DCT
2:23-cv-06904
DKR Consulting LLC v. Shopify Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: DKR Consulting, LLC (North Carolina)
- Defendant: Shopify, Inc. (Canada)
- Plaintiff’s Counsel: PERKOWSKI LEGAL, PC; Daignault Iyer LLP
- Case Identification: 2:23-cv-06904, C.D. Cal., 02/14/2024
- Venue Allegations: Plaintiff alleges venue is proper in the Central District of California based on Defendant’s substantial business in the state, including operating thousands of merchant stores, hosting physical pop-up shops and events in Los Angeles, and employing personnel in the district.
- Core Dispute: Plaintiff alleges that Defendant’s e-commerce platform, including its "Buy Button" and online store creation tools, infringes four patents related to generating and distributing embeddable, transaction-enabled product listings and widgets.
- Technical Context: The technology concerns portable e-commerce modules that allow merchants to sell products directly from various online locations, such as blogs or social media feeds, rather than solely through a traditional, standalone online store.
- Key Procedural History: The complaint alleges a prior business relationship between Plaintiff's predecessor-in-interest, DIY Media, Inc., and Shopify from approximately 2011 to 2015, which included the integration of DIY Media’s "Shoppost" application into Shopify's platform. Plaintiff alleges that during this period, Shopify obtained confidential technical information related to the patents-in-suit and had knowledge of the pending patent applications, which may be relevant to the allegation of willful infringement.
Case Timeline
| Date | Event |
|---|---|
| 2010-08-06 | Earliest Priority Date for all Patents-in-Suit |
| c. 2011 | Discussions begin between Shopify and Plaintiff's predecessor |
| 2013 | Parties meet at SxSW to discuss business relationship |
| 2014-03 | Shopify/Shoppost partnership begins |
| 2014-07-09 | Plaintiff's predecessor's app promoted on Shopify's app store |
| Late 2016 | Shopify allegedly creates feature mirroring predecessor's technology |
| 2020-11-24 | U.S. Patent No. 10,846,785 Issues |
| 2021-10-26 | U.S. Patent No. 11,157,995 Issues |
| 2022-09-27 | U.S. Patent No. 11,455,678 Issues |
| 2022-11-01 | U.S. Patent No. 11,488,237 Issues |
| 2024-02-14 | Complaint Filing Date |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 11,455,678 - "System and Method for Distributable E-Commerce Product Listings"
The Invention Explained
- Problem Addressed: The patent’s background section notes that at the time of the invention, "current web widgets are not used as self-contained electronic commerce platforms" (’678 Patent, col. 2:7-10; Compl. ¶37). It identifies a "significant and rapidly growing need for web widgets with enhanced capabilities" that would allow content owners to engage in purchase transactions directly from within the widget itself, leveraging viral distribution and social media marketing trends (’678 Patent, col. 2:10-18; Compl. ¶36).
- The Patented Solution: The invention provides a system for creating and distributing portable, transaction-enabled e-commerce product listings. The system comprises a server, a storage resource, and a "widget builder resource" that generates a product listing containing item information, a marketplace rule (e.g., price or sales region), and a clickable buy button (’678 Patent, Abstract; col. 5:25-34). This self-contained listing can then be distributed to and displayed on various websites or applications, where a user can initiate and complete a purchase via a checkout screen provided by the system (’678 Patent, col. 7:46-53; Compl. ¶¶40, 73-76).
- Technical Importance: This approach decouples the point-of-sale from a singular e-commerce website, enabling transactions to occur at the point of discovery on third-party digital properties (Compl. ¶36).
Key Claims at a Glance
- The complaint asserts independent claim 1 (Compl. ¶69).
- The essential elements of claim 1 of the ’678 patent include:
- A system with a server controlling a transaction processing service.
- A storage resource coupled to the server for storing an item with an identifier, multimedia content, and metadata.
- A widget builder resource that receives the item from storage and generates a product listing.
- The product listing includes information associated with the item, a marketplace rule, and a clickable buy button.
- The system distributes the product listing to a website or application, receives an indication that the buy button was selected, and provides a checkout screen to the user's device to process a payment.
- The complaint does not explicitly reserve the right to assert dependent claims for this patent.
