STEFAN R. UNDERHILL, District Judge.
SpendingMoney LLC ("SpendingMoney") is the assignee of U.S. Patent No. 5,864,830 (the "'830 Patent"), Data Processing Method of Configuring and Monitoring the Satellite Spending Card Linked to A Host Card. SpendingMoney filed suit on September 10, 2007. It filed an amended complaint (doc. #50) on January 23, 2009 alleging, inter alia, patent infringement against American Express Co. ("American Express") and Visa USA, Inc. ("Visa").
SpendingMoney is a limited liability company organized and existing under the laws of the State of Delaware, with its
The '830 Patent, Data Processing Method of Configuring and Monitoring a Satellite Spending Card Linked to a Host Credit Card, was filed on February 13, 1997 as Application No. 08/799,953 and issued on January 26, 1999 to David Armetta and David Tempest. (Decl. of Frank T. Carroll ("Carroll Decl."), Ex. 1, '830 Patent.)
According to SpendingMoney, the patent "is directed to a data processing method of configuring a satellite spending card. [It] addresses the problem of how to provide an individual, such as a teenager, with access to money while maintaining control of the teen's spending." (SpendingMoney Mem. in Opp. to Visa's Motion for Summ. J. ("Pl. Mem."), doc. #152, at 2.)
The '830 Patent issued with ten claims. SpendingMoney is asserting infringement of Claims 1, 3, 6, 8 and 10 against American Express and Claims 1, 3, 6 and 10 against Visa. Claim 1 is the only independent claim.
('830 Patent col. 6, ll. 58-67, col. 7, ll. 1-31.)
SpendingMoney alleges that Visa has infringed the '830 Patent through the Visa Buxx Card. Visa launched Visa Buxx in 2000. (Carroll Dec., Ex. 2, Choi 30(b)(6) Dep. at 107:4-6.) Visa has submitted evidence indicating that, unlike Visa charge cards and credit cards, the Buxx Card had numerous restrictions on how the card could be used by cardholders. Visa has additionally submitted evidence that it does not issue Buxx Cards. That evidence and its implications are discussed below.
SpendingMoney alleges that American Express violated the '830 Patent by issuing the Travelers Cheque Card.
Summary judgment is appropriate when the evidence demonstrates that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (plaintiff must present affirmative evidence in order to defeat a properly supported motion for summary judgment).
When ruling on a summary judgment motion, the court must construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the moving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); see also Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.1992) (court is required to "resolve all ambiguities and draw all inferences in favor of the nonmoving party"). When a motion for summary judgment is properly supported by documentary and testimonial evidence, however, the nonmoving party may not rest upon the mere allegations or denials of his pleadings, but must present significant probative evidence to establish a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir.1995).
"Only when reasonable minds could not differ as to the import of the evidence is summary judgment proper." Bryant v.
Id. at 247-48, 106 S.Ct. 2505. To present a "genuine" issue of material fact, there must be contradictory evidence "such that a reasonable jury could return a verdict for the non-moving party." Id. at 248, 106 S.Ct. 2505.
If the nonmoving party has failed to make a sufficient showing on an essential element of his case with respect to which he has the burden of proof at trial, then summary judgment is appropriate. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. In such a situation, "there can be no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 322-23, 106 S.Ct. 2548; accord Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (movant's burden satisfied if he can point to an absence of evidence to support an essential element of nonmoving party's claim). The Federal Circuit has determined that in light of Celotex, "we conclude that nothing more is required than the filing of a summary judgment motion stating that the patentee had no evidence of infringement and pointing to the specific ways in which accused systems did not meet the claim limitations." Exigent Tech. v. Atrana Solutions, Inc., 442 F.3d 1301, 1309-10 (Fed.Cir.2006). In short, if there is no genuine issue of material fact, summary judgment may enter. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.
SpendingMoney alleges direct infringement by both Visa and American Express. A determination of direct infringement requires a two-step analysis: "First, the meaning and scope of the relevant claims must be ascertained. Second, the properly construed claims must be compared to the accused device." Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1115 (Fed.Cir.2004) (citations omitted).
