DCT

1:24-cv-20455

Liberty Peak Ventures LLC v. MasterCard Inc

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 1:24-cv-20455, S.D. Fla., 02/05/2024
  • Venue Allegations: Plaintiff alleges venue is proper in the Southern District of Florida because Mastercard maintains a "Regional Headquarters" and a regular and established place of business in Miami, Florida, and has committed acts of infringement in the district.
  • Core Dispute: Plaintiff alleges that Defendant’s payment cards, processing networks, tokenization services, and mobile wallet functionalities infringe ten patents related to secure electronic transactions and payment processing technology.
  • Technical Context: The technology at issue involves foundational aspects of modern digital payments, including EMV chip card security, contactless transactions, and the use of tokenization to protect sensitive account information.
  • Key Procedural History: The complaint alleges that Plaintiff's affiliate first put Defendant on notice of the asserted patent portfolio, which originated with American Express, as early as March 2018. It further alleges that access to data rooms with infringement examples was provided on multiple occasions prior to the suit, which may be significant for allegations of willful infringement.

Case Timeline

Date Event
1999-08-31 U.S. Patent No. 7,953,671 Priority Date
1999-11-05 U.S. Patent Nos. 8,851,369, 8,814,039, and 8,794,509 Priority Date
2001-07-10 U.S. Patent Nos. 7,587,756 and 7,668,750 Priority Date
2002-10-30 U.S. Patent No. 6,886,101 Priority Date
2005-01-05 U.S. Patent No. 7,431,207 Priority Date
2005-04-26 U.S. Patent No. 6,886,101 Issued
2006-06-07 U.S. Patent No. 9,195,985 Priority Date
2006-10-27 U.S. Patent No. 8,584,938 Priority Date
2008-10-07 U.S. Patent No. 7,431,207 Issued
2009-09-08 U.S. Patent No. 7,587,756 Issued
2010-02-23 U.S. Patent No. 7,668,750 Issued
2011-05-31 U.S. Patent No. 7,953,671 Issued
2013-11-19 U.S. Patent No. 8,584,938 Issued
2014-08-05 U.S. Patent No. 8,794,509 Issued
2014-08-26 U.S. Patent No. 8,814,039 Issued
2014-10-07 U.S. Patent No. 8,851,369 Issued
2015-02-24 Mastercard announces HCE-based mobile wallet deployments (Compl. ¶84)
2015-11-24 U.S. Patent No. 9,195,985 Issued
2018-03-15 Plaintiff's affiliate allegedly first contacted Defendant about patents
2018-10-11 Plaintiff's affiliate allegedly provided data room access to Defendant
2022-10-03 Plaintiff's affiliate allegedly re-engaged Defendant with data room access
2024-02-05 Complaint Filed

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

U.S. Patent No. 8,851,369 - "Systems and Methods for Transaction Processing Using a Smartcard," issued October 7, 2014

The Invention Explained

  • Problem Addressed: The patent describes a problem in conventional payment systems, particularly those using RFID, that had difficulty supporting multiple payment systems from a single transaction device (Compl. ¶106).
  • The Patented Solution: The invention proposes a smartcard that can solve this problem by storing payment directory information directly on the card itself. When a transaction is initiated, the smartcard receives a request, queries its own internal directory to determine an appropriate payment system, and then transmits an identifier for that chosen system to the point-of-sale (POS) terminal (Compl. ¶106; ’369 Patent, Abstract). This allows a single card to intelligently manage and select from multiple payment networks it is configured to use.
  • Technical Importance: This approach aimed to enhance the interoperability of payment devices by allowing a single smartcard to identify a mutually supported payment system at the point of sale, rather than being limited to a single, pre-defined network (Compl. ¶106).

Key Claims at a Glance

  • The complaint asserts at least independent claim 1 (Compl. ¶156).
  • Essential elements of claim 1 include:
    • receiving, at a smartcard, a payment request for a transaction;
    • determining, by the smartcard, a first payment system for processing at least a portion of the transaction, wherein said determining includes the smartcard querying payment directory information stored on the smartcard; and
    • transmitting, by the smartcard, an identification of the first payment system to a point of service (POS) device, wherein the identification is usable by the POS device to transmit a first authorization request... to the first payment system.
  • The complaint does not explicitly reserve the right to assert dependent claims for this patent.

