Alexsam, Inc. v. Idt Corporation

715 F.3d 1336, 106 U.S.P.Q. 2d (BNA) 1895, 85 Fed. R. Serv. 3d 907, 2013 WL 2150832, 2013 U.S. App. LEXIS 10009
CourtCourt of Appeals for the Federal Circuit
DecidedMay 20, 2013
Docket2012-1063, 2012-1064
StatusPublished
Cited by21 cases

This text of 715 F.3d 1336 (Alexsam, Inc. v. Idt Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alexsam, Inc. v. Idt Corporation, 715 F.3d 1336, 106 U.S.P.Q. 2d (BNA) 1895, 85 Fed. R. Serv. 3d 907, 2013 WL 2150832, 2013 U.S. App. LEXIS 10009 (Fed. Cir. 2013).

Opinions

Opinion for the Court filed by Circuit Judge DYK.

Dissenting opinion filed by Circuit Judge MAYER.

DYK, Circuit Judge.

Defendant IDT Corporation appeals from the judgment of the District Court for the Eastern District of Texas determining that certain of IDT’s systems infringed claims 57 and 58 of U.S. Patent No. 6,000,608 (“the '608 patent”), and that these claims were not invalid. Plaintiff Alexsam, Inc. cross-appeals from the court’s judgment determining that certain other systems were licensed under claims 57 and 58 of the '608 patent.

We affirm the judgment of no invalidity. We reverse the jury’s finding of infringement with regard to IDT’s Walgreens and EWI systems, but affirm the judgment of [1339]*1339infringement with regard to IDT’s miscellaneous systems based on the district court’s discovery sanction. On the cross-appeal, we affirm the judgment of nonin-fringement with regard to IDT’s SafeNet systems based on the license defense.

Background

I. The Claims

Alexsam owns the '608 patent, which discloses a system for activating and using “multifunction card[s].” These cards include prepaid phone cards, used to pay for long-distance telephone calls, and electronic gift certificate cards. Such cards are typically distributed to retailers and displayed in stores in an inactive state, in order to deter theft, and are activated and assigned a cash value at the retailer’s check-out counter.

The claims at issue in this appeal are drawn to a system for activating multifunction cards using a point-of-sale (“POS”) terminal, such as a cash register or a freestanding credit card reader. Claim 57 of the '608 patent recites:

A multifunction card system comprising:
a. at least one card having a unique identification number encoded on it, said identification number comprising a bank identification number approved by the American Banking Association for use in a banking network;
b. a transaction processor receiving card activation data from an unmodified existing standard retail point-of-sale device, said card activation data including said unique identification number;
c. a processing hub receiving directly or indirectly said activation data from said transaction processor; and
d.said processing hub activating an account corresponding to the unique identification number, thereby permitting later access to said account.

'608 patent col. 18 ll. 35-49 (emphases added). Dependent claim 58 further requires that the card consist of “an electronic gift certificate card, a phone card,” or another enumerated type of card. Id. at ll. 50-53.

The critical limitations for purposes of this appeal are the requirements that the card’s number include a bank identification number (“BIN”), and that the activation make use of “an unmodified existing standard retail point-of-sale device.” The district court defined a BIN as “a numeric code [that] identifies a card-issuing financial institution and that is sanctioned by the American Bankers Association.” See J.A. 1328-29. The parties stipulated that the unmodified POS device limitation requires the use of “[a] terminal for making purchases at a retail location of the type in use as of July 10, 1997 that has not been reprogrammed, customized, or otherwise altered with respect to its software or hardware for use in the card system.” J.A. 1325.

II. The Accused Systems

IDT is a telecommunications and financial services company whose products include both phone cards and prepaid gift cards. IDT’s cards are sold through major retail chains such as Walgreens, as well as at smaller retailers. Like the cards disclosed in the '608 patent, IDT’s cards must be activated at a POS terminal before they can be used. Alexsam’s infringement contentions are premised on the allegation that IDT controls the systems by which its cards are activated.1

[1340]*1340Four accused activation systems, or groups of systems, are at issue in this appeal. The first system was used to activate cards sold by Walgreens. In this system (“the Walgreens system”), card activation data travelled from the POS terminal to an intermediate host computer owned by Walgreens, and from there over a dedicated line to IDT’s host computer.

The second accused system resembled the Walgreens system, except that it used an intermediate host computer owned by a third party named EWI in place of a retailer-owned host computer. This system (“the EWI system”) was used to activate cards sold by various smaller retailers.

The third accused system, known as “the SafeNet system,” was also used to activate cards sold by various retailers. Instead of sending card activation data first to a host owned by the retailer or by EWI and then to IDT by way of a dedicated line, though, the SafeNet system sent activation data first to a bank computer, and then to IDT by way of a network maintained by MasterCard for use in credit card transactions.

The fourth system was actually a group of systems that are considered together for purposes of this appeal. This group (“the miscellaneous systems”) included a system used at Sears stores to activate cards over the Sears network; a system used at 7-Eleven stores to activate cards over a network managed by InComm; and systems used at various stores to activate cards over networks managed by Black-hawk and PaySpot.

III. The Litigation

In September 2007, Alexsam filed a complaint in the United States District Court for the Eastern District of Texas, accusing IDT of infringing, inter alia, claims 57 and 58 of the '608 patent.

In January 2011, following the close of discovery, Alexsam moved for sanctions pursuant to Rule 37 of the Federal Rules of Civil Procedure, alleging that IDT had failed to disclose information suggesting that the miscellaneous systems infringe Alexsam’s patents, in violation of IDT’s discovery obligations. Alexsam asked the court to deem these card products to be infringing “for purposes of the action.” J.A. 7726.

Midway through trial, the court granted Alexsam’s motion for sanctions regarding the miscellaneous systems. The court announced, outside the presence of the jury:

I find that [the court] had ordered the Defendant to fully and completely respond to the Plaintiffs interrogatories ..., [and] that the Defendant failed to do so. The Defendant also stated in its response to the Motion for Sanctions that [some of this information] had been [previously] disclosed. I find that that statement was false. To cure the preju-. dice to the Plaintiff and to prevent this conduct from occurring in the future, I am declaring or deeming established that the Blackhawk cards, the InComm cards, the PaySpot cards, and the Sears cards, [that is, the cards activated using the miscellaneous systems,] infringe the patents-in-suit. The jury will be so instructed. They will also be instructed that the only issues they need to decide, with respect to those cards, relate to invalidity and damages.

J.A. 13,820.

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715 F.3d 1336, 106 U.S.P.Q. 2d (BNA) 1895, 85 Fed. R. Serv. 3d 907, 2013 WL 2150832, 2013 U.S. App. LEXIS 10009, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alexsam-inc-v-idt-corporation-cafc-2013.