Trials@uspto.gov
`571-272-7822
`
`Paper 101
`Entered: October 7, 2014
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`APPLE INC.,
`Petitioner,
`
`v.
`
`SIGHTSOUND TECHNOLOGIES, LLC,
`Patent Owner.
`____________
`
`Case CBM2013-00023
`Patent 5,966,440
`
`
`
`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
`
`
`571-272-7822
`
`Paper 101
`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 CBM2013-00023
`Patent 5,966,440
`
`
`
`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
`
`
`
`CBM2013-00023
`Patent 5,966,440
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`
`I. BACKGROUND
`Petitioner Apple Inc. (“Apple”) filed a Corrected Petition (Paper 5,
`“Pet.”) seeking covered business method patent review of claims 1, 64, and
`95 of U.S. Patent No. 5,966,440 (“the ’440 patent”) pursuant to 35 U.S.C.
`§§ 321–29. On October 8, 2013, we instituted a covered business method
`patent review of claims 1, 64, and 95 on two grounds of unpatentability
`(Paper 12, “Dec. on Inst.”). Patent Owner SightSound Technologies, LLC
`(“SightSound”) filed a Patent Owner Response (Paper 38, “PO Resp.”),
`Apple filed a Reply (Paper 49, “Reply”), and SightSound filed a Sur-Reply
`(Paper 100, “Sur-Reply”). See Paper 96 (authorizing a sur-reply).
`Apple filed a Motion to Exclude (Paper 67, “Pet. Mot. to Exclude”)
`certain testimony from one of SightSound’s declarants, John Snell.
`SightSound filed an Opposition (Paper 75, “PO Exclude Opp.”), and Apple
`filed a Reply (Paper 85, “Pet. Exclude Reply”). SightSound filed a Motion
`to Exclude (Paper 64, “PO Mot. to Exclude”) certain testimony and evidence
`submitted by Apple. Apple filed an Opposition (Paper 76, “Pet. Exclude
`Opp.”), and SightSound filed a Reply (Paper 82, “PO Exclude Reply”).
`SightSound also filed a Motion for Observation (Paper 72, “Obs.”) on
`certain cross-examination testimony of Apple’s declarants, and Apple filed a
`Response (Paper 77, “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 88. The materials later were unsealed upon agreement of the parties.
`Paper 96 at 3–4. Apple subsequently filed an additional Motion to Seal
`(Paper 98, “Mot. to Seal”), which is addressed herein.
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`A combined oral hearing in this proceeding and related Case
`CBM2013-00020 was held on May 6, 2014, and a transcript of the hearing is
`included in the record (Paper 97, “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, 64, and 95 of the ’440 patent
`are unpatentable.
`
`
`A. The ’440 Patent
`The ’440 patent1 relates to a “system and associated method for the
`electronic sales and distribution of digital audio or video signals.” Ex. 4301,
`col. 1, ll. 16–21.2 The ’440 patent describes how three types of media used
`
`
`1 The ’440 patent issued on October 12, 1999, from U.S. Patent Application
`No. 08/471,964, filed June 6, 1995. The ’440 patent is a continuation-in-part
`of U.S. Patent Application No. 08/023,398, filed February 26, 1993, and
`abandoned subsequently, which is a continuation of U.S. Patent Application
`No. 07/586,391, filed September 18, 1990, and issued as U.S. Patent No.
`5,191,573 (the “’573 patent”), which is a file wrapper continuation of U.S.
`Patent Application No. 07/206,497, filed June 13, 1988. The ’573 patent is
`the subject of related Case CBM2013-00020.
`
` Apple’s original Exhibits 1301–1347 were not labeled properly. Paper 4 at
`2. Apple filed corrected exhibits, but used the same numbers as the
`originally filed exhibits. Paper 6. To avoid confusion, we renumbered the
`originally filed copies as Exhibits 4301–4347. Rather than referring to the
`replacement copies numbered Exhibits 1301–1347, however, the parties in
`their subsequent papers continued to refer to the originally filed copies
`numbered Exhibits 4301–4347. 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
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`for storing music at 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. 24–col. 2, l. 21. The ’440 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. 58–61; col. 2, ll. 22–48.
