DCT

3:24-cv-08409

ADASA Inc v. CCL Industries

I. Executive Summary and Procedural Information

Parties & Counsel:
- Plaintiff: ADASA Inc. (Oregon)
- Defendant: CCL Industries Inc. (d/b/a Checkpoint Systems, Inc.) (Canada)
- Plaintiff’s Counsel: Pinilis Halpern; Friedman, Suder & Cooke
Case Identification: 3:24-cv-08409, D.N.J., 08/12/2024
Venue Allegations: Venue is asserted based on Defendant operating its Checkpoint division headquarters within the District of New Jersey, from which it allegedly sells the Accused Products.
Core Dispute: Plaintiff alleges that Defendant’s radio frequency identification (RFID) tags, and the systems used to encode them, infringe a patent related to a specific data structure for ensuring unique serial numbers.
Technical Context: The lawsuit concerns the foundational technology for assigning unique identifiers to individual items in a supply chain using RFID tags, a critical function for modern inventory management and logistics.
Key Procedural History: The complaint highlights that the patent-in-suit, U.S. Patent No. 9,798,967, previously survived an ex parte reexamination initiated by a third party, with all claims confirmed as patentable. Furthermore, the complaint details a prior, successful litigation against Avery Dennison involving the same patent, which resulted in a jury verdict of infringement, a finding of validity, and a final judgment reportedly exceeding $88 million.

Case Timeline

Date	Event
2008-05-21	'967 Patent Priority Date
2016-01-01	CCL acquires Checkpoint Systems Inc.
2017-10-24	U.S. Patent No. 9,798,967 Issues
2017-11-29	Ex parte reexamination of '967 Patent requested
2018-07-30	USPTO issues Reexamination Certificate for '967 Patent
2024-04-24	Plaintiff allegedly provides Defendant with notice letter
2024-08-12	Complaint Filed

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

U.S. Patent No. 9,798,967 - "SYSTEMS, METHODS, AND DEVICES FOR COMMISSIONING WIRELESS SENSORS"

A Reexamination Certificate was issued on July 30, 2018.

The Invention Explained

Problem Addressed: In large-scale RFID systems, ensuring that every single tag has a globally unique Electronic Product Code (EPC) is critical but challenging, especially when tags are encoded at numerous, geographically dispersed locations (e.g., different factories) (Compl. ¶14). Traditional methods often required a constant, real-time connection to a central database to request the next available unique number, creating potential for network delays and operational bottlenecks (’967 Patent, col. 2:21-34).
The Patented Solution: The patent describes a data structure within an RFID tag's memory that decentralizes the assignment of unique serial numbers. The block of memory bits reserved for the serial number is partitioned. A portion of the bits, the "most significant bits" (MSBs), are used as a fixed prefix to define a large, pre-allocated "block" or "sector" of serial numbers (e.g., one block assigned per factory) (Compl. ¶16; ’967 Patent, col. 8:5-16). The remaining bits are then used to create unique serial numbers within that pre-allocated block. This structure allows each encoding location to operate autonomously, guaranteeing uniqueness across the entire system without needing to query a central server for each tag (Compl. ¶18).
Technical Importance: This approach enabled more efficient, reliable, and scalable "on-demand" commissioning of RFID tags in distributed supply chains, reducing reliance on constant network connectivity (Compl. ¶¶19, 26).

Key Claims at a Glance

The complaint asserts infringement of at least Claim 1 of the ’967 Patent, as amended by the Reexamination Certificate (Compl. ¶¶59-60).
The essential elements of independent Claim 1 (amended) are:
- An RFID transponder with a substrate, antenna, and an integrated circuit chip.
- The chip is encoded with a unique object number comprising an "object class information space" and a "unique serial number space."
- The unique serial number space is encoded with one serial number instance from an "allocated block of serial numbers," which is assigned a "limited number of most significant bits."
- The unique serial number space comprises the limited number of most significant bits uniquely corresponding to the limited number of most significant bits of the allocated block, and remaining bits of lesser significance that form the complete serial number instance.

III. The Accused Instrumentality

Product Identification

The accused instrumentalities are encoded RFID tags and labels sold by Defendant's Checkpoint Systems division, including those that incorporate a list of specific inlay models such as "Bunker, Cyclone, Due Mini, Kompasu," and others (Compl. ¶45). These are offered as part of CCL's Apparel Labeling Solutions (ALS) and other RFID solutions (Compl. ¶39).

