states that the “only
`reasonable interpretation of ‘second memory’ . . . is that the claims require a
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`hard disk for storage, not a removable medium.”3 Id. at 26–27 (citing
`Ex. 2153 ¶ 28). Second, SightSound argues that “second memory” means
`“a non-volatile form of memory that is not a tape, CD or other similar
`removable media.” Id. at 13. Apple disagrees with both assertions, arguing
`that “second memory” should not be interpreted as requiring a hard disk or
`non-removable medium. Reply 2–3 (citing Ex. 4262 ¶¶ 4–13).
`
`
`a. Ordinary Meaning
`The parties do not dispute that the ordinary and customary meaning of
`“memory” does not require a hard disk or that the device be non-removable.
`One dictionary, for example, defines “memory” as “storage space in a
`computer system or medium that is capable of retaining data or
`instructions.” S.M.H. COLLIN, ED., DICTIONARY OF COMPUTING (2004)
`(Ex. 3001); see also WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
`1409 (1986) (Ex. 3002) (defining “memory” as “a component in an
`electronic computing machine (as a computer) in which information (as data
`or program instructions) may be inserted and stored and from which it may
`be extracted when wanted” or “a device external to a computer for the
`insertion, storage, and extraction of information”). Thus, the ordinary
`meaning of “second memory” is a second storage space in a computer
`system or medium that is capable of retaining data or instructions.
`
`
`
`3 SightSound argued at the hearing that “second memory” should be limited
`further to require an “internal hard drive” and exclude “external hard
`drives.” Tr. 42:3–16. Because we are not persuaded that “second memory”
`requires a hard disk, for the reasons explained below, we need not determine
`whether such a device must be internal rather than external.
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`
`b. Specification of the ’573 Patent
`SightSound contends that the ordinary meaning of “second memory”
`is disclaimed expressly in the Specification of the ’573 patent. PO Resp.
`25–28. SightSound argues that (1) the Specification describes various
`disadvantages of records, tapes, and CDs, such as potential damage during
`handling, limited capacity, and limited playback capability, and “[f]loppy
`disks have the same limitations” according to SightSound, (2) the purpose of
`the ’573 patent system was to overcome those disadvantages, and (3) every
`embodiment in the Specification overcomes the identified disadvantages in
`the prior art. Id. (citing Ex. 4101, col. 1, l. 16–col. 2, l. 9). In particular,
`SightSound points to the statement in the Specification that Digital Audio
`Music is “stored onto one piece of hardware, a hard disk, thus eliminating
`the need to unnecessarily handle records, tapes, or compact discs on a
`regular basis.” Ex. 4101, col. 2, ll. 31–35.
`We are not persuaded that the Specification limits the recited “second
`memory” to a hard disk. The Specification describes the use of a hard disk
`in the context of describing a preferred embodiment, not defining the
`“second memory” recited in the claims. See, e.g., id. at col. 3, ll. 42–57
`(describing hard disk 60 of the user in a section titled “Description of the
`Preferred Embodiment”); col. 5, ll. 61–67 (stating that the description and
`drawings “shall be interpreted as illustrative, and not in a limiting sense”).
`We do not see anything in the Specification indicating that the disclosed
`method requires a hard disk, as opposed to merely treating it as a preferred
`type of memory.
`Nor are we persuaded that the Specification limits “second memory”
`to only non-removable devices. The Specification does not use the term
`
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`“removable” or state that any memory must be incapable of being removed.
`Indeed, hard disks, which are the preferred embodiment disclosed in the
`Specification, were available at the time of the ’573 patent as removable and
`non-removable devices, as SightSound’s declarant, Mr. Snell,
`acknowledges. See Ex. 4165 at 107:20–108:2. Further, the Specification’s
`description of disadvantages of certain types of removable storage media
`(i.e., records, tapes, and CDs) does not mean necessarily that the term
`“second memory” excludes such devices. See Thorner, 669 F.3d at 1366
`(“Mere criticism of a particular embodiment encompassed in the plain
`meaning of a claim term is not sufficient to rise to the level of clear
`disavowal.”). The Specification does not indicate that the identified
`disadvantages extend to all removable media or that the disadvantages occur
`specifically because the devices are removable. See Ex. 4101, col. 1,
`l. 17–col. 2, l. 9. To the contrary, some of the identified disadvantages, like
`limited capacity and playback capability, have nothing to do with whether
`the device can be removed. See id. at col. 1, ll. 21–38. Thus, we do not see
`any basis in the Specification for limiting “second memory” to only
`non-removable devices.
