AdvanceMe Inc v. RapidPay LLC

Filing 126

RESPONSE in Support re 101 MOTION for Leave to Amend Preliminary Invalidity Contentions filed by First Funds, LLC, Merchant Money Tree, Inc., Reach Financial, LLC. (mjc )

AdvanceMe Inc v. RapidPay LLC

Doc. 126

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 1 of163 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

EXHIBIT 1

Dockets.Justia.com

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 2 of263 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION ADVANCEME, INC. Plaintiff, v. RAPIDPAY, LLC, BUSINESS CAPITAL CORPORATION, FIRST FUNDS LLC, MERCHANT MONEY TREE, INC., REACH FINANCIAL, LLC and FAST TRANSACT, INC. d/b/a SIMPLE CASH Defendants. § § § § § § § § § § § § § § §

CAUSE NO. 6:05-CV-424 (LED)

DEFENDANTS FIRST FUNDS, LLC's, MERCHANT MONEY TREE, INC.'s, AND REACH FINANCIAL, LLC's REPLY IN SUPPORT OF THEIR MOTION FOR LEAVE TO AMEND PRELIMINARY INVALIDITY CONTENTIONS Defendants First Funds, LLC, Merchant Money Tree, Inc., and Reach Financial, LLC ("Defendants") hereby file their Reply in Support of their Motion for Leave to Amend Preliminary Invalidity Contentions and, in support hereof, would respectfully show the Court as follows: I. BACKGROUND As described in Defendants' Motion for Leave to Amend Preliminary Invalidity Contentions ("Motion"), Defendants have gone to great lengths to diligently pursue and collect evidence supporting invalidating prior art in this matter, including undertaking the daunting task of convincing their direct competitors to cooperate and to search for documents over a decade old. See Timeline of Facts Relevant to Defendants' Motion to Amend Invalidity Contentions ("Timeline"), attached hereto as Ex. F; Motion at 2-4. As soon as evidence and documents were
752,540

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 3 of363 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

located, Defendants have both (a) promptly provided the documents to Plaintiff AdvanceMe, Inc. ("AdvanceMe"), and (b) promptly incorporated the evidence and documents into, and served on AdvanceMe, invalidity charts identifying where each element of each claim may be found in the prior art systems. Id. Upon being told by AdvanceMe that it would object to the updated invalidity contentions, Defendants realized they had omitted to obtain leave and immediately filed the motion for leave to amend. Rather than explain how Defendants could have possibly been more diligent in their efforts to discover and disclose the Litle & Company prior art systems and supporting documentation, AdvanceMe, in its Opposition to Defendants' Motion for Leave to Amend Invalidity Contentions ("Opposition"), disregards the documented timeline of relevant facts set forth in Defendants' Motion and instead responds with assertions regarding when it thinks Defendants may have gained knowledge of the Litle & Company prior art. Further, AdvanceMe makes specious claims of hypothetical prejudice, all of which are either wholly unsupported or inapplicable to the instant case, as described herein. Having shown good cause for the proposed amendments of their Preliminary Invalidity Contentions ("Original Contentions"), Defendants respectfully request that the Court grant their Motion.1 II. ARGUMENT A. Defendants Have Shown Good Cause for the Proposed Amendments As the parties agree, the Court may grant Defendants' Motion if Defendants show good cause for the proposed amendments. See STMicroelectronics, Inc. v. Motorola, Inc., 307 F.
As explained in their Motion, Defendants seek leave to amend their Original Contentions to include the Litle & Company prior art systems. See Ex. G, Proposed Litle & Company Invalidity Claim Chart.
1

2

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 4 of463 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

Supp. 2d 845, 849 (E.D. Tex. 2004) (Davis, J.); Opposition at 9. Four considerations are relevant to the Court's determination: (1) Defendants' reasons for not including the proposed amendments by the scheduling order deadline; (2) the importance of the Litle & Company prior art systems; (3) potential prejudice in allowing the addition of the Litle & Company prior art systems; and (4) the availability of a continuance to cure such prejudice. See Alt v. Medtronic, 2006 U.S. Dist. LEXIS 4435 (E.D. Tex. Feb. 1, 2006) (Davis, J.). As explained in their Motion and below, each of these four factors weighs strongly in favor of permitting Defendants' requested amendments. AdvanceMe's only arguments in opposition are either contrary to the documented facts or unsupported assertions of prejudice. 1. Defendants Received the Litle & Co. Information & Documents After Their Preliminary Invalidity Contentions Were Due

As demonstrated in the Motion and reiterated herein, the first factor ­ the explanation for the delay ­ weighs heavily in favor of granting Defendants' proposed amendments. Defendants did not receive sufficient Litle & Co. information and documents to assert this prior art in good faith until July 14, 2006.2 See Motion at 2-4; Ex. F. Defendants promptly provided the

documents and their First Amended Preliminary Invalidity Contentions (including the initial Litle & Company disclosures) to AdvanceMe on July 20, 2006. Defendants brought this motion as soon as it was brought to Defendants' attention that such a motion for leave to amend was necessary to amend their Original Contentions. See Ex. H (Letter from Robert Matz to Hilary Preston dated September 1, 2006). AdvanceMe's attempt to attribute a lack of good faith or gamesmanship to the delay in bringing the motion is thus misplaced. Defendants have promptly provided all relevant information to AdvanceMe as it has become available to Defendants, as
2

As explained in Defendants' Motion, the proposed amendment further supplements the disclosures regarding Litle & Company made in Defendants' First Amended Invalidity Contentions served July 20, 2006. See Ex. G; Motion, Ex. C to Gray Decl.

