4361423 CANADA INC.

Patent Trials and Appeals Board

Apr 27, 2021

IPR2019-01651 (P.T.A.B. Apr. 27, 2021)

Trials@uspto.gov Paper 35
571-272-7822 Date: April 27, 2021

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

SQUARE, INC.,
Petitioner,
v.
4361423 CANADA INC.,
Patent Owner.

IPR2019-01651
Patent 9,443,239 B2

Before JAMESON LEE, ROBERT WEINSCHENK, and
KEVIN C. TROCK, Administrative Patent Judges.
LEE, Administrative Patent Judge.

JUDGMENT
Final Written Decision
Determining All Challenged Claims Unpatentable
35 U.S.C. § 318(a)

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I. 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. We determine that Square, Inc. (“Petitioner”) has proved
by a preponderance of the evidence that claims 1–6 of U.S. Patent 9,443,239
B2 (Ex. 1001, “the ’239 patent”) are unpatentable. See 35 U.S.C. § 316(e);
37 C.F.R. § 42.1(d).
A. Background
Petitioner filed a Petition for inter partes review of claims 1–6
(“challenged claims”) of the ’239 patent. Paper 2 (“Pet.”). 4361423 Canada
Inc. (“Patent Owner”) filed a Preliminary Response. Paper 8. We instituted
review on May 8, 2020. Paper 9 (“Decision on Institution”). Patent Owner
filed a Patent Owner Response. Paper 22 (“PO Response”). Petitioner filed
a Reply. Paper 25 (“Reply”). Patent Owner filed a Sur-Reply. Paper 27
(“Sur-Reply”). Oral hearing was consolidated with the oral hearings in
IPR2019-01652, IPR2019-01653, and IPR2019-01654 (Paper 30), and was
held on February 10, 2021. A copy of the hearing transcript has been
entered into the record as Paper 34 (“Tr.”).
B. Real Parties-in-Interest
Each party identifies itself as the only real party in interest. Pet. 1;
Paper 4, 2.
C. Related Matters
The parties indicate the ’239 patent is the subject of: 4361423 Canada
Inc. v. Square, Inc., No. 4:19-cv-04311 (N.D. Cal.). Pet. 1; Paper 4, 2.
Petitioner indicates that related patents are the subject of other petitions for
inter partes review filed by Petitioner in IPR2019-01625, IPR2019-01626,
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IPR2019-01627, IPR2019-01628, IPR2019-01629, IPR2019-01630,
IPR2019-01649, IPR2019-01650, IPR2019-01652, IPR2019-01653,
IPR2019-01654. Pet. 2–3.
D. The ’239 Patent
The ’239 patent relates to an apparatus and system “for commercial
transactions using a transaction card via a communication device in audio
communication with a remote processor assembly.” Ex. 1001, 2:28–30. It
is also related to a method “for commercial transactions using a transaction
card via a communication device.” Id. at 2:31–33. Specifically, the ’239
patent describes a transaction apparatus, such as a portable point of sale
(“POS”) device, linked to a communication device, such as a mobile phone.
Id. at 5:66–6:3; 6:13–16; 7:35–40. Figure 2 illustrates an embodiment of an
assembly according to the ’239 patent and is reproduced below.

Figure 2 shows a front view of a “transaction/communication assembly”
according to an embodiment of the ’239 patent. Id. at 5:36–38.
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Assembly 16 in Figure 2 includes POS device 12 linked to a
communication device in the form of mobile phone 14 via cable 30. Id. at
7:35–40. POS device 12 includes input device 38 such as card reader slot 39
for swiping or inserting transaction card 24 and capturing information from
the transaction card. Id. at 7:44–51. The ’239 patent explains that a user
swipes card 24 through slot 39, and that analog information on magnetic
strip 46 on card 24 is captured by an analog signal reader such as magnetic
strip reader 52, and transferred to MCU 50 (microcontroller unit). Id. at
7:60–63, 8:8–11.
MCU 50 converts the information into an analog audio signal and
transmits it via an analog communication link such as cable 30 to the
communication device such as mobile phone 14. Id. at 8:17–23. Optionally,
MCU 50 may encrypt the data. Id. at 8:14–16. Mobile phone 14 then
transmits the information to transaction server 18 for processing. Id.
at 8:21–15. The transaction server decrypts the received signal, converts it
to a digital signal, and sends it to remote processor 20 for validation. Id. at
8:25–27. Remote processor 20 can reject or accept the requested transaction
and send a message to transaction server 18 to indicate that determination.
Id. at 8:28–33. Transaction server 18, after receiving the message from
remote processor 20, converts the received information to an audio signal
and sends it back to mobile phone 14. Id. at 8:34–37.
E. Illustrative Claims
Claims 1 and 4 are independent and reproduced below:
1. [Preamble] A portable smart card reader device for
reading a smart card having recorded information stored on an
integrated circuit incorporated into the card, the device
comprising:
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[1.A] A sensor for reading said recorded information
stored on said integrated circuit incorporated into said
card;
[1.B] a controller coupled to said sensor for converting
the recorded information stored on said integrated
circuit into an encrypted signal indicative of the
recorded information, and
[1.C] a communication link for coupling said portable
smart card reader device to a mobile communication
device for the transmission of said encrypted signal
indicative of the recorded information therebetween;
[1.D.1] wherein when said sensor reads the recorded
information stored on said integrated circuit, said
controller converts the recorded information read by
said sensor into said encrypted signal and
[1.D.2] transmits said encrypted signal via said
communication link to said mobile communication
device; and
[1.E] said mobile communication device transmits the
encrypted signal indicative of the recorded
information to a remote transaction server for
processing a commercial transaction.
Id. at 12:7–29 (bracketed section headings added to correspond to
Petitioner’s claim listing (Ex. 1002)).
4. [Preamble] A method for reading a smart card having
recorded information stored on an integrated circuit
incorporated into the card, the method comprising the steps of:
[4.A] providing a portable card reader device comprising
a sensor for reading the recorded information stored
on the integrated circuit,
[4.B] a controller coupled to said sensor for converting
the recorded information into an encrypted signal
indicative of the recorded information stored on said
integrated circuit incorporated
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[4.C] and a communication link for coupling said
portable smart card reader device to a mobile
communication device;
[4.D] wherein when said sensor reads the recorded
information stored on the integrated circuit, said
controller converts the recorded information read by
said sensor into said encrypted signal and
[4.E] transmits said encrypted signal via said
communication link to said mobile communication
device; and
[4.F] providing said encrypted signal indicative of the
recorded information stored on the integrated circuit
to said mobile communication device for further
processing by circuitry contained in said mobile
communication device; and
[4.G] said mobile communication device transmits the
encrypted signal indicative of the recorded
information to a remote transaction server for
processing a commercial transaction.
Id. at 12:38–63 (bracketed section headings added to correspond to
Petitioner’s claim listing (Ex. 1002)).
F. Evidence — Prior Art References and Declarations
Petitioner relies on the following prior art references and
Declarations:
Evidence Exhibit No.
Declaration of Michael Shamos (“Shamos Declaration”) 1003
U.S. Patent No. 6,234,389 B1, issued May 22, 2001
(“Valliani”) 1005
U.S. Patent Application Publication No. 2005/0236480
A1, published Oct. 27, 2005 (“Vrotsos”) 1006
U.S. Patent Application Publication No. 2006/0032905
A1, published Feb. 16, 2006 (“Bear”) 1007
Rebuttal Declaration of Michael Shamos (“Shamos
Rebuttal Declaration”) 1017
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Patent Owner relies on the Declaration of Ivan Zatkovich. Ex. 2004.
G. Asserted Grounds of Unpatentability
Petitioner asserts that the challenged claims are unpatentable on the
following grounds:
Claim(s) Challenged 35 U.S.C. §1 Basis
1–6 103 Valliani, Vrotsos
1–6 103 Bear, Vrotsos
1–6 103 Vrotsos

II. ANALYSIS
A. Principles of Law
To prevail in its challenge to Patent Owner’s claims, Petitioner must
demonstrate by a preponderance of the evidence that the claims are
unpatentable.2 35 U.S.C. § 316(e) (2018); 37 C.F.R. § 42.1(d). That burden
never shifts to the patentee. Dynamic Drinkware, LLC v. Nat’l Graphics,
Inc., 800 F.3d 1375, 1378 (Fed. Cir. 2015).
A patent claim is unpatentable under 35 U.S.C. § 103 if the
differences between the claimed subject matter and the prior art are such that
the subject matter, as a whole, would have been obvious at the time the

1 The Leahy-Smith America Invents Act, Pub. L. No. 112–29, 125 Stat. 284,
287–88 (2011) (“AIA”), revised 35 U.S.C. §§ 102 and 103 effective
March 16, 2013. Because the effective filing date of the ’239 patent is prior
to March 16, 2013 (Ex. 1001, codes (22), (63)), we apply the pre-AIA
version of § 103.
2 The burden of showing something by a preponderance of the evidence
requires the trier of fact to believe that the existence of a fact is more
probable than its nonexistence before the trier of fact may find in favor of
the party who carries the burden. Concrete Pipe & Prods. of Cal., Inc. v.
Constr. Laborers Pension Tr. for S. Cal., 508 U.S. 602, 622 (1993).
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invention was made to a person having ordinary skill in the art to which said
subject matter pertains. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406
(2007). The question of obviousness is resolved on the basis of underlying
factual determinations including (1) the scope and content of the prior art;
(2) any differences between the claimed subject matter and the prior art;
(3) the level of ordinary skill in the art; and (4) when in evidence, objective
evidence of nonobviousness.3 Graham v. John Deere Co., 383 U.S. 1, 17–
18 (1966).
B. Level of Ordinary Skill in the Art
Petitioner asserts that a person of ordinary skill in the art (“POSITA”),
at the time the ’239 patent was filed, would have been a person with “a
bachelor’s degree in electrical engineering, computer science, or an
analogous field, or equivalent experience,” and would have had “at least two
years of relevant experience and familiarity with the fields of embedded
system implementation, mobile communications, electronic payments and
encryption.” Pet. 13 (citing Ex. 1003 ¶¶ 17–25).
Patent Owner’s expert, Ivan Zatkovich, states the level slightly
differently:
The POSITA 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.
Ex. 2004 ¶ 14. The articulations are essentially the same, except that
Petitioner refers to at least two years of experience and Patent Owner’s

3 Patent Owner has not presented any objective evidence of nonobviousness
or any argument in that regard.
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expert refers to at least one to two years of experience. That distinction has
not been shown by either party as making a difference in the outcome of this
case. Neither party has objected to the other party’s characterization of the
level of ordinary skill in the art.
We are more persuaded by Petitioner’s articulation. Petitioner does
not use the tentative language “may have” as Patent Owner’s expert does.
Also, Petitioner’s articulation of the pertinent fields of experience is more
specific than that of Patent Owner. We adopt Petitioner’s articulation of the
level of ordinary skill in the art, but delete the qualifier “at least” for the
level of practical experience, to keep that level from being vague and
extending to a range that corresponds to the level of skill of an expert. Also,
we delete the reference to “or equivalent experience” within the description
of the level of education, to keep education level from being confused with
practical experience, and because Petitioner separately articulates the
appropriate level of experience. Thus, we regard the level of ordinary skill
as being at the level of a person with “a Bachelor of Science in Electrical
Engineering or Computer Engineering, or the equivalent” and “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.”4
C. Claim Construction
For petitions filed on or after November 13, 2018, we use the same
claim construction standard that would be used to construe the claim in a
civil action under 35 U.S.C. § 282(b), including construing the claim in

4 Our decision in this case would be no different had Patent Owner’s
articulation of the level of ordinary skill been adopted.
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accordance with the ordinary and customary meaning of such claim as
understood by one of ordinary skill in the art and the prosecution history
pertaining to the patent. See 37 C.F.R. § 42.100 (2019). The Petition here
was filed on September 30, 2019. Paper 2. We apply the claim construction
standard from Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en
banc).
Claim terms are generally given their ordinary and customary
meaning as would be understood by one with ordinary skill in the art in the
context of the specification, the prosecution history, other claims, and even
extrinsic evidence including expert and inventor testimony, dictionaries, and
learned treatises, although extrinsic evidence is less significant than the
intrinsic record. Phillips, 415 F.3d at 1312–17. Usually, the specification is
dispositive, and it is the single best guide to the meaning of a disputed term.
Id. at 1315.
The specification may reveal a special definition given to a claim term
by the patentee, or the specification or prosecution history may reveal an
intentional disclaimer or disavowal of claim scope by the inventor. Id.
at 1316. If an inventor acts as his or her own lexicographer, the definition
must be set forth in the specification with reasonable clarity, deliberateness,
and precision. Renishaw PLC v. Marposs Societa’ per Azioni, 158 F.3d
1243, 1249 (Fed. Cir. 1998). The disavowal of claim scope, if any, can be
effectuated by language in the specification or the prosecution history. Poly-
America, L.P. v. API Indus., Inc., 839 F.3d 1131, 1136 (Fed. Cir. 2016). “In
either case, the standard for disavowal is exacting, requiring clear and
unequivocal evidence that the claimed invention includes or does not include
a particular feature.” Id.
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Only those claim terms that are in controversy need to be construed,
and only to the extent necessary to resolve the controversy. Nidec Motor
Corp. v. Zhongshan Broad Ocean Motor Co., 868 F.3d 1013, 1017 (Fed.
Cir. 2017).
In neither the Petition nor the Patent Owner Response has either party
proposed an express full construction for any claim term. However, the
arguments of the parties reflect a certain reading of the claim language. To
the extent necessary to reach a decision, we discuss a party’s proposed
reading in our analysis of each party’s arguments below.
D. Obviousness of Claims 1–6 over Valliani and Vrotsos
1. Overview of Valliani
Valliani relates to portable computer systems including personal
digital assistants (“PDA”) for performing point of sale transactions.
Ex. 1005, 1:16–20. Specifically, Valliani discloses a PCMCIA-compliant
generic laptop computer or PDA device “with an add-on module that
provides point of sale functionality.” Id. at 2:41–44. “[T]he module
converts the device to a portable inexpensive point of sale transaction
terminal.” Id. at 2:45–47. The module includes a card reader and has a
housing member which slides into the PCMCIA slot of the computer or
PDA. Id. at 2:48–52. The computer or PDA executes software which
allows the device to read and process information read by the module. Id. at
2:52–55.
Valliani describes that typically payment for a transaction is made
with a credit card that includes a magnetic stripe carrying the cardholder’s
information, and such cards are read by a module with a magnetic stripe
reader unit. Id. at 2:56–60. Valliani further describes that transactions may
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involve a smartcard instead, in which memory internal to the card retains
data, and such cards are read by a module having a smartcard reader/writer
unit. Id. at 2:62–65. Valliani states that when equipped with an appropriate
module, the computer or PDA device “becomes a portable point of sale
transaction terminal.” Id. at 2:65–67.
Figure 1 of Valliani is a block diagram of Valliani’s system and is
reproduced below:

