Trials@uspto.gov
`571-272-7822
`
`Paper 36
`Date: March 25, 2021
`
`
`
`
`
`
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`SQUARE, INC.
`Petitioner,
`
`v.
`
`4361423 CANADA INC.,
`Patent Owner.
`
`IPR2019-01627
`Patent 8,281,998 B2
`
`
`Before JAMESON LEE, ROBERT J. WEINSCHENK, and
`KEVIN C. TROCK, Administrative Patent Judges.
`
`LEE, Administrative Patent Judge.
`
`
`JUDGMENT
`Final Written Decision
`Determining All Challenged Claims Unpatentable
`35 U.S.C. § 318(a)
`
`
`
`
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`
`A.
`
`I.
`INTRODUCTION
`Background and Summary
`Square Inc. (“Petitioner”) filed a Petition for inter partes review of
`claims 1–3, 6, 10, 12, 14–17, and 19 (“challenged claims”) of U.S. Patent
`No. 8,281,998 B2 (Ex. 1001, “the ’998 patent”). Paper 2 (“Pet.”). Patent
`Owner filed a Preliminary Response. Paper 7. We instituted review on
`March 31, 2020. Paper 13 (“Decision on Institution”). 4361423 Canada
`Inc. (“Patent Owner”) filed a Patent Owner Response. Paper 21 (“PO
`Response”).1 Petitioner filed a Reply. Paper 26. Patent Owner filed a Sur-
`Reply. Paper 27. Oral hearing was consolidated with the oral hearings in
`IPR2019-01625 and IPR2019-01629, and was held on January 27, 2021. A
`copy of the hearing transcript has been entered into the record as Paper 35
`(“Tr.”).
`Petitioner has proved by a preponderance of the evidence that claims
`1–3, 6, 10, 12, 14–17, and 19 of the ’998 patent are unpatentable.
`
`B.
`
`Real Parties-in-Interest
`Each party identifies itself as the only real party in interest. Pet. 4;
`Paper 5, 2.
`
`C.
`
`Related Matters
`The parties indicate the ’998 patent is the subject of: 4361423 Canada
`Inc. v. Square, Inc., No. 4:19-cv-04311 (N.D. Cal.). Pet. 4; Paper 5, 2.
`
`
`1 The Patent Owner Response filed as Paper 21 does not include page
`numbers. Patent Owner filed a Corrected Patent Owner Response including
`page numbers. Paper 34. Hereinafter, citations to the Patent Owner
`Response are to the Corrected Patent Owner Response filed as Paper 34.
`2
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`Petitioner indicates that the ’998 patent is the subject of another petition for
`inter partes review in IPR2019-01628. Pet. 5.2
`D.
`The ’998 patent
`The ’998 patent relates to an apparatus and system “for commercial
`transactions using a transaction card via a communication device in audio
`communication with a remote processor assembly.” Ex. 1001, 2:17–20. It
`is also related to a method “for commercial transactions using a transaction
`card via a communication device.” Id. at 2:21–23. Specifically, the ’998
`patent describes a transaction apparatus, such as a portable point of sale
`(“POS”) device, linked to a communication device, such as a mobile phone.
`Id. at 5:52–53, 5:66–6:2; 7:19–24. Figure 2 illustrates an embodiment of an
`assembly according to the ’998 patent and is reproduced below.
`
`
`
`
`2 The Petition in IPR2019-01628 challenges the same claims as the
`challenged claims in this proceeding. We declined to institute review in
`IPR2019-01628. IPR2019-01628, Paper 14.
`
`
`3
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`Figure 2 shows a front view of a transaction/communication assembly
`according to an embodiment of the ’998 patent. Id. at 5:22–24.
`Assembly 16 includes POS device 12 linked to a communication
`device in the form of mobile phone 14 via cable 30. Id. at 7:19–24. POS
`device 12 includes input device 38 such as card reader slot 39 for swiping or
`inserting transaction card 24 and capturing information from the transaction
`card. Id. at 7:31–34. The ’998 patent explains that a user swipes card 24
`through slot 39, and that analog information on magnetic strip 46 on card 24
`is captured by an analog signal reader such as magnetic strip reader 52, and
`transferred to MCU 50 (microcontroller unit). Id. at 7:42–45, 7:56–59.
