[00:00:00] Speaker 00:
Is 161059 Smart Flash versus Apple.

[00:00:04] Speaker 00:
Mr. Perry, whenever you're ready.

[00:00:12] Speaker 04:
Thank you, Chief Judge Prost, and may it please the court.

[00:00:15] Speaker 04:
These business method patents are in the heartland of Alice.

[00:00:20] Speaker 04:
This is not a close case.

[00:00:23] Speaker 04:
The asserted claims recite a fundamental economic concept.

[00:00:27] Speaker 04:
conditioning access to content based on payment that can be implemented on any generic computing device.

[00:00:35] Speaker 00:
But isn't the problem rooted in computer technology and therefore doesn't it fall within how some have broadly construed some of the language in DDR?

[00:00:44] Speaker 04:
Your Honor, it does not either fall within, or excuse me, is not rooted in computer technology nor does it fall within DDR and let me answer that in three steps if I may.

[00:00:53] Speaker 04:
The business problem addressed here, data piracy, is not a technological problem.

[00:00:58] Speaker 04:
It existed before the internet, and it exists outside the internet today.

[00:01:02] Speaker 04:
Second, the solution offered here, or the proposal offered in these patents, is not limited to the internet.

[00:01:08] Speaker 04:
In fact, the patent says so in so many words that it can be applicable to any number of things, including, for example, CDs.

[00:01:16] Speaker 04:
Digital data is on CDs.

[00:01:18] Speaker 04:
CDs can be copied, and this patent

[00:01:20] Speaker 04:
sites and specification, copying from CDs.

[00:01:23] Speaker 04:
And third, I think and most importantly, the point of DDR, we take it, is that a claim that overrides the ordinary routine conventional operation of a network.

[00:01:37] Speaker 04:
as in DDR itself, as in Amdocs, as in Bascom, that takes the network and changes its functionality in a new and innovative way may be eligible.

[00:01:47] Speaker 03:
Did we hear that the Patent Office has found these patents not to pass 101 muster?

[00:01:54] Speaker 04:
That's correct, Your Honor.

[00:01:55] Speaker 04:
The PTAB has now concluded a CBM review of all of the patents.

[00:02:00] Speaker 04:
These four tried claims in this case have all been declared ineligible, as well as every other claim in the entire patent portfolio.

[00:02:07] Speaker 04:
The four tried claims, which are at issue in this appeal, the rehearing petitions have been denied.

[00:02:12] Speaker 04:
The appeals have been filed.

[00:02:13] Speaker 04:
That appeal is pending in this court.

[00:02:15] Speaker 03:
Of course, what was just decided in the Patent Office can be appealed.

[00:02:20] Speaker 03:
Now, what's the situation if we don't agree with you on the ineligibility of these claims?

[00:02:30] Speaker 03:
We have the jury decision that the claims stand.

[00:02:37] Speaker 03:
Of course, there are other issues as well.

[00:02:39] Speaker 03:
But what's the status of...

[00:02:43] Speaker 03:
such a would-be decision here where we uphold the eligibility of the claims and the Patent Office has knocked them out.

[00:02:52] Speaker 04:
Your Honor, first, there are further proceedings remaining in this case.

[00:02:56] Speaker 04:
The Court has ordered a retrial on damages that has not yet occurred.

[00:03:00] Speaker 04:
It's been stayed pending this appeal.

[00:03:02] Speaker 04:
Second, if the Court were to rule on eligibility, that these affirm the judgment of eligibility, the Court would then have to reach our other challenges.

[00:03:11] Speaker 04:
We think these

[00:03:12] Speaker 04:
Claims are either invalid or not infringed under the means plus function analysis that needs to be applied after Williamson.

[00:03:18] Speaker 04:
We think there is claim construction problems.

[00:03:21] Speaker 04:
And of course, if in that retrial, if we got all the way down that road and jumped through all those other hoops, there was a serious instructional error here that would require a retrial on obviousness.

[00:03:30] Speaker 04:
As to the intersection between the PTAB and the district court decision, if that's the court's question, the PTAB appeals are here and already in this court as to the tried claims.

[00:03:41] Speaker 04:
The rest of them will be here soon.

[00:03:43] Speaker 04:
One option would be for the court to coordinate them, which we've proposed before and we continue to think makes sense for judicial economy reasons.

