AdvanceMe Inc v. RapidPay LLC

Filing 234

REPLY to Response to Motion re 215 SEALED PATENT MOTION - Defendants' Response to Plaintiff's Objections to Evidence and Argument in Defendants' Motion for Partial Summary Judgment of Patent Invalidity filed by First Funds, LLC, Merchant Money Tree, Inc., Reach Financial, LLC. (Attachments: # 1 Text of Proposed Order # 2 Exhibit A# 3 Exhibit B# 4 Exhibit C# 5 Exhibit D# 6 Exhibit E# 7 Exhibit F# 8 Exhibit G)(Gray, Joseph)

AdvanceMe Inc v. RapidPay LLC

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EXHIBIT B

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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. DEFENDANTS' THIRD AMENDED P.R. 3-3 INVALIDITY CONTENTIONS Pursuant to Patent Rules ("P.R.") 3-3 and 3-6(a) of the Rules of Practice for Patent Cases before the Eastern District of Texas, Defendants First Funds LLC, Merchant Money Tree, Inc., and Reach Financial LLC ("Defendants") submit the following amended invalidity contentions. These contentions pertain to Claims 1-19 of U.S. Patent No. 6,941,281 (the `281 Patent). Defendants submit, however, that AdvanceMe, Inc. ("AdvanceMe") has not fully complied with its obligation to submit specific Infringement Contentions relating to those elements that Plaintiff believes are not literally present in the Accused Instrumentalities, and are alleged to be present under the doctrine of equivalents. AdvanceMe's Amended Infringement Contentions at 3; see P.R. 3-1. Nor has AdvanceMe submitted specific Infringement Contentions with respect to separate theories of direct infringement, contributory infringement, or inducement of infringement. Further, Defendants submit that AdvanceMe has not fully complied with its obligation to submit specific Infringement Contentions relating to Claims 8 and 17, in that AdvanceMe's Contentions do not identify any ability of the Accused Instrumentalities to CASE NO. 6:05-CV-424 LED

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"accumulate payments until a predetermined amount is reached." Infringement Contentions at 14, 17; see P.R. 3-1.

AdvanceMe's Amended

Defendants have based these Amended Invalidity Contentions on the Court's claim construction. Because AdvanceMe has not yet provided Defendants with reasonably specific Infringement Contentions, and discovery and fact investigations are ongoing, Defendants reserve the right to supplement these Amended Invalidity Contentions. 1. PRIOR ART Attached as Exhibits 1-6 are claim charts respectively indicating how prior art items 1-6 anticipate every limitation of at least certain of Claims 1-19 of the `281 Patent based on this Court's claim construction. To the extent any limitation is deemed not to be exactly met by an item of prior art, Defendants submit that any differences would have been obvious to one skilled in the art at the time of the alleged invention in view of the state of the art and knowledge of those skilled in the art. Prior art items 1-6 individually and collectively anticipate or render obvious all claims of the `281 Patent.

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Publication Title 1. Clever Ideas-- LeCard documents1 (1992-1996)

Item publicly used or known Clever Ideas--LeCard, Inc. ("Clever Ideas") offered a cash or advertising advance that was repaid by a merchant utilizing a system and method of automated payment. Clever Ideas advanced a sum of money or an amount of advertising to restaurants in exchange for the restaurant providing food and beverage credit for Diners Club/LeCard cardholders. The restaurant's contractual obligation to repay the credit amount would be automatically repaid as customers paid for food and beverages with a Diners Club/LeCard card. Diners Club acquired, authorized and settled Diners Club/LeCard cards, then forwarded a portion of the payment to Clever Ideas as payment of the restaurant's outstanding obligation. Clever Ideas received and applied that portion to the restaurant's cash advance or advertising obligation. The alleged invention was thus known or used by others in this country before the alleged invention thereof by Barbara Johnson. The claimed methods and systems were additionally publicly used, and described in a printed publication, more than one year prior to the date of the application for a patent in the United States. See 35 U.S.C. § 102(a), (b), (f), and (g). A chart identifying where specifically in this item of prior art each element of each asserted claim is found is attached hereto as Exhibit 1.2