`
`MCU 50 converts the information into an analog audio signal and
`transmits it via an analog communication link such as cable 30 to the
`communication device such as mobile phone 14. Id. at 7:65–8:4.
`Optionally, MCU 50 may encrypt the data. Id. at 7:61–63. The
`communication device then transmits the information to transaction server
`18 for processing. Id. at 8:5–6. The transaction server decrypts the received
`signal, converts it to a digital signal, and sends it to remote processor 20 for
`validation. Id. at 8:6–8. Remote processor 20 can reject or accept the
`requested transaction and send a message to transaction server 18 to indicate
`that determination. Id. at 8:10–13. Transaction server 18, after receiving the
`message from remote processor 20, converts the received information to an
`audio signal and sends it back to mobile phone 14. Id. at 8:15–18.
`Claims 1, 10, 12, 14, 17, and 19 of the challenged claims are
`independent. Independent claims 1 and 12 are illustrative. Claim 1 is drawn
`to an apparatus for effecting commercial transactions between an input
`device and a remote transaction server using a transaction card. Id. at
`11:48–12:3. Claim 12 is drawn to a portable card reader device for reading a
`4
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`card having magnetically recorded information stored on a magnetic strip
`incorporated into the card. Id. at 13:24–40. Claims 1 and 12 are reproduced
`below.
`
`1[P]. An apparatus for effecting commercial transactions
`between an input device and a remote transaction server using a
`transaction card, said apparatus comprising:
`[A] an input device for capturing information from the
`transaction card;
`[B] a controller for converting the captured card
`information into an encrypted audio signal having an
`analog audio format suitable for transmission to an
`analog hands-free jack of a mobile communication
`device; and
`[C] a communication link for coupling said input device
`to an analog hands-free jack of a mobile
`communication device for the transmission of said
`encrypted analog-audio-format signals therebetween;
`[D] wherein when said input device captures the card
`information, said controller converts the card
`information into said encrypted analog-audio-
`format signal and transmits said converted signal
`via said communication link to said mobile
`communication device; and
`[E] wherein said mobile communication device
`automatically transmits the captured card
`information to the remote transaction server and
`receives transaction validation information from
`said remote transaction server.
`Id. at 11:48–12:3 (clause headings in brackets added).
`12. A portable card reader device for reading a card
`having magnetically recorded information stored on a magnetic
`strip incorporated into the card, the device comprising:
`a read head for sensing magnetically recorded
`information stored on a magnetic strip incorporated
`into a card and for producing an encrypted analog
`
`5
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`signal indicative of the magnetically recorded
`information stored on the magnetic strip, said read
`head including circuitry for converting said encrypted
`analog signal to an audio format suitable for
`transmission to a hands-free jack of a mobile
`communication device; and
`an output jack adapted to be inserted into an jack
`associated with said mobile communication device for
`providing the encrypted analog signal indicative of the
`magnetically recorded information stored on the
`magnetic strip to said mobile communication device
`for transmission to a transaction server for further
`processing.
`Id. at 13:24–40.
`E.
`Evidence Relied on by Petitioner
`Petitioner relies on the following references:
`
`
`
`Evidence
`U.S. Patent Application Publication No. 2002/0091633
`A1, published July 11, 2002 (“Proctor”)
`U.S. Patent Application Publication No. 2005/0236480
`A1, published Oct. 27, 2005 (“Vrotsos”)
`U.S. Patent No. 5,838,773, issued Nov. 17, 1998
`(“Eisner”)
`U.S. Patent No. 7,673,799 B2, issued Mar. 9, 2010
`(“Hart”)
`
`Exhibit No.
`1004
`
`1006
`
`1008
`
`1018
`
`Petitioner additionally relies on the declarations of Bruce McNair
`(Ex. 1003 (“Declaration”); Ex. 1042 (“Reply Declaration”)).
`
`
`
`6
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`F.
`Asserted Grounds of Unpatentability
`Petitioner asserts the following grounds of unpatentability:
`
`
`
`Claim(s) Challenged
`1–3, 6
`10, 12, 14–17, 19
`1–3, 6, 10, 12, 14, 16,
`17, 19
`15
`
`35 U.S.C. §3
`103
`103
`103
`103
`
`References/Basis
`Proctor, Vrotsos
`Proctor, Hart
`Eisner, Proctor
`Eisner, Proctor, Hart
`
`
`
`II. ANALYSIS
`
`A.
