Sightsound Technologies, LLC v. Apple Inc. , 809 F.3d 1307 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
SIGHTSOUND TECHNOLOGIES, LLC,
Appellant
v.
APPLE INC.,
Appellee
______________________
2015-1159, 2015-1160
______________________
Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in No.
CBM2013-00020.
______________________
Decided: December 15, 2015
______________________
MATTHEW WOLF, Arnold & Porter LLP, Washington,
DC, argued for appellant. Also represented by JENNIFER
SKLENAR, Los Angeles, CA.
DOUGLAS HALLWARD-DRIEMEIER, Ropes & Gray LLP,
Washington, DC, argued for appellee. Also represented
by JON STEVEN BAUGHMAN, SHARON LEE, MEGAN
FREELAND RAYMOND, PAUL MICHAEL SCHOENHARD,
DARRELL STARK; CHING-LEE FUKUDA, New York, NY;
2 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
JAMES RICHARD BATCHELDER, LAUREN NICOLE ROBINSON,
East Palo Alto, CA.
BENJAMIN T. HICKMAN, United States Patent and
Trademark Office, Office of the Solicitor, Alexandria, VA,
argued for intervenor Michelle K. Lee. Also represented
by NATHAN K. KELLEY, SCOTT C. WEIDENFELLER.
______________________
Before LOURIE, DYK, and HUGHES, Circuit Judges.
DYK, Circuit Judge.
SightSound Technologies, LLC (“SightSound”) is the
owner of U.S. Patent No. 5,191,573 (the “’573 patent”) and
5,966,440 (the “’440 patent”). Apple Inc. (“Apple”) peti-
tioned the United States Patent and Trademark Office
(“PTO”) for covered business method (“CBM”) review of
claims 1, 2, 4, and 5 of the ’573 patent and claims 1, 64,
and 95 of the ’440 patent. The PTO granted Apple’s
petition and instituted CBM review. The Patent Trial
and Appeal Board (“the Board”) issued a final decision
finding all the challenged claims would have been obvi-
ous. SightSound appealed.
We hold that we lack jurisdiction to review the PTO’s
decision to consider issues not explicitly raised in the
petitions. We do, however, have jurisdiction to review
whether the patents qualify as CBM patents. We affirm
the Board’s determination that the ’573 and ’440 patents
qualify as CBM patents. Finally, we affirm the Board’s
final decision with respect to claim construction and
obviousness.
BACKGROUND
The ’573 and ’440 patents owned by SightSound
disclose methods for the electronic sale and distribution of
digital audio and video signals. Each of the relevant
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 3
claims requires (1) forming a connection, through tele-
communications lines, between a first party’s first
memory and a second party’s second memory; (2) selling
the desired digital video or digital audio signals to the
second party for a fee through telecommunications lines;
(3) transmitting the desired signal from the first memory
to the second memory via telecommunications lines; and
(4) storing the transmitted signal in the second memory.
E.g., ’440 patent col. 8 ll. 44–64; ’573 patent col. 6 ll. 4–24.
Dependent claim 2 of the ’573 patent adds the step of
searching for and selecting a signal from the first memory
after the signal has been transferred. ’573 patent col. 6
ll. 25–29. Claims 4 and 5 of the ’573 patent are the same
as claims 1 and 2 respectively, but substitute digital video
for audio signals. Id. col. 6 ll. 36–59. Claims 64 and 95 of
the ’440 patent recite additional limitations, including
storing digital signals “in the second party hard disk.”
U.S. Patent No. 5,966,440 C1 (re-examination certificate)
(“’440 C1 patent”) col. 8 ll. 14–44, col. 13 ll. 14–51.
On May 6, 2013, Apple filed petitions with the Board
seeking CBM review of the ’573 and ’440 patents under
AIA § 18. See Leahy-Smith America Invents Act (“AIA”),
Pub. L. 112-29, 125 Stat. 284, 329–31 (2011). 1 Apple
argued that claims 1, 2, 4, and 5 of the ’573 patent and
claims 1, 64, and 95 of the ’440 patent were invalid as
anticipated under 35 U.S.C. § 102. The Board instituted
CBM review. In instituting review, the Board applied the
definition of CBM in the statute and regulations. See AIA
§ 18(d); 37 C.F.R. § 42.301. The Board first determined
1 In general, the AIA is codified in various parts of
Title 35 of the U.S. Code. Section 18 of the AIA, however,
is not codified; it is found in pages 329–31 of 125 Stat.