Figure 1 is a block diagram of a computer or PDA combined with a module
to implement a point of sale transaction terminal system. Id. at 3:17–20.
Device 10 in Figure 1 shows a generic portable computer or PDA
device. Id. at 4:34–37. The right-hand portion of Figure 1 shows module
200 the housing of which includes projecting snout-like member 280 that
includes connector edge 265 which slides into and matingly engages slot
socket 90 in device 10. Id. at 4:51–54. Module 200 includes magnetic stripe
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reader 210 that reads information encoded and stored on magnetic stripe 220
on credit card 230, and optionally may 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.”5 Id. at 4:41–44
(emphasis added). “Smartcard reader unit 260 is utilized if card 230 is a
smartcard storing data in memory 225.” Id. at 4:45–47.
Figure 2 of Valliani illustrates an embodiment in which only a
magnetic strip reader is provided in module 200. Id. at 5:1–2. Figure 3 of
Valliani illustrates an embodiment including both a magnetic stripe reader
and a pinpad unit. Id. at 6:16–18. Valliani describes that typically,
information embedded in magnetic stripe 220 of the card includes at least
the card owner’s credit account company and account number, and owner
identification information. Id. at 5:25–28. Valliani also describes that
software routines, either provided through module 200 or made available
through another source, would be loaded into device 10. Id. at 6:4–7.
Regarding such software, Valliani specifically states:
These routines would include point of sale software and
software driver(s) for the PCMCIA-implemented magnetic stripe
reader 210 and can further include driver(s) for pinpad unit 240,
printer unit 245, fingerprint unit 250, signature capture unit 255,
and smartcard reader/writer unit 260. Such routines can also
provide DES encryption, signature capture and signature
compression, among other useful functions. These routines
would be executed by central processor unit 20 within device 10.
Id. at 6:8–16.

5 Sometimes Valliani refers to “smartcard reader/writer unit 260” and not
“smart card reader unit 260.” Ex. 1005, 6:12, 8:9. For consistency, we refer
to unit 260 as smart card reader/writer unit 260 as shown in Figure 1 above.
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Device 10 communicates with host 75 through port 75, a modem, and
telephone lines, or such communication may be by infrared or wireless
telephony, “which further promotes portability.” Id. at 6:47–50. If a card is
stolen, an individual attempting to transact business with module 200 will be
unable to have a PIN confirmed by the remote host system communicating
with device 10. Id. at 6:49–53. Absent such confirmation, for example as
shown on a display in device 10, the transaction would not be allowed.
Id. at 6:54–57.
2. Overview of Vrotsos
Vrotsos is directed to a system and method for transmitting
transaction data over a wireless communication network. Ex. 1006 ¶ 26. In
an embodiment, the system is used to transmit credit card information during
a point-of-sale transaction. Id. An “attachment” is coupled to a wireless
communication device having a transceiver for establishing a
communication link with a wireless communication network. Id. Vrotsos
states that the “attachment” may also be referred to “as a peripheral or
peripheral device.” Id.
The “attachment” includes a processor and an input device. Id. When
the attachment device receives data from the input device, it transmits that
data over the wireless communication network using the transceiver in the
wireless communication device. Id. Vrotsos describes that the input device
may be a magnetic strip reader or a smartcard reader. Id. ¶ 28. In one
embodiment, the attachment includes a combined magnetic stripe reader and
smartcard reader. Id. ¶ 41. In that embodiment, “[a] card 51 having a
magnetic stripe 52 and/or smartchip 53 may be inserted into the slot 22 [of
the attachment].” Id. The slot has a shallow channel portion suitable for
reading a magnetic stripe on a card, and also a deeper channel portion. Id.
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Vrotsos describes as follows: “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.
When input information is received at the input device, it is sent to a
processor in the attachment device for processing and transmission to the
remote computer through the communication device. Id. ¶ 26. The remote
computer may process the received data and generate a response to be sent
back to the processor in the attachment device. Id.
Figure 10 is a block diagram of the system of Vrotsos and is
reproduced below:

Figure 10 illustrates the components of the wireless communication device
and attachment (peripheral device) disclosed in Vrotsos. Id. ¶ 23. The
attachment includes processor 303, memory 307, and input device 308. Id.
¶ 75. Processor 303 receives input information from input device 308 and
processes that information to generate data for transmission to a remote
computer via antenna 5 of the communication device. Id. Vrotsos also
describes that processor 303 operates to encrypt the input information. Id.
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3. Independent Claim 1
a) Preamble
Claim 1’s preamble recites “[a] portable smart card reader device for
reading a smart card having recorded information stored on an integrated
circuit incorporated into the card.” Ex. 1001, 12:7–9. Petitioner identifies
Valliani’s module 200 as the portable smart card reader device. Pet. 14–15.
Petitioner cites to Valliani’s disclosure which states that smart card
reader/writer unit 260 “is utilized if card 230 is a smartcard storing data in
memory 225.” Id. at 14 (citing Ex. 1005, 4:45–46). Petitioner explains that
information stored in memory 225 of card 230, such as user account number,
maximum dollar limit of the account, user identification, and a PIN,
corresponds to recorded information stored on integrated circuit
incorporated into the smart card. Id. at 14–15 (citing Ex. 1003 ¶¶ C1–7;
Ex. 1005, 6:27–29, 7:62–64).6 Valliani states that “a card owner’s PIN is
not stored, encrypted or otherwise, in magnetic stripe(s) 220 but may be
stored in memory 225.” Ex. 1005, 6:27–29. Michael Shamos, Petitioner’s
declarant, identifies Valliani’s memory 225 as in integrated circuit.
Ex. 1003 ¶ C1. Petitioner also cites to the following text in Valliani: “Such
point of sale transaction systems should be portable, small in size,
inexpensive, yet perform the necessary functions required to securely
transact business.” Pet. 15 (citing Ex. 1005, 2:33–36).
To the extent Patent Owner asserts an argument with regard to the
preamble, it is merged with its argument directed to limitation [1.A]
discussed below and related to a sensor for reading recorded information

6 The letter “C” in the citation to paragraph numbers in Ex. 1003 designates
the paragraph numbers within Appendix C of Exhibit 103.

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stored on an integrated circuit incorporated into the card. Notwithstanding
Patent Owner’s argument, discussed below in the context of limitation [1.A],
Petitioner’s assertion is supported by the cited evidence and we are
persuaded that Valliani discloses “[a] portable smart card reader device for
reading a smart card having recorded information stored on an integrated
circuit incorporated into the card.” We need not determine whether this
preamble is limiting.
b) Limitation [1.A] — a sensor
Claim 1 further recites that the portable smart card reader device
comprises “a sensor for reading said recorded information stored on said
integrated circuit incorporated into said card.” Ex. 1001, 12:10–11.
Petitioner asserts that Valliani’s smart card reader/writer unit 260 within
module 200 “includes a sensor that reads a smart card that has recorded
information stored on an integrated circuit incorporated into said card.”
Pet. 16–17 (citing Ex. 1005, 7:61–8:6). Petitioner explains that data stored
in the memory of the smart card corresponds “to recorded information
stored on said integrated circuit incorporated into said card.” Id. at 17
(citing Ex. 1003 ¶¶ C12–14). Further, as noted above in the context of the
preamble, Petitioner cites to Valliani’s disclosure which states that smart
card reader/writer unit 260 “is utilized if card 230 is a smartcard storing data
in memory 225.” Id. at 14 (citing Ex. 1005, 4:45–46). Petitioner’s
declarant, Michael Shamos, testifies that Valliani’s smart card reader/writer
260 is the claimed sensor, and is used for reading card data stored in
memory 225. Ex. 1003 ¶ C12 (citing Ex. 1005, 7:61–8:6, 4:45–47).
Valliani describes:
Memory 225 within smartcard 230 can store substantially
more data than can one or even three magnetic stripes. An
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appropriate smartcard 230 may store user account number,
present maximum dollar limit of the account, user identification
as well as preferably encrypted PIN data. Generally, when a user
purchases a smartcard 230, memory 225 is programmed to store
the dollar value of the card, e.g., the value of the card. In a
preferred embodiment, smartcard reader/writer unit 260 can both
read and write to memory 225. Thus, if prior to the present
transaction memory 225 stored $1,000 as the present card
balance and if the present transaction is $200 debit, unit 260 can
so debit memory 225 such that the new present card balance is
$800.
Ex. 1005, 7:61–8:6.
Notwithstanding Patent Owner’s arguments to the contrary, discussed
below, Petitioner’s assertions are fully supported by the cited evidence and
we are persuaded that Valliani’s module 200 includes “a sensor for reading
said recorded information stored on said integrated circuit incorporated into
said card.” That sensor is within smart card reader/writer 260. Further,
smart card reader/writer 260 itself may be deemed the sensor.
Patent Owner asserts that “[a]lthough Petitioner identifies Valliani’s
mention of a ‘smart card’ reader, Petitioner does not identify any component
of Valliani that might qualify as the claimed sensor.” PO Resp. 12. That is
incorrect. Petitioner’s declarant, Michael Shamos, testifies that Valliani’s
smart card reader/writer 260 is the claimed sensor, and is used for reading
card data stored in memory 225. Ex. 1003 ¶ C12 (citing Ex. 1005, 7:61–8:6,
4:45–47). Even if the sensor is contained within Valliani’s smart card
reader/writer 260, the Petition states that Valliani’s smart card reader/writer
unit 260 within module 200 “includes a sensor that reads a smart card that
has recorded information stored on an integrated circuit incorporated into
said card.” Pet. 16–17 (citing Ex. 1005, 7:61–8:6).