`
`Principles of Law
`To prevail in its challenge to Patent Owner’s claims, Petitioner must
`demonstrate by a preponderance of the evidence that the claims are
`unpatentable.4 35 U.S.C. § 316(e) (2018); 37 C.F.R. § 42.1(d) (2019). That
`burden never shifts to the patentee. Dynamic Drinkware, LLC v. Nat’l
`Graphics, Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015).
`A patent claim is unpatentable under 35 U.S.C. § 103(a) if the
`differences between the claimed subject matter and the prior art are such that
`the subject matter, as a whole, would have been obvious at the time the
`invention was made to a person having ordinary skill in the art to which said
`subject matter pertains. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406
`
`
`3 The Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112–29, 125
`Stat. 284, 287–88 (2011), revised 35 U.S.C. § 103 effective March 16, 2013.
`Because the challenged patent has an effective filing date prior to March 16,
`2013 (Ex. 1001, codes (22), (63)), we refer to the pre-AIA versions of § 103.
`4 The burden of showing something by a preponderance of the evidence
`requires the trier of fact to believe that the existence of a fact is more
`probable than its nonexistence before the trier of fact may find in favor of
`the party who carries the burden. Concrete Pipe & Prods. of Cal., Inc. v.
`Constr. Laborers Pension Tr. for S. Cal., 508 U.S. 602, 622 (1993).
`7
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`(2007). The question of obviousness is resolved on the basis of underlying
`factual determinations including (1) the scope and content of the prior art;
`(2) any differences between the claimed subject matter and the prior art;
`(3) the level of ordinary skill in the art; and (4) when in evidence, objective
`evidence of nonobviousness.5 Graham v. John Deere Co., 383 U.S. 1, 17–
`18 (1966).
`B.
`Level of Ordinary Skill in the Art
`In determining the level of ordinary skill in the art, various factors
`may be considered, including the type of problems encountered in the art,
`prior art solutions to those problems, rapidity with which innovations are
`made, sophistication of the technology, and educational level of active
`workers in the field. In re GPAC Inc., 57 F.3d 1573, 1579 (Fed. Cir. 1995).
`“[E]very factor may not be present, and one or more factors may
`predominate.” Id.
`Petitioner asserts that a person of ordinary skill in the art (“POSITA”),
`at the time the ’998 patent was filed, would have been “a person with a
`bachelor’s degree in electrical engineering, computer engineering, or
`equivalent” and would have had “at least one to two years of relevant
`experience in the fields of embedded systems and mobile communication
`device interfaces, or otherwise equivalent industry experience in the relevant
`field.” Pet. 14–15 (citing Ex. 1003 ¶¶ 5–12, 22–27). Patent Owner has not
`proposed a description of the level of ordinary skill in the art or disputed
`Petitioner’s description.
`
`
`5 Patent Owner has not presented any objective evidence of nonobviousness
`or any argument in that regard.
`
`8
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`Petitioner’s articulation of the level of ordinary skill in the art is
`supported by the Declaration of Mr. McNair. Ex. 1003 ¶ 27. It also appears
`consistent with what is reflected by the content of the applied prior art
`references. Cf. Okajima v. Bourdeau, 261 F.3d 1350, 1354–55 (Fed. Cir.
`2001) (the applied prior art may reflect an appropriate level of skill). We
`adopt Petitioner’s articulation of the level of ordinary skill in the art, but
`delete the qualifier “at least” for the level of practical experience, to keep
`that level from being vague and extending to a range that may correspond to
`the level of skill of an expert.
`C.
`Claim Construction
`For petitions filed on or after November 13, 2018, we use the same
`claim construction standard that would be used to construe the claim in a
`civil action under 35 U.S.C. § 282(b), including construing the claim in
`accordance with the ordinary and customary meaning of such claim as
`understood by one of ordinary skill in the art and the prosecution history
`pertaining to the patent. See 37 C.F.R. § 42.100 (2019). The Petition here
`was filed on September 30, 2019. Paper 2. We apply the claim construction
`standard from Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en
`banc).
`Claim terms are generally given their ordinary and customary
`meaning as would be understood by one with ordinary skill in the art in the
`context of the specification, the prosecution history, other claims, and even
`extrinsic evidence including expert and inventor testimony, dictionaries, and
`learned treatises, although extrinsic evidence is less significant than the
`intrinsic record. Phillips, 415 F.3d at 1312–17. Usually, the specification is
`dispositive, and it is the single best guide to the meaning of a disputed term.
