`
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`
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` Paper 32
` Date: May 6, 2021
`
`Trials@uspto.gov
`571.272.7822
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`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`SQUARE, INC.,
`Petitioner,
`
`v.
`
`
`4361423 CANADA INC.,
`Patent Owner.
`____________
`
`IPR2019-01654
`Patent 9,818,107 B2
`____________
`
`
`Before JAMESON LEE, ROBERT J. WEINSCHENK, and
`KEVIN C. TROCK, Administrative Patent Judges.
`
`TROCK, Administrative Patent Judge.
`
`
`
`JUDGMENT
`Final Written Decision
`Determining All Challenged Claims Unpatentable
`35 U.S.C. § 318(a)
`
`
`
`
`
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`IPR2019-01654
`Patent 9,818,107 B2
`
` INTRODUCTION
`We have authority to hear this inter partes review under 35 U.S.C.
`§ 6. This Final Written Decision issues pursuant to 35 U.S.C. § 318(a) and
`37 C.F.R. § 42.73. For the reasons discussed herein, we determine that
`Square, Inc. (“Petitioner”) has shown by a preponderance of the evidence
`that claims 8–21 and 29–42 (the “challenged claims”) of U.S. Patent No.
`9,818,107 B2 (Ex. 1001, “the ’107 patent”) are unpatentable. See 35 U.S.C.
`§ 316(e) (2018); 37 C.F.R. § 42.1(d) (2019).
`
`A.
`
`Procedural History
`Petitioner filed a Petition, Paper 2 (“Pet.” or “Petition”), to institute an
`inter partes review of the challenged claims of the ’107 patent. 4361423
`Canada, Inc. (“Patent Owner”) filed a Preliminary Response. Paper 8
`(“Prelim. Resp.”). We instituted inter partes review on all challenged
`claims on the grounds presented in the Petition. Paper 9 (“Institution
`Decision” or “Dec.”).
`After institution, Patent Owner filed a Response to the Petition. Paper
`18 (“PO Resp.”). Petitioner thereafter filed a Reply to Patent Owner’s
`Response. Paper 23 (“Pet. Reply”). Patent Owner filed a Sur-reply to
`Petitioner’s Reply. Paper 24 (“PO Sur-reply”). An oral hearing was held on
`February 10, 2021. A transcript of the hearing is included in the record.
`Paper 31 (“Tr.”).
`
`2
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`IPR2019-01654
`Patent 9,818,107 B2
`B.
`Related Proceedings
`According to the parties, the ’107 patent is the subject of the
`following action: 4361423 Canada Inc. v. Square, Inc., 4:19-cv-04311-JSW
`(N.D. Cal.) filed July 26, 2019. Pet. 1; Paper 4, 2.
`Petitioner notes one other petition (IPR2019-01653) filed by
`Petitioner against the ’107 patent. Pet. 2. Petitioner also lists petitions it has
`filed against other family members of the ’107 patent (IPR2019-01625 and
`IPR2019-01626 (U.S. Patent No. 8,286,875 B2); IPR2019-01627 and
`IPR2019-01628 (U.S. Patent No. 8,281,998 B2); IPR2019-01629 and
`IPR2019-01630 (U.S. Patent No. 9,269,084 B2) IPR2019-01649 (U.S.
`Patent No. 9,016,566 B2); IPR2019-01650 (U.S. Patent No. 9,311,637 B2);
`IPR2019-01651 (U.S. Patent No. 9,443,239 B2); IPR2019-01652 (U.S.
`Patent No. 9,613,351 B2)). Pet. 2.
`
`The ’107 Patent (Ex. 1001)
`C.
`The ’107 patent describes commercial transactions using a transaction
`
`card via a communication device in audio communication with a remote
`processor assembly. Ex. 1001, 2:31–34. Figure 1 of the ’107 patent is
`shown below.