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Patent Owner argues:
Nothing in the cited passage from Valliani, however, mentions
any kind of sensor. In fact, nowhere does Valliani or Petitioner
identify any component of Valliani that could qualify as the
claimed sensor. Instead, Valliani references the unit 210 as being
able to sense information from the card. Unit 210, however, is a
magnetic stripe reader and not a smart card reader. Valliani
proves as much when it specifies that “as magnetic stripe 220
moves through slot 290, a read head associated with unit 210
senses magnetic charge embedded in stripe(s) 220.
PO Resp. 13.
Patent Owner has misread the Petition. Petitioner does not rely on
magnetic stripe reader 210 either as the sensor or as containing the sensor,
but, rather, on smart card reader/writer 260 as either being the sensor or
containing the sensor. Ex. 1003 ¶ C12; Pet. 16–17. Petitioner’s declarant,
Michael Shamos, testifies persuasively in his rebuttal declaration:
Petitioner and I never asserted that electronic[s] 210 possessed
the ability to access information from the integrated circuit, but
it is clear that smart card reader/writer 260 (the smartcard
sensor) has that ability, or it would not be able to function as a
smart card reader/writer. Patent Owner then goes on to
denigrate the capabilities of “electronics 210,” but electronics
210 is not the basis of Petitioner’s sensor argument.
Ex. 1017 ¶ 15.
Although it is true, as Patent Owner asserts, that Valliani nowhere
mentions, literally, a “sensor,” Michael Shamos persuasively testifies that
the claimed sensor “is precisely the unit in Valliani that senses and reads the
smart card.” Id. ¶ 16. The law does not require that the prior art describe a
claim limitation in ipsis verbis in order to meet it. Cf. In re Lukach,
442 F.2d 967, 969 (CCPA 1971) (“[T]he invention claimed does not have to
be described in ipsis verbis in order to satisfy the description requirement of
§ 112.”). Patent Owner misdirects the issue by not addressing what in
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Valliani is reading integrated circuit memory 225 on the smart card, and why
smart card reader/writer 260 is not or does not include such a sensor.
To the extent Patent Owner also argues that Valliani does not provide
a detailed disclosure of the specific structure of smart card reader/writer unit
260, no more specific disclosure is necessary to meet the sensor limitation.
Only a generic sensor is claimed, not a specific sensor having a particular
structure. Even the ’239 patent itself does not provide detailed disclosure of
the structure of the sensor that reads an integrated circuit memory on a card.
Further, Patent Owner does not contend that one with ordinary skill in the
art, given Valliani’s disclosure of smart card reader/writer unit 260, would
not have known how to construct such a sensor for reading an integrated
circuit memory on a card. Michael Shamos has testified that sensors for
reading recorded information on an integrated circuit memory of a smart
card were well known to one with ordinary skill in the art in 2009. Ex. 1003
¶ D29; Ex. 1017 ¶¶ 30, 34. Patent Owner’s declarant, Ivan Zatkovich, does
not contend otherwise. Even according to Patent Owner, at the time of the
invention, there already were industry standards which “defined the methods
for reading IC chips embedded in these types of smart cards.” PO Resp. 12–
13. We find that sensors for reading recorded information on an integrated
circuit memory of a smart card were well known to one with ordinary skill
in the art in 2009.
Alternatively, Petitioner asserts that to the extent that Valliani does
not explicitly describe a sensor for reading recorded information stored on
an integrated circuit incorporated into a card, it would have been obvious to
one with ordinary skill in the art, in light of Vrotsos, to include such a sensor
in Valliani. Pet. 17–19. Petitioner asserts as follows: “[T]o the extent that
Valliani does not disclose the precise configuration of how its smartcard
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reader/writer unit reads the smart card, Vrotsos discloses a specific
configuration that provides the same function described by Valliani.” Id.
at 19 (citing Ex. 1003 ¶ C22). Petitioner also explains that one with ordinary
skill in the art would have known to look to Vrotsos for a specific
implementation, because Vrotsos, like Valliani, “is portable and reads
information stored on a credit card (Ex. 1006, ¶ 41), processes that
information (id. ¶ 52), and transmits it to the phone (id. ¶ 43), which
transmits the data to a remote computer to process the credit card
information and facilitate the transaction (id. ¶ 53).” Id.
Petitioner further explains:
[U]sing a smartcard read/write head was known to read recorded
information stored on said integrated circuit incorporated into
said card. Thus, a POSITA applying Vrotsos’s teaching to
Valliani would have expected to yield the predictable result of
success. Specifically, applying a smartcard read/write head to
Valliani’s smart card read/write unit 260 would have enabled the
unit 260 to read the data encoded by the smartcard’s memory
225. Ex. 1006, ¶41. Ex. 1003, ¶C23.
Pet. 19.
Patent Owner asserts:
[A] POSITA would recognize that Vrotsos’s cryptic mention of
a “smartcard read/write head” does not disclose a smart card
reader capable of reading an integrated circuit at all, and
certainly not at any level of detail that would teach how to
integrate Vrotsos’s card reader into Valliani’s device. Ex.
2004, ¶¶35-36.
PO Resp. 26. The argument does not defeat or undermine Petitioner’s
assertions. We address and reject a similar argument in Section II.E.1.b.
We determine that the smartcard read/write head as described in Vrotsos is a
“sensor for reading recorded information stored on an integrated circuit
incorporated into a smart card.” As for the contention that there is
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insufficient teaching on how to integrate Vrotsos’s read/write head into
Valliani’s device, the contention is without persuasion. Petitioner simply
proposes to implement Valliani’s smart card reader/writer unit 260 with
Vrotsos’s smart card read/write head. Patent Owner has identified nothing
complex to be coordinated or intermixed. The smart card reader/writer unit
260 is described in Valliani at a relatively high level that Petitioner’s merely
proposing to implement it with Vrotsos’s smart card read/write head requires
no additional detail for incorporating the read/write head.
Notwithstanding Patent Owner’s arguments, discussed below,
regarding lack of motivation to combine teachings, we find that Petitioner’s
reasoning is based on rational underpinning and supports the assertion that
one with ordinary skill would have had sufficient reason and motivation to
use Vrotsos’s read/write head as Valliani’s smart card reader/writer unit 260.
First, Patent Owner asserts that Petitioner’s approach “is classic
hindsight misadventure,” for “saying that a POSITA would have been
motivated to incorporate beneficial elements of the patent claims because,
well, those elements would have been beneficial.” PO Resp. 26. We do not
find that Petitioner has engaged in such circular reasoning. Petitioner,
instead, as we discussed above, articulated a reason why one with ordinary
skill in the art would have known to use Vrotsos’s smartcard read/write head
as a specific implementation of Valliani’s smart card reader/writer unit 260,
i.e., because Valliani itself does not provide more detail on the specific
implementation. Also, as discussed above, Petitioner reasoned that one with
ordinary skill would have used Vrotsos’s smartcard read/write head so that
in Valliani’s device information can be read from a smart card as Valliani
describes. Such reasoning is not circular. Nor is it based on hindsight.
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Second, Patent Owner argues that “a POSITA would understand that
no aspects of Vrotsos’ converting or communicating data between its reader
and cell phone (e.g., RS232 link) are compatible with Valliani’s reader and
communication device (PCMCIA Bus). Ex. 2004, ¶¶94-101.” PO Resp. 27.
According to Patent Owner, Valliani’s disclosure “mentions PCMCIA-
compliance throughout,” and “the central premise and, indeed, entire
point of Valliani is to develop a mobile POS device under the PCMCIA
standard - not just a POS device that happens to use [] PCMCIA interface.
Ex. 2004, ¶¶ 95–97.” Id. at 27–28. Patent Owner further observes: “Every
figure [of Valliani] is described as disclosing a PCMCIA-compliant
interface, and every described disclosed embodiment is described as being
PCMCIA based.” Id. at 28. Based on the foregoing, Patent Owner argues:
Valliani teaches-away from any solution that does not utilize a
PCMCIA interface. Ex. 2004, ¶¶95-101. Therefore, a POSITA
would not consider combining Valliani with any reference that
does not disclose a PCMCIA compatible solution. Ex. 2004,
¶¶95–101. And as mentioned above, no aspect of the Vrotsos
reference is compatible with the PCMCIA standard. Ex. 2004,
¶¶95–101.
As an example of Vrotsos incompatibility, Valliani’s
PCMCIA interface requires a 68 pin electrical connection using
a parallel communication protocol. Vrotsos teaches a 4 pin RS-
232 connection and a serial communication protocol. . . . Vrotsos
neither mentions nor implies the use of any device standards or
architecture, and none of its disclosed embodiments or figures
appear to be PCMCIA-compliant. . . .
Because of the PCMCIA compliance requirements, any
attempt to integrate Valliani’s PCMCIA interface with the
Vrotsos card reader would require an overhaul to the Vrotsos
card reader or any of Vrotsos’s components that would “convert
information suitable for communication,” provide
“communication link with” or “transmit data to” a mobile
communication device. Ex. 2004, ¶¶95–101. In other words, to
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combine almost any aspect of Vrotsos with Valliani would
require significant overhaul of the Vrotsos design in order to
comply with the limitations of the ‘239 claims. Ex. 2004, ¶¶101.
Therefore, this is clearly an endeavor based on hindsight. Id.
PO Resp. 28–30.
The argument is misplaced, for several reasons. First and foremost is
that Valliani’s smart card reader/writer 260, the sensor, has not been shown
to operate according to PCMCIA standard or interface. The PCMCIA
interface pertains to the connection between Valliani’s module 200 and
PCMCIA-compliant device 10, i.e., the laptop or PDA. Ex. 1005, 3:50–65,
Fig. 1. Patent Owner incorrectly states that “all 20 claims of Valliani require
both a “PCMCIA-compliant card slot” and a “PCMCIA-compliant
connector,” erroneously suggesting that reading from a smart card is also
governed by PCMCIA. PO Resp. 28. No claim in Valliani refers to a
“PCMCIA-compliant card slot” in the sense of a transaction card slot in the
card reader. The claims refer to a “PCMCIA-compliant card slot connector”
which is the interface between module 200 and laptop/PDA 10, consistent
with Valliani’s disclosure. Further, the record does not support that the
standard governing reading of smart cards is PCMCIA. Ivan Zatkovich
testifies regarding Vrotsos’s card as follows: “As a card that requires
physical connection to a reader, it would be the EMV type of card. As stated
above, an EMV type card would require a sensor which could access the
contact pad of the IC chip. The International Standard that applies to EMV
cards is ISO 7816.” Ex. 2004 ¶ 37 (footnote omitted).
Second, Vrotsos does not teach away from using the PCMCIA
standard or interface. It simply does not refer to it, which is not the same as
“criticiz[ing], discredit[ing], or otherwise discourag[ing]” anything about a
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PCMCIA standard or interface. See In re Fulton, 391 F.3d 1195, 1201 (Fed.
Cir. 2004).
Third, Petitioner has not proposed direct bodily incorporation of the
physical components of Vrotsos into Valliani, without appropriate and
necessary adaptations. If, as Patent Owner asserts, Valliani is all about
having a PCMCIA interface between module 200 and laptop/PDA 10, then
one with ordinary skill in the art would have known, based on Valliani’s
disclosure, to implement a PCMCIA interface for whatever component is
sourced from Vrotsos for incorporation into Valliani’s system. Patent
Owner has not asserted that it would have been beyond the skill level of one
with ordinary skill in the art to add a PCMCIA interface to components
sourced from Vrotsos that are relied on by Petitioner.
For the foregoing reasons, we are persuaded that Valliani’s module
200 includes “a sensor for reading said recorded information stored on said
integrated circuit incorporated into said card.” Alternatively, we are
persuaded that one with ordinary skill in the art would have known to use
Vrotsos’s smartcard read/write head in Valliani’s smart card reader/writer
260, and thus the combined teachings of Valliani and Vrotsos account for
the claimed sensor. Either position leads to satisfaction of limitation [1.A].
c) Limitation [1.B] — a controller
Claim 1 further recites that the portable smart card reader device
comprises “a controller coupled to said sensor for converting the recorded
information stored on said integrated circuit into an encrypted signal
indicative of the recorded information.” Ex. 1001, 12:12–15. Petitioner
identifies “electronics 210” in Valliani as the claimed controller. Pet. 20.
This “electronics 210” is the “electronics 210” referred to in the following
description of Valliani: “For security reasons, a card owner’s PIN is not
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stored magnetically on stripe 220 but may be stored electronically in
memory 225. To promote security, electronics 210 provides any card 230-
provided PIN information to device 10 in encrypted form using only
internally stored encryption keys.” Ex. 1005, 5:29–34. Electronics 210 is
not Valliani’s magnetic stripe reader 210, because the PIN is not stored on a
magnetic stripe. Petitioner’s declarant, Michael Shamos makes the
distinction between electronics 210 and magnetic stripe reader 210 through
his testimony that “[w]hither the [electronics 210] is located within the
smart card reader writer unit 260, the magnetic stripe reader unit 210 or
some other unit within the module 200 is a decision choice [for a POSITA].”
Ex. 1003 ¶ C31; see also id. ¶ 60.
Valliani does not specifically describe the location of its electronics
210. However, based on its description that electronics 210 “provides any
card 230-provided PIN information to device 10 in encrypted form using
only internally stored encryption keys” (Ex. 1005, 5:29–34), it is implicit
that electronics 210 is within module 200 and is coupled to smart card
reader/writer 260. In that regard, Michael Shamos persuasively testifies:
Accordingly, Valliani discloses storing PIN data in
memory 225 (the claimed integrated circuit) on a smart card
230. The smart card reader/writer 260 (the claimed sensor)
reads the data from the memory 225 (4:45–47), and the
electronics 210, which is coupled to the smart card reader/writer
260, converts that data into an encrypted signal indicative of the
PIN data.
Ex. 1003 ¶ C30.
Notwithstanding Patent Owner’s arguments to the contrary, discussed
below, we are persuaded that Valliani’s portable smart card reader device
comprises “a controller coupled to said sensor for converting the recorded
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information stored on said integrated circuit into an encrypted signal
indicative of the recorded information.”
Patent Owner asserts that “Petitioner does not identify anything in
Valliani capable of filling these roles [of the claimed controller].” PO Resp.
16. We disagree. Petitioner has identified “electronics 210” in a specific
manner and with support from the testimony of Michael Shamos, as we
discussed above.
Patent Owner asserts:
[T]he purported controller, “electronics 210,” is a component of
the Valliani reader’s magstripe reader – not a reader for smart
cards and specifically not having a controller coupled to a sensor
for reading and converting recorded information stored on the
integrated circuit of a smart card. There is no reason to believe
that electronics 210 has the ability to even access information
from the card’s integrated circuit, as discussed above or even has
the characteristics of a controller. Ex. 2004, ¶¶ 46.
PO Resp. 17. We disagree that “electronics 210” as described in Valliani is
a component of Valliani’s magnetic stripe reader 210 such that it does not
read and convert information stored on the integrated circuit of a smart card.
That position is expressly contradicted by Valliani’s disclosure that PIN
information is not stored on the magnetic strip but is stored on the memory
of a smart card, and that the purpose and usage of electronics 210 is to
provide to device 10 card-provided PIN information in encrypted form using
only internally stored encryption keys. Ex. 1005, 5:29–34.
Patent Owner and Patent Owner’s declarant, Ivan Zatkovich, misread
Petitioner’s position. Mr. Zatkovich testifies: “Petitioner accuses the
electronics in 210, which is the Magnetic stripe reader. The Magstripe
reader 210 cannot access the integrated circuit on the card, therefore the
magstripe reader 210 cannot be used for converting the data from the
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integrated circuit.” Ex. 2004 ¶ 46. But Petitioner identified “electronics
210,” not “the electronics in 210,” and Petitioner’s declarant, Michael
Shamos, made clear distinction between “electronics 210” and “magnetic
stripe reader 210.” Pet. 20; Ex. 1003 ¶¶ C30–31.
We credit the testimony of Michael Shamos over that of Ivan
Zatkovich. Ivan Zatkovich’s testimony is non-responsive to the position
expressed by Petitioner and Michael Shamos. Also, as explained above,
Petitioner’s position is more consistent with the express disclosure of
Valliani, i.e., that “electronics 210” is to provide to device 10 card-provided
PIN information in encrypted form using only internally stored encryption
keys, and that PIN information is not stored on the magnetic strip but on the
memory of a smart card. Ex. 1005, 5:29–34. Mr. Zatkovich does not
explain how his reading is consistent with the express disclosure of Valliani.
Patent Owner argues that “‘electronics 210’ does not perform any
kind of conversion or encryption of recorded information stored on the
integrated circuit as required for the claimed controller.” PO Resp. 17.
Patent Owner further asserts that the encryption must happen before the
information is transmitted to the mobile communication device. Id. at 18.
Both of these requirements have been adequately accounted for by
Petitioner. Indeed, we reiterate that in Valliani, “electronics 210” is to
provide to device 10, the mobile communication device, card-provided PIN
information in encrypted form using only internally stored encryption keys,
and that PIN information is not stored on the magnetic strip but on the
memory of a smart card. Ex. 1005, 5:29–34.
Regarding characteristics of a “controller,” the cited paragraph of Ivan
Zatkovich’s Declaration states nothing. Ex. 2004 ¶ 46. We find, however,
the following testimony in paragraph 48:
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A POSITA would also understand that in order to convert
the card information retrieved from the card reader input device
38 to an encrypted signal for transmission it would require a
microprocessor, microcontroller, or a controller with similar
processing power. This is because the data signals from the
magnetic stripe or Integrated Circuit of the payment card must
be received and validated before being passed to the mobile
communication device. For example, the data fields that would
need validation include the Primary account number format
(which is different for different card types), a check digit to
identify data transmission errors, as well as a valid country code
and service code.
Ex. 2004 ¶ 48. The testimony supports Petitioner’s identification of
“electronics 210” as a controller.
A patent specification need not describe what already is well known.
Patent Owner does not purport to have invented a microprocessor or a
microcontroller. The above-quoted testimony of Patent Owner’s declarant,
Ivan Zatkovich, establishes that one with ordinary skill in the art would have
known that Valliani’s “electronics 210,” the component which encrypts PIN
information taken from the integrated circuit memory of a smart card and
provides it to device 10, would have to include a microprocessor,
microcontroller, or a controller with similar processing power. This means
Valliani does not have to mention the word “controller” for one with
ordinary skill in the art to understand that “electronics 210” is a
microprocessor, microcontroller, or a controller with similar processing
power. Further, it also establishes that it would have been obvious to one
with ordinary skill in the art that Valliani’s “electronics 210” is a
microprocessor, a microcontroller, or a controller with similar processing
power.
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Ivan Zatkovich notes that inside Valliani’s device 10 there is a
controller which executes software routines 35 and/or 45. Ex. 2004 ¶ 50.
That is true. We agree with Patent Owner that software routines 35 and/or
45 are executed by device 10 and not by anything in module 200.7 But that
fact does not undermine “electronics 210” in Valliani’s module 200 from
being a controller that satisfies the limitation “a controller coupled to said
sensor for converting the recorded information stored on said integrated
circuit into an encrypted signal indicative of the recorded information” as
discussed above. For the limitation at issue, it is sufficient that only the PIN
information read from the memory of the smart card is encrypted by
“electronics 210” located within module 200. The claim does not require
that all data read from integrated circuit memory 225 on smart card 230 by
smart card reader/writer 260 be encrypted by “electronics 210.”8
Alternatively, Petitioner asserts that the limitation of “a controller
coupled to said sensor for converting the recorded information stored on said
integrated circuit into an encrypted signal indicative of the recorded
information” would have been reasonably suggested by the combined
teachings of Valliani and Vrotsos. Pet. 23. We do not reach this alternative
argument, because Valliani itself describes, and also reasonably would have
suggested, the limitation that the portable smart card reader device

