Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-16-01059/USCOURTS-ca13-16-01059-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 

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NOTE: This disposition is nonprecedential.

United States Court of Appeals 

for the Federal Circuit ______________________ 

SMARTFLASH LLC, SMARTFLASH 

TECHNOLOGIES LIMITED,

Plaintiffs-Appellees

v.

APPLE INC.,

Defendant-Appellant

______________________ 

2016-1059

______________________ 

Appeal from the United States District Court for the 

Eastern District of Texas in No. 6:13-cv-00447-JRG, 

Judge J. Rodney Gilstrap.

______________________ 

Decided: March 1, 2017

______________________ 

AARON MARTIN PANNER, Kellogg, Huber, Hansen, 

Todd, Evans & Figel, PLLC, Washington, DC, argued for 

plaintiffs-appellees. Also represented by NICHOLAS O.

HUNTER; JOHN AUSTIN CURRY, JASON DODD CASSADY,

BRADLEY WAYNE CALDWELL, JOHN FRANKLIN SUMMERS,

HAMAD M. HAMAD, Caldwell Cassady & Curry, Dallas, TX.

MARK ANDREW PERRY, Gibson, Dunn & Crutcher LLP, 

Washington, DC, argued for defendant-appellant. Also 

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2 SMARTFLASH LLC v. APPLE INC. 

represented by BRIAN BUROKER; HERVEY MARK LYON, Palo 

Alto, CA; BLAINE H. EVANSON, JENNIFER RHO, Los Angeles, CA; BRETT ROSENTHAL, Dallas, TX; JAMES RICHARD 

BATCHELDER, Ropes & Gray LLP, East Palo Alto, CA; 

DOUGLAS HALLWARD-DRIEMEIER, Washington, DC; KEVIN 

JOHN POST, New York, NY. 

______________________ 

Before PROST, Chief Judge, NEWMAN and LOURIE, Circuit 

Judges.

PROST, Chief Judge. 

Apple Inc. (“Apple”) appeals from the district court’s 

denial of Apple’s motion for judgment as a matter of law 

(“JMOL”) seeking to invalidate three Smartflash LLC 

(“Smartflash”) patents for being patent-ineligible under 

35 U.S.C. § 101. Apple further appeals a jury verdict of

patent validity and infringement. Because we find that 

the asserted claims recite patent-ineligible subject matter 

under § 101, we reverse. 

I 

Smartflash asserted the following claims from three 

patents in district court: claim 13 of U.S. Patent No. 

7,334,720 (“’720 patent”); claim 32 of U.S. Patent No. 

8,118,221 (“’221 patent”); and claims 26 and 32 of U.S. 

Patent No. 8,336,772 (“’772 patent”) (collectively, “the 

asserted claims”).1 The three patents-in-suit, entitled 

“Data Storage and Access Systems,” generally “relate[] to 

a portable data carrier for storing and paying for data and 

1 The ’772 patent is a continuation of the ’221 patent which is a continuation of U.S. Patent No. 7,942,317, 

which is a continuation of the ’720 patent. All four patents share the same specification. For simplicity, all 

citations herein are to the ’720 patent unless stated 

otherwise. 

 

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SMARTFLASH LLC v. APPLE INC. 3

to computer systems for providing access to data to be 

stored.” ’720 patent col. 1 ll. 6–8. 

According to the specification, at the time of the invention, there was a “growing prevalence of so-called data 

pirates” who “obtain[ed] data either by unauthorized or 

legitimate means and then ma[d]e this data available 

essentially world-wide over the internet without authorization.” Id. at col. 1 ll. 15–19. The patents sought to 

address this problem by purportedly inventing systems 

comprising data carriers, or “terminals,” that could receive and validate payments from users and then retrieve 

and provide data, such as audio, video, text, and software

over the Internet. See id. at col. 1 ll. 45–55. Figure 6 of 

the ’720 patent, shown below, illustrates one such system:

 

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In this system, users employ content access terminals 

118, including, for example, personal computers, to request content such as audio or video content and provide 

payment information such as credit card or bank account 

information. The payment information is validated by epayment systems 121 and banks 122. After the payment 

is validated, the requested content is provided to the 

content access terminal 118 by a content access web 

server 124. 

Independent claim 3 of the ’720 patent, from which 

asserted Claim 13 depends, claims “[a] data access terminal for retrieving data from a data supplier and providing 

the retrieved data to a data carrier.” Id. at col. 26 ll. 41–

43. The claimed terminal further comprises interfaces for 

communicating with the data supplier and the data 

carrier, and a “processor coupled to . . . the data carrier.” 

