Consolidated Transaction Processing LLC v. Kroger Co

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Consolidated Transaction Processing LLC (Nevada)
  • Defendant: The Kroger Co. (Ohio)
  • Plaintiff’s Counsel: DEVLIN LAW FIRM LLC
• Case Identification: 1:23-cv-04182, N.D. Ill., 06/28/2023
• Venue Allegations: Venue is alleged to be proper based on Defendant Kroger maintaining an established place of business within the Northern District of Illinois, specifically a retail store in Chicago.
• Core Dispute: Plaintiff alleges that Defendant’s e-commerce system infringes patents related to methods for aggregating product data from multiple distributors and using customer data to generate and send targeted product offerings.
• Technical Context: The technology concerns the architecture of e-commerce platforms, specifically those that act as a central hub for products from various suppliers to create personalized, dynamic online catalogs for consumers.
• Key Procedural History: The patents-in-suit share a specification and claim priority back to a common application filed in 1999, indicating a long prosecution history. The complaint does not mention any prior litigation, inter partes review (IPR) proceedings, or licensing history related to these patents.

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 Issued
2014-04-29	U.S. Patent No. 8,712,846 Issued
2023-06-28	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"

• Patent Identification: 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, including the high costs and limited product selection associated with maintaining physical inventory (Compl. ¶11; ’846 Patent, col. 1:26-44, 3:8-14). It notes that early e-commerce systems often replicated this inefficient model by operating their own warehouses, and were also prone to downtime due to dependence on single, outsourced financial service centers for fraud checks (’846 Patent, col. 3:22-38).
• The Patented Solution: The invention proposes a centralized, computer-based transaction processor that solves these problems by receiving and aggregating product data from a "plurality of distributors" into a single database (’846 Patent, col. 3:55-59; Fig. 1). This system combines the aggregated product data with customer-specific data (including location data derived from an IP address) to dynamically generate and display user-specific electronic catalogs and product offerings (’846 Patent, Abstract; col. 5:61-6:6).
• Technical Importance: This approach, as characterized by the plaintiff, allows a merchant to offer a broader range of products from multiple sources without the costs of maintaining inventory, while providing customers a more personalized shopping experience (Compl. ¶19).

Key Claims at a Glance

• The complaint asserts infringement of at least independent claim 1 and dependent claims 3 and 4 (Compl. ¶30).
• Independent Claim 1 requires:
  • A method for targeted product offering comprising:
  • 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.
• The complaint does not specify which other claims it may assert.

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

• Patent Identification: 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 common specification with the ’846 Patent and thus addresses the same technical problems: the inefficiencies of traditional retail and early e-commerce, such as costly inventory management and inflexible product catalogs (’743 Patent, col. 1:22-2:2, 3:8-21).
• The Patented Solution: The solution described is a system that overcomes prior art limitations by creating a centralized platform to receive product data from multiple distinct distributors and customer data from shoppers (’743 Patent, col. 4:26-31). This platform uses a "Catalog Builder/Price Modeler" to dynamically generate personalized electronic catalogs, for example, showing different products and pricing to a student versus a business professional (’743 Patent, col. 5:61-6:16; Fig. 1).
• Technical Importance: The invention is presented as an improvement to the computerized backbone of e-commerce, enabling a merchant to use aggregated product and customer data to create a more personalized shopping experience than static catalogs allowed (Compl. ¶18-19).

Key Claims at a Glance

• The complaint asserts infringement of at least independent claim 1 and dependent claim 4 (Compl. ¶35).
• Independent Claim 1 requires:
  • A computer-implemented method for targeted product offering comprising:
  • 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.
• The complaint does not specify which other claims it may assert.

III. The Accused Instrumentality

Product Identification

• The complaint identifies the "Accused Instrumentalities" as the e-commerce systems and methods used and provided by Kroger for online retail (Compl. ¶30, ¶35).

Functionality and Market Context

• The complaint alleges that Kroger's systems enable the offering of targeted products over a communications network (Compl. ¶12). This functionality is allegedly achieved by receiving product data from multiple distributors, receiving personal information from customers, and using this combined data to generate user-specific product offerings, which are then conveyed to customers via automated messages (Compl. ¶12). The complaint suggests that such user-specific customization is crucial for businesses to distinguish themselves in the crowded online retail market (Compl. ¶20).

IV. Analysis of Infringement Allegations

No probative visual evidence provided in complaint.

The complaint alleges direct infringement of both the ’846 and ’743 patents but states that the detailed allegations are contained within preliminary claim charts attached as Exhibits 3 and 4, respectively (Compl. ¶30, ¶35). As these exhibits were not included with the complaint document, a detailed, element-by-element analysis is not possible.

