AdvanceMe Inc v. RapidPay LLC

Filing 285

Proposed Findings of Fact by First Funds, LLC, Merchant Money Tree, Inc., Reach Financial, LLC. (Gray, Joseph)

AdvanceMe Inc v. RapidPay LLC

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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. § § § § § § § § § § § § § §

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

DEFENDANTS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW Defendants First Funds, LLC ("First Funds"), Merchant Money Tree, Inc. ("MMT"), and Reach Financial, LLC ("Reach Financial") (collectively "Defendants") hereby submit their proposed findings of fact and conclusions of law.1

Any finding of fact that constitutes a conclusion of law, and any conclusion of law that constitutes a finding of fact, is hereby incorporated as such.

1

Dockets.Justia.com

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TABLE OF CONTENTS Page I. BACKGROUND .................................................................................................................1 A. B. C. The Parties and Their Contentions...........................................................................1 Jurisdiction...............................................................................................................1 The Patent-in-Suit ....................................................................................................1 i. Independent Claim 1 (Method)....................................................................3 ii. II. Independent Claim 10 (System)...................................................................5

INVALIDITY: CONCLUSIONS OF LAW.......................................................................7 A. Anticipation: 35 U.S.C. § 102(a) and 35 U.S.C. § 102(b) ......................................7 B. Obviousness: 35 U.S.C. § 103 ..............................................................................12 C. The LeCard Prior Art Method and System ............................................................14 D. The Litle & Co. Prior Art Method and System......................................................14 E. The Transmedia Prior Art Method.........................................................................15 F. Prior Art Reserve Account Method .......................................................................15 INVALIDITY: FINDINGS OF FACT .............................................................................16 A. The LeCard Program..............................................................................................16 B. The Litle & Co. Prior Art.......................................................................................30 C. The Transmedia Program.......................................................................................50 D. Prior Art Reserve Account Method .......................................................................57 E. Obviousness: Findings Of Fact.............................................................................63 INEQUITABLE CONDUCT.............................................................................................64 A. Conclusions Of Law ..............................................................................................64 B. Findings Of Fact ....................................................................................................67 EXCEPTIONAL CASE AND ATTORNEYS' FEES.......................................................69 NON-INFRINGEMENT....................................................................................................71 A. B. C. D. E. Direct Infringement of Method Claims ­ Conclusions of Law .............................71 Direct Infringement of Method Claims ­ Findings of Fact ...................................73 Direct Infringement of System claims ­ Findings of Fact and Conclusions of Law ....................................................................................................................79 Infringement Under the Doctrine of Equivalents...................................................84 Indirect Infringement .............................................................................................85 i. Inducement of Infringement ......................................................................85 ii. Contributory Infringement .........................................................................87

III.

IV.

V. VI.

VII. VIII.

WILLFUL INFRINGEMENT ...........................................................................................88 INJUNCTIVE RELIEF......................................................................................................89 i

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TABLE OF AUTHORITIES Page Cases A.B. Chance Co. v. RTE Corp., 854 F.2d 1307 (Fed. Cir. 1988) ................................................................................................ 69 Ajinomoto Co., Inc. v. Archer-Daniels-Midland Co., 228 F.3d 1338 (Fed. Cir. 2000) ................................................................................................ 87 American Hoist & Derrick Co. v. Sowa & Sons, 725 F.2d 1350 (Fed. Cir. 1984) .................................................................................................. 7 American Original Corp. v. Jenkins Food Corp., 774 F.2d 459 (Fed. Cir. 1985) .................................................................................................. 87 Anderson's-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57 (1969).................................................................................................................... 13 Applied Medical Resources Corp. v. United States Surgical Corp., 448 F.3d 1324 (Fed. Cir. 2006) ................................................................................................ 80 Aquatex Indus. v. Techniche Solutions, 419 F.3d 1374 (Fed. Cir. 2005) ................................................................................................ 84 Baxter Int'l v. COBE Laboratories, 88 F.3d 1054 (Fed. Cir. 1996) .................................................................................................... 8 BMC Resources, Inc. v. Paymentech, L.P., No. 3:03-CV-1927-M, 2006 U.S. Dist. LEXIS 37746 (N.D. Tex. May 24, 2006), argued, No. 06-1503 (Fed. Cir. April 9, 2007)................................................................... 72, 73 Brasseler, U.S.A. I, L.P v. Stryker Sales Corp., 267 F.3d 1370 (Fed. Cir. 2001) ................................................................................................ 65 Charles E. Hill v. Amazon.com, No. 2:02-CV-186, 2006 U.S. Dist. LEXIS 3389 (E.D. Tex. Jan. 19, 2006) (J. Ward) ...... 71, 72 Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 145 F.3d 1303 (Fed. Cir. 1998) .......................................................................................... 84, 85 Coffin v. Ogden, 85 U.S. 120 (1873)...................................................................................................................... 8 Critikon, Inc. v. Becton Dickinson Vascular Access, 120 F.3d 1253 (Fed. Cir. 1997) ................................................................................................ 66 Crystal Semiconductor Corp. v. TriTech Microelectronics Int'l, Inc., 246 F.3d 1336 (Fed. Cir. 2001) ................................................................................................ 87 Cybor Corp. v. Fas Techs, Inc., 138 F.3d 1448 (Fed. Cir. 1998) ................................................................................................ 69

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Decca Ltd. v. United States, 544 F.2d 1070 (1976)................................................................................................................ 82 Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972)............................................................................................................ 81, 83 Digital Control Inc. v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006) .......................................................................................... 64, 65 DSU Med. Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) ................................................................................................ 85 Duro-Last, Inc. v. Custom Seal, Inc., 321 F.3d 1098 (Fed. Cir. 2003) ................................................................................................ 64 Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263 (Fed. Cir. 2004) .......................................................................................... 85, 87 eBay Inc. v. Mercexchange, L.L.C., 126 S. Ct. 1837 (2006)........................................................................................................ 88, 89 Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361 (Fed. Cir. 2000) .................................................................................................. 7 Elec. Battery Co. v. Shimadzu, 307 U.S. 5 (1939)........................................................................................................................ 9 Epcon Gas Systems, Inc. v. Bauer Compressors, Inc., 279 F.3d 1022 (Fed. Cir. 2002) ................................................................................................ 69 Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed. Cir. 2006) ................................................................................................ 65 Finnegan Corp. v. Int'l Trade Comm'n, 180 F.3d 1354 (Fed. Cir. 1999) .......................................................................................... 10, 12 FMC Corp. v. Manitowoc Co., 835 F.2d 1411 (Fed. Cir. 1987) ................................................................................................ 67 Gambro Lundia AB v. Baxter Healthcare Corporation, 110 F.3d 1573 (Fed. Cir. 1997) ................................................................................................ 12 GFI, Inc. v. Franklin Corp., 265 F.3d 1268 (Fed. Cir. 2001) ................................................................................................ 65 Graham v. John Deere Co., 383 U.S. 1 (1966).......................................................................................................... 12, 13, 14 Halliburton Co. v. Schlumberger Tech., 925 F.2d 1435 (Fed. Cir. 1991) ................................................................................................ 66 Inpro II Licensing, S.A.R.L. v. T-Mobile USA, Inc., 450 F.3d 1350 (Fed. Cir. 2006) ................................................................................................ 79 J & M Corp. v. Harley-Davidson, Inc., 269 F.3d 1360 (Fed. Cir. 2001) ................................................................................................ 80 iii