U.S. Patent No. 8,814,039 - "Methods for Processing a Payment Authorization Request Utilizing a Network of Point-of-Sale Devices," issued August 26, 2014

The Invention Explained

  • Problem Addressed: The patent addresses the difficulty merchants in remote or mobile settings (e.g., taxis, home delivery, concerts) faced in obtaining quick and secure payment authorizations. These transactions were often treated as higher-risk "card not present" transactions, which incurred higher fees (Compl. ¶91).
  • The Patented Solution: The invention describes a computer-based system that acts as an intermediary to facilitate immediate authorization. The system sends a query to a payment system directory to locate a suitable payment network, causes the POS device to transmit an authorization request to that network, receives the payment authorization back from the network, and forwards it to the POS device (Compl. ¶92; ’039 Patent, Abstract).
  • Technical Importance: This method provided a technical solution for enabling secure, real-time payment authorizations at the point of sale in environments where direct, persistent connections to banking networks were previously unavailable or impractical (Compl. ¶92).

Key Claims at a Glance

  • The complaint asserts at least independent claim 1 (Compl. ¶96, ¶172).
  • Essential elements of claim 1 include:
    • sending a query from a computer based system to a payment system directory, wherein the query includes a request to locate a candidate payment system that is configured to process at least a portion of said transaction...;
    • causing, by said computer based system, a payment authorization request... to be transmitted from said first POS device to said candidate payment system;
    • receiving, by said computer based system, payment authorization from said candidate payment system; and
    • sending, by said computer based system, said payment authorization to said first POS device.
  • The complaint does not explicitly reserve the right to assert dependent claims for this patent.

Multi-Patent Capsule: U.S. Patent No. 7,953,671

  • Patent Identification: "Methods and Apparatus for Conducting Electronic Transactions," issued May 31, 2011.
  • Technology Synopsis: The patent addresses security threats in electronic transactions, such as the duplication of identifiers like PINs. The invention describes a challenge-response system where a computer-based system sends a challenge to a client's intelligent token, receives a response, assembles credentials including a key, and later validates a portion of those credentials to grant access to a transaction service (Compl. ¶45).
  • Asserted Claims: At least claim 1 is asserted (Compl. ¶206).
  • Accused Features: The accused features include Mastercard's computer-based systems that provide processing, authorization, and settlement services, as well as user enrollment processes for mobile wallets that allegedly use a challenge for identification, verification, and device attestation (Compl. ¶46, ¶48-49).

Multi-Patent Capsule: U.S. Patent No. 9,195,985

  • Patent Identification: "Method, System, and Computer Program Product for Customer-Level Data Verification," issued November 24, 2015.
  • Technology Synopsis: The patent addresses transaction authorization errors and fraud by analyzing customer-level data that may be common to more than one transaction instrument (e.g., a physical card and a mobile wallet token). It describes a computer system receiving an authorization request for a first instrument, determining a second instrument corresponding to the same user, and analyzing transaction data associated with the second instrument to authorize the transaction for the first (Compl. ¶55).
  • Asserted Claims: At least claim 1 is asserted (Compl. ¶58, ¶223).
  • Accused Features: The accused features are Mastercard's card issuance and mobile wallet solutions, including its tokenization services, where a token (a first instrument) is used for a transaction and is de-tokenized to the original PAN (a second instrument) for authorization by the issuer (Compl. ¶56, ¶61-63).

Multi-Patent Capsule: U.S. Patent No. 7,587,756

  • Patent Identification: "Methods and Apparatus for a Secure Proximity Integrated Circuit Card Transactions," issued September 8, 2009.
  • Technology Synopsis: The patent addresses the need for secure and fast data transfer between a proximity payment device (e.g., a smartcard) and a merchant system. It describes a method where the merchant system and the payment device each determine an action analysis result (e.g., approve, decline, go online) based on factors like Offline Data Authentication and risk management, and based on these results, the merchant system requests an authorization response from the card issuer (Compl. ¶70).
  • Asserted Claims: At least claim 1 is asserted (Compl. ¶240).
  • Accused Features: The accused features are Mastercard's EMV-compliant POS systems and devices, such as its Mobile Point-of-Sale (MPOS) solutions, which are alleged to perform offline data authentication, risk management, and process restriction analysis as part of an EMV transaction flow (Compl. ¶71, ¶73-75).

