UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE PATENT TRIAL AND APPEAL BOARD. Visa Inc. Petitioner. Leon Stambler Patent Owner

Transcription

1 UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE PATENT TRIAL AND APPEAL BOARD Visa Inc. Petitioner v. Leon Stambler Patent Owner Patent No. 5,793,302 Filing Date: November 12, 1996 Issue Date: August 11, 1998 Title: METHOD FOR SECURING INFORMATION RELEVANT TO A TRANSACTION Inter Partes Review No. Unassigned PETITION FOR INTER PARTES REVIEW UNDER 35 U.S.C AND 37 C.F.R ET SEQ.

2 TABLE OF CONTENTS Page I. MANDATORY NOTICES UNDER 37 C.F.R 42.8(a)(1)... 1 A. Real Party-In-Interest Under 37 C.F.R. 42.8(b)(1)... 1 B. Related Matters Under 37 C.F.R. 42.8(b)(2)... 2 C. Lead And Back-Up Counsel Under 37 C.F.R. 42.8(b)(3)... 3 D. Service Information... 3 II. PAYMENT OF FEES 37 C.F.R III. REQUIREMENTS FOR IPR UNDER 37 C.F.R A. Grounds for Standing Under 37 C.F.R (a)... 4 B. Challenge Under 37 C.F.R (b) and Relief Requested... 4 C. Claim Construction under 37 C.F.R (b)(3)... 6 IV. SUMMARY OF THE 302 PATENT A. Brief Description B. Summary of the Prosecution History of the 302 Patent V. THERE IS A REASONABLE LIKELIHOOD THAT AT LEAST ONE IPR CLAIM OF THE 302 PATENT IS UNPATENTABLE VI. MANNER OF APPLYING CITED PRIOR ART TO EVERY CLAIM FOR WHICH INTER PARTES REVIEW IS REQUESTED A. Rejections Based on Davies as Primary Reference [GROUND 1] Davies anticipates Claims 51, 53 and [GROUND 2] Davies in view of Nechvatal renders obvious Claims 51, 53 and [GROUND 3] Davies in view of Fischer and further in view of Piosenka renders obvious Claim VII. CONCLUSION i

3 EXHIBIT 1001 EXHIBIT 1002 EXHIBIT 1003 EXHIBIT 1004 EXHIBIT 1005 EXHIBIT 1006 EXHIBIT 1007 EXHIBIT 1008 EXHIBIT 1009 EXHIBIT 1010 EXHIBITS U.S. Patent No. 5,793,302 to Leon Stambler ( 302 Patent ) Prosecution History of the 302 Patent ( Prosecution History ) Response dated July 21, 1998 in U.S. Patent Application No. 08/872,116 ( 541 Response ) Declaration of Professor Whitfield Diffie ( Diffie Declaration ) D. W. Davies et al., Security for Computer Networks: An Introduction to Data Security in Teleprocessing and Electronic Funds Transfer (1989) ( Davies ) James Nechvatal, Public-key Cryptography (NIST Special Publication 800-2) (April 1991) ( Nechvatal ) U.S. Patent No. 4,868,877 to Fischer ( Fischer ) U.S. Patent No. 4,993,068 to Piosenka et al. ( Piosenka ) Memorandum Order from Leon Stambler v. RSA Security et al., Civil Action No cv-65 SLR (D. Del.) ( RSA Order ) Plaintiff s Opening Brief on Issues of Claim Construction from Leon Stambler v. RSA Security et al., Civil Action No cv-65 SLR (D. Del.) ( RSA Brief ) EXHIBIT 1011 Memorandum Opinion and Order from Leon Stambler v. JPMorgan Chase & Co., et al., Civil Action No cv-204- DF-CE (E.D. Tex.) ( JP Morgan Order ) EXHIBIT 1012 Memorandum Opinion and Order from Leon Stambler v. Merrill Lynch & Co., Inc., et al., Civil Action No. 2:08-cv- 462-DF-CE (E.D. Tex.) ( Merrill Order ) EXHIBIT 1013 Plaintiff s Opening Claim Construction Brief from Leon Stambler v. Merrill Lynch & Co., Inc., et al., Civil Action No. 2:08-cv-462 (E.D. Tex.) ( Merrill Brief ) EXHIBIT 1014 Claim Construction Order from Leon Stambler v. Amazon.com, Inc., et al., Civil Action No. 2:09-cv-310 DF (E.D. Tex.) ( Amazon Order ) ii

4 EXHIBIT 1015 EXHIBIT 1016 Plaintiff s Opening Claim Construction Brief from Leon Stambler v. Amazon.com, Inc., et al., Civil Action No. 2:09- cv-310 (E.D. Tex.) ( Amazon Brief ) Previous Constructions of Claim Terms of the 302 Patent ( Previous Claim Terms ) iii