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Joy Tech., Inc. v. Flakt, Inc., 6 F.3d 770 (Fed. Cir. 1993) ...................................................................................................... 71 Juicy Whip, Inc. v. Orange Bang, Inc., 292 F.3d 728 (Fed. Cir. 2002) .................................................................................................. 11 Knorr v. Pearson, 671 F.2d 1368 (C.C.P.A. 1982) ................................................................................................ 11 Kridl v. McCormick, 105 F.3d 1446 (Fed. Cir. 1997) .......................................................................................... 10, 11 KSR Int'l Co. v. Teleflex, Inc., 127 S. Ct. 1727 (2007)....................................................................................................... passim Lacks Industries, Inc. v. McKechnie Vehicle Components USA, Inc., 322 F.3d 1335 (Fed. Cir. 2003) .......................................................................................... 10, 12 Leapfrog Enterprises, Inc. v. Fisher-Price, Inc., 82 U.S.P.Q.2d (BNA) 1687 (Fed. Cir. 2007) ............................................................... 13, 63, 64 Lockwood v. American Airlines, 107 F.3d 1565 (Fed. Cir. 1997) .................................................................................................. 8 Loral Fairchild Corp. v. Victor Co. of Japan Ltd., 61 USPQ2d 1943 (E.D.N.Y. 2002) .......................................................................................... 65 Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572 (Fed. Cir. 1996) .............................................................................................. 7, 10 Matter of Carolin Paxson Advertising, 938 F.2d 595 (5th Cir. 1991) .............................................................................................. 72, 81 McKesson Information Solutions, Inc. v. Bridge Medical, Inc., No. 06-1517 (Fed. Cir. May 18, 2007) ..................................................................................... 65 McNeil-PPC, Inc. v. L. Perrigo Co., 337 F.3d 1362 (Fed. Cir. 2003) ................................................................................................ 69 Mendenhall v. Cedarapids, Inc., 5 F.3d 1557 (Fed. Cir. 1993) ...................................................................................................... 7 Merck & Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418 (Fed. Cir. 1989) ................................................................................................ 66 Minn. Mining and Mfg Co. v. Chemque, Inc., 303 F.3d 1294 (Fed. Cir. 2002) .................................................................................................. 9 Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995) .................................................................................................. 66 Motionless Keyboard Co. v. Microsoft Corp., No. 05-1497 (Fed. Cir. May 29, 2007) ..................................................................................... 10 Nat'l Research Development Corp. v. Varian Associates, Inc., 822 F. Supp. 1121 (D.N.J. 1993), aff'd in relevant part, 1994 U.S. App. LEXIS 1493 (Fed. Cir. 1994) (unpublished)................. 9 iv

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New Railhead Manufacturing v. Vermeer Manufacturing Co., 298 F.3d 1290 (Fed. Cir. 2002) .................................................................................................. 8 NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005) .................................................................................... 71, 81, 82 O'Neill v. Dept. of HUD, 220 F.3d 1354 (Fed. Cir. 2000) ................................................................................................ 72 Paice LLC v. Toyota Motor Corp., No. 2:04-CV-211 (DF), 2006 U.S. Dist. LEXIS 61600 (E.D. Tex. 2006) ............................... 88 Price v. Symsek, 988 F.2d 1187 (Fed. Cir. 1993) ................................................................................................ 10 Rotec Indus., Inc. v. Mitsubishi Corp., 215 F.3d 1246 (Fed. Cir. 2000) ................................................................................................ 83 Sandt Tech. v. Resco Metal and Plastics Corp., 264 F.3d 1344 (Fed. Cir. 2001) .......................................................................................... 10, 11 State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226 (Fed. Cir. 1985). ............................................................................................... 88 The Beachcombers, Int'l, Inc. v. Wildewood Creative Products, Inc., 31 F.3d 1154 (Fed. Cir. 1994) .................................................................................................. 11 Thomson v. Quixote, 166 F.3d 1172 (Fed. Cir. 1999) ................................................................................................ 11 W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540 (Fed. Cir. 1983) .................................................................................................. 9 Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368 (Fed. Cir. 1998) ................................................................................................ 11 z4 Techs. Inc., v. Microsoft Corp., 434 F. Supp. 2d 437 (E.D. Tex. 2006)...................................................................................... 89 Rules and Statutes 28 U.S.C. § 1331............................................................................................................................. 1 28 U.S.C. § 1338............................................................................................................................. 1 28 U.S.C. § 1391(b) ........................................................................................................................ 1 28 U.S.C. § 1400(b) ........................................................................................................................ 1 35 U.S.C. § 102................................................................................................................... 1, 7, 8, 9 35 U.S.C. § 102(a) ................................................................................................................. passim 35 U.S.C. § 102(b) ................................................................................................................. passim 35 U.S.C. § 103............................................................................................................. 1, 12, 14, 15 35 U.S.C. § 103(a) ........................................................................................................................ 12 v

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35 U.S.C. § 112............................................................................................................................. 80 35 U.S.C. § 271............................................................................................................................... 1 35 U.S.C. § 271(a) ................................................................................................................. passim 35 U.S.C. § 271(b) .................................................................................................................. 85, 86 35 U.S.C. § 271(c) ........................................................................................................................ 86 35 U.S.C. § 282............................................................................................................................... 7 35 U.S.C. § 283............................................................................................................................... 1 35 U.S.C. § 285......................................................................................................................... 1, 69 37 C.F.R. § 1.56 ............................................................................................................................ 64 37 CFR § 1.56(b) .................................................................................................................... 65, 66 Other Authorities Manual of Patent Examining Procedure § 2001.06 (7th ed. 1998)........................................................................................................... 65

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I. A. 1.

