UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`________________________________
`
`SAMSUNG ELECTRONICS CO., LTD.,
`SAMSUNG ELECTRONICS AMERICA, INC.,
`SAMSUNG RESEARCH AMERICA, INC.
`
`Petitioner
`
`v.
`
`DYNAMICS INC.,
`Patent Owner
`
`_________________________________
`
`Case No. IPR2020-00499
`
`U.S. Patent No. 8,827,153
`Title: SYSTEMS AND METHODS FOR WAVEFORM GENERATION FOR
`DYNAMIC MAGNETIC STRIPE COMMUNICATIONS DEVICES
`____________________________________
`
`DECLARATION OF IVAN ZATKOVICH IN SUPPORT OF
`PATENT OWNER’S SUR-REPLY TO PETITION FOR
`INTER PARTES REVIEW OF U.S. PATENT NO. 8,827,153
`
`Dynamics Inc. - EX. 2035
`Page 1
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`________________________________
`
`SAMSUNG ELECTRONICS CO., LTD.,
`SAMSUNG ELECTRONICS AMERICA, INC.,
`SAMSUNG RESEARCH AMERICA, INC.
`
`Petitioner
`
`v.
`
`DYNAMICS INC.,
`Patent Owner
`
`_________________________________
`
`Case No. IPR2020-00499
`
`U.S. Patent No. 8,827,153
`Title: SYSTEMS AND METHODS FOR WAVEFORM GENERATION FOR
`DYNAMIC MAGNETIC STRIPE COMMUNICATIONS DEVICES
`____________________________________
`
`DECLARATION OF IVAN ZATKOVICH IN SUPPORT OF
`PATENT OWNER’S SUR-REPLY TO PETITION FOR
`INTER PARTES REVIEW OF U.S. PATENT NO. 8,827,153
`
`Dynamics Inc. - EX. 2035
`Page 1
`
`
`
`Table of Contents
`I.
`INTRODUCTION ..................................................................................................................................... 2
`II. OVERVIEW OF THE ASSERTED CHALLENGES TO PATENTABILITY.......................................................... 4
`III.
`PATENTABILITY ANALYSIS ................................................................................................................. 5
`Claims 1 and 5-8 of the ’153 Patent are not Invalid over the Combination of Gutman and
`Shoemaker ................................................................................................................................................ 5
`Claims 1 and 5-8 of the ’153 Patent are Not Obvious over the Combination of Lessin and
`Shoemaker .............................................................................................................................................. 13
`IV.
`CONCLUSION ................................................................................................................................... 22
`
`i
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`Dynamics Inc. - EX. 2035
`Page 2
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`
`
`Dynamics
`Exhibit No.
`2001
`
`2002
`
`2003
`
`2004
`
`2005
`
`2006
`
`2007
`
`2008
`
`2009
`
`2010
`
`EXHIBIT LIST
`
`Reference Name
`
`Scheduling Order Issued September 11, 2019 in the ITC
`Proceeding 337-1700
`Revised Scheduling Order Issued April 20, 2020 in the ITC
`proceeding 337-1700
`Joint Tutorial Dated November 26, 2019 from ITC Proceeding
`337-1700
`Explaining the Physics Behind Magstripes/Experimental
`Conclusions, Lasers, Technology, and Teleportation with Prof.
`Magnes available at https://pages.vassar.edu/ltt/?p=965
`(accessed April 4, 2020)
`Microchip User Guide Card Reader Demo available at
`http://ww1.microchip.com/downloads/en/DeviceDoc/Magnetic%
`20Card%20Reader%20User%20Guide.pdf (accessed April 19,
`2020)
`Julia Kagan, Magnetic Stripe Card, Investopedia, March 21,
`2018 available at
`https://www.investopedia.com/terms/m/magnetic-stripe-card.asp
`(accessed April 4, 2020)
`Payment Terminal. November 13, 2019. In Wikipedia. Accessed
`on January 19, 2020 from
`https://en.wikipedia.org/wiki/Payment_terminal
`
`The historical roots of electronic card machines. July 26, 2019.
`In Mobile Transactions.
`Accessed on January 19, 2020 from
`https://www.mobiletransaction.org/history-of-credit-
`cardmachines/
`Consumers or merchants: Why haven’t NFC payments taken
`off?. (n.d.). In Datacap Systems.