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`Figure 1, above, is a diagram showing a transaction network including
`a transaction device 12 and communication device 14 which together form a
`transaction and communication assembly 16. Id. at 7:10–13. “The
`transaction apparatus 12 captures transaction data and, in some
`implementations, provides a user with feedback.” Id. at 7:13–15.
`Transaction server 18 and a remote processor/issuer 20 together form a
`remote processor assembly 22. Id. at 7:15–17.
`The ’107 patent describes the operation of the system as follows:
`The transaction apparatus 12 captures information from the
`transaction card and converts this information into an audio
`signal. The audio signal is transmitted to the communication
`device 14 for transmission to the transaction server 18 via a
`communication network 26 (e.g. Internet, GSM/GPRS network).
`At the transaction server 18, the audio signal is converted into a
`digital signal and transmitted to the remoter processor/issuer 20
`via a communication or payment network 28 (e.g. Internet, Visa-
`Net, BankNet). The remoter processor/issuer 20 validates this
`request by accepting or denying the request and sends this
`validation information to the transaction server 18 which then
`converts this digital signal into an audio signal and transmits it
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`IPR2019-01654
`Patent 9,818,107 B2
`back to the assembly 16 providing the seller and buyer with a
`confirmation or a
`rejection message.
` As such,
`the
`communication device 12 acts as a receiver of the transaction
`data in analog audio format and also as a conduit to transmit the
`transaction data to a transaction server 18 via the communication
`network 26.
`Id. at 7:19–37.
`Figure 2 of the ’107 patent is shown below.
`
`
`Figure 2, above, depicts a transaction and communication assembly
`16 including a portable transaction apparatus 12 in the form of a point of
`sale (POS) device linked to a communication device in the form of mobile
`phone via a communication link in the form of a cable 30. Id. at 7:38–43.
`The POS device 12 includes a display screen 36 and an input device 38 such
`as card reader slot 39 for swiping or inserting a transaction card and
`capturing information therefrom. Id. at 7:47–54. The POS device 12 can
`also include an additional input device 40 in the form of a control pad
`including a PIN pad 42, and other control buttons 44 allowing the user to
`enter transaction information which is also captured by the POS device 12
`and converted into an audio signal for transmission to the communication
`device 14. Id. at 7:54–60.
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`Patent 9,818,107 B2
`Figure 5 of the ’107 patent is reproduced below.
`
`
`Figure 5, above, is a block diagram depicting transaction device 12
`which includes a controller 50 in the form of a microcontroller unit (MCU).
`Id. at 7:63–65. The input device 38 can be in the form of an analog signal
`reader 52 such as a magnetic stripe reader and/or a digital signal reader 54
`such as an Integrated Circuit (IC) or Smart Card or EMV reader. Id. at
`7:65–8:1.
`
`D. Challenged Claims
`Petitioner challenges claims 8–21 and 29–42 of the ’107 patent. Pet.
`1. Claims 8, 15, 29, and 36 are independent. Claims 8 and 29 are
`substantially similar to each other, with each reciting a “smart card,” except
`that claim 8 is written as an apparatus claim and claim 29 is written as a
`method claim. Ex. 1001, 12:60–13:16, 15:10–36. Claims 15 and 36 are also
`substantially similar to each other, but here each recites a “payment device”
`instead of a “smart card,” with claim 15 written as an apparatus claim and
`claim 36 written as a method claim. Id. at 13:42–67, 16:4–31. Claim 8 is
`generally illustrative.
`8. [Preamble] An apparatus for effecting commercial transactions
`between an input device and a remote transaction server using a
`communication device, said apparatus comprising:
`[8.A] an input device for capturing recorded information from a
`smart card;
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`Patent 9,818,107 B2
`[8.B] a sensor incorporated into said input device for reading said
`recorded information stored on an integrated circuit incorporated
`into said smart card;
`[8.C] a controller coupled to said sensor for converting the recorded
`information stored on said smart card into a format suitable for
`transmission to a communication device; and
`[8.D] a communication link for coupling said controller to a
`communication device for the transmission of said recorded
`information therebetween;
`[8.E] wherein the said sensor reads the recorded information stored
`on said smart card,
`[8.F] said controller converts said recorded information read by said
`sensor into a format suitable for transmission to said
`communication device and transmits said recorded information
`via the communication link to said communication device,
`[8.G] and said communication device transmits said recorded
`information to a remote transaction server for processing a
`commercial transaction.