U.S. Patent No. 10,846,785 - "System and Method for Generating and Distributing Embeddable Buy Buttons"
The Invention Explained
- Problem Addressed: The patent addresses the same technical problem as the ’678 Patent: the limitations of existing web widgets and the need for portable, self-contained e-commerce functionality that can be virally distributed (’785 Patent, col. 2:7-18; Compl. ¶46).
- The Patented Solution: The invention discloses a method for creating an embeddable buy button that contains a hyperlink to an electronic commerce store. A key aspect of the method is its distributed architecture: a "buy button provider" operates a "first server" to generate the button, which is then embedded into a third-party website "executed by a second server not operated by the buy button provider." When a user clicks the hyperlink, the e-commerce store, which is operated by the first server, is displayed within the third-party website to facilitate a purchase (’785 Patent, claim 1). This architecture is illustrated in the system diagrams showing content owners, distributors, and consumers interacting through a network with distinct server resources (’785 Patent, Fig. 1A).
- Technical Importance: This method allows a merchant's transaction capabilities to be embedded directly into external digital content, such as a blog post or partner website, while maintaining control over the e-commerce and payment processing functions on the merchant's own server infrastructure (Compl. ¶¶ 83-84).
Key Claims at a Glance
- The complaint asserts independent claim 1 (Compl. ¶79).
- The essential elements of claim 1 of the ’785 patent include:
- Receiving a selection of an item by a buy button builder executing on a first server operated by a buy button provider.
- Generating, by the first server, an embeddable buy button configured to display the item's representation and a hyperlink.
- Embedding the buy button into a website, where the website is executed by a second server not operated by the buy button provider.
- Upon selection of the hyperlink, displaying an electronic commerce store within the website, where the store is operated by the buy button provider and configured for payment processing.
- The complaint does not explicitly reserve the right to assert dependent claims for this patent.
U.S. Patent No. 11,157,995 - "System and Method for Generating and Distributing Embeddable Electronic Commerce Stores"
- Technology Synopsis: The patent relates to a system for generating an entire embeddable electronic commerce store, rather than just a single button or listing (’995 Patent, Abstract). The complaint states it solves the same technological challenges as the ’678 Patent by enabling portable, distributable e-commerce functionality (Compl. ¶¶ 51-52).
- Asserted Claims: Claim 1 is asserted (Compl. ¶87).
- Accused Features: The complaint accuses Shopify's services that generate online stores, including the application server controlling transactions, the storage resource for product data, and the widget builder resource that creates and embeds product listings into websites and social media (Compl. ¶¶ 88-94).
U.S. Patent No. 11,488,237 - "System and Method for Facilitating Social Shopping"
- Technology Synopsis: This patent describes a system for facilitating "social shopping" using a portable web widget for distributing e-commerce content (’237 Patent, Abstract). The system generates a product listing with a preview and a clickable buy button, which is then distributed to a website or distributed application (Compl. ¶¶ 57-58, 101-102).
- Asserted Claims: Claim 1 is asserted (Compl. ¶97).
- Accused Features: The complaint accuses Shopify’s system for generating and distributing product listings, including its application server, storage for product information, and a widget builder resource that generates listings with previews and buy buttons for display on websites and applications (Compl. ¶¶ 98-104).
III. The Accused Instrumentality
Product Identification
- The accused instrumentalities are the "Shopify e-commerce Products and Services" (Compl. ¶6). This is a collective term for Shopify’s e-commerce platform, which includes its E-commerce app, Admin API, Storefront API, Partner API, Marketplaces API, Buy-Button, and Shop Pay (Compl. ¶¶ 2-3).
Functionality and Market Context
- The complaint alleges that the accused services collectively provide an integrated platform for merchants to create and manage online sales channels (Compl. ¶¶ 70-71). A merchant allegedly uses the platform to upload product information, including images and metadata, which is stored by Shopify (Compl. ¶71). The platform then enables the generation of product listings that include this information, marketplace rules (such as discounts or shipping zones), and a clickable "buy button" (Compl. ¶73). The complaint provides a screenshot of the Shopify interface for adding product details such as a title, description, and image (Compl. p. 16). These product listings can then be distributed to various online channels, including third-party websites, blogs, and social media platforms (Compl. ¶74, p. 19). When a customer clicks the buy button, the platform allegedly provides a checkout screen to process the payment (Compl. ¶76). The complaint highlights Shopify's significant market presence, referencing its relationships with major brands like Kylie Cosmetics (Compl. p. 5).