BACKGROUND

The Parties and Their Contentions This is a patent infringement case. Plaintiff AdvanceMe, Inc. ("AdvanceMe")

alleges that Defendants First Funds, LLC ("First Funds"), Merchant Money Tree, Inc. ("MMT"), and Reach Financial, LLC ("Reach") directly infringe and/or indirectly infringe by contributing to or inducing the infringement of certain claims of Patent No. 6,941,281 ("the `281 Patent"). AdvanceMe further contends that this infringement is willful. AdvanceMe seeks a permanent injunction under 35 U.S.C. § 283, enjoining Defendants from infringing, contributing to, or inducing the infringement of the `281 Patent. In addition, AdvanceMe seeks recovery of its attorneys' fees under 35 U.S.C. § 285. 2. Defendants deny infringement and that they contribute to or induce infringement,

either literally or under the doctrine of equivalents. Defendants allege that the `281 Patent is invalid for failure to comply with 35 U.S.C. §§ 102 and 103. Defendants further allege that the `281 Patent is unenforceable due to inequitable conduct. Defendants are also seeking a

declaration of non-infringement, invalidity, and unenforceability of the `281 Patent. In addition, Defendants seek recovery of their attorneys' fees under 35 U.S.C. § 285. B. 3. Jurisdiction Jurisdiction in this case is based upon 28 U.S.C. §§ 1331 and 1338 in that the

Plaintiff brings this action under the patent laws of the United States, including 35 U.S.C. § 271 et seq. Venue is proper in this judicial district under 28 U.S.C. §§ 1391(b) and 28 U.S.C. § 1400(b). Jurisdiction is not disputed. C. 4. The Patent-in-Suit United States Patent No. 6,941,281 ("the `281 patent") relates to a method and

system for automated payment of an obligation made by a merchant. The `281 patent describes

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that, prior to the invention, "the merchant 20 typically pays the outstanding loan back in periodic installments (e.g., equal monthly payments over five years)." (`281 patent, 5:12-14.) The `281 patent describes the invention as a modification of the existing merchant processor system, so that rather than the merchant making payment directly to the lender as in the prior art, "[t]he borrowing merchants use one or more already-familiar payment transaction processing systems to make the payments required by the lender or the loan collecting entity." (`281 patent, 2:4851.) 5. The patentee confirmed this description of the invention during prosecution:

"The invention relates to modifying the existing merchant processor system that is now used by merchants to authorize and settle card payment transactions." (Applicant's June 7, 2000 Appeal Br., at p. 3.) 6. The `281 specification describes that, in the prior art, merchants used VeriFone

merchant-location equipment to accept a customer identifier (e.g., a credit card number) as payment from a customer and to electronically forward information related to the payment to a computerized merchant processor. (`281 patent, 6:18-59.) The `281 patent also describes that, in the prior art, computerized merchant processors used modems to acquire the information related to the payment from a merchant, and software executing known algorithms to authorize and settle the payment. (`281 Patent, 1:15-25, 3:31-4:37.) 7. The `281 specification further describes that, in the prior art, the merchant

processor would forward full payment (less processing fees) for that transaction to the merchant. (`281 Patent, 4:16-56.) A general description of prior art card transactions at the merchant and merchant processor is discussed with reference to Figures 1A and 1B of the `281 patent. (`281 patent, 3:10-5:3.)

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8.

The claims of the `281 patent reflect the invention's modification of the existing

merchant processor system by requiring that a "computerized merchant processor" forwards a "portion" (Claim 10) or "at least a portion" (Claim 1) of the payment to an entity to which a merchant owes an obligation. In other words, the invention enables a merchant to automatically have its obligations repaid out of card receipts and, therefore, enables a capital provider to be repaid before the merchant gains access to payment amounts. 9. The patent examiner noted this sole non-obvious feature in his Notice of

Allowance for the claims of the `281 patent: "[T]he non-obvious novelty of the invention is using the portion of the transaction payment as a remittance towards payment of an obligation owed by the merchant." (March 17, 2005 Notice of Allowance, pp. 3-4.) 10. The `281 patent contains two independent claims, claims 1 and 10--both of

which are limited to this narrow, purportedly novel feature. i. 11. Independent Claim 1 (Method)

Claim 1 of the `281 patent claims:

A method for automated payment, comprising: at a merchant, accepting a customer identifier as payment from the customer and electronically forwarding information related to the payment to a computerized merchant processor; at the computerized merchant processor, acquiring the information related to the payment from the merchant, authorizing and settling the payment, 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; 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.

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12.

The `281 patent--through various statements in the "Background Information"

and "Description" sections of the specification--acknowledges that each of the steps of claim 1 was well known prior to the Application Date, except for the steps that are italicized above. 13. The "Background Information" section of the `281 patent recites that it was

known that "[c]ard transactions (e.g., credit, debit, charge, smart, etc.) generally involve at least merchants, merchant processors, issuers, and cardholders," and that such "transactions include authorization, clearing and settlement processes." (`281 patent, 1:17-20.) Further, the `281 patent discloses that it was well known that such merchant processors may use "a system such as the VisaNet or Cirrus system to authorize, clear and settle the card payment." (Id. at 1:20-22.) 14. In the "Description" section of the specification, the patentee also discusses

standard card processing practices at the time of the application, and corresponding equipment in standard use to process card transactions, with reference to Figures 1A and 1B of the `281 patent. (Id. at 3:10-30.) This discussion of the prior art is identical to the step of claim 1, which recites "at a merchant, accepting a customer identifier as payment from the customer." The patentee's discussion of the prior art further describes the prior art card authorization and settlement steps, also with reference to Figures 1A and 1B of the `281 patent. (Id. at 3:31-5:3.) This prior art discussion is identical to the claim 1 steps of "electronically forwarding information related to the payment to a computerized merchant processor" and "at the computerized merchant processor, acquiring the information related to the payment from the merchant, authorizing and settling the payment." 15. The patentee specifically characterizes this discussion of Figures 1A and 1B as

relating to known prior art methods and equipment: "[h]aving described the environment in

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which the invention operates with reference to FIGS. 1A and 1B, the automated loan repayment system and process according to the invention will now be described." (Id. at 5:4-8.) ii. 16. Independent Claim 10 (System)

The `281 patent also acknowledges that nearly all of the elements of independent

claim 10 were known prior to the Application Date. Claim 10, a system claim, recites: A system for automated payment of an obligation made by a merchant, comprising: at a merchant, means for accepting a customer identifier as payment from the customer and for electronically forwarding information related to the payment to a computerized merchant processor, wherein the merchant associated with the payment has an outstanding obligation to a third party; and at the computerized merchant processor, means for receiving the information related to the payment from the merchant, means for authorizing and settling the payment; and means for forwarding a portion of the payment to the third party to reduce the obligation. 17. Again, except for the italicized portion above, the `281 patent describes that each

of the elements of claim 10 was well known prior to the Application Date. 18. In the "Summary of the Invention" section of the `281 patent, the patentee

explains that merchants using the claimed system use known equipment to practice the claimed invention: "The borrowing merchants use one or more already-familiar payment transaction processing systems to make the payments required by the lender or the loan collecting entity." (`281 patent, 2:48-51.) In other words, the claimed system uses well known, existing equipment to process transactions and forward payment to the third party to reduce the obligation. 19. With respect to the first claim element (i.e., "at a merchant"), the `281 patent

acknowledges that, prior to the Application date, known VeriFone merchant-location equipment accepted and electronically forwarded customer identifying card information to a merchant