`Accessed on January 19, 2020 from
`https://datacapsystems.com/blog/2017/6/7/consumers-
`ormerchants-
`why-havent-nfc-payments-taken-off.
`Everything You Need to Know About NFC Technology & Why
`NFC Payments Are the
`
`ii
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`Dynamics Inc. - EX. 2035
`Page 3
`
`
`
`2011
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`2017
`
`2018
`
`2019
`
`Future. January 6, 2020. In Merchant Maverick. Accessed on
`January 19, 2020 from
`https://www.merchantmaverick.com/what-is-nfc/;
`Martin Rupp, Tokenization in Banking and Financial Services,
`July 24, 2019, CryptomathIC available at
`https://www.cryptomathic.com/news-events/blog/tokenization-
`in-banking-and-financial-services (accessed April 14, 2020).
`Claim Construction Order Issued January 31, 2020 in the ITC
`Proceeding 337-1700
`Licensing Agreement between Dynamics and LG
`
`Samsung User Manual Model SM-G973W. March 2019. P. 15,
`accessed Jan. 17, 2020 from
`http://downloadcenter.samsung.com/content/UM/201903/201903
`08231138899/G97x_UG_CA_
`Pie_ENG_D4.pdf.
`Adrian Diaconescu, Samsung’s Q4 2018 Smartphone Profits
`Were the Lowest in More than Two Years, January 31, 2019,
`Phonearena.com available at
`https://www.phonearena.com/news/samsung-q4-2018-
`smartphone-profits-full-year-financial-report_id113307
`(accessed April 14, 2020).
`Matt Burns, Stratos Card To Shut Down Just Six Months After
`Launching, available at
`https://techcrunch.com/2015/12/21/stratoscard-to-shut-down-
`just-six-months-after-launching/ (December 21, 2015).
`Geoffrey Morrison, Plastc Card Is Cancelled: The Dangers Of
`Crowd Funding Tech, available at
`https://www.forbes.com/sites/geoffreymorrison/2017/04/29/plast
`c-card-is-cancelled-the-dangersof-
`crowd-funding-tech/#732607402a65 (April 29, 2017).
`Matt Burns, The Stratos All-In-One Credit Card Isn’t Perfect
`Enough, available at https://techcrunch.com/2015/05/26/the-
`stratos-all-in-one-creditcard-
`isnt-perfect-enough/ (May 26, 2015)
`Jason Del Rey, I Waited 19 Months for
`the Magic Coin Card and It Was a Big Disappointment,
`available at
`
`iii
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`Dynamics Inc. - EX. 2035
`Page 4
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`
`
`2020
`
`2021
`
`2022
`
`2023
`
`2024
`
`2025
`
`2026
`
`2027
`
`2028
`
`2029
`
`2030
`
`2031
`
`2032
`
`2033
`
`2034
`
`2035
`
`https://www.vox.com/2015/7/13/11614656/i-waited-19-months-
`for-the-magic-coin-card-and-itwas-
`a-big (July 13, 2015).
`U.S. Patent Application Pub. No. 2008/0126260 to Cox
`
`INTENTIONALLY LEFT BLANK
`
`INTENTIONALLY LEFT BLANK
`
`INTENTIONALLY LEFT BLANK
`
`Order Granting Motion to Stay Issued September 4, 2019 in
`District Court Proceeding 19-cv-6479 in Southern District of
`New York
`Order Suspending Hearing Dates Issued May 15, 2020 in the
`ITC Proceeding 337-1700
`Respondents’ Motion to Stay District Court Proceeding dated
`Sept. 3, 2019 in 19-cv-6479 (Southern District of New York)
`Robert Morris Email to Trials at USPTO dated August 12, 2020
`in Response to Petitioner’s Email Informing the PTAB the
`updated ITC Schedule
`F. Christopher Mizzo E-Mail to PTAB Dated August 12, 2020 re
`Updated ITC Schedule
`Excerpt from Shoemaker Prosecution History, Amendment B
`dated December 23, 2008 (received at USPTO on December 24,
`2008)
`Deposition of Stephen Halliday dated October 21, 2020
`
`Deposition of Stephen Halliday dated October 22, 2020
`
`Curriculum Vitae of Ivan Zatkovich
`
`Expert Declaration of Ivan Zatkovich
`
`Deposition Transcript of Stuart Lipoff
`
`Expert Declaration of Ivan Zatkovich dated March 9, 2021
`
`iv
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`Dynamics Inc. - EX. 2035
`Page 5
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`
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`I, Ivan Zatkovich, do hereby declares as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`I have been retained by Dynamics Inc. (the “Patent Owner” or
`
`“Dynamics”), through their attorneys Eckert Seamans Cherin & Mellott, LLC., as
`
`an expert witness on behalf of Patent Owner for this case involving the petition for
`
`Inter Partes Review (“IPR”) of U.S. Patent No. 8,827,153 (the “’153 patent,” EX.
