Ondot Systems Inc v. Mantissa Corp

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Ondot Systems, Inc. (Delaware)
  • Defendant: Mantissa Corporation (Alabama)
  • Plaintiff’s Counsel: Wilson Sonsini Goodrich & Rosati
• Case Identification: 3:18-cv-00207, N.D. Cal., 04/02/2018
• Venue Allegations: Plaintiff alleges venue is proper in the Northern District of California because Defendant Mantissa has licensed software products in California, engaged in business disputes in the district, developed its product with a San Francisco-based partner, targeted California residents for licensing, and retained a California-based law firm for its patent enforcement efforts.
• Core Dispute: Plaintiff Ondot Systems seeks a declaratory judgment that its card control technology does not infringe Defendant Mantissa's U.S. Patent No. 9,361,658 and that the patent is invalid.
• Technical Context: The technology at issue involves systems that allow financial account holders to proactively set rules and conditions—such as on/off status, transaction categories, and geographic limits—to control the use of their accounts, primarily for fraud prevention.
• Key Procedural History: This action follows a history of disputes between the parties. Mantissa previously sued Ondot in the Southern District of Texas over two related patents ('456 and '027), which were ultimately found invalid under 35 U.S.C. § 101. Mantissa has since sued Ondot's bank customers in Illinois, alleging their use of Ondot's technology infringes the ’658 patent, prompting Ondot to file this declaratory judgment action.

Case Timeline

Date	Event
2005-04-27	'658 Patent Priority Date
2006-03-31	Mantissa executes software license with GoldenGate (no later than)
2006-05-08	Mantissa sends letter to Visa offering to license iDovos
2006-09-25	Mantissa attends American Banker's Symposium in San Francisco
2010-08-17	Related U.S. Patent No. 7,779,456 issues
2013-01-08	Related U.S. Patent No. 8,353,027 issues
2014-05-06	Related U.S. Patent No. 8,719,953 issues
2015-10-28	Mantissa's counsel sends letter to Ondot accusing it of infringement
2016-04-14	S.D. Texas court holds hearing where Mantissa states intent to sue on '658 patent
2016-06-07	U.S. Patent No. 9,361,658 issues
2017-08-10	S.D. Texas court grants summary judgment of invalidity for '456 and '027 patents
2017-11-30	Mantissa begins sending letters to Ondot's bank customers (approximate)
2017-12-20	Mantissa files infringement lawsuits against Ondot's customers in N.D. Illinois
2018-01-09	Mantissa sends settlement proposal to Ondot regarding the '658 patent
2018-04-02	Ondot files First Amended Complaint for Declaratory Judgment

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 9,361,658 - "System and Method For Enhanced Protection and Control Over the Use of Identity"

• Patent Identification: U.S. Patent No. 9,361,658, "System and Method For Enhanced Protection and Control Over the Use of Identity," issued June 7, 2016.

The Invention Explained

• Problem Addressed: The patent asserts that traditional methods for combating identity and financial fraud are "reactive," meaning they address misuse only after damage has occurred ('658 Patent, col. 1:50-63). The background section identifies a need for a system that gives an identity owner "means of proactively controlling use of his identity and identification information" ('658 Patent, col. 2:7-11).
• The Patented Solution: The invention describes a method where a "service provider" manages a system that allows an account owner (the "entity") to define a "scope of use" for a financial account via a network ('658 Patent, col. 15:21-23). This scope is defined by a set of user-configurable rules, such as turning the account ON or OFF, authorizing or blocking certain transaction categories, and setting geographic boundaries for permitted use ('658 Patent, col. 15:25-33). When a transaction is attempted, the system checks the request against these predefined rules to determine whether to authorize or deny it ('658 Patent, col. 15:34-40).
• Technical Importance: This approach shifts control over transaction authorization from a purely bank-centric, reactive model to a proactive, user-driven model, empowering the account holder to define the conditions of use in advance. ('658 Patent, col. 2:7-11).