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processor. (`281 patent, 2:13-17.) This known prior art equipment corresponds to claim 10's element "at a merchant, means for accepting a customer identifier as payment from the customer and for electronically forwarding information related to the payment to a computerized merchant processor." 20. With respect to the second element of claim 10 (i.e., "at the computerized

merchant processor"), the `281 patent describes that the prior art merchant processors used the claimed "means for receiving the information related to the payment from the merchant" and "means for authorizing and settling the payment." In its discussion of the prior art, the `281 patent discloses that the merchant terminal requests an authorization and sends card information "electronically, for example, transmission through the telephone system and/or some other network (e.g., the Internet and/or an intranet)." (`281 patent, 3:31-36.) In addition, the `281 patent discusses authorization and settlement as all taking place electronically through the use of computers executing appropriate software and networks. (Id. at 3:42-49, 4:2-15.) 21. Accordingly, similar to the narrow alleged novel feature of claim 1, claim 10's

alleged novel feature is a "means for forwarding a portion of the payment to the third party to reduce the obligation." Since the computer equipment at the computerized merchant processor is acknowledged to be in the prior art before the application date, the only alleged point of novelty in claim 10, according to the Court's claim construction and the patentee's description of the prior art, is using known computer systems to execute an algorithm that derives and forwards a selected portion of the payment to a third party to reduce the obligation. Invention Date 22. The priority date of the `281 patent is July 9, 1997. The date an application is

filed is presumed to be the date of invention. Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d

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1361, 1371 (Fed. Cir. 2000). To establish a date of invention prior to the filing date, the inventor (or patent holder) bears the burden of proving a date of invention that is earlier than the filing date. See Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1576-77 (Fed. Cir. 1996). AdvanceMe has failed to prove an invention date prior to the July 9, 1997 filing date of the parent patent application; therefore, the invention date is July 9, 1997. II. 23. INVALIDITY: CONCLUSIONS OF LAW

A patent is presumed to be valid, and a party attacking the validity must prove

invalidity by clear and convincing evidence. 35 U.S.C. § 282. However, as the Federal Circuit has held: When new evidence touching validity of the patent not considered by the [PTO] is relied on, the tribunal considering it is not faced with having to disagree with the [PTO] or with deferring to its judgment or with taking its expertise into account. The evidence may, therefore, carry more weight and go further toward sustaining the attacker's unchanging burden. American Hoist & Derrick Co. v. Sowa & Sons, 725 F.2d 1350, 1360 (Fed. Cir. 1984); see also KSR Int'l Co. v. Teleflex, Inc., 127 S. Ct. 1727 (2007); Mendenhall v. Cedarapids, Inc., 5 F.3d 1557, 1564 (Fed. Cir. 1993). 24. None of the prior art upon which Defendants rely was considered by the PTO

during prosecution of the `281 patent. A. 25. Anticipation: 35 U.S.C. § 102(a) and 35 U.S.C. § 102(b) Section 102 of Title 35 of the United States Code provides that an applicant is not

entitled to a patent if: (a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or

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(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States . . . 35 U.S.C. § 102 (2000). Publicly Known 26. Under 35 U.S.C. § 102(a), a patent is invalid if prior art satisfying all of the claim

limitations was known or used by others in this country before the applicant's invention date. 35 U.S.C. § 102(a) (2000). 35 U.S.C. § 102(a) (2000); Coffin v. Ogden, 85 U.S. 120, 124-25 (1873) ("The prior knowledge and use by a single person is sufficient. immaterial."). Public Use 27. In addition, any public use in this country of a method or system satisfying all of The number is

the claim limitations, or any printed publication disclosing all of the claim limitations, that is more than one year prior to the U.S. filing date of a patent invalidates the claims of that patent under 35 U.S.C. § 102(b). 28. For a method or system to be in "public use" within the meaning of 35 U.S.C. §

102(a) or (b), the method or system must be used in the ordinary course of business without active efforts to conceal its operation. New Railhead Manufacturing v. Vermeer Manufacturing Co., 298 F.3d 1290, 1298-1300 (Fed. Cir. 2002) (finding that performance of the claimed method of drilling in rock at a commercial jobsite under public land, hidden from view, constituted public use); Lockwood v. American Airlines, 107 F.3d 1565, 1570 (Fed. Cir. 1997) (finding that the defendant's use of the high-level aspects of its computer reservation system was a prior public use of a means-plus-function claim for a computer system); Baxter Int'l v. COBE Laboratories, 88 F.3d 1054 (Fed. Cir. 1996) (finding that a scientist's use of a machine

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implementing the claimed method in a laboratory at the National Institute of Health, without the public's awareness of the method employed by the machine, was a prior public use). [T]he public use doctrine requires an inquiry into whether the invention was used in its natural and intended way. . . . A prior use is public even if there is no effort to show the invention to the public at large, even if the invention is completely hidden from view, even if viewers of a machine incorporating the invention do not comprehend the invention. There simply is no requirement that the prior user make an effort to make the invention publicly accessible, so long as he or she uses it in the ordinary course of business without efforts to conceal it." Nat'l Research Development Corp. v. Varian Associates, Inc., 822 F. Supp. 1121, 1133 (D.N.J. 1993) (citations omitted), aff'd in relevant part, 1994 U.S. App. LEXIS 1493 (Fed. Cir. 1994) (unpublished) ("[U]se by only one member of the public, without that use informing other members of the public as to the true nature of the invention, is sufficient under Supreme Court jurisprudence to invalidate a patent under Section 102(b) for prior public use."). 29. See also Elec. Battery Co. v. Shimadzu, 307 U.S. 5, 20 (1939) ("The ordinary use

of a machine or the practise [sic] of a process in a factory in the usual course of producing articles for commercial purposes is a public use"); Minn. Mining and Mfg Co. v. Chemque, Inc., 303 F.3d 1294, 1301 (Fed. Cir. 2002) ("Public use under 35 U.S.C. § 102(b) includes any use of the claimed invention by a person other than the inventor who is under no limitation, restriction or obligation of secrecy to the inventor."). 30. Cases in which courts find that a prior use was not a "public use" within the

meaning of 35 U.S.C. § 102 have found active concealment of the method or system by the prior user, typically by contractual agreements to maintain secrecy. See, e.g., W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540, 1550 (Fed. Cir. 1983) (finding that company told all employees that the prior art machine was confidential and required them to sign confidentiality agreements, thus concealing the machine); Motionless Keyboard Co. v. Microsoft Corp., No.