[00:03:52] Speaker 04:
The court, of course, can reach them first in this case.

[00:03:55] Speaker 04:
We submit that they should be declared ineligible.

[00:03:57] Speaker 04:
There's no way that these patents survive.

[00:04:00] Speaker 04:
They are bad patents.

[00:04:01] Speaker 04:
The PTAP got it exactly right.

[00:04:03] Speaker 00:
We do think... Has the briefing been completed in those cases?

[00:04:06] Speaker 04:
I'm sorry?

[00:04:06] Speaker 00:
Is the briefing complete on the ones that have already been filed?

[00:04:09] Speaker 00:
No, Your Honor.

[00:04:10] Speaker 04:
Every time a briefing deadline arrives, SmartFlash files another motion to slow the train down to catch up with the caboose.

[00:04:17] Speaker 00:
Is there an argument made in that case?

[00:04:19] Speaker 00:
This is neither here nor there for this case, but is there a question about whether or not it was an appropriate CBM proceeding?

[00:04:26] Speaker 04:
Your Honor, the institution decision found, of course, that these are business method patents, that they're directed to financial services, and that they do not provide a technological solution.

[00:04:36] Speaker 04:
I don't know whether SmartFlash intends to challenge that under the court's recent Unwired Planet ruling.

[00:04:41] Speaker 04:
As applies to this appeal, we would submit that that is a ruling by a coordinate branch of the federal government that SmartFlash has not challenged here.

[00:04:49] Speaker 04:
Absence of a technological solution as found by the PTAB certainly plays into the DDR analysis, because DDR essentially adopts a technological solutions requirement for one prong of the eligibility.

[00:05:01] Speaker 00:
Let me move back to this case.

[00:05:03] Speaker 00:
Yes, Your Honor.

[00:05:04] Speaker 00:
And the step two analysis the district court went through.

[00:05:08] Speaker 00:
I mean, he relied, as I read it, he just said this is a complicated and a very detailed process that we go through.

[00:05:15] Speaker 00:
And he said, therefore, it

[00:05:17] Speaker 00:
it satisfies the inventive concept prop.

[00:05:20] Speaker 00:
So what was wrong with his analysis in that regard?

[00:05:23] Speaker 04:
Your Honor, the only specific claim limitations, and remember it's the limitations in the claim and not the specification that have to define the inventive concept, the district court or magistrate judge actually identified two.

[00:05:36] Speaker 04:
Some of the claims then at issue in the case required distinct memory limitations, content memory and parameter memory, either physically or logically separated in the device.

[00:05:46] Speaker 04:
The court identified that as one so-called inventive concept, and the other was the application of use rules.

[00:05:52] Speaker 04:
That is, a decision point as to whether or not access could be provided.

[00:05:57] Speaker 04:
The distinct memory claims dropped out of the case.

[00:05:59] Speaker 04:
SmartFlash abandoned them before trial.

[00:06:01] Speaker 04:
So one of the two things the district court relied on isn't even here anymore.

[00:06:05] Speaker 04:
And then at trial, Mr. Rax, the inventor, testified, as he had to, that he did not invent use rules, he did not invent access rules, he did not invent digital rights management, he did not invent any of the

[00:06:16] Speaker 04:
kinds of things that apply to access to content, which should not surprise.

[00:06:21] Speaker 00:
If individually these various steps were in the prior art, a particular combination could still result in an inventive concept.

[00:06:31] Speaker 04:
That is absolutely true theoretically and absolutely inapplicable to these patents because here we have no combination that is not itself routine.

[00:06:40] Speaker 04:
In other words, SmartFlash continues to rely on storage.

[00:06:45] Speaker 04:
transmission, reading, and writing.

[00:06:47] Speaker 04:
These are the things that computers do.

[00:06:50] Speaker 04:
And if I can analogize the case to its closest counterpart, it's really Ultramershal.

[00:06:55] Speaker 04:
Ultramershal was the use of advertising as currency to get access to content.

[00:07:00] Speaker 04:
This case is the use of currency as currency to get access to content.

[00:07:04] Speaker 04:
I mean, it's closer to the business method than Ultramershal.

[00:07:08] Speaker 04:
And what Ultramershal said, and it's a very important passage, we believe,

[00:07:12] Speaker 04:
that while the claim limitations there added a degree of particularity, what my friends at SmartFlash call the specificness, that the particularity is not the test for inventive concept, rather it is whether there's an addition.