References to § 18 in this opinion are to the statutes at
large.
4 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
that the ’573 and ’440 patents are CBM patents because
they recite the electronic movement of money between
financially distinct entities, an activity that is “financial
in nature,” and do not include novel and non-obvious
technological features that would otherwise excluded
them from CBM treatment. J.A. 556–59, 987–94. The
Board then determined that there was a reasonable
likelihood that the asserted claims were anticipated or
rendered obvious by a series of disclosures relating to a
computer system developed by CompuSonics in the 1980s.
Although Apple’s petitions included the grounds on which
the PTO instituted review with respect to anticipation
and alleged facts to support obviousness, the petitions did
not specifically allege obviousness over CompuSonics.
The Board nonetheless held that it was appropriate to
initiate review on obviousness grounds: “[I]n addition to
Petitioner’s asserted ground of anticipation . . . we exer-
cise our discretion to institute a covered business method
review . . . on the ground of unpatentability over the
CompuSonics publications under 35 U.S.C. § 103(a).” J.A.
571.
During the CBM proceedings SightSound argued that
it had been deprived of a fair opportunity to respond to
the obviousness grounds on which the CBM review had
been instituted. The Board granted SightSound addition-
al time for argument and authorized it to file sur-replies
and new declaration testimony on the issue of obvious-
ness, “to ensure that Patent Owner has a full and fair
opportunity to be heard on the issue of obviousness.” J.A.
709, 1003.
In its final decision on the merits, the Board rejected
SightSound’s contention that the term “second memory” is
limited to non-removable media, relying on the claim
language, specification, and prosecution history to con-
clude that under the broadest reasonable interpretation
standard the term encompasses any second storage space
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 5
in a computer medium that is capable of retaining data or
instructions and is not limited to hard disks. The Board
reaffirmed the initiation decision that the Board did not
exceed its jurisdiction when it initiated CBM review,
explaining that, while Apple’s petitions did not assert
obviousness explicitly, they nevertheless “supported
[such] a ground” based on their detailed explanation of
the various CompuSonics references. J.A. 25–27, 92–94.
The Board held claims 1, 2, 4, and 5 of the ’573 patent and
claim 1 of the ’440 patent invalid as obvious. It found
that “Apple explains in detail in its Petition[s] how the
CompuSonics publications teach every limitation” of the
claims, J.A. 31, 98, and that the reason to combine was
manifested by the references themselves. The Board also
held claims 64 and 95 of the ’440 patent invalid as obvi-
ous, finding that the CompuSonics publications would
have suggested to an ordinary artisan the desirability of
using a hard disk in connection with the other claimed
aspects of the invention. SightSound appealed. The PTO
intervened. We have jurisdiction to review the Board’s
final decision under 28 U.S.C. § 1295(a)(4)(A) and 35
U.S.C. § 329.
DISCUSSION
I
We first address the question of jurisdiction. CBM
patents are governed by the special provisions of AIA
§ 18. For purposes of conducting proceedings and appel-
late review, section 18 is considered part of the broader
chapter 32 provisions of title 35 of the U.S. Code, govern-
ing post-grant review (“PGR”). 2 Decisions relating to the
2 “The transitional proceeding implemented pursu-
ant to this subsection shall be regarded as, and shall
employ the standards and procedures of, a post-grant
6 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
institution of CBM review are not reviewable. “The
determination by the Director whether to institute a post-
grant review under this section shall be final and nonap-
pealable.” 35 U.S.C. § 324(e). As noted, this provision is
applicable to both PGR and CBM proceedings; the Board
acts for the Director in deciding whether to institute a
review. See AIA § 18(a)(1); 37 C.F.R. § 42.4. After CBM
review is instituted, CBM review proceeds before the
Board, and concludes with the Board’s “final written
decision” pursuant to 35 U.S.C. § 328(a). Section 329
provides for appeal of that decision to this court. Thus the
decision whether to initiate is not appealable, but the
final decision is subject to review. See In re Cuozzo Speed
Techs., LLC, 793 F.3d 1268, 1273 (Fed. Cir. 2015).