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2005-1497 (Fed. Cir. May 29, 2007) (finding that the prior user was required to sign a nondisclosure agreement related to the prior art, thus concealing the prior art). Corroboration 31. Under 35 U.S.C. § 102(a) or (b), the party challenging a patent on the basis of

prior knowledge or prior public use must come forth with sufficient corroborating evidence to support a finding of invalidity. Finnegan Corp. v. Int'l Trade Comm'n, 180 F.3d 1354, 1367 (Fed. Cir. 1999). 32. Corroboration may be in the form of either documentary or testimonial evidence,

though it is unnecessary when a party seeks to prove facts through the use of contemporaneous documents. Lacks v. McKechnie Vehicle Components USA, Inc., 322 F.3d 1335, 1349 (Fed. Cir. 2003); Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572 (Fed. Cir. 1996); Price v. Symsek, 988 F.2d 1187, 1195-96 (Fed. Cir. 1993). "[O]ral testimony of someone other than the alleged inventor may corroborate an inventor's testimony." Sandt Tech. v. Resco Metal and Plastics Corp., 264 F.3d 1344, 1351 (Fed. Cir. 2001). 33. "Each corroboration case must be decided on its own facts with a view to

deciding whether the evidence as a whole is persuasive." Sandt Tech. v. Resco Metal and Plastics Corp., 264 F.3d 1344, 1350 (Fed. Cir. 2001). 34. "[A] tribunal must make a reasonable analysis of all of the pertinent evidence to

determine whether the inventor's testimony is credible. The tribunal must also bear in mind the purpose of corroboration, which is to prevent fraud, by providing independent confirmation of the inventor's testimony." Kridl v. McCormick, 105 F.3d 1446, 1450 (Fed. Cir. 1997); Finnigan Corp. v. Int'l Trade Commission 180 F.3d 1354, 1369 (Fed. Cir. 1999); see also Thomson v.

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Quixote, 166 F.3d 1172 (Fed. Cir. 1999); The Beachcombers, Int'l, Inc. v. Wildewood Creative Products, Inc., 31 F.3d 1154 (Fed. Cir. 1994). 35. In determining whether oral testimony is sufficiently corroborated, the Federal

Circuit has considered the following criteria: (1) the relationship between the corroborating witness and the alleged prior user; (2) the time period between the event and trial; (3) the interest of the corroborating witness in the subject matter in suit; (4) contradiction or impeachment of the witness' testimony; (5) the extent and details of the corroborating testimony; (6) the witness' familiarity with the subject matter of the patented invention and the prior use; (7) probability that a prior use could occur considering the state of the art at the time; (8) impact of the invention on the industry, and the commercial value of its practice. Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1371 (Fed. Cir. 1998). 36. In situations where contemporaneous documentation and testimony that is

"credible in light of the full record" is offered by the party challenging validity, courts have found that the testimony is corroborated. Sandt Tech. v. Resco Metal and Plastics Corp., 264 F.3d 1344, 1350 (Fed. Cir. 2001); Kridl v. McCormick, 105 F.3d 1446 (Fed. Cir. 1997); Thomson v. Quixote, 166 F.3d 1172 (Fed. Cir. 1999); The Beachcombers, Int'l, Inc. v. Wildewood Creative Products, Inc., 31 F.3d 1154 (Fed. Cir. 1994); Knorr v. Pearson, 671 F.2d 1368 (C.C.P.A. 1982). 37. Conversely, in situations where--unlike here--(1) the defendant is attempting to

prove its own prior public use of a claimed invention, (2) without any contemporaneous documentary support revealing the alleged prior use, and (3) with contradictory testimony in the record, courts have found testimony to be insufficiently corroborated. Woodland Trust v.

Flowertree Nursery, Inc., 148 F.3d 1368 (Fed. Cir. 1998); Juicy Whip, Inc. v. Orange Bang, Inc., 292 F.3d 728 (Fed. Cir. 2002); Lacks Industries, Inc. v. McKechnie Vehicle Components USA,

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Inc., 322 F.3d 1335 (Fed. Cir. 2003); Finnigan Corp. v. Int'l Trade Commission, 180 F.3d 1354 (Fed. Cir. 1999). B. 38. Obviousness: 35 U.S.C. § 103 The Patent Act provides no protection to obvious inventions. Section 103(a) of

Title 35 of the United States Code provides that: A patent may not be obtained though the invention is not identically disclosed or described as set forth in 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. 35 U.S.C. § 103(a) (2007). 39. The obviousness standard, as articulated in Section 103(a), requires that the

invention must not have been obvious to one of ordinary skill in the relevant art in light of the teachings of the prior art. Graham v. John Deere Co., 383 U.S. 1 (1966). A party challenging the nonobviousness of a patent must prove obviousness by clear and convincing evidence. Gambro Lundia AB v. Baxter Healthcare Corporation, 110 F.3d 1573, 1576 (Fed. Cir. 1997). 40. On April 30, 2007, the Supreme Court issued its ruling in KSR Int'l Co. v.

Teleflex, Inc., clarifying the obviousness standard under § 103 and abolishing the Federal Circuit's previous "rigid" teaching-suggestion-motivation test for nonobviousness. The Supreme Court explained that a patent describing a combination of old elements with no change in their respective functions withdraws from the public domain, diminishes the resources available to the public, and, therefore, is considered unpatentable. KSR, 127 S. Ct. 1727 (2007), at 1739. 41. The Supreme Court also explained that the combination of familiar elements with

known methods is obvious when it provides no functionality except for yielding predictable results. Id. When, as here, a combination of prior art elements fails to yield a result different from what can be obtained by the sequential operation of old elements, the combination is 12

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obvious. See id.; see also Anderson's-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57, 60-62 (1969). 42. Courts must look to interrelated teachings of multiple prior art references in

determining whether an invention is obvious. KSR,127 S. Ct. 1727 (2007), at 1740. The court should also consider the "common sense of those skilled in the art" to determine whether a combination is obvious in light of the prior art. Leapfrog Enterprises, Inc. v. Fisher-Price, Inc., 82 U.S.P.Q.2d (BNA) 1687, 1690 (Fed. Cir. 2007). 43. "In many fields it may be that there is little discussion of obvious techniques or

combinations, and market demand, rather than scientific literature, may often drive design trends." KSR, at 1741. Therefore, granting patent monopoly to technological advances that would occur in the ordinary course without real innovation ­ like the `281 patent ­ retards progress and deprives prior inventions of their value. Id. 44. A finding of obviousness may be reinforced by "testimony from the sole inventor

at trial that he did not have a technical background, could not have actually built the prototype himself, and relied on the assistance of an electrical engineer... to build a prototype of his invention." Leapfrog, 82 U.S.P.Q.2d (BNA) 1687, 1692 (Fed. Cir. 2007). Accordingly,

inventions by inventors that are untrained or unskilled in the relevant art bolsters a conclusion that the invention is obvious. See id. 45. Four factors that aid the Court's obviousness inquiry were set forth by the