5 VISA Inc. ( Petitioner or VISA ) petitions for Inter Partes Review ( IPR ) under 35 U.S.C and 37 C.F.R. 42 of claims 51, 53, 55 and 56 ( the IPR Claims ) of U.S. Patent No. 5,793,302 ( 302 Patent ) of Leon Stambler ( Patentee or Stambler ). As explained in this petition, there exists a reasonable likelihood that VISA will prevail with respect to at least one claim challenged in this petition. The 302 Patent claims methods for securing information relevant to a transaction for example, to authenticate a financial transaction such as a transfer of funds by coding and/or storing in a credential information associated with a party to generate a variable authentication number (VAN), which is used to authenticate the party and/or the communications. The patent was improvidently granted without providing a reason for allowance and without full consideration to the wide body of applicable prior art. The relevant patent claims are unpatentable based on teachings set forth in at least the four references presented in this petition. Petitioner respectfully submits Inter Partes Review should be instituted, and the challenged claims be cancelled as unpatentable. I. MANDATORY NOTICES UNDER 37 C.F.R 42.8(a)(1) A. Real Party-In-Interest Under 37 C.F.R. 42.8(b)(1) Petitioner, VISA, is the real party-in-interest. 1

6 B. Related Matters Under 37 C.F.R. 42.8(b)(2) Petitioner is not aware of any disclaimers or reexamination certificates for the 302 Patent. The 302 Patent has been asserted in twenty-seven litigations, twelve of which are currently pending in the Southern District of Florida and Eastern District of Texas. Petitioner has been named as a defendant in one of these litigations concerning the 302 Patent, Stambler v. Visa Inc., Civ. Action No. 0:14- cv kmm (S.D. Fla) ( Visa Litigation ). The Federal Reserve previously filed two petitions for the 302 patent, one on June 11, 2013 (IPR ) for claims 7, 8, 31, 33, 34, 41-43, and and another on July 1, 2013 (IPR ) for claims 9, 28-30, 32, 35-38, 44, and On the same dates, the Federal Reserve also petitioned for Inter Partes Review of U.S. Patent No. 5,936,541 (IPR and IPR ), a continuation of the same patent application as the 302 Patent. On December 6, 2013, the parties filed a joint motion to terminate the trial proceedings in all four inter partes review proceedings. The Board granted the joint motions and terminated each proceeding on December 11, Similarly, on December 19, 2013, Fifth Third Bank also petitioned for Inter Partes Review of the 302 patent (IPR ) for claims 7, 8, 31, 33, 34, 41-43, and On March 10, 2014, prior to institution of trial by the Board, the parties filed a joint motion to terminate the proceedings for IPR

7 On March 17, 2014, the Board granted the joint motion and terminated the proceeding. This petition is directed to a narrower set of claims (i.e., claims 51, 53, 55 and 56). However, issues similar to those raised in the Federal Reserve s and Fifth Third Bank s petitions filed on June 11, 2013 (IPR ) and December 19, 2013 (IPR ), respectively, are raised in view of the same invalidating references. C. Lead And Back-Up Counsel Under 37 C.F.R. 42.8(b)(3) Petitioner provides the following designation of counsel: LEAD COUNSEL Joseph Melnik (Reg. No. 48,741) Jones Day 1755 Embarcadero Road Palo Alto, CA T: F: BACK-UP COUNSEL An P. Doan (Reg. No. 57,085) Jones Day 1755 Embarcadero Road Palo Alto, CA T: F: D. Service Information Please address all correspondence and service to counsel at the address for lead counsel provided in Section I(C). Petitioner also consents to electronic service by at jmelnik@jonesday.com. II. PAYMENT OF FEES 37 C.F.R The Petitioner authorizes the Patent and Trademark Office to charge Deposit Account No for the fee required by in 37 C.F.R (a) for this 3

8 Petition, and further authorizes payment for any additional fees to be charged to this Deposit Account. III. REQUIREMENTS FOR IPR UNDER 37 C.F.R A. Grounds for Standing Under 37 C.F.R (a) Petitioner certifies that the 302 Patent is eligible for IPR and that Petitioner is not barred or estopped from requesting IPR. The present petition is being filed within one year of service of the original complaint against Petitioner in the district court litigation. Visa was served on March 6, B. Challenge Under 37 C.F.R (b) and Relief Requested Petitioner requests Inter Partes review of the claims 51, 53, 55 and 56 of the 302 Patent on the grounds set forth in the table below, and requests that each of the claims be found unpatentable. An explanation of how the IPR Claims are unpatentable under the statutory grounds identified below is provided in the form of detailed description and claim charts that follow, setting forth the identification of where each element can be found in the cited prior art, and the relevance of that prior art. Additional explanation and support for each ground of rejection is set forth in Exhibit 1004, Declaration of Professor Whitfield Diffie ( Diffie Declaration ). 4

9 Ground 302 Patent Claims Basis for Rejection of the IPR Claims Ground 1 51, 53 and 55 Anticipated under 102(b) by Davies Ground 2 51, 53 and 55 Obvious under 103(a) by Davies in view of Nechvatal Ground 3 56 Obvious under 103(a) by Davies in view of Fischer and Piosenka The 302 Patent issued from a string of patent applications dating back to an original application filed on November 17, Accordingly, claims 51, 53, 55 and 56 of the 302 Patent may have, at best, an earliest possible effective filing date of November 17, Davies and Nechvatal were each published more than one year prior to the effective filing date of the 302 Patent (1989 and April 1991, respectively), and qualify as prior art under 35 U.S.C 102(b). Fischer, and Piosenka were each issued more than one year prior to the effective filing date of the 302 Patent (September 19, 1989 and February 12, 1991, respectively), and qualify as prior art under 35 U.S.C 102(b). 1 The Petitioner is not expressing any opinion at this point as to whether the claims of the 302 Patent are supported by the parent application. In view of the relevant dates of the currently cited references, the prior art status of the references do not change if claims 51, 53, 55 and 56 are not accorded the filing date of the parent application. 5

