Alexsam, Inc. v. Mastercard International Incorporated
Filing
186
REPORT AND RECOMMENDATION: For the reasons contained herein, I respectfully recommend that the Court adopt the following constructions of the following claims: 1."debit/medical services card": A card that can function as part of a multif unction card system as both a debit card and a medical services card, the different functions depending upon the database the system is directed to access when the card is used. 2."loyalty card": A card, separate from a card used to pur chase goods or services, used to reward a consumers loyalty account at the point of sale in real time as a purchase takes place. 3."preselected information retrieval device": A device, such as an electronic mail device, facsimile device , or voice response device, selected in advance from among two or more devices to receive the requested information.I further respectfully recommend that the Court reject MasterCard's contention that the phrase "transmitting a rejection code to said point-of-sale device if said pin entered does not correspond to said identification number" renders Claim 31 of the '787 patent indefinite under 32 U.S.C. § 112(b). Any objections to the recommendations made in this Rep ort must be submitted within fourteen days after filing of the Report and, in any event, no later than June 25, 2018. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. Proc. 72(b)(2). Failure to file timely objections may waive the right to appeal the District Court's order. See Small v. Secy of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989) (discussing waiver under the former ten-day limit). Ordered by Magistrate Judge Steven M. Gold on 6/11/2018. (Recca, Vincent)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ALEXSAM, INC.,
:
:
Plaintiff,
:
:
-against:
:
MASTERCARD INTERNATIONAL INC.,
:
:
Defendant.
:
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GOLD, STEVEN M., U.S.M.J.:
REPORT &
RECOMMENDATION
15-CV-2799 (ILG) (SMG)
INTRODUCTION
This diversity action for breach of contract is brought by Alexsam, Inc. (“Alexsam”)
against MasterCard International Inc. (“MasterCard”). Alexsam’s breach of contract claim arises
out of a license agreement entered into by the parties in May 2005. Complaint, (“Compl.”) ¶ 1,
Docket Entry 1. Alexsam holds two patents: United States Patent No. 6,000,608 (“‘608 Patent”
or “‘608”), entitled “Multifunction Card System,” Docket Entry 166-2, and United States Patent
No. 6,189,787 (“‘787 Patent” or “‘787”), a continuation of the “608 Patent entitled
“Multifunctional Card System” (together “the patents”), Docket Entry 166-3.
Alexsam granted MasterCard a non-exclusive, non-transferable license to use the patents
and to enable others to engage in “Licensed Transactions.” License Agreement (the
“Agreement”) ¶¶ 1.1, 2.1, Docket Entry 1-6. The Agreement defines “licensed transactions” in
relevant part as those conducted by means of processes “covered by one of the Licensed
Patents.” Id. ¶ 1.3. In exchange, MasterCard agreed to pay Alexsam royalties for each licensed
transaction and to provide Alexsam with monthly royalty reports identifying the number of
licensed transactions conducted. Id. ¶¶ 4.1-4.2. Plaintiff alleges in this action, however, that
from as early as April 2008, MasterCard has repeatedly failed to provide accurate reports and to
make payments for licensed transactions as the Agreement requires. Compl. ¶¶ 15, 22-26.
The Agreement defines “licensed transactions” as those covered by the patents.
Accordingly, it is necessary to construe the meaning of the patent claims before determining
whether MasterCard breached the License Agreement and, if so, to what extent. To that end,
after receiving briefing from the parties, the Court held a claim construction hearing on April 20,
2018. See Transcript of Civil Cause for Claim Construction Hearing on April 20, 2018 (“Tr.”),
Docket Entry 174.
Even before the hearing, the parties had stipulated to the construction of several claim
terms. After the hearing and in part in response to suggestions made by the Court, the parties
stipulated to the construction of additional claim terms. Alexsam Letter dated April 27, 2018
(“Alexsam Letter”) at 2-3, Docket Entry 176; MasterCard Letter dated April 27, 2018
(“MasterCard Letter”) at 2, Docket Entry 177. These agreed-upon constructions are included in
the table of stipulated terms below. Also prompted by a suggestion made by the Court at the
hearing, Alexsam—in response to MasterCard’s contention that Claim 31 of the ‘787 patent is
indefinite—stipulated that a rejection under Step D of Claim 31 would not be a covered
transaction under the license. Alexsam Letter at 3-4.