7 Valliani describes: “Software routine(s) 35 and/or 45, which can be
provided with module 200 or may be available from other sources including
the manufacturer of device 10, would be loaded into device 10. . . . These
routines would be executed by central processor unit 20 within device 10.”
Ex. 1005, 6:4–16.
8 We do not reach Petitioner’s contention (Pet. 20) that it would have been
obvious to one with ordinary skill in the art to encrypt other information read
from the smart card, such as card number and expiration date, in electronics
210 within module 200.
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comprises “a controller coupled to said sensor for converting the recorded
information stored on said integrated circuit into an encrypted signal
indicative of the recorded information.”
d) Limitation [1.C] — a communication link
Claim 1 further recites “a communication link for coupling said
portable smart card reader device to a mobile communication device for the
transmission of said encrypted signal indicative of the recorded information
therebetween.” Ex. 1001, 12:16–19. Petitioner explains that in Valliani,
module 200 plugs into device 10 over a PCMCIA interface, and that the
PCMCIA interface or connection “is a communication link for coupling said
portable smart card reader device to the device 10, corresponding to a
mobile communication device.” Pet. 25–26 (citing Figures 1 and 7).
Petitioner states that “[s]pecifically, the module 200 has a projecting
member 280 that plugs into socket 90 (‘mounted in a so-called PCMCIA-
slot in the housing of unit 10’) in the device 10 to effectuate transmission
there between. Ex. 1005, 4:23–32, see also id. 4:50–54; Ex. 1003 ¶¶ C46–
49.” Id. at 26. Petitioner further explains that the only connection between
module 200 and device 10 in Valliani is the physical PCMCIA interface
depicted in Figure 1. Id. These assertions are supported by the cited
evidence.
We already have discussed above how Petitioner has adequately
accounted for the requirement of a controller within Valliani’s module 200
which takes PIN information from memory 225 on smart card 230 and
encrypts it to provide an encrypted PIN to device 10 which is the mobile
communication device. The communication link discussed by Petitioner
here constitutes the physical channel through which that encrypted
information gets provided from “electronics 210” to device 10.
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Patent Owner makes the same argument it made in the context of the
controller limitation, i.e., that Valliani’s card reader 210 does not encrypt a
PIN or anything from the memory of smart card 230 because it is incapable
of reading anything from smart card 230, as it is merely a magnetic stripe
reader. PO Resp. 22. We have discussed and rejected this argument above,
because it misreads Petitioner’s argument as well as Valliani’s disclosure.
Patent Owner further argues that “Petitioner wrongly assumes that
Valliani’s module 260 would include electronics to encrypt all of the
information on the smart card’s integrated circuit chip, although Valliani
does not support this assumption and in fact seems to merely contemplate
the encryption of PIN information.” Id. But as we noted above, the claim
does not require encryption of all data read from the integrated memory of a
smart card. Mere encryption of the PIN information read from the integrated
circuit memory of the smart card is sufficient to meet the encryption
limitation of the claim. Further, Valliani describes that “electronics 210”
encrypts the PIN information read from the memory of smart card 230 to
provide the encrypted information to device 10, as we have discussed above.
Ex. 1005, 5:29–34.
For the foregoing reasons, we are persuaded that Valliani describes “a
communication link for coupling said portable smart card reader device to a
mobile communication device for the transmission of said encrypted signal
indicative of the recorded information therebetween.”
e) Limitation [1.D.1] — wherein clause, part 1
Claim 1 further recites “wherein when said sensor reads the recorded
information stored on said integrated circuit, said controller converts the
recorded information read by said sensor into said encrypted signal.”
Ex. 1001, 12:20–23. For this limitation, Petitioner relies on the same
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arguments it presents for the limitations [1.A] and [1.B] of claim 1. Pet. 28.
Petitioner further explains that it is the logical flow of operations for the
sensor to first read the data on the card and then for other electronics to
encrypt that data, because the controller cannot encrypt the recorded
information until after the sensor has read that recorded information. Id.
at 28 (citing Ex. 1003 ¶¶ 54–58).
Patent Owner has presented no arguments additional to those it has
asserted in connection with limitations [1.A] and [1.B], which we already
have addressed above. For reasons discussed above with respect to
limitations [1.A] and [1.B] of claim 1, and based on Petitioner’s explanation
that the recorded information first has to be read before it is converted by
encryption, we are persuaded that the limitation “wherein when said sensor
reads the recorded information stored on said integrated circuit, said
controller converts the recorded information read by said sensor into said
encrypted signal” is met by Petitioner’s reliance on Valliani.
In the alternative, Petitioner asserts that to the extent Valliani does not
disclose the time sequence of reading data and encrypting data that has been
read, then further in light of the disclosure of Vrotsos, it would have been
obvious to one with ordinary skill in the art to have the data read first and
then to encrypt the read data. Pet. 28–30. Petitioner explains that “[w]hen
Vrotsos’s smart card read/write head in the input device 308, corresponding
to the sensor, reads the smart card data, the processor 303 performs
encryption of that card data. Ex. 1006, ¶ 52, see also id. ¶¶ 75, 78, 94.”
Id. at 28. Petitioner further explains that it would have been obvious for one
with ordinary skill in the art to implement Valliani’s smartcard reader/writer
260 with a controller according to the more specific implementation
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described in Vrotsos, because Vrotsos provides the same functionality but
with more details. Id. at 29.
We do not reach this alternative argument, because the time sequence
of reading data first and then encrypting the data is expressly disclosed by
Valliani. Note, in particular, Valliani describes that electronics 210
“provides any card 230-provided PIN information to device 10 in encrypted
form using only internally stored encryption keys.” Ex. 1005, 5:29–34.
Thus, electronics 210 has to use internally stored encryption keys to encrypt
the PIN information that has been read from card 230.
f) Limitation [1.D.2] — wherein clause, part 2
Claim 1 further recites “[wherein when said sensor reads the recorded
information stored on said integrated circuit, said controller . . . ] transmits
said encrypted signal via said communication link to said mobile
communication device.” Ex. 1001, 12:23–25. Petitioner explains that
Valliani describes that electronics 210 in module 200 provides any card 230-
provided PIN information to device 10, the wireless communication device,
in encrypted form. Pet. 29–30 (citing Ex. 1005, 5:32–35). Petitioner further
explains that the only connection between card reader module 200 and
device 10 is the PCMCIA interface serving as the communication link, and
thus any data transmission from module 200 to the PDA (device 10), and
from the PDA to module 200, occurs over that PCMCIA interface. Id.
(citing Ex. 1003 ¶¶ C61–65). We are persuaded as there is no other means
described for transmitting encrypted data from module 200 to device 10.
Petitioner asserts:
It would have been obvious to implement Valliani’s
system to transmit the card data (e.g., PIN information) to the
device 10 over the physical connection between the module 200
and the device 10. One practical benefit of transmitting the
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encrypted card data over the physical connection is that the
transmission would be secure, and would protect the card data
from unwanted access during transmission. Id. ¶¶C72–73. See
Ex. 1006, ¶¶75, 78.
Id. at 32. Petitioner additionally notes Vrotsos’s disclosure of transmitting
encrypted transaction data from attachment 21 to wireless communication
device 1 through a physical connection, i.e., an RS-232 connection, and
asserts that one of ordinary skill in the art would have looked to a reference
such as Vrotsos for further details. Id. at 31.
We agree with Petitioner that given Valliani’s disclosure of
electronics 210 providing any card 230-provided PIN information to device
10 in encrypted form, and of the PCMCIA interface serving as the only
connection between card reader module 200 and device 10, it would have
been obvious to one with ordinary skill in the art to transmit card data (e.g.,
PIN information) to device 10 over the PCMCIA interface. Petitioner also
explained practical benefits for doing so, i.e., making the transmission and
protecting the card data from unwanted access during transmission. Id. at 32
(citing Ex. 1003 ¶¶ C72–73). The reasoning is based on rational
underpinning. For this limitation, there is no need for Petitioner to rely on
any teaching from Vrotsos, and we do not consider the teachings from
Vrotsos in assessing Petitioner’s position for this limitation.
Patent Owner has presented no counter-arguments additional to those
it has asserted in connection with limitations [1.A], [1.B], and [1.C]. Those
arguments have been discussed and rejected above. They do not defeat or
undermine Petitioner’s assertions for limitation [1.D.2]. In particular, we
note Valliani’s description that “electronics 210” encrypts the PIN
information read from the memory of smart card 230 to provide the
encrypted information to device 10. Ex. 1005, 5:29–34. It is not necessary
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that encryption be performed on all of the information read from the
integrated circuit memory of the card.
We are persuaded that the limitation “[wherein when said sensor reads
the recorded information stored on said integrated circuit, said controller …]
transmits said encrypted signal via said communication link to said mobile
communication device” is adequately accounted for by Petitioner’s reliance
on Valliani’s disclosure.
g) Limitation [1.E] — transmission to remote server
Claim 1 further recites “said mobile communication device transmits
the encrypted signal indicative of the recorded information to a remote
transaction server for processing a commercial transaction.” Ex. 1001,
12:26–29. Petitioner explains as follows:
Valliani further describes the device 10 transmitting information
to a host server 75, which then validates that information, and is
accordingly a remote transaction server for processing a
commercial transaction. Specifically, the device 10
“communicates with host 75” to send the card data, such as “user
account number, present maximum dollar limit of the account,
user identification as well as preferably encrypted PIN data”,
corresponding to the encrypted signal indicative of the recorded
information, to host 75. [Ex. 1005,] 6:35–50, 7:63–65. The host
system 75 “will have available PIN data from the true owner of
card 230 and can rapidly confirm whether the “pinpad input PIN
and the known valid PIN agree.” Id. 6:36–49, Ex. 1003, ¶¶ C77–
83. The known valid PIN corresponds to the encrypted PIN
provided by the card 230. [Ex. 1003] ¶¶ C77–83. The host
system then determines whether the “pinpad input PIN and the
known valid PIN agree.” (Ex. 1005, 6:36–49) and allows the
transaction to proceed. Accordingly, in Valliani, the device 10
is a mobile communication device that transmits the encrypted
signal indicative of the recorded information to the host 75,
which is a remote transaction server for processing a
commercial transaction. [Ex. 1003] ¶ C83.
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Pet. 33. These assertions are supported by the cited evidence.
Notwithstanding Patent Owner’s contrary arguments, discussed below, we
are persuaded that Valliani’s device 10 satisfies the limitation “said mobile
communication device transmits the encrypted signal indicative of the
recorded information to a remote transaction server for processing a
commercial transaction.”
Patent Owner argues that “Petitioner’s reliance on the transmission of
PIN data is misplaced and mistakes the authentication of the Valliani card
user’s identity for the actual processing of a commercial transaction.” PO
Resp. 20. Patent Owner explains:
A POSITA would understand that a commercial
transaction is any transaction that involves some form of
payment, or money transfer, in exchange for goods and services.
This is consistent with the use of the term within the ’239 patent
and virtually all other usage of the term at the time of the
invention. Ex. 2004, ¶82 (citing intrinsic and extrinsic evidence).
But the cited portions of Valliani do not describe the exchange
of payment for goods and services. Valliani’s remote host 75 is
only used for retrieving and verifying PIN and signature data—
not for processing of the payment transaction. Id., ¶¶83–85.
Id. Patent Owner’s argument is unpersuasive, as explained below.
Patent Owner and its declarant Ivan Zatkovich focus on one aspect of
a commercial transaction to the exclusion of everything else that also relates
to the performance of the commercial transaction. The claim phrase at issue
simply is “for processing a commercial transaction.” Verifying the identity
of a person with whom a transaction would be completed is as much a part
of the commercial transaction to be completed as the transfer of money
between accounts. The claim limitation at issue does not specify which
aspect of the commercial transaction must be tied directly to the encrypted
data that has been transmitted. Further, Valliani discloses that PIN
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verification leads to learning whether the proposed sale transaction should
proceed or be aborted. Ex. 1005, 6:24–46. Michael Shamos testifies that
notifying a seller/buyer of an acceptance or rejection of a transaction is an
example of “processing a commercial transaction.” Ex. 1017 ¶ 48. We
agree. The claim does not require completion of a commercial transaction
by the remote transaction server. We find that “for processing a commercial
transaction” as recited in limitation [1.E] encompasses authenticating the
identity of a person with whom a commercial transaction is proposed or
contemplated.
For the foregoing reasons, we are persuaded that Valliani’s device 10
“transmits the encrypted signal indicative of the recorded information to a
remote transaction server for processing a commercial transaction.”
h) Conclusion
Petitioner has shown by a preponderance of the evidence that claim 1