A
SightSound contends that we should set aside the
final decision because the proceedings were improperly
initiated since Apple did not explicitly raise the issue of
obviousness in its petitions. 3 The Board rejected this
argument, explaining that Apple’s petitions supported
review for obviousness because they explained in detail
how the CompuSonics disclosures “teach every limitation
of the claims . . . and describe similar features and relate
review under chapter 32 of title 35.” AIA § 18(a)(1). See
also Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d
1306, 1315 (Fed. Cir. 2015) (“Versata II”).
3 SightSound relies on 35 U.S.C. § 322(a)(3), which
requires that a petition must recite “in writing and with
particularity, each claim challenged, the grounds on
which the challenge to each claim is based, and the evi-
dence that supports the grounds for the challenge to each
claim,” and 37 C.F.R. § 42.204(b), which requires a peti-
tion to include the “specific statutory grounds . . . on
which the challenge to [each] claim is based.”
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 7
to each other.” J.A. 26. Because the CompuSonics refer-
ences described various advantages of a system that
would enable electronic music processing, “the references
themselves demonstrate that a person of ordinary skill in
the art would have been led to create a system for users to
purchase and download music.” Id. at 40. The PTO and
Apple argue that the statute and our prior decision in In
re Cuozzo Speed Technologies., 793 F.3d at 1268, bars this
Court from reviewing whether the Board properly initiat-
ed review when obviousness was not explicitly raised in
the petitions. We agree.
In Cuozzo we considered § 314(d), applicable to inter
partes review proceedings, which mirrors the bar on
appeal in § 324(e). It provides that “[t]he determination
by the Director whether to institute an inter partes re-
view under this section shall be final and nonappealable.”
35 U.S.C. § 314(d). There, Cuozzo argued that the PTO
improperly instituted inter partes review with respect to
certain claims because it relied on prior art references not
identified by the petitioner in its petitions contrary to the
requirements of 35 U.S.C. § 312(a)(3). Cuozzo, 793 F.3d
at 1272. We rejected Cuozzo’s challenge as barred by the
statute. Id. at 1274. We held that § 314(d) “bar[s] review
of all institution decisions, even after the Board issues a
final decision.” Id. at 1273. We explained that generally
institution decisions are not reviewable, and in particular
a challenge based on a defect in the initiation that could
have been cured by a proper pleading is not reviewable.
Id. at 1274. Only limitations on the Board’s authority to
issue a final decision are subject to review.
In Achates Reference Publishing. Inc. v. Apple Inc.,
803 F.3d 652 (Fed. Cir. 2015), we again considered alleged
defects in the initiation of inter partes review. There,
Achates argued that the Board improperly instituted
inter partes review because the underlying petitions were
time-barred under 35 U.S.C. § 315(b). Once again, we
8 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
rejected the argument as barred by the statute. Achates,
803 F.3d at 658. We explained that just as the pleading
in Cuozzo could have been made “sufficient by the inclu-
sion of the missing prior art reference . . . the [alleged]
timeliness issue here could have been avoided if Apple’s
petition had been filed a year earlier or if a petition
identical to Apple’s were filed by another party.” Id. at
657. Achates’ argument thus challenged nothing more
than the Board’s determination to institute inter partes
review.
The same is true here. SightSound argues that the
Board erred in considering obviousness because Apple
failed to include such argument in its petitions. As in
Cuozzo, the statute does not limit the Board’s authority at
the final decision stage to grounds alleged in the CBM
petitions. The reasoning of Cuozzo and Achates applies
not only to § 314(d), involved in Cuozzo and Achates, but
also to § 324(e), the identical provision applicable to CBM
review. SightSound argues that the “under this section”
language in § 324(e) only bars review of challenges to
institution decisions based on the grounds specified in
§ 324(a) and (b). We reject this argument. Section 324(e)
bars review of any institution decision. Cuozzo and
Achates control, and the challenge is therefore barred by
§ 324. 4 We also see no basis for mandamus relief on the
Board’s initiation decision, because “the situation here is
far from satisfying the clear-and-indisputable require-
ment for mandamus.” Cuozzo, 793 F.3d at 1275.