3

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 5 of563 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

described in their Motion and herein.

Id.

Upon receiving additional Litle & Company

documents on July 25, 2006, Defendants promptly provided those documents to AdvanceMe on July 28, 2006 and provided AdvanceMe with their Second Amended Preliminary Invalidity Contentions (the amendments on which their Motion is based) on August 31, 2006. See Motion at 2-4; Ex. F. This documented timeline demonstrates that Defendants could not have reasonably met the scheduling order deadline of July 7, 2006 for the Litle & Company prior art systems and documents, despite their diligence. AdvanceMe's Opposition does nothing to undercut that demonstration. Instead, it responds by making bald and unsupported assertions about

Defendants' knowledge, all of which are contradicted by the objective facts. AdvanceMe argues that Defendants received "the Litle documents" in June, see Opposition at 11, although it fails to recognize that the only Litle documents received in June were fragments of a single postage advance agreement. See Ex. F; Ex. B to the Declaration of Joseph Gray in Support of Defendant's Motion ("Gray Declaration"). At that time, Defendants had not obtained enough information about Litle & Company (which was sold in 1995) to determine whether and to what extent Litle & Company practiced the claimed invention in the early 1990s. It was not until Defendants received additional information and additional

documentation on July 14, 2006 that Defendants were able to assert in good faith that Litle & Company publicly and commercially practiced U.S. Patent No. 6,942,281's (the "281 Patent") claimed invention. See Ex. F; Ex. C to Gray Declaration. Seven days later, on July 21, 2006, Defendants served their First Amended Preliminary Invalidity Contentions, which included the Litle & Company prior art systems and citations to the relevant documents that Defendants had received as of that date. See Ex. F.

4

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 6 of663 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

Relevant information has been difficult to obtain. Defendants had only limited access to Mr. Litle. Many relevant documents were in the possession of Paymentech (a multi-billion dollar processing company and competitor of Defendants, which evolved from First USA years after First USA bought Litle & Co. in 1995). Additionally, Mr. Litle is the CEO of a large processing company (also a competitor of Defendants') and has no immediate interest in the outcome of this litigation. See Ex. I. Defendants have painstakingly gained only limited access to Mr. Litle and have had an extremely difficult time convincing Paymentech to search for decade-old documents and provide them to Defendants. Defendants have exerted incredible efforts in their search for documentation regarding the Litle & Company prior art and have provided to AdvanceMe all relevant information they have obtained every step of the way.3 See Ex. F; Motion at 2-4. Indeed, Defendants now seek to supplement their contentions to include the Litle & Co. prior art systems and the documentary evidence that they received after July 7, 2006, and had promptly produced to AdvanceMe on July 21 and July 28, 2006. AdvanceMe's statement that "[t]he alleged prior that the Defendants now seek to add was known to the defendants weeks before they served their Preliminary Invalidity Contentions" Opposition at 1, is simply inaccurate, as it is directly contradicted by AmeriMerchant's documented correspondence with Tim Litle and Paymentech. 2. The Litle & Company Prior Art Systems Anticipate All Relevant Claims of the `281 Patent

As explained in Defendants' Motion, the Litle & Co. prior art systems and documents and the accompanying analyses in Defendants' proposed amendments, are critically important to

Defendants brought this motion as soon as it was brought to their attention that they had failed to file a motion for leave to amend their Original Contentions. See Ex. H (letter from Robert Matz). AdvanceMe's attempt to attribute a lack of good faith or gamesmanship to the delay in bringing the motion is thus misplaced. Defendants have promptly provided all relevant information to AdvanceMe as it has become available, as described in their Motion and herein.

3

5

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 7 of763 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

their defense of AdvanceMe's claims, as they establish invalidity of all relevant asserted claims. See Motion at 7; Ex. G. AdvanceMe, in its Opposition, does not explain any basis for

contending that Litle & Company does not constitute invalidating prior art, but rather states that Defendants "rely only on lawyer's argument." Opposition at 15. But Defendants do no such thing. The detailed facts demonstrating how Litle & Company's systems anticipated the relevant asserted claims are found in the July 21, 2006 amended Invalidity Contentions, as supplemented by the Litle & Company documents (produced to AdvanceMe on or before July 28, 2006) and in Defendants' further Amended Preliminary Invalidity Contentions (served August 30, 2006). AdvanceMe fails to mention that Mr. Litle testified at his deposition on September 6, 2006, that Defendants' proposed Amended Invalidity Contentions accurately describe the manner in which the Litle & Company systems anticipate all relevant claims of the patent-insuit. See Ex. J, Tim Litle Deposition Transcript at 123-158. AdvanceMe also fails to mention that it cross-examined Mr. Litle for about three hours and was unable to raise even one single basis for contending that any relevant asserted claims could somehow avoid anticipation by the Litle & Co. systems. As this Court has agreed that an amendment to include invalidating prior art weighs in favor of permitting the amendment, Defendants have satisfied this second prong of the analysis.4 See Alt, 2006 U.S. Dist. LEXIS 4435, *12-13. 3. AdvanceMe Will Suffer No Relevant Prejudice if the Court Permits the Amendment

As explained in Defendants' Motion and confirmed by AdvanceMe's Opposition, AdvanceMe will suffer no relevant prejudice if the Court permits the proposed amendments. Defendants included the initial framework for the Litle & Company prior art in their First
4

Defendants again note that their second proposed amendment is proposing to supplement their first amended Preliminary Invalidity Contentions of July 21, 2006 to include further support found in documents obtained after those Contentions were served.