Key Claims at a Glance

• The complaint states that Mantissa has accused Ondot's customers of infringing at least independent claim 1 and seeks a declaratory judgment of non-infringement as to "any claim" of the '658 patent (Compl. ¶¶ 37, 51). The independent claims are 1, 7, and 13.
• Independent Claim 1 recites a method for a service provider to control a financial account, comprising the key steps of:
  • Setting a scope of use defined by the entity, including (a) an ON/OFF status, (b) authorized/unauthorized transaction categories, and (c) a geographical scope.
  • Receiving an inquiry for a proposed transaction from a source other than the entity.
  • Determining whether the transaction is permissible based on the set scope of use.
  • Responding to the inquiry with the determination.
• Independent Claim 7 recites a similar method executed on computer hardware, but defines the geographic control as "setting a distance from the entity, where the entity's financial account can be used within said distance."
• Independent Claim 13 recites a method of protecting an account by storing entity-defined criteria (including ON/OFF state and geographical limitations) and using them to determine whether a proposed use is authorized.
• The complaint implicitly reserves the right to address all claims, including dependent claims (Compl. ¶ 51).

III. The Accused Instrumentality

Product Identification

• Ondot’s "card control" technology, which is provided to banks and other financial institutions for use by their customers (Compl. ¶¶ 23, 31, 39).

Functionality and Market Context

• The complaint provides limited direct description of Ondot’s technology. Its functionality is primarily described through Mantissa’s allegations. Mantissa’s demand letters and settlement proposals suggest that Ondot's technology allows an account owner to control their debit or credit card by setting conditions for its use (Compl. ¶¶ 36, 43). These conditions allegedly include an on/off function, transaction category controls, and geographic scope limitations (Compl. ¶ 36). Mantissa’s infringement lawsuits against Ondot’s bank customers are based on their use of this card control technology (Compl. ¶ 39).

IV. Analysis of Infringement Allegations

No probative visual evidence provided in complaint.

The core of the dispute rests on Mantissa's contention, detailed in communications to Ondot and its customers, that Ondot's "card control" technology practices the method claimed in the '658 patent (Compl. ¶¶ 37-38, 43).

'658 Patent Infringement Allegations

Claim Element (from Independent Claim 1)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
setting scope of use, defined by the entity via a network, for the financial account	Ondot's technology allegedly allows an account owner to set conditions controlling the use of their account.	¶43	col. 15:21-24
including at least: (a) the financial account to either OFF or ON	Mantissa's description of the accused functionality specifically includes an "on/off" configuration.	¶36	col. 15:25-26
(b) for a plurality of individual categories, whether each category is authorized or unauthorized...	Mantissa's description of the accused functionality includes control by "category."	¶36	col. 15:27-30
(c) a geographical scope reflecting a geographic area in which transactions are authorized	Mantissa's description of the accused functionality includes control by "geographic scope," and its settlement proposal centers on accounts with "at least geographic control."	¶¶36, 43	col. 15:31-33
receiving, via a network from a source other than the entity, an inquiry regarding a proposed transaction	This functionality is inherent in any system that provides real-time transaction authorization for payment cards.	¶¶31, 39	col. 15:34-37
determining, relative to the scope of use, whether the financial account may or may not be used	This functionality is the core of a "card control" technology that approves or denies transactions based on user-set rules.	¶¶23, 31	col. 15:38-40
responding to the inquiry by providing, via a network to the source, first information based on the result	This functionality is the necessary output (approval/denial) of the determination step in a transaction authorization process.	¶¶31, 39	col. 15:50-52

Identified Points of Contention

• Scope Questions: A central question may be whether the architecture of Ondot's system, as used by its bank customers, maps to the "service provider" structure recited in the claims. The patent's figures depict the "service provider" (10) as a distinct entity from the "user" (20, e.g., a bank) and the "identity owner" (30) ('658 Patent, Fig. 1). The court may need to determine if Ondot, the bank, or the software itself constitutes the claimed "service provider."
• Technical Questions: The complaint alleges invalidity under 35 U.S.C. § 101, framing the patent as directed to the abstract idea of "protecting and controlling use of an entity's financial account over a computer network" (Compl. ¶ 58). This raises the question of whether the claim limitations (e.g., ON/OFF status, categories, geographic scope) constitute a sufficient "inventive concept" to transform the abstract idea into a patent-eligible application.