10 C. Claim Construction under 37 C.F.R (b)(3) The Board s review of the claims of an expired patent is similar to that of a district court s review. Innolux Corp. v. Semiconductor Energy Lab. Co., Ltd., IPR (SCM), 10 (April 30, 2013) (citing In re Rambus, Inc., 694 F.3d 42, 46 (Fed. Cir. 2012) (citing Ex Parte Papst-Motoren, 1 U.S.P.Q.2d 16555, (B.P.A.I. Dec. 23, 1986)); see also MPEP 2258 I.G (directing Examiners to construe claims pursuant the principles set forth by the court in Philips v. AWH Corp., 415 F.3d 1303, 1316, 75 U.S.P.Q.2d 1321, 1329 (Fed. Cir. 2005)). Because the subject patent has expired, its claims and claim terms are properly given their ordinary and customary meaning. Philips, 415 F.3d at 1316 (words of a claim are generally given their ordinary and customary meaning as understood by a person of ordinary skill in the art in question at the time of the invention). In determining the ordinary and customary meaning, the words of a claim are first given their plain meaning. Id. According to Phillips, the structure of the claims may breathe additional meaning into the claims, and the specification and file wrapper also may be used to lesser extent to better construe a claim insofar as the plain meaning of the claims cannot be understood. Moreover, Phillips offers that even treatises and dictionaries may be used, albeit under limited circumstances, to determine the meaning attributed by a person of ordinary skill in the art to a claim term at the time of filing. 6

11 Other than claim terms addressed immediately below, for which information concerning constructions appropriate for this Petition is set forth, the remaining terms in the claims are not believed to require additional clarification for purposes of the present IPR. 2 However, for the sake of convenience, a chart of constructions of individual claim terms of the 302 patent is included as Exhibit 1016 (Previous Claim Terms), which includes constructions that have been advanced, during litigations involving the 302 patent, by Patentee, and/or resolved through Markman proceedings. Except where otherwise noted, the constructions set forth below are consistent with the narrowest of the constructions included in Exhibit 1016 (Previous Claim Terms), despite the possibility that each such term is entitled to receive broader treatment, consistent with District Court constructions reflecting the same, making the integrating claim more vulnerable to prior art. Petitioner expressly reserves the right to argue a different claim construction in litigation for any term of the 302 Patent as appropriate in that proceeding. 2 In as much as 37 C.F.R (b)(2) defines a narrow scope of inquiry in this Petition, Petitioner does not acknowledge claim compliance with 35 U.S.C. 112, through its assessment of a broadest reasonable interpretation for terms that follow, or otherwise. 7

12 i. Error Detection Code (EDC) For purposes of this Petition, the term error detection code or EDC is construed as the result of applying an algorithm for coding information that, when applied to original information, creates coded information wherein changes to the coded information can be detected without complete recovery of the original information. See Ex (Diffie Declaration) at 18. This construction is consistent with constructions resolved through Markman proceedings conducted in previous litigation, and it is harmonious with constructions offered by Patentee during those proceedings. See, e.g., Ex (Merrill Brief) at p. 23 ( [t]his construction is substantively identical to the Delaware Court s understanding of the term, which is defined by the patents specification as the result coding information in such a manner as to permit detection of changes... but without complete recovery of the original information ). ii. Credential and credential information For purposes of this Petition, the term credential is construed as a document or information obtained from a trusted source that is transferred or presented to establish the identity of a party, and the term credential information is construed as information stored or contained in a credential. See Ex (Diffie Declaration) at 18. These constructions are consistent with constructions resolved through Markman proceedings conducted in previous 8

13 litigation, and they are harmonious with constructions offered by Patentee during those proceedings. See, e.g., Ex (Merrill Brief) at p. 13 ( Stambler s construction accurately reflects the patents disclosure of a credential.... These credentials are presented as evidence or proof of identity, and the receiving party or system uses the credential for that purpose ). iii. Variable Authentication Number (VAN) For purposes of this Petition, the term variable authentication number or VAN is construed as a variable number resulting from a coding operation that can be used in verifying the identity of a party or the integrity of information or both. See Ex (Diffie Declaration) at 18. This construction is consistent with constructions resolved through Markman proceedings conducted in previous litigation, and it is harmonious with constructions offered by Patentee during those proceedings. See, e.g., Ex (Merrill Brief) at p. 8 ( [i]n the funds transfer context, a VAN is an encoded variable number used in verifying the integrity and origin of funds transfer instructions (e.g., a check). In the credential issuing and authentication context, a VAN is an encoded variable number used in authenticating a credential, which is presented for purposes of determining identity ). 9

14 iv. Previously issued For purposes of this Petition, the term previously issued is construed as existing or occurring prior to something else in time or order. See Ex (Diffie Declaration) at 18. This construction is consistent with constructions resolved through Markman proceedings conducted in a previous litigation. See, e.g., Ex (RSA Order) at p. 5, where the District Court construed that: the term previously issued shall be construed to mean existing or occurring prior to something else in time or order...[t]he term wherein a credential is previously issued shall be construed to mean that the credential referenced in the claim must already be issued before the execution of the steps recited in the claim. IV. SUMMARY OF THE 302 PATENT A. Brief Description Generally, the 302 Patent discloses a method for securing information relevant to a transaction, and for authenticating parties involved in the transaction. See Ex ( 302 Patent) at 1:1-23. In a transaction between two parties, a variable authentication number (VAN) may be used to authenticate at least one of the parties. Id. at 5: A VAN also may be used to authenticate transaction information. Id. at 2: The VAN is created by coding the information to be authenticated. Id. at 5: In some cases, the VAN is included within a 10

