DCT
1:11-cv-00313
Walker Digital LLC v. Expedia Inc
Key Events
Complaint
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Walker Digital, LLC (Delaware)
- Defendant: Facebook, Inc. (Delaware), Amazon.com, Inc. (Delaware), eBay, Inc. (Delaware), and multiple other e-commerce and technology companies
- Plaintiff’s Counsel: Bayard, P.A.
- Case Identification: 1:11-cv-00313, D. Del., 04/11/2011
- Venue Allegations: Venue is alleged to be proper because Defendants, many of which are Delaware corporations, have committed acts of infringement in the district and/or are deemed to reside there.
- Core Dispute: Plaintiff alleges that Defendants’ e-commerce platforms infringe patents related to methods of providing third-party subsidies or cross-benefits to customers during an online transaction.
- Technical Context: The technology addresses customer acquisition in e-commerce by allowing a third-party merchant to offer a discount on a primary merchant's goods in exchange for the customer signing up for the third-party's service.
- Key Procedural History: The complaint notes that the founder of Plaintiff Walker Digital is also the founder of Priceline.com, whose business processes were developed by the Plaintiff. U.S. Patent No. 7,827,056 is subject to a terminal disclaimer.
Case Timeline
| Date | Event |
|---|---|
| 1996-09-05 | Earliest Priority Date for '470 and '056 Patents |
| 2010-11-02 | U.S. Patent No. 7,827,056 Issues |
| 2010-11-09 | U.S. Patent No. 7,831,470 Issues |
| 2011-04-11 | Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 7,831,470 - Method and Apparatus for Facilitating Electronic Commerce Through Providing Cross-Benefits During a Transaction
The Invention Explained
- Problem Addressed: The patent describes the challenge for e-commerce merchants of converting online "browsers" into actual purchasers, particularly when price competition is high and customers can easily "shop around." (’470 Patent, col. 2:16-29). Standard discounts directly erode the merchant's profit margins. (’470 Patent, col. 2:25-33).
- The Patented Solution: The invention proposes a method where, after a customer has signaled an intent to purchase items from a first merchant (e.g., by initiating checkout), a second merchant "intervenes" to offer a subsidy on that purchase. (’470 Patent, col. 2:50-65). In exchange for the subsidy (e.g., a price reduction), the customer agrees to participate in a transaction with the second merchant, such as applying for a new credit card, thereby providing the second merchant with a new customer. (’470 Patent, col. 3:5-13).
- Technical Importance: This method creates a targeted customer acquisition model for service-based businesses (the second merchant) by leveraging the point-of-sale moment of an unrelated transaction.
Key Claims at a Glance
- The complaint asserts at least claims 16 and 21 (Compl. ¶26). These depend on independent claims 1 and 20, respectively.
- Independent Claim 1 (Method) essential elements:
- Receiving an indication that a customer initiated a checkout process for an item.
- Transmitting a web page with two options: a first button to pay the total price and a second button to receive an offer for a price reduction.
- Receiving a signal that the customer selected the second button.
- Automatically selecting an offer for a price reduction in exchange for applying for a credit card account with a credit card issuer who is not the merchant.
- Providing the selected offer to the customer before the purchase is completed.
- Receiving an indication of the customer's willingness to apply for the credit card account.
- Selling the item for less than the original total price.
- Independent Claim 20 (Apparatus) essential elements:
- An apparatus with a processor and memory storing instructions to perform a method.
- The method includes receiving a checkout indication and customer information.
- The method further includes selecting a second merchant, transmitting the customer information to them, receiving a subsidy description back, providing an offer for that subsidy to the customer, and applying it to the purchase.
- The complaint reserves the right to assert additional claims.
U.S. Patent No. 7,827,056 - Method and Apparatus for Facilitating Electronic Commerce Through Providing Cross-Benefits During a Transaction
The Invention Explained
- Problem Addressed: The patent addresses the same e-commerce problem as the ’470 Patent: intense price competition and the need to incentivize customers to complete a purchase without the first merchant having to bear the full cost of a discount. (’056 Patent, col. 2:16-33).
- The Patented Solution: The system allows a second merchant to "intervene" in a transaction with a first merchant. (’056 Patent, col. 4:63-65). After the customer indicates they are ready to purchase items, the first merchant's system provides an offer for a benefit (e.g., a price reduction) funded by the second merchant. (’056 Patent, Abstract). The customer receives this benefit in exchange for agreeing to "sign up for a service" with the second merchant. (’056 Patent, col. 11:34-40).