`
`1001) filed by the petitioner Samsung Electronics Co., Ltd., Samsung Electronics
`
`America, Inc., and Samsung Research America, Inc. (the “Petitioner” or
`
`“Samsung”).
`
`2.
`
`Among other things, I have been asked to render an opinion as to
`
`whether claims 1 and 5-8 of the ’153 patent are patentable over the prior art
`
`references listed in the Petition, U.S. Patent No. 6,206,293 to Gutman et al.
`
`(“Gutman,” EX. 1005), U.S. Patent No. 4,868,376 to Lessin (“Lessin,” EX. 1011),
`
`and U.S. Patent No. 7,690,580 to Shoemaker (“Shoemaker,” EX. 1010).
`
`Additionally, I have been asked to provide background information relative to
`
`certain technical issues as set forth herein.
`
`3.
`
`I am being compensated as an independent consultant in this matter at
`
`a rate of $525 per hour for my work on this matter. I have received no additional
`
`compensation for my work on this matter, and my compensation depends in no
`
`way on my opinions expressed in this declaration, any testimony that I may give,
`
`2
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`
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`or the outcome of this matter. In addition, I will be reimbursed for reasonable
`
`expenses incurred in connection with my work on this matter.
`
`4.
`
`In preparing my Declaration, I have relied upon my knowledge, skill,
`
`experience, training, and education in my field of expertise. I have also reviewed
`
`and considered the ’153 patent, its prosecution history, Gutman, Lessin,
`
`Shoemaker, and any other documents that may be referenced herein. A list of
`
`materials that I relied upon in forming the opinions set forth in this Declaration are
`
`included in the Exhibits List at the beginning of this Declaration, as well as cited
`
`throughout this Declaration and in the accompanying Exhibits. I reserve the right
`
`to consider and rely on, as well as supplement, this Declaration in view of
`
`additional information that is provided to me in this review, including information
`
`considered by Samsung’s experts or developed before trial.
`
`5.
`
`This Declaration sets forth and updates the opinions I formed in this
`
`matter and the bases for those opinions through my independent evaluation and
`
`analysis. My opinions are based on the information available to me as of the date I
`
`signed this Declaration below. If additional information becomes available to me
`
`either by production by the parties or third parties, or otherwise, I may, if permitted
`
`to do so, offer additional opinions. I may also, if requested and permitted to do so,
`
`provide further opinions to rebut any testimony, reports or opinions offered by
`
`3
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`Dynamics Inc. - EX. 2035
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`
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`Samsung’s witnesses (expert or otherwise). I may present demonstrative or
`
`illustrative exhibits at trial to explain my opinions to the Board.
`
`6.
`
`It is my opinion that the claims 1 and 5-8 of the ’153 patent are
`
`patentable and not obvious over Gutman, Lessin, and Shoemaker, alone or in
`
`combination.
`
`II. OVERVIEW OF THE ASSERTED CHALLENGES TO
`PATENTABILITY
`12.
`Petitioner asserts the following challenges to patentability, which the
`
`Board has agreed to examine:
`
`Challenged Claims
`1, 5-8
`1, 5-8
`
`35 U.S.C. §
`103
`103
`
`Reference(s)/Basis
`Gutman, Shoemaker
`Lessin, Shoemaker
`
`13. As noted above, the following prior art references are being asserted in
`
`this proceeding:
`
`14. U.S. Patent No. 6,206,293 to Gutman, issued March 27, 2001 (Ex.