is unpatentable over Valliani and Vrotsos.
4. Independent Claim 4
Claim 4 recites “[a] method for reading a smart card having recorded
information stored on an integrated circuit incorporated into the card.” Ex.
1001, 12:38–40. Petitioner relies on its discussion of the preamble of claim
1. Pet. 40. Patent Owner has not presented counter-arguments additional to
those it asserts in the context of claim 1. For essentially the same reasons
discussed above with respect to the preamble of claim 1, we are persuaded
that this preamble in claim 4 is met by the applied prior art. We need not
determine whether this preamble is limiting.
Claim 4 recites a step of “providing a portable card reader device
comprising a sensor for reading the recorded information stored on the
integrated circuit.” Ex. 1001, 12:41–43. Petitioner relies on its discussion
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of the preamble and limitation [1.A] of claim 1. Pet. 40. Patent Owner has
not presented counter-arguments additional to those it asserts in the context
of claim 1. For essentially the same reasons discussed above with respect to
the preamble and limitation [1.A] of claim 1, we are persuaded that this step
is met by the applied prior art.
Claim 4 recites a step of “[providing . . .] a controller coupled to said
sensor for converting the recorded information into an encrypted signal
indicative of the recorded information stored on said integrated circuit
incorporated.” Ex. 1001, 12:41–46. Petitioner relies on its discussion of
limitation [1.B] of claim 1. Pet. 40. Patent Owner has not presented
counter-arguments additional to those it asserts in the context of limitation
[1.B]. For essentially the same reasons discussed above with respect to
limitation [1.B] of claim 1, we are persuaded that this step is met by the
applied prior art.
Claim 4 recites a step of “[providing . . .] a communication link for
coupling said portable smart card reader device to a mobile communication
device.” Ex. 1001, 12:41–48. Petitioner relies on its discussion of limitation
[1.C] of claim 1. Pet. 40. Patent Owner has not presented counter-
arguments additional to those it asserts in the context of limitation [1.C].
For essentially the same reasons discussed above with respect to limitation
[1.C] of claim 1, we are persuaded that this step is met by the applied prior
art.
Claim 4 recites “wherein when said sensor reads the recorded
information stored on the integrated circuit, said controller converts the
recorded information read by said sensor into said encrypted signal.” Ex.
1001, 12:49–52. Petitioner relies on its discussion of limitation [1.D.1] of
claim 1. Pet. 40. Patent Owner has not presented counter-arguments for this
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limitation additional to those it asserts in the context of limitation [1.D.1].
For essentially the same reasons discussed above with respect to limitation
[1.D.1] of claim 1, we are persuaded that this limitation is met by the applied
prior art.
Claim 4 recites “[wherein when said sensor reads the recorded
information stored on the integrated circuit, said controller . . .] transmits
said encrypted signal via said communication link to said mobile
communication device.” Ex. 1001, 12:49–54. Petitioner relies on its
discussion of limitation [1.D.2] of claim 1. Pet. 40. Patent Owner has not
presented counter-arguments for this limitation additional to those it asserts
in the context of limitation [1.D.2]. For essentially the same reasons
discussed above with respect to limitation [1.D.2] of claim 1, we are
persuaded that this limitation is met by the applied prior art.
Claim 4 recites a step of “providing said encrypted signal indicative of
the recorded information stored on the integrated circuit to said mobile
communication device for further processing by circuitry contained in said
mobile communication device.” Ex. 1001, 12:55–59. Relying on its
discussion of limitation [1.D.2] of claim 1, Petitioner asserts that the applied
prior art already teaches providing the encrypted signal indicative of the
recorded information stored on the integrated circuit to the communication
device. Pet. 41. Petitioner further asserts that Valliani additionally discloses
the claimed “for further processing by circuitry contained in said mobile
communication device.” Id. Petitioner explains as follows:
Valliani discloses that the mobile communication device
10 includes a central processor unit 20, corresponding to
circuitry. Ex. 1005, 4:4–12. “Software routine(s) 35 and/or 45
. . . may be loaded into device 10.” Id. 6:5–7. “These routines
would include point of sale software, software driver(s) for . . .
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smart card reader/writer unit 260 . . . DES encryption, signature
capture and signature compression.” See id. 6:8–13. The
software routines “would be executed by central processing unit
20 within device 10.” Id. 6:14–15. Thus, the mobile
communication device in Valliani is equipped with software 35
and 45 that can process the encrypted signal from the card reader.
It was necessary to process that data into a form suitable for
transmission via the appropriate communication protocols.
Ex. 1003, ¶¶ C127–132.
Id. These assertions are rational and supported by the cited evidence.
Patent Owner has not presented counter-arguments for this limitation
additional to those it asserts in the context of limitation [1.D.2] of claim 1.
For essentially the same reasons discussed above with respect to limitation
[1.D.2] of claim 1, and further based on Petitioner’s above-quoted
explanation, we are persuaded that this limitation relating to further
processing in the mobile communication device is met by the applied prior
art.
Claim 4 recites “said mobile communication device transmits the
encrypted signal indicative of the recorded information to a remote
transaction server for processing a commercial transaction.” Ex. 1001,
12:60–63. Petitioner relies on its discussion of limitation [1.E] of claim 1.
Pet. 43. Patent Owner has not presented counter-arguments additional to
those it asserts in the context of limitation [1.E] of claim 1. For essentially
the same reasons discussed above with respect to limitation [1.E] of claim 1,
we are persuaded that this limitation is met by the applied prior art.
For the foregoing reasons, Petitioner has shown by a preponderance of
the evidence that claim 4 is unpatentable over Valliani and Vrotsos.
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5. Dependent Claims 3 and 6
Claims 3 depends directly from claim 1 and further recites “wherein
said mobile communication device receives transaction validation
information from said remote transaction server.” Ex. 1001, 12:35–37.
Claim 6 depends directly from claim 4 and further recites the same
additional limitation. Id. at 13:2–4.
Petitioner explains:
In Valliani, when the host system validates the user’s PIN,
the device 10, corresponding to said mobile communication
device, receives transaction validation information from the host
system 75 indicating the transaction is allowed to proceed.
Specifically, as stated in Section IX.A.1.g, the host system 75
compares the PIN data received from the device 10 to the known
valid PIN. Ex. 1005, 6:33–46. The known valid PIN
corresponds to the PIN provided by the card 230. Ex. 1003,
¶¶C105-107. If the PINs match, “th[e] comparison outcome can
be sent by host system 75 to device 10, whereupon an individual
using device and module 210 to transact a sale rapidly learns
whether the sale should proceed.” Ex. 1005, 6:39–42.
Pet. 37–38. The accounting by Petitioner is logical and supported by the
cited evidence. Notwithstanding Patent Owner’s argument to the contrary,
discussed below, we are persuaded that this limitation is met by the applied
prior art.
Patent Owner argues:
Petitioner asserts that “validat[ing] the user’s PIN” is
equivalent to transaction validation information. [Petition, p.
37]. Petitioner is incorrect, because there is much more
information that must be exchanged and processed for a
commercial transaction to be deemed validated and completed.
As described above, Valliani does not disclose processing
a commercial transaction because a commercial transaction
would require some form of payment in exchange for goods and
services. The asserted remote host 75 in Valliani is used for
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retrieving and verifying PIN and signature data—not for
processing a commercial transaction. Although Valliani
mentions that the results of this PIN or signature verification may
inform the user “whether the same should proceed,” there is no
mention of transaction processor, processing a commercial
transaction, or of receiving verification from a commercial
transaction. Ex. 2004, ¶¶88–91.
PO Resp. 25 (emphasis added). The argument does not undermine
Petitioner’s showing because the claim recitation “transaction validation
information” is read too restrictively by Patent Owner. A preliminary
identity check that allows the proposed commercial transaction to proceed
still constitutes a form of transaction validation. Patent Owner reads
“transaction validation” as though it requires completion of the commercial
transaction. But such a narrow reading of “transaction validation” is
unreasonable. Patent Owner does not sufficiently explain why a preliminary
identity check that would allow or disallow continuation of the transaction is
not a form of transaction validation. Execution and completion of the
commercial transaction simply is not required for “transaction validation.”
Although the ’239 patent describes embodiments in which the transaction
server interacts with a remote processor/issuer 20 of the financial institution
that issued the card to accept or refuse the commercial transaction, thus
completing or rejecting the transaction (Ex. 1001, 9:19–36, 10:24–44, 11:8–
35, 11:40–60), the Specification nowhere specially defined “transaction
validation” to require “completion” of transaction. “[A] particular
embodiment appearing in the written description may not be read into a
claim when the claim language is broader than the embodiment.”
SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870, 875 (Fed. Cir.
2004) (citation omitted); see also In re Van Geuns, 988 F.2d 1181, 1184
(Fed. Cir. 1993).
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For the foregoing reasons, Petitioner has shown by a preponderance of
the evidence that claims 3 and 6 are unpatentable over Valliani and Vrotsos.
6. Dependent Claims 2 and 5
Claim 2 depends directly from claim 1 and further recites “in which
the smart card is selected from a group consisting of a chip card, EMV card,
proximity detector or NFC card, contactless card, or any combination
thereof.” Ex. 1001, 12:30–33. Claim 5 depends directly from claim 4 and
further recites the same additional limitation. Id. at 12:64–67. Petitioner
accounts for the additional limitation of claim 2, relative to claim 1. Pet. 36–
39. Petitioner also accounts for the additional limitation of claim 5, relative
to claim 4. Id. at 43–44. The assertions are supported by the cited evidence.
Patent Owner does not present any counter-argument for claims 2 and 5,
additional to those it asserts in the context of claims 1 and 4, respectively,
which we already have addressed above and rejected in discussing claims 1
and 4. Petitioner has shown by a preponderance of the evidence that claims
2 and 5 are unpatentable over Valliani and Vrotsos.
E. Obviousness of Claims 1–6 over Vrotsos
1. Independent Claim 1
a) Preamble
Claim 1 recites “[a] portable smart card reader device for reading a
smart card having recorded information stored on an integrated circuit
incorporated into the card.” Ex. 1001, 12:7–9. Petitioner identifies in
Vrotsos a smart card reader having portion 55 for reading information from
smartchip 53 of a credit card, and reasons that the smart card reader is
portable because it is part of attachment 21 secured to a mobile phone. Pet.
45–47 (citing Ex. 1006 ¶ 41, Figs. 1D, 1E; Ex. 1003 ¶¶ 12–16). We find
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Petitioner’s reasoning to be supported by the cited evidence, and we need
not determine whether this preamble recitation is limiting.
Patent Owner does not specifically address this preamble recitation
and Vrotsos. However, Patent Owner argues that Vrotsos does not disclose
another claim limitation, i.e., limitation [1.A] — “a sensor for reading said
recorded information stored on said integrated circuit incorporated into said
card.” To the extent that argument applies to this preamble recitation as
well, we note that that argument, as we discuss below, does not undermine
Petitioner’s showings that Vrotsos does disclose such a sensor. For the same
reasons, we are persuaded that Vrotsos describes this preamble.
b) Limitation [1.A] — a sensor
Claim 1 further recites that the portable smart card reader device
comprises “a sensor for reading said recorded information stored on said
integrated circuit incorporated into said card.” Ex. 1001, 12:10–11.
Petitioner explains that, in Vrotsos, when card 51 having smartchip 53 is
inserted into slot 22, a smartcard read/write head within the slot can read
information from, or write information to, smartchip 53. Pet. 18 (citing
Ex. 1006 ¶ 41; Ex. 1003 ¶¶ C19–20). Paragraph 41 of Vrotsos describes:
In embodiments of the invention, the attachment 21 may
have a combined magnetic stripe reader and smartcard reader. In
such embodiments, the slot 22 may be as shown in FIG. 1E. A
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 slot 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 deep channel
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portion 55 may contact the lateral surfaces of the card 51 to
ensure that the smartchip 53 is in a desired position. 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 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.
Ex. 1006 ¶ 41 (emphasis added). Petitioner identifies Vrotsos’s smartchip
53 as the claimed “integrated circuit incorporated into the smart card.” Pet.
18. For the claimed sensor, Petitioner states: “In Vrotsos, the smartcard
read/write head is a sensor for reading said recorded information stored on
said integrated circuit incorporated into said card.” Id.
Patent Owner does not dispute that Vrotsos refers to a “smartcard”
inserted into a slot. Patent Owner does not dispute that the referenced
“smartcard” has incorporated thereon an integrated circuit for storing
information. In that regard, Patent Owner states:
A POSITA would understand that Vrotsos’s mention of a
“smartcard” that is inserted into a slot, [Ex. 1006, ¶41] could
only refer to an EMV-type smart card. Ex. 2004, ¶37. EMV
standards define the methods for reading IC chips embedded in
these types of smartcards, including the sensors for accessing
the contacts on the card’s IC chip. Id. ¶¶18, 37, 40–42.
PO Resp. 15.9 Nonetheless, Patent Owner maintains that Vrotsos does not
disclose a sensor for reading an integrated circuit on the card. Id. at 14.
Patent Owner asserts:

9 Ivan Zatkovich testifies: “As a card that requires physical connection to a
reader, it would be the EMV type of card. As stated above, an EMV type
card would require a sensor which could access the contact pad of the IC
chip.” Ex. 2004 ¶ 37.
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A POSITA would understand that a read/write “head”
refers to a magnetic read head used for magnetic stripe. Ex.
2004, ¶ 35. This is consistent with how Vrotsos itself refers to
the magnetic stripe sensor as “read head 23,” which is a standard
industry term for a magnetic read head. Id., ¶ 35. A magnetic
read head would not be compatible with a sensor required to read
an integrated circuit within a smart card, specifically “consisting
of a chip card, EMV card, proximity detector or NFC card,
contactless card, mobile NFC device, or any combination
thereof.” Ex. 1001, claims 2 and 5; Ex. 2004, ¶¶34–35.
Id. at 14–15. Patent Owner further asserts:
Vrotsos does not refer to industry standards, a specific
type of smart card, or to any specific type of sensor other than
the lone reference to a read/write head, and Vrotsos’ teachings
contradict normal smart card or EMV card standards. Instead of
an EMV or smart card sensor, Vrotsos proposes “a card 51
having a magnetic stripe 52 and/or smartchip 53” to be read by a
“smartcard read/write head . . . positioned within a surface of the
deeper channel portion 55 of the slot 22 so that information may
be read form or written to the smartchip 53 when the card is
positioned within the deeper channel portion 55,” Ex. 1006, ¶ 41,
with the only thing described about the purported smartcard
reader being the size and width, and the inclusion of a smartcard
read/write head. Id.
Based on the entirety of Vrotsos’s disclosure and
knowledge in the art, a POSITA would understand that the
disclosed read/write head would only be appropriate for reading
magnetically sensed information, such as from a magnetic stripe.
Id., ¶ 42. A POSITA would find no disclosure of a sensor for
reading either an NFC or contract less smart card or
electronically recorded information on an EMV card. Id., ¶43.
Accordingly, Vrotsos does not meet the claim limitations
requiring that the card reader device include a sensor for reading
information from the integrated circuit of a smart card. Id., ¶44.
Id. at 15–16.
These arguments do not sufficiently undermine Petitioner’s
showing. Patent Owner’s arguments stretch beyond reason. They
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have an inflexible focus on the literal wording used in Vrotsos, to the
exclusion of the substantive content Vrotsos would have disclosed to
one with ordinary skill in the art. They overstate the consequence of
Vrotsos’s not using the words Patent Owner contends should have
been used to describe a sensor that reads information from an
integrated circuit incorporated into a smart card.
First, however, we address Patent Owner’s contention, relying
on testimony of Ivan Zatkovich (Ex. 2004 ¶ 35), that a read/write
“head” could only be used to refer to something that reads
magnetically sensed information, such as a magnetic stripe. We are
not persuaded that that is true. The testimony of the party’s declarants
conflict in that regard. Michael Shamos, Petitioner’s declarant,
testifies as follows:
33. A POSITA would have understood that like
“sensor,” the word “head” as used in Vrotsos refers to a device
that reads, records, erases, or writes data on the particular storage
medium it interacts with. The word is not limited solely to
magnetic heads, but would include smart card read/write devices
as well. Therefore by using the term “head,” Vrotsos sufficiently
describes to a POSITA that its reference to smartcard read/write
head refers to a sensor that reads from an integrated circuit on a
smart card.
Ex. 1017 ¶ 33. Ivan Zatkovich, Patent Owner’s declarant, testifies:
35. One of ordinary skill in the art would understand
that a read/write “head” refers to a magnetic read head used for
magnetic stripe. This is also consistent with how Vrotsos refers
to their magnetic stripe sensor as “read head 23”. Again, this is
a standard industry term for a magnetic read head. A magnetic
read head would not be compatible with a sensor required to read
an integrated circuit within a card, specifically, “consisting of a
chip card, EMV card, proximity detector or NFC card,
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contactless card, or any combination thereof.” [Ex. 1001, 12:32–
33 or Claim 2]
36. The asserted Vrotsos “sensor” is not actually a
sensor for reading an integrated circuit since it is referred to as a
smart card read/write head, and then only as a single isolated
reference with no description or indication of what type of smart
card read/write head.
Ex. 2004 ¶¶ 35–36.
On close scrutiny of the testimony of the declarants, there is not much
of a genuine conflict, except for the conclusion on whether Vrotsos
describes a sensor which reads recorded information from an integrated
circuit incorporated into a card. Notably, Ivan Zatkovich does not testify
that a read/write “head” can only refer to a magnetic read head used for
magnetic stripe. His testimony leaves that suggestion but he actually did not
so testify. We do not assume that that is his testimony. Also, Ivan
Zatkovich states that a read/write head referring to a magnetic read head is
consistent with how Vrotsos refers to its magnetic sensors as “read head 23.”
Ex. 2004 ¶ 35. That is true, but he does not mention that that is not
consistent with Vrotsos’s also referring to a “smartcard read/write head” as
being used to read information from smartchip 53 incorporated into a card.
Ex. 1006 ¶ 41. Ivan Zatkovich does not testify that the more restrictive
reading of “head” as Patent Owner proposes is consistent with all usages
contained in Vrotsos.
Further, although Ivan Zatkovich states that a read/write “head” is
industry standard term for a magnetic read head used for magnetic stripe, he
does not testify that any applicable industry standard precludes using “read
head” to describe a device which reads information from an integrated
circuit incorporated on a card. Ex. 2004 ¶ 35. Ivan Zatkovich also testifies
that “[a] magnetic read head would not be compatible with a sensor required
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to read an integrated circuit within a card,” id., but Petitioner is relying on
Vrotsos’s disclosure of a “smartcard read/write head,” not Vrotsos’s
magnetic “read head 23” which is a separate component. Ivan Zatkovich
does not testify that “smartcard read/write head” would not be compatible
with a sensor required to read an integrated circuit incorporated into a card.
Thus, in all these respects, there is no genuine conflict. We do not see
Ivan Zatkovich as having testified that a read “head” simply cannot be used
to describe a device, e.g., a sensor, which reads information recorded on an
integrated circuit incorporated into a card. On the one hand, we have
Michael Shamos’s testimony that to one with ordinary skill in the art, a read
“head” refers to a device that reads, records, erases, or writes data on the
particular storage medium it interacts with, “and is not limited solely to
magnetic heads, but would include smart card read/write devices as well.”
Ex. 1017 ¶ 33. On the other hand, we do not have Ivan Zatkovich testifying
that a read “head” simply cannot be used to describe a device, e.g., a sensor,
which reads information recorded on an integrated circuit incorporated into a
card. There is insufficient basis to agree with Patent Owner’s restrictive
reading of a read “head,” particularly because Vrotsos itself uses the term
“smart card read/write head” to refer to a component that reads information
from smartchip 53 (Ex. 1006 ¶ 41). We credit the testimony of Michael
Shamos (Ex. 1017 ¶ 33) that the word “head” as used in Vrotsos, would
have been understood by one with ordinary skill in the art as not limited
solely to magnetic heads, but would include smart card read/write devices as
well, and find that the word “head” would be so understood by one with
ordinary skill in the art.
A genuine conflict does exist with respect to Ivan Zatkovich’s
testimony (Ex. 2004 ¶ 36) that “[t]he asserted Vrotsos ‘sensor’ is not
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actually a sensor for reading an integrated circuit since it is referred to as a
smart card read/write head,” and Michael Shamos’s testimony (Ex. 1017
¶ 33) that “Vrotsos sufficiently describes to a POSITA that its reference to
smartcard read/write head refers to a sensor that reads from an integrated
circuit on a smart card.” We credit the testimony of Michael Shamos over
that of Ivan Zatkovich, for several reasons.
First, as discussed above, Ivan Zatkovich never testified that a read
“head” simply cannot be used to describe a device, e.g., a sensor, which
reads information recorded on an integrated circuit incorporated into a card.
Second, as discussed above, we have determined that “head” as used in
Vrotsos would have been understood by one with ordinary skill in the art as
not limited solely to magnetic heads, but would include smart card
read/write devices as well. Ivan Zatkovich’s statement is inconsistent with
Vrotsos’s expressly stating that “[a] smartcard read/write head” is used to
read information from smartchip 53. Ex. 1006 ¶ 41.
Even assuming that Patent Owner’s restrictive reading of
“head” is correct, we still would arrive at the conclusion that
Petitioner has shown that Vrotsos discloses “a sensor for reading said
recorded information stored on said integrated circuit incorporated
into said card.” Vrotsos expressly discloses reading information from
smartchip 53 of a transaction card (Ex. 1006 ¶ 41). If it is incorrect to
use the word “head” to describe a sensor which reads recorded
information from the integrated circuit incorporated into a card, it
does not follow that Vrotsos does not disclose a sensor which reads
recorded information from the integrated circuit incorporated into a
card. Patent Owner’s contention focuses inflexibly on the literal
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wording used in Vrotsos, to the exclusion of the substantive content
Vrotsos would have disclosed to one with ordinary skill in the art.
Ivan Zatkovich testifies regarding Vrotsos’s card as follows:
“As a card that requires physical connection to a reader, it would be
the EMV type of card. As stated above, an EMV type card would
require a sensor which could access the contact pad of the IC chip.
The International Standard that applies to EMV cards is ISO 7816.”
Ex. 2004 ¶ 37 (footnote omitted). Thus, one with ordinary skill in the
art, notwithstanding the fact that Vrotsos uses the term “smart card
read/write head,” would have known to use a sensor that indisputably
could access the contact pad of the IC chip to read information from
the integrated circuit. Michael Shamos testifies that sensors for
reading recorded information on an integrated circuit memory of a
smart card were well known to one with ordinary skill in the art in
2009. Ex. 1003 ¶ 29; Ex. 1017 ¶¶ 30, 34. Ivan Zatkovich does not
dispute that “integrated circuit readers and smart card readers were
known.” Ex. 1018, 25:18–20. Even according to Patent Owner, at the
time of the invention, there already were industry standards which
“defined the methods for reading IC chips embedded in these types of
smart cards.” PO Resp. 12–13.
Thus, notwithstanding that the term “smart card reader/writer
head” is used in Vrotsos, and assuming that that term is incorrect for
referring to a device that reads an integrated circuit on a card, one
with ordinary skill in the art still would have understood that Vrotsos
was disclosing “a sensor for reading said recorded information stored
on said integrated circuit incorporated into said card.”
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For the foregoing reasons, we agree with Petitioner that by describing
a “smart card read/write head” which reads recorded information from
smartchip 53, Vrotsos discloses to one with ordinary skill in the art “a sensor
for reading said recorded information stored on said integrated circuit
incorporated into said card.”
c) Limitation [1.B] — a controller
Claim 1 further recites that the portable smart card reader device
comprises “a controller coupled to said sensor for converting the recorded
information stored on said integrated circuit into an encrypted signal
indicative of the recorded information.” Ex. 1001, 12:12–15. Petitioner
identifies processor 303 as corresponding to the claimed controller, and
asserts that it encrypts transaction data captured by the card reader. Pet. 23–
24. Petitioner further notes that as shown in Figure 10 of Vrotsos, processor
303 is coupled to input device 308 which includes the sensor for reading
recorded information on the integrated circuit on smartchip 53. Id. at 23
(citing Ex. 1003 ¶¶ C35–39). Petitioner cites to paragraphs 75 and 78 of
Vrotsos which describe in a general manner, non-specific to any particular
embodiment, that processor 303 of attachment 21 may encrypt input
information from the attachment’s input device 308. Id. at 24. Thus, the
teaching reasonably applies to recorded information read from smartchip 53.
Petitioner explains that the step of encrypting information is the same as
converting that information into an encrypted signal indicative of the
recorded information. Id. (citing Ex. 1003 ¶ C42). The assertions are
rational and supported by the cited evidence. Notwithstanding Patent
Owner’s arguments to the contrary, we are persuaded that Vrotsos describes
this limitation of claim 1.
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Patent Owner asserts that Vrotsos does not disclose “the controller
with the functionality required in claims 1 and 4.” PO Resp. 18.
Essentially, this argument is built on the foundation of Patent Owner’s
contention that Vrotsos does not disclose reading information from an
integrated circuit incorporated into a card. Patent Owner states:
As discussed above, Vrotsos’s disclosure does not support
the reading of an integrated circuit. See discussion, supra.
Accordingly, Vrotsos also does not disclose converting the
recorded information read from an integrated circuit into an
encrypted signal and transmitting a signal containing the
encrypted information representing the recorded information
stored on the integrated circuit.
PO Resp. 19. We have already considered and rejected the argument that
Vrotsos does not disclose reading recorded information from the integrated
circuit incorporated into a card in the context of the sensor limitation
discussed above. Patent Owner’s assertion building on that failed argument
as a foundation is also without merit.
Patent Owner further argues:
Vrotsos does disclose the encryption of the card
information, but the encrypted information is derived from
Vrotsos’s magstripe 23. Petitioner relies on its expert’s
declaration for the argument that Vrotsos discloses the
encryption of information from an integrated circuit, citing
multiple Vrotsos excerpts suggesting that encryption occurs prior
to sending information to the mobile communication device, but
always referring to the mag stripe reader 23 for capturing
information and attachment 21 for encrypting that information.
Petitioner’s expert asserts, for example, that “[t]he user may
move the card past the reader assembly and transaction data may
be captured by the reader 23 in the attachment 21. The
attachment 21 may encrypt the transaction data captured by the
reader 23.” Ex. 1003, ¶C36. But again, because there is nothing
in Vrotsos supporting that reader 23 can read an integrated circuit
of a smart card, these arguments do nothing other than to
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establish that any information being encrypted would come from
Vrotsos’s magstripe reader.
PO Resp. 24. But Patent Owner does not address Petitioner’s assertion
(1) that processor 303 is coupled to input device 308 which includes smart
card reader/writer head, the sensor that reads recorded information from the
integrated circuit incorporated on the smartchip (Pet. 23), and (2) that
Vrotsos, without regard to whether the read information is from a magnetic
stripe or from an integrated circuit of a smart card, states “processor 303 of
the attachment 21 may encrypt input information received from the
attachment’s input device 308” (Pet. 24 (citing Ex. 1006 ¶ 78)). Patent
Owner also overlooks similar testimony from Michael Shamos citing to
Vrotsos’s paragraphs 75 and 94, which amply supports Petitioner’s assertion
that information read from the integrated circuit of a smart card is then
encrypted by processor 303. Ex. 1003 ¶¶ C37, C39, C41.
Vrotsos describes:
The attachment 21 may also include a processor 303, a
memory 307 and an input device 308. The processor may
execute 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, . . . .
Ex. 1006 ¶ 75. Indeed, Vrotsos further describes:
The processing performed by the processor 303 of the
attachment 21 may include encrypting the information, dividing
the input information into data packets, appending header
information to the input information to indicate the identify
and/or location of the user, etc. In embodiments of the invention
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in which the attachment 21 includes multiple input devices, the
processor of the attachment 21 may encrypt the information
differently depending on from which input device the input
information was received [from magstripe or smartchip].
Id. ¶ 94. Thus, Patent Owner’s arguments are misplaced.
Patent Owner further asserts: “As Petitioner concedes, Vrotsos also
does not disclose transmitting data from the integrated circuit of a smart card
(or an encrypted signal produced therefrom) to a mobile communication
device. See Petition, pp. 71–72; Ex. 2004, ¶¶75–77.” PO Resp. 19. This
argument is misplaced, because the controller limitation does not require
transmitting data from the integrated circuit of a smart card (or an encrypted
signal produced therefrom) to a mobile communication device. That is a
feature of limitation [1.C] reciting a communication link. Further, it is also
misplaced because Petitioner acknowledges only that there is no explicit
disclosure of smart card data being transmitted over a particular
communication link to a wireless communication device. Pet. 71–72. As
discussed below in the context of limitation [1.C], it is still Petitioner’s
contention that it would have been obvious to one with ordinary skill in the
art to send smart card data encrypted by the controller to the wireless
communication device over that communication link.
We are persuaded that Vrotsos discloses “a controller coupled to said
sensor for converting the recorded information stored on said integrated
circuit into an encrypted signal indicative of the recorded information.”
d) Limitation [1.C] — communication link
Claim 1 recites “a communication link for coupling said portable
smart card reader device to a mobile communication device for the
transmission of said encrypted signal indicative of the recorded information
therebetween.” Ex. 1001, 12:16–19. Petitioner identifies a first Vrotsos
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embodiment (Ex. 1006 ¶¶ 72–78) with attachment 21 including input device
308 having a smart card reader, where attachment 21 receives input from the
smart card reader, processes it, and sends it to a cellular phone for
transmission to remote computer 101. Pet. 27, 71. Figure 10 is a block
diagram of that embodiment and is reproduced below:

Figure 10 shows a block diagram of one embodiment of Vrotsos. Ex. 1006
¶ 23. Vrotsos describes:
The wireless communication device 1 may have a
communication port and the attachment 21 may have a
corresponding connector 27 that mate when the two are coupled
together, permitting electrical signals to be passed from the
attachment 21 to the wireless communication device 1 and vice
versa.
Id. ¶ 42. Petitioner identifies the wired physical connection between
attachment 21 and the cellular phone as the communication link. Pet. 71.
Petitioner states, however, that “Vrotsos does not explicitly refer to smart
card data being transmitted over that link.” Id.
Petitioner identifies a second Vrotsos embodiment, which reads card
data from a magnetic stripe on the card and in which attachment 21
communicates with the phone over a wireless connection. Id. at 72 (citing
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Ex. 1006 ¶¶ 50–55, Fig. 7). Petitioner asserts that in that second
embodiment, when a user swipes the card, attachment 21 captures
transaction data, encrypts it, and transmits the encrypted transaction data to
the wireless communication device over the wireless local communications
network. Id. (citing Ex. 1006 ¶ 52). Figure 7 of Vrotsos is reproduced
below:

Figure 7 illustrates implementation of wireless communication between a
wireless communication device and an attachment according to an
embodiment of Vrotsos. Ex. 1006 ¶ 20.
Petitioner explains that one with ordinary skill in the art would have
known to process smart card data the same way as data read from a magnetic
stripe, i.e., send it over a wireless communication link to the phone. Pet. 74.
Petitioner asserts that it would have been obvious to one with ordinary skill
in the art, in the second embodiment of Vrotsos, to transmit smart card data,
rather than data read from the magnetic stripe of a card, to the cellular
phone. Id. (citing Ex. 1003 ¶ E21). Petitioner asserts that one with ordinary
skill in the art would have been motivated to transmit transaction data read
from smartchip 53 through such a wireless communication link to complete
a commercial transaction. Id. (citing Ex. 1003 ¶ E20).
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Alternatively, Petitioner explains that one with ordinary skill in the art
would have recognized physical connection as an alternative connection for
sending smart card data. Id. at 73 (citing Ex. 1003 ¶ E16). Petitioner further
explains that because the two embodiments provide the same function, it
would have been obvious to one with ordinary skill in the art to send smart
card data to the phone via the physical connection in the first embodiment,
akin to sending magnetic stripe data to the phone via a wireless connection
in the second embodiment. Id. at 73 (citing Ex. 1003 ¶ E14). Petitioner
further notes that Vrotsos contemplates different ways that attachment 21
could connect to and communicate with the phone. Id. (citing Ex. 1006, Fig.
1A–1D, 3, 7, 10).
Petitioner’s assertions are rational and supported by the cited
evidence. Notwithstanding the contrary arguments of Patent Owner,
discussed below, we are persuaded that Vrotsos reasonably suggests this
limitation of claim 1 under either alternative presented by Petitioner.
Patent Owner makes a number of counter-arguments including the
same arguments we discussed and rejected above in the context of the other
limitations of claim 1 and Vrotsos, i.e., (1) Vrotsos does not disclose a
sensor for reading recorded information from an integrated circuit
incorporated into a card; (2) Vrotsos does not disclose encrypting
information read from an integrated circuit incorporated into a card; and
(3) Vrotsos does not disclose sending from the smart card reader device
encrypted signal indicative of recorded information on the card to a wireless
communication device. PO Resp. 53. Our reasoning and analysis in that
regard equally applies here.
On pages 54–57 of the Patent Owner Response, Patent Owner
provides what appears to be additional arguments. PO Resp. 54–57.
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However, as we discuss below, those arguments are largely built on the
foundation of the already rejected arguments and are otherwise a
mischaracterization of Petitioner’s arguments.
Patent Owner asserts:
Petitioner asserts that Vrotsos shows two embodiments—
one embodiment disclosing a smart card reader for reading card
information, but not disclosing any encryption of the card
information or a communication link to a mobile device; and a
second embodiment disclosing a magnetic stripe reader and
encryption of the card information, but not disclosing a smart
card reader of any kind. [Petition, pp. 71–72] From there,
Petitioner’s view of obviousness essentially consists of asserting
that a POSITA would have conflated the two embodiments to
come up with a device that read information from a smart card,
encrypt[ed] it, and transmitted it to a mobile phone.
Id. at 55 (emphasis added). Petitioner, however, has not represented that in
the first embodiment, where there is a wired physical connection as the
communication link between the attachment and the cellular phone, there is
no encryption of information from a smart card. Petitioner also has not
represented that in that first embodiment, there is no communication link
between the attachment and the cellular phone.
To the contrary, Petitioner asserts for that embodiment that attachment
21 includes input device 308 having a smart card reader, where attachment
21 receives input from the smart card reader, generates encrypted data, and
sends the encrypted data to a cellular phone for transmission to remote
computer 101. Pet. 27, 71. Petitioner states: “Moreover, transmission of an
encrypted signal between card reader and communication device over a
physical connection was well-known to a POSITA, as disclosed e.g. in
Vrotsos. Id. ¶C53; Ex. 1006, ¶¶42, 53, 93, Fig. 10.” Id. at 27.
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In that regard, Vrotsos describes: “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.” Ex. 1006 ¶ 80 (emphasis added). Vrotsos further
describes: “The wireless communication device 1 may package the
encrypted transaction data in a transaction transmission and may send the
transaction transmission including the encrypted transaction data to the
server 101 over the wireless communication network 550.” Id. ¶ 53.
Vrotsos still further describes: “The processor 303 of the attachment 21 may
then process the input information (block 405) and the resulting data may be
directly transmitted to the antenna 5 of the wireless communication device
for transmission to the remote computer 101.” Id. ¶ 93.
What Petitioner represents is only that “Vrotsos does not explicitly
refer to smart card data being transmitted over that [physical] link.” Pet. 71.
Patent Owner argues:
[I]f one embodiment purportedly expressly disclosed reading,
converting, encrypting, and transmitting of information read
from a magnetic stripe, but intentionally removed any reference
to these functions with regard to information from the integrated
circuit of a smart card, that does not suggest the desirability of
conflating the two embodiments so much as it suggests that
Vrotsos viewed the capability to read, process, encrypt and
transmit information from a magnetic stripe as something
different than Vrotsos’s own perception of its device’s
capabilities with regard to an integrated circuit of a smart card.
Ex. 2004, ¶¶ 179–182.
PO Resp. 55. But we do not find that Vrotsos has intentionally removed any
reference to the sensing, encryption, and transmission functions with respect
to data from the integrated circuit of a smart card. There are numerous
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instances where Vrotsos refers to: (1) sensing from the integrated circuit of
a smart card, (2) encrypting sensed data from the input device regardless of
whether the data comes from a magnetic stripe or an integrated circuit, and
(3) transmitting encrypted data to the wireless communication device
regardless of whether the data comes from a magnetic stripe or an integrated
circuit. Ex. 1006 ¶¶ 41, 53, 78, 80. The circumstance does not reflect what
Patent Owner suggests. Rather, Vrotsos specifically describes certain
limitations involving reading recorded information from an integrated circuit
of a smart card and otherwise uses broad description to cover both data read
from an integrated circuit and data read from a magnetic stripe where there
is no need for distinction.
For example, Vrotsos describes: “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.” Ex. 1006 ¶ 41. We
have determined above that Vrotsos discloses to one with ordinary skill in the
art “a sensor for reading said recorded information stored on said integrated
circuit incorporated into said card.”
For example, Vrotsos describes: “The processor 303 may also include
software or code that enables or executes encryption processing on any
transaction data or identification data.” Ex. 1006 ¶ 80. The description
covers data read from the integrated circuit of a smart card. Vrotsos also
describes: “[T]he processor 303 of the attachment 21 may encrypt input
information received from the attachment’s input device 308 so that the
resulting attachment-processed data cannot be read off the antenna by the
processor of the wireless communication device 1 (or the logical bus) for
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misuse by the user.” Id. ¶ 78. That description also covers data read from
the integrated circuit of a smart card.
For example, Vrotsos describes: “The wireless communication device
1 may package the encrypted transaction data in a transaction transmission
and may send the transaction transmission including the encrypted
transaction data to the server 101 over the wireless communication network
550.” Id. ¶ 53. That description covers data read from the integrated circuit
of a smart card.
Patent Owner’s contention that Vrotsos viewed the capability to read,
process, encrypt and transmit information from a magnetic stripe as
something different than Vrotsos’s own perception of its device’s
capabilities with regard to an integrated circuit of a smart card simply is not
supported by the record. Similarly, we also disagree with Patent Owner’s
characterization (PO Resp. 56–57) that “even Vrotsos itself drew a stark
distinction between a magnetic stripe embodiment and a smart card
embodiment.” Patent Owner asserts that “[i]t may be that Vrotsos never
intended to transmit information from an integrated circuit onward at all.”
PO Resp. 56. The contention is mere speculation and also not supported by
the evidence of record. As noted above, Vrotsos describes: “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.” Ex. 1006 ¶ 41. Also as noted above, Vrotsos describes: “The
processor 303 may also include software or code that enables or executes
encryption processing on any transaction data or identification data.” Id.
¶ 80. Further as noted above, Vrotsos describes: “The wireless
communication device 1 may package the encrypted transaction data in a
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transaction transmission and may send the transaction transmission
including the encrypted transaction data to the server 101 over the wireless
communication network 550.” Id. ¶ 53.
Patent Owner additionally argues:
Second, Petitioner’s entire argument rests on the premise
that magnetic stripe readers and smart card readers use similar
reader devices to provide the same function of reading recorded
information and sending that information to a mobile phone.
Petition, p. 74. They do not. To the contrary, the technologies
for reading and working with information from a magnetic stripe
are actually very different from those for information on the
integrated circuit of a smart card as evidenced at least by the very
different physical components, the different ways information is
stored on the cards, the different types of signals, and very
different industry standards. Ex. 2004, ¶179; see also discussion,
supra.
Id. at 55–56. Patent Owner has mischaracterized Petitioner’s argument.
Petitioner on page 74 of the Petition did not assert that the technology for
reading from a magnetic stripe is similar to technology for reading from an
integrated circuit. Rather, Petitioner states: “Accordingly, regardless of the
source of the data (i.e., whether it comes from a magnetic stripe or an
integrated circuit), a POSITA would have recognized that Vrotsos’s card
reader processes the data read from the card in a similar manner.” Pet. 74.
Petitioner is referring to the sensing of data, encrypting of data, and sending
of encrypted data to the wireless communication device for further sending
to a remote server, not the actual technology regarding how information is
read from a magnetic stripe versus how information is read from an
integrated circuit. On that basis, Petitioner alternatively asserts that “[a]
POSITA would have been motivated to encrypt and transmit transaction data
read from a smartchip 53 to securely complete a commercial transaction.”
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Pet. 74. We agree. However, we have determined above that Vrotsos
discloses encrypting and transmitting transaction data read from smartchip
53.
Patent Owner further argues:
Based on Vrotsos alone, it is more logical to assume that
Vrotsos would suggest virtually nothing to a POSITA about the
reading and encryption of card information from an integrated
circuit because Vrotsos itself does not even demonstrate the
ability to read an integrated circuit from a smart card, let alone
teach a POSITA how to read, encrypt, and transmit information
from an integrated circuit. Ex. 2004, ¶182.
PO Resp. 57. The argument does not undermine Petitioner’s assertions,
given the testimony of Michael Shamos that sensors for reading recorded
information on an integrated circuit memory of a smart card were well
known to one with ordinary skill in the art in 2009. Ex. 1003 ¶ 29; Ex. 1017
¶¶ 30, 34. Patent Owner’s declarant, Ivan Zatkovich, does not contend
otherwise. Even according to Patent Owner, at the time of the invention,
there already were industry standards which “defined the methods for
reading IC chips embedded in these types of smart cards.” PO Resp. 12–13.
Vrotsos does not have to specifically describe what already was well known.
Similarly, neither Patent Owner nor Ivan Zatkovich contends that
once information is read from the integrated circuit of a smart card, one with
ordinary skill in the art would have lacked sufficient skill to effect
encryption of the information and transmission of the encrypted information.
Furthermore, Michael Shamos testified that “[e]ncrypting smart card
information in the reader module was well known in 2009, because certain
standards in the Payment Card Industry (PCI) required it to protect sensitive
financial data that could easily be accessed if unencrypted.” Ex. 1017 ¶ 18.
Ivan Zatkovich provided no rebuttal testimony in that regard. The record
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also does not support any assertion that one with ordinary skill in the art
would not have known how to transmit information, once encrypted, from
one device to another.
For the foregoing reasons, we are persuaded by Petitioner that Vrotsos
reasonably would have suggested “a communication link for coupling said
portable smart card reader device to a mobile communication device for the
transmission of said encrypted signal indicative of the recorded information
therebetween.”
e) Limitation [1.D.1] — wherein clause, part 1
Claim 1 recites “wherein when said sensor reads the recorded
information stored on said integrated circuit, said controller converts the
recorded information read by said sensor into said encrypted signal.” Ex.
1001, 12:20–25. Petitioner explains that in Vrotsos, when read/write head in
input device 308 reads smart card data, processor 303, the controller,
performs encryption of that data. Pet. 28 (citing Ex. 1006 ¶¶ 52, 75, 78, 94;
Ex. 1003 ¶ C57). The explanation is supported by the cited evidence.
Patent Owner does not present arguments additional to those it presents for
limitations [1.A] and [1.B]. Those arguments have been discussed and
rejected above in the context of the analysis of Vrotsos for limitations [1.A]
and [1.B] and need not be reiterated here. We are persuaded that Vrotsos
describes this limitation of claim 1.
f) Limitation [1.D.2] — wherein clause, part 2
Claim 1 recites “[wherein when said sensor reads the recorded
information stored on said integrated circuit, said controller . . .] transmits
said encrypted signal via said communication link to said mobile
communication device.” Ex. 1001, 12:20–25. Petitioner asserts that this
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limitation is met by Vrotsos and cites to paragraph 93 of Vrotsos which, in
pertinent part, describes as follows:
If input is received at the input device (decision block 404), the
processor 303 of the attachment may be awoken from a “sleep
state (e.g., a lower-power wait mode) and begin to execute
instructions to receive the input information. The processor 303
of the attachment 21 may then process this input information
(block 405) and the resulting data may be directly transmitted to
the antenna 5 of the wireless communication device for
transmission to the remote computer 101.
Ex. 1006 ¶ 93 (cited at Pet. 75). Patent Owner does not present arguments
additional to those it presents for limitation [1.C]. Those arguments have
been discussed and rejected above in the context of the analysis for
limitation [1.C] and need not be reiterated here. We are persuaded that
Vrotsos describes this limitation of claim 1.
g) Limitation [1.E] — transmission to remote server
Claim 1 recites “said mobile communication device transmits the
encrypted signal indicative of the recorded information to a remote
transaction server for processing a commercial transaction.” Ex. 1001,
12:16–19. Petitioner explains that in Vrotsos, wireless communication
device 1 sends encrypted transaction data indicative of recorded information
from the card to remote server 101. Pet. 34 (citing Ex. 1006 ¶¶ 52–53; Ex.
1003 ¶¶ C84–88). Specifically, Petitioner states:
As depicted in Figure 7 of Vrotsos . . . , and explained by Vrotsos
at ¶53, the wireless communication device 1 (red) sends a
transaction transmission to a server 101 (purple) over a wireless
communications network 550, using a wireless communications
protocol such as “CDMA, PCS, GSM, 802.11, or any wireless
protocol utilized by any wireless device.” The transaction
transmission includes “the encrypted transaction data,” (Ex.
1006, ¶53) from the card (id. ¶52).