`We also note that the primary case relied upon by SightSound in
`support of its proposed interpretation, In re Abbott Diabetes Care Inc., 696
`F.3d 1142 (Fed. Cir. 2012), is distinguishable. In Abbott, the Federal Circuit
`interpreted the claim term “electrochemical sensor” as excluding cables and
`wires, noting that the “claims themselves suggest[ed]” that the sensor does
`not include such devices. Id. at 1149. The challenged claims of the ’573
`patent, by contrast, do not have anything suggesting that the “second
`memory” must be non-removable. Also, the specification of the patent at
`
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`issue in Abbott specifically referenced “cables and wires,” whereas the ’573
`patent Specification does not discuss the removability of any memory. See
`id. at 1150. Accordingly, we are not persuaded that the Specification shows
`a clear disclaimer of the ordinary meaning of “second memory.”
`
`c. Prosecution History
`SightSound also argues that the prosecution history of an ex parte
`reexamination of the ’573 patent, Reexamination Control No. 90/007,402
`(“the ’402 reexamination”), shows that “second memory” means
`“non-volatile storage that is not a tape, CD, or removable media.” PO Resp.
`11–13. During the reexamination, the patentee amended claims 1 and 4 to
`recite “storing the digital signal in a non-volatile storage portion of the
`second memory, wherein the non-volatile storage portion is not a tape or a
`CD.” Ex. 4103 at 716–17 (added language in emphasis). The ’573 patent
`then expired, removing the pending amendments from consideration. Id. at
`1504–05. The examiner entered a new rejection of the original claims based
`on certain prior art that disclosed storing a digital audio signal on a tape or
`CD. Id. at 1506–22. In response, the patentee argued that (1) “cassette tapes
`and CDs are not ‘second memories’ according to the claims and
`specification,” and (2) tapes, records, and CDs are “described in the
`specification as containing drawbacks in light of their removable nature and
`their physical distribution (when compared with a hard disk acting as an
`internal, non-volatile storage device), and it is those drawbacks that the
`patented invention seeks to overcome.” Id. at 1531–32.
`The examiner then allowed the claims, stating that “[i]n view of [the]
`patent expiration, the specification, and the repeated patent owner statements
`
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`and actions [during the reexamination], the examiner interprets the ordinary
`and customary meaning of ‘second memories’ as not including cassette
`tapes, CDs and the like.” Id. at 1587. Thus, the examiner viewed the claims
`as having “essentially the same scope” as the amended claims reciting a
`second memory that is “not a cassette tape or a CD.” Id. (emphasis omitted).
`SightSound reads the examiner’s statement of “and the like” as applying to
`all removable media, and asserts that the examiner’s interpretation should
`apply in this proceeding as well. PO Resp. 12–13.
`We are not persuaded that the prosecution history demonstrates a clear
`and unmistakable disclaimer of all removable media. Again, like the
`portions of the Specification discussed above, the cited statements from the
`prosecution history pertain to specific hardware devices—records, tapes, and
`CDs—and are not tied explicitly to all removable media. Further, the prior
`art the patentee was attempting to overcome in the reexamination used a tape
`or CD for storage. See Ex. 4103 at 1506–22. The fact that tapes and CDs
`have the common attribute of being removable (in addition to many other
`attributes) does not mean that the patentee was disclaiming all removable
`devices. At most, the patentee’s statements may be read as disclaiming
`records, tapes, and CDs, but may not be read as disclaiming all removable
`media as SightSound contends.
`In addition, certain statements in the prosecution history contradict
`SightSound’s proposed interpretation. During the original prosecution of the
`’391 application, which issued as the ’573 patent, the named inventor,
`Arthur R. Hair, stated that “[a]ny suitable recording apparatus controlled and
`in possession of the second party can be used to record the incoming digital
`signals.” Ex. 4102 at 140. SightSound characterizes the word “suitable” as
`
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`indicative of Mr. Hair describing non-removable devices, but we see nothing
`in the surrounding discussion indicating that he meant “suitable” to mean
`non-removable. See Sur-Reply 8 n.6. In addition, the original claims of the
`’391 application expressly recited a “hard disk,” but the language was
`removed from the claims in favor of the broader term “second memory.”