`Id. at 1315.
`
`9
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`The specification may reveal a special definition given to a claim term
`by the patentee, or the specification or prosecution history may reveal an
`intentional disclaimer or disavowal of claim scope by the inventor. Id.
`at 1316. If an inventor acts as his or her own lexicographer, the definition
`must be set forth in the specification with reasonable clarity, deliberateness,
`and precision. Renishaw PLC v. Marposs Societa’ per Azioni, 158 F.3d
`1243, 1249 (Fed. Cir. 1998). The disavowal of claim scope, if any, can be
`effectuated by language in the specification or the prosecution history. Poly-
`America, L.P. v. API Indus., Inc., 839 F.3d 1131, 1136 (Fed. Cir. 2016). “In
`either case, the standard for disavowal is exacting, requiring clear and
`unequivocal evidence that the claimed invention includes or does not include
`a particular feature.” Id.
`Only those claim terms that are in controversy need to be construed,
`and only to the extent necessary to resolve the controversy. Nidec Motor
`Corp. v. Zhongshan Broad Ocean Motor Co., 868 F.3d 1013, 1017 (Fed.
`Cir. 2017).
`In neither the Petition nor the Patent Owner Response has either party
`proposed an express full construction for any claim term. However, the
`arguments of the parties reflect a certain reading of the claim language. To
`the extent necessary to reach a decision, we discuss each party’s proposed
`reading in our analysis of the party’s arguments below.
`
`D.
`
`Alleged Unpatentability of Claims 1–3 and 6
`as Obvious over Proctor and Vrotsos
`1.
`Overview of Proctor
`Proctor discloses a system and method for verification of credit card
`purchases through wireless communication. Ex. 1004 ¶ 1. Proctor provides
`a wireless financial transaction verification facility that has a transaction
`10
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`information terminal for scanning credit cards and entering a purchase price,
`where the information is communicated in a first electronic format. Id. ¶ 5.
`A converter is connected to the terminal and converts that information to a
`second format transmissible by a digital cellular network. Id. A wireless
`communication device is connected to the converter, and operates to
`communicate with the network in the second format. Id.
`Figure 1 of Proctor illustrates a block diagram of the operating
`environment of Proctor (id. ¶ 6) and is reproduced below:
`
`
`Figure 1 shows financial transaction verification system 10 including
`wireless or cellular network 12 with a user system connected to the network.
`Ex. 1004 ¶ 7. The cellular network is connected to conventional telephone
`system 16, and central verification facility 20, such as a bank, credit card
`issuer, or agency is connected to telephone system 16. Id.
`11
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`The user system includes digital cellular telephone 22 communicating
`with cellular network 12. Id. ¶ 8. Cellular phone includes circuitry that
`encodes voice communication digitally for transmission, and circuitry with
`receiving capabilities to receive a digital data stream and to convert it into an
`audible representation of the original caller with whom the user is speaking.
`Id. Cellular phone 22 also includes supplementary connector 26 of the type
`used for communication with accessories such as hands-free headsets. Id.
`Credit card verification terminal 36 includes magnetic credit card
`reader slot 46 as an input device that reads data encoded on a magnetic strip
`on purchaser’s credit card 48. Id. With regard to credit card verification
`terminal 36, Proctor describes as follows:
`
`The terminal 36 operates conventionally, and includes
`what is essentially a modem that converts the scanned or entered
`data to be sent from a digital form to a modulated tonal pattern
`transmissible via conventional telephone lines; it further operates
`to receive such a modulated audio signal and convert it to a
`digital form for display.
`Id. ¶ 11.
`
`Converter 30 is connected between credit card verification terminal
`and cellular phone 22. Id. ¶¶ 9–10. It converts the signal from terminal 36
`into a format that is readily transmitted via digital cellular networks. Id.
`¶ 16. Central verification facility 20 is connected to the telephone network
`via phone lines 50, and a converter, i.e., converter 52, that is essentially
`functionally identical to converter 30 is connected via line 54 to line 50.
`Id. ¶ 12.