`
`
`Id. at 12:60–13:16 (numbering and formatting designated by Petitioner; see
`Ex. 1002, 1).
`
`E.
`
`Evidence
`Petitioner relies upon the following evidence:
`(1) U.S. Patent No. 6,234,389 B1, issued May 22, 2001 (“Valliani”)
`(Ex. 1005);
`(2) U.S. Patent Publication No. 2005/0236480 A1, published October
`27, 2005 (“Vrotsos”) (Ex. 1006);
`(3) U.S. Patent Publication No. 2006/0032905 A1, published Feb. 16,
`2006 (“Bear”) (Ex. 1007);
`(4) U.S. Patent Publication No. 2003/0183691 A1, published October
`2, 2003 (“Lahteenmaki”) (Ex. 1009);
`(5) U.S. Patent No. 6,278,779 B1, issued August 21, 2001 (“Bryant”)
`(Ex. 1010); and
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`Patent 9,818,107 B2
`(6) Declaration and Rebuttal Declaration of Michael Shamos, Ph.D.
`(Exs. 1003, 1017).
`Patent Owner relies on the Declaration of Mr. Ivan Zatkovich (Ex.
`2004).
`
`F.
`
`Asserted Grounds of Unpatentability
`Claims Challenged
`35 U.S.C. § References
`8–13, 15–20, 29–34, 36–41
`103
`Valliani/Vrotsos
`
`14, 21, 35, 42
`
`8, 9, 11, 13, 15, 16, 18, 20,
`29, 30, 32, 34, 36, 37, 39, 41
`10, 12, 17 19, 31, 33, 38, 40
`
`14, 21, 35, 42
`
`8–13, 15–20, 29–34, 36–41
`
`14, 21, 35, 42
`
`
`
`103
`
`103
`
`103
`
`103
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`103
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`103
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`Valliani/Vrotsos/Bryant
`
`Bear/Lahteenmaki
`
`Bear/Lahteenmaki/Vrotsos
`
`Bear/Lahteenmaki/Bryant
`
`Vrotsos
`
`Vrotsos/Bryant
`
` ANALYSIS
`
`A.
`
`Level of Ordinary Skill
`In determining whether an invention would have been obvious at the
`time it was made, we consider the level of ordinary skill in the pertinent art
`at the time of the invention. Graham v. John Deere Co., 383 U.S. 1 (1966).
`“The importance of resolving the level of ordinary skill in the art lies in the
`necessity of maintaining objectivity in the obviousness inquiry.” Ryko Mfg.
`Co. v. Nu-Star, Inc., 950 F.2d 714, 718 (Fed. Cir. 1991).
`Petitioner describes a person of ordinary skill in the art as a person
`having “a Bachelor of Science Electrical Engineering, Computer Science, or
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`Patent 9,818,107 B2
`an analogous field, or equivalent experience, and at least two years of
`relevant experience and familiarity with the fields of embedded system
`implementation, mobile communications, electronic payments and
`encryption.” Pet. 15 (citing Ex. 1003 ¶¶ 17–24). Petitioner’s declarant,
`Dr. Shamos, testifies that a person of ordinary skill in the art “would have
`had bachelor’s degree in electrical engineering, computer science, or an
`analogous field, or equivalent experience, and at least two years of relevant
`experience and familiarity with embedded system implementation, mobile
`communications, electronic payments and encryption.” Ex. 1003 ¶ 24.