4 We see no merit in SightSound’s contention that
the Board’s approach deprived it of due process, particu-
larly in light of the Board’s care in giving SightSound
multiple opportunities to comment on the obviousness
issue beyond what was required.
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 9
B
SightSound also contends that the ’573 and ’440
patents are not CBM patents, and therefore the Board
lacked authorization to review them. The PTO and Apple
again argue that we are barred from reviewing this
question. Here we disagree.
We previously addressed our jurisdiction to review the
Board’s determination of whether patents are CBM
patents in Versata II. There we held that the question of
whether a patent falls within the scope of the Board’s
authority under AIA § 18 as a CBM patent is a limitation
on the Board’s authority to issue a final decision and may
be reviewed on appeal from a final written decision of the
Board. Id. at 1319. While Versata II is limited to our
review of Board determinations of whether a patent falls
within its § 18 authority as a CBM patent, that is precise-
ly the issue here. Accordingly, Versata II controls, and
SightSound’s contention that the Board lacked jurisdic-
tion to review the ’573 and ’440 patents because they are
not CBM patents is not barred by § 324(e).
II
CBM review is available only for patents that fall un-
der the definition of a “covered business method patent.”
The statute defines that term:
For the purposes of this section, the term “covered
business method patent” means a patent that
claims a method or corresponding apparatus for
performing data processing or other operations
used in the practice, administration, or manage-
ment of a financial product or service, except that
the term does not include patents for technological
inventions.
AIA § 18(d). There are three sources of PTO rulemaking
relevant to CBM review. First, 35 U.S.C. § 326, which is
10 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
applicable to CBM review through the PGR provisions,
grants the PTO authority to “prescribe regulations . . .
setting forth the standards for the showing of sufficient
grounds to institute a review.” 35 U.S.C. § 326(a)(2).
Second, AIA § 18 grants the PTO general authority to
“issue regulations establishing and implementing a
transitional post-grant review proceeding for the review of
the validity of covered business method patents.” AIA
§ 18(a)(1). Third, AIA § 18 grants the PTO specific au-
thority with respect to the “technological inventions”
element of the covered business method patent definition:
To assist in implementing the transitional pro-
ceeding authorized by this subsection, the Direc-
tor shall issue regulations for determining
whether a patent is for a technological invention.
AIA § 18(d)(2).
A
We need not decide whether Chevron deference ap-
plies because the only legal questions regarding applica-
tion of AIA § 18 to the patents-at-issue were decided by
Versata II. SightSound primarily contends that its pa-
tents are not CBM patents because to “relate to a finan-
cial product or service the invention as a whole must be
directed to the management of money, banking, or in-
vestment or credit.” Appellant’s Br. 30. Versata II fore-
closed this interpretation: “as a matter of statutory
construction, the definition of ‘covered business method
patent’ is not limited to products and services of only the
financial industry, or to patents owned by or directly
affecting activities of financial institutions.” 793 F.3d at
1325. We explained that the interpretation proposed by
SightSound would “require reading limitations into the
statute that are not there.” Id. Here, the Board conclud-
ed that a “financial activity” not directed to money man-
agement or banking can constitute a “financial product or
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 11
service” within the meaning of the statute. J.A. 988;
accord J.A. 556. Versata II directly supports this conclu-
sion.
SightSound also contends that its patents are not
CBM patents because they claim technological inventions,
since they “recite a computer to transmit, and a second
memory to store, digital signals in a way that prior art
hardware units did not.” Appellant’s Br. 35 n.9. Versata
II again foreclosed this interpretation: “the presence of a
general purpose computer to facilitate operations through
uninventive steps” in a patent does not render it a techno-
logical invention within the meaning of the statute. Id. at
1327. Claiming a computer without “specific, unconven-
tional software, computer equipment, tools or processing
capabilities” is insufficient. Id. Here, the Board conclud-
ed that a combination of known technologies does not
amount to a “technological invention” within the meaning
of the statute. J.A. 559–60, 993–94. Versata II also
directly supports this conclusion.