[00:07:25] Speaker 04:
As to the specific combinations, your honor, SmartFlash identifies only three in its brief.

[00:07:32] Speaker 04:
And this is pages 28 and 30 of the red brief.

[00:07:35] Speaker 04:
First, they say storing payment on the data carrier.

[00:07:40] Speaker 04:
The PTAB directly addressed this.

[00:07:41] Speaker 04:
This was not an argument, by the way, they made in the district court.

[00:07:43] Speaker 04:
So the PTAB directly addressed this.

[00:07:44] Speaker 03:
Mr. Perry, let me ask you.

[00:07:47] Speaker 03:
These claims are a clever process.

[00:07:51] Speaker 03:
We get a lot of them.

[00:07:53] Speaker 03:
And they get knocked down under 101.

[00:08:00] Speaker 03:
How does one protect these clever software ideas operated on a computer?

[00:08:08] Speaker 04:
Claims like these properly get knocked down under 101 because these are pre-Bilski patents.

[00:08:13] Speaker 04:
These were prosecuted under the old guidelines that the PTO has disavowed in light of the Supreme Court's teaching.

[00:08:18] Speaker 04:
They were killed by Bilski.

[00:08:20] Speaker 04:
They were buried by Alice.

[00:08:21] Speaker 04:
The nails in the coffin were put in by the PTAB.

[00:08:24] Speaker 04:
There's nothing left of these patents.

[00:08:25] Speaker 04:
How, to answer your question, does a true innovator, a true inventor, claim computer-implemented methods?

[00:08:32] Speaker 04:
By following the guidance laid down by the Supreme Court, by this court and Alice, and by

[00:08:37] Speaker 04:
the post-ALIS decisions by claiming.

[00:08:39] Speaker 03:
Do you think that guidance is clear?

[00:08:41] Speaker 04:
Your Honor, it is clearer than it was before, and it is becoming clearer through the decisional process.

[00:08:45] Speaker 04:
And certainly the court has marked out.

[00:08:47] Speaker 03:
Something more?

[00:08:49] Speaker 04:
Something more in the context of computer implemented methods, Your Honor.

[00:08:54] Speaker 04:
It is clear from DDR and its companions that an improvement in the functionality of the computer itself, which of course Justice Thomas said in the ALIS step two analysis as well,

[00:09:05] Speaker 04:
can then pass that threshold to move on to the patentability analysis under the rest of the Patent Act.

[00:09:10] Speaker 04:
Here we don't have that.

[00:09:11] Speaker 04:
Here we have, as in Ultramershal, as in the Affinity Labs cases, as in TLI, an old-fashioned, pre-Bilski, results-oriented functional claim, which simply describes the outcome that the applicant wished to reach without any invention as to how to get there.

[00:09:31] Speaker 04:
Could a computer-implemented method of

[00:09:34] Speaker 04:
delivering secure content be patented?

[00:09:36] Speaker 04:
Of course.

[00:09:38] Speaker 04:
New encryption methods, for example, are always offered as good examples of implementation of content delivery methods.

[00:09:46] Speaker 04:
But this court has a series of cases, an unbroken line of cases, after Alice, in which the manipulation, transmission, delivery, and storage of information, content, on devices, conventional computers and mobile devices,

[00:10:01] Speaker 04:
are not eligible.

[00:10:01] Speaker 04:
And that's because they were prosecuted under that old state street, just claimed the result is enough analysis.

[00:10:08] Speaker 03:
Is it because they're mostly mental steps?

[00:10:10] Speaker 04:
Excuse me.

[00:10:12] Speaker 04:
There is certainly a mental steps component here as related to what would a human being do in the non-internet world.

[00:10:19] Speaker 04:
There is no difference in concept between the application here or the description here

[00:10:24] Speaker 04:
And the clerk at the blockbuster, if you walk in and pay $4.99 to rent a DVD for a night or pay $19.99 to buy it outright, that is what this patent claims if you, quote, do it on a computer.

[00:10:36] Speaker 04:
And what Alice told us, what the Supreme Court told us in Alice, was that's not enough.

[00:10:40] Speaker 04:
That translation of a bricks and mortar human being mental step into the computer world cannot confer eligibility.