`Patent Owner’s expert, Mr. Zatkovich, agrees with Dr. Shamos that a
`person of ordinary skill in the art “in the field of the challenged claims
`would have been someone with good working knowledge of device
`interfaces and the integration of devices involving digital and analog
`signals.” Ex. 2004 ¶ 14. Mr. Zatkovich testifies that a person of ordinary
`skill in the art “may have a Bachelor of Science in Electrical Engineering or
`Computer Engineering, or the equivalent and have 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.” Id.
`The parties’ description of a person of ordinary skill is essentially the
`same and is consistent with the subject matter of the ’107 patent. We agree
`with the parties’ description of a person of ordinary skill in the art at the time
`of the claimed invention, with the exception of the qualifier “at least” to
`keep the description from extending to a level beyond that of ordinary skill.
`Accordingly, for purposes of this Final Written Decision, a person of
`ordinary skill in the art is a person with a bachelor’s degree in electrical or
`computer engineering or equivalent having two years of relevant experience
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`Patent 9,818,107 B2
`in the fields of embedded systems and mobile communication device
`interfaces, or otherwise equivalent industry experience in the field.
`
`B.
`
`Claim Construction
`In an inter partes review, we apply the same claim construction
`standard that would be used in a civil action under 35 U.S.C. § 282(b),
`following the standard articulated in Phillips v. AWH Corp., 415 F.3d 1303
`(Fed. Cir. 2005) (en banc). 37 C.F.R. § 42.100(b). In applying such
`standard, claim terms are generally given their ordinary and customary
`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, 415 F.3d at 1312–13. “In determining the meaning of the disputed
`claim limitation, we look principally to the intrinsic evidence of record,
`examining the claim language itself, the written description, and the
`prosecution history, if in evidence.” DePuy Spine, Inc. v. Medtronic
`Sofamor Danek, Inc., 469 F.3d 1005, 1014 (Fed. Cir. 2006) (citing Phillips,
`415 F.3d at 1312–17).
`Only terms that are in controversy need to be construed, and then only
`to the extent necessary to resolve the controversy. Nidec Motor Corp. v.
`Zhongshan Broad Ocean Motor Co. Matal, 868 F.3d 1013, 1017 (Fed. Cir.
`2017); see Vivid Techs., Inc. v. Am. Sci. & Eng’g, Inc., 200 F.3d 795, 803
`(Fed. Cir. 1999) (applying Vivid Techs. in the context of an inter partes
`review).
`Here, neither party proposes an express construction for any claim
`terms. We agree that no claim terms require express construction, and use
`the ordinary and customary meaning of the terms. However, to the extent
`that the arguments of the parties reflect a particular understanding of the
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`Patent 9,818,107 B2
`claim language, we discuss each party’s understanding in our analysis of the
`arguments below.
`
`C.
`
`Patentability Challenges
`1.
`Principles of Law on Obviousness
`Section 103(a) forbids issuance of a patent when “the differences
`between the subject matter sought to be patented 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.” In Graham, the Supreme Court set out a
`framework for applying the statutory language of Section 103: the scope
`and content of the prior art are to be determined; differences between the
`prior art and the claims at issue are to be ascertained; and the level of
`ordinary skill in the pertinent art resolved. See Graham, 383 U.S. at 17–18.
`The Supreme Court has made clear that we apply “an expansive and
`flexible approach” to the question of obviousness. KSR Int’l Co. v. Teleflex,
`Inc., 550 U.S. 398, 415 (2007). Whether a patent claiming the combination
`of prior art elements would have been obvious is determined by whether the
`improvement is more than the predictable use of prior art elements according
`to their established functions. KSR, 550 U.S. at 417. Reaching this
`conclusion, however, requires more than a mere showing that the prior art
`includes separate references covering each separate limitation in a claim
`under examination. Unigene Labs., Inc. v. Apotex, Inc., 655 F.3d 1352,
`1360 (Fed. Cir. 2011). Rather, obviousness requires the additional showing
`that a person of ordinary skill at the time of the invention would have
`selected and combined those prior art elements in the normal course of
`research and development to yield the claimed invention. Id.