Id. at col. 26 ll. 44–50. The processor implements 

code to read payment data from the data carrier and to forward the payment data to a payment 

validation system;

code to receive payment validation data from 

the payment validation system;

code responsive to the payment validation data 

to retrieve data from the data supplier and to 

write the retrieved data into the data carrier; and

code responsive to the payment validation data 

to receive at least one access rule from the data 

supplier and to write the at least one access rule 

into the data carrier, the at least one access rule 

specifying at least one condition for accessing the 

retrieved data written into the data carrier, the at 

least one condition being dependent upon the 

amount of payment associated with the payment 

data forwarded to the payment validation system.

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Id. at col. 26 ll. 51–67. Asserted dependent claim 13 

further recites “[a] data access terminal according 

to claim 3 integrated with a mobile communication device, 

a personal computer, an audio/video player, and/or a cable 

or satellite television interface device.” Id. at col. 28 ll. 1–

4.

Asserted claim 32 of the ’221 patent is identical to 

claim 3 of the ’720 patent except that claim 32 further 

recites “code to retrieve from the data supplier and output 

to a user-stored data identifier data and associated value 

data and use rule data for a data item available from the 

data supplier.” ’221 patent col. 28 ll. 23–50. 

 Independent claim 25 of the ’772 patent, from which 

asserted claim 26 depends, claims a “handheld multimedia terminal for retrieving and accessing protected multimedia content.” ’772 patent col. 29 ll. 40–41. The

claimed “handheld terminal” comprises wireless and user 

interfaces, memory, display, and a processor. Id. at col.

29 ll. 41–54. The terminal comprises code to 

request and receive “multimedia content 

available for retrieving;” 

request, receive, and present “content information compris[ing] one or more of description data and cost data pertaining to . . . [the] 

multimedia content;” 

receive user selection of available multimedia 

content and respond by “transmit[ting] payment 

data . . . for validation by a payment validation 

system;” 

receive and respond to payment validation data by “writ[ing] said retrieved . . . multimedia content into . . . [the] memory” and “receiv[ing] . . . 

user selection . . . [of] one or more items of retrieved multimedia content;”

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read and evaluate “use status data and use 

rules to determine whether access is permitted 

to . . . one or more items of [the] retrieved multimedia content.” 

Id. at col. 29 l. 55–col. 30 l. 34. Further, the “user interface is operable to enable a user to make a first/second 

user selection . . . for retrieving/accessing” the multimedia 

content “responsive to . . . code to control access permitting access to . . . [the] retrieved multimedia content.” Id. 

at col. 30 ll. 35–47. Dependent claim 26 recites that the 

handheld multimedia terminal of claim 25 further comprises “code to present said . . . selected one or more items 

of retrieved multimedia content to a user via said display 

if access is permitted.” Id. at col. 30 ll. 48–51. 

Asserted claim 32 of the ’772 patent, which depends 

from independent claim 30, claims a “data access terminal” similar to the “handheld multimedia terminal” of 

claim 26 discussed above. Id. at col. 31 ll. 46–48. In 

addition to including the features of the “handheld multimedia terminal,” the “data access terminal” of claim 32 

is also integrated with a “mobile communication device 

and audio/video player” and is able to receive “content 

data items” instead of “multimedia content.” Id. at col. 30 

ll. 65–67, col. 31 ll. 46–48. 

At district court, Apple filed a motion for summary 

judgment with the magistrate judge seeking invalidity of 

all asserted claims under § 101. The magistrate judge 

recommended denying the motion. The district court 

adopted the magistrate judge’s findings and recommendation and found the claims not invalid under § 101. Smartflash LLC v. Apple Inc., 2015 WL 661174 (E.D. Tex. Feb. 

13, 2015). In finding that the claims were directed to 

patent-eligible subject matter, the district court applied 

the Supreme Court’s two-step framework for determining 

patent eligibility. See Alice Corp. v. CLS Bank Int’l, 134 

S. Ct. 2347 (2014) (citing Mayo Collaborative Servs. v. 

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Prometheus Labs., Inc., 132 S. Ct. 1289, 1294, 1296–98 

(2012)). At step one, the district court concluded that the 

claims are directed to the abstract idea of “conditioning 

and controlling access to data based on payment.” Smartflash, 2015 WL 661174, at *8. At step two, however, the 

district court found that the claims recite meaningful 

limitations that transform the abstract idea into a patenteligible invention because the claims “recite specific ways 

of using distinct memories, data types, and use rules that 

amount to significantly more than the underlying abstract 

idea.” Id. The district court concluded that “[a]lthough in 

some claims the language is functional and somewhat 

generic, the claims contain significant limitations on the 

scope of the inventions.” Id.