[00:10:50] Speaker 04:
And that's all we have here.

[00:10:51] Speaker 04:
Judge Newman, I'm sorry.

[00:10:52] Speaker 02:
Well, then perhaps you've answered the question.

[00:10:54] Speaker 02:
One can't help but wonder why we aren't talking about 112 instead of 101.

[00:10:59] Speaker 04:
Well, Your Honor, I think here we have a 101 problem, and the court need not get to 112.

[00:11:05] Speaker 04:
There is a relation between the two doctrines, and this case is an excellent illustration of it.

[00:11:10] Speaker 04:
This kind of functional claiming, where the patentee, where the applicant claims only the result and not the process by which that result is obtained by a person of skill in the art,

[00:11:21] Speaker 04:
If it passes 101, and we submit, of course, it should not.

[00:11:24] Speaker 04:
But if it does, it raises a serious indefinite problem.

[00:11:27] Speaker 04:
And let me explain that very quickly.

[00:11:31] Speaker 04:
The inventive concept claimed by smart flash, and this is from the red brief at page 19, is quote, the asserted claims are drawn to specific electronic devices programmed to carry out specific purchase, download, access, and storage functions.

[00:11:46] Speaker 04:
Those functions, your honor,

[00:11:49] Speaker 04:
are not defined by structure anywhere in this patent.

[00:11:52] Speaker 04:
The claims themselves are purely functional.

[00:11:56] Speaker 04:
And then when one goes to the specification, one finds not structure, not algorithms, not flow charts, not diagrams, not any disclosure as to how to program this mythical device, but rather repeated references to means, the content delivery means, the content storage means.

[00:12:13] Speaker 04:
In other words, we have functional claims with a functional specification.

[00:12:17] Speaker 04:
And so we have in these patents the problem identified by Professor Lemley in his article.

[00:12:23] Speaker 04:
And Judge Laurie, this is one of the answers to your questions about software patents of pure functional claiming.

[00:12:28] Speaker 04:
Can there be a software patent?

[00:12:29] Speaker 04:
This court has left that question largely open.

[00:12:32] Speaker 04:
But certainly it has said in the line of cases involving Aristocrat and Noah and so forth that if there is to be a software patent, it must disclose to persons of skill in the art the steps necessary to achieve the result, not just the result itself.

[00:12:47] Speaker 04:
These patents, in contrast, claim only the result, only the desired outcome of conditioning access to content based on payment.

[00:12:56] Speaker 04:
That renders them ineligible under 101, full stop.

[00:13:00] Speaker 04:
If the court accepted Smart Flash's position, it would render them indefinite under 112, full stop.

[00:13:06] Speaker 04:
They cannot survive either of the two analyses because they are, at bottom, problematic applications and patents.

[00:13:14] Speaker 04:
Unless the court has further questions, I'll reserve.

[00:13:16] Speaker 04:
Thank you, Your Honor.

[00:13:41] Speaker 00:
Mr. Pan, come on.

[00:13:46] Speaker 01:
Chief Judge Prost, and may it please the court.

[00:13:48] Speaker 01:
The argument that you have heard from Apple ignores the language of the claims and what those limitations describe.

[00:13:56] Speaker 01:
The patents that are at issue here are eligible because they claim a specific solution to a technological problem associated with online distribution of digital content files.

[00:14:06] Speaker 01:
This was a problem that major corporations, IBM, Xerox, Sun, those corporations were trying to solve this problem.

[00:14:13] Speaker 01:
And patents were introduced at trial.

[00:14:15] Speaker 01:
that Apple attempted to use to invalidate these patents as either obvious or in the case of the 720 patents.

[00:14:22] Speaker 00:
Is that a step one or a step two analysis?

[00:14:24] Speaker 01:
I think it very much goes to the step two analysis, as this court pointed out, in internet patents, which is to say that

[00:14:31] Speaker 01:
This is a technological problem associated with delivery of digital content files.

[00:14:38] Speaker 03:
Is the computer modified in a physical way to solve this problem, or is it just more, and I don't mean to demean it by saying just more, but is it just mental steps written down in a

[00:14:56] Speaker 03:
Getting the computer?

[00:14:58] Speaker 01:
Not at all.

[00:14:59] Speaker 01:
I think that this falls very much within the distribution of functionality within the network and among devices in a system.

