DCT

1:24-cv-03100

AuthWallet LLC v. Global Payments Inc

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 1:24-cv-03100, N.D. Ga., 07/12/2024
  • Venue Allegations: Venue is based on Defendant having a regular and established place of business in the Northern District of Georgia.
  • Core Dispute: Plaintiff alleges that Defendant’s financial transaction processing platforms and services infringe two patents related to methods for securely processing payments with mobile device confirmation and for applying stored value to transactions.
  • Technical Context: The technology at issue falls within the financial technology (fintech) sector, addressing security and functionality in electronic payments by using a consumer's mobile device as an out-of-band verification channel and integrating stored-value items like coupons or gift cards into transactions.
  • Key Procedural History: The complaint does not mention prior litigation. However, public records attached to U.S. Patent No. 9,292,852 show that an Inter Partes Review (IPR) proceeding, IPR2021-01260, resulted in the cancellation of claims 1-9, 11-22, 24-35, and 37-40. The complaint asserts claims 1-40 of this patent, raising a threshold question about the viability of the infringement allegations for these cancelled claims.

Case Timeline

Date Event
2008-11-08 Priority Date for '368 and '852 Patents
2012-01-17 U.S. Patent No. 8,099,368 Issued
2013-01-01 Global Payments (Heartland) mobile payments announcement
2014-01-01 Global Payments (EVO) integrated strategy announcement
2015-01-01 Global Payments (Xenial) payments announcement
2016-03-22 U.S. Patent No. 9,292,852 Issued
2017-01-01 Global Payments (TSYS) tokenization announcement
2023-04-28 IPR Certificate issues cancelling claims of the '852 Patent
2024-07-12 Complaint Filing Date

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

U.S. Patent No. 8,099,368, Intermediary service and method for processing financial transaction data with mobile device confirmation, Issued Jan. 17, 2012

The Invention Explained

  • Problem Addressed: The patent describes the challenge of balancing security, cost, and convenience in electronic transactions. Specifically, it notes the difficulty for consumers in managing multiple payment instruments and the delayed detection of fraudulent "card not present" transactions. (’368 Patent, col. 1:17-50).
  • The Patented Solution: The invention proposes an "intermediary service" that operates between the merchant's acquirer and the card's issuing institution. This service uses the customer's mobile device as an out-of-band channel to provide real-time transaction notifications. (’368 Patent, Abstract). The customer can then use their mobile device to confirm, deny, or even select which of their stored payment instruments to use for that specific transaction, adding a layer of security and user control. (’368 Patent, col. 2:37-44; Fig. 2B).
  • Technical Importance: This method sought to reduce fraud in online and other "card not present" scenarios by introducing a real-time, out-of-band verification step, while also offering consumers a streamlined way to manage and select from multiple payment cards via a single interface. (’368 Patent, col. 2:45-50).

Key Claims at a Glance

  • The complaint asserts infringement of claims 1-29 and provides a claim chart for independent claim 1. (Compl. ¶9; Ex. B).
  • Independent Claim 1 recites a method comprising the essential steps of:
    • Receiving an authorization request for a transaction at a point of purchase.
    • Authenticating the request and retrieving stored customer information, which includes definitions for multiple payment instruments and a mobile device address.
    • Generating and transmitting a "transaction indication message" to the mobile device, where the message allows for the "selection of a payment instrument from at least two of the multiple payment instruments."
    • Receiving a "customer confirmation message" from the mobile device that includes the selected payment instrument.
    • Obtaining customer account information from an issuing institution, where the information includes two parts encrypted with different methods, such that the server can decrypt the first part but not the second.
    • Providing the decrypted account information to the requester to authorize the transaction.
  • Plaintiff reserves the right to assert other claims, including dependent claims. (Compl. ¶9).

U.S. Patent No. 9,292,852, System And Method For Applying Stored Value To A Financial Transaction, Issued Mar. 22, 2016

The Invention Explained

  • Problem Addressed: As with the '368 patent, this patent addresses complexity in electronic transactions, but with a focus on integrating non-monetary or "stored value" items like coupons, loyalty points, or gift cards into the payment flow. (’852 Patent, col. 1:17-44).
  • The Patented Solution: The invention describes an intermediary service that, upon receiving a transaction request, determines if any stored value items (e.g., coupons, vouchers) are available and applicable to the purchase. (’852 Patent, Abstract). The system can apply this value to pay for a first portion of the total amount and then initiate a standard payment process for the remaining balance, creating a "split-tender transaction." The system can also notify the user's mobile device about available stored value items. (’852 Patent, col. 4:40-62).
  • Technical Importance: This technology aimed to seamlessly integrate loyalty programs, promotions, and gift cards into the electronic payment process, which could increase customer engagement and simplify checkout for both consumers and merchants. (’852 Patent, col. 4:53-62).