1

These documents include Clever Ideas-LeCARD Cash and/or Advertising Advance Agreements; Restaurant Statements; Letters from Clever Ideas to Participating Restaurants; and other related correspondence. 2 This prior art reference anticipates Claims 1, 5-7, 9-10, 14-16, and 18-19. It renders obvious Claims 2-4, 8, 11-13, and 17. See Exhibit 1.

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2.

SEC Form 10-K for Transmedia Network, Inc. (December 29, 1995)

3.

First USA Merchant Services, Inc. Merchant Credit Card Agreement (July 1, 1993)

Transmedia Network Inc. ("Transmedia") offered a product known as the Transmedia card which allowed merchants to use a system and method of automated payment wherein Transmedia advanced a sum of money to a restaurant or other merchant, via a purchase at a discount of "Rights-to-Receive" (i.e., the right to receive goods and services). After the merchant accepted the Transmedia card as payment and electronically forwarded information related to the payment to Transmedia, Transmedia acquired, authorized and settled the transaction. Transmedia then electronically forwarded a portion of the payment to a computerized payment receiver as payment of at least a portion of the restaurant's cash advance obligation to Transmedia. The computerized payment receiver received and applied that amount to reduce the merchant's outstanding cash advance obligation to Transmedia. The alleged invention was thus known or used by others in this country before the alleged invention thereof by Barbara Johnson. The claimed methods and systems were additionally publicly used, and described in a printed publication, more than one year prior to the date of the application for a patent in the United States. See 35 U.S.C. § 102(a), (b), (f), and (g). A chart identifying where specifically in this item of prior art each element of each asserted claim is found is attached hereto as Exhibit 2.3 First USA Merchant Services, Inc. ("First USA") provided credit card processing services to merchants that incorporated a system and method of automated payment as claimed in the `281 patent. A merchant in the First USA system and method accepted cards as payment and electronically forwarded information related to the payment to First USA. First USA, the merchant processor, would then acquire, authorize and settle the transaction. First USA electronically forwarded some portion of the payment to computerized payment receivers and/or third parties as payment of at least a portion of an obligation made by the merchant. The alleged invention was thus known or used by others in this country before the alleged invention thereof by Barbara Johnson. The claimed methods and systems were additionally publicly used, and described in a printed publication, more than one year prior to the date of the application for a patent in the United States. See 35 U.S.C. § 102(a), (b), (f), and (g). A chart identifying where specifically in this item of prior art each element of each asserted claim is found is attached hereto as Exhibit 3.4

Transmedia anticipates Claims 1, 5-7, 9-10, 14-16, and 18-19. Transmedia renders obvious Claims 2-4, 8, 11-13, and 17. See Exhibit 2. 4 First USA anticipates Claims 1-7, 9-16, and 18-19. First USA renders obvious Claims 8 and 17. See Exhibit 3.

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4.

Bank of America Merchant Services Card Processing Service Agreement Terms and Conditions (November 1994 (Reprinted August 1995))

5.

Credit Card Processing Agreement; Reserve Account Agreement (among Reno Air, Inc., Electronic Data Systems Corporation and First USA Merchant Services, Inc.) (June 1995)