`
`A merchant having system 14 dials on cellular phone 22 the number
`of the credit card verification system; the data message generated by
`terminal 36 is modulated to an audible stream of tones which are transmitted
`
`12
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`to converter 30; converter 30 converts the tonal signal into a form that is
`readily transmitted via digital cellular networks; and the phone then
`transmits the encoded stream to a receiver node on network 12 which then
`transmits the stream to credit card verification facility 20 through
`conventional telephone network 16. Id. ¶¶ 15, 16.
`
`Remote credit card verification facility 20 includes computer 56
`which includes or connects to a financial database containing information
`about a purchaser’s credit card, credit history, account balance or available
`credit, and other financial status, including whether or not the credit card is
`stolen. Id. ¶ 12. Computer 56 processes the message transmitted by credit
`card verification terminal 36 and generates a reply message which may be a
`simple indication of approval or denial of a transaction. Id. ¶ 17. The reply
`message or return communication follows the same path back to terminal 36
`as the original communication from terminal 36. Id.
`Finally, Proctor describes the following: “For instance, the
`component[s] of the merchant system 14 may be combined or integrated.
`All may be included in a single device, the telephone may incorporate the
`decoder circuitry [converter 30], and/or the terminal may incorporate the
`decoder circuitry [converter 30].” Id. ¶ 18. Thus, Proctor discloses three
`separate embodiments based on a different location for converter 30, i.e.,
`within the phone, within the terminal, and between the terminal and the
`phone.
`Overview of Vrotsos
`2.
`Vrotsos is directed to a system and method for transmitting
`transaction data over a wireless communication network. Ex. 1006 ¶ 26. In
`an embodiment, the system is used to transmit credit card information during
`a point-of-sale transaction. Id. An “attachment” is coupled to a wireless
`13
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`communication device having a transceiver for establishing a
`communication link with a wireless communication network. Id. Vrotsos
`states that the “attachment” may also be referred to “as a peripheral or
`peripheral device.” Id.
`The “attachment” includes a processor and an input device. Id. When
`
`the attachment device receives data from the input device, it transmits that
`data over the wireless communication network using the transceiver in the
`wireless communication device. Id. Vrotsos describes that the input device
`may be a magnetic strip reader or a smartcard reader. Id. ¶ 28. In one
`embodiment, the attachment includes a magnetic stripe reader that can be
`used to collect information encoded in the magnetic strip on a credit card.
`Id. The magnetic stripe reader includes a slot through which the magnetic
`stripe-carrying card may be passed before a reader head to decode the data
`encoded thereon. Id.
`
`When input information is received at the input device, it is sent to a
`processor in the attachment device for processing and transmission to the
`remote computer through the communication device. Id. ¶ 26. The remote
`computer may process the received data and generate a response to be sent
`back to the processor in the attachment device. Id.
`
`14
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`
`Figure 10 is a block diagram of the system of Vrotsos:
`
`
`Figure 10 illustrates the components of the wireless communication device
`and attachment (peripheral device) disclosed in Vrotsos. Id. ¶ 23. The
`attachment includes processor 303, memory 307, and input device 308. Id.
`¶ 75. Processor 303 receives input information from input device 308 and
`processes that information to generate data for transmission to a remote
`computer via antenna 5 of the communication device. Id. Vrotsos also
`describes that processor 303 operates to encrypt the input information. Id.
`3.
`Independent Claim 1
`Recitation 1[P] — Preamble
`Claim 1 recites “[a]n apparatus for effecting commercial transactions
`between an input device and a remote transaction server using a transaction
`card.” Ex. 1001, 11:48–50. Petitioner identifies Proctor’s terminal 36 as the
`claimed apparatus, Proctor’s magnetic card reader slot 46, which reads data
`from a magnetic strip of a user’s credit card, as satisfying the claimed input
`device, Proctor’s central verification facility 20 as the remote transaction
`server, and a user’s credit card as the claimed transaction card. Pet. 23–25
`(citing Ex. 1004 ¶¶ 7, 10). Although Petitioner refers to magnetic card
`reader slot 46 as the claimed input device, we understand Petitioner to be
`referring to the magnetic card reader, which is without a numeric reference
`15
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`in Proctor’s disclosure, rather than just a slot denoting empty space.6 We
`expressed the same understanding in the Decision on Institution. Paper 13,
`14. Patent Owner does not present any counter-argument with respect to
`Petitioner’s assertions for the preamble of claim 1. We are persuaded that
`Proctor discloses “[a]n apparatus for effecting commercial transactions
`between an input device and a remote transaction server using a transaction
`card.” It is not necessary to determine whether the preamble is limiting.