After trial, Apple moved for JMOL asserting that the 

tried claims were ineligible under § 101. The district 

court denied Apple’s motion and Apple appeals. “[W]e 

apply [the regional circuit’s] law when reviewing . . . 

denials of motions for JMOL or new trial.” i4i Ltd. P’ship 

v. Microsoft Corp., 598 F.3d 831, 841 (Fed. Cir. 2010), 

aff’d, 564 U.S. 91 (2011). The Fifth Circuit reviews denial 

of JMOL de novo. Cambridge Toxicology Grp. v. Exnicios, 

495 F.3d 169, 175 (5th Cir. 2007). Further, the issue of 

patent-eligibility under § 101 is a question of law that we 

review without deference. Rapid Litig. Mgmt. Ltd. v. 

CellzDirect, Inc., 827 F.3d 1042, 1047 (Fed. Cir. 2016). 

We have jurisdiction under 28 U.S.C. § 1295(a)(1).

II

Section 101 of the Patent Act states that “[w]hoever 

invents or discovers any new and useful process, machine, 

manufacture, or composition of matter, or any new and 

useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this 

title.” 35 U.S.C. § 101. In interpreting this statute, the 

Supreme Court has held that the broad language of this 

provision is subject to an implicit exception for “laws of 

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nature, natural phenomena, and abstract ideas,” which 

are not patentable. Alice, 134 S. Ct. at 2355.

To determine whether the exception applies, the Supreme Court has set forth a two-step inquiry. Specifically, courts must determine (1) whether the claim is 

directed to a patent-ineligible concept, i.e., a law of nature, a natural phenomenon, or an abstract idea; and if so, 

(2) whether the elements of the claim, considered “both 

individually and ‘as an ordered combination,’” add enough 

to “‘transform the nature of the claim’ into a patenteligible application.” Id. (quoting Mayo, 132 S. Ct. at

1298, 1297). 

Applying this two-step process to claims challenged 

under the abstract idea exception, we first evaluate “the

focus of the claimed advance over the prior art to determine if the claim’s character as a whole is directed to 

excluded subject matter.” Affinity Labs of Tex., LLC v. 

DIRECTV, LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016)

(internal quotation marks omitted). If the claim is directed to such excluded subject matter, then, at step two 

we “search for an ‘inventive concept’” that “‘transform[s]

the nature of the claim’ into a patent-eligible application.” 

Alice, 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct. at 

1294, 1297). “At step two, more is required than ‘wellunderstood, routine, conventional activity already engaged in by the . . . [relevant] community,’ which fails to 

transform the claim into ‘significantly more than a patent 

upon the’ ineligible concept itself.” Rapid Litig., 827 F.3d 

at 1047 (quoting Mayo, 132 S. Ct. at 1298, 1294). 

On appeal, Apple contends that each of the asserted 

claims is directed to an abstract idea and fails to recite 

any inventive concept sufficient to transform the nature of 

the claims into patent-eligible applications.

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A 

We begin our analysis at step one: whether the claims 

are “directed to” an abstract idea. Alice, 134 S. Ct. at

2355. The district court concluded that the asserted 

claims were directed to the abstract idea of “conditioning 

and controlling access to data based on payment.” Smartflash, 2015 WL 661174, at *8. We agree.

In Alice, the Supreme Court explained that “fundamental economic practice[s]” and other “method[s] of 

organizing human activity” are not patent-eligible because they are abstract ideas. 134 S. Ct. at 2356–57. In 

Bilski v. Kappos, for example, the Supreme Court held 

that the “concept of hedging risk and the application of 

that concept to energy markets” was not patentable 

because it was a “fundamental economic practice long 

prevalent in our system of commerce.” 561 U.S. 593, 611 

(2010). Following this guidance, we have noted that when 

considering claims purportedly directed to “an improvement of computer functionality,” we “ask whether the 

focus of the claims is on the specific asserted improvement 

in computer capabilities . . . or, instead, on a process that 

qualifies as an ‘abstract idea’ for which computers are 

invoked merely as a tool.” Enfish, LLC v. Microsoft Corp., 

822 F.3d 1327, 1335–36 (Fed. Cir. 2016); compare id. at 

1336–37 (finding computer-implemented system for 

improving computer search and retrieval systems using 

self-referential tables patent-eligible), with Ultramercial, 

Inc. v. Hulu, LLC, 772 F.3d 709, 716 (Fed. Cir. 2014) 