Bank of America NT&SA provided card processing services to merchants which incorporated a system and method of automated payment as claimed in the `281 patent. A merchant accepted cards as payment and electronically forwarded information related to the payment to Bank of America. Bank of America, the merchant processor, acquired, authorized, and settled the transaction. Bank of America would electronically forward some portion of the payment to a computerized payment receiver and/or a third party as payment of at least a portion of an obligation made by the merchant. The alleged invention was thus known or used by others in this country before the alleged invention thereof by Barbara Johnson. The claimed methods and systems were additionally publicly used, and described in a printed publication, more than one year prior to the date of the application for a patent in the United States. See 35 U.S.C. § 102(a), (b), (f), and (g). A chart identifying where specifically in this item of prior art each element of each asserted claim is found is attached hereto as Exhibit 4.5 Electronic Data Systems Corporation ("EDS") and First USA Merchant Services, Inc. ("First USA") provided card processing services to merchants that incorporated a system and method of automated payment as claimed in the `281 patent. A merchant accepted cards as payment and electronically forwarded information related to the payment to EDS. EDS, one of the merchant processing entities, acquired, authorized, and settled the transactions and forwarded a portion of the payment to a computerized payment receiver and/or third party as payment of at least a portion of the merchant's obligation. The alleged invention was thus known or used by others in this country before the alleged invention thereof by Barbara Johnson. The claimed methods and systems were additionally publicly used, and described in a printed publication, more than one year prior to the date of the application for a patent in the United States. See 35 U.S.C. § 102(a), (b), (f), and (g). A chart identifying where specifically in this item of prior art each element of each asserted claim is found is attached hereto as Exhibit 5.6

Bank of America anticipates Claims 1-7, 9-16, and 18-19. Bank of America renders obvious Claims 8 and 17. See Exhibit 4. 6 EDS/First USA anticipates Claims 1-7, 9-16, and 18-19. EDS/First USA renders obvious Claims 8 and 17. See Exhibit 5.

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6.

Litle & Co. documents7 (1990-1992)

First National Bank of Louisville ("FNBL"), National Processing Company ("NPC"), and Litle & Co. ("Litle") (collectively the "Litle Processing Entity") played a role in a system and method of automated payment used by merchants wherein an entity would, among other things, advance a sum of money or provide a line of credit to a merchant or on behalf of a merchant. A merchant would accept cards as payment and electronically forward information related to the payment to the Litle Processing Entity. The Litle Processing Entity, the merchant processor, would acquire, authorize and settle the transaction and would electronically forward some portion of the payment to a computerized payment receiver and/or third party as payment of at least a portion of the merchant's obligation. The alleged invention was thus known or used by others in this country before the alleged invention thereof by Barbara Johnson. The claimed methods and systems were additionally publicly used, and described in a printed publication, more than one year prior to the date of the application for a patent in the United States. See 35 U.S.C. § 102(a), (b), (f), and (g). A chart identifying where specifically in this item of prior art each element of each asserted claim is found is attached hereto as Exhibit 6.8

Defendants' investigation of these products and services is ongoing, and Defendants reserve the right to supplement these contentions to include additional details regarding these products and services as discovery in this case continues.

These documents include, inter alia, the Litle & Co. Member Agreement; Demand Promissory Note for Postage Advances (between Museum Publications of America and Litle & Co.); "People Thought I was Nuts" Forbes Article (6/8/92); Promissory Note Repayment Schedule; and related correspondence. 8 Litle & Co. anticipates Claims 1-19. See Exhibit 6.

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2.

INVENTORSHIP ­ 35 U.S.C. § 102(f) The `281 patent is invalid because the alleged inventor did not herself invent the subject

