DCT
1:17-cv-01405
Kroy IP Holdings LLC v. Groupon Inc
Key Events
Complaint
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Kroy IP Holdings, LLC (Delaware)
- Defendant: Groupon, Inc. (Delaware)
- Plaintiff’s Counsel: Potter Anderson & Corroon LLP; Kasowitz Benson Torres LLP
- Case Identification: Kroy IP Holdings, LLC v. Groupon, Inc., 1:17-cv-01405, D. Del., 10/06/2017
- Venue Allegations: Venue is alleged to be proper in the District of Delaware because Defendant Groupon, Inc. is a Delaware corporation and therefore resides in the district.
- Core Dispute: Plaintiff alleges that Defendant’s online platforms for creating and managing deals infringe a patent related to a system and method for generating and fulfilling online incentive programs.
- Technical Context: The technology concerns a centralized, network-based platform that allows multiple third-party sponsors (e.g., merchants) to build, customize, and offer promotional campaigns to consumers.
- Key Procedural History: The complaint notes that the patent-in-suit, U.S. Patent No. 6,061,660, underwent an ex parte reexamination initiated by the Plaintiff in 2014 to address potential patent eligibility issues following the Supreme Court's decision in Alice Corp. v. CLS Bank. The USPTO subsequently issued a reexamination certificate in 2015, confirming the patentability of the original claims and allowing numerous new claims. However, subsequent to the filing of this complaint, Inter Partes Review (IPR) proceedings were initiated against the patent, which resulted in the cancellation of all claims asserted in this litigation.
Case Timeline
| Date | Event |
|---|---|
| 1997-10-20 | ’660 Patent Priority Date |
| 2000-05-09 | ’660 Patent Issue Date |
| 2010-10-28 | Groupon launches Merchant Center for Groupon Stores |
| 2011-07-29 | Groupon launches Merchant Center for Now! Deals |
| 2014-02-10 | Groupon launches Deal Builder |
| 2014-05-19 | ’660 Patent placed in ex parte reexamination |
| 2015-02-06 | ’660 Patent Ex Parte Reexamination Certificate issued |
| 2016-03-15 | Groupon expands and rebrands its Merchant Platform |
| 2017-10-06 | Complaint Filing Date |
| 2018-10-10 | Inter Partes Review proceedings IPR2019-00044 and IPR2019-00061 filed |
| 2022-01-31 | Inter Partes Review Certificate issues, canceling all asserted claims |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 6,061,660 - "System and Method For Incentive Programs And Award Fulfillment"
- Patent Identification: U.S. Patent No. 6,061,660, "System and Method For Incentive Programs And Award Fulfillment," issued May 9, 2000.
The Invention Explained
- Problem Addressed: The patent describes conventional incentive programs as suffering from significant drawbacks. They were often limited to a single merchant, required expensive, custom-coded software, could not automatically track customer participation, and relied on inefficient fulfillment methods like mailing paper certificates. (’660 Patent, col. 5:1-26; Compl. ¶9). Consumers also faced difficulty tracking their participation across multiple, disparate programs. (’660 Patent, col. 3:49-54).
- The Patented Solution: The invention proposes a centralized, network-based system featuring a host server with an "incentive program builder application." (’660 Patent, Abstract). This allows multiple, independent sponsors to connect to the host, use the builder application to create and customize their own incentive programs from a database of objects and parameters, and offer them to consumers through a central marketplace. (Compl. ¶¶9-10; ’660 Patent, col. 6:55-65). The system is also designed to automate the tracking of consumer participation and the fulfillment of awards. (Compl. ¶10; ’660 Patent, col. 4:13-17).
- Technical Importance: The technology aimed to shift online promotions from a fragmented, bespoke model to a unified, platform-based model, thereby reducing the cost and complexity for sponsors to launch campaigns and creating a centralized location for consumers to find them. (Compl. ¶10).
Key Claims at a Glance
- The complaint asserts direct infringement of claims 1, 10, 16-21, 25, and 27-30, with a narrative focus on independent claim 1. (Compl. ¶¶43-45).
- Essential elements of asserted independent claim 1 (as amended by reexamination) include:
- A system comprising a network, a sponsor computer, and a host computer with a server.
- An "incentive program builder application" running on the server.
- A database of "objects" associated with parameters of the builder application.
- An "interface" for a sponsor to enter parameters and build an incentive program.
- The host computer is configured to receive input from a "plurality of sponsors."
- The host computer is also configured to receive input from a consumer selecting a program, issue a corresponding award, and receive and process a request from a sponsor to validate that award.
- The host, sponsor, and consumer are different entities.
III. The Accused Instrumentality
Product Identification
- The complaint accuses Groupon's website (www.groupon.com), mobile applications, and its merchant-facing platforms, including Groupon Stores, Merchant Center, Deal Builder, and Groupon Now! (Compl. ¶¶28, 43).
Functionality and Market Context
- The accused instrumentalities are described as self-service platforms that allow merchants (sponsors) to create, customize, structure, and launch their own deals on the Groupon marketplace. (Compl. ¶¶31, 38, 40). Merchants allegedly use an interface to log in, define deal parameters such as price, value, and terms, and submit the deal for launch on the Groupon platform. (Compl. ¶32). A screenshot in the complaint shows the "Run your own deals with Groupon Stores" interface, which outlines a multi-step process for merchants to create and share a deal. (Compl. p. 10). A consumer who purchases a deal receives a voucher (award) which is later validated by the merchant, allegedly using Groupon's system. (Compl. ¶29).