For the reasons set forth below, I respectfully recommend that the Court adopt the
constructions proposed below of the following claim terms, which are the only terms still in
dispute: “debit/medical services card” (‘608 Patent: Claim 32); “loyalty card” (‘608 Patent:
Claim 20; ‘787 Patent: Claim 27); and “preselected information receiving device” (‘787 Patent:
Claim 31). I also respectfully recommend that the Court reject MasterCard’s contention that the
phrase “transmitting a rejection code to said point-of-sale device if said pin entered does not
2
correspond to said identification number” renders Claim 31 of the ‘787 patent indefinite under 35
U.S.C. § 112(b). 1
BACKGROUND
The two patents at issue in this case have different titles and claims, but identical
specifications. MasterCard’s Opening Claim Construction Brief (“Def.’s Mem.”) at 1 n.1,
Docket Entry 166. The patents have been the subject of much litigation, and other courts have
construed some of the claim terms before. Alexsam’s Opening Claim Construction Brief (“Pl.’s
Mem.”) at 4 & n.5, Docket Entry 165. Because a detailed description of the claimed invention is
set forth in Alexsam, Inc. v. Gap, Inc., 621 F. App’x 983, 985-87 (Fed. Cir. 2015), only a brief
overview is provided here.
In essence, the patents describe a multifunction card system that utilizes existing retail
point-of-sale (“POS”) devices. ‘608 Patent 4:14-35.2 This system is intended to allow the use of
various types of prepaid cards, particularly phone cards, gift cards, medical cards, and loyalty
cards. ‘608 Patent, Abstract; Pl.’s Mem. at 3. The novel aspect of the system is its use of Bank
Identification Numbers (“BIN”) to accomplish transactions using existing POS devices rather
than “closed systems” requiring activation terminals unique to each card issuer. ‘608 Patent
1:66-2:14. In the patented system, each card is assigned a BIN, which allows a retailer to
1
By order dated November 4, 2017, Senior United States District Court Judge I. Leo Glasser referred all
nondispositive pretrial matters to me pursuant to 28 U.S.C. § 636(b)(1). Docket Entry 97. There is a split in
authority as to whether claim construction is a nondispositive pretrial matter. Compare Fisher-Price, Inc. v. Kids II,
Inc., 2015 WL 2401887, at *3 n.1 (W.D.N.Y. May 19, 2015) (“Claim construction questions upon referral are
considered as dispositive requiring a report and recommendation pursuant to 28 U.S.C. § 646(b)(1)(B)”), with
Mantissa Corp. v. Ondot Sys. Inc., 2017 WL 1373771, at *1 n.2 (S.D. Tx. Jan. 13, 2017) (“Claim construction
following a Markman hearing has been held to be a non-dispositive pretrial matter appropriate for decision by a
United States Magistrate Judge under 28 U.S.C. § 646(b)(1)(A).”), and SciCo Tec GmbH v. Bos. Sci. Corp., 599 F.
Supp. 2d 741, 742 (E.D. Tx. 2009) (concluding that claim construction is a nondispositive pretrial matter). Because
of these divergent views, and out of an abundance of caution, I render my decision on claim construction as a Report
and Recommendation. See Spinal Concepts, Inc., v. EBI, L.P., 2004 WL 5680799, at *1 n.1 (W.D. Tx. Apr. 13,
2004) (“The Court addresses its findings on claim construction by Report and Recommendation due to the
potentially dispositive nature of Markman rulings.”).
2
Citations to the patents are in Column Number: Line Number(s) format.
3
remotely add or subtract data, typically a monetary amount or loyalty points, using a POS device.
‘608 Patent 4:36-46—5:9-14. Existing POS devices were, at the time of the invention, preprogrammed to recognize BINs. Alexsam, Inc. v. Humana Inc., 2009 WL 2843333, at *1 (E.D.
Tx. Aug. 28, 2009).
Figure 2 of the patents graphically illustrates “the various ways in which a retail point-ofsales device might connect to the multifunction card system.” ‘608 Patent 4:7-9.
FIGURE 2
DISCUSSION
I.
Claim Construction Standard
The claims of a patent “define the invention to which the patentee is entitled the right to
exclude.” Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en banc) (quoting
Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1115 (Fed. Cir.
4
2004). Thus, when determining the scope a patent, the claims are of “primary importance, in the
effort to ascertain precisely what it is that is patented.” Phillips, 415 F.3d at 1312 (quoting
Merrill v. Yeomans, 94 U.S. 568, 570 (1876)).