`
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`Patent 9,818,107 B2
`2.
`Grounds Based in part on Valliani
`a. Relevant Prior Art
`i. Valliani (Ex. 1005)
`Valliani describes “a PCMCIA [Personal Computer Memory Card
`International Association] compliant generic laptop computer or personal
`digital assistant (‘PDA’) device with an add-on module that provides point
`of sale functionality,” as illustrated in Figure 1 below. Ex. 1005, 2:42–45.
`
`
`
`Valliani’s Figure 1, above, is a block diagram depicting a generic
`PCMCIA-compliant device 10 such as a laptop computer or PDA, a module
`200 mechanically and electrically coupled to device 10 via connectors 90
`and 265, a card 230, and a remote host 75. Id. at 3:51–54; 4:62–65.
`Valliani’s module 200 includes “a magnetic stripe reader 210 that reads
`information encoded and stored on at least one magnetic stripe (or track) 220
`on a credit card (or other card) 230.” Id. at 4:38–42. “Module 200 may
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`provide a pinpad unit 240, a printer unit 245, a fingerprint reader unit 250, a
`signature capture unit and/or virtual pinpad unit 255, and/or a smartcard
`reader unit 260.” Id. at 4:42–45. “Smartcard reader unit 260 is utilized if
`card 230 is a smartcard storing data in memory 225.” Id. at 4:45–47. Using
`wireless unit 65 and/or serial and/or parallel ports 70, device 10 can
`communicate with remote host system 75 using an internal modem. Id. at
`4:13–21. “Software-memory within circuitry 240 encrypts user-input PIN
`data and, using device 10 as an interface [35] terminal, causes such
`encrypted data to be sent by device 10 to a host system 75.” Id. at 6:33–36.
`ii. Vrotsos (Ex. 1006)
`Vrotsos describes “[a]n attachment that may be coupled to a wireless
`communication device, such as a cellular telephone, personal digital
`assistant (PDA), or the like, to perform commercial or other information
`transactions” as illustrated in Figure 10 below. Ex. 1006, Abstr.
`
`
`Vrotsos’ Figure 10, above, is a block diagram that illustrates
`components of the wireless communication device and the attachment. Id.
`¶ 24.
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`Vrotsos discloses that “the system may be used to transmit credit card
`information during a point-of-sale transaction, transmit fingerprint
`information during a traffic stop, transmit bar code information during a tour
`of a warehousing facility or retail location, or the like.” Id. ¶ 26. The
`attachment 21 may include one or more input devices, such as a magnetic
`stripe reader, a smartcard reader, a fingerprint scanner, an optical scanner, a
`signature pad, an alphanumeric keypad (such as, a PIN pad), a proximity
`detector, an audio recording device, or a camera (such as, a digital or charge-
`coupled device (CCD) camera). Id. ¶ 28. The attachment 21 may also
`include an independent processor located on printed circuitboard (PCB) 25.
`Id. ¶ 33.
`Vrotsos describes the function of processor 303 as follows:
`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, append additional information indicating the
`identity or location of the user (using locator 302, which may be
`a GPS position sensor and/or processor or a processor for
`measuring signal strength from multiple base stations of the
`communication network to determine the attachments location
`by triangulation), divide the input information into data packets
`suitable for transmission over the communication network 102,
`etc.
`Id. ¶ 75.
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`Figure 11 of Vrotsos is reproduced below.
`
`
`Vrotsos’ Figure 11, above, is a block diagram that “illustrates a
`second embodiment of an attachment according to an embodiment of the
`present invention.” Id. ¶ 24.