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Pet. 34. Figure 7 of Vrotsos, color annotated by Petitioner and appearing on
page 35 of the Petition, is reproduced below:

Figure 7, shown above with color annotation by Petitioner, illustrates a
Vrotsos embodiment implementing wireless communication between an
attachment and a wireless communication device. Ex. 1006 ¶ 20.
Petitioner’s annotations highlight the wireless communication device 1 in
red and the server 101 in purple.
With regard to the remote transaction server performing processing of
a commercial transaction, Petitioner explains:
That remote transaction server performs processing of a
commercial transaction. Specifically, Vrotsos discloses the
server 101 “analyze[s] the transaction transmission . . . to verify
authenticity of the user and other server 101 requirements.” Ex.
1006, 54. The server 101 also “send[s] a transaction response to
the wireless communication device 1.” Id. That response “may
be a confirmation number or approval number, a transaction
denied request, or a request asking a user or the wireless
communication device 1 for additional information.” Id.
Accordingly, the server 101 processes a commercial transaction.
Ex. 1003, ¶¶C89-91.
Pet. 35. Petitioner’s assertions are rational and supported by the cited
evidence.
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Patent Owner does not present counter-argument for this limitation.
We are persuaded that Vrotsos describes this limitation of claim 1.
h) Conclusion
For the foregoing reasons, Petitioner has proved by a preponderance
of the evidence that claim 1 would have been obvious over Vrotsos.
2. Independent Claim 4
Claim 4 is very similar to claim 1. For instance, claim 1 recites “[a]
portable smart card reader device . . . the device comprising: [a] sensor for
reading said recorded information stored on said integrated circuit
incorporated into said card,” and claim 4 recites “[a] method for reading a
smart card having recorded information stored on an integrated circuit
incorporated into the card, the method comprising the steps of: providing a
portable card reader device comprising a sensor for reading the recorded
information stored on the integrated circuit.” Claim 1 recites “[the device
comprising . . .] a controller coupled to said sensor for converting the
recorded information stored on said integrated circuit into an encrypted
signal indicative of the recorded information,” and claim 4 recites a step of
“[providing . . .] a controller coupled to said sensor for converting the
recorded information into an encrypted signal indicative of the recorded
information stored on said integrated circuit incorporated.”
For claim 4, Petitioner relies on its discussion of claim 1. Pet. 75
(citing to Section IX.B.1 of the Petition). Patent Owner similarly relies on
its arguments presented for claim 1. PO Resp. 14–16, 18–19, 23–24, 33, 35,
43, 53–57. Our discussion of claim 1 above with respect to the disclosure of
Vrotsos equally applies to the preamble and limitations [4.A] through [4.E]
and also [4.G] of claim 4. Petitioner has not accounted for, in the context of
claim 1, limitation [4.F] of claim 4 which has no corresponding counterpart
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in claim 1. However, there is discussion in the Petition, in a different section
concerning claim 4, of how limitation [4.F] of claim 4 is met by disclosure
in Vrotsos. It appears on pages 40–42 of the Petition. In the Decision on
Institution, we determined that it is appropriate to consider it. Paper 9, 35.
Limitation [4.F] reads as follows: “providing said encrypted signal
indicative of the recorded information stored on the integrated circuit to said
mobile communication device for further processing by circuitry contained
in said mobile communication device.” Petitioner explains: “Vrotsos
explicitly discloses the wireless communication device packaging data
before sending it to a server.” Pet. 43. The assertion is supported by the
disclosure of Vrotsos. Indeed, Vrotsos states: “The wireless communication
device 1 may package the encrypted transaction data in a transaction
transmission and may send the transaction transmission including the
encrypted transaction data to the server 101 over the wireless
communications network 550.” Ex. 1006 ¶ 53.
Patent Owner argues, however, that “Vrotsos discloses packaging, but
not processing.” PO Resp. 38 (citing Ex. 2004 ¶¶ 149–157). Patent Owner
asserts:
“Packaging” does not require any interpretation of the
recorded information. Vrotsos makes that clear when it states
that the wireless communication device need not be utilized for
processing information to be sent to the server. Ex. 1006, ¶80.
Presumably, if the wireless device is optional to Vrotsos’s
invention, one could assume that the processing of payment
information happens independently from the wireless device.
Id. The argument is misplaced. The pertinent part of paragraph 80 of
Vrotsos is introducing an embodiment in which information is transmitted to
remote server 101 through a local area network rather than through the
wireless communication device. Ex. 1006 ¶ 80. In that embodiment, “[t]he
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local area network may include or may be coupled to a server or remote
computer 101.” Id. Petitioner, however, is relying on embodiments which
use wireless communication device 1 for transmission to remote computer
101 and thus the associated processing in wireless communication device 1
is not optional. Pet. 43.
Patent Owner further asserts:
The language of claim 4 requires that the information
stored on the integrated circuit be “further processed” by
circuitry of the mobile communication device before
transmitting that information to a transaction server. The
limitation of “further processing” is not just reformatting,
repackaging or relaying the encrypted signal to the transaction
server. The claimed processing requires at a minimum that he
information from the card must be extracted from the encrypted
signal in order to be processed. Ex. 2004, ¶¶149–157.
The ‘239 patent explains how a mobile communication
device is equipped with a “software application . . . used to
convert between audio and digital signal.” See Ex. 1001, 10:66–
11:2, Figs. 7–8. Specifically, “[t]he analog signal from the
magnetic card 24 is sent via the hands-free interface 41 where
the software application of the controller [in the cell phone]
converts the received signal back to binary data for example as
stored on the magnetic card 34.” Id., 11:11–14. In fact, this
embodiment was also cited by Square to the board as an example
of “further processing by circuitry contained in the cell phone.”
[citing Ex. 2001, 52–53 (Corrected Petition in IPR2019-00312)]
PO Resp. 38–39. In summary, Patent Owner states: “As the ‘239 patent
shows, the limitation of ‘further processing’ minimally requires the data to
be extracted in order to be processed.” Id. at 39.
Patent Owner’s arguments do not persuade us that “further
processing” as recited in claim 4 requires extracting the original data from
the encrypted signal. That is an unreasonably restrictive reading of “further
processing” in light of the Specification of the ’239 patent. Indeed, the cited
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portion of the Specification is describing only an embodiment, and the
introductory sentence, omitted in the above quotation provided by Patent
Owner, referring to the software applications identified by Patent Owner, is
this: “As such, in this embodiment, installation of a software application
controller 51 is necessary.” Ex. 1001, 10:65–66 (emphasis added). Nothing
indicates that extraction of original data from encrypted data is required to
meet the “further processing” limitation. Further, even according to Patent
Owner, Petitioner no more than identified the embodiment as an example of
what can meet the “further processing” limitation. PO Resp. 39.
We see nothing in the Specification to support the restrictive reading
of “further processing” as urged by Patent Owner. “[A] particular
embodiment appearing in the written description may not be read into a
claim when the claim language is broader than the embodiment.”
SuperGuide Corp., 358 F.3d at 875; see also In re Van Geuns, 988 F.2d
at 1184.
For the foregoing reasons, Petitioner has proved by a preponderance
of the evidence that claim 4 is unpatentable over Vrotsos.
3. Dependent Claims 2, 3, 5, and 6
Claim 2 depends directly from claim 1 and further recites “in which
the smart card is selected from a group consisting of a chip card, EMV card,
proximity detector or NFC card, contactless card, or any combination
thereof.” Ex. 1001, 12:30–33. Claim 5 depends directly from claim 4 and
further recites the same additional limitation. Id. at 12:64–67. Petitioner
accounts for the additional limitations of claims 2 and 5, relative to the
independent claim from which each claim depends. Pet. 36–37, 43, 66–67,
71.
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Claims 3 depends directly from claim 1 and further recites “wherein
said mobile communication device receives transaction validation
information from said remote transaction server.” Ex. 1001, 12:35–37.
Claim 6 depends directly from claim 4 and further recites the same
additional limitation. Id. at 13:2–4. Petitioner accounts for the additional
limitations of claims 3 and 6, relative to the independent claim from which
each claim depends. Pet. 37–38, 43–44, 67–68, 71. For instance, Petitioner
explains:
Vrotsos describes a server or remote computer 101 transmitting
a transaction response to a wireless communication device 1. Ex.
1006, ¶54. The transaction response can be a “confirmation
number or approval number.” Id. The response may also be
“that the transaction could not be completed . . . or that additional
information is required from the purchaser or user.” Id. ¶96.
That transaction response corresponds to transaction validation
information that is received by the phone from the server.
Accordingly, Vrotsos discloses this claim element. Ex. 1003,
¶¶C108–111.
Pet. 38.
Patent Owner does not present any counter-argument for claims 2 and
3 additional to those it asserts for independent claim 1, and those arguments
have been discussed and rejected above in the context of claim 1. Patent
Owner does not present any counter-argument for claims 5 and 6 additional
to those it asserts for independent claim 4, and those arguments have been
discussed and rejected above in the context of claim 4.
We find Petitioner’s reasoning for the additional limitations of claims
2, 3, 5, and 6 to be rational and supported by the cited evidence. Petitioner
has shown by a preponderance of the evidence that claims 2, 3, 5, and 6 are
unpatentable over Vrotsos.
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F. Obviousness of Claims 1–6 over Bear and Vrotsos
We do not reach the alleged ground of unpatentability of claims 1–6
as obvious under U.S.C. § 103 over Bear and Vrotsos, because we conclude
that each of these claims is unpatentable on the two other grounds discussed
above.
III. CONSTITUTIONAL CHALLENGE
Patent Owner argues that the appointment of Administrative Patent
Judges still violates the United States Constitution, Article II, § 2, cl. 2
(Appointments Clause), despite the “attempted cure” by the Federal Circuit
in Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019)
cert. granted sub nom. United States v. Arthrex, Inc., 2020 WL 6037206
(Oct. 13, 2020). PO Resp. 57–58.
Patent Owner argues that “subjecting a patent filed before September
16, 2012 (date of relevant provisions of AIA), as is the case here, to IPR is
an impermissibly retroactive, unconstitutional taking” and “violates the Due
Process Clause of the Fifth Amendment.” Id. at 58.
We decline to consider Patent Owner’s constitutional challenges. The
Federal Circuit has addressed the issue of APJ appointment status in
Arthrex, Inc., 941 F.3d at 1325, 1337–38 (“This as-applied severance . . .
cures the constitutional violation.”); see also Arthrex, Inc. v. Smith &
Nephew, Inc., 953 F.3d 760, 764 (Fed. Cir. 2020) (Moore, J., concurring in
denial of rehearing) (“Because the APJs were constitutionally appointed as
of the implementation of the severance, inter partes review decisions going
forward were no longer rendered by unconstitutional panels.”). The Federal
Circuit has also addressed the 5th Amendment due process and takings
issues in Celgene Corp. v. Peter, 931 F.3d 1342, 1362–63 (Fed. Cir. 2019).
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IV. CONCLUSION10
Petitioner has proved by a preponderance of the evidence that
claims 1–6 of the ’239 patent are unpatentable on the grounds of
unpatentability as summarized in the following table:

Claims
35
U.S.C.
§
Reference(s)/
Basis
Claim Shown
Unpatentable
Claim Not
Shown
Unpatentable
1–6 103 Valliani, Vrotsos 1–6
1–6 103 Vrotsos 1–6
1–6 103 Bear, Vrotsos11
Overall
Outcome

1–6

10 Should Patent Owner wish to pursue amendment of the challenged claims
in a reissue or reexamination proceeding subsequent to the issuance of this
decision, we draw Patent Owner’s attention to the April 2019 Notice
Regarding Options for Amendments by Patent Owner Through Reissue or
Reexamination During a Pending AIA Trial Proceeding. See 84 Fed. Reg.
16,654 (Apr. 22, 2019). If Patent Owner chooses to file a reissue application
or a request for reexamination of the challenged patent, we remind Patent
Owner of its continuing obligation to notify the Board of any such related
matters in updated mandatory notices. See 37 C.F.R. § 42.8(a)(3), (b)(2).
11 We do not reach the alleged unpatentability of claims 1–6 as obvious
under U.S.C. § 103 over Bear and Vrotsos, because each of these claims is
already held unpatentable on a different ground.

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FOR PETITIONER:
David M. Tennant
Grace Wang
Bijai Vakil
Hallie Kiernan
WHITE & CASE
dtennant@whitecase.com
grace.wang@whitecase.com
bijal@whitecase.com
hallie.kiernan@whitecase.com

FOR PATENT OWNER:
Jason S. Jackson
Niall A. MacLeod
Jacob Song
KUTAK ROCK LLP
jason.jackson@kutakrock.com
niall.macleod@kutakrock.com
jacob.song@kutakrock.com