`
`1005, “Gutman”).
`
`15. U.S. Patent No. 4,868,376 to Lessin, issued September 19, 1989 (Ex.
`
`1011, “Lessin”).
`
`16. U.S. Patent No. 7,690,580 to Shoemaker, issued April 6, 2010 (Ex.
`
`1010, “Shoemaker”).
`
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`
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`III. PATENTABILITY ANALYSIS
`Claims 1 and 5-8 of the ’153 Patent are Not Invalid over the
`Combination of Gutman and Shoemaker
`Claim 1
`17. As an initial matter, I would like to note that the Petitioner’s basis for
`
`combining Gutman and Shoemaker is based on critically flawed assumptions. Most
`
`notably, Petitioner appears to base the motivation of combining Gutman and
`
`Shoemaker on the argument that because Gutman’s device can be swiped, it would
`
`have been obvious to incorporate swipe directions from Shoemaker into Gutman.
`
`This is incorrect.
`
`18.
`
`First, Gutman does not need to be swiped. In fact, Gutman expressly
`
`teaches away from swiping. For instance, Gutman states that “[s]ince the magnetic
`
`fields change electronically, movement of the card of the present invention is not
`
`required, thereby saving wear and tear on both the card and the card reader.” Ex.
`
`1005 at 16:60-63. This passage of Gutman, by noting the wear and tear that is saved
`
`by not swiping a card, expressly criticizes the swiping method, and in fact
`
`discourages one from swiping at all. Thus, contrary to Petitioner’s arguments, it is
`
`my opinion that a POSITA would not have provided detection of forward and
`
`reverse swipe directions to Gutman because such an addition adds nothing to the
`
`operation of Gutman’s disclosed device which expressly operates without movement
`
`of the device.
`
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`19.
`
`In fact, Gutman’s functionality is expressly designed to prevent
`
`problems caused by swiping a card. For instance, Gutman goes on to reiterate,
`
`explicitly, that “no ‘swiping’ movement is necessary.” Ex. 1005 at 17:4. Thus,
`
`Petitioner’s assumption that Gutman must be swiped is flawed. Given that Gutman
`
`indicates that its device can be swiped, rather than must be swiped, adding swipe
`
`direction sensors, as Petitioner promotes, would reduce the effectiveness of Gutman
`
`by adding extraneous features that Gutman specifically designed around by
`
`removing the need to move the card through the reader. Since Gutman does not need
`
`to be swiped, the direction in which it is swiped is of no consequence. Petitioner has
`
`provided no evidence to support its position that a POSITA would have removed
`
`Gutman’s disclosed means for transmitting data, thereby eviscerating Gutman’s
`
`invention, and replaced those means with those of Shoemaker, and then required
`
`Gutman to store versions of data that it previously did not require in order to function
`
`properly.
`
`20. Thus, a POSITA would not look to Shoemaker and decide to eliminate
`
`Gutman’s non-swiping feature. In fact, doing so would not only defeat a clear, stated
`
`purpose of Gutman (e.g., to eliminate the wear and tear that swiping causes to a card
`
`and card readers, see EX. 1005, 2:3-13, 16:60-63), but would require modifications
`
`that Petitioner has not explained how a POSITA would have implemented, such as
`
`
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`replacing Gutman’s hardware with Shoemaker’s, modifying Gutman’s software, and
`
`why a POSITA would have found these changes necessary or advantageous at all.
`
`21.
`
`Even to the extent that Gutman can be swiped, Gutman explicitly notes
`
`that Gutman transmits information to a card reader completely independent of swipe
`
`movement or swipe direction. In fact, Gutman teaches that even where a user
`
`chooses to swipe a card through a card reader, the swiping action plays no role in
`
`the transmission of data. EX. 1005, 17:4-13 (“[N]o swiping movement is necessary.
`
`Additionally, since the conductor 204 runs substantially the width of the card, the
`
`placement of the card along the ‘swipe’ direction in the magnetic card reader is not
`
`critical for operation with the magnetic card reader 100 as long as a portion of the
`
`length of the card is inserted in the slotted portion 104 of the magnetic card reader
`
`100. Consequently, communication of data by the card of the current invention is
`
`independent of movement of the card or placement of the card within the magnetic
`
`card reader.”). This is in stark contrast to Shoemaker, which expressly teaches that
`
`the swiping motion is what triggers the communication of data, thus necessitating
`
`the swipe direction sensors, forward and reverse transmission of data, and other
`
`features that Petitioner points to in Shoemaker. EX. 1010, 14:54-15:6.