Regarding the first step, I held a Markman
Step two requires a comparison of the properly construed claims to the accused product to determine whether that product contains all of the limitations of the asserted claims, either literally or by equivalents. CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1365 (Fed.Cir.2002); Innova/Pure Water, 381 F.3d at 1115.
At the Markman hearing, I construed the claim term "satellite spending card" or "satellite card" as follows: "a prepaid spending card, which has the functionality of a credit card, and is linked to the host credit card." I also ruled that the term "available balance of the host credit, card" requires no construction and can be accorded its plain meaning. The parties agreed that the terms "data processing device" and "linking, in the data processing device, the satellite account record to the host account record" do not need construction and can be accorded their plain meanings, and I accepted their stipulation. I adopted the parties' agreed-upon construction of the term "host cardholder determined spending capacity" as "the maximum amount that can be spent using the satellite card, as fixed by the host cardholder."
I later issued a claim construction ruling in which I ruled on the remaining terms. In that ruling, I construed the following terms: (1) "means for storing on the satellite card the satellite account number": the function to which the claim is directed is "storing on the satellite card the satellite account number" and the corresponding structure is "a magnetic strip or data chip and structural equivalents thereof"; (2) "means on the card for displaying at least a portion of the configuration data sufficient to identify the satellite cardholder": the function to which the claim is directed is "displaying at least a portion of the configuration data sufficient to identify the satellite cardholder" and the corresponding structure is "information printed, embossed, or otherwise displayed on the card sufficient to identify the satellite cardholder and structural equivalents thereof."
As noted above, at the Markman hearing I construed the term "satellite spending card" or "satellite card" as "a prepaid spending card, which has the functionality of a credit card, and is linked to the host credit card." The parties now contest what is meant by "functionality of a credit card."
The '830 Patent's specification
('830 Patent col. 2 ll. 42-49; col. 3 ll. 61-67) (emphasis added.)
As contained in the specification, the concept of "functionality of a credit card" focuses on the attribute that a credit card carries a credit line and functions differently in the market than payments by other methods, such as cash, checks, or debit cards. When a merchant accepts a credit card for payment by a customer, it does so on the condition that the issuer or its agent has made additional funds available to that customer through a line of credit.
SpendingMoney attempts to distinguish between merchants' acceptance of the satellite card and its functionality. It argues that whether the card can be used to rent a car, for example, depends upon whether the car company accepts the card, rather than whether the card has the functionality of a credit card.
The distinction between "functionality" and "acceptance" was discussed at the Markman hearing. At that time, I noted that the plain meaning of "acceptance" is whether a merchant has a contract with a particular brand of card and accepts an offer by a customer to use that brand of card to purchase merchandise. The '830 Patent claims a method for data processing such that, if a merchant accepts a MasterCard credit card for payment, it will also accept a MasterCard SpendingMoney card.
SpendingMoney mischaracterizes my description of "acceptance" when it states that acceptance is "whether the card will be accepted by a merchant for a particular type of purchase." (SpendingMoney Reply to American Express, doc. #148, at 3.) The particular type of purchase is of no import; the question of acceptance is whether a particular merchant has an agreement with a particular financial services company binding the merchant to accept the company's cards for payment by a customer.
In attempting to distinguish between functionality and acceptance, SpendingMoney ignores the use of "functionality" in the '830 Patent specification. As discussed in the specification, a credit card includes the following functionalities: rent a hotel room; rent a car; and order merchandise or services by telephone, mail, or over the Internet. Since a satellite card has the same functionalities as a credit card, if a card does not have those functionalities in the marketplace, then it cannot be a satellite card.
In the second step of a direct infringement analysis, I compare the properly construed claims to the accused products.
The '830 Patent claims a "data processing method of configuring a satellite spending card linked to a host card." Thus, to prove infringement of claims 1, 3, 6, 8, or 10 of the '830 Patent, SpendingMoney must prove, in addition to all of the other claim requirements, that an alleged infringing card was a "satellite spending card." As noted above, that means that SpendingMoney must prove that the Travelers Cheque Card is "a prepaid spending card, which has the functionality
American Express's principal argument is that the Travelers Cheque Card was configured not to have the functionalities of a credit card and that American Express therefore cannot have directly infringed the patent.