`Vrotsos further describes the function of processor 303 in its second
`embodiment as follows:
`Generally, the processor 303 is responsible for controlling the
`hardware components located within the attachment 21. The
`processor 303 may also include software or code that enables or
`executes encryption processing on any transaction data or
`identification data. In an embodiment of the invention, the
`encryption is performed before the data is transmitted to the
`communication interface 311. In an embodiment of the
`invention, encryption is performed before storage of any
`transaction, measurement, or identification data in the removable
`memory 315 or the internal memory 307. The internal memory
`307 may be a volatile memory that is utilized by the processor
`303 as workspace for its processing. The internal memory 307
`may also have a non-volatile section. The non-volatile section
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`of the internal memory may store the encryption key currently
`utilized by the attachment 21.
`Id. ¶ 80.
`Vrotsos’ Figure 1E is shown below.
`
`
`
`Vrotsos’ Figure 1E, above, is a diagram depicting a combined
`magnetic stripe reader and smartcard reader, with card 51 having magnetic
`stripe 52 and smartchip 53. Vrotsos explains that:
`card 51 having a magnetic stripe 52 and/or smartchip 53 may be
`inserted into the slot 22. The slot may be shaped so as to include
`a shallow channel portion 54 of a depth suitable for reading a
`magnetic stripe 52 positioned parallel to a lateral surface of the
`card 51 as well as a deeper channel portion 55 of a suitable depth
`and width such that substantially all of the card 51 may be
`inserted into the slot 22 when a portion of the card 51 is inserted
`into the deeper channel portion 55. As shown, the deeper channel
`portion 55 is of a width substantially identical to the width of the
`card 51, such that lateral surfaces of the deeper channel portion
`55 may contact the lateral surfaces of the card 51 to ensure that
`the smartchip 53 is in a desired location. A magnetic stripe reader
`head may be located within a surface of the shallow channel
`portion 54 so that the magnetic stripe 52 can be read as the card
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`51 is swiped through the shallow channel portion 54. A
`smartcard read/write head may be positioned within a surface of
`the deeper channel portion 55 of the slot 22 so that information
`may be read from or written to the smartchip 53 when the card is
`positioned within the deeper channel portion 55.
`
`Id. ¶ 41.
`
`iii. Bryant (Ex. 1010)
`Bryant describes an “[a]n accessory device for a wireless telephone or
`handset” that “functions as either a shoulder rest or a stand” as illustrated in
`Figure 1 below. Ex. 1010, Abstr.
`
`
`Bryant’s Figure 1, above, is an illustration showing “a telephone
`
`shoulder rest and stand 100 attached to a cordless telephone handset 10.” Id.
`at 2:66–67. In Figure 1, support 100 is configured to operate as a stand. Id.
`at 3:5–6. As shown in Figure 1, “support 100 comprises a sliding arm 110, a
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`body 120, a locking pin 130, a foot 140, an attaching extension 150, a pair of
`attaching arms 160 and a shoulder rest surface 170.” Id. at 3:11–14.
`
`Figure 4A of Bryant, reproduced below, depicts a front perspective
`view of telephone shoulder rest 100.
`
`
`Bryant’s Figure 4A, above, shows an attaching pin 162 on one of the
`
`attaching arms 160. Id. at 4:4–5. “There is an opposing attaching pin 162
`(not shown) on the other attaching arm 160.” Id. at 4:5–6. Bryant describes
`how support 100 is attached to a telephone handset as follows:
`The support 100 is attached to the handset 10 by inserting the
`attaching pins 162 into corresponding openings (not shown) on
`the sides of the handset 10, with the front surface of the base 122
`touching the rear surface of the handset 10. The attaching arm
`160 is flexible so that the attaching pins 162 can easily be
`inserted into and removed from the corresponding openings in
`the handset 10, so that the support 100 is easily removed from
`the handset 10.
`Id. at 4:14–21.
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`b. Obviousness over Valliani and Vrotsos
`Petitioner asserts claims 8–13, 15–20, 29–34, 36–41 are unpatentable
`as obvious under 35 U.S.C. § 103 over the combination of Valliani and
`Vrotsos. Pet. 17–45.
`i.