15 credential that is previously issued to at least one of the parties by an entity authorized to issue the credential, and the VAN is created by coding credential information with a joint key. Id. at 11:65-12:2. Information relevant to the transaction is coded to generate coded information relevant to the transaction. Id. at 2: B. Summary of the Prosecution History of the 302 Patent Prosecution resulted in an improvident grant of the 302 Patent. Specifically, in an Office Action dated August 12, 1997, the Examiner rejected the claims of the 302 Patent application under 35 U.S.C. 103(a) as being unpatentable over Hellman (U.S. Patent No. 4,200,770), and separately as being unpatentable over Maurer (US Patent No. 5,161,244), pointing out that each ground demonstrates that a multi-party secure transaction system that sends coded information or noncoded information in an encrypted manner was common in the art at the time of the invention. Ex (Prosecution History) at pp In the November 7, 1997 response, Stambler amended the claims, arguing that the applied references did not disclose or teach several features, which included, [u]se of a third party to authenticate a VAN and transfer of funds, and 11

16 use of originator, recipient and payment information to derive a VAN. 3 Id. at pp Immediately following Stambler s response, the Examiner issued a notice of allowance on January 2, Id. at pp No reasons for allowance were given. V. THERE IS A REASONABLE LIKELIHOOD THAT AT LEAST ONE IPR CLAIM OF THE 302 PATENT IS UNPATENTABLE The references cited in this petition demonstrate that, at the time the original application to which the 302 Patent claims priority was filed, it was well known to use originator/recipient/payment information to derive a signature, and to use a third party to authenticate a signature for transfer of funds. Moreover, they demonstrate that it was well known to provide an entity with a credential that includes authenticated information, to use credential information for coding transaction information, and to verify an entity or communication signed by the entity using information from the entity s credential. In doing so, they address each feature allegedly missing from the prior art during original prosecution with regard to the asserted claims. Specifically, the Davies reference describes, among other examples, a point-of-sale payment from a 3 Stambler s response also argued additional features as not being disclosed by the prior art, but these were offered with respect to other claims not at issue. 12

17 customer to a merchant using an electronic check at the merchant s terminal. The customer generates a signature on the payment information in the electronic check, which includes the payee identity and the amount of payment. Ex (Davies) at 10.6, pp Following the explanation of Professor Whitfield Diffie, pioneer of public-key cryptography and co-inventor of the Hellman patent that was cited during prosecution of the 302 Patent, and upon applying the above-ascribed claim interpretations, the signature in Davies and the other references would qualify as the VAN claimed in the 302 Patent (see, e.g., Ex (Diffie Declaration) at 51, 87 and 109). The customer and the merchant/payee in Davies would qualify as the originator and recipient, respectively, in Stambler s response discussed previously. Teaching the feature of use of originator, recipient and payment information to derive a VAN, as Stambler asserted in his response, Davies customer generates the signature using the payee identity and the payment information. Davies further describes that the customer s signature is authenticated by a bank before the payment is approved. Ex (Davies) at 10.6, p The bank is the third party in the transaction between the customer and the merchant, with this description in Davies disclosing [u]se of a third party to authenticate a VAN and transfer of funds, as was asserted by Stambler in his response. For these reasons, this example from Davies, among others referenced within the claim 13

18 charts below, teaches 302 s [u]se of a third party to authenticate a VAN and transfer of funds, and use of originator, recipient and payment information to derive a VAN, as asserted by Stambler during prosecution and discussed above. Moreover, as shown in the discussion and further demonstrated in the claim charts below, each and every feature of the IPR Claims is met by combinations of the references cited in this petition. For example, each of Davies, Nechvatal and Fischer describe encryption and decryption operations, for example using a publickey cryptosystem. The references also describe distributing public keys using certificates that are generated by a certifying authority, which is trusted by other parties in the system and which may include a signed copy of a public key in the associated certificate. Following the explanation of Professor Whitfield Diffie (see Ex (Diffie Declaration) at 54, 88, 111 and 126), and upon applying the aboveascribed claim interpretations, the certificate would qualify as the credential claimed in the 302 Patent. Thus, these references disclose features claimed in at least claim 51, when applying the above constructions. In addition, Piosenka describes a personal identification system that generates credentials for a user. Ex (Piosenka) at Abstract. The identification system in Piosenka receives identifying information from a user, verifies the information and, upon verification, generates a credential for the user. 14

19 Id. Specifically, Piosenka describes that a credential issuing authority generates a credential for a user only after validating the identifying information. While not considered by the Examiner during original prosecution, these references disclose each of the features relied upon by Stambler to distinguish prior art applied during prosecution. In addition, they demonstrate that the Examiner was correct in concluding that it was well known to send coded information or noncoded information between stations. Indeed, these four references yield three grounds that render the IPR Claims unpatentable. Because the Examiner was not aware of these references in granting the 302 Patent, he appears to have been unaware of the well-known nature of the claimed combination, and, as a result, improvidently granted the patent. As detailed in the following section, the present petition shows how all of these references, alone or in combinations specified, render all limitations of the IPR Claims unpatentable, thus raising a reasonable likelihood of prevailing in one or more of the numerous challenges levied against these claims. Indeed, the IPR Claims are merely a combination of prior art elements according to known methods to yield predictable results and thus are unpatentable. MPEP 2143(A and C). 15