American Express has shown that the Traveler Cheque Card contained text on its back which noted that "USE OF THIS CARD IS SUBJECT TO THE ACCOMPANYING AGREEMENT," "THIS IS NOT A CREDIT/DEBIT CARD" and
(American Express Reply to Opp'n to Summ. J., Ex. E, Decl. of John C. Spaccarotella.)
The TravelFunds/Travelers Cheque Card cardholder agreement further restricted usage of the Travelers Cheque Card. The agreement stated that:
(Wright Decl. Exs. A, B.) (emphasis added.)
American Express also entered into acceptance agreements with merchants that contained additional restrictions on uses of the Travelers Cheque Card. Those agreements "specifically prohibited merchants from accepting prepaid cards for reserving a room or during check-in for a lodging stay." (Levitt Decl. at ¶ 3, 5; Slusarz Decl. Ex. 5, at AMSM0054867; Slusarz Decl. Ex. 6, at AMSM0054881) (noting that Acceptance Agreements states that merchants "must not accept Prepaid Cards at check-in for purposes of Authorization or payment," and that merchants "must accept all Cards, except Prepaid Cards, to reserve accommodations until the published check-out time on the day following the scheduled arrival date (Assured Reservations). You must not accept Prepaid Cards for Assured Reservations.")
American Express provided lodging and vehicle rental merchants with the Bank Identification Numbers ("BINs") of Travelers Cheque Cards, in order to enable them to electronically program their systems to decline prepaid cards. (Levitt Decl. at ¶ 7.) Merchants such as Dollar Thrifty Automotive Group, Enterprise Rent-A-Car Company, and Avis Budget Car Rental electronically programmed their systems to prevent Travelers Cheque Cards from being used for reservations or vehicle check-out. (Id.)
Fourth and finally, American Express configured its computer systems to prohibit many Travelers Cheque Card transactions. American Express had a computer program called the Stored Value Card Authorization Platform ("SVCAP"). (Wright Decl. Ex. C at 1.) SVCAP was programmed to prevent the Travelers Cheque Card from being used for certain purchases. "In particular, the Travelers Cheque Card could not be used to pay for Internet telecommunications, pay for an Internet service provider, rent cars over the Internet, purchase auto related goods over the Internet, or pay for Internet subscriptions. An American Express charge card or credit card could be used to pay for such Internet-related services." (Wright Decl. at 11; see also id. Ex. C at AMSM0054809-10, listing excluded industries.)
These four restrictions prevented the Travelers Cheque Card from having the functionality of a credit card. SpendingMoney attempts to refute this point by arguing that two of the layers of restrictions — the merchant acceptance agreements and SVCAP — were imperfect.
SpendingMoney argues first that SVCAP failed to prevent the prohibited transactions. The parties agree that SVCAP was able to exclude entire retailers and industries, but not specific types of transactions. Furthermore, although SVCAP prevented Travelers Cheque cardholders from renting cars over the Internet, SVCAP did not prevent cardholders from renting cars over the phone or in person.
SpendingMoney next argues that several of the merchant acceptance agreements
Any flaws in the merchant acceptance agreements and SVCAP are not fatal to American Express's motion for summary judgment, because they were not the only mechanisms used to restrict consumer transactions. For instance, there is no dispute that the Travelers Cheque Card had printed on it at all relevant times a restriction that stated it "[m]ay be used to pay for hotels/car rentals at the conclusion of the stay/rental, but not for reservations nor at hotel checkin nor rental car pick-up." Neither does SpendingMoney dispute that the cardholder agreement contained pertinent usage restrictions at all relevant times.
Even if it was theoretically possible for the Travelers Cheque Card to be used as a credit card, that fact is insufficient to conclude that the card had the functionality of a credit card. It is not enough that the defendant's card was capable of infringing the patent. Instead, SpendingMoney must present evidence that the apparatus actually infringed the '830 Patent. See Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 90 Fed.Appx. 540, 543 (Fed.Cir.2004); see also Cybersettle, Inc. v. National Arbitration Forum, Inc., 243 Fed.Appx. 603, 606-07 (Fed.Cir.2007) ("A patented method is a series of steps, each of which must be performed for infringement to occur. It is not enough that a claimed step be capable of being performed.'"); Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311 (Fed.Cir.2006) ("Method claims are only infringed when the claimed process is performed....").
