Card Activation Technologies Suffers Invalidity Blow to Retail Gift Card Patent

On July 1, 2011, the District of Delaware issued a ruling in Stored Value Solutions v. Card Activation Technologies (CAT), that CAT's '859 patent is invalid as anticipated, as obvious, and for lack of written description.  The '859 patent also recently suffered an adverse ruling during reexaminations proceedings ongoing at the PTO.

According to its website, CAT "owns proprietary patented transaction technology which covers Gift Cards, Phone Cards and Debit Cards used by thousands of retailers. The management’s mission is to pursue license agreements for its patented technology from the thousands of retailers and if necessary enforce our rights through the court system."  CAT has filed suit against as many as fifty major retailers for infringement of US Patent No. 6,032,859 ("'859 patent").  Many suits are still pending.  In this case, Stored Value Solutions filed a declaratory judgment of invalidity of the '859 patent.

Judge Jordan, a Third Circuit Judge sitting by designation, issued his ruling on July 1, which can be found here.  The Court concludes that the '859 patent is invalid for a number reasons:

• Claims 1-3, 5-7, 9-14, and 16-19 are anticipated under section 102(a) by a systems reference manual distributed by MicroTrax along with its software that permitted retailers in a point-of-sale system to accept the use of ATM cards to purchase and return goods; and
• Claims 20, 22-28, 29, 30-31, and 33-38 are invalid pursuant to section 112, paragraph 1, for failure to meet the written description requirement.

CAT had this to say about the ruling here:  

We believe the Delaware Court's Order contains numerous additional errors. However, we anticipate that the PTO will likewise make a final determination that the '859 Patent is invalid. Consequently, we will be required to appeal in both the Delaware Action and the PTO reexamination proceeding.

The realities of Card's financial status surely impact our ability to appeal these decisions. The costs of appeal, as well as the cost of maintaining an ongoing entity, are estimated to reach $750,000.00 over the next two years.  It is also important to understand that success on appeal means the action will be returned to the Delaware District Court for further proceedings regarding the validity of the patent. It is also common for the Federal Circuit Court of Appeals to affirm a trial court's ruling without written explanation. 

 

Although we strongly disagree with the Court's Order and what we presume will be the findings of the PTO, we are mindful of the economic realities facing the company at this juncture. A telephone conference has been scheduled for August 2, 2011 at 9:00 AM PST, dial in # 800-895-0198 Conference ID: CASUPDATE, in which President Bob Kite will answer questions concerning these important issues. Please bear in mind that we know, and expect, our adversaries to be listening on this call. Consequently, the company will not be inclined or able to fully disclose all of its strategies. 

SVS issued this statement on its website:

On July 1, 2011, Judge Kent A. Jordan, sitting by designation in the United States District Court for the District of Delaware, ruled that 33 of the 36 claims of Card Activation Technologies, Inc.'s U.S. Patent No. 6,032,859 are invalid. And on July 7, 2011, Card Activation Technologies, Inc. stipulated that the remaining three claims are also invalid. SVS filed this lawsuit seeking to invalidate all of the claims of U.S. Patent No. 6,032,859 because Card Activation Technologies, Inc. had previously sued a number of SVS's customers asserting that SVS's card products infringed the patent.

"We initiated this litigation to protect our customers from being sued over a patent that should have never been issued," said Ralph Rolen, SVS Executive Vice President and General Manager, "I am delighted that our view has been confirmed by the court process." Rolen added, "We are pleased with the outcome. We will continue to defend with vigor baseless patent threats against our business and business processes."

Retailers should continue to monitor the situation for developments both at the PTO and the Federal Circuit on appeal.