Consolidated Transaction Processing LLC v. Costco Wholesale Corp

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Consolidated Transaction Processing LLC (Nevada)
  • Defendant: Costco Wholesale Corporation (Washington)
  • Plaintiff’s Counsel: DEVLIN LAW FIRM LLC
• Case Identification: Consolidated Transaction Processing LLC v. Costco Wholesale Corporation, 1:19-cv-01915, D. Del., 10/09/2019
• Venue Allegations: Plaintiff alleges venue is proper in the District of Delaware because Defendant Costco has committed acts of infringement in the district and maintains a regular and established place of business there, including a warehouse located in Newark, Delaware.
• Core Dispute: Plaintiff alleges that Defendant’s e-commerce website, Costco.com, infringes patents related to methods for aggregating product and customer data to generate and send targeted, user-specific product offerings over a network.
• Technical Context: The technology at issue addresses personalized e-commerce systems that create dynamic electronic catalogs by combining product information from multiple distributors with personal information from customers.
• Key Procedural History: The patents-in-suit share a common specification and are part of the same patent family, with the ’846 patent being a continuation of the application that issued as the ’743 patent. No other significant procedural events are mentioned in the complaint.

Case Timeline

Date	Event
1999-06-30	Earliest Priority Date for ’846 and ’743 Patents
2013-03-12	U.S. Patent No. 8,396,743 Issues
2014-04-29	U.S. Patent No. 8,712,846 Issues
2019-10-09	Complaint Filed

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

U.S. Patent No. 8,712,846 - “Sending Targeted Product Offerings Based on Personal Information,” Issued April 29, 2014

The Invention Explained

• Problem Addressed: The patent’s background section describes the significant disadvantages of traditional retail models, such as the high costs, limited product selection, and inflexibility of brick-and-mortar stores and print catalogs (Compl. ¶12; ’846 Patent, col. 1:24-61). It further notes that early e-commerce businesses often retained these disadvantages by operating on a model that required maintaining physical inventory, which was particularly inefficient for products with short life cycles (Compl. ¶19; ’846 Patent, col. 3:6-21).
• The Patented Solution: The invention proposes a computer-based transaction processing system that overcomes these issues by functioning as a dynamic, virtual storefront. The system receives and aggregates product data from a plurality of different distributors and also receives data from customers, including personal information, to generate user-specific electronic catalogs and product offerings that are sent to customers via automated messages (Compl. ¶13; ’846 Patent, Abstract; col. 4:50-58). Figure 1 of the patent depicts an overall system architecture including an "Online Shopping System," an "Order Processing System," and databases for customer and product data, all interacting with multiple "Distributors/Vendors" (’846 Patent, Fig. 1).
• Technical Importance: This technology sought to advance e-commerce beyond a simple digital catalog by enabling a system to create highly customized and dynamically priced product offerings for different user segments without the need for the retailer to hold its own inventory (Compl. ¶15-17).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 3, 4, 9, 11, 12, 16, 18, and 19 (Compl. ¶28).
• Independent Claim 1 recites a computer-implemented method with the following key elements:
  • receiving product data for a plurality of products from a plurality of distributors for the products via a communications network;
  • receiving customer data from a plurality of customers, the customer data comprising location information associated with customers, the location information derived from an IP address associated with one or more of the customers;
  • generating, at least in part from the customer data, user-specific product offerings from the plurality of products; and
  • sending, by a computer, automated messages comprising the user-specific product offerings to the one or more of the customers.

U.S. Patent No. 8,396,743 - “Sending Targeted Product Offerings Based on Personal Information,” Issued March 12, 2013

The Invention Explained

• Problem Addressed: As the ’743 Patent shares its specification with the ’846 Patent, it identifies the same problems of inflexibility and high overhead associated with traditional retail and early, inventory-based e-commerce models (Compl. ¶12, ¶19; ’743 Patent, col. 2:62-3:14).
• The Patented Solution: The patent describes a system that creates a more efficient e-commerce model by integrating data from multiple sources. A "Catalog Builder/Price Modeler" uses an intelligent, rule-based algorithm to generate competitive prices by factoring in distributor costs, promotions, and desired profit margins, allowing for dynamic pricing adjustments (’743 Patent, col. 6:17-29). This allows the system to present different catalogs to different users, for example, showing academic pricing to a student and corporate discounts to a business user (’743 Patent, col. 6:6-13).
• Technical Importance: The invention provided a framework for a more sophisticated e-commerce operation, shifting from a static product listing to a dynamic, data-driven platform capable of personalized marketing and real-time price optimization (Compl. ¶15-17).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 4, 8, 11, 15, and 18 (Compl. ¶39).
• Independent Claim 1 recites a computer-implemented method with the following key elements:
  • receiving product data for a plurality of products from a plurality of distributors for the products via a communications network;
  • receiving customer data from a plurality of customers, the customer data comprising location information associated with customers, the customer location information derived from an IP address associated with the customer;
  • generating, at least in part from the personal information concerning a customer location, at least one user-specific product offering from the plurality of products; and
  • sending, by a computer, automated messages comprising the at least one user-specific product offering to the one or more customers.

III. The Accused Instrumentality

Product Identification

• The accused instrumentality is the Costco.com website (Compl. ¶28, ¶39).