`Limitation 1[A] — Input Device
`Claim 1 further recites “an input device for capturing information
`from the transaction card.” Ex. 1001, 11:51–52. Petitioner explains that
`Proctor’s magnetic card reader slot 46 captures information from the
`magnetic strip on a user’s credit card. Pet. 25 (citing Ex. 1004 ¶ 10). As
`discussed above, we understand Petitioner to be referring to the magnetic
`card reader, rather than just a slot. Patent Owner does not present any
`counter-argument for this limitation of claim 1. We are persuaded that
`Proctor discloses “an input device for capturing information from the
`transaction card.”
`
`Limitation 1[B] — Controller
`Claim 1 further recites “a controller for converting the captured card
`
`information into an encrypted audio signal having an analog audio format
`suitable for transmission to an analog hands-free jack of a mobile
`communication device” (hereinafter “the controller limitation”). Ex. 1001,
`11:53–56. Petitioner presents a claim chart in which Proctor’s terminal 36 is
`mapped to the claimed controller. Pet. 25. The claim chart indicates that a
`
`
`6 At least in one instance, Petitioner does refer to Proctor’s “magnetic stripe
`reader” as the claimed input device. Pet. 23.
`16
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`controller is met by “conventional credit card verification circuitry including
`a modem,” and that Proctor’s terminal 36 is such conventional credit card
`verification circuitry including a modem. Id. Proctor describes terminal 36
`as a “conventional credit card verification terminal.” Ex. 1004 ¶ 10 (cited at
`Pet. 25). Proctor also describes terminal 36 as operating “conventionally
`and includes what is essentially a modem.” Id. ¶ 11 (cited at Pet. 25).
`Petitioner further asserts that Proctor’s terminal 36 “converts the
`scanned or entered data to be sent from a digital form to a modulated tonal
`pattern transmissible via conventional telephone lines.” Pet. 25, 27 (citing
`Ex. 1004 ¶¶ 10, 11). Petitioner further notes that Proctor’s Figure 1 shows
`credit card verification terminal 36 coupled to phone 22 at connector 26. Id.
`at 27. Petitioner explains that Proctor’s phone 22 includes supplementary
`connector 26 of the type used for communication with accessories such as
`hands-free headsets. Id. at 28 (citing Ex. 1004 ¶ 8). Thus, the location of
`connector 26 represents a hands-free jack of phone 22. Further, Petitioner
`cites to Mr. McNair, who testifies that modulated tonal patterns
`transmissible over telephone lines are analog signals. Id. (citing Ex. 1003
`¶ 43).
`
`
`Petitioner further states:
`While the embodiment of Proctor primarily used in this Petition
`and applied in the claim charts takes the option, explicitly given
`by Proctor, of incorporating converter 30’s functionality into
`phone 22 (see Proctor ¶ 18), Proctor’s system and method meet
`the claim limitations of the ‘998 patent even in the alternative
`embodiments where (1) the converter 30 is a physical unit
`between terminal 36 and phone 22 and (2) the converter 30 is
`incorporated in terminal 36.
` Id. at 18 n.2.
`
`17
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`We focus our discussion on the embodiment in which converter 30 is
`located within terminal 36, in which case the output of terminal 36 as
`controller is directly transmitted to the hands-free jack of phone 22. As
`such, that output clearly is in a format suitable for transmission to the analog
`hands-free jack of phone 22.7
`Proctor is not relied on by Petitioner to meet the encryption
`requirement of the controller limitation. Instead, for that requirement,
`Petitioner asserts that encryption was:
`old and well known in the card-reader art, and a POSITA would
`have recognized a number of ways to generate encrypted
`information, including Vrotsos’s detailed example described in
`Figures 9(a)-(c), and would have had a reasonable expectation of
`success in doing so. See also Ex. 1008, 5:3–49 (prior art example
`converting card data to an encrypted analog signal). (Ex. 1003
`¶¶ 80, 29–31, 48–51.)