V. Key Claim Terms for Construction

The Term: "service provider"

• Context and Importance: This term appears in the preambles of independent claims 1 and 7 and is foundational to the patent's architecture. The infringement analysis will depend on whether Ondot, its bank customers, or the software platform itself is construed as the "service provider." Practitioners may focus on this term because its construction could determine whether the accused system's operational structure falls within the scope of the claims.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification suggests the "service provider" can be an automated system, stating it can be "an automated combination of hardware and software" and that a "human identity owner 30 may, for the purpose of practicing this embodiment, maintain and/or utilize a personal computer as a service provider 10" ('658 Patent, col. 8:53-63). This could support a reading where the software itself, or the bank operating it, is the provider.
  • Evidence for a Narrower Interpretation: The primary embodiment and figures depict the "service provider 10" as a distinct entity that intermediates between a "user 20" (e.g., a credit card company) and an "identity owner 30" ('658 Patent, Fig. 1; col. 4:18-21). This could support a narrower construction requiring a three-party system, which may or may not align with Ondot's business model.

The Term: "category representing a different type of transaction partner"

• Context and Importance: Claim 1 requires control based on "categories." Whether Ondot's product infringes may depend on how its category-based controls are implemented and whether they meet this definition. Mantissa's letters allege "category" control is a feature of the accused system (Compl. ¶ 36).
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: This phrase could be interpreted broadly to cover standard Merchant Category Codes (MCCs) used in the payment card industry to classify businesses (e.g., "restaurants," "airlines").
  • Evidence for a Narrower Interpretation: The specification provides an example of allowing use only for "pre-authorized for health services (e.g., doctors, hospitals, pharmacies)" ('658 Patent, col. 5:51-54). This could be argued to require categorization based on the specific type or identity of the "partner" entity, a potentially more specific requirement than a general MCC.

VI. Other Allegations

Indirect Infringement

• Ondot seeks a declaration that it has not contributed to or induced infringement (Compl., Prayer for Relief ¶(a)). Mantissa's strategy of suing Ondot's customers for direct infringement suggests its underlying theory against Ondot is one of indirect infringement, where Ondot is alleged to have supplied the technology (the "card control" system) and encouraged or instructed its customers to use it in an infringing manner (Compl. ¶¶ 39, 48).

Willful Infringement

• While Ondot, as the plaintiff, does not allege willfulness, the complaint details extensive pre-suit knowledge on Ondot's part, including direct communications from Mantissa, threats of litigation before the patent even issued, and active lawsuits against its customers (Compl. ¶¶ 30, 33, 39, 43). These facts would likely form the basis of a willfulness counterclaim by Mantissa should it choose to assert its patent directly against Ondot.

VII. Analyst’s Conclusion: Key Questions for the Case

• A central issue will be the patent eligibility challenge under § 101: given that two parent patents with the same specification were invalidated as abstract ideas, the court will have to determine if the specific limitations in the '658 patent's claims—such as combining ON/OFF status, categories, and geographic controls—provide a sufficient "inventive concept" to render the claims patent-eligible.
• The case will also turn on a question of definitional scope and system architecture: can the term "service provider", as described in the patent's specification and figures, be construed to read on the role played by Ondot's software platform as it is deployed by its bank customers, or is there a fundamental mismatch in the operational structure?
• A key evidentiary question will be one of functional implementation: beyond high-level feature descriptions, the analysis will require a granular comparison of how Ondot's "card control" technology actually implements its features versus the specific technical requirements of the claim language, particularly for terms like "category" and the distinct types of geographic controls in claims 1 and 7.