No Presents for Gift Card Patent Owner from Federal Circuit

AlexSam, Inc. lost its patent infringement cases against Simon Property Group/Blackhawk Network and Cigna Corporation in two separate decisions issued by the U.S. Court of Appeals for the Federal Circuit (CAFC) on Monday, April 1.

AlexSam owns U.S. Patent No. 6,000,608, which discloses a “multifunction card system.” Essentially, the invention is a type of gift card that “can serve a number of functions, thus allowing the consumer to have one card which may act as their card for financial transactions, long-distance telephone calls, loyalty information, and medical information.” Primarily at issue in both cases was a claim construction adopted in AlexSam, Inc. v. Datastream Card Servs. Ltd., No. 2:03-cv-337, 2005 WL 6220095 (E.D. Tex. 2005) for the term “unmodified”, namely, “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.”

In the Cigna case, AlexSam filed suit against Cigna Corp on March 18, 2020, three years after the ’608 patent’s expiration, in the U.S. Court of Appeals for the Eastern District of Texas, alleging that Cigna’s Consumer-Driven Health Plan debit cards infringed independent claim 32 and dependent claim 33 of the ’608 patent. In preliminary construction hearings for disputed claims, AlexSam requested that the trial court adopt the same construction for the term “unmodified” in claim 32 that was used in Datastream. The court did, but added two commas at Cigna’s request, making the final construction for “unmodified” in claim 32: “a terminal, for making purchases, that is of the type in use as of July 10, 1997, and that has not been reprogrammed, customized, or otherwise altered with respect to its software or hardware for use in the card system.”

At the Federal Circuit, AlexSam argued that “while claim 32 was construed correctly, the district court erred by ignoring the end of the construction, which states ‘for use in the card system.’” The Federal Circuit disagreed, explaining that “AlexSam has advocated for over fifteen years for the same claim construction contained in claim 32 of the ’608 patent…[and] [f]or the first time, on summary judgment in this case,…argues for a broader construction…. [W]e decline to consider AlexSam’s eleventh-hour arguments….”

Ultimately, though, AlexSam’s key problem was not the claim construction issue, said the CAFC, but the fact that it failed to provide sufficient evidence that the alleged infringer used unmodified devices, just as it did in the precedential case of Alexsam, Inc. v. IDT Corp., 715 F.3d 1336 (Fed. Cir. 2013). “The magistrate judge correctly concluded that ‘AlexSam’s evidence in this case, like its evidence in IDT, simply shows that modifications of standard existing POS devices were not required for use in the accused system. Binding precedent establishes that such evidence is insufficient,’” wrote the CAFC.

In the Simon Property litigation, AlexSam sued Simon, and later amended its complaint to add Blackhawk, alleging that products including Simon’s self-branded gift cards infringed independent claims 34 and 60 and various dependent claims of the ’608 patent. The Eastern District of Texas court adopted the Report and Recommendation (R&R) of a magistrate judge and granted two motions of non-infringement for Simon Property and Blackhawk in March 2022. AlexSam asserted that “[t]he ‘608 Patent covers a variety of important technologies relating to the debit card industry,” and “[t]he multifunction card system disclosed in the ‘608 Patent enabled consumers and retailers to use existing point-of-sales devices, the existing banking infrastructure, and a bank identification number (BIN) to perform financial transactions.” AlexSam, Inc. v. Simon Property Group L.P., No. 2:19-CV-331-JRG, (E.D. Tex. 2021). Simon and Blackhawk motioned for summary judgment of non-infringement and the magistrate judge recommended granting both the Simon and the Blackhawk motions, which the district court ultimately adopted.

In its objections, AlexSam contended that the R&R “offers a different understanding of the claim term ‘unmodified’ than is stipulated to by the parties.” But the court concluded that the R&R did not offer a new claim construction of the term “unmodified,” although it did clarify the scope of the term in view of the Federal Circuit’s decision in IDT and the evidence AlexSam needed to meet its burden on patent infringement. The CAFC agreed, reaching similar findings as it did in the Cigna opinion.

Ultimately, both rulings affirmed the Eastern District of Texas court, with the CAFC concluding in Simon Property that the district court correctly applied the Datastream claim construction and that AlexSam did not provide sufficient evidence to establish a genuine dispute of material fact over whether the accused devices were ‘unmodified’ and in Cigna affirming that AlexSam failed to provide sufficient evidence of Cigna’s infringement.

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