`Figure 1 of the ’440 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, l. 62–col. 4,
`l. 18. 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,
`
`Apple’s original exhibits filed as Exhibits 4301–4473. See 37 C.F.R.
`§ 42.5(b). Accordingly, Exhibits 1301–1347 should no longer be cited in
`this proceeding.
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`video display unit 70, and speakers 80. Id. at col. 4, ll. 18–28. The agent
`and user are connected via telephone lines 30. Id. at col. 4, ll. 14–18.
`According to the ’440 patent, control units 20 and 50 are “designed
`specifically to meet the teachings of this invention,” but all other
`components shown in Figure 1 were “already commercially available.” Id.
`at col. 4, ll. 34–40.
`The ’440 patent describes a process by which a user transfers money
`“via telecommunications lines” to purchase music from the agent and the
`music is transferred electronically “via telecommunications lines” to the user
`and stored on the user’s hard disk. Id. at col. 5, ll. 43–62. For example, a
`user may provide a credit card number to charge a fee to the user’s credit
`card account. Id. at col. 7, ll. 34–56. Control integrated circuits 20b and 50b
`regulate the electronic transfer. Id. at col. 4, ll. 45–63. 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 ’440 patent
`contemplates “Digital Video” being sold and distributed electronically via
`the disclosed methods. Id. at col. 6, ll. 16–19.
`
`
`B. Exemplary Claim
`Claim 1 of the ’440 patent recites:
`1. A method for transferring desired digital video or
`digital audio signals comprising the steps of:
`forming a connection through telecommunications lines
`between a first memory of a first party and a second memory of
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`a second party control unit of a second party, said first memory
`having said desired digital video or digital audio signals;
`selling electronically by the first party to the second party
`through telecommunications lines, the desired digital video or
`digital audio signals in the first memory, the second party is at a
`second party location and the step of selling electronically
`includes the step of charging a fee via telecommunications lines
`by the first party to the second party at a first party location
`remote from the second party location, the second party has an
`account and the step of charging a fee includes the step of
`charging the account of the second party; and
`transferring the desired digital video or digital audio
`signals from the first memory of the first party to the second
`memory of the second party control unit of the second party
`through telecommunications lines while the second party
`control unit with the second memory is in possession and
`control of the second party;
`storing the desired digital video or digital audio signals in
`a non-volatile storage portion the second memory; and
`playing through speakers of the second party control unit
`the digital video or digital audio signals stored in the second
`memory, said speakers of the second party control unit
`connected with the second memory of the second party control
`unit;
`
`wherein the non-volatile storage portion is not a tape or
`
`CD.
`
`
`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. 4335);
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`2. Joint Telerecording Push: CompuSonics, AT&T Link,
`BILLBOARD, Oct. 5, 1985 (Ex. 4309);
`3. David Needle, From the News Desk: Audio/Digital
`Interface for the IBM PC?, INFOWORLD, June 4, 1984, at 9
`(Ex. 4310);
`4. Larry Israelite, Home Computing: Scenarios for
`Success, BILLBOARD, Dec. 15, 1984 (Ex. 4311);
`5.
`Image
`titled
`“CompuSonics Digital Audio
`Telecommunications System” (Ex. 4315);
`6. Letter from David M. Schwartz to CompuSonics
`shareholders, July 16, 1984 (Ex. 4316);
`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. 4317);
`8. Letter from David M. Schwartz to CompuSonics
`shareholders, Oct. 10, 1985 (Ex. 4318);
`9. CompuSonics Video Application Notes: CSX Digital
`Signal Processing (1986) (Ex. 4319);
`10. Image titled “CompuSonics Digital Audio Software
`Production/Distribution” (Ex. 4320);
`11. U.S. Patent No. 4,682,248, issued July 21, 1987
`(Ex. 4323);
`12. Brian Dumaine, The Search for the Digital Recorder,
`FORTUNE, Nov. 12, 1984 (Ex. 4324);
`13. Video excerpts of a lecture given at Stanford
`University by David M. Schwartz and John P. Stautner, Feb.
`18, 1987 (Ex. 4321);
`14. Photograph of CompuSonics equipment (Ex. 4333);
`
`and
`
`15. New Telerecording Method for Audio, BROADCAST
`MANAGEMENT/ENGINEERING, Oct. 1985, at 14-15 (Ex. 4342).