Key Claims at a Glance

  • The complaint asserts infringement of claims 1-40 and provides claim charts for independent claim 1 and dependent claim 10. (Compl. ¶16; Ex. D). As noted, many of these claims, including claim 1, were cancelled via IPR.
  • Independent Claim 1 (Cancelled) recites a method comprising the essential steps of:
    • Receiving an authorization request via an acquirer.
    • Determining one or more "stored value items" to apply to the transaction, where these items can come from a plurality of different third parties.
    • Transmitting a message to a mobile device with information about the determined stored value items.
    • Receiving an indication from the user to apply at least one stored value item.
    • Applying the stored value item to "pay a first portion of the transaction amount."
    • Initiating a payment process for the "remaining portion of the transaction amount."
  • Plaintiff reserves the right to assert other claims. (Compl. ¶16).

III. The Accused Instrumentality

  • Product Identification: The complaint accuses "systems, products, and services" maintained, operated, and administered by Defendant Global Payments, including its various platforms and developer portals for subsidiaries such as Heartland, TSYS, EVO, and Xenial. (Compl. ¶9, ¶16; Ex. B, p. 41; Ex. D, p. 100).
  • Functionality and Market Context: The accused instrumentalities are a suite of financial transaction processing services and Application Programming Interfaces (APIs) that enable merchants to accept and manage electronic payments. (Ex. B, p. 42). The functionality includes point-of-sale transactions, mobile payments, e-commerce checkouts, and payment tokenization. (Ex. B, p. 42). The complaint alleges these services form a "revenue-generating payments engine" that can be integrated into websites, mobile apps, and other software, positioning them as a core part of the digital commerce ecosystem. (Ex. B, p. 42).

IV. Analysis of Infringement Allegations

’368 Patent Infringement Allegations

The complaint's infringement theory is that Defendant's transaction processing systems perform the patented method of using a mobile device for out-of-band selection and confirmation. A screenshot from the accused developer documentation shows a user interface for selecting one of two saved credit cards during checkout. (Ex. B, p. 48).

Claim Element (from Independent Claim 1) Alleged Infringing Functionality Complaint Citation Patent Citation
retrieving customer information... the customer information including data defining multiple payment instruments and an address associated with a mobile device of the customer; Defendant's systems store and retrieve customer data, including multiple payment cards and contact details like email addresses, which are associated with mobile devices. An included screenshot shows a user interface with two saved payment cards. (Ex. B, p. 46). Ex. B, p. 46-47 col. 19:33-38
generating a transaction indication message... specifying a response that allows a selection of a payment instrument from at least two of the multiple payment instruments associated with the customer; Defendant's checkout form provides customers the option to choose between their saved payment methods, which the complaint alleges constitutes the claimed message allowing for selection. Ex. B, p. 48 col. 19:38-44
receiving a customer confirmation message from the mobile device... wherein the customer confirmation message includes a selected payment instrument; After a user selects a card and confirms payment, Defendant's system receives a confirmation message containing the details of the chosen payment instrument. The complaint provides a sample JSON response as evidence. (Ex. B, p. 50). Ex. B, p. 50 col. 19:48-52
obtaining customer account information... including a first part encrypted... and a second part encrypted... the first encryption method and the second encryption method selected such that the server is capable of decrypting the first part and is not capable of decrypting the second part; and Plaintiff alleges that industry standards (PCI-DSS) require Defendant to handle sensitive payment data (like a PAN) and non-sensitive data (like transmission protocols) using different encryption methods, effectively creating a system where edge servers cannot decrypt the core payment data. Ex. B, p. 52-56 col. 19:53-63
providing the customer account information to the requester in response to determining that the customer confirmation message indicates that the transaction is authorized by the customer. After biometric or other verification, Defendant's system provides customer account information to the requester (e.g., card issuer) to complete the transaction. An API response shows a "fingerprint_presence_indicator" as evidence of authorization. (Ex. B, p. 57). Ex. B, p. 57 col. 20:1-5
  • Identified Points of Contention:
    • Technical Question: The complaint's theory for the two-part encryption element relies heavily on an interpretation of what PCI-DSS standards require, rather than direct evidence of the accused system's architecture. A central question will be whether Defendant's system actually implements a server that is "not capable of decrypting the second part," as the claim requires, or if the complaint's infringement read is based on inference from external standards.
    • Scope Question: Does the term "transaction indication message" as used in the patent, which is transmitted to a mobile device, read on a web-based checkout form displayed on that device as alleged by the Plaintiff?

’852 Patent Infringement Allegations

The complaint alleges Defendant’s systems, particularly its TSYS platform, infringe by allowing stored value (e.g., "Digital Offers") to be applied to transactions. A key piece of visual evidence shows a receipt where a gift card is applied to a transaction, paying a first portion of the total and leaving a remaining balance to be paid separately. (Ex. D, p. 111).