IV. Analysis of Infringement Allegations
The following analysis summarizes the infringement allegations as presented in the complaint. It is noted that all claims asserted in the complaint were subsequently canceled in Inter Partes Review proceedings concluded in 2022.
’660 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| A system for incentive program generation, comprising: a network; a sponsor computer connected to the network; a host computer connected to the network... | Groupon's system allegedly uses the internet and wireless networks to connect merchant ("sponsor") computers to Groupon's central ("host") computer systems and servers. | ¶¶46-48 | col. 10:43-50 |
| an incentive program builder application, running on the server; | Groupon's "Deal Builder," "Merchant Center," and related software are alleged to be the "incentive program builder application" that runs on Groupon's servers. | ¶¶46, 51 | col. 6:55-58 |
| a database of objects associated with parameters of the incentive program builder application; | Groupon's system is allegedly linked to a database containing "objects" and "parameters" for each deal, such as merchant name, deal title, retail value, and restrictions. | ¶49 | col. 6:58-62 |
| an interface of the incentive program builder application for sponsor entry of parameters for an incentive program, wherein the sponsor builds an incentive program by interacting with the incentive program builder application, | The websites and mobile applications for Groupon's merchant-facing tools are alleged to be the "interfaces" that merchants use to enter deal parameters and "interact" with the builder application to create a deal. A screenshot shows an interface for defining a "NOW! Deal." | ¶¶50-51, p. 11 | col. 6:55-65 |
| wherein the host computer is configured to receive input from a plurality of sponsors... | The complaint alleges Groupon's platform is designed to receive deal-creation input from thousands of different merchants ("a plurality of sponsors"). | ¶46 | col. 15:15-26 |
| receive second input from a consumer selecting an incentive program... | Groupon's system receives input when a consumer selects and buys a deal on its website or mobile apps. | ¶52[b] | col. 16:25-46 |
| issue an award to the consumer... receive a request to validate the award from a sponsor... and validate the award, | Groupon's system allegedly issues a "voucher" (award) to the consumer, and the merchant later uses Groupon's platform to validate that voucher, with Groupon's system confirming its validity. A screenshot shows a "Launch Deal!" preview page prior to issuance. | ¶¶52[c-e], p. 12 | col. 17:29-34 |
| wherein the host, the sponsor, and the consumer are different entities, and wherein the host and sponsor are different individuals or corporate entities. | The complaint alleges that Groupon (host), the merchant (sponsor), and the end-user (consumer) are all separate and distinct entities. | ¶53 | col. 15:27-29 |
- Identified Points of Contention:
- Scope Questions: A central dispute, prior to claim cancellation, would have been whether Groupon’s e-commerce deal listing tools constitute the specific “incentive program builder application” recited in the claims. The defense could have argued that Groupon provides a generic marketplace platform, not a specialized "builder" of "incentive programs" as contemplated by the patent, which describes more complex, game-like promotions. (e.g., ’660 Patent, Fig. 20).
- Technical Questions: The complaint alleges that merchants "build an incentive program by interacting with the incentive program builder application." (Compl. ¶51). A factual question would have been the extent to which merchants "build" a program versus simply filling out a standardized web form for a listing, and whether that distinction is meaningful under the patent's claim language.
V. Key Claim Terms for Construction
- The Term: "incentive program builder application"
- Context and Importance: This term is the technological core of the asserted claims. Its construction would have been dispositive. Plaintiff would argue for a broad construction covering any tool that allows a third party to define parameters for a promotion on a host platform. Defendant would likely argue for a narrower construction, limited to applications that "build" a program by combining discrete "objects" to create more complex, interactive promotions (like a scratch-and-win game) as shown in the patent's embodiments, not merely listing a simple discount.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The patent summary states the invention permits sponsors to "build, buy, store, modify, offer, track and administer incentive programs." (’660 Patent, col. 5:50-54). This broad language could support including simpler "offerings" like Groupon deals.
- Evidence for a Narrower Interpretation: The detailed description repeatedly discusses building programs by selecting and combining different types of "objects" to create varied promotions like "scratch-and-win games, treasure hunts, sweepstakes games, or the like." (’660 Patent, col. 14:30-38). The figures also depict flowcharts for building complex programs, not just listing discounts. (e.g., ’660 Patent, Figs. 10-11). This could support a narrower definition tied to constructing interactive, game-like promotions.
VI. Other Allegations
- Indirect Infringement: The complaint does not contain separate counts for indirect infringement.
- Willful Infringement: The complaint does not explicitly plead willfulness. However, the prayer for relief seeks attorneys' fees pursuant to 35 U.S.C. § 285 based on the "exceptional nature of this case," which is a remedy often linked to findings of willfulness or litigation misconduct. (Compl., Prayer for Relief ¶3).
VII. Analyst’s Conclusion: Key Questions for the Case
While the complaint originally presented a dispute centered on claim interpretation, the post-filing procedural history is now the dominant factor. The key issue in this case is dispositive and procedural:
- Mootness due to Claim Cancellation: The primary and overriding issue is that all patent claims asserted in the complaint (Claims 1, 10, 16-21, 25, and 27-30) were subsequently canceled in Inter Partes Review proceedings. As there are no longer any asserted claims for the court to adjudicate, the infringement action as pleaded is rendered moot. The analysis of the original infringement allegations serves as a historical record of the dispute as it was initially framed, but the cancellation of the claims is fatal to the case.