(finding computer-implemented system for “using advertising as a currency [on] the Internet” to be ineligible), 

buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1352, 1355 

(Fed. Cir. 2014) (finding computer-implemented system 

for guaranteeing performance of an online transaction to 

be ineligible), and CyberSource Corp. v. Retail Decisions, 

Inc., 654 F.3d 1366, 1370 (Fed. Cir. 2011) (finding computer-implemented system for “verifying the validity of a 

credit card transaction over the Internet” to be ineligible).

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The asserted claims here invoke computers merely as 

tools to execute fundamental economic practices. Claim 

13 of the ’720 patent and claim 32 of the ’221 patent, for 

example, both claim “data access terminal[s] for retrieving data from a data supplier and providing the retrieved 

data to a data carrier.” ’720 patent col. 28 ll. 1–4; ’221 

patent col. 28 ll. 23–25. Claims 26 and 32 of the ’772 

patent similarly claim terminals for controlling access to 

and retrieving multimedia content. ’772 patent col. 30 ll. 

48–52; col. 31 ll. 45–48. The asserted claims all purport to 

retrieve and provide this data subject to “payment validation” and “access/use rule[s]” that specify conditions for 

accessing/using the retrieved data. ’720 patent col. 26 ll. 

59–67; ’221 patent col. 28 ll. 38–46; ’772 patent col. 30 ll. 

19–34, col. 31 ll. 31–34, 41–43. The patents’ specifications

explain that “[t]his invention is generally concerned with 

data storage and access systems. More particularly, it 

relates to portable data carrier[s] for storing and paying 

for data and to computer systems for providing access to 

data to be stored.” ’720 patent col. 1 ll. 6–9. The district 

court correctly concluded that “the asserted claims recite 

methods and systems for controlling access to content 

data, such as various types of multimedia files, and 

receiving and validating payment data.” Smartflash, 

2015 WL 661174, at *8. As such, the asserted claims are 

directed to the abstract idea of conditioning and controlling access to data based on payment. 

B 

Having determined that the asserted claims are directed to an abstract idea, we next address whether the 

claims recite any “inventive concept” sufficient to “‘transform the nature of the claim’ into a patent-eligible application.” Alice, 134 S. Ct. at 2355. The district court found 

that the claims are patent-eligible because they purportedly recite “specific ways of managing access to digital 

content data based on payment validation through storage and retrieval of use status data and use rules in 

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distinct memory types2 and evaluating the use data 

according to the use rules.” Smartflash, 2015 WL 661174, 

at *9. Smartflash argues that the claims comprise inventive concepts because they recite “storing payment 

data on the data carrier,” “transmitting payment validation data to the data access terminal and having the 

terminal retrieve the digital content from the data supplier in response,” and “writing on the data carrier ‘access 

rules’ that are dependent on the amount of payment.” 

Appellee’s Br. 29–30 (emphasis removed). 

The Supreme Court and this court, however, have 

previously held that such routine computer activities are 

insufficient for conferring patent eligibility. See, e.g., 

Alice, 134 S. Ct. at 2359 (“[U]se of a computer to obtain 

data, adjust account balances, and issue automated 

instructions; all of these computer functions are ‘wellunderstood, routine, conventional activit[ies]’ previously 

known to the industry.”) (quoting Mayo, 132 S. Ct. at 

1294); Content Extraction & Transmission LLC v. Wells 

Fargo Bank, Nat. Ass’n, 776 F.3d 1343, 1347 (Fed. Cir. 

2014) (“The concept of data collection, recognition, and 

storage is undisputedly well-known. Indeed, humans 

have always performed these functions.”); Accenture

Global Servs., GmbH v. Guidewire Software, Inc., 728 

F.3d 1336, 1339, 1346 (Fed. Cir. 2013) (finding claims 

reciting “applying . . . information related to the insurance 

transaction to rules to determine a task to be completed” 

2 The district court found that the claims’ recitation 

of “distinct memory types,” specifically “parameter 

memory” and “content memory” contributed to the inventive concept of the asserted claims. Smartflash, 2015 

WL 661174, at *8–*9. Smartflash is no longer asserting 

the claims that recite these distinct memory type limitations. “Distinct memory types” therefore cannot support 

the eligibility of the asserted claims.

