Consolidated Transaction Processing LLC v. Dunham's Athleisure Corp

I. Executive Summary and Procedural Information

• Parties & Counsel:

  • Plaintiff: Consolidated Transaction Processing LLC (Nevada)
  • Defendant: Dunham's Athleisure Corporation, d/b/a Dunham's Sports (Michigan)
  • Plaintiff’s Counsel: Devlin Law Firm LLC

• Case Identification: 1:23-cv-04177, N.D. Ill., 06/28/2023

• Venue Allegations: Venue is alleged to be proper based on Defendant maintaining established places of business, specifically retail stores, within the Northern District of Illinois.

• Core Dispute: Plaintiff alleges that Defendant’s e-commerce operations infringe patents related to processing electronic transactions by using customer and product data to generate user-specific product offerings.

• Technical Context: The patents address methods for online retail that aggregate product data from multiple distributors and combine it with customer data to create personalized, dynamic e-commerce experiences.

• Key Procedural History: The asserted patents claim priority back to a 1999 application and have an extensive family history, including at least one abandoned application and multiple issued patents. The complaint does not mention any prior litigation, licensing, or inter partes review proceedings involving these patents.

Case Timeline

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, with many online businesses still relying on a traditional retail model of maintaining their own costly physical inventory, which limited product selection and adaptability ('846 Patent, col. 2:63-3:14). These early systems also offered a static, one-size-fits-all "catalog" experience to shoppers without personalization (Compl. ¶17).
• The Patented Solution: The invention proposes a centralized system that receives product data (e.g., price, availability) from a plurality of different distributors and customer data (e.g., location information derived from an IP address) from a plurality of customers ('846 Patent, col. 11:36-47; Abstract). The system then uses this combined information to dynamically generate and send "user-specific product offerings" to customers, creating a personalized shopping experience without requiring the merchant to hold inventory ('846 Patent, col. 3:44-52).
• Technical Importance: This approach aimed to solve the technical problem of creating a more efficient and personalized e-commerce system by shifting from a static, inventory-based model to a dynamic, data-driven model that could aggregate offerings from multiple sources ('846 Patent, col. 5:22-50).

Key Claims at a Glance

• The complaint asserts independent claim 1 (Compl. ¶29).
• The essential elements of independent claim 1 include:
  • Receiving product data for a plurality of products from a plurality of distributors via a communications network.
  • Receiving customer data from a plurality of customers, where the data includes location information derived from an IP address.
  • Generating, at least in part from the customer data, user-specific product offerings.
  • Sending, by a computer, automated messages comprising the user-specific product offerings to the customers.
• The complaint notes the infringement of dependent claims 3 and 4 but reserves the right to assert other claims ('846 Patent, col. 12:56-61; Compl. ¶29).

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 '743 Patent shares a specification with the '846 Patent and addresses the same technical problems: the high costs and inflexibility of inventory-based e-commerce and the lack of personalization in early online retail systems ('743 Patent, col. 2:63-3:14).
• The Patented Solution: The solution is a computer-implemented method that obtains product data from multiple distributors and customer data, including "personal information concerning a customer location," from multiple customers ('743 Patent, col. 12:36-48). This data is then used to generate "user-specific product offering[s]" which are sent to customers via automated messages, enabling targeted marketing and sales ('743 Patent, Abstract). The specification describes how this allows for different catalogs to be shown to different users, such as a student versus a business person, from a single underlying system ('743 Patent, col. 6:6-16).
• Technical Importance: The invention provided a technical framework for e-commerce platforms to act as intermediaries that aggregate supply from various sources and personalize demand-side offerings in real-time ('743 Patent, col. 5:56-59).

Key Claims at a Glance

• The complaint asserts independent claim 1 (Compl. ¶34).
• The essential elements of independent claim 1 include:
  • Receiving product data for a plurality of products from a plurality of distributors.
  • Receiving customer data from a plurality of customers, comprising "location information associated with customers" derived from an IP address.
  • Generating, at least in part from the personal information concerning a customer location, at least one user-specific product offering.
  • Sending, by a computer, automated messages comprising the product offering to the customers.
• The complaint notes the infringement of dependent claim 4 but reserves the right to assert other claims ('743 Patent, col. 12:58-61; Compl. ¶34).

III. The Accused Instrumentality

Product Identification

• The complaint does not name specific products, services, or web pages. It refers generally to the "Accused Instrumentalities" which are used in connection with Defendant's e-commerce business (Compl. ¶29, ¶34).

Functionality and Market Context

• Based on the allegations, the Accused Instrumentalities appear to be the systems and methods that power Defendant's online retail presence (Compl. ¶19). The complaint alleges that Defendant's e-commerce operations provide "automation and user-specific customization" to distinguish themselves in the market, which Plaintiff contends is achieved through the use of the patented inventions (Compl. ¶19). The complaint does not provide specific details on how Defendant’s systems operate, such as whether they aggregate data from multiple distributors or how they use customer location data to generate specific offerings.