The narrative infringement theory presented in the complaint is that Kroger’s e-commerce platform performs the core methods claimed in the patents. Specifically, the plaintiff alleges that Kroger's system (1) receives product data from various distributors, (2) receives customer data, including personal information, and (3) uses that data to generate and convey user-specific product offerings and customized catalogs (Compl. ¶12, ¶15-16). This aligns with the high-level steps recited in the independent claims of both asserted patents.

• Identified Points of Contention:
  • Structural Questions: A likely point of contention will be whether Kroger’s supply chain and e-commerce architecture matches the "plurality of distributors" model described in the patents. The court may need to determine if Kroger’s system receives and aggregates data from distinct third-party entities in real-time or near-real-time, as contemplated by the patent, or if it operates more like a traditional first-party retailer that sources products for its own inventory and lists them for sale.
  • Technical Questions: The infringement analysis will likely require evidence on the specific mechanism Kroger uses for personalization. A key technical question is whether Kroger’s system generates offerings based on "location information derived from an IP address," as explicitly required by the independent claims of both patents (’846 Patent, cl. 1; ’743 Patent, cl. 1). The defense may argue that personalization is based on other factors, such as a user’s purchase history, manually selected "home store," or billing address, rather than IP-based geolocation.

V. Key Claim Terms for Construction

• The Term: "plurality of distributors" (’846 Patent, cl. 1; ’743 Patent, cl. 1)

• Context and Importance: This term is foundational to the patents' claimed architecture, which distinguishes itself from a single-merchant system. The resolution of this term will be critical to determining if Kroger’s system, which may involve numerous suppliers but present them to the consumer as a single retail entity (Kroger), falls within the scope of the claims.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification does not appear to provide an explicit definition. A party could argue for a broad interpretation where any distinct source of product supply constitutes a "distributor."
  • Evidence for a Narrower Interpretation: The specification describes a system where product information is received from "multiple distributors" and that these distributors can be polled for availability and price in response to a customer order (’743 Patent, col. 9:8-24; Fig. 5). This description of selecting among distributors (332) for a single order suggests they are distinct, competing entities, which may support a narrower construction requiring separate, independent third-party suppliers, not just different internal or captive supply chains of a single retailer.

• The Term: "location information derived from an IP address" (’846 Patent, cl. 1; ’743 Patent, cl. 1)

• Context and Importance: This limitation recites a specific technical source for the customer data used in generating targeted offerings. Practitioners may focus on this term because infringement will hinge on whether Kroger's system specifically uses IP-based geolocation for this purpose, as opposed to other forms of location data (e.g., shipping address, user-selected store preference).

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: A party might argue this term should be read broadly to cover any location data that is ultimately associated with an IP address session, even if not directly derived from it for targeting. The patent states customer data "compris[es]" location information that is "derived from an IP address," which could be read to mean the IP-derived data is just one component of the location information used.
  • Evidence for a Narrower Interpretation: The claim language is specific and links the "location information" directly to derivation from an "IP address." The specification supports this by describing the issuance of a unique ID to a customer using techniques like "the customer's IP (i.e., Internet Protocol) address" (’743 Patent, col. 11:12-14). This specificity may support a narrow construction requiring proof that the accused system actively performs IP-to-location mapping to generate the user-specific offering.

VI. Other Allegations

• Indirect Infringement: The complaint exclusively pleads "direct[]" infringement for both asserted patents and does not include allegations to support claims of induced or contributory infringement (Compl. ¶30, ¶35).
• Willful Infringement: The complaint does not explicitly allege "willful infringement." However, in the prayer for relief, Plaintiff requests a "declaration that this case is exceptional under 35 U.S.C. § 285" (Compl. p. 9, ¶C). An exceptional case finding, which can lead to an award of attorney's fees, often involves findings of willful infringement or other litigation misconduct, but is a distinct legal standard.

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

This dispute appears to center on whether a large, modern e-commerce platform operated by a major retailer falls within the scope of patents describing a specific, multi-distributor, data-driven architecture. The case will likely turn on the following key questions:

1. A core question of structural scope: Can the term "plurality of distributors," as described in the patent's distributed supplier model, be construed to read on the supply chain of a large, integrated retailer like Kroger? The outcome may depend on whether Kroger's system merely sources from many suppliers for its own account or operates as a platform that aggregates and presents data from distinct third-party entities.

2. A critical evidentiary question of technical operation: Does the Plaintiff have evidence that Kroger’s personalization engine generates targeted offers using the specific mechanism required by the claims—"location information derived from an IP address"—or does it rely on other user data, creating a potential mismatch with the literal claim language?

3. A broader question of inventive concept: In light of the 1999 priority date, the court will likely examine whether the claims, which combine the concepts of using customer data for targeted offers with a multi-distributor e-commerce model, represent a patent-eligible technological improvement over prior art business methods or are merely an abstract idea implemented on a generic computer. The complaint preemptively argues the claims are not directed to an abstract idea (Compl. ¶22-26).