matter sought to be patented. As evidenced during the deposition of the alleged inventor, Barbara Johnson, she lacks knowledge or familiarity with card processing and many, if not all, features of the `281 patent. Name of person from whom Circumstances the invention or any part was derived Gary Johnson Gary Johnson is the husband of the inventor. On information and belief, he was knowledgeable of the card processing industry at the time of the alleged inventor's invention. Barbara Johnson testified that she did not directly correspond with the prosecuting attorneys, but instead indirectly corresponded with the prosecuting attorneys through Gary Johnson. On knowledge and belief, the invention or some part of the invention was derived from Gary Johnson. Les Falk, Glen Goldman, On information and belief, Les Falk is the former CEO of the Tom Burnside and/or other assignee of the `281 patent. Glen Goldman is the current CEO employees of Media Works of AdvanceMe, and Tom Burnside is the current President and Funding Corporation, Chief Operating Officer of AdvanceMe. On information and Countrywide Business belief, the invention or some part of the invention was derived Alliance, Inc. and/or from Les Falk, Glen Goldman, Tom Burnside, and/or other AdvanceMe, Inc. employees of the assignee (which underwent multiple name changes). Paula Campbell, Robert Attorneys from Testa, Hurwitz & Thiebeault LLP were involved Tosti, John Forcier and/or in the prosecution of U.S. Patent No. 6,941,281 and/or U.S. other attorneys of the law Patent No. 6,826,544. On information and belief, the invention firm Testa, Hurwitz & or some part of the invention was derived from Paula Campbell, Thiebeault LLP involved in Robert Tosti, John Forcier and/or other attorneys of the law firm the prosecution of U.S. Testa, Hurwitz & Thiebeault LLP. Patent No. 6,941,281 and/or U.S. Patent No. 6,826,544. David Klein and/or other Attorneys from Shearman & Sterling LLP were involved in the attorneys of the law firm prosecution of U.S. Patent No. 6,941,281 and/or U.S. Patent No. Shearman & Sterling LLP 6,826,544. On information and belief, the invention or some involved in the prosecution part of the invention was derived from David Klein and/or other of the U.S. Patent No. attorneys of the law firm Shearman & Sterling LLP. 6,941,281 and/or U.S. Patent No. 6,826,544.

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Name of person from whom Circumstances the invention or any part was derived Tim Litle, Randall Bourne, Each of these individuals was instrumental in the development Larry Bouchard, and/or Lee and operation of the Clever Ideas and Litle & Co. prior art Suckow. systems and methods described above, which were known and used years before the alleged invention by Barbara Johnson. Defendants' investigation of these individuals and the circumstances surrounding their contribution(s) to the alleged invention is ongoing, and Defendants reserve the right to supplement these contentions to include additional details regarding these individuals and circumstances as discovery in this case continues. 3. P.R. 3-4 DOCUMENT PRODUCTION Defendants have produced relevant, non-privileged documents required under P.R. 3-4. Defendants' search for documents is ongoing, and Defendants reserve the right to supplement their document production as additional, relevant, non-privileged documents in their possession, custody or control are identified.

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Dated: February 12, 2007

Respectfully submitted, By:_/s/ Joseph D. Gray_________________ Willem G. Schuurman Texas State Bar No. 17855200 Brian K. Buss Texas State Bar No. 00798089 Joseph D. Gray Texas State Bar No. 24045970 R. Floyd Walker Texas State Bar No. 24044751 VINSON & ELKINS L.L.P. 2801 Via Fortuna, Suite 100 Austin, Texas 78746 Phone: [phone] ­ Fax: [phone] - and Hilary L. Preston VINSON & ELKINS L.L.P. 666 Fifth Avenue ­ 26th Floor New York, New York 10103 Phone: [phone] Fax: [phone] - and Douglas McSwane Texas State Bar No. 13861300 POTTER MINTON, P.C. 110 North College 500 Plaza Tower Tyler, Texas 75702 Phone: [phone] Fax: [phone] ATTORNEYS FOR DEFENDANTS FIRST FUNDS, LLC, MERCHANT MONEY TREE, INC., AND REACH FINANCIAL, LLC

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CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing instrument has been served upon all counsel of record on this the 12th day of February, 2007 as indicated: Via Electronic Mail and U.S. Mail Ronald S. Lemieux PAUL, HASTINGS, JANOFSKY & WALKER LLP Five Palo Alto Square, Sixth Floor Palo Alto, CA 94306-2155 Otis Carroll IRELAND, CARROLL & KELLEY, P.C. 6101 S. Broadway, Suite 500 Tyler, Texas 75703 By:_/s/ Joseph D. Gray_________________