6

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 8 of863 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

Amended Preliminary Infringement Contentions, which were served on AdvanceMe on July 21, 2006. See Ex. F. AdvanceMe was thus on notice of this prior art system two weeks after the scheduling order deadline. On July 28, 2006, eight days after serving their First Amended Preliminary Infringement Contentions, Defendants produced the additional documentation to AdvanceMe on which the entirety of Defendants' proposed amendments are based. See Ex. F. Further, trial is set for March 26, 2007, and discovery does not close until February 15, 2007. Both parties thus have ample time to conduct all necessary discovery. But, instead of addressing these facts directly, AdvanceMe ignores the precedent of this Court that permitted an amendment seven months after the original deadline for submission of preliminary invalidity contentions (and after the Markman hearing)5 and proffers several stock claims of prejudice that are wholly disconnected from the facts of this case. AdvanceMe claims that Defendants' proposed amendments threaten "to throw the discovery process into chaos" because AdvanceMe has "prepared discovery requests, responded to discovery, conducted depositions, and prepared for claims construction on the assumption that the Defendants' original Preliminary Invalidity Contentions would govern Defendants' invalidity arguments in this case." Opposition at 17. AdvanceMe also inexplicably claims that it would have to propound "new requests for admission and new requests for production." Id. AdvanceMe's specious claims of prejudice may appear credible in a vacuum, but they are wholly inapplicable to this case. First, as the parties in this action are to produce all documents relevant to any claim or defense without discovery requests, pursuant to the patent rules and Discovery Order, and as AdvanceMe has not served a single request for admission on Defendants, AdvanceMe's claim of prejudice based on propounding "new requests for admission and new requests for production"

5

See Alt v. Medtronic, Inc., 2006 U.S. Dist. LEXIS 4435, *13-14 (E.D. Tex. Feb. 1, 2006).

7

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 9 of963 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page of

are questionable at best. Regarding "respond[ing] to discovery," AdvanceMe has not produced a single non-publicly available document in this action,6 but instead has only produced several thousand pages of publicly available prosecution histories, and the articles and patents cited therein. Nor has AdvanceMe responded to the single interrogatory propounded by any

Defendant. AdvanceMe does not explain how its lack of discovery response has in any way been affected by the proposed amendments. Second, AdvanceMe argues that it has "prepared for claims construction on the assumption that Defendants' Preliminary Invalidity Contentions would govern Defendants' arguments in this case." Opposition at 11. While it is clear from AdvanceMe's proposed constructions that it is attempting to exclude prior art through erroneous claim construction, as explained in Defendants' Responsive Claim Construction Brief at 5-12 and 16-21, invalidity contentions and prior art are wholly irrelevant to claim construction analysis and thus provide no basis for AdvanceMe's claims of prejudice. See Phillips v. AWH Corp., 415 F.3d 1303, 1327 (Fed. Cir. 2005) (en banc). Third, only two depositions have been taken in this case, both of which were noticed by Defendants: Mr. Litle and the alleged inventor, Barbara Johnson.7 At Mr. Litle's deposition on September 6, 2006, all parties examined Mr. Litle on the documents that AmeriMerchant received by July 25, 2006 and that Defendants produced to AdvanceMe on or before July 28, 2006. In other words, AdvanceMe received all Litle & Company documents on which

Defendants' proposed amendments are based, and on which Defendants' questioning at Mr.

However, yesterday, Plaintiff, for the first time produced some discovery, in the form of excerpts from three depositions in another case, where Defendants had been requesting the entire deposition transcripts for some time. Barbara Johnson was deposed on June 28, 2006 at the location of AdvanceMe's choice, well before the July 20, 2006 scheduling order deadline for submitting preliminary invalidity contentions.
7

6

8

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 10 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 10 of

Litle's deposition was largely based, over a month prior to Mr. Litle's deposition, and AdvanceMe had the opportunity to question Mr. Litle based on all of those documents. Further, AdvanceMe served a subpoena requesting additional documents on Mr. Litle, and Mr. Litle produced all relevant documents pursuant to that subpoena in advance of the deposition. AdvanceMe thus had every opportunity to examine Mr. Litle based on all relevant documents at his deposition on September 6th, which it did for roughly three hours. AdvanceMe also fails to mention that upon receiving Defendant's updated invalidity contentions on August 31, 2006, AdvanceMe contacted Mr. Litle, asked him questions, and told him that his deposition would be taken on September 6, 2006. How can AdvanceMe now pretend it was not ready for the deposition on the date it chose for the deposition? As shown above, AdvanceMe's stock claims of prejudice are untenable under the facts of this case. The reality is that, despite AdvanceMe's rhetoric of "enough [is] enough," Opposition at 2, the trial in this case is about six months away and discovery does not close for over four months, and AdvanceMe will suffer no actual prejudice from the Court's granting Defendants' Motion. This factor thus also weighs in favor of permitting Defendants' proposed amendments. 4. Availability of a Continuance

As explained in Defendants' Motion, any prejudice suffered by AdvanceMe could be cured by a continuance of the pre-trial deadlines. Motion at 9. AdvanceMe does not argue that such a continuance would not cure any prejudice suffered; instead, AdvanceMe claims that its "planning for [certain unrelated] discovery would have to be modified," including the claim construction hearing and 30(b)(6) depositions. Opposition at 17. AdvanceMe, however, fails to explain how its "planning" for this discovery would "have to be modified," or why a continuance would not resolve any such "planning" issues. This factor thus weighs heavily in favor of permitting Defendants' proposed amendments. 9

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 11 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 11 of

B.

