DCT
3:23-cv-03005
CloudofChange LLC v. Clover Network Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: CloudofChange, LLC (New York)
- Defendant: Clover Network, Inc. (California)
- Plaintiff’s Counsel: Patterson + Sheridan LLP
- Case Identification: 6:22-cv-00634, W.D. Tex., 12/12/2022
- Venue Allegations: Plaintiff alleges venue is proper in the Western District of Texas because Defendant has a regular and established place of business in the district, specifically its Clover Sport business unit in Austin, and has committed acts of infringement within the district.
- Core Dispute: Plaintiff alleges that Defendant’s Clover point-of-sale (POS) systems, including its cloud-based dashboard and hardware terminals, infringe three patents related to web-based systems for building and configuring POS interfaces.
- Technical Context: The technology at issue addresses the creation and remote management of POS system interfaces, enabling non-expert users to customize terminal screens via a web browser, with changes syncing to in-store devices.
- Key Procedural History: The complaint alleges Defendant had pre-suit knowledge of its potential infringement via a notice letter sent in January 2018. It also notes that the same three patents-in-suit were previously litigated against NCR Corporation in the same court, resulting in a judgment of willful infringement, which may influence claim construction and willfulness arguments in the present case.
Case Timeline
| Date | Event |
|---|---|
| 2008-02-05 | Priority Date for ’640, ’012, and ’793 Patents |
| 2016-07-26 | U.S. Patent No. 9,400,640 Issues |
| 2018-01-19 | Plaintiff Sends Notice Letter to Defendant |
| 2018-09-25 | U.S. Patent No. 10,083,012 Issues |
| 2021-07-13 | Judgment Entered in CloudofChange v. NCR |
| 2022-01-18 | U.S. Patent No. 11,226,793 Issues |
| 2022-06-16 | Original Complaint Filed |
| 2022-12-12 | First Amended Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 9,400,640 - "Web-Based Point of Sale Builder"
The Invention Explained
- Problem Addressed: The patent describes the prior art process of assembling POS systems as involving manual coding by a programmer or data expert, which was prone to mistakes, time-consuming, and difficult to change, leading businesses to retain outdated POS screens (’971 Patent, col. 1:20-38).
- The Patented Solution: The invention is a web-based system allowing non-expert business operators to build, edit, and test their POS terminals remotely and in real time (’971 Patent, Abstract). The system architecture decouples the POS terminal from the configuration logic by using a central web server to host "point of sale builder software," which is accessed by remote workstations (e.g., PCs) to design and modify the POS screens that are then displayed on the terminals in stores (’971 Patent, col. 2:21-31).
- Technical Importance: This approach aimed to lower the technical barrier for customizing POS systems, thereby reducing reliance on specialized programmers and enabling businesses to rapidly deploy updates across one or many locations (’971 Patent, col. 3:40-49).
Key Claims at a Glance
- The complaint asserts at least independent Claim 1 (Compl. ¶42).
- The essential elements of Claim 1 include:
- A web-based point of sale (POS) builder system comprising:
- one or more point of sale terminals, that display POS screens,
- an internet connection from the POS terminals to a web server,
- one or more local or remote PC workstations, and
- point of sale builder software that runs on the web server.
- The system is further characterized by the workstations being used to build or edit the POS terminals in real time over the worldwide web.
- A final key characteristic is that the web servers are provided as part of a vendor subscription service where the software is hosted on the vendor's remote servers.
- The complaint does not explicitly reserve the right to assert dependent claims.
U.S. Patent No. 10,083,012 - "Web-Based Point of Sale Builder"
The Invention Explained
- Problem Addressed: As a continuation of the ’640 Patent, the ’012 Patent addresses the same core problem of rigid, hard-to-modify POS systems that require expert intervention (’012 Patent, col. 1:31-48).
- The Patented Solution: The ’012 Patent claims a system centered on a "POS builder interface" that is accessible over a network and is used to "programmatically" create or modify the POS terminals in real time (’012 Patent, col. 6:9-17). The system is described as a continuous loop: the interface sends instructions to the server's builder software, the software configures the terminals, the terminals process transactions and send data back to the server, and this data can then be correlated with transactions (’012 Patent, Abstract, Fig. 3).
- Technical Importance: This invention refines the web-based builder concept by focusing on the "interface" as the tool for real-time, programmatic modification and emphasizing the two-way data flow between the central server and the terminals (’012 Patent, col. 3:36-54).
Key Claims at a Glance
- The complaint asserts at least independent Claim 1 (Compl. ¶62).
- The essential elements of Claim 1 include:
- A web-based POS builder system comprising:
- a web server with POS builder software installed thereon,
- one or more POS terminals generated by the software, configured to accept transactions and collect data, and
- a POS builder interface accessible via a network.
- The system is further characterized by the interface being used to access the builder software to "programmatically creating or modifying" the POS terminals in real time.