- Technical Importance: This approach provides a mechanism for service providers to target potential new customers at the precise moment they are making a purchase, a point of high commercial receptivity.
Key Claims at a Glance
- The complaint asserts at least claims 1 and 47 (Compl. ¶63).
- Independent Claim 1 (Method) essential elements:
- Receiving an indication that a customer is ready to purchase an item from a shopping cart.
- Allowing a second merchant to "intervene" by providing an offer for a benefit.
- The offer provides the item for less than the total price in exchange for the customer agreeing to sign up for a service with the second merchant (where the service is not the item being purchased).
- The offer is only provided after the indication to purchase is received.
- Receiving a signal from the customer selecting the offer.
- Applying the benefit by selling the item at the reduced second price.
- Independent Claim 47 (Computer Readable Medium) essential elements:
- A computer-readable medium with instructions to perform a method substantially similar to that of Claim 1, with specific details about transmitting a web page with selectable elements for accepting or declining the offer.
- The complaint reserves the right to assert additional claims.
III. The Accused Instrumentality
Product Identification
- The complaint accuses the e-commerce platforms and related services of numerous defendants. The specific accused functionalities vary by defendant but share a common theme (Compl. ¶¶26, 37, 48, 74, 85).
Functionality and Market Context
- The accused functionalities generally involve systems where users, during a transaction, are presented with an offer for a benefit, such as a discount, virtual currency, or free product. This benefit is provided in exchange for the user performing a secondary action, such as shopping with a partner merchant, applying for a credit card, or using a specific payment service (Compl. ¶¶26, 48, 74, 85). For example, the complaint alleges that Facebook provides "the ability for users / customers of Facebook to earn Facebook credits for free by shopping via the 'Earn for free by shopping' button" (Compl. ¶26). Similarly, it alleges Expedia provides "the ability to get discounted travel by applying for cross-promotions, such as a credit card" (Compl. ¶74).
- The Defendants are prominent entities in the e-commerce, social media, and travel industries, and the accused cross-promotional features represent a significant aspect of online marketing and customer acquisition strategies.
- No probative visual evidence provided in complaint.
IV. Analysis of Infringement Allegations
’470 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality (as to Facebook) | Complaint Citation | Patent Citation |
|---|---|---|---|
| receiving an indication that a customer initiated a checkout process to consummate purchase of at least one item from a merchant... | Facebook's system receives an indication that a user is initiating a transaction to earn Facebook Credits. | ¶26 | col. 7:60-67 |
| transmitting a web page including ... a second selectable button associated with a second option for the customer to receive an offer for a reduction of the associated total price | Facebook’s platform provides an interface with an option to get a benefit, such as the "Earn for free by shopping" button. | ¶26 | col. 11:4-10 |
| automatically selecting by a computer device ... an offer for a reduction in the total price in exchange for applying for a credit card account... | Facebook's system provides an offer to earn credits by shopping with third-party partners. | ¶26, ¶28 | col. 9:1-12 |
| after receiving the signal and before the at least one item is purchased, receiving, from the customer, an indication of willingness to apply for a credit card account | The user is instructed to perform, and performs, the steps required by the third-party merchant to earn the credits. | ¶31 | col. 12:44-54 |
| selling, by the merchant, the at least one item to the customer for less than the total price in accordance with the selected offer. | Facebook provides the Facebook Credits to the user for free or at a reduced cost. | ¶26 | col. 10:9-14 |
- Identified Points of Contention:
- Scope Questions: A primary question for the '470 Patent will be whether the various "cross-promotions" alleged (e.g., earning credits by shopping, using Google Checkout) meet the specific limitation of "applying for a credit card account" as required by claim 1. The complaint's broad allegations may not map directly onto this narrow claim language.
- Technical Questions: What evidence demonstrates that the accused systems "automatically select" an offer from a database of plural offers, as recited in claim 1? The complaint alleges an offer is provided, but not the mechanism of its selection.