The Court Should Deny AdvanceMe's Premature Request In what appears to be AdvanceMe's true motivation in opposing Defendants' meritorious

Motion, AdvanceMe argues that it would have been willing to agree to the amended Invalidity Contentions provided that this should "be the last set of amended contentions that Defendants are permitted to serve in this case." Opposition at 17. AdvanceMe's novel suggestion of a

preemptive approach to future amendments, even if based on good cause, is not only unsupported, but contrary to the interests of justice. Indeed, such an argument reveals the lack of a credible argument in opposition to the current Motion. The Court should not permit

AdvanceMe to cower behind stock claims of prejudice in an attempt to avoid introduction or development of invalidating prior art. Third party depositions to provide additional evidence to support the disclosed prior art are still being scheduled,8 and additional facts regarding prior art systems which were used commercially more than 10 years ago by various companies, many of whom no longer exist, are still being investigated on an urgent basis. Defendants thus

respectfully request that AdvanceMe's request for an arbitrary, preemptive exclusion of any future proposed amendments to Defendants' Preliminary Invalidity Contentions be disregarded. III. CONCLUSION Defendants therefore respectfully request that the Court grant their motion for leave to amend, and that any future motions for leave to amend be considered on their own merits.

For example, the deposition of Lee Suckow (the CEO of Clever Ideas-LeCard, Inc., another invalidating prior art system) is scheduled for Wednesday, October 4, 2006.

8

10

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 12 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 12 of

October 3, 2006

Respectfully submitted, By: /s/ Willem G. Schuurman Willem G. Schuurman Texas State Bar No. 17855200 [e-mail] Joseph D. Gray Texas State Bar No. 24045970 [e-mail] VINSON & ELKINS L.L.P. 2801 Via Fortuna, Suite 100 Austin, Texas 78746 Telephone: [phone] Facsimile: 512.236.3476 -andHilary L. Preston [e-mail] VINSON & ELKINS L.L.P. 666 Fifth Avenue ­ 26th Floor New York, NY 10103 Telephone: [phone] Facsimile: 212.237.0100 -andDouglas R. McSwane, Jr. State Bar No. 13861300 POTTER MINTON A Professional Corporation 110 N. College 500 Plaza Tower (75702) P.O. Box 359 Tyler, Texas 75710 Telephone: [phone] Facsimile: 903.593.0846 E-mail: [e-mail] Counsel for Defendants First Funds, LLC, Merchant Money Tree, Inc., and Reach Financial, LLC

11

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 13 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 13 of

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION ADVANCEME, INC. Plaintiff, v. RAPIDPAY, LLC, BUSINESS CAPITAL CORPORATION, FIRST FUNDS LLC, MERCHANT MONEY TREE, INC., REACH FINANCIAL, LLC and FAST TRANSACT, INC. d/b/a SIMPLE CASH Defendants. § § § § § § § § § § § § § § §

CAUSE NO. 6:05-CV-424 (LED)

CERTIFICATE OF SERVICE I HEREBY CERTIFY that all counsel of record who have consented to electronic service are being served a copy of this document via the court's CM/ECF system per Local Rule CV5(a)(3) on this the 3rd day of October, 2006. Any other counsel of record will be served by first class mail on this same date. /s/ Willem G. Schuurman Willem G. Schuurman

12

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 14 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 14 of

EXHIBIT F

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 15 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 15 of

EXHIBIT F Timeline of Facts Relevant to Defendants' Motion to Amend Invalidity Contentions February 27, 2006: AdvanceMe adds Defendants (the "Rapidpay Defendants") as defendants in the instant action and files an action against AmeriMerchant, LLC ("AmeriMerchant") (together with the Rapidpay Defendants, "Defendants") similarly claiming infringement of the `281 Patent. April 20, 2006: Defendants retain Vinson & Elkins L.L.P. ("V&E") as national counsel. April 26, 2006: David Goldin (of AmeriMerchant) sends an email to Tim Litle containing David Goldin's contact information. See Ex. A to Gray Declaration. June 19, 2006: Paymentech provides to AmeriMerchant (which, in turn, provides to the Rapidpay Defendants) fragments of supporting documentation for a Litle & Company "postage advance" agreement with a merchant. See Ex. B to Gray Declaration.1 This documentation, alone, does not provide the Defendants with sufficient information to include Litle & Company as a prior art reference in their Preliminary Invalidity Contentions. Defendants' efforts to discover additional documentation continue. June 28, 2006: Deposition of the alleged inventor, Barbara Johnson. Examination did not involve Litle & Company. July 7, 2006: The Rapidpay Defendants serve their Preliminary Invalidity Contentions. July 14, 2006: Paymentech provides to AmeriMerchant (which, in turn, provides to the Rapidpay Defendants) additional fragments of supporting documentation evidencing Litle & Company's public and commercial use of its "postage advance" product. See Motion, Ex. C to Gray Declaration. At this point, based on both sets of documents they have received and factual investigations to date, Defendants have a good faith basis for including Litle & Company as a prior art reference in their Preliminary Invalidity Contentions. July 20 and 21, 2006: AmeriMerchant serves its Preliminary Invalidity Contentions in the AmeriMerchant action; the Rapidpay Defendants serve their Amended Preliminary Invalidity Contentions (amended to include Litle & Company prior art reference); and Defendants provide to AdvanceMe all Litle & Company supporting documentation they have received to date.
1

AmeriMerchant received these first fragments of documentation on June 19, 2006. The fax header accompanying the documents reveals this date, although the fax cover sheet improperly states "March 3, 2006." See Motion, Ex. B to Gray Declaration. These documents were first received by AmeriMerchant on June 19, 2006, as correctly revealed by the fax header.