`See Ex. 4102 at 18 (reciting a “hard disk of the user”); see also Ex. 4103 at
`717–18 (new claims submitted in the ’402 reexamination reciting “second
`party hard disk”). This indicates a deliberate choice to use the broader
`“second memory” language instead of a narrower term, such as “hard disk.”
`After reviewing the full prosecution history of the ’573 patent and ’402
`reexamination, we do not see clear evidence that “second memory” excludes
`removable devices.
`
`
`d. Conclusion
`For the reasons explained above, we are not persuaded that the full
`scope of “second memory” was disclaimed, either in the Specification or
`during prosecution. Thus, we interpret the term according to its ordinary
`meaning to mean a second storage space in a computer system or medium
`that is capable of retaining data or instructions.
`
`
`B. Overview of the CompuSonics Prior Art
`In its Petition, Apple alleges that a computer system, referred to by
`Apple as the “CompuSonics system,” was developed by CompuSonics Corp.
`and CompuSonics Video Corp. (collectively, “CompuSonics”) in the 1980s.
`Pet. 33–35. Apple provides as supporting evidence a declaration from the
`founder of CompuSonics, David M. Schwartz (Ex. 4133), as well as various
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`printed publications (Exs. 4106–4108, 4112–4119, 4140), a photograph
`(Ex. 4131), and a videotaped lecture from February 18, 1987 (Ex. 4120),
`allegedly describing the CompuSonics system. In response, SightSound
`provides a declaration from another former CompuSonics employee, John
`P. Stautner (Ex. 2121). Before turning to the substance of Apple’s
`allegations of unpatentability, we provide a brief summary of the evidence
`submitted by the parties.
`
`1. Mr. Schwartz’s Testimony and the CompuSonics Publications
`Mr. Schwartz, founder of CompuSonics and declarant for Apple,
`testifies that the CompuSonics system comprised “digital recorder/players,
`which CompuSonics referred to as DSPs [Digital Signal Processors].”
`Ex. 4133 ¶ 4. According to Mr. Schwartz, a DSP could “download digital
`data from a remote source to a local disk” (a process CompuSonics called
`“[t]elerecording”) and play back the stored digital data. Id. Mr. Schwartz
`provides the following photograph of “a CompuSonics digital
`recorder/player” as Exhibit 4131. Ex. 4133 ¶ 18.
`
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`Exhibit 4131 is a photograph depicting a “DSP-1000” device with a floppy
`disk that can be inserted in the device.
`Mr. Schwartz also provides two diagrams allegedly showing the
`CompuSonics system. The first diagram is Exhibit 4112 shown below.
`
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`Exhibit 4112 depicts the transmission of digital audio from one “DSP-2002”
`to another “DSP-2002” over an AT&T telephone line or T1 line.
`Mr. Schwartz testifies that he created the diagram, which “illustrat[es]
`CompuSonics’[s] telerecording technology, dated 1985,” and presented the
`diagram to the public at various events. Ex. 4133 ¶ 9.
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`The second diagram is Exhibit 4117 shown below.
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`Exhibit 4117 depicts “Dial-Up Electronic Record Store” user access to a
`music performance via a “Local Phone Company” and “AT&T Accunet.”
`Mr. Schwartz testifies that he created the diagram and showed it to the
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`public at various events, including the videotaped lecture he gave with
`Mr. Stautner in 1987 (Ex. 4120). Ex. 4133 ¶ 14.
`Mr. Schwartz describes the CompuSonics publications and attests that
`they are “public disclosure[s] of features of the CompuSonics system.” Id.
`¶¶ 5–14, 16, 17, 19. For example, various publications describe
`downloading music electronically over a telephone line and storing it locally
`on the user’s device. A June 1984 article in InfoWorld magazine discloses:
`Among the new products to be previewed at the
`Consumer Electronics Show this month will be a digital / audio
`disk player that uses a new 3.3-megabyte floppy drive to store
`music in digital form. The player will cost $1,000. The
`company behind the product, CompuSonic[s], says it also has
`developed a software interface for its new CompuSonic[s]
`DS-1000 system that will allow the user to route music through
`the IBM PC. The user will supposedly be able to edit the music
`by using the computer’s keyboard as a mixer. The firm is also
`looking at potential electronic distribution of music whereby
`you would be able to download music onto your PC in the same
`manner as other digital information. The CompuSonic[s]
`system has a built-in communications device that receives
`information via an existing phone line.