Claim construction is a question of law. Markman v. Westview Instruments, 517 U.S.
370, 372 (1996) (holding that claim construction is “exclusively within the province of the
court”). Courts construe claim terms by ascertaining their “ordinary and customary meaning,” or
“the meaning that the term would have to a person of ordinary skill in the art in question at the
time of the invention, i.e., as of the effective filing date of the patent application.” Phillips, 415
F.3d at 1312-13. When construing claims, a court should focus its analysis on the patent’s
intrinsic evidence, which includes the patent claims themselves, the specification, and the
patent’s prosecution history. Id. at 1315-17; see also Teva Pharms. USA, Inc. v. Sandoz, Inc.,
135 S. Ct. 831, 841 (2015) (describing intrinsic evidence). Indeed, a “person of ordinary skill in
the art is deemed to read the claim term not only in the context of the particular claim in which
the disputed term appears, but in the context of the entire patent, including the specification.”
Phillips, 415 F.3d at 1313. Thus, “[b]ecause claim terms are normally used consistently
throughout the patent, the usage of a term in one claim can often illuminate the meaning of the
same term in other claims.” Id. at 1314. Likewise, a patent’s specification informs the meaning
of its claims; nevertheless, limitations from the specification should not be read into the claims.
Anchor Wall Sys., Inc. v. Rockwood Retaining Walls, Inc., 340 F.3d 1298, 1306 (Fed. Cir. 2003).
5
II.
Stipulated Claims
The parties have stipulated to the construction of the following claim terms. Final Joint
Claim Construction Chart and Stipulation, Docket Entry 169; Alexsam Letter at 2-3; MasterCard
Letter at 2.
Claim/Term
“bank processing hub
computer”
Agreed Construction
“A computer, other than a processing hub, that is maintained by
a bank, that facilitates the card transaction and that is
remote from the pre-existing standard retail point-of-sale
(‘787 Patent: Claims 27, 31) device”
“banking network”
“A set of interconnected computers used by banks and
financial institutions for purposes of conducting and
(‘608 Patent: Claims 20, 32; processing financial transactions, and which incorporates and
‘787 Patent: Claims 27, 31) utilizes a processing hub”
“processing hub”
(‘608 Patent: Claim 20)
“A computer which provides front-end point-of-sale device
management and message processing for card authorizations or
activations”
“unmodified existing
standard retail point-of-sale
device”
“A terminal for making purchases at a retail location of the type
in use as of July 10, 1997, that has not been reprogrammed,
customized, or otherwise altered with respect to its software or
hardware for use in the card system”
“unmodified existing
standard point-of-sale
device”
“A terminal for making purchases of the type in use as of July
10, 1997, that has not been reprogrammed, customized, or
otherwise altered with respect to its software or hardware for
use in the card system”
(‘608 Patent: Claim 32)
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“bank identification number “A numeric code which identifies a card-issuing financial
approved by the American
institution and that is sanctioned by the American Bankers
Banking Association for use Association”
in a banking network” /
“said identification number
comprising a bank
identification number
approved by said American
Banking Association for use
in a banking network”
(‘608 Patent: Claims 20, 32;
‘787 Patent: Claims 27, 31)
“Decrypting”
“Decoding or deciphering”
(‘787 Patent: Claims 27, 31)
“pre-existing standard retail “A terminal for making purchases at a retail location of the type
point-of-sale device”
in use as of July 10, 1997”
(‘787 Patent: Claims 27, 31)
“swiped / swiping / is
“Passed or slid through an electronic card reader / passing or
swiped through”
sliding a card through an electronic card reader / is passed or
slid through an electronic card reader”
(‘608 Patent: Claims 8, 20;
‘787 Patent: Claims 27, 31)
“means for crediting an
Corresponding Structure:
account corresponding to
the loyalty card with loyalty ‘608 Patent: Col. 5, lines 9-12; col. 9, line 11-col. 10, line
points based upon the
6; Figures 1 and 2 (element 103)
purchase data”
‘787 Patent: n/a
(‘608 Patent: Claim 20)
Function: crediting an account corresponding to the loyalty card
with loyalty points based upon the purchase data
The means for crediting the account is the processing hub 103.
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“means for increasing the
balance of the account
corresponding to the
electronic gift certificate
card by the electronic gift
certificate recharge amount”
Corresponding Structure:
(‘608 Patent: Claim 2)
Function: increasing the balance of the account corresponding
to the electronic gift certificate card by the electronic gift
certificate recharge amount
‘608 Patent: Col. 5, line 27; col. 5, lines 66-67; col. 7, line
65-col. 8, line 2; Figure 2 (element 103)
‘787 Patent: n/a
The means for increasing the balance of the account is the
processing hub 103.