1

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 16 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 16 of

July 25, 2006: Defendants finally receive from Paymentech a complete "postage advance" agreement and additional supporting documentation regarding the systems and methods practiced by Litle & Company prior to the filing of the `281 Patent. See Motion, Ex. D to Gray Declaration. July 28, 2006: Defendants produce all Litle & Company documentation received since July 20, 2006 to AdvanceMe. August 30 and 31, 2006: Defendants served on AdvanceMe amended preliminary invalidity contentions in both actions reflecting the additional information in the documents that were produced by July 28, 2006. These amended preliminary invalidity contentions added no new prior art references; they simply further explained the Litle & Company systems and methods that were disclosed in AmeriMerchant's Preliminary Invalidity Contentions and the Rapidpay Defendants' First Amended Preliminary Invalidity Contentions, served July 20, 2006. September 6, 2006: Deposition of Tim Litle. All parties, including AdvanceMe, examined Tim Litle based on Litle & Company documents available to all parties over one month earlier.

2

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 17 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 17 of

EXHIBIT G

L I U C P P R S

&C . C C P N . 6,941,281

1. A method for automated payment, comprising:

Litle & Co. ("Litle") utilized a method for automated payments to Litle as repayment of obligations owed by merchants either for postage or cash advances. See, e.g., Litle & Co. Member Agreement, LI_00017-29 (hereafter "Member Agreement"); see, e.g., Demand Promissory Note for Postage Advances between Museum Publications of America and Litle & Co., dated September 27, 1993, LI_00033-35 (hereafter "Promissory Note"); see, e.g., February 17, 1994 Letter from Robert George to Michael Duffy, LI_00030-31; see M. Kripalani, T. Pouschine, "People thought I was nuts", F , June 8, 1992, v.149, n12, p120(2), LI_00001-03 (hereafter "Forbes Article").

at a merchant,

The merchant, either directly or via its agent, would accept a customer identifier, e.g., a card, as payment from the customer. See Member Agreement, accepting a customer identifier as payment from LI_00017-29. the customer, "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id.

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 18 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 18 of

U C "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

and electronically forwarding information related The merchant, either directly or via its agent, electronically forwarded to the payment to a computerized merchant information related to the payment to Litle, the computerized merchant processor. processor; "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018 (showing that the merchant electronically forwarded information related to the payment to Litle, a computerized merchant processor). "SALES RECORD means all documents or data presented to LITLE as evidence of a CARD SALE." Id. at LI_00019 (showing that the merchant electronically accepts the customer identifier).

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 19 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 19 of

2

U C "c. MEMBER shall complete each SALES RECORD to include a notation in the space provided for the CARDHOLDERS's signature that the sale was initiated by mail order (MO), telephone order (TO) or pre-authorized order (PO) (except for sales made in person, for which the CARDHOLDER's signature shall be obtained). . . ." Id. at LI_00019 (showing that the merchant electronically forwarded information related to the payment to Litle, a computerized merchant processor). "SALES RECORD means all documents or data presented to LITLE as evidence of a CARD SALE." Id. at LI_00019. "Litle & Co. continues to be your credit card processor and will continue to work directly with you to provide a high level of customer and technical service." February 28, 1992 letter from Tim Litle to Robert George, LI_00016. S R

S

P

N . 6,941,281

at the computerized merchant processor,

"Litle & Co. continues to be your credit card processor and will continue to work directly with you to provide a high level of customer and technical service." acquiring the information related to the payment February 28, 1992 letter from Tim Litle to Robert George, LI_00016. from the merchant, authorizing and settling the payment, "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS . . . ." Member Agreement at LI_00018. "In consideration of Litle & Co. making advances for the account of [Museum Publications of America] to United States Postal Service, [Museum Publications of America] agrees to pay on demand the Principal Amount of Advance plus management fee to Litle & Co., or order. MEMBER further agrees that all CHARGE CARD transactions from all divisions and subsidiaries will be processed by Litle & Co. while any amount owed under this note is still outstanding. Notwithstanding that such amounts are otherwise payable on demand, MEMBER agrees that . . . (ii) the Daily Repayments shall be deducted from daily NET PROCEEDS. . . ."