American Express created several mechanisms to prevent the Travelers Cheque Card from operating as a credit card, and SpendingMoney has failed to present evidence that all of those mechanisms failed to do so. The Travelers Cheque Card did not have the functionality of a credit card, and therefore was not a satellite card. Thus, the Travelers Cheque Card did not infringe the '830 Patent, and American Express is not liable for direct infringement.
Visa makes two principal arguments against direct infringement. First, it claims that it did not perform the claimed step of issuing Buxx cards, and thus cannot be a direct infringer. Second, like American Express, Visa claims that its product did not have the functionality of a credit card.
As admitted by SpendingMoney, the '830 Patent "is directed to a data processing method of configuring a satellite spending card." "A patented method is a series of steps, each of which must be performed for infringement to occur.'" Cybersettle, 243 Fed.Appx. at 606-07. The sixth step of the '830 Patent is "issuing the satellite card."
Visa has submitted evidence that it does not issue Visa Buxx Cards to cardholders. Instead, it is undisputed that non-party banks issue the cards. Those issuing banks include Bank of America, U.S. Bank, First Tennessee, National City Bank, and various Metavante Banks (including American Bank & Trust, Area Bank, and Bankers Bank). (Carroll Decl., Ex. 3, Diamond Dep. at 31:16-33:24.) Thus, because Visa does not perform the step of "issuing the satellite card," Visa has not performed all of the steps of the patented method.
SpendingMoney argues that even if Visa itself did not actually issue the Visa Buxx Cards, Visa is still liable for direct infringement under a theory of joint infringement. The Federal Circuit has held that, although typically direct infringement requires a party to have performed every step of a patented method, "the law imposes vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party. In the context of patent infringement, a defendant cannot thus avoid liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf." BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1379 (Fed.Cir.2007) (internal citations omitted). Thus, Visa can be liable for direct infringement if it contracts out one of the steps of a patented process to another entity, so long as it "controls" or "directs" the issuing banks' infringement. Id. at 1380-81.
The relevant inquiry, then, is the level of control Visa had over the issuing banks. "[W]here the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises control or direction' over the entire process such that every step is attributable to the controlling party, i.e., the mastermind.'" Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed.Cir.2008). "At the other end of this multi-party spectrum, mere arms-length cooperation' will not give rise to direct infringement by any party." Id. Furthermore, to satisfy the requirements of the '830 Patent, Visa must not have only directed the issuing banks to issue the Visa Buxx Cards, but to issue them so that they (1) had means for storing on the Visa Buxx Card the satellite account number, so that each purchase made with the card was debited from the Buxx spending capacity; and (2) had means on the Buxx Card for displaying at least a portion of the configuration data sufficient to identify the cardholder so that only the cardholder identified on the card could use it for financial transactions in a total amount limited by the card spending capacity.
Here, there is evidence that Visa had some control over the issuers. Visa had several requirements that issuers of Visa Buxx had to follow. For instance, Visa Buxx cards had to be a prepaid product, with the Visa brand on it, that contained a magnetic stripe, and was embossed with the teen cardholder's name, the account number, and the expiration date. (Vriheas Decl., Ex. 2 at 2-4.) Issuers did have some latitude to make decisions. The issuers were allowed to set "all cardholder pricing, and the terms and conditions for their own Visa Buxx card payment product." (Id.) The issuer could also make decisions such as whether value could be loaded by the teen, or by an authorized
Visa argues that there is insufficient evidence of control here. In support, it cites Emtel, Inc. v. Lipidlabs, Inc., 583 F.Supp.2d 811 (S.D.Tex.2008). In that case, the plaintiff claimed infringement of a "telemedicine" method that used videoconference to allow a physician to communicate with a medical caregiver and patient in a remote healthcare facility. Patent steps included diagnosing the patient's condition, and providing instructions for the treatment of the patient. Although the defendant had hired physicians for a telemedicine endeavor, the defendant had no involvement in how the physicians diagnosed patients or instructed in their treatment. Id. at 838. Here, in contrast, Visa has not only contracted with the issuing banks to issue Visa Buxx cards, but has provided them instructions regarding how that issuance can be done. In short, there is enough evidence in the record that Visa directed and controlled the banks' issuance of the Visa Buxx card that a reasonable jury could find Visa jointly liable for any infringement.