“means for receiving
electronic gift certificate
card recharge data from an
existing standard retail
point-of-sale device when
said electronic gift
certificate card is swiped
through the point-of-sale
device, said electronic gift
certificate card recharge
data comprising the unique
identification number of the
electronic gift certificate
card and an electronic gift
certificate recharge amount”
(‘608 Patent: Claim 2)
Corresponding Structure:
‘608 Patent: Col. 4, lines 7-9; col. 5, line 37-col. 7, line 33;
Figure 2 (elements comprising “combinations of structure
which form pathways for receiving the data from the POS
device. These include the various combinations or the
retailer processors, the bank processors, the debit network,
and the processing hub as shown in Figure 2.”)
‘787 Patent: n/a
Function: receiving electronic gift certificate card recharge data
from an existing standard retail point-of-sale device when the
electronic gift certificate card is swiped through the point-ofsale device, the electronic gift certificate card recharge data
including the unique identification number of the electronic gift
certificate card and an electronic gift certificate recharge
amount
The corresponding structures include the pathways for receiving
the data from the POS device, which include the various
combinations of the retailer processors, the bank processor, the
debit network, and the processing hub as shown in Figure 2, and
equivalents thereof.
8
“means for receiving
loyalty data from an
unmodified existing
standard retail point-of-sale
device when said loyalty
card is swiped through the
point-of-sale device, said
loyalty data comprising the
unique identification
number of the card and
purchase data”
(‘608 Patent: Claim 2)
Corresponding Structure:
‘608 Patent: Col. 4, lines 7-9; col. 5, line 37-col. 7, line 33;
Figure 2 (elements comprising “combinations of structure
which form pathways for receiving the data from the POS
device. These include the various combinations or the
retailer processors, the bank processors, the debit network,
and the processing hub as shown in Figure 2.”)
‘787 Patent: n/a
Function: receiving loyalty data from an unmodified existing
standard retail point-of-sale device when said loyalty card is
swiped through the point-of-sale device, said loyalty data
comprising the unique identification number of the card and
purchase data
The corresponding structures include the pathways for receiving
the data from the POS device, which include the various
combinations of the retailer processors, the bank processor, the
debit network, and the processing hub as shown in Figure 2, and
equivalents thereof.
“information retrieval card”
(‘787 Patent: Claim 31)
“medical card”
(‘608 Patent: Claim 32)
“medical information
number”
(‘608 Patent: Claim 33;
‘787 Patent: Claim 34)
“recharge data”
“A card that is used to receive information specific to the
cardholder or someone associated with the cardholder with
respect to the information retrieved.”
“A card that allows access to a database containing medical
information specific to the cardholder or someone associated
with the card holder with respect to the medical information
accessed.”
“A number used for identification purposes associated with a
record in a database containing medical information specific to
the cardholder or someone associated with the cardholder with
respect to the medical information accessed. “
“Data related to a purchase of additional value for a previously
activated prepaid card.”
(‘608 Patent: Claim 2)
“recharge amount”
“The amount of additional value added to a previously activated
prepaid card.”
(‘608 Patent: Claims 2, 61)
9
III.
Disputed Claims
Three claim terms remain in dispute. Each is addressed in turn below.
a.
“Debit/medical services card”
“debit/medical services card” (‘608 Patent: Claim 32)
Claim 32: “a multifunction card system comprising:
a. at least one debit/medical services card having a unique identification number encoded
on it comprising a bank identification number approved by the American Banking
Association for use in a banking network;”
Alexsam’s Proposed
Construction
A card that can function as
part of a multifunction card
system as both a debit card
and a medical services card,
depending upon the database
it is directed to access.
MasterCard’s Proposed
Construction
A card that can function
differently as part of a
multifunction card system as
both a debit card and a
medical services card, the
different functions depending
upon the database the system
is directed to access by the
user.
The Court’s Construction
A card that can function as
part of a multifunction card
system as both a debit card
and a medical services card,
the different functions
depending upon the database
the system is directed to
access when the card is used.