 

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and “allowing an authorized user to edit and perform the 

determined task” to be patent ineligible). As such, merely 

storing, transmitting, retrieving, and writing data to 

implement an abstract idea on a computer does not 

“‘transform the nature of the claim’ into a patent-eligible 

application.” Alice, 134 S. Ct. at 2355. 

Smartflash further argues that the asserted claims 

are akin to the claims we found patent-eligible in DDR 

Holdings, LLC v. Hotels.com, L.P. 773 F.3d 1245 (Fed. 

Cir. 2014). In DDR Holdings, we evaluated the eligibility 

of claims “address[ing] the problem of retaining website 

visitors that, if adhering to the routine, conventional 

functioning of Internet hyperlink protocol, would be 

instantly transported away from a host’s website after 

‘clicking’ on an advertisement and activating a hyperlink.” 

Id. at 1257. There, we found that the claims were patenteligible because they transformed the manner in which a 

hyperlink typically functions to resolve a problem that 

had no “pre-Internet analog.” Id. at 1258. “[W]e caution[ed], however, that not all claims purporting to address Internet-centric challenges are eligible for patent.” 

Id. For example, in DDR Holdings we distinguished the 

patent-eligible claims at issue from claims we found 

patent-ineligible in Ultramercial. See id. at 1258–59 

(citing Ultramercial, 772 F.3d at 715–16). As we noted 

there, the Ultramercial claims were “directed to a specific 

method of advertising and content distribution that was 

previously unknown and never employed on the Internet 

before.” Id. at 1258 (quoting Ultramercial, 772 F.3d at 

715–16). Nevertheless, those claims were patentineligible because they “merely recite[d] the abstract idea 

of ‘offering media content in exchange for viewing an 

advertisement,’ along with ‘routine additional steps such 

as updating an activity log, requiring a request from the 

consumer to view the ad, restrictions on public access, and 

use of the Internet.’” Id.

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Smartflash’s asserted claims are analogous to claims 

found ineligible in Ultramercial and distinct from claims 

found eligible in DDR Holdings. The ineligible claims in 

Ultramercial recited “providing [a] media product for sale 

at an Internet website;” “restricting general public access 

to said media product;” “receiving from the consumer a 

request to view [a] sponsor message;” and “if the sponsor 

message is an interactive message, presenting at least one 

query to the consumer and allowing said consumer access 

to said media product after receiving a response to said at 

least one query.” 772 F.3d at 712. Similarly, Smartflash’s asserted claims recite reading, receiving, and 

responding to payment validation data and, based upon 

the amount of payment, and access rules, allowing access 

to multimedia content. This is precisely the type of 

Internet activity that we found ineligible in Ultramercial. 

Smartflash also argues that its claims are patenteligible because the claim elements, when considered as 

an ordered combination, recite “specific hardware components—including a communications interface, an interface for communicating with the data carrier, and a 

program store, all coupled to a processor” that “reflect 

specific technical choices that provide distinct advantages 

over alternatives.” Appellee’s Br. 28–29. But “provid[ing] 

a distinct advantage over alternatives” is not the test for 

eligibility. Instead, the test is whether the claims recite 

an “inventive concept sufficient to ‘transform’ the nature 

of the claim” into an eligible application. Alice, 134 S. Ct. 

at 2355 (quoting Mayo, 132 S. Ct. at 1298, 1297). In Alice, 

the Supreme Court considered an argument similar to 

Smartflash’s and found that “what petitioner characterizes as specific hardware—a ‘data processing system’ with a 

‘communications controller’ and ‘data storage unit’”—did 

not confer eligibility because “[n]early every computer will 

include a ‘communications controller’ and ‘data storage 

unit’ capable of performing the basic calculation, storage, 

and transmission functions required by the . . . claims.” 

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134 S. Ct. at 2360. Similarly, we find here that “interfaces,” “program stores,” and “processors” are all generic 

computer components and do not, taken individually or as 

an ordered combination, “transform [the] abstract idea 

into a patent-eligible invention.” Id. at 2352. 

In sum, the asserted claims are all directed to the abstract idea of conditioning and controlling access to data 

based on payment, and fail to recite any inventive concepts sufficient to transform the abstract idea into a 

patent-eligible invention. As such, the asserted claims 

are all invalid for failing to recite patent-eligible subject 

matter under 35 U.S.C. § 101. 

Because we find all asserted claims invalid, we do not 

reach the remaining issues raised on appeal. For the 

foregoing reasons, the district court’s decision is reversed. 

REVERSED

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