`
`22.
`
`In fact, there are numerous structural differences between Shoemaker
`
`and Gutman that Petitioner has failed to address in making its proposed combination.
`
`For instance, Gutman sends alternating electromagnetic currents through a coil that
`
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`sends the same data from each point along the coil, thus removing any necessity for
`
`swiping Gutman’s device. This is illustrated in FIG. 3 of Gutman below, which
`
`depicts a card 200 that includes a conductor 204 wrapped around a ferrite core 302.
`
`The card is in aligned with a read head 308, but as Gutman indicates throughout its
`
`disclosure, is not swiped across the read head. EX. 1005, 5:43-7:24.
`
`23. Gutman does not include features that Shoemaker requires to
`
`accommodate its “swiping” feature, such as swipe direction sensors and software for
`
`
`
`
`
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`reconfiguring its magnetic stripe emulator based on the detected swipe direction
`
`(Compare EX. 1005, 16:57-17:16 with EX. 1010, 14:52-15:6).
`
`24. These differences between Gutman and Shoemaker illustrate the
`
`fundamental differences between Gutman and Shoemaker – that Gutman has a
`
`design that operates without swiping its device (see, e.g., EX. 1005, 16:57-17:13),
`
`while Shoemaker requires swiping in order to determine how to dynamically
`
`configure the data to be output (see e.g., EX. 1010, 12:28-43, 14:54-15:6).
`
`25.
`
`I also disagree with Petitioner’s argument that a POSITA would have
`
`been motivated by Shoemaker’s N-time use tokens to incorporate multiple digital
`
`representations of a track of data into Gutman’s device. It is clear that these tokens
`
`are not separate digital representations of the same data. Rather, they are different
`
`sets of data entirely. Further, Shoemaker does not make any indication that these N-
`
`time use tokens are stored representations of a track of magnetic stripe data. This
`
`type of token is information in addition to or accompanying the magnetic stripe track
`
`data to authenticate the track data. In addition, there can only be one N-time token
`
`active at a time for any given card account (i.e. a token used n-times and then
`
`replaced by a new token). Therefore, a POSITA would have no motivation to
`
`generate multiple n-time tokens in advance and store them in memory.
`
`26. Moreover, I note that Shoemaker does not merely teach transmitting
`
`data to a card reader as that data exists in memory. Rather, Shoemaker teaches that
`
`
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`when data is to be sent to a card reader, that data is “dynamically” (a term used
`
`roughly 100 times in Shoemaker) constructed, then encrypted, then stored as a single
`
`representation in a patter buffer, and then sent to a card reader. EX. 1010, 12:28-43.
`
`Thus, even where N-time use tokens are employed, Shoemaker only teaches that the
`
`necessary data to be communicated to a card reader is dynamically built at the time
`
`of the transaction, not merely retrieved verbatim from memory.
`
`27. Additionally, I disagree with Petitioner’s assertion that business and
`
`personal profiles are different digital representations of a track of magnetic stripe
`
`data. In fact, I note that Petitioner misrepresents the language of the claims. Claim 1
`
`requires a “track of magnetic stripe data.” EX. 1001, claim 1 (emphasis added).
`
`Petitioner claims that Shoemaker teaches this limitation because “Shoemaker
`
`discloses retrieving multiple representations (business/personal) of the same track
`
`data (credit card account).” Petitioner’s Reply at 8 (emphasis added). As this Board
`
`noted in its Decision to Institute, different profiles are not different representations
`
`of the same data. Decision to Institute at 50. I understand that Petitioner’s argument
`
`implies that a card number is a track of magnetic stripe data. Petitioner’s Reply at 8.
`
`This is incorrect. A card number is merely one part of the information contained
`
`within a track of magnetic stripe data. Just as a field of grass is a component of, but
`
`not in and of itself an NFL-compliant football field, a card number is not necessarily
`
`a track of ISO-compliant magnetic stripe data.