Functionality and Market Context

• The complaint alleges that the Costco.com website is an e-commerce platform through which Costco sells, offers to sell, and/or uses products and services (Compl. ¶3). The infringement allegations contend that this website performs the functions of receiving product and customer data, generating user-specific offerings, and sending automated messages to customers, thereby practicing the methods claimed in the patents-in-suit (Compl. ¶28, ¶39). The complaint does not provide specific technical details about the website's architecture or operation, instead referencing preliminary claim charts in Exhibits C and D, which were not filed with the complaint (Compl. ¶28, ¶39).

IV. Analysis of Infringement Allegations

The complaint references preliminary and exemplary claim charts in Exhibits C and D to detail its infringement allegations, but these exhibits were not provided with the public filing (Compl. ¶28, ¶39). The narrative allegations in the complaint assert that the Costco.com website directly infringes the patents-in-suit by making, using, and/or providing the claimed methods (Compl. ¶28, ¶39). The theory appears to be that Costco's standard e-commerce operations map onto the elements of the asserted claims. No probative visual evidence provided in complaint.

• Identified Points of Contention:
  • Architectural Questions: The patents describe a system that aggregates data from multiple distinct "distributors" to dynamically build a product database and catalog (’846 Patent, col. 5:21-28). A potential point of contention is whether Costco’s relationship with its suppliers fits this "aggregator" model, or if Costco.com functions as a conventional first-party retailer listing its own curated set of products.
  • Technical Questions: Independent claim 1 of both patents requires "generating... user-specific product offering[s]" based at least in part on "location information derived from an IP address." A key factual question will be what evidence demonstrates that the Costco.com website specifically uses IP-address-derived location to generate product offerings, as opposed to using other customer data like a shipping address or account preferences. The complaint does not provide specific facts to support this causal link.
  • Scope Questions: The interpretation of "user-specific product offering" may be disputed. The patent specification gives examples of highly tailored catalogs, such as different versions for students versus business professionals with unique pricing structures (’846 Patent, col. 6:6-16). This raises the question of whether simply displaying a standard product page to an individual user meets this limitation, or if a more significant level of rule-based customization is required by the claims.

V. Key Claim Terms for Construction

• The Term: "user-specific product offering"

• Context and Importance: This term defines the core output of the claimed method. Its construction is critical because it will determine the level of personalization required to infringe. A broad definition might cover standard e-commerce functionality, while a narrow one could require a higher, more specific degree of targeting.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The claim language itself is general, requiring only that the offering be "user-specific" and "generat[ed], at least in part from the customer data" (’846 Patent, col. 12:46-51). This could be argued to encompass any product information presented to a particular user based on their data.
  • Evidence for a Narrower Interpretation: The specification describes generating "multiple catalogs from the same system" to "dynamically display user specific interfaces," providing concrete examples of a student seeing "academic pricing" while a business person sees "corporate discounts" (’846 Patent, col. 6:6-16). This may support an interpretation that the "offering" must be substantively different based on the user's profile, not merely directed to them.

• The Term: "receiving product data... from a plurality of distributors"

• Context and Importance: Practitioners may focus on this term because it defines the foundational architecture of the claimed system. The dispute will likely center on whether Costco’s system functions as the "aggregator" platform described in the patent or as a traditional online retailer.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: A party could argue this term simply means receiving electronic product information from more than one supplier, a common practice for any large retailer.
  • Evidence for a Narrower Interpretation: The detailed description explains that the "Catalog Builder/Price Modeler 50 receives product information from multiple distributors" and that this information is "preferably updated continually throughout the day" to build a product database (’846 Patent, col. 5:25-41). This suggests an automated, near-real-time data aggregation process rather than a retailer manually managing its product listings from various sources.

VI. Other Allegations

• Indirect Infringement: The complaint alleges that Costco induces infringement by "distributing the Accused Instrumentalities and providing materials and/or services" to its partners and customers, with knowledge of the patents "since at least the time of receiving this Complaint" (Compl. ¶31-32, ¶42-43). The complaint also pleads contributory infringement, alleging the Accused Instrumentalities are material components especially made for infringing and are not staple articles of commerce (Compl. ¶33, ¶44).
• Willful Infringement: The complaint alleges that Costco's infringement has been and continues to be willful (Compl. ¶34, ¶45). The only factual basis provided for knowledge of the patents is the date of the complaint's filing, which may support a claim for post-filing willfulness but does not establish pre-suit knowledge (Compl. ¶30, ¶41).

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

The resolution of this dispute will likely depend on the court’s answers to several central questions:

1. A core issue will be one of architectural scope: does Costco’s first-party retail website, Costco.com, embody the patented system of a real-time aggregator that dynamically builds its product catalog from data feeds received from a "plurality of distributors," as described in the specification?

2. A key evidentiary question will be one of causation and proof: can the plaintiff produce evidence that the accused website actually "generat[es]... user-specific product offerings" based on "location information derived from an IP address," as expressly required by the asserted independent claims, or is there a fundamental mismatch in the alleged and actual technical operation?

3. Finally, the case may turn on a definitional question during claim construction: does the term "user-specific product offering" require the sophisticated, rule-based customization for different user segments (e.g., student vs. corporate pricing) detailed in the patent's embodiments, or can it be construed more broadly to cover a standard product page viewed by an individual customer?