20 VI. MANNER OF APPLYING CITED PRIOR ART TO EVERY CLAIM FOR WHICH INTER PARTES REVIEW IS REQUESTED In this Section, Petitioner proposes various grounds of rejection for the IPR Claims and, thus, explains the justification for Inter Partes Review. Petitioner presents claim charts that compare the claim language as construed under the above-ascribed claim interpretations, with the disclosure of the prior art as understood by one of ordinary skill in the art. A. Rejections Based on Davies as Primary Reference 1. [GROUND 1] Davies Anticipates Claims 51, 53 and 55 Claim 51 discloses a method for authenticating the transfer of funds between two accounts by using a variable authentication number ( VAN ) generated from funds transfer information. Claim 53 depends from claim 51 and additionally requires that the fund transfer comprises a payment made by one party to another. Claim 55 also depends from claim 51 and, in addition to the requirements of Claim 51, requires the VAN to be generated from an error detection code derived by using at least a portion of the funds transfer information. Claims 51, 53 and 55 are anticipated by Davies. Davies discloses payment mechanisms, including debit and credit transfers, which result in the transfer of funds from a first account associated with a first entity to a second account 16

21 associated with a second entity. See Ex (Diffie Declaration) at 40. Davies describes how the legitimacy of the transaction messages involved in funds transfer may be verified using digital signatures. See id. As described in greater detail below and in the Diffie Declaration, Davies describes how the funds transfer from a first account to a second account may result in a debit to the first account and a credit to the second account. See id. As noted above and explained below in the claim chart in greater detail, the features of claims 51, 53 and 55 of the 302 Patent are anticipated by Davies under 35 U.S.C. 102(b). Claims Claim 51 [51preA] A method for authenticating the transfer of funds from an account associated with a first party to an account associated with a second party, Davies Davies discloses the transfer of funds from an account associated with a first party to an account associated with a second party. Example I Davies describes funds transfer from Ann s ( first party ) bank account to Bill s ( second party ) bank account, where the information on the bank accounts are held at the respective banks or in magnetic tape (the banks and the magnetic tape being examples of storage means, following the ascribed claim based on the explanation in the Diffie Declaration (Ex. 1004) at 40 and 58): Bill, presents the cheque for payment to his own bank which sends the cheque to the payer s bank...the payer s bank debits Ann s account and the payee s bank credits Bill s. Ex (Davies) at 10.2, p. 285; Fig (reproduced and annotated below). See also id. at 10.2, pp and Fig. 10.2; see also Ex (Diffie Declaration) at

22 Claims Davies Davies also discloses authenticating the transfer of funds from a first account associated with a first party to a second account associated with a second party in the context of describing funds transfer using an electronic check. Example II Davies describes funds transfer from a customer ( first party ) to a payee ( second party ) using an electronic check where the information on the customer and the payee are authenticated using a signature by the customer. The account information for the customer and the payee are stored in the electronic check, in an intelligent token or smart card, or in their respective banks: [t]he second section of the cheque contains the customer identity and his public key... followed by the payment information which forms the third section of the cheque data...the amount and currency of the payment and identity of payee describe the payment to be made... The final signature, by the customer, covers all the variable information in the cheque. Ex (Davies) at 10.6, pp ; see also Fig (reproduced and annotated below). Private customers of the bank can carry...an intelligent token or smart card... Functioning as an electronic chequebook...the smart card used for point-of-sale payment has been called an electronic wallet... the electronic cheque is transmitted...to the card issuer bank where the signature is checked...and drawer s account examined...the accounts of the customer and merchant can be updated. Id. at 10.6, pp ; see also Ex (Diffie Declaration) at 70 and

23 Claims Davies [51preB] a credential being previously issued to at least one of the parties by a trusted party, the information stored in the credential being non-secret, the method comprising: Davies discloses that a credential containing non-secret information is previously issued to at least one of the parties by a trusted party, as shown by the following examples. Example I Davies describes that the public key ( non-secret information ) of a sender ( party ) is contained in a certificate ( credential ) that is issued by a public key registry ( trusted party ). Davies discloses that a credential having non-secret information stored therein is issued to at least one entity by a trusted entity in the context of describing that the public key of a sender ( entity ) is contained in a certificate that is issued by a key registry: [s]ignatures can use the same public keys... A key registry is the source of authentic public keys. Ex (Davies) at 9.6, p [A] person P wishes to register a new key with the registry R... P must send to the registry the public key [and]... receive in response the certificate containing the identity and the public key value signed by R. This is the effective certificate. Id. at 9.6, pp Following the ascribed claim interpretations, as applicable, and the explanation in the Diffie Declaration (see, e.g., Ex at 19, 26 and 37), a public key would be an example of non-secret information, a certificate would qualify as a credential and a key registry would be an example of a trusted entity as described in the 302 Patent. Davies also discloses that the credential is previously issued in the context of describing that a public key is issued in a certificate before the public key is used. Since the public keys are used in the transaction, the public keys are provided 19