The parties’ differences over the construction of the claim term “debit/medical services
card” have narrowed since the claim construction hearing. Alexsam Letter at 2; MasterCard
Letter at 3. The remaining differences are over (1) whether it is clearer to refer to the card as
performing different functions or functioning differently; (2) whether it is the card or the system
that is directed to a particular database; and (3) whether the definition should be limited to
require that the user of the card be the one who directs the card or system to access one database
or another.
The parties’ dispute over “functions differently” is largely a semantic one. Essentially,
the card itself does not function differently depending upon how it is used; each time it is used it
10
is simply swiped through a POS device. Rather, it is the system that functions differently. When
used as a debit card, the card directs the system to access one database; the card directs the
system to access a different database when it used as a medical services card. See Figure 2
(showing different preferred embodiments). No matter what function is being accomplished,
however, the card itself is always used in the same manner: by being swiped at a POS terminal.
The central point any construction must capture is that the system is capable of doing two
different things: enabling the card to act as a debit card and as a medical services card.
In this context, and as I pointed out at the claim construction hearing, I perceive a risk
that a jury will be confused by the phrase “functions differently.” Tr. 76:12-22. A finder might
conclude that, for a card to “function differently,” there must be something different about how
the card is deployed or the manner in which it is used. For example, a jury could mistakenly
understand that one way for a card to function is by swiping it through a terminal, another is by
being held against a card-reading device, and a third is by entering the card number and security
code into a computer. The invention, however, clearly claims a card that functions—in this sense
of the word—the same way regardless of the purpose for which it is used. It is therefore clearer
to say that the card performs different functions than it is to describe the card as functioning
differently. Similarly, because it is the system and not the card that is functioning differently, it
is clearer and more accurate to say, as MasterCard proposes, that the system—not the card—is
directed to access one database or another.
Finally, as Alexsam argues, the phrase “directed . . . by the user” in MasterCard’s
proposed construction is ambiguous. As Alexsam contends, the user need not be aware of which
database the system is accessing or how the system operates. Alexsam Letter at 2. Moreover, to
the extent the term “user” implies the cardholder, MasterCard’s proposed definition may be
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inaccurately restrictive; it is easy to envision circumstances in which a cardholder surrenders the
card to an employee of a medical services provider or retail establishment, and the employee
then enters information through the POS terminal that directs the system to access a particular
database. To avoid any confusion on this point, the Court’s construction simply refers to “when
the card is used” rather than identifying or imputing any specific intention to the user.
The Court’s construction is supported by the specification, which states:
In order to let the system 108 know which function or functions the card is
serving in any particular transaction, a code is entered into the PIN pad of the
POS device from which the transaction is originating. Alternatively, the system
108 could prompt the user to indicate the proper card function and the databases
that must be accessed. Based upon this input, the system 108 carries out the
appropriate actions. The system 108 can access each of the databases discussed
above . . . .
‘608 Patent 10:54-62.3 As can be seen from this excerpt, the specification refers to the functions
the card serves, not to the card functioning differently; refers to the system, not the card,
accessing databases; and describes a code being entered into a PIN pad without identifying or
describing the intent of the person making the entry.
Accordingly, I respectfully recommend the following construction of the term
“debit/medical services card”: A card that can function as part of a multifunction card system as
both a debit card and a medical services card, the different functions depending upon the
database the system is directed to access when the card is used.
3
“108” refers to a designation on Figure 1 of the patent specification.
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b. “Loyalty Card”
“loyalty card” (‘608 Patent: Claim 20; ‘787 Patent: Claim 27)
“Claim 20: A loyalty card system, comprising:
a. at least one loyalty card having a unique identification
number encoded on it, said identification number comprising
a bank identification number approved by the
American Banking Association for use in a banking
network, said identification number corresponding to
the loyalty card system;
b. means for receiving loyalty data from an unmodified
existing standard retail point-of-sale device when said
loyalty card is swiped through the point-of-sale device,
said loyalty data comprising the unique identification
number of the card and purchase data; and
c. means for crediting an account corresponding to the
loyalty card with loyalty points based upon the purchase data”
Claim 27 of ‘787: “A method of adding points to a loyalty card…”
Alexsam’s Proposed
Construction
A card used to reward
consumers, where the
information regarding the
consumer’s loyalty account is
transmitted at the point of
sale in real time as a purchase
takes place
MasterCard’s Proposed
Construction
A card, separate from a card
used to purchase goods or
services, used to reward a
consumer’s loyalty account at
the point of sale in real time
as a purchase takes place.
The Court’s Construction
The Court adopts
MasterCard’s proposed
construction.