B
We next address the Board’s determinations that the
particular patents at issue are CBM patents. In this
respect, we review the Board’s reasoning under the arbi-
trary and capricious standard and its factual determina-
tions under the substantial evidence standard. “A
reviewing court reviews an agency’s reasoning to deter-
mine whether it is ‘arbitrary’ or ‘capricious,’ or, if bound
up with a record-based factual conclusion, to determine
whether it is supported by ‘substantial evidence.’” Dick-
inson v. Zurko, 527 U.S. 150, 164 (1999). See also In re
Gartside, 203 F.3d 1305, 1313–14 (Fed. Cir. 2000); Harry
T. Edwards & Linda A. Elliot, Federal Standards of
Review: Review of District Court Decisions and Agency
Actions 167–169 (2007). In concluding that the ’573 and
’440 patents claim a method used in a financial product or
12 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
service, the Board explained that claim 1 of both the ’573
and ’440 patents is “directed to activities that are finan-
cial in nature, namely the electronic sale of digital audio.”
J.A. 554, 988. The Board looked to the specifications,
which repeatedly refer to electronic “sale,” “purchase,”
and “money,” e.g., ’573 patent col. 1 ll. 9–14; col. 2 ll. 26–
30; col. 2 ll. 51–58, and claims 3 and 4 of the ’573 and ’440
patents respectively, which recite “providing a credit card
number of the second party . . . so the second party is
charged money.” J.A. 555, 988. The Board concluded that
“the electronic sale of something, including charging a fee
to a party’s account, is a financial activity, and allowing
such a sale amounts to providing a financial service.” J.A.
988; accord J.A. 556. The Board’s reasoning is not arbi-
trary or capricious and its findings are supported by
substantial evidence.
The Board next explained that the ’573 and ’440 pa-
tents do not claim a “technological invention.” J.A. 560,
994. It found that, while the claims of both the ’573 and
’440 patents utilize technical components such as a “first
memory,” “second memory,” “telecommunications line,”
“transmitter,” and “receiver,” those components were all
“generic hardware devices known in the prior art.” J.A.
559, 992. The Board also found that the combination of
steps recited in the ’573 and ’440 patents did not amount
to a technological feature that is novel and non-obvious
over the prior art, because the steps would have been
obvious in light of the CompuSonics references. The
Board explained that “while we agree with Patent Owner
that the steps in claim 1 must be implemented using the
recited hardware . . . that does not mean necessarily that
the patent is for a technological invention because the
components themselves were known in the art.” J.A. 560,
993. Finding that the claims merely recited “known
technologies to perform a method” and the “combination”
of those technologies would have been obvious, the Board
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 13
concluded that the ’573 and ’440 patents did not claim a
“technological invention.” J.A. 559–60, 993–94. The
Board’s reasoning is not arbitrary or capricious and
substantial evidence supports its findings here.
III
The next question is whether the Board here properly
construed the relevant claims. The Board applied the
broadest reasonable interpretation standard, the stand-
ard adopted by the PTO for AIA post-grant proceedings
and approved by this court. See Cuozzo, 793 F.3d at 1278.
We also apply the Supreme Court’s decision in Teva
Pharmaceuticals U.S.A., Inc. v. Sandoz, Inc., 135 S. Ct.
831, 841 (2015). We review intrinsic evidence and the
ultimate construction of the claim de novo. See id. We
review underlying factual determinations concerning
extrinsic evidence for substantial evidence. Id.
Claims 1 and 4 of the ’573 patent and claims 1, 64,
and 95 of the ’440 patent include the term “second
memory,” as in “[a] method for transmitting a desired
digital audio signal stored on a first memory of a first
party to a second memory of a second party.” ’573 patent
col. 6 ll. 4–24 (emphasis added). See also id. col. 6 ll. 37–
56; ’440 C1 patent col. 1 ll. 33–64, col. 8 ll. 14–44, col. 13
ll. 14–51. The two patents have a common specification
and trace their origin to the same parent application.