Supreme Court's 1966 Graham decision: (1) the scope and content of the prior art; (2) the differences between the claimed invention and the prior art; (3) the level of ordinary skill in the relevant art; and, if applicable, (4) objective or secondary considerations tending to prove

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nonobviousness. These secondary considerations include evidence of commercial success, longfelt need, and failure of others to make the invention. Graham, 383 U.S. at 18. C. 46. The LeCard Prior Art Method and System The Court concludes that claims 1, 5-7, 9-10, 14-16, and 18-19 are invalid under

35 U.S.C. § 102(a) and (b) in light of the prior art LeCard program. As explained below, the Court finds that the LeCard program, as operated commercially beginning in 1992, expressly disclosed every element of claims 1, 5-7, 9-10, 14-16, and 18-19. The Court finds that the LeCard program was known and used by others before the invention by Barbara Johnson within the meaning of 35 U.S.C. § 102(a), and that the LeCard program was in public use more than one year prior to the U.S. filing date of the `281 patent within the meaning of 35 U.S.C. § 102(b). 47. The Court also concludes, as explained below, that claims 2-4 and 11-13 are

invalid as obvious under 35 U.S.C. § 103 in light of the LeCard program. Among other things, common sense of a person of skill in the art would lead to the use of numbers from other commonly available card types in the LeCard program. D. 48. The Litle & Co. Prior Art Method and System The Court concludes that claims 1-3, 5-7, 9-12, 14-16, and 18-19 are invalid

under 35 U.S.C. § 102(a) and (b) in light of the Litle & Co. prior art. As explained below, the Court finds that each of the Litle & Co. merchant creditor arrangements (i.e., postage advance, Hanover Finance, and Bieler Marketing Associates), as operated commercially between 1990 and 1995, expressly disclosed every element of claims 1-3, 5-7, 9-12, 14-16, and 18-19. The Court finds that each of the Litle & Co. merchant creditor arrangements was known and used by others before the invention by Barbara Johnson within the meaning of 35 U.S.C. § 102(a), and that each was in public use more than one year prior to the U.S. filing date of the `281 patent within the meaning of 35 U.S.C. § 102(b). 14

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49.

The Court also concludes that claims 4 and 13 are invalid as obvious under 35

U.S.C. § 103 in light of the Litle & Co. prior art. Among other things, common sense of a person of skill in the art would lead to the use of numbers from smart cards in the Litle & Co. prior art. E. 50. The Transmedia Prior Art Method The Court concludes that claims 1, 6, 7, and 9 are invalid under 35 U.S.C. §

102(a) and (b) in light of the Transmedia prior art. As explained below, the Court finds that the Transmedia program, as operated commercially by at least 1995, expressly disclosed every element of method claims 1, 6, 7, and 9. The Court finds that the Transmedia program was known and used by others before the invention by Barbara Johnson within the meaning of 35 U.S.C. § 102(a), and that it was in public use more than one year prior to the U.S. filing date of the `281 patent within the meaning of 35 U.S.C. § 102(b). 51. The Court also concludes that claims 2-5 are invalid as obvious under 35 U.S.C. §

103 in light of the Transmedia program. Among other things, common sense of a person of skill in the art would lead to the use of numbers from other commonly available card types in the Transmedia prior art method. F. 52. Prior Art Reserve Account Method The Court concludes that claims 1-7 and 9 are invalid under 35 U.S.C. § 102(a)

and (b) in light of prior art reserve accounts (including Litle & Co. reserve accounts). As explained below, the Court finds that the well known method of funding prior art reserve accounts, as practiced commercially prior to July 9, 1996, expressly disclosed every element of method claims 1-7 and 9. The Court finds that prior art reserve accounts were known and used by others before the invention by Barbara Johnson within the meaning of 35 U.S.C. § 102(a), and

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that they were in public use more than one year prior to the U.S. filing date of the `281 patent within the meaning of 35 U.S.C. § 102(b). III. 53. 17. A. 54. 55. The LeCard Program2 The evidence reveals the following facts regarding the LeCard program: At least five years before the July 9, 1997 priority date of the `281 patent, Citicorp INVALIDITY: FINDINGS OF FACT

The Plaintiff has not asserted that any Defendant infringes dependent claims 8 or

Diners Club, Inc. ("Diners Club") offered a discount dining program to its cardholders known as the LeCard program. (From testimony to be elicited at trial.) In the LeCard program, Diners Club cardholders registered for the LeCard program with Diners Club and received a co-branded Diners Club/LeCard charge card (a "LeCard card"). (From testimony to be elicited at trial.) If a cardholder presented a LeCard card as payment at a restaurant participating in the LeCard program, that cardholder received a 20% discount off that charge on its monthly statement from Diners Club. (From testimony to be elicited at trial.) By October 1992, electronic capture of LeCard transactions was available to all restaurant members provided they used Diners Club exclusively as the merchant processor for all LeCard transactions. (From testimony to be elicited at trial.) 56. In addition to the LeCard program's benefits to the cardholder, restaurants

benefited from the program. (From testimony to be elicited at trial.) Restaurants participating in the LeCard program received a cash or advertising advance from Clever Ideas-LeCard, Inc.

Defendants' evidence regarding the LeCard program will be a combination of contemporaneous documentation, deposition testimony from witnesses with personal knowledge of the LeCard program, and testimony to be elicited at trial. Accordingly, in addition to the citations contained herein, Defendants will supplement their findings of fact post-trial to reflect the supporting trial testimony and exhibits.

2

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("Clever Ideas"), which was repaid out of future LeCard transactions at that restaurant. (From testimony to be elicited at trial.) For each LeCard transaction, Diners Club processed the transaction (i.e., electronically acquired payment information from the merchant, authorized and settled the payment), then derived a portion of the payment amount by subtracting from the total LeCard charge, the Diners Club processing fees and the 20% cardholder discount, and forwarded that portion to Clever Ideas as payment of the restaurant's outstanding cash or advertising advance obligation. (From testimony to be elicited at trial.) Clever Ideas would then receive and apply the amount forwarded to reduce the restaurant's cash or advertising advance obligation. (From testimony to be elicited at trial.) Specific Findings of Fact 57. Clever Ideas provided cash and advertising advances to merchants participating in

the LeCard program. (LC_00007-10.) 58. The merchants' obligation to repay Clever Ideas was created by the cash or

advertising advance and, therefore, was an "obligation" within the meaning of the claims of the `281 patent: it was an amount owed by a merchant that was independent of any costs or fees arising out of the use of customer identifiers as payment. (LC_00007-10.) 59. LeCard card numbers were "customer identifiers" within the meaning of the (From

claims of the `281 patent, because they were unique identifying account numbers. testimony to be elicited at trial.) 60.