[00:15:05] Speaker 01:
And it's done in an innovative way that has distinct advantages over alternatives.

[00:15:10] Speaker 01:
And I'm going to point to three of those limitations that are critical, referring to the 720PAT.

[00:15:17] Speaker 01:
First, the claims require a data carrier that stores both content data and payment data that's used for payment.

[00:15:24] Speaker 01:
That's not something that Apple was able to show in the prior art, and it obviously provides convenience for the user.

[00:15:32] Speaker 01:
Second, the claims require a payment validation system that returns payment validation data.

[00:15:40] Speaker 01:
It's the payment validation data that is then used to retrieve the protected content from a data supplier.

[00:15:49] Speaker 01:
That's an architecture

[00:15:50] Speaker 01:
that is innovative.

[00:15:52] Speaker 01:
It requires a particular distribution of functionality within the network that is different from the alternative.

[00:16:00] Speaker 01:
And I'll mention the third, which is that when the content data is retrieved from the data supplier, there's also access rules that are downloaded to that same data carrier, that same place where the content data is stored.

[00:16:15] Speaker 01:
And there are distinct advantages to having those access rules

[00:16:19] Speaker 01:
stored next to content.

[00:16:21] Speaker 01:
It means you can download one content once and then either modify the access rules.

[00:16:26] Speaker 00:
So what's inventive about that?

[00:16:28] Speaker 00:
How does that fulfill the requirement of an inventive concept?

[00:16:31] Speaker 01:
It fulfills the requirement of an inventive concept because it was that particular arrangement of functionalities within the network.

[00:16:39] Speaker 01:
So for example, the alternative of Ultramershal was suggested, where there's a situation where the

[00:16:48] Speaker 01:
abstract idea is simply exchanging, viewing an advertisement for receiving content.

[00:16:56] Speaker 01:
Now if this patent simply said make payment in exchange for protected content, or it said a user will transmit payment and in exchange receive content,

[00:17:12] Speaker 01:
then that would certainly be very much like what was at issue in Ultramershal.

[00:17:16] Speaker 00:
Wasn't Ultramershal a lot more sophisticated and a lot more complicated than that?

[00:17:20] Speaker 00:
I recall the case.

[00:17:20] Speaker 00:
It had like 11 steps.

[00:17:22] Speaker 00:
And it was talking about what to do on an internet website, which makes it much closer to DDR than the case here that's described.

[00:17:33] Speaker 01:
I don't think so, Your Honor.

[00:17:34] Speaker 01:
First of all, there's no doubt that this is specifically, these claims are about

[00:17:40] Speaker 01:
such about a technique that works within a computer network.

[00:17:45] Speaker 01:
The idea that this is about CDs is just not correct.

[00:17:49] Speaker 01:
These claims specifically refer to the use of a data carrier that transmits to a payment validation system.

[00:17:56] Speaker 01:
So I do want to correct that.

[00:17:58] Speaker 01:
But with regard to Ultramershal, what was critical in Ultramershal is that the court made clear that most of the majority of the steps simply describe

[00:18:09] Speaker 01:
broke down the process of exchanging payment, exchanging, watching an ad for the content.

[00:18:19] Speaker 01:
And that was simply broken down into a number of steps.

[00:18:22] Speaker 03:
There was then... But these claims describe passing information back and forth.

[00:18:27] Speaker 01:
Of course they do, Your Honor, but they do so in a specific architecture and involving specific storage.

[00:18:36] Speaker 03:
That just means that they're very clever.

[00:18:39] Speaker 01:
No, they are inventive, Your Honor.

[00:18:42] Speaker 01:
And I think that clever is one way to say inventive.

[00:18:45] Speaker 01:
The point is that they are not simply employing the internet with a conventional business practice, but there is a problem that arose with the distribution of digital content that was unconnected to a medium.

[00:18:58] Speaker 01:
You have digital content that you can sell over the internet.

[00:19:03] Speaker 01:
And that created tremendous problems of piracy, unlike anything that had been seen,

[00:19:08] Speaker 01:
And it created a tremendous opportunity if somebody could come up with an architecture and a method for storage on particular devices that would address those technological problems of security.

[00:19:22] Speaker 01:
and of inconvenience of entering, for example, your payment information into an invoice every time you wanted to get it.