`
`
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`28. For example, a track of magnetic stripe data includes several different
`
`pieces of information, including a start sentinel, a card’s expiration data, and “card
`
`number” (i.e., a Primary Account Number). Petitioner’s suggestion that the same
`
`card number being used to form different tracks constitutes different representations
`
`of the same track is incorrect. Instead, those are entirely different tracks of magnetic
`
`stripe data.
`
`29. Lastly, Petitioner argues that “Shoemaker provides an obvious solution
`
`to the swipe direction problem that a POSITA would have recognized in Gutman …
`
`so that ‘the data stream is always provided in the expected order irrespective of the
`
`swipe direction’” Petitioner’s Reply at 12. First, very few card readers expect
`
`
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`information to be transmitted in an expected order based on what direction a card is
`
`swiped. Card readers generally cannot detect the swipe direction of a card. A card
`
`reader simply reads the track data as it appears at the read-head, and then determines
`
`the direction of the data based on whether a start sentinel appears in the forward
`
`direction or an end sentinel appears first in the reverse direction. Second, for those
`
`very few card readers that only support cards swiped in the forward direction, a card
`
`emulator being swiped would have no way of determining if a card reader only
`
`accepts data in one direction.
`
`30. Therefore, none of Petitioners reasons to combine Shoemaker with
`
`Gutman are correct. In summary, Shoemaker does not currently maintain multiple
`
`representations of the same track in memory at the same time. So first, a POSITA
`
`would have to be motivated to modify Shoemaker to provide an un-needed feature
`
`of storing a track of data in both forward and reverse direction prior to swiping the
`
`card. Shoemaker states that it is already capable of dynamically generating forward
`
`or reverse dynamically at the time of swiping (where pre-storing the data gains no
`
`efficiency). Then, after modifying Shoemaker, a POSITA must then be motivated
`
`to combine that modified Shoemaker with Gutman in order to provide yet another
`
`un-needed function of detecting swipe direction in Gutman. In my opinion, a
`
`POSITA would not be likely to perform either modification for either un-needed
`
`function, let alone perform a sequence of two unlikely modifications in order to end
`
`
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`up with two new features in Gutman (pre-storing a track in forward and reverse
`
`direction, and detecting the direction of a swipe) for a function that Gutman already
`
`says is unnecessary.
`
`Claims 5-8
`31. As stated above, neither Gutman nor Shoemaker teach that a digital
`
`representation of a track of magnetic stripe data is retrieved from memory from a
`
`plurality of digital representations. Accordingly, the combination of Gutman and
`
`Shoemaker do not render obvious claims 5-8 of the ’153 patent for the same reasons
`
`as with respect to claim 1 of the ’153 patent.
`
` Claims 1 and 5-8 of the ’153 Patent are Not Obvious over the
`Combination of Lessin and Shoemaker
`Claim 1
`In order to make up a motivation to combine out of whole cloth,
`32.
`
`because none actually exists, Petitioner improperly creates problems that did not
`
`exist with Lessin. This, in fact, misinterprets Lessin based on assumptions that are
`
`only possible through hindsight bias – namely, that a POSITA would have
`
`recognized a “swipe direction” problem in Lessin’s device and would have sought
`
`to resolve it by combining Lessin with Shoemaker.
`
`33.
`
`In fact, Lessin purports to make improvements to the user interface
`
`between the user interacting with the payment device itself, and “improvements” for
`
`how the device itself interfaces with a card reader. See, e.g., EX. 1011, 1:62-2:10.
`
`
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`Thus, Lessin’s user interface is intended to make the device “user friendly.”
`
`Petitioner claims that making Lessin’s device capable of being swiped and
`
`communicating data in both the forward and reverse directions adds to the user
`
`friendliness. However, Petitioner fails to cite to any passage of Lessin that supports
`
`this statement (which is not surprising given that none exist). Petitioner’s argument
`
`appears to suggest that any potential improvement that can be made to Lessin,
`
`regardless of whether or not Lessin teaches, suggests, or provides any motivation for
`
`such improvement, is obvious. I disagree.
`
`34. Additionally, Lessin, like Gutman discussed above, does not teach a
`
`device that is swiped. Petitioner cites Lessin at 19:35-43 as support of its suggestion
`
`that Lessin is “concerned with swipe directions.” See Petitioner’s Reply at 16.