`
`Independent Claim 8
`Preamble
`Claim 8 recites the following preamble: “An apparatus for effecting
`commercial transactions between an input device and a remote transaction
`server using a communication device.” 1 Ex. 1001, 12:60–64. Petitioner
`provides an annotated version of Figure 1 of Valliani, reproduced below.
`Pet. 17.
`
`
`
`
`1 Petitioner does not take a position as to whether the preamble of claim 8 is
`limiting, but addresses the preamble only “[t]o the extent it is deemed
`limiting.” See Pet. 17.
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`Petitioner’s annotated Figure 1, above, depicts a block diagram of a
`generic PCMCIA compliant device 10 (bordered in purple), connected to a
`module 200 (bordered in red) including smart card reader/writer 260
`(bordered in blue). Device 10 is in communication with remote host 75
`(bordered in green).
`Petitioner asserts Valliani teaches the preamble because:
`Valliani discloses an apparatus for effecting commercial
`transactions as a module 200, shown in red. The smart card
`reader/writer 260 is an input device in communication with host
`server 75 (green), the remote transaction server. The module
`200 plugs into a device 10 (purple), which is a personal digital
`assistant
`(“PDA”),
`device, which
`a
`communication
`“communicates with host 75” to send card data.
`Pet. 17 (citing Ex. 1005, 3:51–54; Ex. 1003 ¶¶ C1–24).2
`Patent Owner asserts that Valliani does not disclose “effecting
`commercial transactions between an input device and a remote transaction
`server.” PO Resp. 11–14. Patent Owner argues that “[m]atching PINs or
`authenticating the card owner’s identity is not the same thing as effecting a
`commercial transaction. Ex. 2004 ¶ 32. A [person of ordinary skill in the
`art] would understand that a commercial transaction is any transaction that
`involves some form of payment, or money transfer, in exchange for goods
`and services.” PO Resp. 12. Patent Owner argues that “Valliani uses
`remote host 75 for retrieving and verifying PIN and signature data—not for
`processing a commercial transaction.” Id. at 13 (citing Ex. 2004 ¶ 33).
`
`
`2 Although we are unable to find an explanation in the Petition, we assume,
`for example, the notation “Ex. 1003 ¶ C1” in the Petition refers to paragraph
`1 of Appendix C of Exhibit 1003, the Declaration of Dr. Shamos.
`20
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`IPR2019-01654
`Patent 9,818,107 B2
`Patent Owner argues, “Valliani provides no indication as to how the final
`commercial transaction would be conducted.” PO Resp. 13.
`We disagree with Patent Owner that Valliani does not disclose
`“effecting commercial transactions between an input device and a remote
`transaction server.” Patent Owner’s argument that authenticating a card
`owner’s identity is not the same thing as effecting a commercial transaction
`is unavailing, because authentication is a necessary and integral part of
`electronic commercial transactions. For example, if authentication were to
`fail (by determining that the user is not the card owner), an attempted
`commercial transaction would likely be rejected, and its purpose frustrated.
`See, e.g., Ex. 1005, 6:39–46.
`Patent Owner’s argument that Valliani does not specify how a
`commercial transaction would be conducted is equally unavailing.
`Valliani’s invention is directed to “a portable point of sale transaction
`terminal.” Ex. 1005, Abstr. Valliani’s “device can communicate . . . with a
`remote host system to further process a transaction for which [a] card is
`being used.” Id. In discussing the background of the invention, Valliani
`explains that “[s]uch systems are commonly used when a consumer (or user)
`pays for a purchase.” Ex. 1005, 1:30–31. Valliani further explains, “there is
`a need for a method and mechanism by which generic computing/PDA
`devices can be made to perform point of sale transaction functions.” Id. at
`2:32–34. “The present invention,” Valliani states, “provides such a method
`and system to implement point of sale transaction terminals.” Id. at 2:38–39.