IV. Analysis of Infringement Allegations
11,455,678 Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| A system for distributing multimedia content over a network comprising: a server configured to control a transaction processing service; | The Shopify platform is alleged to be a system that employs a server to control transaction processing services like ShopPay. | ¶70 | col. 4:8-14 |
| a storage resource communicatively coupled to the server and configured to store an item, wherein the item comprises an identifier, multimedia content, and metadata; | Shopify’s system is alleged to include a storage resource coupled to its server, which stores product items comprising identifiers, multimedia content (images), and metadata (descriptions). | ¶71 | col. 4:56-65 |
| a widget builder resource configured to generate a product listing, wherein the product listing includes: (i) information associated with the item, (ii) a marketplace rule, and (iii) a clickable buy button; | Shopify’s platform is alleged to execute a resource that generates product listings, which include item information, marketplace rules like discounts or shipping zones, and a clickable buy button. A screenshot of a Kylie Cosmetics product with a "BUY BUTTON" is provided as an example. | ¶73 | col. 5:25-34 |
| distribute the product listing to a web site or a distributed application... based on a marketplace rule; | The Shopify platform is alleged to distribute these product listings to various websites and applications, such as a merchant's online store or other sales channels. | ¶74 | col. 6:49-53 |
| receive an indication that the clickable buy button has been selected by a remote computing device; | Shopify’s system is alleged to receive an indication when a user clicks the buy button, for example, by adding an item to a shopping cart. A screenshot shows a shopping cart after a user selection. | ¶75, p. 19 | col. 7:46-53 |
| and provide a checkout screen to the remote computing device... | Shopify’s platform is alleged to provide a checkout screen to the user’s device to process the payment after the buy button is selected. | ¶76 | col. 7:46-53 |
Identified Points of Contention
- Scope Questions: A central question may be whether Shopify's integrated platform constitutes the claimed "system" with discrete functional components corresponding to the claimed "server," "storage resource," and "widget builder resource." The defense could argue that Shopify offers a single, monolithic service, whereas the patent describes a more modular architecture.
- Technical Questions: The complaint alleges that Shopify's tools for setting "discounts" and "shipping zones" meet the "marketplace rule" limitation (Compl. ¶73, pp. 17-18). An issue may arise as to whether these user-configured settings perform the function of a "marketplace rule" as contemplated by the patent, which also describes rules like territorial restrictions and sales campaign timing (’678 Patent, col. 10:49-64).
10,846,785 Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| receiving, by an embeddable buy button builder executing on a first server operated by a buy button provider, a selection of an item from an item inventory... | Shopify's "Buy Button" builder, allegedly executing on Shopify's server (the "first server"), receives a merchant's selection of a product from their inventory. | ¶81 | col. 18:41-49 |
| generating, by the first server, the embeddable buy button, wherein the embeddable buy button is configured to display the representation of the item, and a hyperlink; | Shopify's server is alleged to generate the embeddable buy button, which displays the product and contains a hyperlink to the checkout or product page. | ¶82 | col. 18:51-54 |
| embedding, by the buy button provider, the embeddable buy button into a web site, wherein the web site is executed by a second server not operated by the buy button provider, | Shopify is alleged to provide embeddable code that merchants place on third-party websites (e.g., a Wordpress blog), which are executed on servers not operated by Shopify. A screenshot of source code from an externally hosted website is provided as evidence. | ¶83, p. 25 | col. 18:55-58 |
| wherein the electronic commerce store is displayed within the web site upon selection of the hyperlink... and wherein the electronic commerce store is operated by the buy button provider. | When the hyperlink in the embedded button is clicked, Shopify's e-commerce store or checkout flow is allegedly displayed within the third-party site, with the e-commerce functionality being operated by Shopify's servers. A screenshot depicts a Shopify Buy Button on a Wordpress blog. | ¶84, p. 26 | col. 18:59-64 |
Identified Points of Contention
- Scope Questions: The construction of the phrase "a second server not operated by the buy button provider" will be critical. The analysis may focus on the degree of technical and operational separation required between Shopify's infrastructure and the third-party web host. Use of Shopify APIs or content delivery networks (CDNs) by the third-party site could raise questions about whether the second server is truly "not operated by" Shopify.