Multi-Patent Capsule: U.S. Patent No. 7,668,750

  • Patent Identification: "Securing RF Transactions Using a Transactions Counter," issued February 23, 2010.
  • Technology Synopsis: The patent addresses securing RFID transactions by using a transaction counter. It describes a method where a merchant system receives a transaction request from a device that includes a "transactions counted value." This request is forwarded to a processor, and the transaction is denied if the counted value exceeds a maximum allowed value (Compl. ¶81).
  • Asserted Claims: At least claims 1 and 12 are asserted (Compl. ¶256).
  • Accused Features: The accused features are Mastercard's EMV-compliant systems that effect RF payments, particularly mobile wallets using Host Card Emulation. These systems are alleged to use an Application Transaction Counter (ATC) as part of a "Limited use Key" (LUK), which indicates the number of transactions performed and can be used to decline transactions if thresholds are exceeded (Compl. ¶82, ¶86-89).

Multi-Patent Capsule: U.S. Patent No. 8,794,509

  • Patent Identification: "Systems and Methods for Processing a Payment Authorization Request Over Disparate Payment Networks," issued August 5, 2014.
  • Technology Synopsis: The patent addresses problems with supporting multiple payment systems in conventional transactions. It discloses a computer-based system that queries a payment system directory, selects an appropriate payment system based on information like a proxy account number, and routes the transaction for authorization (Compl. ¶93).
  • Asserted Claims: At least claim 1 is asserted (Compl. ¶96, ¶97, ¶189).
  • Accused Features: The accused features are Mastercard's payment network and computer-based systems that process transactions from contactless cards and mobile wallets. These systems are alleged to query an onboard directory to select a payment application (identified by an AID) and route the transaction accordingly (Compl. ¶94, ¶98-100).

Multi-Patent Capsule: U.S. Patent No. 8,584,938

  • Patent Identification: "Wireless Transaction Medium Having Combined Magnetic Stripe and Radio Frequency Communications," issued November 19, 2013.
  • Technology Synopsis: The patent describes a method to enhance security by altering a card payment account number over time. It discloses a computer-based system that replaces a first portion of a first account code to create a second, temporary account code for a transaction, while a second portion of the code remains associated with the original, allowing the issuer to link the temporary code back to the user's account (Compl. ¶115).
  • Asserted Claims: At least claim 14 is asserted (Compl. ¶116, ¶275).
  • Accused Features: The accused features are Mastercard's systems for creating "virtual account numbers" or tokens. These systems are alleged to create a token (second account code) where the first portion is changed, but the Issuer Identification Number (IIN) (second portion) remains the same as the primary account number (PAN), allowing the transaction to be routed and processed (Compl. ¶117-118).

Multi-Patent Capsule: U.S. Patent No. 7,431,207

  • Patent Identification: "System and Method for Two-Step Payment Transaction Authorizations," issued October 7, 2008.
  • Technology Synopsis: The patent addresses fraud in "card not present" e-commerce transactions. It describes a method where a cardholder is authenticated by an issuer's computer, which involves matching information from the cardholder to stored values and generating an authentication score. If approved, a private payment number is generated and, along with the score, is issued to the merchant to confirm the transaction (Compl. ¶121).
  • Asserted Claims: At least claim 1 is asserted (Compl. ¶292).
  • Accused Features: The accused features are Mastercard's 3-D Secure provider services, such as Mastercard Identity Check. These services are alleged to initiate communication between a cardholder and an issuer's server (ACS) to authenticate the user (e.g., via biometrics or a passcode), generate an authentication score, and provide an authorization confirmation to the merchant (Compl. ¶122-123, ¶127-129).

Multi-Patent Capsule: U.S. Patent No. 6,886,101

  • Patent Identification: "Privacy Service," issued April 26, 2005.
  • Technology Synopsis: The patent describes a privacy service that allows users to audit and control their personal data stored in a database. The system facilitates a self-audit where a user can review their stored privacy data and change it, while being restricted from auditing the data of other users (Compl. ¶132; ’101 Patent, Abstract).
  • Asserted Claims: At least claim 1 is asserted (Compl. ¶309).
  • Accused Features: The accused feature is the Mastercard developer account website. This site is alleged to collect and store privacy data (e.g., email address) for multiple users in a central database and provide a "My Account" section where a user can log in to view and change their own data while being restricted from viewing others' data (Compl. ¶133, ¶138-140).