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 20 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 20 of

and forwarding at least a portion of the payment to a computerized payment receiver as payment of at least a portion of an obligation made by the merchant;

3

U C Promissory Note at LI_00033 (showing that a portion of the card payments were forwarded to Litle, as a computerized payment receiver, as payment of at least a portion of an obligation that arose when Litle advanced postage costs ("Principal Amount of Advance") to merchant). "NET PROCEEDS is an amount equal to: The GROSS PROCEEDS, Less LITLE FEES, Less RELEASED CHARGEBACKS (if no RESERVE exists), Less any other amounts due from MEMBER to LITLE, Less any PREPAYMENTS." Member Agreement at LI_00018. "Litle agreed to finance [Exposures, Inc.'s ("Exposures")] postage by discounting his [Exposures'] credit card receivables." See Forbes Article at LI_00003 (describing how a portion of the payment from credit card companies was forwarded as payment on Exposures' obligation to Litle, as a computerized payment receiver, for financing postage costs, with the remainder, the discounted credit card receivables, being forwarded to Exposures). "As security for the obligations of Boston Publishing (the Borrower) under such financing agreements, Hanover Finance is being granted a security interest in our inventory, certain accounts and substantially all of the tangible and intangible personal property of Boston Publishing, including, without limitation, all rights of the Borrower to receive payments in respect of Card Sales from Litle & Co. . . . 1. Upon written instruction from Hanover Finance or assignees of Hanover Finance, designated in writing by Hanover Finance, without further action by Boston Publishing, you will make all payments of Net Proceeds or any other credits, reserves, deposits, balances, refunds or other amounts now or hereafter due to Boston Publishing under the Member Agreement in respect of Card Sales directly by wire transfer, to such account or accounts as Hanover Finance may designate in writing (the "Accounts")." February 17, 1994 Letter from Robert George to Michael Duffy at LI_00030-31 (showing that Litle forwarded a portion of the payment to the loan payment S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 21 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 21 of

4

U C receiver, e.g., Hanover Finance, as payment of at least a portion of an obligation made by the merchant, e.g., Boston Publishing). S R

S

P

N . 6,941,281

and at the computerized payment receiver,

receiving the portion of the payment forwarded by the computerized merchant processor and applying that portion to the outstanding obligation made by the merchant to reduce such obligation.

"In consideration of Litle & Co. making advances for the account of [Museum Publications of America] to United States Postal Service, [Museum Publications of America] agrees to pay on demand the Principal Amount of Advance plus management fee to Litle & Co., or order. MEMBER further agrees that all CHARGE CARD transactions from all divisions and subsidiaries will be processed by Litle & Co. while any amount owed under this note is still outstanding. Notwithstanding that such amounts are otherwise payable on demand, MEMBER agrees that . . . (ii) the Daily Repayments shall be deducted from daily NET PROCEEDS. . . ." Promissory Note at LI_00033 (showing that a portion of the payment is received by Litle as repayment of an obligation that arose when Litle advanced postage costs ("Principal Amount of Advance") to merchant); see Promissory Note Repayment Schedule at LI_00035 (showing that Litle received and applied the forwarded portion of the payment to Museum Publication of America's outstanding obligation to Litle). "NET PROCEEDS is an amount equal to: The GROSS PROCEEDS, Less LITLE FEES, Less RELEASED CHARGEBACKS (if no RESERVE exists), Less any other amounts due from MEMBER to LITLE, Less any PREPAYMENTS." Member Agreement at LI_00018.

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 22 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 22 of

2. The method of claim 1 wherein the accepting "WHEREAS, LITLE and NPC are engaged in the business of processing paperstep comprises accepting a credit card number as based and electronic data representing transactions conducted through the use of the customer identifier. CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK

5

U C CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

3. The method of claim 1 wherein the accepting It would have been obvious to a person of ordinary skill in the art at the time of step comprises accepting a debit card number as the alleged invention of Plaintiff's asserted claims to apply mechanisms and the customer identifier. methods in use for one type of customer identifier to another type of customer identifier, e.g. for debit cards as well as credit cards. And the statements by the alleged inventor and by the examiner, and the language of the patent itself makes clear that a person of ordinary skill in the art would be motivated to make the method or system work in the same way for any customer identifier, including debit cards. "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 23 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 23 of

6

U C CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 24 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 24 of

4. The method of claim 1 wherein the accepting It would have been obvious to a person of ordinary skill in the art at the time of step comprises accepting a smart card number as the alleged invention of Plaintiff's asserted claims to apply mechanisms and the customer identifier. methods in use for one type of customer identifier to another type of customer identifier, e.g. for smart cards as well as credit cards. And the statements by the alleged inventor and by the examiner, and the language of the patent itself makes clear that a person of ordinary skill in the art would be motivated to make the

7

U C method or system work in the same way for any customer identifier, including smart cards. "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 25 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 25 of

5. The method of claim 1 wherein the accepting "WHEREAS, LITLE and NPC are engaged in the business of processing paper-

8

U C S R

S

P

N . 6,941,281

step comprises accepting a charge card number based and electronic data representing transactions conducted through the use of as the customer identifier. CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019.

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 26 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 26 of

6. The method of claim 1 wherein the accepting "c. MEMBER shall complete each SALES RECORD to include a notation in the step comprises accepting the customer identifier space provided for the CARDHOLDER's signature that the sale was initiated by at a merchant location. mail order (MO), telephone order (TO) or pre-authorized order (PO) (except for sales made in person, for which the CARDHOLDER's signature shall be

9

U C obtained). . . ." Member Agreement at LI_00019. S R

S

P

N . 6,941,281

7. The method of claim 1 wherein the accepting "c. MEMBER shall complete each SALES RECORD to include a notation in the step comprises electronically accepting the space provided for the CARDHOLDER's signature that the sale was initiated by customer identifier. mail order (MO), telephone order (TO) or pre-authorized order (PO) (except for sales made in person, for which the CARDHOLDER's signature shall be obtained) . . . ." Member Agreement at LI_00019. "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS . . . ." Member Agreement at LI_00018 (showing that the merchant electronically accepts the customer identifier). "SALES RECORD means all documents or data presented to LITLE as evidence of a CARD SALE." Id. at LI_00019 (showing that the merchant electronically accepts the customer identifier). Litle would accumulate the payments until a predetermined amount was reached and then forward at least a portion of the accumulated payments to the payment receiver. See, e.g., Promissory Note Repayment Schedule at LI_00035 (outlining specified daily and weekly payment amount).