`Ex. 4107 at 1 (emphasis added). A June 1984 letter to CompuSonics
`shareholders states:
`Testing of the Telerecording system with CMI Labs
`began last week. . . . A successful test of the digital
`transmission of high fidelity music over telephone lines will be
`followed by a joint press conference of CompuSonics, CMI
`Labs and AT&T, heralding the dawn of a new era in the music
`industry in the not too distant future [when] consumers will be
`able to purchase digital recordings of their favorite artists
`directly from the production studio’s dial-up data base and
`record them on blank SuperFloppies in a DSP-1000.
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`Ex. 4113 at 1 (emphases added); see also Ex. 4106 at 3 (“record the
`transmission onto a five-and-a-quarter-inch ‘super-floppy’ disk”).
`Various publications also describe work that CompuSonics did with
`AT&T in the 1980s, including one demonstration of transmitting digital
`audio between DSPs in Chicago and New York. An October 1985 article in
`Billboard magazine discloses that the two companies entered into an
`agreement to jointly promote AT&T’s “Accunet Switched 56 data
`transmission service and CompuSonics[’s] digital telerecording system.”
`Ex. 4106 at 3. The article states:
`At a recent press demonstration hosted by AT&T at its
`headquarters here, CompuSonics made use of AT&T’s
`land-based telephone data transmission system to digitally
`transmit and receive music between Chicago and New York.
`. . .
`David Schwartz, president of CompuSonics, is a strong
`proponent of the “electronic record store” concept, an idea that
`has been bandied about for some time, but which Schwartz says
`is now poised to “become a reality.” While that is open to
`debate, such a system, as seen by Schwartz and CompuSonics,
`would utilize the firm’s telerecording process and hard disk
`equipment to allow music software dealers to receive an album
`master via a digital transmission from the record company.
`The retailers would then be able, in turn, to digitally
`transmit the music to consumers who would use credit cards to
`charge their purchases over the phone lines. The final step
`would involve the CompuSonics consumer digital audio
`recorder/player (which has yet to see production), which would
`record
`the
`transmission onto a
`five-and-a-quarter-inch
`“super-floppy” disk.
`Id.; see also Ex. 4114 at 2 (describing the use of the AT&T Accunet service
`for transmitting digital audio signals at 56,000 bits per second); Ex. 4140.
`An October 1985 letter to CompuSonics shareholders describes a “series of
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`successful telerecording tests and demonstrations which culminated in
`August with New York City to Chicago and back digital audio
`communications between two CompuSonics DSP-2002s with AT&T
`ACCUNET Switched 56 service providing the channel.” Ex. 4115 at 1.
`Finally, the CompuSonics publications discuss using the telerecording
`process to sell music to consumers. One article, for instance, contemplates
`retailers being able “to digitally transmit the music to consumers who would
`use credit cards to charge their purchases over the phone lines.” Ex. 4106 at
`3. Another discloses that:
`Compusonics is talking to AT&T about setting up a service that
`would enable record companies to sell direct to consumers over
`the telephone. Symphonies, ordered by credit card, could travel
`digitally over phone lines into homes to be recorded by
`Compusonics’[s] machine. Movies, which can also be recorded
`digitally, might be sent the same way.
`Ex. 4119 at 2. Another publication states that:
`AT&T’s commitment to telerecording may hasten the arrival of
`that day, in the not too distant future, when the technology will
`filter down to the consumer level, allowing all-electronic
`purchases, transfers and digital recording of high fidelity audio
`from any music dealer’s DSP-2000 to the DSP-1000 in your
`living room.
`Ex. 4115 at 1.
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`2. Mr. Stautner’s Testimony
`Mr. Stautner, declarant for SightSound, testifies that he began
`working for CompuSonics as its second employee in 1983 or 1984, became
`President of CompuSonics Video Corp. in 1985, and remained with the
`company until CompuSonics went out of business in 1989 or 1990.
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`Ex. 2121 ¶¶ 3–4. Mr. Stautner describes two “series” of DSPs created by
`CompuSonics, both of which could record audio in digital form. Id.
`¶¶ 6–14. The “2000 series,” which included the DSP-2002 and DSP-2004,
`was meant for professional recording studios and used a hard disk for storing
`digital audio. Id. ¶¶ 6–7. The “1000 series” was meant for consumers and
`“used a floppy disk storage system as well as cartridge floppy storage and
`cartridge optical disk storage.” Id. ¶¶ 8–9. Later DS