`
`However, Petitioner is wrong. In fact, the words “swipe,” “swiped,” and “swiping”
`
`do not exist anywhere in Lessin, nor is “swipe direction” or even “direction” by
`
`itself. Lessin has absolutely nothing to do with transmitting data based on the
`
`direction of a swipe. Rather, Lessin teaches a transducer that, like Gutman, merely
`
`needs to be “aligned” with a read head in order to transmit data, as opposed to being
`
`swiped as required by the magnetic stripe of Shoemaker.
`
`
`
`14
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`Dynamics Inc. - EX. 2035
`Page 18
`
`
`
`35. Specifically, Lessin teaches the following:
`
`
`
`It may be desirable to communicate information stored or
`calculated in the ITC card to a terminal of a transaction
`card system. For example,
`if PIN verification
`is
`successfully executed on the ITC, the proper transaction
`code may be sent by the ITC to the terminal to
`acknowledge the verification. However, on many of the
`existing
`transaction
`terminals,
`the communication
`medium
`is a magnetic strip containing encoded
`information. Therefore, in another embodiment of the
`present invention shown in FIGS. 22A and 22B the ITC is
`provided with a magnetic head 1200 embedded in the card
`that can receive and transmit magnetically encoded
`information.
`
`Transducer 1200 is positioned within the card, as
`illustrated in FIG. 22A, such that the transducer can be
`aligned with the head in a card reading device such as a
`point of sale terminal 1210 as illustrated in FIG. 22B.
`Signals representing the data to be communicated are
`output serially, emulating the data encoded on a magnetic
`strip.
`
`
`
`
`15
`
`Dynamics Inc. - EX. 2035
`Page 19
`
`
`
`36. EX. 1011, 19:35-54. From the above passage, it is clear that Lessin
`
`teaches that instead of a magnetic stripe like Shoemaker and other magnetic stripes
`
`of prior art payment cards, a transducer can simply emit data to a card when aligned
`
`with a read head of a card reader. For instance, as shown below, Shoemaker teaches
`
`various formulations of a magnetic stripe, which it then encodes with magnetic stripe
`
`data.
`
`
`
`
`
`16
`
`Dynamics Inc. - EX. 2035
`Page 20
`
`
`
`37. Shoemaker teaches that portions of this stripe can be dynamically
`
`encoded with different information, thereby necessitating the swiping motion in
`
`order for a card reader to read all of the necessary information from the card. EX.
`
`1010, 8:11-41. Shoemaker is replete with references to magnetic stripes being used
`
`in its invention. See generally, EX. 1010.
`
`38. Therefore, rather than swiping the card, as a consumer would do with a
`
`magnetic stripe, a user can simply insert Lessin’s ITC into a card reader. Lessin, in
`
`fact, discusses prior art “magnetic stripes,” and then differentiates its device from
`
`the prior art by its use of a transducer that merely needs to be aligned with a read
`
`head, which indicates that Lessin is not a device intended to be swiped. In addition
`
`to using differently structured emulators, Lessin and Shoemaker differ in other
`
`hardware and software aspects. For example, because Shoemaker dynamically
`
`generates data, Shoemaker would require less memory that it would require to store
`
`multiple versions of every track of data.
`
`39. Additionally, Lessin does not even require insertion into a card reader,
`
`as it even notes that it can operate independently of a point of sale terminal entirely,
`
`let alone being swiped through a card reader located on a point of sale terminal. See,
`
`e.g., EX. 1011, 21:15-19.
`
`40.
`
`I also disagree with Petitioner’s assertion that Shoemaker’s teaching of
`
`dynamic modification of a data pattern is “beside the point.” Given the fact that
`
`
`
`17
`
`Dynamics Inc. - EX. 2035
`Page 21
`
`
`
`Lessin does not teach swiping its card at all, and that Shoemaker teaches dynamically
`
`compiling a track of magnetic stripe data at the time of a transaction for security
`
`purposes, it would defy reason to ignore Lessin’s and Shoemaker’s teachings to
`
`somehow provide motivation to create the combination proposed by Petitioner.
