Consolidated Transaction Processing LLC v. Sephora USA Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Consolidated Transaction Processing LLC (Nevada)
  • Defendant: Sephora USA, Inc. (Michigan)
  • Plaintiff’s Counsel: Devlin Law Firm LLC
• Case Identification: 1:22-cv-06812, N.D. Ill., 12/05/2022
• Venue Allegations: Plaintiff alleges venue is proper in the Northern District of Illinois because Defendant maintains established places of business in the district, specifically identifying two retail store locations in Chicago.
• Core Dispute: Plaintiff alleges that Defendant’s e-commerce platform infringes two patents related to methods for aggregating product data from multiple sources and generating user-specific, targeted product offerings based on customer data.
• Technical Context: The technology concerns e-commerce systems that move beyond static, one-size-fits-all online catalogs by dynamically creating personalized shopping experiences based on both customer-specific attributes and real-time data from a marketplace of product suppliers.
• Key Procedural History: The two patents-in-suit share a 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. Both patents claim priority to an application filed in 1999. The front page of the ’846 patent includes a terminal disclaimer, which may limit the patent's term to that of the earlier-issued ’743 patent. The complaint does not reference any prior litigation or administrative proceedings involving these patents.

Case Timeline

Date	Event
1999-06-30	Priority Date for ’846 & ’743 Patents
2013-03-12	U.S. Patent No. 8,396,743 Issued
2014-04-29	U.S. Patent No. 8,712,846 Issued
2022-12-05	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 describes the state of e-commerce in the late 1990s as being limited by its reliance on business models inherited from traditional retail. These models involved maintaining costly physical inventory and presenting static, "catalog/infomercial type" advertising that was not personalized to the individual shopper (Compl. ¶11; ’846 Patent, col. 2:63-3:14).
• The Patented Solution: The invention proposes a centralized transaction processing system that aggregates product data from a "plurality of distributors" and combines it with customer data, including location information derived from a user's IP address. This combined data is used to dynamically generate "user-specific product offerings" and send them to customers via automated messages, creating a more personalized and efficient marketplace (Compl. ¶12; ’846 Patent, Abstract; col. 4:26-59).
• Technical Importance: The described system represented a shift from a simple online storefront to a more sophisticated e-commerce platform capable of acting as an intelligent intermediary, personalizing the shopping experience by leveraging data from both customers and a network of suppliers (Compl. ¶¶19-20).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 3 and 4 (Compl. ¶30).
• Essential elements of independent claim 1 include:
  • receiving product data for a plurality of products from a plurality of distributors;
  • receiving customer data, including location information derived from a customer's IP address;
  • generating, based at least in part on the customer data, a user-specific product offering; and
  • sending an automated message containing the offering to the customer.

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

The Invention Explained

• Problem Addressed: The patent identifies the same core problem as its continuation: early e-commerce systems were functionally limited, acting as static advertising mediums for inventoried products rather than interactive, personalized retail environments (Compl. ¶18; ’743 Patent, col. 2:51-3:14).
• The Patented Solution: The invention details a computer-implemented method where product data from multiple distributors and personal information from customers (specifically including location data derived from an IP address) are processed to generate targeted product offerings. This enables a single system to create customized catalogs, for instance, showing academic pricing to a student or corporate discounts to a business user, based on user-specific data (’743 Patent, col. 5:61-6:16; Abstract).
• Technical Importance: The technology provided a framework for centralizing product data from disparate sources, which allowed for new functionalities like selecting a distributor for a given product based on criteria like price or shipping speed, thereby increasing market access and efficiency (Compl. ¶17; ’743 Patent, col. 9:23-44).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claim 4 (Compl. ¶35).
• Essential elements of independent claim 1, which is substantively very similar to claim 1 of the ’846 patent, include:
  • receiving product data from a plurality of products from a plurality of distributors;
  • receiving customer data, including location information derived from the customer's IP address;
  • generating, based at least in part on personal information concerning customer location, a user-specific product offering; and
  • sending an automated message with the offering to the customer.

III. The Accused Instrumentality

• Product Identification: The complaint identifies the "Accused Instrumentalities" as the e-commerce systems and methods used by Defendant Sephora, presumably including its website and mobile applications (Compl. ¶30).
• Functionality and Market Context: The complaint alleges that Sephora's business of selling products online from numerous different brands constitutes an infringing use of the patented technology (Compl. ¶¶19-20). The plaintiff asserts that the automation and user-specific customization provided by such systems are crucial for businesses like Sephora to distinguish themselves in the modern online retail market (Compl. ¶20). The complaint does not provide specific technical details about the architecture or operation of Sephora's back-end systems.