8. The method of claim 1 wherein the steps performed at the merchant processor further comprise accumulating the payments until a predetermined amount is reached and then forwarding at least a portion of the accumulated payments to the payment receiver.

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 27 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 27 of

9. The method of claim 1 wherein the steps Litle would periodically forward at least a portion of the payment to the payment performed at the merchant processor comprise receiver. See, e.g., Promissory Note Repayment Schedule at LI_00035 (outlining periodically forwarding at least a portion of the daily and weekly payment schedules). payment to the payment receiver. "In consideration of Litle & Co. making advances for the account of [Museum Publications of America] to United States Postal Service, [Museum Publications of America] agrees to pay on demand the Principal Amount of Advance plus management fee to Litle & Co., or order. MEMBER further agrees that all CHARGE CARD transactions from all divisions and subsidiaries will be 10

U C processed by Litle & Co. while any amount owed under this note is still outstanding. Notwithstanding that such amounts are otherwise payable on demand, MEMBER agrees that . . . (ii) the Daily Repayments shall be deducted from daily NET PROCEEDS. . . ." Promissory Note at LI_00033 (showing that payments were periodically forwarded). S R

S

P

N . 6,941,281

10. A system for automated payment of an Litle utilized a system for automated payments to Litle as repayment of obligation made by a merchant, comprising: obligations owed by merchants either for postage or cash advances. See Member Agreement; Promissory Note; February 17, 1994 Letter from Robert George to Michael Duffy; Forbes Article.

at a merchant,

The merchant, either directly or via its agent, would accept a customer identifier as payment from the customer. Means for accepting a customer identifier as means for accepting a customer identifier as payment existed, including, on information and belief, a magnetic card reader, payment from the customer and keyboard input and/or telephone.

"WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for for electronically forwarding information related processing and to sell to FNBL the SALES RECORDs generated with BANK to the payment to a computerized merchant CARDs and the indebtednesses represented thereby." processor, Member Agreement at LI_00018 (showing that the merchant maintained a wherein the merchant associated with the magnetic card reader and/or keyboard input and/or telephone for accepting a payment has an outstanding obligation to a third customer identifier and electronically forwarded information related to the party; payment to Litle, a computerized merchant processor). "c. MEMBER shall complete each SALES RECORD to include a notation in the space provided for the CARDHOLDERS's signature that the sale was initiated by mail order (MO), telephone order (TO) or pre-authorized order (PO) (except for

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 28 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 28 of

11

U C sales made in person, for which the CARDHOLDER's signature shall be obtained). . . ." Id. at LI_00019 (showing that the merchant maintained a magnetic card reader and/or keyboard input and/or telephone for accepting a customer identifier and electronically forwarded information related to the payment to Litle, a computerized merchant processor). "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00018. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. "In consideration of Litle & Co. making advances for the account of [Museum Publications of America] to United States Postal Service, [Museum Publications of America] agrees to pay on demand the Principal Amount of Advance plus management fee to Litle & Co., or order. MEMBER further agrees that all CHARGE CARD transactions from all divisions and subsidiaries will be processed by Litle & Co. while any amount owed under this note is still outstanding. Notwithstanding that such amounts are otherwise payable on demand, MEMBER agrees that . . . (ii) the Daily Repayments shall be deducted S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 29 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 29 of

12

U C from daily NET PROCEEDS. . . ." Promissory Note at LI_00033 (showing that Litle acted as the merchant processor and that the merchant had an outstanding obligation that arose when Litle advanced postage costs ("Principal Amount of Advance") to merchant). "As security for the obligations of Boston Publishing (the Borrower) under such financing agreements, Hanover Finance is being granted a security interest in our inventory, certain accounts and substantially all of the tangible and intangible personal property of Boston Publishing, including, without limitation, all rights of the Borrower to receive payments in respect of Card Sales from Litle & Co. . . . 1. Upon written instruction from Hanover Finance or assignees of Hanover Finance, designated in writing by Hanover Finance, without further action by Boston Publishing, you will make all payments of Net Proceeds or any other credits, reserves, deposits, balances, refunds or other amounts now or hereafter due to Boston Publishing under the Member Agreement in respect of Card Sales directly by wire transfer, to such account or accounts as Hanover Finance may designate in writing (the "Accounts")." February 17, 1994 Letter from Robert George to Michael Duffy at LI_00030-31 (showing that the merchant, e.g., Boston Publishing, had an outstanding obligation to a third party, e.g., Hanover Finance). S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 30 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 30 of

and at the computerized merchant processor,

The language of the patent makes clear that a merchant processor acquires payment information and authorizes and settles the payment. On information and means for receiving the information related to belief, the means for performing these functions and for forwarding a portion of the payment from the merchant, the payment to the third party to reduce the obligation is a modem and computer running appropriate software. means for authorizing and settling the payment, "Litle & Co. continues to be your credit card processor and will continue to work directly with you to provide a high level of customer and technical service." February 28, 1992 letter from Tim Litle to Robert George at LI_00016.

