Blackwater Tech Inc v. Synesi Group Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Tiger Team Technologies, Inc., f/k/a Blackwater Technologies, Inc. (Nevada)
  • Defendant: Synesi Group, Inc., f/k/a Portogo, Inc. (Minnesota); Tim Olish; and Rod Miley
  • Plaintiff’s Counsel: Parker & Wenner, P.A.
• Case Identification: 0:06-cv-01273, D. Minn., 05/01/2008
• Venue Allegations: Venue is asserted based on the residence of the corporate and individual defendants in the judicial district.
• Core Dispute: Plaintiff alleges breach of contract, fraud, and unfair competition stemming from Defendant’s alleged misrepresentations about possessing patented technology, and seeks, among other relief, a declaration that its own product does not infringe Defendant’s patents.
• Technical Context: The patents-in-suit describe systems and methods for financially insuring, bonding, or underwriting electronic data transmissions over networks like the Internet.
• Key Procedural History: The complaint alleges a complex business history, including extensive licensing negotiations for the technology at issue, a prior related lawsuit (Case No. 05-2205), and a subsequent transfer of the patent interest by Defendant Synesi to a third party, TranSurety, LLC, during litigation.

Case Timeline

Date	Event
1999-09-10	Earliest Priority Date for '720 and '692 Patents
2004-06-01	(Approx.) Initial meetings between Plaintiff and Defendant regarding licensing
2004-10-15	(Approx.) Parties allegedly agree to an exclusive license
2005-01-08	(Approx.) Defendant allegedly terminates relationship with Plaintiff
2005-07-26	U.S. Patent No. 6,922,720 Issues
2006-03-09	Plaintiff "New T3" incorporated as Blackwater Technologies, Inc.
2006-03-28	U.S. Patent No. 7,020,692 Issues
2006-10-01	(Approx.) Defendant Synesi transfers interest in the patent-in-suit
2008-05-01	Second Amended Complaint Filed

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

U.S. Patent No. 6,922,720 - "Systems and methods for insuring data over the internet" (Issued Jul. 26, 2005)

The Invention Explained

• Problem Addressed: The patent identifies a need for recourse when sensitive data transmitted over the Internet fails to arrive securely, noting that existing security measures like encryption can be cost-prohibitive and do not provide a remedy for failure (’720 Patent, col. 2:1-7).
• The Patented Solution: The invention provides a system where a user can insure, bond, or underwrite an electronic data transmission. This system includes a server that receives a request from a sending client to apply a selected form of financial coverage to a data transmission destined for a receiving client, and then charges a fee for that coverage (’720 Patent, Abstract; col. 2:21-44). The system logs the status of the transmission to facilitate this process (’720 Patent, col. 10:49-59).
• Technical Importance: The technology proposes a framework to manage the financial risk and liability associated with electronic data transfer, a significant concern for industries like healthcare and finance that handle confidential information (’720 Patent, col. 2:48-58).

Key Claims at a Glance

• The complaint seeks a declaration of non-infringement of "Synesi's 720... patent claims" but does not specify which claims are at issue (Compl., Prayer for Relief ¶2). Independent claim 1 is representative.
• Independent Claim 1: A system for providing transmission-coverage, comprising:
  • a computer server communicatively coupled to first and second remote clients.
  • a receiver operative to receive a request from the first client to cover a data transmission to the second client, the request specifying a "selected transmission-coverage type" and "amount."
  • a charging mechanism to charge a fee for the selected coverage.
  • a logging mechanism to log the status of the transmission.
  • The claim specifies the coverage type is "bonding that provides a bonding coverage amount that is payable in the event the transmission fails."
• The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 7,020,692 - "Systems and methods for insuring data transmissions" (Issued Mar. 28, 2006)

The Invention Explained

• Problem Addressed: As a continuation of the '720 Patent, the '692 patent addresses the same problem: the lack of financial recourse for failed or insecure data transmissions over the Internet (’692 Patent, col. 2:1-10).
• The Patented Solution: The invention is substantively identical to that of the '720 patent, describing a system that enables a user to apply financial coverage, such as insurance, to an electronic data transmission by selecting a coverage type and amount via a server, which then charges a fee (’692 Patent, Abstract; Fig. 2).
• Technical Importance: This patent further develops the concept of integrating financial instruments with electronic communication protocols to create a new layer of security and accountability for digital transactions (’692 Patent, col. 2:25-30).

Key Claims at a Glance

• The complaint seeks a declaration of non-infringement of "Synesi's... 692 patent claims" without specifying which claims are at issue (Compl., Prayer for Relief ¶2). Independent claim 1 is representative.
• Independent Claim 1: A system for providing transmission-coverage, comprising:
  • a computer server communicatively coupled to first and second remote clients.
  • a receiver operative to receive a request to "insure transmission" of data, the request specifying a "coverage amount for the insurance."
  • a charging mechanism to charge an "insurance premium fee."
  • a logging mechanism to log the status of the transmission.
  • The claim specifies the insurance provides that the "coverage amount is payable in the event the transmission fails."
• The complaint does not explicitly reserve the right to assert dependent claims.

III. The Accused Instrumentality

Product Identification

• The "Auditrac product and related software" (Compl. ¶44).