IV. Analysis of Infringement Allegations

The complaint references preliminary claim charts in Exhibits 3 and 4, which were not attached to the publicly filed document (Compl. ¶29, ¶34). The narrative alleges that Defendant's e-commerce business infringes by implementing a system that provides user-specific customization based on customer and product data (Compl. ¶19). No probative visual evidence provided in complaint.

• ’846 Patent Infringement Allegations: The complaint alleges that Defendant infringes at least claim 1 of the '846 Patent by "making, using, providing, and/or causing to be used the Accused Instrumentalities" (Compl. ¶29). The core of the infringement theory appears to be that Defendant's e-commerce system receives product data (from its own inventory or third-party distributors), receives customer data that includes location information derived from an IP address, and uses this information to generate and display targeted or customized product offerings to online shoppers.

• ’743 Patent Infringement Allegations: The infringement theory for the '743 Patent is substantially similar, alleging that Defendant’s e-commerce platform infringes at least claim 1 by using customer "personal information concerning a customer location" to generate and send "user-specific product offering[s]" (Compl. ¶11, ¶34).

• Identified Points of Contention:

  • Factual Questions: A primary factual question will be whether Defendant's system actually performs the claimed steps. For example, what evidence demonstrates that Defendant's system receives product data "from a plurality of distributors," as opposed to solely from its own inventory? What evidence shows that Defendant’s system "generat[es]" a "user-specific product offering" based specifically on a customer's IP-derived location, as required by the claims?
  • Scope Questions: The dispute may turn on the scope of key terms. Does showing different shipping options or taxes based on location meet the claim limitation of generating a "user-specific product offering"? Does the accused system’s functionality constitute sending "automated messages" as contemplated by the patent?

V. Key Claim Terms for Construction

For the ’846 Patent (Claim 1)

• The Term: "user-specific product offering"
• Context and Importance: This term is central to the invention's purpose. Its definition will determine what level of customization is required to infringe. The Defendant may argue it requires a highly tailored offering (e.g., a unique price or product bundle), while the Plaintiff may argue it covers more general personalization, such as displaying geographically relevant products or promotions.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification lists examples of user-specific offerings that include "targeted advertising, purchase incentives such as electronic coupons and rebates, specialized promotions and competitive pricing" ('846 Patent, col. 5:17-20). This suggests the term could encompass a range of common e-commerce marketing techniques.
  • Evidence for a Narrower Interpretation: The patent also describes generating "multiple catalogs from the same system" to "dynamically display user specific interfaces," such as showing one catalog for students with academic pricing and another for business people with corporate discounts ('846 Patent, col. 6:6-16). This could support a narrower construction requiring the generation of distinct, user-group-specific catalogs or interfaces.

For the ’743 Patent (Claim 1)

• The Term: "location information...derived from an IP address"
• Context and Importance: This term defines the specific type of customer data that must be used. The case may hinge on how this "derivation" occurs and what "location information" means. Practitioners may focus on this term because the functionality of merely using an IP address for geolocation is a ubiquitous feature of the modern internet, raising questions about the scope and potential obviousness of the claim.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: Claim 1 itself only requires that the location information be "derived from an IP address," without specifying the method or precision of the derivation ('743 Patent, col. 12:42-43). Plaintiff may argue this covers any standard geolocation service that maps an IP address to a city, state, or country.
  • Evidence for a Narrower Interpretation: Dependent claim 7 states the location information is derived from a "billing address" ('743 Patent, col. 13:4-6). A defendant could argue this suggests the independent claim's "IP address" derivation should be interpreted as something distinct from, and perhaps less specific than, a billing address, potentially limiting its application in contexts where both are available. The specification also discusses using the IP address and host name to issue a "unique identification number" for the customer, which could imply a more involved process than simple geolocation ('743 Patent, col. 11:13-15).

VI. Other Allegations

The complaint does not contain specific factual allegations to support claims for indirect or willful infringement.

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

1. A Core Evidentiary Question: What proof will be offered that the Defendant’s e-commerce platform functions as claimed? Specifically, does the system aggregate product data "from a plurality of distributors," and does it actually "generate" a "user-specific product offering" that is causally based on a customer's IP-derived location, beyond standard web personalization?

2. A Central Claim Construction Question: How broadly will the court construe "user-specific product offering"? Will the term be defined to cover common, location-aware web features like calculating shipping costs or showing local store availability, or will it require a more substantive and unique customization of the products or prices being offered to the user?

3. A Question of Technical Specificity: The dispute will likely examine whether the ubiquitous practice of IP-based geolocation, when used in a standard e-commerce context, is sufficient to meet the specific limitations of the claims as they were understood at the time of the invention.