[00:19:29] Speaker 03:
Does inventive step essentially mean non-obviousness?

[00:19:33] Speaker 03:
In Europe, if I recall from years ago, probably still is the same, their statute involves an inventive step.

[00:19:42] Speaker 03:
And by that, that's their replacement for 103, non-obviousness.

[00:19:48] Speaker 03:
Is inventive step here?

[00:19:50] Speaker 01:
Well, I think doctrinally this court has said that it's not the same as non-obviousness, although the court has also said that there's an analogy to it.

[00:19:59] Speaker 01:
And what is in this case, I think that the fact that there was a trial over whether these patents were obvious

[00:20:09] Speaker 01:
And Apple lost and doesn't challenge the result of that except with regard to the jury instruction.

[00:20:15] Speaker 03:
Even if a bunch of steps are non-obvious, they are still mental steps, aren't they not?

[00:20:24] Speaker 01:
But again, Your Honor, these are not simply mental steps because of the nature of the way in which

[00:20:30] Speaker 00:
um... the functionalities at issue are distributed and this particular requirement i'm getting a little confused here i mean i don't think we've ever had a case because the circumstances have never arisen but what you're suggesting is

[00:20:43] Speaker 00:
if the court decides not to do 101 first, which it typically does, and you ultimately have a conclusion of non-obviousness by a jury, that that somehow informs or determines whether or not you've got an inventive concept here?

[00:20:57] Speaker 01:
Is that what you're saying?

[00:20:59] Speaker 01:
As I say, I don't mean to suggest doctrinally that the court can say, well, the jury found that it was non-obvious, so our job is done.

[00:21:05] Speaker 01:
That's not my point.

[00:21:06] Speaker 01:
But my point is that

[00:21:08] Speaker 01:
What this court has emphasized is the difference between a patent that simply claims a result, for example, something that simply claims a result, and a patent that teaches how to do something

[00:21:22] Speaker 01:
that couldn't be done before.

[00:21:24] Speaker 01:
And so there's two different things.

[00:21:26] Speaker 00:
It depends on how.

[00:21:27] Speaker 00:
We've got so many cases now, contract extraction, TLI.

[00:21:30] Speaker 00:
I mean, a lot of cases that talk about organizing, retrieving, receiving, and all of those steps.

[00:21:37] Speaker 00:
I mean, the district court here, when he was describing why he concluded this was an inventive concept,

[00:21:42] Speaker 00:
says because it addresses specific ways of managing access to digital contact data based on payment through storage and retrieval of used data.

[00:21:50] Speaker 00:
Don't a lot of our cases suggest that that's not sufficient?

[00:21:53] Speaker 00:
Those kinds of exercises are not sufficient for step two?

[00:21:59] Speaker 01:
I think the district court got this one right under this court's decisions in DDR.

[00:22:05] Speaker 01:
And Baskin confirms that, as does Amdocs.

[00:22:09] Speaker 01:
And I do want to urge the court to see how this improves the functionality of the computer and the computer system itself.

[00:22:18] Speaker 01:
You have a situation in which there are digital files.

[00:22:21] Speaker 01:
So we're not talking about information that existed in the pre-internet world.

[00:22:28] Speaker 01:
There wasn't a prior situation where you had simply delivery of a digital file free of media.

[00:22:35] Speaker 01:
And so that created issues that

[00:22:38] Speaker 01:
artisans were trying to solve so that it would be convenient and secure to make content available over the internet to purchasers.

[00:22:49] Speaker 01:
And what this invention does is it says, okay, there's a series of issues related to that that we can solve by combining these functionalities on a single data carrier that is then portable.

[00:23:04] Speaker 01:
And it has, again, it is a quite specific

[00:23:08] Speaker 01:
solution.

[00:23:09] Speaker 01:
If you think about the preemption policy concern that's behind this, this is not a preemptive invention.

[00:23:15] Speaker 01:
It is saying not use the internet to deliver content in exchange for payment.

[00:23:20] Speaker 01:
What it is saying is there's a number of problems with simply sending payment to a website and then receiving content in return.

[00:23:29] Speaker 01:
That is not working well.

[00:23:31] Speaker 01:
So how do we solve that problem?

[00:23:33] Speaker 01:
One of the ways in which we solve the problem is to say people don't want to have to enter information into a website, and it also means that people without access to a credit card won't be able to use the data.