Where multiple patents “derive from the same parent
application and share many common terms, we must
interpret the claims consistently across all asserted
patents.” NTP, Inc. v. Research In Motion, Ltd., 418 F.3d
1282, 1293 (Fed. Cir. 2005). Here the claim term “second
memory” should be interpreted the same in the ’573 and
’440 patents. The Board construed “second memory” in
both patents as meaning “a second storage space in a
computer system or medium that is capable of retaining
data or instructions.” J.A. 15, 82. The specification notes
14 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
some disadvantages of the “three basic mediums (hard-
ware units) of music” then available: “records, tapes, and
compact discs.” E.g., ’573 patent col. 1 ll. 17–20; ’440
patent col. 1 ll. 24–26. Addressing the language in the
specification, the Board appeared to conclude that “second
memory” would not exclude those three media based on
the specification, because the Board required a “clear
disclaimer” in the specification to overcome the ordinary
meaning and to exclude records, tapes, and CDs. J.A. 13,
82.
The Board’s analysis in this respect was incorrect.
Claims “must be read in view of the specification, of which
they are a part.” Phillips v. AWH Corp., 415 F.3d 1303,
1315 (Fed. Cir. 2004) (en banc). We have explained that
the specification is “the single best guide to the meaning
of a disputed term and that the specification acts as a
dictionary when it expressly defines terms used in the
claims or when it defines terms by implication.” Id. at
1321 (citation and internal quotation marks omitted)
(emphasis added). Thus “a claim term may be clearly
redefined without an explicit statement of redefinition.”
Id. (quoting Bell Atl. Network Servs., 262 F.3d 1258, 1268
(Fed. Cir. 2011)). We followed this approach in In re
Abbott Diabetes Care Inc., 696 F.3d 1142 (Fed. Cir. 2012),
where we held that the claim term “electrochemical
sensor” excluded cables and wires based on critical lan-
guage in the claims and specification, despite their having
been no explicit disclaimer of cables or wires. See id. at
1149–50. See also Edwards Lifesciences LLC v. Cook Inc.,
582 F.3d 1322, 1329 (Fed. Cir. 2009). The disadvantages
identified by the specification of records, tapes, and CDs
amount to implied disclaimer of those three media. See,
e.g., ’573 patent col. 1 ll. 17–20; ’440 patent col. 1 ll. 24–
26. Thus we disagree with the Board’s interpretation
insofar as it included records, tapes, and CDs in its con-
struction of “second memory.”
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 15
Nonetheless, the Board did not err in rejecting
SightSound’s contention that floppy disks—a medium
referenced in the CompuSonics prior art—should also be
excluded. SightSound contends that the correct construc-
tion should exclude “all removable memory sharing the
attributes of the prior art tapes and CDs distinguished in
the specification and throughout prosecution,” i.e., that it
should exclude floppy disks. Appellant’s Br. 55 (emphasis
added). SightSound argues that the specification and
prosecution histories make clear that a removable “second
memory” would not fulfill the purpose of the invention to
overcome the disadvantages of records, tapes, and CDs,
and therefore the patents expressly disclaimed all remov-
able memory from the scope of “second memory,” limiting
it to a non-removable hard disk.
The Board rejected this argument. The Board found,
and we agree, that the specification’s description of the
disadvantages of records, tapes, and CDs does not “indi-
cate that the identified disadvantages extend to all re-
movable media or that the disadvantages occur
specifically because the devices are removable. . . . To the
contrary, some of the identified disadvantages, like lim-
ited capacity and playback capability, have nothing to do
with whether the device can be removed.” J.A. 12, 81.
The specification suggests that the patent’s objective was
not to overcome the alleged disadvantages associated with
the removable nature of the three hardware units, as
SightSound suggests, but rather to overcome the disad-
vantages associated with distributing the three types of
units: “hardware units need to be physically [transferred]
from the manufacturing facility to the wholesale ware-
house to [the] retail warehouse to the retail outlet, result-
ing in [lengthy], lag time between music creation and
music marketing.” ’573 patent col. 1 ll. 39–43; ’440 patent
col. 1 ll. 45–49. These disadvantages would not apply to
storing digitally purchased music on a floppy disk, for
16 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
example. See ’573 patent col. 1 ll. 39–49; ’440 patent col. 1
ll. 45–54. Accordingly, SightSound’s reading of “second-
ary memory” to exclude all removable media is not sup-
ported by the specification.