- Additional characteristics include the software interacting with the terminals and transaction data being transmitted back to the server.
- The complaint does not explicitly reserve the right to assert dependent claims.
U.S. Patent No. 11,226,793 - "Web-Based Point of Sale Builder"
Technology Synopsis
This patent, also in the same family, claims a system where a server communicates with POS terminals over a network. The server is configured to receive information from a POS builder interface to create or modify POS screens and also receives "further information" (e.g., transaction data) back from the terminals. A key aspect is that the server then uses this "further information" to configure the terminals, creating a feedback loop where transaction activity can inform subsequent POS screen modifications (’793 Patent, Claim 1).
Asserted Claims
At least Claim 1 (Compl. ¶84).
Accused Features
The complaint alleges that the Clover system’s ability to track inventory, sales, and customer data from transactions and use that data within its management dashboard to inform business decisions and system configuration infringes this patent (Compl. ¶¶ 96, 98).
III. The Accused Instrumentality
Product Identification
- The accused products are collectively referred to as "Clover POS" and include hardware terminals (Clover Station Solo, Station Duo, Mini), software services (Clover Dashboard, Clover Sport), and the web-based management interface (Clover Web Dashboard) (Compl. ¶7).
Functionality and Market Context
- The Clover POS system is a cloud-based platform where physical POS terminals connect to Clover's central servers via the internet (Wi-Fi, Ethernet, or 3G) (Compl. ¶44; Ex. 7, p. 12). The complaint provides a network architecture diagram showing Clover devices connecting to redundant data centers in Texas (Compl. Ex. 7, p. 12).
- Users manage their POS system—including adding or editing menu items, changing prices, and viewing sales reports—through the "Web Dashboard," a browser-based interface accessible from a PC or other remote device (Compl. ¶¶ 50, 52). A screenshot from a Clover tutorial shows a user editing the "Items" in their inventory via a web browser (Compl. Ex. 16, p. 19).
- The complaint alleges that changes made in the Web Dashboard are synchronized in "real time" or "almost instantly" with the POS terminals operating in a store, citing video webinars where this functionality is demonstrated (Compl. ¶¶ 20, 52).
IV. Analysis of Infringement Allegations
’640 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| one or more point of sale terminals, that display POS screens | Defendant provides hardware terminals such as the Clover Station, Mini, and Flex which function as points of sale and display transaction interfaces (Compl. Ex. 8, p. 12). | ¶46 | col. 2:25-26 |
| an internet connection from said one or more point of sale terminals to a web server | Clover devices connect to Clover's cloud servers via Wi-Fi, Ethernet, or 3G cellular connection, as shown in setup guides and network diagrams (Compl. Ex. 7, p. 12; Ex. 10, p. 14). | ¶48 | col. 2:26-28 |
| one or more local or remote PC workstations | Users access the Clover Web Dashboard on devices such as PCs to manage their system from anywhere (Compl. Ex. 13, p. 16). | ¶50 | col. 2:28-29 |
| point of sale builder software that runs on said web server, wherein said local or remote workstations are utilized to build or edit said POS terminals in real time, from anywhere in the world and over the worldwide web | The Clover Web Dashboard allows users on remote PCs to add/edit menu items, and these changes are alleged to sync in real time to the POS terminals (Compl. Ex. 18, p. 20). | ¶52 | col. 2:29-41 |
| wherein said web servers are provided as a vendor subscription service wherein web server software resides and is hosted on said vendor's remote servers and wherein subscriber company's POS terminals access and repeatedly interact with said web server software... | Clover operates a cloud-based subscription service where it hosts the POS software on its servers, and its customers' terminals connect to these servers to function (Compl. Ex. 19, p. 21). | ¶54 | col. 4:8-15 |
- Identified Points of Contention:
- Scope Question: A likely point of dispute will be whether a user configuring menu items through a graphical user interface (the Clover Web Dashboard) qualifies as "utilize[ing] workstations to build or edit said POS terminals" in the manner contemplated by the patent, which was written to solve the problem of manual coding by experts.
- Technical Question: The complaint alleges "real time" editing based on marketing materials stating changes happen "almost instantly." The actual synchronization latency and architecture of the Clover system will be a key factual question to determine if it meets the temporal "real time" limitation of the claim.