IV. Analysis of Infringement Allegations

The complaint references "preliminary and exemplary claim charts" in Exhibits 3 and 4 that detail the infringement allegations for the ’846 and ’743 patents, respectively (Compl. ¶¶30, 35). However, these exhibits were not attached to the publicly filed complaint. The infringement theory, based on the narrative of the complaint, is that Sephora's e-commerce platform performs the patented methods by aggregating product information from the various brands it sells, collecting data from its customers, and using that data to create a personalized online shopping experience.

No probative visual evidence provided in complaint.

• Identified Points of Contention:
  • Scope Questions: A likely point of dispute will be the interpretation of "plurality of distributors." The court may need to determine if the various cosmetic and beauty brands that supply products to Sephora qualify as "distributors" within the meaning of the claims, or if Sephora functions as a single retailer sourcing from suppliers, which a court could find is a different model from the one described in the patent (see, e.g., ’743 Patent, Fig. 5, showing selection logic between multiple distributors for overlapping products).
  • Technical Questions: The claims require generating a "user-specific product offering" based "at least in part" on "location information derived from an IP address." A central factual question for the court will be what evidence shows that Sephora's platform uses IP-derived location data for the specific purpose of generating an offering (e.g., creating a customized price or product list), as opposed to for other common e-commerce functions such as calculating shipping costs, checking for fraud, or displaying local store availability, which may not meet the claim limitation.

V. Key Claim Terms for Construction

"user-specific product offering"

• Context and Importance: This term appears in the independent claims of both patents and defines the ultimate output of the claimed method. Its construction is critical because it will determine what type of personalized content qualifies as infringing. Practitioners may focus on this term to dispute whether generic, region-based promotions or personalized recommendations based on browsing history (without a location component) meet the claim's requirements.
• Intrinsic Evidence for a Broader Interpretation: The specification suggests the offering can include a wide array of commercial inducements, such as "a coupon, an electronic coupon, a promotional offer, an exclusive sale, an incentive, a rebate, and competitive pricing" (’846 Patent, col. 12:51-55). This language could support a broad definition covering various forms of marketing.
• Intrinsic Evidence for a Narrower Interpretation: Claim 1 of both patents explicitly links the generation of the "offering" to "location information derived from an IP address" (’846 Patent, Claim 1; ’743 Patent, Claim 1). This could support a narrower construction requiring that the substance of the offering itself is tailored based on the user's specific location, not just on other personal data like purchase history.

"plurality of distributors"

• Context and Importance: This term defines the sources of product data. The viability of the infringement case may depend on whether Sephora's relationship with the brands it carries fits this definition.
• Intrinsic Evidence for a Broader Interpretation: The patent's background describes improving on prior art where merchants maintained their own inventory, suggesting that any system aggregating products from multiple outside sources could be covered. The patent speaks of providing "increased access to the marketplace for a wider range of distributors" (Compl. ¶19; ’846 Patent, col. 5:56-58).
• Intrinsic Evidence for a Narrower Interpretation: The detailed description and Figure 5 explain a "Distributor Selection" logic where the system chooses among multiple distributors, potentially for the same product, based on factors like price and availability (’846 Patent, col. 9:8-44). This could be argued to require a system that facilitates competition among sellers of identical items, a potentially narrower scenario than a single retailer sourcing different products from different brands.

VI. Other Allegations

• Indirect and Willful Infringement: The complaint alleges only direct infringement for both patents (Compl. ¶¶30, 35). It does not plead facts to support claims for indirect infringement (inducement or contributory) or willful infringement. The prayer for relief includes a request for a declaration that the case is "exceptional" under 35 U.S.C. § 285 to recover attorneys' fees, but does not request enhanced damages typically associated with a finding of willfulness (Compl. p. 9, ¶C).

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

• A core issue will be one of definitional scope: can the term "plurality of distributors," which the patent illustrates with a system that selects between competing suppliers for an order, be construed to cover a large retailer like Sephora that sources distinct products from numerous different brands?
• A key evidentiary question will be one of causality and function: does the accused e-commerce platform use a customer's IP-derived location data to "generate" a "user-specific product offering" as required by the claims, or does it use that data for other non-infringing purposes? The case may turn on the evidence presented to connect the IP data input to the personalized output.
• A final question will be one of patentability: given the 1999 priority date, the court will likely examine whether the claims, which are directed to methods of processing business and customer data, are drawn to patent-ineligible abstract ideas under 35 U.S.C. § 101, an issue the complaint attempts to preemptively address (Compl. ¶¶22-26).