`Pet. 23. The assertion is supported by the testimony of Mr. McNair. See
`Ex. 1003 ¶ 80. Regarding motivation for adding encryption to Proctor’s
`teachings, Petitioner asserts that encryption of data “is important for keeping
`personal information secure during financial transactions and preventing
`misuse.” Pet. 22. That assertion is supported by the testimony of
`Mr. McNair. Ex. 1003 ¶ 79. Notwithstanding Patent Owner’s arguments to
`
`
`7 Even in the case of the two other embodiments, where converter 30 is
`between terminal 36 and phone 22, and within phone 22, notwithstanding
`Patent Owner’s arguments discussed below, the output of terminal 36 still is
`in a format suitable for transmission to the hands-free jack of phone 22,
`because, as noted by Petitioner (Pet. 27), Proctor describes that the output of
`terminal 36 is “a modulated tonal pattern transmissible via conventional
`telephone lines.” Ex. 1004 ¶ 11. Petitioner explains that because the ’998
`patent describes DTMF (dual-tone multi-frequency audio signal) as suitable,
`one with ordinary skill would have recognized that other audio tone signals
`also would be suitable. Pet. 27 n.4 (citing Ex. 1003 ¶¶ 48–51).
`18
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`the contrary, discussed below, we are persuaded that it would have been
`obvious to one with ordinary skill in the art to add the encrypting function to
`Proctor’s teachings, on the basis that encrypting card data was old and well
`known and that encryption of card data would have been recognized by one
`with ordinary skill in the art as important for keeping personal information
`secure during financial transactions and preventing misuse.
`
`Petitioner also makes alternative contentions regarding the controller
`limitation, relying specifically on the combined teachings of Proctor and
`Vrotsos. Petitioner contends: “To the extent it may be argued that a
`‘controller’ must be a microcontroller or microprocessor that directs the
`action of the terminal, Proctor does not explicitly disclose that type of
`controller. Vrotsos teaches a central controller (processor 303) that controls
`the components and operations of a reader attachment to a mobile
`communication device.” Pet. 25. Petitioner also contends: “To the extent
`Proctor does not disclose encrypting information, Vrotsos teaches the
`controller encrypting data captured by the card reader.” Id. at 28.
`
`As discussed above, the encryption requirement is accounted for
`without formal reliance on Vrotsos. As discussed below, Patent Owner has
`not in the Patent Owner Response argued that a “controller” necessarily
`must include a microprocessor or microcontroller. Thus, it is not necessary
`to discuss these alternative contentions of Petitioner. For completeness on
`judicial review, however, we address both alternative contentions.
`
`For the alternative contentions relying formally on Vrotsos, Petitioner
`identifies Proctor as a known device ready for improvement because
`Proctor’s terminal 36 contains unspecified circuitry. Pet. 22. Vrotsos
`contains more detailed disclosure with respect to its attachment 21, also a
`point of sale device connected to a wireless communication device, than
`19
`
`
`

`

`IPR2019-01627
`Patent 8,281,998 B2
`Proctor contains for its terminal 36. Petitioner cites to the following text
`from Vrotsos:
`The attachment 21 may also include a processor 303, a
`memory 307 and an input device 308. The processor may
`execute a software application (which may be stored in the
`attachment memory 307) allowing the processor to receive input
`information from the input device 308 and process the input
`information to generate data for transmission to a remote
`computer 101 via the antenna 5 of the wireless communication
`device 1. By executing the software application, the attachment
`may determine from which input device 308 it is receiving input
`information (if multiple input devices are provided), encrypt the
`input information, . . . divide the input information into data
`packets suitable for transmission over the communication
`network 102, etc.
`Ex. 1006 ¶ 75 (cited at Pet. 25–26). Notwithstanding Patent Owner’s
`arguments to the contrary, discussed below, we are persuaded by Petitioner
`that in light of the more specific disclosure of Vrotsos, one with ordinary
`skill in the art would have known to incorporate a processor, like processor
`303 of Vrotsos, within Proctor’s terminal 36 (with unspecified circuitry), to
`direct the actions of terminal 36. The reason is that Proctor does not
`specifically identify the usable structure, and Vrotsos provides such detail
`for a similar device or attachment.
`
`Regarding encryption, Petitioner cites to Vrotsos’s paragraph 52
`which states that “[t]he attachment 21 may encrypt the transaction data
`captured by the reader 23.” Pet. 28 (citing Ex. 1006