24 Claims Davies prior to the execution of the transaction: registering new public keys...giving the owner of the key in question a certificate signed by the registry which will be accepted by other participants as guaranteeing the genuineness of the public key. Ex (Davies) at 9.6, p Each entity, when it generates its keys, must register the public key with the key registry...when any of these entities requires an authentic public key it is received in a message from the card registry containing the key, the identifying data and a digital signature using the registry s key. Before using any public key for the first time, each entity checks its signature in this certificate which it has received. Id. at 10.5, p. 322; see also Ex (Diffie Declaration) at 57. Example II Davies describes an electronic check used for funds transfer from a customer ( first party ) to a payee ( second party ). Davies teaches that the electronic check serves as a certificate ( credential ) for the customer that includes the customer public key signed by the bank. The check also serves as a certificate for the bank: [the] registry authenticates the bank s public key and the bank authenticates the customer s public key the cheque contain[s] a certificate by the key registry which authenticates the bank s public key the cheque contains the customer identity and his public key signed by the bank. Ex (Davies) at 10.6, p. 328; see also Fig (reproduced and annotated previously at [51preA]). Based on the explanation in the Diffie Declaration at 29-30, and the ascribed claim interpretations, the customer public key included in a certificate would qualify as credential information as described in the 302 Patent. See Ex (Diffie Declaration) at Davies discloses that the information stored in the credential is non-secret in the context of describing that the electronic check ( credential as construed above) includes public keys ( non-secret information) and signatures: [a]nyone can verify the bank s public key using the signature the customer identity and his public key [are] verifiable. Ex (Davies) at 10.6, p

25 Claims [51a] receiving funds transfer information, including at least information for identifying the account of the first party, and information for identifying the account of the second party, and a transfer amount; [51b] generating a variable authentication number (VAN) using at least a portion of the received funds transfer information; Davies Davies also discloses that the credential is previously issued in the context of describing that a public key is issued in a certificate before the public key is used, as explained above. Davies discloses receiving funds transfer information, including at least information for identifying the account of the first party, and information for identifying the account of the second party, and a transfer amount, at least in the following context. Davies describes the funds transfer transaction using an electronic check that provides the identity of the customer ( information for identifying the account of the first party ) and the payee ( information for identifying the account of the second party ), where a bank receives information identifying the payer, the payee and the payment amount ( transfer amount ). Ex (Davies) at 10.6, pp and Fig (reproduced and annotated previously at [51preA]). The terminal collects the cheques...the electronic cheque is transmitted...to the card issuer bank where the...drawer s account examined... the accounts of the customer and merchant can be updated. Id. at 10.6, p Davies discloses generating a variable authentication number (VAN) using at least a portion of the received funds transfer information, as shown by the following examples. Example I Davies describes that a customer generates a signature on transaction information included in the electronic check with its secret key: the payment information forms the third section of the cheque data final signature, by the customer, covers all the variable information in the cheque to form this signature the customer needs a secret key. Ex (Davies) at 10.6, p. 329; see also Fig (reproduced and annotated previously at [51preA]). Based on the explanation in the Diffie Declaration (see, Ex at 51, 87 and 109) and upon applying the ascribed claim interpretations, a signature would qualify as a VAN as described in the 302 Patent. Example II Davies describes a point-of-sale payment using an 21

26 Claims Davies intelligent token in which the token generates a signature ( VAN ) on a payment request: [t]he customer s request is formed into a message and presented to the token. Here it is signed and returned to the ATM. Ex (Davies) at 10.6, pp ; see also Fig (reproduced and annotated below). [51c] determining whether the at least a portion of the received funds transfer information is authentic by using the VAN and the credential information; and Davies discloses determining whether at least a portion of the received funds transfer information is authentic by using the VAN and the credential information, as shown below. Example I Davies describes funds transfer using an electronic check, which includes a customer certificate ( credential ) with the customer identity and the customer public key ( credential information ) signed by the bank. Davies teaches that the payment information in the check ( the funds transfer information ) is signed by the customer using his public key. A merchant terminal and an issuer bank verify the customer s signature ( VAN see [51b]) using the customer public key obtained from the check itself: [t]he second section of the cheque contains the customer identity and his public key, signed by the bank and therefore verifiable using the public key [of the bank] The final signature, by the customer, covers all the variable information in the cheque. Ex (Davies) at 10.6, ; see also Fig (reproduced 22

27 Claims Davies and annotated previously at [51preA]). The merchant s terminal can verify the signatures and the merchant is sure that the cheques will be accepted as genuine the electronic cheque is transmitted to the card issuer bank where the signature is checked. Id. at 10.6, p Example II Davies describes a payment transaction in which the signature ( VAN ) on a payment request ( funds transfer information ) is checked by a bank: [t]he customer s request is signed the cheque passes to the card issuer bank, B. Here the signature is checked. Id. at 10.6, p ; see also Fig (reproduced and annotated previously at [51b]). Davies also describes that the signature ( VAN ) on a message ( received funds transfer information ) is verified using a public key ( credential information ) that is contained in a certificate ( credential ): [s]ender A is transmitting a message M and signing it, using his secret key kda At the receiving end, the message is obtained in plaintext form and, in order to check the signature, it is enciphered with A s public key kea. Id. at 9.3, p. 260; see also Fig. 9.5 (reproduced and annotated below). [T]he certificate containing the identity and the public key value signed by R. This is the effective certificate and may be used as evidence of the value of the public key. Id. at 9.6, pp As shown above, Davies describes that a message is verified by verifying the signature on the message using the public key of the sender obtained from the sender s 23