’056 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality (as to Facebook) | Complaint Citation | Patent Citation |
|---|---|---|---|
| receiving an indication of at least one item in a shopping cart that a customer is ready to purchase from a first merchant via a web site | Facebook's system detects a user initiating a transaction involving its platform and third-party partners. | ¶63 | col. 10:1-4 |
| allowing a second merchant to intervene in the purchase ... by providing ... an offer for a benefit from the second merchant... | Facebook's platform presents an offer from a third-party partner to a user during a transaction. | ¶63, ¶65 | col. 4:63-65 |
| in which the offer comprises an offer ... for an amount less than the associated total price in exchange for the customer agreeing to sign up for a service... | The offer provides Facebook credits for free in exchange for the user shopping with a third-party partner service. | ¶63 | col. 3:9-13 |
| applying the benefit to the at least one item ... selling the at least one item to the customer for a second price, the second price being less than the first price. | The user receives the Facebook Credits, a benefit that reduces the overall cost of the transaction. | ¶63 | col. 10:9-14 |
- Identified Points of Contention:
- Scope Questions: Does the act of "shopping" with a partner via an "Earn for free" button constitute "signing up for a service" as required by claim 1 of the '056 Patent? The defense may argue that "signing up for a service" implies creating a new, ongoing customer relationship (like a new cell phone plan or credit card), not just completing a single promotional purchase.
- Technical Questions: What is the nature of the "intervention" by the second merchant? The claim language "allowing a second merchant to intervene" suggests a specific technical integration between the first and second merchants' systems, the details of which are not specified in the complaint.
V. Key Claim Terms for Construction
The Term: "in exchange for the customer agreeing to sign up for a service" (’056 Patent, claim 1)
Context and Importance: This term is critical because it defines the quid pro quo required for the cross-benefit. The infringement analysis for many of the defendants will turn on whether their varied promotional activities (e.g., using a specific checkout service, shopping with a partner) fall within the scope of "signing up for a service." Practitioners may focus on this term because its construction will determine whether the patent covers a broad range of affiliate marketing or is limited to the acquisition of customers for ongoing subscription-style services.
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification lists a wide array of potential services, including "telephone service, Internet service, banking services, credit card account services, insurance service," and more, suggesting the term is not limited to a single type of service. (’056 Patent, col. 13:40-46).
- Evidence for a Narrower Interpretation: The core examples provided in the patent, such as initiating a "new service agreement" or switching long-distance providers, consistently point toward the establishment of a formal, ongoing customer relationship with the second merchant, not a one-time transaction. (’056 Patent, col. 3:9-13; Fig. 14A).
The Term: "allowing a second merchant to intervene" (’056 Patent, claim 1)
Context and Importance: This active verb phrase defines the role of the first merchant's system. Its interpretation will determine the required level of technical integration between the two merchants. A narrow interpretation could excuse systems where the first merchant merely hosts a passive link or advertisement.
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The summary of the invention describes the system as one that "provides an offer for a benefit from a second merchant," which could be read to encompass any system that programmatically presents a third-party offer at the point of purchase. (’056 Patent, col. 2:61-64).
- Evidence for a Narrower Interpretation: The specification repeatedly uses the word "intervening" to describe the second merchant's action, which implies an active interruption of the primary transaction flow between the customer and the first merchant, rather than a parallel or passive offer. (’056 Patent, col. 4:63-65).
VI. Other Allegations
- Indirect Infringement: The complaint alleges that all Defendants actively induce infringement by, at a minimum, "providing instructions to its users and/customers on how to use the accused apparatuses" (e.g., the "Earn for free by shopping" button) in a way that infringes the patents. (Compl. ¶¶31, 42, 53, 68, etc.). The complaint also alleges contributory infringement, stating the accused products are not staple articles of commerce and are especially made for infringing use. (Compl. ¶¶32, 43, 54, 69, etc.).
- Willful Infringement: Willfulness is alleged for all Defendants based on knowledge of the patents since "at least the service of this action." (Compl. ¶¶34, 45, etc.). The complaint asserts that Defendants continued to infringe "despite an objectively high likelihood that their actions constitute infringement" and with "a subject knowledge or obviousness of such risk." (Compl. ¶¶163-164).
VII. Analyst’s Conclusion: Key Questions for the Case
- A central issue will be one of definitional scope and claim construction: can the specific transactional requirements of the claims, such as "applying for a credit card account" ('470 Patent) or "signing up for a service" ('056 Patent), be construed to cover the wide variety of affiliate marketing, payment processing, and cross-promotional activities alleged in the complaint, or is there a fundamental mismatch between the patented invention and the accused functionalities?
- A key evidentiary question will concern the timing and sequence of events: what proof will be offered to establish that the accused systems perform the claimed steps in the required order—specifically, that the third-party offer is made only after the customer signals a concrete intent to purchase from the first merchant but before that primary purchase is consummated?
- A third question relates to the role of the parties: does the evidence show that the entities involved in the accused "cross-promotions" function as "second merchants" who "intervene" in the primary transaction in the manner contemplated by the patents, or do they operate as more passive advertisers or payment processors outside the scope of the claims?