The Clever Ideas method and system for repayment were completely automated,

and thus were a method and system of automated payment. (From testimony to be elicited at trial.) Claim 1

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At the merchant 61. "Accepting a customer identifier as payment from the customer." Merchants in

the LeCard program electronically accepted LeCard card numbers as payment from customers. (LC_00001-14; Suckow Tr. 16:9-17:6; 19:4-16; Landon Tr. 12:15-14:6, 47:16-22; Sorwell Tr. 13:15-17, 14:4-15:6, 46:18-24; from testimony to be elicited at trial.) 62. "Electronically forwarding information related to the payment to the After accepting the LeCard card numbers, merchants

computerized merchant processor."

electronically forwarded information related to the LeCard card payment to Diners Club. (LC_00001-14; Suckow Tr. 22:13-23:8; Landon Tr. 16:5-17, 47:23-48:2; Sorwell Tr. 24:1125:1, 46:18-47:3; McBrearty Tr. 9:23-25, 75:25-78:4; from testimony to be elicited at trial.) At the computerized merchant processor 63. "Acquiring the information related to the payment from the merchant." Diners (LC_00001-14;

Club received the information related to the payment from the merchant.

McBrearty Tr. 21:8-22:23, 39:20-43:19, 75:25-78:4; Sorwell Tr. 24:11-25:1; Landon Tr. 48:349:4 ; from testimony to be elicited at trial.) 64. "Authorizing and settling3 the payment." Diners Club then authorized and settled

the LeCard payments. (LC_00001-14; McBrearty Tr. 21:8-22:23, 39:24-43:19, 77:21­78:4; Landon Tr. 21:14-22:1, 42:6-8; 47:23-49:4; Sorwell Tr. 17:7-20, 38:22-39:3; from testimony to be elicited at trial.) As the card issuer and merchant processor, Diners Club itself approved the authorization request and conveyed this information back to the merchant. (See `281 patent, 3:53-58; from testimony to be elicited at trial.) The settlement involved Diners Club, as the

3

According to the Court's claim construction, "settling the payment" means "the part of a transaction when an amount is transferred or credited to the merchant processor.

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merchant processor, reflecting a credit for the transaction in its records as required by the agreed upon claim construction. (From testimony to be elicited at trial.) 65. Accordingly, Diners Club was the "computerized merchant processor" within the

meaning of the claims of the `281 Patent: it was a computer-equipped entity that acquired or processed merchant transactions. (LC_00001-14; McBrearty Tr. 22:20-23; Landon Tr. 19:1324:23, 21:14-22:1, 42:6-8, 47:23-49:4; Sorwell Tr. 17:7-20, 23:12-29:6, 39:1-3; Secher Tr. 16:13-18; from testimony to be elicited at trial.) 66. "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." Once a particular merchant's transaction had been approved, Diners Club then deducted its processing fees from the settled payment, deducted the 20% cardholder discount and applied that as a credit to the cardholder's account, and then forwarded the remaining portion of the LeCard payment amount to Clever Ideas as payment of the merchant's cash or advertising advance obligation using either ACH or wire transfer. (LC_00001-14; McBrearty Tr. 22:3-19, 42:21-43:19, 78:2380:5; Suckow 30:18-31:5, 33:17-34:5; Landon Tr. 11:7-12:14, 16:5-17:14, 48:11-24; Sorwell Tr. 9:11-11:6, 47:17-48:21; from testimony to be elicited at trial.) 67. Clever Ideas was a "computerized payment receiver" within the meaning of claim

1 of the `281 patent, because it was an account or entity capable of receiving payments or credits electronically. (LC_00001-14; McBrearty Tr. 22:3-19, 42:21-43:19, 78:23-80:5; Suckow 30:1831:5, 33:17-34:5; Landon Tr. 11:7-12:14, 16:5-17:14, 48:11-24; Sorwell Tr. 9:11-11:6, 47:1748:21; from testimony to be elicited at trial.)

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At the computerized payment receiver 68. processor." "Receiving the portion of the payment forwarded by the computerized merchant Clever Ideas received the portion of the payment forwarded by Diners Club.

(LC_00001-14; Landon Tr. 11:7-12:14, 48:11-24; Sorwell Tr. 9:11-11:6, 47:17-48:15; from testimony to be elicited at trial.) 69. "Applying that portion to the outstanding obligation made by the merchant to

reduce such obligation." Clever Ideas applied the full amount of the portion forwarded to it by Diners Club to reduce the restaurant's outstanding cash or advertising advance obligation to Clever Ideas. (LC_0001-14; Suckow Tr. 32:4-33:14, 37:8-38:12, 74:12-79:24; Landon Tr. 11:712:14, 33:18-35:6, 49:17-21, 50:5-22; Sorwell Tr. 33:14-34:16, 35:16-37:9, 47:17-48:15; McBrearty Tr., 29:4-20. 53:2-56:14; from testimony to be elicited at trial.) Clever Ideas thus "us[ed] the portion that was received from the merchant processor to reduce the obligation owed by the merchant" ­ as set forth in the Court's claim construction ­ and, therefore, "appl[ied] that portion to the outstanding obligation made by the merchant to reduce such obligation." 70. Clever Ideas also applied an additional amount to reduce the obligation that

equates to the difference between 80% of the total LeCard payment amount (the amount applied by Clever Ideas) and the amount forwarded by Diners Club (approximately 73.6% of the LeCard payment amount). (LC_00001-14; Suckow Tr. 32:4-33:14, 37:8-38:12, 74:12-79:24; Landon Tr. 11:7-12:14, 33:18-35:6, 49:17-21, 50:5-22; Sorwell Tr. 33:14-34:16, 35:16-37:9, 47:17-48:15; McBrearty Tr., 29:4-20. 53:2-56:14; from testimony to be elicited at trial.) 71. The merchant, computerized merchant processor (Diners Club), and computerized

payment receiver (Clever Ideas) in the LeCard program practiced every element of claim 1.