Functionality and Market Context

• The complaint does not provide any technical details regarding the functionality or operation of the Auditrac product. It is identified only as a "product of New T3" (Compl. ¶44). The dispute arises from Synesi's alleged public claims that the Auditrac product infringes its patents, which Plaintiff contends creates a "false impression of the origin, source, characteristics and/or design" of the product (Compl. ¶44).

IV. Analysis of Infringement Allegations

The complaint seeks a declaratory judgment of non-infringement and does not contain affirmative infringement allegations or a claim chart. Instead, it alleges that Defendant Synesi has publicly claimed that Plaintiff's "Auditrac product... violates Synesi's patents" (Compl. ¶44) and asks the court for an injunction to stop Synesi from making such claims (Compl., Prayer for Relief ¶2). The complaint does not provide sufficient detail for analysis of how the Auditrac product might or might not meet the specific limitations of any patent claim.

• Identified Points of Contention: A dispute over infringement of the '720 and '692 patents would likely focus on the following questions:
  • System Questions: Do the claims require a single, integrated system with all four components (server, receiver, charging mechanism, logging mechanism), or could the "Auditrac" product be found to infringe if it performs only some functions while interacting with other standard network components?
  • Functional Questions: Does the "Auditrac" software, in its normal operation, perform the functions of a "charging mechanism" that assesses a fee for coverage and a "logging mechanism" that tracks transmission status for the purpose of validating a potential insurance or bond payout, as recited in the claims?
  • Scope Questions: Can the terms "insurance" and "bonding" be read to cover functions unrelated to actual financial indemnity, or are they limited to systems that provide a payable amount upon transmission failure as explicitly claimed?

No probative visual evidence provided in complaint.

V. Key Claim Terms for Construction

For both the '720 and '692 Patents:

• The Term: "a logging mechanism that is operative to log a status of the transmission"

• Context and Importance: This is a core functional element of the claimed invention. The outcome of an infringement analysis would heavily depend on whether the Auditrac product's functionality, whatever it may be, can be characterized as performing this specific logging function. Practitioners may focus on this term to determine if any general-purpose logging in a software product is sufficient to meet the claim limitation, or if the logging must be specifically tied to the claimed insurance/bonding function.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification describes this element as a "logging data structure for tracking all transmissions of data sets" (’720 Patent, col. 10:50-52). This language could support an argument that any mechanism that systematically records transmission events meets the limitation.
  • Evidence for a Narrower Interpretation: The specification links the logging function directly to the financial recourse aspect, stating its purpose is to "facilitate[] authenticating the submission of claims covered according to the insuring, bonding, and underwriting aspects" (’720 Patent, col. 10:55-59). This suggests the logging is not merely for technical diagnostics but is integral to the claimed financial process.

• The Term: "a charging mechanism"

• Context and Importance: This term is central to the business-method nature of the patents. A key question for infringement will be whether the accused Auditrac product includes a feature that "charge[s] a transmission-coverage fee" ('720 Patent, cl. 1) or an "insurance premium fee" ('692 Patent, cl. 1). If the Auditrac product does not have a billing or payment component, infringement may be difficult to establish.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The patent provides for various "invoicing configurations," including per-usage charges, flat fees, and periodic fees (’720 Patent, col. 11:30-40). This flexibility could be used to argue that the "charging mechanism" need not be a real-time transaction but could be part of a broader billing system associated with the software.
  • Evidence for a Narrower Interpretation: The claims explicitly link the fee to the selected coverage ("charge a transmission-coverage fee to an identified account for the selected transmission-coverage type") (’720 Patent, cl. 1). This suggests a direct transactional link between a specific transmission's coverage and a specific fee, potentially precluding systems where fees are not tied to individual covered transmissions.

VI. Other Allegations

• Unfair Competition and Deceptive Trade Practices: The core of the complaint lies in non-patent counts. Plaintiff alleges that Defendant engaged in deceptive trade practices and unfair competition by knowingly making "false and misleading statements" that its technology was "fully patented" to induce Plaintiff into a business relationship (Compl. ¶¶ 41, 52). The complaint further alleges that Defendant's public claims of patent infringement against the Auditrac product are part of this continuing unlawful conduct (Compl. ¶¶ 44, 48-49).
• Willfulness Allegations: The complaint requests a judgment that Defendants "have knowingly and willfully engaged in unfair competition" and are therefore liable for all resulting damages, including attorney fees (Compl., Prayer for Relief ¶3). The basis for willfulness is the allegation that Defendants knew their representations about having a patent were false at the time they were made (Compl. ¶52).

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

1. A Threshold Pleading Question: Does the complaint, which focuses primarily on business torts, state a plausible claim for declaratory judgment of patent non-infringement when it fails to identify specific patent claims or provide any technical description of the product for which the declaration is sought?
2. A Core Claim Construction Question: A central issue for the patent counts will be one of definitional scope: can the terms "charging mechanism" and "logging mechanism," which are described in the context of providing financial recourse for data transmissions, be construed to read on a software product that may lack a direct billing component or whose logging functions are for general-purpose technical monitoring rather than claim authentication?
3. An Overarching Factual Question: Beyond the patent claims, the case will depend heavily on evidence regarding the parties' negotiations. What exactly was represented about the status of the "patented technology" during the 2004 discussions, and did Plaintiff's reliance on those representations, which predated the issuance of either patent, lead to its claimed damages?