The material difference between the parties’ proposed constructions concerns whether a
“loyalty card” must be separate from a card used to purchase goods or services.4
The parties originally proposed different constructions for this term. See Pl.’s Mem. at 16; Def.’s Mem. at 16-18.
Alexsam proposed a new construction in its responsive brief. Pl.’s Reply at 18-20. Accordingly, I afforded
MasterCard an opportunity to submit additional briefing, Order dated April 17, 2018, which it did. MasterCard
Letter dated April 19, 2018, Docket Entry 170. The parties were then permitted to submit additional briefing after
the claim construction hearing was held, Order dated April 24, 2018, which they did. MasterCard’s Supplemental
Letter Brief (“Def.’s Supp.”), Docket Entry 181; Alexsam’s Supplemental Letter Brief (“Pl.’s Supp.”), Docket Entry
184.
4
13
Both sides invoke the patent specification for support. As MasterCard points out, the
specification distinguishes between “separate” loyalty cards and a “loyalty feature add-on” to
other types of cards; where it introduces “loyalty cards,” the specification states the following:
“Not unlike the loyalty feature add-on of the Electronic Gift Certificate[] card, the system 108 of
the present invention may provide a separate loyalty card much like a frequent flier card that can
have points added at virtually any POS device[].” ‘608 Patent 9:25-31; Def.’s Mem. at 16-17.
According to MasterCard, this language in the specification is a powerful indication that a
loyalty card—at least as that term is used in the claims referenced above—must be a separate
card. Alexsam emphasizes that the specification’s use of the permissive term “may” in the
phrase “may provide a separate loyalty card,” rather than a more restrictive word, indicates that a
loyalty card need not be separate from any other card. Alexsam’s Responsive Claim
Construction Brief (“Pl.’s Reply”) at 19, Docket Entry 168.
The Court agrees with MasterCard in large part because its reading of the word
“separate” in the specification is the more natural one, and because the patent claims themselves
indicate that, when used without modification, the term “loyalty card” refers to a card that
functions only in that capacity. As noted above, claim terms are read consistently across a
patent, and the wording used in one claim may therefore inform the meaning of another. Here, it
is clear from the words used in other claims that the inventor had the capacity to, and did,
describe a card with multiple functions, including the functions of a loyalty card, when he
intended to do so. Claim 13 of the ‘608 patent, for example, claims a “multifunction card system
. . . wherein a single card with a single identification number can function as an electronic gift
certificate card and as a loyalty card.” The inference is accordingly strong that, when—as in
14
Claim 20—the term “loyalty card” is used by itself and not in conjunction with some other type
of card or function, it refers to a card that functions as a loyalty card and not in any other way.
Indeed, perhaps understandably given the number of different proposed constructions for
“loyalty cards,” but nevertheless tellingly, Alexsam itself has described the term “loyalty card”
as used in Claim 20 as a separate card; in its reply brief, Alexsam wrote, “[t]he ‘608 Patent
describes, among other things, a system involving a loyalty card that may be part of a
multifunction card (e.g. ‘608 Patent, Claim 58) or be a separate card (e.g. ‘608 Patent, Claim
20).” Pl.’s Reply at 11.
To be sure, some language in the specification describes the preferred embodiment of the
invention as a multifunction card system capable of performing all of the functions the
specification describes. ‘608 Patent 10:49-53. But while many of the patent claims begin by
describing “a multifunction card system,” ‘608 Claim 20 begins by describing “[a] loyalty card
system.” If this difference is to be accorded any meaning, the distinction must be between cards
capable of performing multiple functions and those that function only as a loyalty card. The
Court therefore concludes that “loyalty card” as it appears in Claim 20 of the ‘608 patent and
Claim 27 in the ‘787 patent describes a single card designed for and capable of performing a
single task—that is, a separate loyalty card.
Accordingly, I respectfully recommend that the Court adopt the following construction of
“loyalty card”: A card, separate from a card used to purchase goods or services, used to reward a
consumer’s loyalty account at the point of sale in real time as a purchase takes place.
15
c.
“Preselected Information Receiving Device”
“preselected information receiving device” (‘787 Patent: Claim 31)
Claim 31, Step E:
“e. transmitting said information to a preselected information
receiving device in order to receive said information.”
Alexsam’s Proposed
Construction
A device which has been
selected in advance so that it
can receive data.