`
`41. For example, Lessin does not teach that its device is swiped through a
`
`card reader. A POSITA would not have been motivated to create swipe functionality,
`
`and then further complicate that functionality by requiring a swipe direction sensor.
`
`Further, Shoemaker teaches that its device dynamically configures its track of
`
`magnetic stripe data at the time of a transaction for security purposes rather than
`
`store a digital representation of a complete magnetic stripe. It would defy reason for
`
`a POSITA to have ignored these security features and store multiple versions of the
`
`same data in memory, solely to accommodate a feature that Lessin is not designed
`
`for, and in fact has alternatives to.
`
`42. Petitioner also points to Mr. Halliday’s opinion that swipe direction is
`
`important for a card reader to function. Petitioner’s Reply at 15 (citing EX. 2031,
`
`359:11-19). However, I have not found any evidence that indicates that the swipe
`
`direction problem created by Petitioner applies to all card readers. In fact, in my
`
`experience, a very limited number of card readers “expect” data to be transmitted in
`
`the same direction of a physical swipe. Instead, most card readers determine whether
`
`they are receiving track data in a reverse direction based on whether the first bit of
`
`
`
`18
`
`Dynamics Inc. - EX. 2035
`Page 22
`
`
`
`data represents an end sentinel versus a start sentinel. Thus, Petitioner’s motivation
`
`to combine relies on a POSITA being motivated to solve a problem that simply does
`
`not apply to Lessin, and that only applies to a small percentage of card readers.
`
`43. Lastly, Petitioner repeats its argument that “Shoemaker provides an
`
`obvious solution to the swipe direction problem that a POSITA would have
`
`recognized in Gutman … so that ‘the data stream is always provided in the expected
`
`order irrespective of the swipe direction’” and applies that argument to Lessin as
`
`well. Petitioner’s Reply at 12. First, very few card readers expect information to be
`
`transmitted in an expected order based on what direction a card is swiped. Card
`
`readers generally cannot detect the swipe direction of a card. A card reader simply
`
`reads the track data as it appears at the read-head, and then determines the direction
`
`of the data based on whether a start sentinel appears in the forward direction or an
`
`end sentinel appears first in the reverse direction. Second, for those very few card
`
`readers that only support cards swiped in the forward direction, a card emulator
`
`being swiped would have no way of determining if a card reader only accepts data
`
`in one direction.
`
`44. Therefore, Petitioner’s reasons to combine Shoemaker with Lessin are
`
`incorrect. In summary, Shoemaker does not currently maintain multiple
`
`representations of the same track in memory at the same time. So first, a POSITA
`
`would have to be motivated to modify Shoemaker to provide an un-needed feature
`
`
`
`19
`
`Dynamics Inc. - EX. 2035
`Page 23
`
`
`
`of storing a track of data in both forward and reverse direction prior to swiping the
`
`card. Shoemaker states that it is already capable of dynamically generating forward
`
`or reverse dynamically at the time of swiping (where pre-storing the data gains no
`
`efficiency). Then, after modifying Shoemaker, a POSITA must then be motivated
`
`to combine that modified Shoemaker with Lessin in order to provide yet another un-
`
`needed function of detecting swipe direction in Lessin. In my opinion, a POSITA
`
`would not be likely to perform either modification for either un-needed function, let
`
`alone perform a sequence of two unlikely modifications in order to end up with two
`
`new features in Lessin (pre-storing a track in forward and reverse direction, and
`
`detecting the direction of a swipe) for a function that Lessin already says is
`
`unnecessary.
`
`45.
`
`I also disagree with Petitioner’s argument that a POSITA would have
`
`been motivated by Shoemaker’s N-time use tokens to incorporate multiple digital
`
`representations of a track of data into Lessin’s device, for the same reason that I
`
`disagree with this argument as it relates to the combination of Gutman and
`
`Shoemaker. It is clear that these tokens are not separate digital representations of the
`
`same data. Rather, they are different sets of data entirely. Further, Shoemaker does
`
`not make any indication that these N-time use tokens are stored representations of a
`
`track of magnetic stripe data. This type of token is information in addition to or
`
`accompanying the magnetic stripe track data to authenticate the track data. In
`
`
`
`20
`
`Dynamics Inc. - EX. 2035
`Page 24
`
`
`
`addition, there can only be one N-time token active at a time f
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