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Claim 5 72. The LeCard card was a charge card, because it was a card that required full

payment every billing cycle. (LC_00001-5; Suckow Tr. 17:10-20; Sorwell Tr. 13:15-14:3; Landon Tr. 12:15-13:14; Shamos Infringement Expert Report, ¶ 77; Shamos Invalidity Report, ¶ 103; from testimony to be elicited at trial.) Claim 6 73. Merchants in the LeCard program accepted the LeCard card at their restaurant

locations, i.e. "at a merchant location." (LC_00001-14; Suckow Tr. 19:11-16; Landon Tr. 47:1622; Sorwell Tr. 14:4-15:6, 46:18-24; from testimony to be elicited at trial.) Claim 7 74. Restaurants participating in the LeCard program after 1992 accepted the Diners (LC_00001-12 ;

Club/LeCard cards using an electronic draft capture, i.e. "electronically."

Suckow Tr. 19:17-20:14; Landon Tr. 14:7-17, 47:16-22; Sorwell Tr. 14:4-15:6, 46:18-24; from testimony to be elicited at trial.) Claim 9 75. Diners Club forwarded payments to Clever Ideas on a periodic basis -- i.e., on a (LC_00001-12; Suckow Tr. 34:20-35:4; McBrearty Tr. 10:20-11:5;

daily or weekly basis.

Sorwell Tr. 49:1-5; from testimony to be elicited at trial.) Claim 10 At a merchant 76. "Means for accepting a customer identifier as payment from the customer and for

electronically forwarding information related to the payment to a computerized merchant processor." Merchants accepted LeCard card numbers and electronically forwarded information

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related to the payment to Diners Club using ordinary merchant-location equipment, including VeriFone merchant-location equipment. (LC_00001-12; Suckow Tr. 14:13-15:11, 16:9-17:6; 19:4-16, 20:19-21:9, 22:13-23:8, 26:5-12; Landon Tr. 12:15-14:6, 16:5-17, 20:13-21:7, 47:1648:2; Sorwell Tr. 13:15-15:17, 24:11-25:1, 46:18-47:3; McBrearty Tr. 9:23-25, 75:25-78:4; from testimony to be elicited at trial.) 77. Standard VeriFone merchant-location equipment, as described in the `281 patent,

contained a processor, memory, modem, and a keypad or magnetic card reader together with software executing an algorithm to accept customer identifiers and electronically forward information related to the payment to a computerized merchant processor. (`281 patent, 6:18-59; from testimony to be elicited at trial.) At the computerized merchant processor 78. "Means for receiving the information related to the payment from the merchant."

Diners Club received the information related to the payment from the merchant electronically via modems. (LC_00001-12; McBrearty Tr. 21:8-22:23, 39:20-43:19, 75:25-78:4; Sorwell Tr.

24:11-25:1; Landon Tr. 48:3-49:4; from testimony to be elicited at trial.) 79. "Means for authorizing and settling the payment." Diners Club used computers

programmed to execute the standard algorithms identified in the Court's claim construction order to authorize and settle LeCard payments. (LC_00001-12, McBrearty Tr. 21:8-22:23, 39:2443:19, 77:21­78:4; Landon Tr. 21:14-22:1, 42:6-8; 47:23-49:4; Sorwell Tr. 17:7-20, 38:22-39:3; from testimony to be elicited at trial.) 80. "Means for forwarding a portion of the payment to the third party to reduce the

obligation." Diners Club derived the portion to be forwarded by subtracting the Diners Club processing fees and the 20% cardholder discount from the amount of the LeCard payment and

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electronically forwarded the remaining portion of the payment to Clever Ideas using its computer system. (LC_00001-14; McBrearty Tr. 10:20-11:5; 22:3-19, 42:21-43:19, 78:23-80:5; Suckow 30:18-31:5, 33:17-35:4; Landon Tr. 11:7-12:14, 16:5-17:14, 48:11-24; Sorwell Tr. 9:11-11:6, 47:17-48:21; 49:1-5; from testimony to be elicited at trial.) 81. Diners Club thus forwarded a portion of the payment to Clever Ideas to reduce the

merchant's obligation using the claimed means--i.e., the combination of a processor, memory, and modem together with software executing an algorithm for forwarding payment to the third party as described at `281 patent, 5:21-37. 82. Clever Ideas and Diners Club were independent entities, sharing no common

ownership or management. (LC_00001-12; Suckow Tr. 13:3-12; Landon Tr. 18:17-23; from testimony to be elicited at trial.) Accordingly, Clever Ideas was a "third party" within the meaning of claim 10 of the `281 patent: Clever Ideas was neither the merchant nor the merchant processor. Claim 14 83. The LeCard card was a charge card, because it was a card that required full

payment every billing cycle. (LC_00001-6; Suckow Tr. 17:10-20; Sorwell Tr. 13:15-14:3; Landon Tr. 12:15-13:14; Shamos Infringement Expert Report, ¶ 77; Shamos Invalidity Report, ¶ 103; from testimony to be elicited at trial.) Merchants accepted LeCard charge cards using ordinary merchant-location equipment, including VeriFone merchant-location equipment. (LC_00001-12; Suckow Tr. 14:13-15:11, 16:9-17:6; 19:4-16, 20:19-21:9, 22:13-23:8, 26:5-12; Landon Tr. 12:15-14:6, 16:5-17, 20:13-21:7, 47:16-48:2; Sorwell Tr. 13:15-15:17, 24:11-25:1, 46:18-47:3; McBrearty Tr. 9:23-25, 75:25-78:4; from testimony to be elicited at trial.)

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Claim 15 84. Merchants accepted LeCard card numbers at their merchant location using

ordinary merchant-location equipment, including VeriFone merchant-location equipment. (LC_00001-12; Suckow Tr. 14:13-15:11, 16:9-17:6; 19:4-16, 20:19-21:9, 22:13-23:8, 26:5-12; Landon Tr. 12:15-14:6, 16:5-17, 20:13-21:7, 47:16-48:2; Sorwell Tr. 13:15-15:17, 24:11-25:1, 46:18-47:3; McBrearty Tr. 9:23-25, 75:25-78:4; from testimony to be elicited at trial.) Claim 16 85. Merchants electronically accepted LeCard card numbers at their merchant

location using ordinary merchant-location equipment, including VeriFone merchant-location equipment. (LC_00001-12; Suckow Tr. 14:13-15:11, 16:9-17:6; 19:4-16, 20:19-21:9, 22:1323:8, 26:5-12; Landon Tr. 12:15-14:6, 16:5-17, 20:13-21:7, 47:16-48:2; Sorwell Tr. 13:15-15:17, 24:11-25:1, 46:18-47:3; McBrearty Tr. 9:23-25, 75:25-78:4; from testimony to be elicited at trial.) Claim 18 86. Diners Club subtracted the Diners Club processing fees and the 20% cardholder

discount from the amount of the LeCard payment and periodically forwarded the remaining portion of the payment to Clever Ideas using its computer system, which included a processor, memory, modem, and software.