28 Claims [51d] transferring funds from the account of the first party to the account of the second party if the at least a portion of the received funds transfer information and the VAN are determined to be authentic. Davies certificate, and thus teaches determining whether information is authentic using the VAN and the credential information. Davies discloses transferring funds from the account of the first party to the account of the second party if the at least a portion of the received funds transfer information and the VAN are determined to be authentic, as shown by the following examples. Example I Davies describes funds transfer using the electronic check in which the issuer bank authorizes a payment ( transferring funds ) if the customer s signature ( VAN ) covering the payment information in the check ( funds transfer information ) is verified: payment information forms the third section of the cheque data... final signature, by the customer, covers all the variable information in the cheque the electronic cheque is transmitted to the card issuer bank where the signature is checked and drawer s account examined. If all is well, a payment message is sent the accounts of the customer and merchant can be updated. Ex (Davies) at 10.6, p Example II Davies describes a payment transaction ( transferring funds ) where cash is provided from a customer s bank account ( account of the first party ) to the customer ( account of the second party ) after the customer s bank checks the signature ( VAN ) on the request: customer s request is signed the cheque passes to the card issuer bank, B. Here the signature is checked and the customer s account examined and, if everything is in order, debited. A payment message signed by B is sent to A if all is well an authorization goes to the ATM to release the money. Id. at 10.6, pp ; see also Fig (reproduced and annotated previously at [51b]). The above example is also consistent with the Patentee s own interpretation of the 302 patent: the [ 302] specification uses transferring broadly and does not restrict it to crediting and debiting. For example, in the embodiments of FIGS. 6-8 and 13, transferring funds may be accomplished by dispensing paper money from an ATM 24

29 Claims Claim 53 The method of claim 51 wherein the funds transfer comprises a payment made by the first party to the second party. Claim 55 The method of claim 51 wherein the VAN is generated by using an error detection code derived by using at least a portion of the funds transfer information. Davies machine or cashing a check. (7:44-50.). Ex (Amazon Brief) at II.A.1, pp As shown below, Davies discloses funds transfer comprising a payment made by the first party to the second party. Example I Davies describes the transfer of funds where a payment is made by Ann ( first party ) to Bill ( second party ), as construed previously in [51pre]. See [51pre], Example I. Example II Davies describes funds transfer from a customer ( first party ) to a payee ( second party ) using an electronic check, as construed previously in [51pre]. See [51pre], Example II. Davies discloses that the VAN is generated by using at least a portion of the funds transfer information, as shown by the following examples. Example I Davies describes the generation of a signature ( VAN ) based on a portion of the transaction information ( funds transfer information ). See, for example, [51b]. Example II Davies describes that the signature ( VAN ) on a message M is generated by signing H(M) using the sender s secret key, where H(M) is obtained by applying a one-way function H to the message M. Davies describes generating a separate signature by applying to a message M a one-way function H to return the value H(M), which is signed using the secret key kda of the sender: [s]ender A is transmitting a message M and signing it, using his secret key kda A one-way function H(M) is formed using the message and then transformed by the public key signature method, to form the signature. Ex (Davies) at 9.3, p. 260; also Fig. 9.5 (reproduced and annotated previously at [51c]). Davies discloses that at least one of the second and third information is associated with at least one entity by describing that the secret key kda is associated with the sender, as construed above. Also, as discussed above, Davies discloses that the entity is a person or computer program. 25

30 2. [GROUND 2] Davies in View of Nechvatal Renders Obvious Claims 51, 53 and 55 Davies teaches that the signatures may be generated by computing hash values on the transaction information as an intermediate step. Nechvatal provides rationale for using hash functions in this manner, which include, among others, an explanation that hash functions mitigate the effects of data expansion and lower bandwidth transmission that result from generating digital signatures. Hash functions therefore allow the signing entity in Davies to condense the information M included in a certificate into a fixed size representation H(M) that is of smaller size than M, and sign H(M) in a relatively quick fashion, which would improve signing efficiency, as taught by Nechvatal. It would be obvious for a person of ordinary skill in the art, at the time of the effective filing date of the 302 Patent, to combine the teachings of Davies and Nechvatal to implement an electronic funds transfer system in which the transactions are authenticated by digital signatures, as taught by Davies. See Ex (Diffie Declaration) at 91. As noted above and explained below in the claim chart in greater detail, the features of claims 51, 53 and 55 of the 302 Patent are rendered obvious over Davies in view of Nechvatal, rendering claims 51, 53 and 55 unpatentable under 35 U.S.C. 103(a). Claims Claim 51 [51preA] A Davies in view of Nechvatal Davies discloses the transfer of funds from an account associated with a first party to an account associated with a 26