’012 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| a web server including POS builder software installed thereon | Clover's cloud servers host its point-of-sale software, which syncs with and manages the POS terminals (Compl. Ex. 5, p. 26). | ¶66 | col. 6:2-3 |
| one or more POS terminals generated by said POS builder software and said one or more POS terminals configured to...accept POS transactions and collect corresponding transaction data | The software on Clover's servers generates the functionality of the Clover hardware terminals (e.g., Station, Mini), which are used to conduct sales and collect transaction data (Compl. Ex. 8, p. 31; Ex. 25, p. 32). | ¶68 | col. 6:4-9 |
| a POS builder interface configured to be accessible via network communication with said web server over a communications network | The Clover Web Dashboard serves as the POS builder interface and is accessed via the internet to communicate with Clover's servers (Compl. Ex. 27, p. 34). | ¶70 | col. 6:9-12 |
| wherein said POS builder interface is configured to be utilized to access said POS builder software for programmatically creating or modifying said one or more POS terminals in real time over the communications network... | The Web Dashboard is used to create and manage the menu, with changes being sent over the network to the terminals in what is alleged to be real time (Compl. Ex. 24, p. 40). | ¶72 | col. 6:13-17 |
- Identified Points of Contention:
- Scope Question: The central dispute for this patent will likely concern the term "programmatically creating or modifying." It raises the question of whether a user's actions within a GUI (clicking buttons, filling forms) constitute "programmatic" modification, or if that term requires a more direct, code-level or script-based interaction not alleged in the complaint.
- Technical Question: The complaint asserts that the POS terminals are "generated by" the builder software. The court will need to examine the technical relationship between the software running on Clover's servers and the software/firmware operating on the physical terminals to determine if the terminals are "generated by" the central software in the way the claim requires.
V. Key Claim Terms for Construction
The Term: "build or edit said POS terminals in real time" (’640 Patent, Claim 1)
Context and Importance: This phrase is the functional core of the ’640 patent's asserted claim. The definitions of "build or edit" and "real time" are critical to determining whether Clover’s system, which uses a remote dashboard to configure terminals that then sync, falls within the claim scope. Practitioners may focus on this term because the defendant will likely argue that configuring settings in a dashboard is not "building" a terminal and that any synchronization delay, however small, means the process is not "real time."
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification describes the process as allowing a store operator to "edit and test his screens until he is satisfied" and to "edit, change and test the screens within minutes in real time," which could support a functional definition where any user-driven configuration that propagates to the terminal in a reasonably short period qualifies (’640 Patent, col. 3:15-17, 3:43-45).
- Evidence for a Narrower Interpretation: The patent contrasts its invention with prior art "off-line" editing where testing occurs at a "later date" (’640 Patent, col. 1:49-51). This could support a narrower definition requiring an instantaneous, synchronous update, potentially excluding systems that rely on an asynchronous, queued synchronization process.
The Term: "programmatically creating or modifying" (’012 Patent, Claim 1)
Context and Importance: This term is a key limitation added in the ’012 patent. Its construction is crucial because if it is construed narrowly to mean something akin to writing code or using an API, the plaintiff's infringement theory based on user interaction with a GUI (the Web Dashboard) may fail.
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The patent does not explicitly define "programmatically" or limit it to scripting. A patentee could argue that any software-mediated process that translates user inputs from an interface into a modified terminal state, without the user manually coding the terminal itself, is "programmatic" in nature.
- Evidence for a Narrower Interpretation: The patent is aimed at solving the problem of "manually coding" POS systems (’012 Patent, col. 1:31-32). A defendant could argue that "programmatically" is the direct antonym, implying an automated or code-driven process distinct from a user manually selecting options in a GUI. The specification's reference to "instructions sent from the POS builder interface" could be argued to imply a command-based interaction rather than simple GUI configuration (’012 Patent, col. 6:21-23).
VI. Other Allegations
- Indirect Infringement: The complaint alleges that Defendant induces infringement by providing customers with instructions, user manuals, and video webinars that teach them how to use the Clover POS systems in a manner that directly infringes the patents-in-suit (Compl. ¶¶ 40, 60, 82). Contributory infringement is also alleged on the basis that the accused products are used to perform the patented methods (Compl. ¶¶ 41, 61, 83).
- Willful Infringement: The complaint alleges willful infringement based on both pre-suit and post-suit knowledge. Pre-suit knowledge is grounded in a notice letter allegedly sent to Clover on January 19, 2018 (Compl. ¶32). Post-suit willfulness is based on the filing of the original complaint on June 16, 2022. The allegation is further supported by the prior adverse judgment against NCR on the same patents (Compl. ¶33).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of definitional scope: Can the claim terms "build or edit said POS terminals" and "programmatically creating or modifying" be construed to read on a user configuring options through a standard graphical web interface? The outcome of this claim construction battle will be pivotal to the infringement analysis.
- A second central issue will be the impact of prior adjudication: How will the court treat the prior judgment against NCR that found these same patents valid and willfully infringed? This raises questions of issue preclusion for validity and claim construction, and it significantly elevates the risk for the defendant on the question of willfulness.
- A key evidentiary question will be one of technical implementation versus marketing: The complaint's infringement allegations are heavily supported by marketing statements and high-level tutorials. The case will likely turn on whether discovery into the actual software architecture and operational details of the Clover system confirms that it functions in the specific manner required by the claim limitations, particularly regarding the "real time" and "programmatic" nature of the updates.