The Board also reviewed the prosecution history and
found certain statements contradicting SightSound’s
proposed limitation, including one made by the named
inventor, Arthur R. Hair, that “[a]ny suitable recording
apparatus controlled and in possession of the second party
can be used to record the incoming digital signals.” J.A.
14. What is more, the original claims expressly recited a
“hard disk,” but that language was removed in favor of
the broader term “second memory.” J.A. 15. The Board
concluded that this “deliberate choice” to use the broader
term “second memory” instead of the narrower “hard disk”
strongly supports that the two are not coextensive. Id.;
see Arlington Indus., Inc. v. Bridgeport Fittings, Inc., 632
F.3d 1246, 1255 (Fed. Cir. 2011).
The doctrine of claim differentiation additionally sup-
ports the Board’s construction that “second memory” is
not limited to a non-removable hard disk. Claim 1 of the
’440 patent recites a method for transferring desired
digital video or audio signals by “forming a connection
through telecommunications lines between a first memory
of a first party and a second memory of a second party
control unit of a second party.” ’440 C1 patent col. 1
ll. 34–37. Claim 64 of the ’440 patent contains nearly
identical language, but adds the following limitation:
“forming a connection through telecommunications lines
between a first memory of a first party and a second
memory of a second party control unit of a second party,
the second memory including a second party hard disk.”
’440 C1 patent col. 8 ll. 16–18 (emphasis added). This
distinction further underscores that “second memory”
must be different from a non-removable “hard drive,”
because otherwise the additional language of claim 64
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 17
would be redundant. J.A. 79; see Arlington Indus., Inc.,
632 F.3d at 1254–55. The intrinsic and extrinsic evidence
both support construing “second memory” as not limited
to a non-removable hard disk. We see no error in the
Board’s ultimate conclusion that the term “second
memory” includes floppy disks.
IV
The final question is whether the Board properly
determined that the claims would have been obvious. We
review the Board’s factual findings for substantial evi-
dence and its legal conclusions de novo. Cuozzo, 793 F.3d
at 1280 (citing In re Baxter Int’l, Inc., 678 F.3d 1357, 1361
(Fed. Cir. 2012)). The ultimate determination of obvious-
ness under § 103 is a question of law based on underlying
factual findings. Id. (citing Graham v. John Deere Co.,
383 U.S. 1, 17–18 (1966)). What a reference teaches and
the differences between the claimed invention and prior
art are questions of fact which we review for substantial
evidence. Id.
The Board found that “Apple explains in detail in its
Petition[s] how the CompuSonics publications teach every
limitation” of the primary claims. J.A. 31, 54, 98.
SightSound conceded that the CompuSonics publications
“describe prior art elements working according to their
established functions in a predictable manner,” but ar-
gued that a skilled artisan would have had no reason to
combine those elements. J.A. 38, 105. The Board rejected
this argument, finding that the references “expressly
contemplate that it would be commercially desirable to
have a system that allowed users to buy” and store music
and video electronically. J.A. 39, 55, 106. Finding that
the reason to combine was manifested by the references
themselves, see Brown & Williamson Tobacco Corp. v.
Philip Morris Inc., 229 F.3d 1120, 1125 (Fed. Cir. 2000),
the Board thus concluded that a person of ordinary skill
18 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
in the art would have had reason to combine the teach-
ings of the CompuSonics references.