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`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, 64, and 95
`
`CompuSonics
`publications (Exhibits
`4309–4311, 4315–4320,
`4323, 4324, and 4342)
`
`35 U.S.C. § 103(a)
`
`1, 64, and 95
`
`
`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
`[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”). There is a “heavy presumption” that a claim term carries its
`ordinary and customary meaning. CCS Fitness, Inc. v. Brunswick Corp.,
`288 F.3d 1359, 1366 (Fed. Cir. 2002). However, a “claim term will not
`receive its ordinary meaning if the patentee acted as his own lexicographer
`and clearly set forth a definition of the disputed claim term in either the
`specification or prosecution history.” Id. “Although an inventor is indeed
`free to define the specific terms used to describe his or her invention, this
`must be done with reasonable clarity, deliberateness, and precision.” In re
`Paulsen, 30 F.3d 1475, 1480 (Fed. Cir. 1994). Also, we must be careful not
`to read a particular embodiment appearing in the written description into the
`claim if the claim language is broader than the embodiment. See In re Van
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`Geuns, 988 F.2d 1181, 1184 (Fed. Cir. 1993) (“[L]imitations are not to be
`read into the claims from the specification.”).
`
`1. Previously Interpreted Terms
`In the Decision on Institution, we interpreted various claim terms of
`the ’440 patent as follows:
`Term
`“first party”
`
`“second party”
`
`“second party control unit”
`
`“second party hard disk”
`
`“telecommunications line”
`
`“electronically”
`
`“connecting electronically”
`
`“transferring electronically”
`
`“charging a fee”
`
`“selling electronically”
`
`
`
`
`Interpretation
`a first entity, whether a corporation
`or a real person
`a second entity, whether a
`corporation or a real person
`a control unit of the second party
`
`a permanent, rigid, magnetic
`storage device of the second party
`an electronic medium for
`communicating between computers
`through the flow of electrons
`
`connecting through devices or
`systems which depend on the flow
`of electrons
`transferring through devices or
`systems which depend on the flow
`of electrons
`requesting payment electronically
`
`providing a product or service
`electronically in exchange for
`providing payment electronically
`(i.e., through devices or systems
`which depend on the flow of
`electrons)
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`Term
`“digital audio signal”
`
`Interpretation
`digital representation of sound
`waves
`
`See Dec. on Inst. 9–11. 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, 64, and 95)
`SightSound argues that the “only reasonable interpretation of the
`claims of the ’440 Patent . . . is that the claims require a hard disk for
`storage, not a removable medium.”3 PO Resp. 26–30, 78 (citing Ex. 2353
`¶ 28). We agree as to claims 64 and 95, which recite expressly a “second
`memory including a second party hard disk,” where the digital video or
`digital audio signals are stored in the “second party hard disk.” Claim 1,
`however, does not recite a “hard disk” or “non-removable medium.”
`Instead, claim 1 recites a “second memory,” where the digital video or
`digital audio signals are stored in “a non-volatile storage portion [of] the
`second memory” and “the non-volatile storage portion is not a tape or CD.”
`Apple disagrees that “second memory” should be interpreted as requiring a
`hard disk or non-removable medium. Reply 2–3 (citing Ex. 4420 ¶¶ 4–13).
`
`
`
`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”
`in claim 1 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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`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.
`
`
`b. Other Claims
`As Apple correctly points out, the fact that some claims of the ’440
`patent, such as claims 10, 64, and 95, expressly recite a “hard disk,” whereas
`claim 1 does not, indicates that claim 1 should not be read to require a “hard
`disk.” See Reply 2; Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327,
`1330 (Fed. Cir. 2004) (refusing to interpret the claim at issue to require
`“rotating through 360°” when the claim “has no such explicit limitation,
`unlike the other independent claims”). This further supports that the term
`“second memory” is not limited to a hard disk or removable media.
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`c. Specification of the ’440 Patent
`SightSound contends that the ordinary meaning of “second memory”
`is disclaimed expressly in the Specification of the ’440 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 ’440 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. 4301, col. 1, l. 24–col. 2, l. 21). 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. 4301, col. 2, ll. 44–48.