13

U C S R

S

P

N . 6,941,281

and means for forwarding a portion of the "WHEREAS, LITLE and NPC are engaged in the business of processing paperpayment to the third party to reduce the based and electronic data representing transactions conducted through the use of obligation. CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "In consideration of Litle & Co. making advances for the account of [Museum Publications of America] to United States Postal Service, [Museum Publications of America] agrees to pay on demand the Principal Amount of Advance plus management fee to Litle & Co., or order. MEMBER further agrees that all CHARGE CARD transactions from all divisions and subsidiaries will be processed by Litle & Co. while any amount owed under this note is still outstanding. Notwithstanding that such amounts are otherwise payable on demand, MEMBER agrees that . . . (ii) the Daily Repayments shall be deducted from daily NET PROCEEDS. . . ." Promissory Note at LI_00033 and Promissory Note Repayment Schedule at LI_00035 (showing that a portion of card payments are forwarded to Litle, as a computerized payment receiver, to reduce the obligation that arose when Litle advanced postage costs ("Principal Amount of Advance") to merchant). "NET PROCEEDS is an amount equal to: The GROSS PROCEEDS, Less LITLE FEES, Less RELEASED CHARGEBACKS (if no RESERVE exists), Less any other amounts due from MEMBER to LITLE, Less any PREPAYMENTS." Member Agreement at LI_00018. "As security for the obligations of Boston Publishing (the Borrower) under such financing agreements, Hanover Finance is being granted a security interest in our

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 31 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 31 of

14

U C inventory, certain accounts and substantially all of the tangible and intangible personal property of Boston Publishing, including, without limitation, all rights of the Borrower to receive payments in respect of Card Sales from Litle & Co. . . . 1. Upon written instruction from Hanover Finance or assignees of Hanover Finance, designated in writing by Hanover Finance, without further action by Boston Publishing, you will make all payments of Net Proceeds or any other credits, reserves, deposits, balances, refunds or other amounts now or hereafter due to Boston Publishing under the Member Agreement in respect of Card Sales directly by wire transfer, to such account or accounts as Hanover Finance may designate in writing (the "Accounts")." February 17, 1994 Letter from Robert George to Michael Duffy at LI_00030-31 (showing that Litle could forward a portion of the payment to the loan payment receiver, e.g., Hanover Finance, to reduce the merchant's, e.g., Boston Publishing, obligation). S R

S

P

N . 6,941,281

11. The system of claim 10 wherein the The merchant, e.g., Museum Publications of America, accepted credit cards from accepting means comprises means for accepting customers for payment. Means for accepting a credit card number as the a credit card number as the customer identifier. customer identifier included, on information and belief, a magnetic card reader, keyboard input and/or telephone. "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 32 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 32 of

15

U C CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

12. The system of claim 10 wherein the It would have been obvious to a person of ordinary skill in the art at the time of accepting means comprises means for accepting the alleged invention of Plaintiff's asserted claims to apply systems and means in a debit card number as the customer identifier. use for one type of customer identifier to another type of customer identifier, e.g. for debit cards as well as credit cards. And the statements by the alleged inventor and by the examiner, and the language of the patent itself makes clear that a person of ordinary skill in the art would be motivated to make the method or system work in the same way for any customer identifier, including debit cards. Debit card numbers may be accepted, for example, using the merchant's magnetic card reader, keyboard input and/or telephone. "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 33 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 33 of

16

U C RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 34 of 63 63 C se 6:05-cv-00424-LED Document 124-3 Filed 10/04/2006 Page 34 of

13. The system of claim 10 wherein the It would have been obvious to a person of ordinary skill in the art at the time of accepting means comprises means for accepting the alleged invention of Plaintiff's asserted claims to apply systems and means in a smart card number as the customer identifier. use for one type of customer identifier to another type of customer identifier, e.g. for smart cards as well as credit cards. And the statements by the alleged inventor and by the examiner, and the language of the patent itself makes clear that a person of ordinary skill in the art would be motivated to make the method or system work in the same way for any customer identifier, including smart cards. Smart card numbers may be accepted, for example, using the merchant's

17

U C magnetic card reader, keyboard input and/or telephone. "WHEREAS, LITLE and NPC are engaged in the business of processing paperbased and electronic data representing transactions conducted through the use of CHARGE CARDS, and WHEREAS, MEMBER desires to honor CHARGE CARDS in connection with the retail sale of PRODUCTS to MEMBER's customers, to submit SALES RECORDs and REFUNDs representing such transactions to LITLE for processing and to sell to FNBL the SALES RECORDs generated with BANK CARDs and the indebtednesses represented thereby." Member Agreement at LI_00018. "CHARGE CARD is the plastic BANK CARD or T&E CARD issued by a CARD ORGANIZATION to the CARDHOLDER and the charge account number designated on the card, either of which MEMBER accepts from customers as payment for their purchases from MEMBER." Id. "BANK CARD means a valid and unexpired CHARGE CARD issued by an ISSUING MEMBER of MCI or VISA which contains the MasterCard service mark or Visa's Blue, White and Gold Bands Design service mark. A BANK CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. "CARD ORGANIZATION is VISA, MCI or the issuer of a T&E CARD." Id. "T&E CARD is a valid and unexpired Travel and Entertainment CHARGE CARD issued by American Express, Carte Blanche, Diner's Club or Discover. A T&E CARD shall be deemed valid on and after the effective date, if shown, and through and including the expiration date embossed thereon." Id. at LI_00019. S R

S

P

N . 6,941,281

Casea6:05-cv-00424-LED-JDL Document 126 Filed 10/06/2006 Page 35 of 63 63 C se 6:05-cv-00424-LED Document 124