As for claims 1, 2, 4, and 5 of the ’573 patent and
claim 1 of the ’440 patent, SightSound argues that the
Board erred in rejecting objective indicia of non-
obviousness. On appeal, SightSound contends only that
the Board lacked substantial evidence to conclude that
there was no nexus between the success of the iTunes
Music Store (“iTMS”) and the claimed invention. To
establish a proper nexus between a claimed invention and
the commercial success of a product, a patent owner must
offer “proof that the sales were a direct result of the
unique characteristics of the claimed invention—as op-
posed to other economic and commercial factors unrelated
to the quality of the patented subject matter.” In re
Huang, 100 F.3d 135, 140 (Fed. Cir. 1996). If a product
both “embodies the claimed features” and is “coextensive”
with the claims at issue, “a nexus is presumed.” Brown &
Williamson, 229 F.3d at 1130. In other words, a nexus
exists if the commercial success of a product is limited to
the features of the claimed invention. But “if the com-
mercial success is due to an unclaimed feature of the
device” or “if the feature that creates the commercial
success was known in the prior art, the success is not
pertinent.” Ormco Corp., 463 F.3d 1299, 1312 (Fed. Cir.
2006). Here the Board found that “iTMS embodies nu-
merous inventions other than the general purchasing and
downloading of music relied upon by SightSound.” J.A.
46, 113. The Board further found that SightSound failed
to offer proof that the commercial success of iTMS is the
direct result of a unique characteristic of the claimed
invention, noting that there was “persuasive evidence
that the commercial success of the iTMS is due to features
other than those of the claimed methods.” Id. at 47, 114.
Specifically, the Board relied on the testimony of
Lawrence Kenswil, former employee of the Universal
SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC. 19
Music Group and board member of the Recording Indus-
try Association of America with over 25 years of experi-
ence in the music industry, who explained how content
selection and the user interface were predominantely
responsible for iTMS’ commercial success. SightSound
objects to Mr. Kenswil’s reliance on certain other features,
such as Genius and five-star and song-by-song popularity
ratings, which were not available until 2008—long after
the commercial success of iTMS had been established.
Even putting these features to one side, the Board’s
findings are supported by substantial evidence because
the two primary features posited as responsible for the
commercial success of iTMS—content selection and user
interface—were present from the beginning. The Board
found that iTMS was successful largely because of its
ability to acquire licensed content from the major record
labels. SightSound admits that its inability to do the
same was in part responsible for its failed business model.
We see no error in the Board’s conclusion that claims 1, 2,
4, and 5 of the ’573 patent and claim 1 of the ’440 patent
would have been obvious.
SightSound also argues that the Board erred in find-
ing that claims 64 and 95 of the ’440 patent would have
been obvious. Claims 64 and 95 of the ’440 patent recite
similar limitations to claim 1, but expressly require that
the digital video or audio signals be stored in a “second
party hard disk.” SightSound contends that it would not
have been obvious to employ a hard disk to store pur-
chased and received digital signals. SightSound acknowl-
edges that CompuSonics “professional” devices taught
using a hard disk for a similar purpose, but argues that
because CompuSonics’ “consumer” devices used only
floppy disks, a skilled artisan would not have sought a
hard disk for the patented purposes. Appellant’s Br. 66–
67.
20 SIGHTSOUND TECHNOLOGIES, LLC v. APPLE INC.
We have explained that that the “mere disclosure of
more than one alternative” does not amount to teaching
away from one of the alternatives where the reference
does not “criticize, discredit, or otherwise discourage the
solution claimed.” In re Fulton, 391 F.3d 1195, 1201 (Fed.
Cir. 2004). The Board here found that the publications
“do not criticize the use of a hard disk for storing or
receiving signals,” nor do they indicate that such a use
“would have been undesirable.” J.A. 125. To the contra-
ry, the Board found that at least one publication disclosed
a “benefit to using a hard disk rather than other types of
storage,” namely, greater storage capacity. Id. Addition-
ally, the Board found that it would have been obvious to
utilize a hard disk to store purchased and received digital
signals because doing so would only require a hard disk to
function for its known purpose of storing digital data: “we
do not see sufficient reason why using a hard disk rather
than a floppy disk would have achieved an unexpected
result or would have been uniquely challenging or other-
wise beyond the level of an ordinarily skilled artisan.”
J.A. 124. The Board’s findings are supported by substan-
tial evidence. The same secondary considerations of non-
obviousness apply to claims 64 and 95 of the ’440 patent
as discussed above, and the Board did not err in conclud-
ing that claims 64 and 95 of the ’440 patent would have
been obvious.
For the foregoing reasons, we affirm the Board’s
decision.
AFFIRMED
COSTS
Costs to appellee.