MasterCard’s Proposed
Construction
A device, other than the preexisting standard retail pointof-sale device, preselected for
receiving the requested
information, such as an
electronic mail device,
facsimile device, or voice
response device.
The Court’s Construction
A device, such as an
electronic mail device,
facsimile device, or voice
response device, selected in
advance from among two or
more devices to receive the
requested information.
The central difference between the parties’ proposed constructions involves whether a
POS device may be a “preselected information receiving device.” The Court has an additional
concern with respect to whether either of the proposed constructions sufficiently addresses the
requirement that the device be selected in advance.
As indicated above, the claim refers to preselected information receiving devices without
describing what those devices might be. The relevant portion of the specification states that the
“means” for receiving information “may include electronic mail, facsimile, voice response, and
other similar means.” ‘787 Patent 10:33-34. Alexsam’s expert contends that a person of
ordinary skill in the art would understand the claim to be referring to any electronic device
capable of receiving and displaying the type of information envisioned in the invention,
including existing POS devices. Declaration of Ivan Zatkovich (“Zatkovich Decl.”) ¶ 40, Docket
Entry 165-1 (noting that “a point-of-sale device . . . would be an obvious choice since hospitals
and doctor[’]s offices both contained point-of-sale devices at the time of the invention,” and that
16
“[m]any point-of-sale devices [at that time] . . . had the multi-line displays capable of receiving
and displaying digital text information”). MasterCard contends that, because POS devices are
not among those listed in the relevant portion of the specification, a person of ordinary skill in
the art would understand the claim to exclude POS devices from the definition of a preselected
information receiving device. MasterCard’s Responsive Claim Construction Brief (“Def.’s
Reply”) at 10, Docket Entry 167.
As noted above, when determining the scope a patent, the claims are of “primary
importance.” Phillips, 415 F.3d at 1312 (quoting Yeomans, 94 U.S. at 570). Nothing in the
language of Claim 31 excludes a POS terminal from the definition of information receiving
device, or suggests that electronic mail, facsimile, and voice response devices more closely fit
the terms of the claim. Although the specification explicitly lists electronic mail, facsimile, and
voice response as included devices and makes no mention of POS devices, limitations from the
specification should not be read into the claims. Anchor Wall Sys., 340 F.3d at 1306.
Accordingly, while I conclude that listing the devices identified in the specification as examples
may be helpful to a finder, a construction that explicitly excludes POS devices is not supported
by the ordinary and customary meaning of the claim terms.
As I expressed at the claim construction hearing, I remain concerned that neither party’s
proposed construction sufficiently describes the meaning of a “preselected” device.
Tr. 111:2-20. The term “preselected” requires that there has been a “selection,” or an affirmative
act designating a device as the one to which information should be sent. As Alexsam
acknowledges, though, the patent does not describe a process or mechanism for the preselection
of any device. Id. 121:5-7. Accordingly, if the claim were construed as Alexsam suggests, every
receipt of information by means of a POS terminal, whether the POS device was affirmatively
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“selected” to receive the information or not, might arguably be a covered transaction. Indeed,
Alexsam seems to argue that every receipt of information over a POS device, even if the
information was received by that device simply because it was used to request the information,
would be a covered transaction. Id. 112:12-19. To avoid this overly broad construction, the
Court’s proposal requires that there be a selection of a device from among alternatives.
Accordingly, I respectfully recommend that the term “preselected information receiving
device” be construed as follows: A device, such as an electronic mail device, facsimile device, or
voice response device, selected in advance from among two or more devices to receive the
requested information.
IV.
The Term “Transmitting a Rejection Code to said Point-of-Sale Device if said
PIN Entered Does not Correspond to said Identification Number” (‘787 Patent,
Claim 31) Does not Render that Claim Indefinite.
A patent’s specification must “conclude with one or more claims particularly pointing out
and distinctly claiming the subject matter which the inventor . . . regards as the invention.”
35 U.S.C. § 112(b). In other words, patents have a “definiteness requirement.” See Nautilius,
Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124-25 (2014) (discussing 35 U.S.C. § 112(b)
and noting that “[a] lack of definiteness renders [a patent or claim] invalid”). To satisfy this
requirement, a patent’s claim, when “viewed in light of the specification and prosecution history,
[must] inform those skilled in the art about the scope of the invention with reasonable certainty.
The definiteness requirement, so understood, mandates clarity, while recognizing that absolute
precision is unattainable.” Id. at 2129.