`Valliani also explains that its device is for credit card transactions,
`reads the information from the magnetic stripe (or a smart card), and
`communicates with a remote host system to process a transaction. Id. at
`2:56–3:4. Valliani also discusses vendors who transact business “at a flea
`
`21
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`IPR2019-01654
`Patent 9,818,107 B2
`market or a garage sale” (id. at 2:25–28), and “a library . . . conducting a
`used book sale, and some patrons wish to purchase books with credit cards”
`(id. at 5:65–66). Indeed, Patent Owner’s expert, Mr. Zatkovich,
`acknowledges that commercial transactions may occur at flea markets,
`garage sales, and yard sales. See Ex. 1019, 136:13–23. We also credit
`Petitioner’s expert, Dr. Shamos, who credibly testifies that a person of
`ordinary skill in the art “would have understood Valliani as effecting a
`commercial transaction between the module 200 and the remote host server
`75 via the mobile device 10.” Ex. 1017 ¶ 50.
`We are persuaded by Petitioner’s evidence and arguments that
`Valliani teaches an apparatus (module 200) for effecting commercial
`transactions between an input device (smart card reader/writer 260) and a
`remote transaction server (remote host 75) using a communication device
`(device 10).
`Based on the complete record and for the reasons discussed herein, we
`are persuaded that Petitioner has demonstrated that Valliani teaches “[a]n
`apparatus for effecting commercial transactions between an input device and
`a remote transaction server using a communication device” as recited in the
`preamble of claim 1.3
`
` [8.A] “an input device for capturing recorded
`information from a smart card”
`
`Petitioner asserts that Valliani teaches this limitation. Referring to
`Valliani’s annotated Figure 1, infra, Petitioner argues:
`
`
`3 We do not reach the issue of whether the preamble is limiting. Regardless
`of whether the preamble is limiting, we are persuaded that Petitioner
`demonstrates that the recitation of the preamble is met by Valliani.
`22
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`IPR2019-01654
`Patent 9,818,107 B2
`smart card reader/writer unit 260 (red), corresponding to the
`input device “is utilized if card 230 is a smartcard storing data in
`memory 225.” Ex. 1005, 4:45–46. Card 230 (blue), is the smart
`card. The data (green) stored in memory 225 (purple)
`corresponds to the recorded information stored on an integrated
`circuit incorporated into the smart card. That recorded
`information includes “user account number, present maximum
`dollar limit of the account, [and] user identification,” as well as
`“a card owner’s PIN . . . stored in memory 225.” Id. 6:27–29;
`7:62–64; Ex. 1003 ¶¶ C25–28.
`Pet. 18 (emphasis in original).
`Valliani’s Figure 1, annotated by Petitioner, is shown below.
`
`Valliani’s annotated Figure 1, above, is a block diagram depicting
`device 10 connected to module 200 with smartcard reader/writer 260 (red)
`and smartcard 230 (blue) with memory 225 (purple).
`
`
`
`23
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`IPR2019-01654
`Patent 9,818,107 B2
`Patent Owner does not respond substantively to Petitioner’s
`arguments or evidence with respect to this limitation of claim 8. See PO
`Resp. 11–24.
`We are persuaded by Petitioner’s evidence and arguments that
`Valliani teaches an input device (smartcard reader/writer 260) for capturing
`recorded information (e.g., user account number, present maximum dollar
`limit of the account, and user identification, as well as card owner’s PIN
`stored in memory 225) from a smartcard (card 230 with memory 225). See
`Pet. 18–20 (citing Ex. 1003 ¶¶ C25–36; Ex. 1005, 3:43–46, 4:45–46, 6:27–
`29, 7:62–64).
`Based on the complete record and for the reasons discussed herein, we
`are persuaded that Petitioner has demonstrated that Valliani teaches “an
`input device for capturing recorded information from a smartcard,” as
`recited in claim 8.
`
` [8.B]: “a sensor incorporated into said input
`device for reading said recorded information
`stored on an integrated circuit incorporated
`into said smart card”
`
`Petitioner asserts that Vallia
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