Visa next argues that it should not be held liable because the Visa Buxx card did not have the functionality of a credit card, as required by the Markman definition. Visa claims that rental car agencies will not accept prepaid cards as security deposits for car rentals, but do accept credit cards for that purpose. Visa also has stated, and SpendingMoney does not dispute, that at least four rental car merchants (Hertz, Avis, National, and Enterprise) asked Visa to supply them with BIN numbers, so that the companies could identify and refuse to accept Visa Buxx cards used to reserve rental cars. (Vriheas Dep. at 47:1-49:13.) As noted above, the ability to use a card as a security deposit for a rental car is one functionality of a credit card.
SpendingMoney argues that other car rental companies may not have asked Visa to supply them with BIN numbers in order to prevent Buxx cards from being used as a security deposit. Visa Opp'n to Mot. for Summ. J. at 14. SpendingMoney has not, however, put forward any evidence to that effect. Even if it had, the fact would remain that the Visa Buxx card in at least some situations did not have the functionality of a credit card.
SpendingMoney next argues that even if some rental car agencies did not accept the Visa Buxx card for security deposits, the card was configured to be capable of being accepted. SpendingMoney is incorrect. There are two aspects to functionality of a credit card: (1) what the card could do if the defendant permitted it, and (2) what the defendant actually permits the card to do. In order for Visa to be liable, both aspects of functionality must be present. SpendingMoney cannot rely on evidence that the card was capable of infringing the patent, but must also present evidence that it actually did infringe the patent. See Epcon, 90 Fed.Appx. at 543; see also Cybersettle, 243 Fed.Appx. at 606-07 ("A patented method is a series of steps, each of which must be performed for infringement to occur. It is not enough that a claimed step be `capable of being performed.'"); Ormco Corp., 463 F.3d at 1311 ("Method claims are only infringed when the claimed process is performed....").
As noted above, SpendingMoney's patent "is directed to a data processing method of configuring a satellite spending card." (Pl. Mem. at 2.) The "configuring" aspect of the definition requires that the card and the system controlling the card work together to allow an infringement. For example, if the patent were for a method of unlocking a door with a key, the
SpendingMoney advances an alternative theory of infringement against Visa only.
SpendingMoney moved to strike (doc. #169) portions of declarations submitted by Visa that refer to websites and matters over which the witnesses have no personal knowledge. Likewise, SpendingMoney has moved to strike (doc. #170) portions of the affidavits submitted by American Express as not based on personal knowledge. "On a summary judgment motion, the district court properly considers only evidence that would be admissible at trial." See Raskin v. Wyatt Co., 125 F.3d 55, 66 (2d Cir.1997).
I did not rely upon Visa's disputed information in determining that the Visa Buxx card was not a satellite spending card. Therefore, SpendingMoney's motion to strike (
The Levitt and Wright declarations submitted by American Express are based on adequate personal knowledge to be admissible. Levitt testified that she specifically drafted the confidentiality agreement between American Express and Avis Budget Car Rental concerning distribution of confidential BIN numbers. (Slusarz Decl., Ex. 7, Levitt Tr. 58:5-14.) Levitt also had personal knowledge of the prepaid card restricted-use contractual provisions in American Express's Card Acceptance Agreements. (Levitt Decl. 3, Exs. A-D.)
For the foregoing reasons, I conclude that Travelers Cheque Card is not a satellite card, and therefore that American Express is not liable as a direct infringer. I conclude that the Visa Buxx card is not a satellite card, and thus that Visa is not liable as a direct infringer. Additionally, because SpendingMoney has not demonstrated that anyone directly infringed the patent, Visa cannot be liable for indirect infringement. Therefore, no genuine issue of material fact remains whether either Visa or American Express infringed the '830 Patent under any theory and judgment must issue as a matter of law.
The motions for summary judgment (docs. ##103, 119) are
It is so ordered.
('830 Patent col. 3 ll. 33-36; col. 4 ll. 29-33).