Claim Element (from Independent Claim 1 - Cancelled) Alleged Infringing Functionality Complaint Citation Patent Citation
determining one or more stored value items to apply to the transaction... wherein each stored value item includes an associated value,; Defendant's TSYS developer portal offers an API to "retrieve available Offers by AccountID and customerID," which Plaintiff alleges is a determination of stored value items with an associated value. Ex. D, p. 106 col. 32:9-12
wherein the plurality of stored value items includes stored value items provided by a plurality of different third parties: The TSYS platform allegedly provides access to a wide array of "digital offers" and "promotional offers" from various vendors, which the complaint maps to the concept of items from a plurality of third parties. Ex. D, p. 108 col. 32:18-21
receiving an indication from a user of the mobile device that at least one stored value item should be applied against the transaction Defendant’s "Communications Platform" allegedly provides a "Two-Way Response" API that allows a vendor or user to send a keyword response via email or SMS to trigger an action, which the complaint equates to receiving an indication to apply a stored value. Ex. D, p. 110 col. 32:25-29
applying the indicated at least one stored value item to pay a first portion of the transaction amount; and The complaint presents an image from a partner's documentation showing a gift card (a stored value item) being applied to a transaction, covering $66.35 of a $90.40 bill. This is alleged to be payment of a "first portion." (Ex. D, p. 111). Ex. D, p. 111 col. 32:30-32
initiating a payment process to pay a remaining portion of the transaction amount by providing a modified transaction amount to the acquirer for Submission to a payment association. The same visual evidence shows the remaining balance of $24.05 being processed by the acquirer, which is alleged to be the initiation of a payment process for the remaining portion. (Ex. D, p. 112). Ex. D, p. 112 col. 32:33-36
  • Identified Points of Contention:
    • Legal Question: The primary issue is that the asserted independent claim 1 (and most other asserted claims) has been cancelled by the USPTO. The viability of this entire infringement count is therefore in question.
    • Scope Question: Assuming any valid claims remain, a key question will be whether Defendant's "Digital Offers" platform falls within the patent's definition of "stored value item." Practitioners may focus on whether this term should be construed broadly or limited to the specific embodiments like gift cards and vouchers.

V. Key Claim Terms for Construction

  • ’368 Patent, Claim 1:

    • The Term: "the server is capable of decrypting the first part and is not capable of decrypting the second part"
    • Context and Importance: This limitation is the core of the patent's security innovation. The Plaintiff's infringement case hinges on proving that Defendant's system architecture maps onto this specific functional limitation. The dispute will likely center on whether an architecture that complies with industry standards (PCI-DSS) for data segregation inherently meets this claim language.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The specification describes the concept generally, stating that the intermediary service can route "encrypted messages or portions of messages" without being able to "read or otherwise act on the contents." (’368 Patent, col. 18:55-59). This could support a reading that any system with selective blindness to encrypted data meets the claim.
      • Evidence for a Narrower Interpretation: Figure 9 and the associated text depict a specific key exchange arrangement (Keys A, B, C, D) where the intermediary service (204) lacks the key (D') to decrypt certain information passed between the acquirer (108) and issuing institution (110). A defendant may argue the claim should be limited to an architecture that mirrors this specific disclosed embodiment. (’368 Patent, col. 18:49-68).

  • ’852 Patent, Claim 1 (Cancelled):

    • The Term: "stored value item"
    • Context and Importance: The definition of this term is central to the scope of the patent. Plaintiff's case depends on this term being construed broadly to encompass a wide range of digital promotions, while Defendant would benefit from a narrower definition limited to more traditional instruments like gift cards.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The specification defines "stored value" broadly as "any type of value stored by the intermediary service that can be used to pay a portion of a transaction." (’852 Patent, col. 4:40-42). It also refers to items like coupons and vouchers. (’852 Patent, col. 5:1-4).
      • Evidence for a Narrower Interpretation: The most detailed examples and figures often revolve around more concrete items like gift cards or specific, monetized coupons. A defendant could argue that the term should be limited to items with a direct, pre-determined currency or percentage value, rather than more abstract "promotional offers." (’852 Patent, col. 4:45-52).

VI. Other Allegations

  • Indirect Infringement: The complaint alleges that Defendant induces infringement by providing documentation and APIs that instruct its customers and partners on how to implement and use the accused payment processing services in an infringing manner. (Compl. ¶11, ¶18).
  • Willful Infringement: For the '368 patent, willfulness is alleged based on knowledge "from at least the filing date of the lawsuit," supporting only a claim for post-suit willfulness. (Compl. ¶11). For the '852 patent, the complaint alleges Defendant "has known or should have known" of the patent since its issuance date, which could support a claim for pre-suit willfulness, although no specific facts demonstrating such knowledge are pleaded. (Compl. ¶18).

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

  1. A threshold legal question of patent validity: What is the legal effect of the IPR proceeding that cancelled the majority of the asserted claims of the '852 patent, including the lead independent claim, prior to the filing of this lawsuit? The resolution of this issue could be dispositive for a substantial portion of the case.
  2. An evidentiary question of technical operation: For the '368 patent, does the evidence show that Global Payments' system architecture actually implements the specific two-part encryption scheme of Claim 1, or is the infringement allegation based on an inferential reading of industry security standards that may not reflect the accused product's true functionality?
  3. A claim construction question of definitional scope: Should any valid claims of the '852 patent survive, a central issue will be whether the term "stored value item" can be broadly construed to cover the full suite of "Digital Offers" and promotions in the accused system, or if it is limited to the more concrete examples, like gift cards, disclosed in the patent's specific embodiments.