`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, l. 55–col. 4,
`l. 28 (describing hard disk 60 of the user in a section titled “Description of
`the Preferred Embodiment”); col. 6, ll. 10–16 (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 ’440 patent as removable and
`non-removable devices, as SightSound’s declarant, Mr. Snell,
`acknowledges. See Ex. 4366 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 v. Sony Computer
`Entm’t Am. LLC, 669 F.3d 1362, 1366 (Fed. Cir. 2012) (“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. 4301, col. 1, l. 24–col. 2, l. 21. 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. 27–44. 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 ’440
`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 ’440
`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.”
`
`d. Conclusion
`For the reasons explained above, we are not persuaded that the full
`scope of “second memory” was disclaimed. 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.
`Claim 1 requires that the non-volatile storage portion of the “second
`memory” is “not a tape or CD,” but does not limit “second memory” to a
`hard disk or non-removable media. Claims 64 and 95, however, require that
`the second memory include a “second party hard disk.”
`
`
`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. 42–43. Apple provides as supporting evidence a declaration from the
`founder of CompuSonics, David M. Schwartz (Ex. 4335), as well as various
`printed publications (Exs. 4309–4311, 4315–4320, 4323, 4324, 4342), a
`photograph (Ex. 4333), and a videotaped lecture from February 18, 1987
`(Ex. 4321), allegedly describing the CompuSonics system. In response,
`SightSound provides a declaration from another former CompuSonics
`employee, John P. Stautner (Ex. 2321). Before turning to the substance of
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`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. 4335 ¶ 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 4333. Ex. 4335 ¶ 18.
`
`Exhibit 4333 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.
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`The first diagram is Exhibit 4315 shown below.
`
`
`Exhibit 4315 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. 4335 ¶ 9.
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`The second diagram is Exhibit 4320 shown below.
`
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`Exhibit 4320 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. 4321). Ex. 4335 ¶ 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. 4310 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. 4316 at 1 (emphases added); see also Ex. 4309 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. 4309 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. 4317 at 2 (describing the use of the AT&T Accunet service
`for transmitting digital audio signals at 56,000 bits per second); Ex. 4342.
`An October 1985 letter to CompuSonics shareholders describes a “series of
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`Patent 5,966,440
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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. 4318 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. 4309 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. 4324 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. 4318 at 1.
`
`
`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. 2321 ¶¶ 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 DSP-1000s used a
`“write-once optical disk drive.” Id. ¶ 10. Mr. Stautner states that
`CompuSonics “developed and tested software that enabled DSP’s to transmit
`digital audio files locally and over distances,” including the software used in
`the 1985 demonstration discussed above. Id. ¶¶ 12–14. However,
`“[t]elerecording capability never existed on any DSP that was sold or
`commercially available by CompuSonics” because of various “challenges
`that stood in the way of the adoption of telerecording,” such as the limited
`availability and large expense of high-capacity digital connections. Id. ¶ 15.
`Mr. Stautner further testifies that “CompuSonics never developed a system
`or method for selling digital audio or video signals over telecommunications
`lines, nor did CompuSonics ever develop or write software that would
`enable DSP’s to be used to transfer money electronically.” Id. ¶ 21.
`According to Mr. Stautner, telerecording, and the idea of an “Electronic
`Record Store,” were merely aspirational, and not actually put into practice
`by CompuSonics. Id. ¶¶ 15–16.
`
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`C. Anticipation Ground
`Apple argues that claims 1, 64, and 95 are anticipated by the
`CompuSonics system under 35 U.S.C. § 102(a),4 which specifies that a
`person shall be entitled to a patent unless “the invention was known . . . by
`others in this country . . . before the invention thereof by the applicant for
`patent.” See Pet. 42–43; Reply 5. We have reviewed the parties’
`submissions and evidence discussed in those papers, and are not persuaded,
`by a preponderance of the evidence, that claims 1, 64, and 95 are anticipated.
`The basis for Apple’s anticipation argument is its assertion that there
`existed a single “CompuSonics system” that was known publicly prior to the
`’440 patent. See Pet. 42–43. Apple asserts that “CompuSonics publicly
`demonstrated its recorder/players, patented its underlying technology, and
`promoted the use of its recorder/player system for facilitating the sale and
`distribution of digital audio and video over telephone, T1, and cable lines.”
`Id. Apple refers collectively to the “tech
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