[00:23:46] Speaker 01:
So we can solve that problem by putting payment data on the data carrier.

[00:23:50] Speaker 01:
We have a problem in that if you expose your payment information to the data carrier, there's a loss of security there.

[00:23:58] Speaker 01:
So instead, what we do is we have a scheme owner, and the scheme owner

[00:24:02] Speaker 01:
will be the one to validate the payment data.

[00:24:08] Speaker 01:
The scheme owner doesn't want to have to deal with all of the content.

[00:24:11] Speaker 01:
So what the scheme owner does is returns payment validation data, which is then used to go retrieve the content from the data supplier.

[00:24:19] Speaker 01:
Again, these are not inherent in the idea of delivering content in exchange for payment.

[00:24:26] Speaker 01:
Very much to the contrary, they are a specific solution that is designed to overcome

[00:24:32] Speaker 01:
the problems that were associated with distribution of digital content in exchange for payment.

[00:24:38] Speaker 00:
Before your time runs out, you want to turn briefly to the indefiniteness argument.

[00:24:42] Speaker 00:
Certainly, Your Honor.

[00:24:43] Speaker 01:
This Court has been very clear that the requirement for an algorithm, for example, only applies in a circumstance where the inventor employs means plus function claiming.

[00:24:55] Speaker 01:
And this Court has never suggested, and it has dealt with dozens of

[00:25:01] Speaker 01:
patents involving computers and processors.

[00:25:04] Speaker 01:
It has never suggested that a processor is non-structural.

[00:25:08] Speaker 01:
Here we have a processor running code to do something.

[00:25:11] Speaker 01:
That is a structural claim that is governed by Section 112, paragraph 1 and 2, AB.

[00:25:18] Speaker 01:
It is not in means plus function format.

[00:25:21] Speaker 01:
That doesn't mean there's any sort of a free pass.

[00:25:23] Speaker 01:
But Apple is standing in front of you today and saying, well, this is indefinite.

[00:25:28] Speaker 01:
They didn't argue

[00:25:30] Speaker 01:
that it was indefinite except by way of 112.6.

[00:25:34] Speaker 01:
They never said that the claim terms by themselves were indefinite under A and B, but they said you have to treat this as though as means plus function claims.

[00:25:45] Speaker 01:
And because they're means plus function claims, then you have to go look in the specification for structure.

[00:25:51] Speaker 01:
That's not the way the statute works.

[00:25:54] Speaker 01:
I should say the statute only requires

[00:25:57] Speaker 01:
limiting the claim to corresponding structure in the specification if it's claimed in mean plus function terms.

[00:26:04] Speaker 01:
These claims are not in that form.

[00:26:06] Speaker 01:
They are in the form of a processor running code to carry out certain functions that's very common and this court has never held that anything like this is a means plus function claim and to the contrary it has upheld the structural nature of circuits

[00:26:23] Speaker 01:
on performing various functions.

[00:26:25] Speaker 01:
It's upheld the structural nature of something like a detent mechanism, because it describes a class of structures.

[00:26:32] Speaker 01:
And as the district court pointed out, there was no dispute.

[00:26:36] Speaker 01:
There was testimony by Apple's expert conceding that processors are a class of structures.

[00:26:47] Speaker 01:
And it's interesting to look at the testimony that that expert gave, because what the expert says is, I've been told

[00:26:54] Speaker 01:
that if something's a means plus function claim, then here's what you do.

[00:26:58] Speaker 01:
What he didn't say was, as an expert, I don't know what a processor is.

[00:27:02] Speaker 01:
There's no definite structure associated with that.

[00:27:06] Speaker 01:
And the district court quite rightly said, there's a presumption, if you don't use a nonce word, that this is a structural, that it's ordinary structural claiming.

[00:27:16] Speaker 01:
And that's what occurred here.

[00:27:18] Speaker 01:
So I think that, again, the district court

[00:27:21] Speaker 01:
quite rightly said, this is not a means plus function claim.

[00:27:23] Speaker 01:
And they've waived any claim that if it's not means plus function, that there's any problem under A and B. If it would be helpful, I can return to the issue of the subject matter eligibility of the claim.

[00:27:39] Speaker 01:
But I do also, if the court has questions about the other issues.