III. The Accused Instrumentality

Product Identification

The complaint collectively defines the "Accused Instrumentalities" as the products, methods, and services related to Mastercard's payment ecosystem (Compl. ¶30). This includes, but is not limited to, Mastercard-branded payment cards (credit, debit, prepaid), Mastercard Transaction Instruments (including mobile wallets and contactless devices), payment processing and gateway services (e.g., Mastercard Identity Check, EMV 3-D Secure), and tokenization services (e.g., MDES Token Connect) (Compl. ¶30, ¶40).

Functionality and Market Context

The complaint alleges that the Accused Instrumentalities form a "multi-layered approach to protect the global payments ecosystem" (Compl. ¶9). The complaint provides a graphic from a Mastercard annual report depicting its "Core Payment Network" as a central switch for authorizing, clearing, and settling transactions between issuers and acquirers, augmented by value-added security services and digital payment enablement (Compl. p. 5). Key accused functionalities include processing EMV chip transactions, enabling contactless payments via Near Field Communication (NFC) on physical cards and mobile wallets (e.g., Google Pay, Samsung Pay), and replacing Primary Account Numbers (PANs) with secure "tokens" for online and in-app purchases (Compl. ¶33, ¶40-41). The complaint also highlights Mastercard's role in setting technical standards through its co-ownership of EMVCo (Compl. ¶13). A diagram in the complaint illustrates the "MDES Token Connect" service, which allows issuers to securely provision tokens to token requestors like mobile wallets and merchants (Compl. p. 24).

IV. Analysis of Infringement Allegations

’369 Patent Infringement Allegations

Claim Element (from Independent Claim 1) Alleged Infringing Functionality Complaint Citation Patent Citation
receiving, at a smartcard, a payment request for a transaction Mastercard transaction instruments, including contactless cards and mobile wallets configured with smartcards, receive payment requests from POS terminals during a transaction. ¶107, ¶111 col. 10:5-15
determining, by the smartcard, a first payment system for processing at least a portion of the transaction, wherein said determining includes the smartcard querying payment directory information stored on the smartcard The smartcards in Mastercard instruments allegedly query an onboard payment system directory in response to a command from the POS terminal, consistent with the EMV standard's application selection process where the card presents a list of supported applications (AIDs). ¶112, ¶156 col. 10:16-24
and transmitting, by the smartcard, an identification of the first payment system to a point of service (POS) device...usable by the POS device to transmit a first authorization request... The Mastercard transaction device transmits an identification of the supported payment system (the selected application/AID) to the POS terminal, which then uses this information to proceed with the transaction authorization. ¶113, ¶156 col. 10:25-34

’039 Patent Infringement Allegations

Claim Element (from Independent Claim 1) Alleged Infringing Functionality Complaint Citation Patent Citation
sending a query from a computer based system to a payment system directory, wherein the query includes a request to locate a candidate payment system... Mastercard’s computer-based systems, including contactless cards and mobile wallets, query an onboard payment system directory in response to a command from a POS terminal to identify candidate payment systems (applications). ¶94, ¶98, ¶172 col. 34:11-22
causing, by said computer based system, a payment authorization request related to said transaction to be transmitted from said first POS device to said candidate payment system After a payment application is selected, Mastercard's system causes an authorization request (containing an ARQC and PAN/token) to be transmitted from the POS environment to the issuer bank, which is the identified candidate payment system. ¶101, ¶103, ¶172 col. 34:23-28
receiving, by said computer based system, payment authorization from said candidate payment system Mastercard applications stored in mobile wallets are alleged to receive authorization from the candidate payment system (the issuer). ¶104, ¶172 col. 34:29-31
and sending, by said computer based system, said payment authorization to said first POS device. The Mastercard payment application sends the authorization, in the form of a Transaction Certificate, back to the POS terminal. ¶105, ¶172 col. 34:32-34