- Technical Questions: Does the display of a Shopify-hosted checkout page in an iframe or new window within a third-party site meet the limitation "displayed within the web site"? The parties may dispute whether this constitutes a sufficient level of integration to meet the claim language.
V. Key Claim Terms for Construction
The Term: "widget builder resource" (’678 Patent, claim 1)
- Context and Importance: The infringement theory for the ’678 patent depends on identifying a component within Shopify's platform that corresponds to this claimed "resource." Its construction will determine whether Shopify's integrated store-creation tools can be mapped to the patent's seemingly modular system. Practitioners may focus on whether this term requires a distinct software module or can read on a set of functionalities within a larger, unified platform.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification describes the component's function as being "used to create various marketing resources including new web widgets, buy buttons, links and preview clips" (’678 Patent, col. 5:25-29). This functional description could support an interpretation that covers any toolset that performs these actions, regardless of its software architecture.
- Evidence for a Narrower Interpretation: Figure 2 of the patent depicts the "Widget Builder Resource Component (204)" as a distinct block within the larger "Content Management System (202)." This could support a narrower construction requiring a structurally separate or modular software component, which a defendant might argue is absent in its integrated platform.
The Term: "a second server not operated by the buy button provider" (’785 Patent, claim 1)
- Context and Importance: This term is central to the claimed architecture, which separates the content-hosting website from the e-commerce-providing service. The infringement analysis for the ’785 patent will turn on whether the third-party websites where Shopify's Buy Buttons are embedded are sufficiently independent to qualify as being "not operated by" Shopify.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The plain language suggests a simple distinction based on ownership or primary administrative control of the server hardware or hosting account. The complaint's example of a Wordpress blog (Compl. p. 26) would align with this interpretation.
- Evidence for a Narrower Interpretation: The ’785 patent also states in claim 7 that "the buy button provider controls operation of the embeddable buy button on the web site." A defendant could argue that this "control" implies a level of operational integration (e.g., through APIs, JavaScript execution, CDN content delivery) that blurs the line, suggesting Shopify does, in some sense, "operate" a portion of the functionality on the second server.
VI. Other Allegations
- Indirect Infringement: While the complaint focuses on direct infringement, the prayer for relief requests a finding of infringement under 35 U.S.C. § 271(a) and/or (b) (Compl. p. 40). The complaint alleges Shopify provides APIs and "instructions directed to customers... regarding how to start a business" using its services, which could form the basis for an inducement theory (Compl. ¶¶ 7, 11).
- Willful Infringement: The complaint explicitly alleges willful infringement based on a prior business and technical relationship between Shopify and Plaintiff's predecessor-in-interest, DIY Media (Compl. ¶¶ 20-27). It alleges that from 2011-2015, Shopify obtained "confidential technical information" and had "knowledge of DIY Media's pending patent applications" before allegedly creating a "mirrored" feature in late 2016 (Compl. ¶¶ 20, 25-27).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of claim scope and architecture: can the component-based language of the patents (e.g., "widget builder resource," "first server," "second server") be mapped onto Shopify’s highly integrated, cloud-based e-commerce platform? The outcome may depend on whether the court views these terms functionally or as requiring distinct structural separation.
- A key evidentiary question will be one of pre-suit knowledge and conduct: the allegations regarding the prior business relationship between Shopify and Plaintiff's predecessor will be central to the willfulness claim. The case will likely involve discovery into what technical information was shared and what knowledge Shopify possessed regarding the patent applications during that period.
- A central technical question for the ’785 patent will be the operational independence of the third-party website from Shopify. The analysis will likely focus on the modern web architecture of embedded scripts, APIs, and CDNs to determine if a third-party website using Shopify's tools is truly "not operated by" Shopify as required by the claim.