[00:27:44] Speaker 01:
So what I do want to close with is to, again, to emphasize that this court has

[00:27:51] Speaker 01:
made clear that there's a distinction between circumstances that just take a conventional business practice and put it onto the internet, a case like Ultramershal, or cases that describe the results without describing the means to achieve them.

[00:28:07] Speaker 01:
I think the internet patents cases versus active networks illustrates that problem.

[00:28:12] Speaker 01:
It's internet specific.

[00:28:14] Speaker 01:
How do you keep the information on the web page when you navigate away?

[00:28:20] Speaker 01:
doesn't tell you anything other than you should achieve that.

[00:28:22] Speaker 01:
It doesn't tell you how to do it.

[00:28:25] Speaker 01:
This case falls into neither bucket.

[00:28:28] Speaker 01:
That is to say, it is talking about a specific technological problem associated with the distribution of a new form of content, i.e., content files that can be distributed without any medium over the internet or over a computer network.

[00:28:43] Speaker 01:
And two, it says very specifically, here's how we are going to overcome

[00:28:48] Speaker 01:
the problems associated with the ways this has been done in the past.

[00:28:52] Speaker 01:
And here's the way that we can make this convenient and secure and to the benefit of users and content providers as well.

[00:29:03] Speaker 00:
Thank you.

[00:29:04] Speaker 01:
Thank you.

[00:29:13] Speaker 04:
Unless the court has questions on 112, I have just two quick points on 101.

[00:29:18] Speaker 04:
First, the inventive concept identified by SmartFlash, Mr. Pender says there are three.

[00:29:23] Speaker 04:
Storing content on the data carrier.

[00:29:25] Speaker 04:
The PTAB said, the concept of storing two different types of information at the same place and the same device is an age-old practice.

[00:29:32] Speaker 04:
That's in the final written decision on the 221 patent at 18.

[00:29:36] Speaker 04:
And it cited some examples of that.

[00:29:38] Speaker 04:
Second, validating payment in advance.

[00:29:41] Speaker 04:
The cyber source case, which is pre-ALICE but presaged ALICE quite well, said,

[00:29:47] Speaker 04:
Confirming a credit card transaction in advance of doing something on the internet is something that merchants do everywhere.

[00:29:53] Speaker 04:
That's not valid.

[00:29:54] Speaker 04:
And third, access rules.

[00:29:57] Speaker 04:
Alice involved rules.

[00:29:58] Speaker 04:
Accenture involved rules.

[00:30:00] Speaker 04:
Most recently, this court, in fair warning, had a rules case.

[00:30:03] Speaker 04:
And the court said that where rules, quote, ask the same questions that humans in analogous situations have asked for decades, not centuries.

[00:30:11] Speaker 04:
That's at 839 F third 1095.

[00:30:13] Speaker 04:
then those rules do not confer eligibility.

[00:30:16] Speaker 04:
And here, the rules, of course, are not created by this applicant.

[00:30:19] Speaker 04:
They're not in this patent.

[00:30:20] Speaker 04:
The rules are created by the data supplier.

[00:30:22] Speaker 04:
The device simply applies any rules that come associated with the data.

[00:30:27] Speaker 04:
And those rules can be as simple, of course, as if you haven't paid for me, then you may not listen or watch to me.

[00:30:33] Speaker 04:
And that's exactly the same as this court considered in Ultramershal.

[00:30:37] Speaker 04:
As to the digital data point,

[00:30:40] Speaker 04:
Digital data, of course, predated the internet and exists outside the internet.

[00:30:45] Speaker 04:
And the patent itself in column 8, page 171 of the appendix, explains that the data source may be a CD or a DVD or even come from a third party such as a cable TV company.

[00:30:57] Speaker 04:
This is simply content.

[00:30:58] Speaker 04:
And this court has had a series of cases, TLI, both Affinity Labs cases, Ultramershal and others.

[00:31:10] Speaker 04:
electric power, all of which have dealt with the manipulation of information.

[00:31:14] Speaker 04:
Content is information.

[00:31:16] Speaker 04:
None of which have found eligibility.

[00:31:18] Speaker 04:
There is nothing like this case on the eligibility side.

[00:31:20] Speaker 04:
These claims are ineligible under 101, and this court should reverse on that basis.

[00:31:25] Speaker 00:
Thank you.

[00:31:26] Speaker 00:
We thank both parties in the cases submitted.