MasterCard contends that Step D of Claim 31, “transmitting a rejection code to said
point-of-sale device if said PIN entered does not correspond to said identification number,” is
indefinite. Def.’s Mem. at 20-21. First, MasterCard argues that the specification does not define
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the term “rejection code” and does not describe the transmission of any code at all. Id. at 21.
Second, MasterCard points out that the term “said PIN entered” lacks an antecedent that might
inform the reader what the “said” PIN might be. Id. Third, MasterCard contends that Steps D
and E of the claim are incompatible with each other, because Step D describes transmission of a
rejection code, whereas Step E describes transmitting information, presumably after confirmation
that the PIN entered and the card user’s identification number match. Tr. 157:5-12. MasterCard
argues, in other words, that Claim 31 could be infringed only if Step D were not performed, but
that the claim as written indicates that both Steps D and E need to be performed to meet the
requirements of the claim. Thus, argues MasterCard, the claim is indefinite because there is “no
way to determine how [a person could] infringe” it. Id. 158:4-8.
Whether a claim is indefinite “must be decided in context.” Energizer Holdings, Inc. v.
Int’l Trade Comm’n, 435 F.3d 1366, 1370 (Fed. Cir. 2006). Thus, the failure to provide an
antecedent basis for a term does not necessarily render a claim indefinite. Id. Here, when
considered in the context of the entire patent, the term “rejection code” is readily understood as a
code that is transmitted when the PIN number entered is incorrect, with the result that the desired
transaction may not be completed. In the context of Claim 31, which describes an “information
retrieval card,” a rejection code indicates that the desired information will not be received. This
interpretation of the claim term is confirmed as one that would be understood by a person of
ordinary skill in the art by Alexsam’s expert. Zatkovich Decl. ¶¶ 26-28. Similarly, a reading of
the claim, particularly Step B, clarifies that “said PIN entered” refers to the entry of a PIN
assigned to the card to verify the identity of the user. Finally, as I noted at the claim construction
hearing, Step E is clearly meant as an alternative to Step D. Tr. 157:13-14. Per Step D, if the
incorrect PIN is entered, a rejection code is transmitted; per Step E, if the correct PIN is entered,
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the information is sent to the preselected device. Both cannot logically occur at the same time.
Contrary to MasterCard’s contention, it is clear that what the patent claims, though perhaps
inartfully, is a system with steps D and E as alternative outcomes, depending on whether a
correct PIN is entered. It is reasonably clear, therefore, that to conduct a covered transaction,
one would have to reach Step E, and avoid rejection under Step D. Alexsam has now stipulated
that a rejection under Step D would not result in a covered transaction under the license
agreement. Alexsam Letter at 3-4.
For the reasons stated above, the Court concludes that the phrase “transmitting a rejection
code to said point-of-sale device if said PIN entered does not correspond to said identification
number” informs a person skilled in the art about the scope of the claimed invention with
reasonable certainty. I therefore respectfully recommend that MasterCard’s contention that
Claim 31 of the ‘787 Patent is indefinite be rejected and that this phrase be given its plain
meaning.
CONCLUSION
For the aforementioned reasons, I respectfully recommend that the Court adopt the
following constructions of the following claims:
1. “debit/medical services card”: A card that can function as part of a multifunction card
system as both a debit card and a medical services card, the different functions depending
upon the database the system is directed to access when the card is used.
2. “loyalty card”: A card, separate from a card used to purchase goods or services, used to
reward a consumer’s loyalty account at the point of sale in real time as a purchase takes
place.
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3. “preselected information retrieval device”: A device, such as an electronic mail device,
facsimile device, or voice response device, selected in advance from among two or more
devices to receive the requested information.
I further respectfully recommend that the Court reject MasterCard’s contention that the phrase
“transmitting a rejection code to said point-of-sale device if said pin entered does not correspond
to said identification number” renders Claim 31 of the ‘787 patent indefinite under 32 U.S.C.
§ 112(b).
Any objections to the recommendations made in this Report must be submitted within
fourteen days after filing of the Report and, in any event, no later than June 25, 2018. See 28
U.S.C. § 636(b)(1); Fed. R. Civ. Proc. 72(b)(2). Failure to file timely objections may waive the
right to appeal the District Court’s order. See Small v. Sec’y of Health & Human Servs., 892
F.2d 15, 16 (2d Cir. 1989) (discussing waiver under the former ten-day limit).
/s/
Steven M. Gold
United States Magistrate Judge
Brooklyn, New York
June 11, 2018
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