31 Claims method for authenticating the transfer of funds from an account associated with a first party to an account associated with a second party, Davies in view of Nechvatal second party. Example I Davies describes funds transfer from Ann s ( first party ) bank account to Bill s ( second party ) bank account, where the information on the bank accounts are held at the respective banks or in magnetic tape (the banks and the magnetic tape being examples of storage means, following the ascribed claim based on the explanation in the Diffie Declaration (Ex. 1004) at 40 and 58): Bill, presents the cheque for payment to his own bank which sends the cheque to the payer s bank...the payer s bank debits Ann s account and the payee s bank credits Bill s. Ex (Davies) at 10.2, p. 285; Fig (reproduced and annotated below). See also id. at 10.2, pp and Fig. 10.2; see also Ex (Diffie Declaration) at 58. Davies also discloses authenticating the transfer of funds from a first account associated with a first party to a second account associated with a second party in the context of describing funds transfer using an electronic check. Example II Davies describes funds transfer from a customer ( first party ) to a payee ( second party ) using an electronic check where the information on the customer and the payee are authenticated using a signature by the customer. The account information for the customer and the payee are stored in the electronic check, in an intelligent token or smart card, or in their respective banks ( storage means ): [t]he second section of the cheque contains the customer identity and his 27

32 Claims Davies in view of Nechvatal public key... followed by the payment information which forms the third section of the cheque data...the amount and currency of the payment and identity of payee describe the payment to be made... The final signature, by the customer, covers all the variable information in the cheque. Ex (Davies) at 10.6, pp ; see also Fig (reproduced and annotated below). Private customers of the bank can carry...an intelligent token or smart card... Functioning as an electronic chequebook...the smart card used for point-of-sale payment has been called an electronic wallet... the electronic cheque is transmitted...to the card issuer bank where the signature is checked...and drawer s account examined...the accounts of the customer and merchant can be updated. Id. at 10.6, pp ; see also Ex (Diffie Declaration) at 70 and 73. [51preB] a credential being previously issued to at least one of the parties by a trusted party, the information stored in the credential being non-secret, the method comprising: Davies discloses that a credential containing non-secret information is previously issued to at least one of the parties by a trusted party, as shown by the following examples. Example I Davies describes that the public key ( non-secret information ) of a sender ( party ) is contained in a certificate ( credential ) that is issued by a public key registry ( trusted party ). Davies discloses that a credential having non-secret information stored therein is issued to at least one entity by a trusted entity in the context of describing that the public key of a sender ( entity ) is contained in a certificate that is issued by a key registry: [s]ignatures can use the same public keys... A key registry is the source of authentic public keys. Ex (Davies) at 9.6, p [A] person P wishes to 28

33 Claims Davies in view of Nechvatal register a new key with the registry R... P must send to the registry the public key [and]... receive in response the certificate containing the identity and the public key value signed by R. This is the effective certificate. Id. at 9.6, pp Following the ascribed claim interpretations, as applicable, and the explanation in the Diffie Declaration (see, e.g., Ex at 19, 26 and 37), a public key would be an example of non-secret information, a certificate would qualify as a credential and a key registry would be an example of a trusted entity as described in the 302 Patent. Davies also discloses that the credential is previously issued in the context of describing that a public key is issued in a certificate before the public key is used. Since the public keys are used in the transaction, the public keys are provided prior to the execution of the transaction: registering new public keys...giving the owner of the key in question a certificate signed by the registry which will be accepted by other participants as guaranteeing the genuineness of the public key. Ex (Davies) at 9.6, p Each entity, when it generates its keys, must register the public key with the key registry...when any of these entities requires an authentic public key it is received in a message from the card registry containing the key, the identifying data and a digital signature using the registry s key. Before using any public key for the first time, each entity checks its signature in this certificate which it has received. Id. at 10.5, p. 322; see also Ex (Diffie Declaration) at 57. Example II Davies describes an electronic check used for funds transfer from a customer ( first party ) to a payee ( second party ). Davies teaches that the electronic check serves as a certificate ( credential ) for the customer that includes the customer public key signed by the bank. The check also serves as a certificate for the bank: [the] registry authenticates the bank s public key and the bank authenticates the customer s public key the cheque contain[s] a certificate by the key registry which authenticates the bank s public key the cheque contains the customer identity and his 29

34 Claims [51a] receiving funds transfer information, Davies in view of Nechvatal public key signed by the bank. Ex (Davies) at 10.6, p. 328; see also Fig (reproduced and annotated previously at [51preA]). Based on the explanation in the Diffie Declaration at 29-30, and the ascribed claim interpretations, the customer public key included in a certificate would qualify as credential information as described in the 302 Patent. See Ex at Davies discloses that the information stored in the credential is non-secret in the context of describing that the electronic check ( credential as construed above) includes public keys ( non-secret information) and signatures: [a]nyone can verify the bank s public key using the signature the customer identity and his public key [are] verifiable. Ex (Davies) at 10.6, p Davies also discloses that the credential is previously issued in the context of describing that a public key is issued in a certificate before the public key is used, as explained above. Although, as discussed above, Davies teaches that the information stored in a credential is non-secret, Nechvatal specifically discloses that a credential contains non-secret information in the context of describing that a central issuing authority creates a certificate ( credential ) for a user ( party ) that includes the user s public key ( non-secret information ): [a] certificate-based system assumes a central issuing authority CA each user A may register EA [i.e., A s encrypted key] with the CA... EA is public A receives a certificate signed by the CA and containing EA A s certificate is a public document which both contains EA and authenticates it, since the certificate is signed by the CA. Ex (Nechvatal), The central issuing authority above would qualify as a trusted party as described in the 302 Patent, following the explanation in the Diffie Declaration at 27. See Ex at 27. Davies discloses receiving funds transfer information, including at least information for identifying the account of the first party, and information for identifying the account of 30