Identified Points of Contention

  • Scope Questions: A central question for the ’369 patent is one of agency and action: does a smartcard following the EMV application selection protocol, which is initiated by commands from a POS terminal, meet the claim limitation of "determining, by the smartcard" a payment system by "querying" its own directory? The analysis may turn on whether the smartcard is viewed as the active, decision-making component or a passive repository of data that is queried by an external device. The complaint provides a visual depicting the "Contactless Indicator" on a Mastercard, which signifies its capability to engage in such EMV-compliant communications (Compl. p. 29).
  • Technical Questions: For the ’039 patent, a key technical question is whether the distributed set of components involved in a mobile payment transaction (the smartcard/wallet, the POS terminal, and Mastercard’s backend network) collectively function as the claimed "computer based system." The patent's description may suggest a more centralized architecture, raising the question of whether the complaint's infringement theory matches the technical operation described and claimed in the patent.

V. Key Claim Terms for Construction

  • For the ’369 Patent:

    • The Term: "determining, by the smartcard"
    • Context and Importance: This term is critical because the infringement allegation hinges on the smartcard being the actor that performs the "determining" step. Practitioners may focus on whether the smartcard's response to a POS terminal's command to list supported applications constitutes active "determining" or passive "responding."
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The specification may describe the smartcard as containing a processor and logic capable of executing commands, which could support an interpretation where responding to a query is a form of "determining" the output (’369 Patent, col. 10:16-24).
      • Evidence for a Narrower Interpretation: The patent’s specific embodiments may consistently show that the process is always initiated by an external POS device, which could support a narrower interpretation where the POS terminal is the "determining" entity and the smartcard is merely a data source.

  • For the ’039 Patent:

    • The Term: "computer based system"
    • Context and Importance: The definition of this term will be central to whether the accused distributed architecture infringes. The complaint alleges a combination of Mastercard's contactless cards, payment network, and other services perform the claimed steps (Compl. ¶94). Practitioners may focus on whether the claim requires a single, integrated system or if it can be read to cover the coordinated actions of multiple, discrete components.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The specification may define "computer based system" in broad terms that could encompass a network of communicating components working in concert to achieve the claimed result (’039 Patent, col. 3:52-56).
      • Evidence for a Narrower Interpretation: The patent figures and detailed descriptions may depict the "computer-based system" as a single, centralized server or entity that queries the directory and routes the authorization, suggesting a more limited scope that may not read on the distributed functionality of the accused systems (’039 Patent, FIG. 24).

VI. Other Allegations

  • Indirect Infringement: The complaint alleges that Mastercard induces infringement by requiring its partners, issuers, and merchants to conform to the EMV standards that implement the patented methods (Compl. ¶99, ¶153, ¶174). It is also alleged that Mastercard provides developer resources, APIs, and documentation (e.g., for MDES Token Connect) that instruct others on how to implement the infringing functionalities, and creates advertisements promoting the use of accused products like contactless payments (Compl. ¶158, ¶159).
  • Willful Infringement: Willfulness is alleged for all asserted patents. The basis is Defendant's alleged pre-suit knowledge of the patents and infringement. The complaint alleges that on at least three occasions, beginning March 15, 2018, Plaintiff's affiliate contacted Mastercard's General Counsel regarding the patent portfolio, invited licensing discussions, and provided access to data rooms that included "examples of how Defendants infringed the claims of numerous patents" in the portfolio, including claims of the asserted patents (Compl. ¶157, ¶173, ¶190).

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

  • A core issue will be one of technical mapping: can the standardized, multi-party protocols of the modern EMV payment ecosystem be mapped onto the specific steps and system architectures claimed in patents filed between 1999 and 2006? The case will likely involve significant disputes over whether the accused systems, which involve coordinated actions between POS terminals, smartcards, and network servers, meet claim limitations that may be interpreted as requiring a single component (e.g., "by the smartcard") or a more centralized system (e.g., "a computer based system") to perform the claimed functions.
  • A key evidentiary question will concern willful infringement: the complaint presents specific factual allegations of pre-suit notice, including the alleged provision of infringement charts to Defendant's legal department years before the lawsuit was filed. The development of these facts will be central to determining whether any infringement found was willful, which could expose Defendant to a risk of enhanced damages.