Functionality and Market Context

The accused products are RFID tags encoded with EPC data, which are affixed to retail goods for item-level tracking and inventory management (Compl. ¶¶43-44). The complaint alleges that CCL encodes these tags for its customers (including major retailers like Walmart and Target) at its "Service Bureau" locations or provides customers with "In-House Plant Printing Applications" to do so themselves (Compl. ¶¶41, 43-44). The core accused functionality is the specific binary data structure that CCL allegedly encodes into the 38-bit serial number portion of the EPC, which is alleged to use a fixed sequence of most significant bits to define a block of serial numbers (Compl. ¶¶47-48). The complaint includes a diagram illustrating the standard SGTIN-96 structure, highlighting the 38-bit "Serial" field where the invention is allegedly practiced (Compl. ¶17).
The complaint positions CCL's Checkpoint division as a "leading manufacturer" of RFID and tagging solutions for "global apparel brand owners and omni channel retailers" (Compl. ¶38).

IV. Analysis of Infringement Allegations

Claim Chart Summary

The complaint provides a narrative infringement theory supported by data allegedly scanned from RFID tags in use at Walmart, a CCL customer. The table in the complaint showing this scraped data is presented as evidence of the infringing structure (Compl. ¶55).

’967 Patent Infringement Allegations

Claim Element (from Independent Claim 1, as amended)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
An RFID transponder comprising: a substrate; an antenna structure formed on the substrate; and an RFID integrated circuit chip which is electrically coupled to the antenna structure,	The accused products are described as converted RFID tags comprising a substrate, an antenna, and an RFID integrated circuit chip (the inlay) (Compl. ¶46).	¶46	col. 5:4-10
wherein the RFID integrated circuit chip is encoded with a unique object number, the unique object number comprising an object class information space and a unique serial number space,	The accused tags are allegedly encoded with an Electronic Product Code (EPC) that has an "object class information space" and a "unique serial number space" (Compl. ¶47).	¶47	col. 9:8-15
wherein the unique serial number space is encoded with one serial number instance from an allocated block of serial numbers, the allocated block being assigned a limited number of most significant bits,	The complaint alleges that for customers like Walmart, CCL's encoding schemas fix a limited number of most significant bits (e.g., 18 bits) of the serial number space to define a block of serial numbers allocated to an encoder (Compl. ¶¶47-48, 53).	¶47, ¶48, ¶53	col. 8:5-16
wherein the unique serial number space comprises the limited number of most significant bits uniquely corresponding to the limited number of most significant bits of the allocated block and of remaining bits of lesser significance that together comprise the one serial number instance.	The complaint alleges that the 38-bit serial number space in the accused tags is structured with a static sequence of most significant bits (e.g., a fixed 18-bit sequence) followed by a variable sequence of lesser significant bits (e.g., a 20-bit sequence) (Compl. ¶¶47-48). A data table is provided as evidence, showing a static 18-bit prefix and variable trailing bits for numerous tags (Compl. ¶55).	¶47, ¶48, ¶55	col. 8:16-36

Identified Points of Contention

Evidentiary Questions: The complaint's primary evidence consists of data from RFID tags scanned at Walmart stores (Compl. ¶¶51-52). A central factual dispute may be whether Plaintiff can prove that the specific tags it analyzed were manufactured and encoded by Defendant CCL, as opposed to another of Walmart's approved suppliers. The complaint acknowledges this possibility, stating that "not all of the scanned RFID tags were necessarily encoded just by CCL," but argues the frequency of the pattern demonstrates CCL's infringement (Compl. ¶57).
Scope Questions: The interpretation of the phrase "uniquely corresponding to," which was added during reexamination, may be a key legal dispute. The question for the court will be whether the accused method—allegedly using a fixed bit sequence as a prefix for a block of numbers—satisfies the "uniquely corresponding to" limitation as construed by the court.

V. Key Claim Terms for Construction

The Term: "uniquely corresponding to"
- Context and Importance: This phrase was added to Claim 1 during reexamination and is central to defining the relationship between the bits in the serial number space and the "allocated block." Its construction will likely determine the scope of the claim. Practitioners may focus on this term because its addition was a key event in the patent's history, and its meaning will be pivotal to the infringement analysis.
- Intrinsic Evidence for Interpretation:
  - Evidence for a Broader Interpretation: The patent specification describes a system where sectors of the number space are "defined by a limited number of MSB's" (’967 Patent, col. 8:12-16). A party could argue this supports a straightforward interpretation where the MSB sequence is the identifier for the block, thus "uniquely corresponding" to it.
  - Evidence for a Narrower Interpretation: A party could argue the term implies a more specific mapping or assignment process than merely using a prefix. The patent also discloses more complex database systems (e.g., Fig. 14) and authorization schemes, which could be used to argue for a narrower definition tied to those specific embodiments (’967 Patent, col. 8:37-51).
The Term: "allocated block of serial numbers"
- Context and Importance: The infringement theory depends on showing that CCL's system creates and uses an "allocated block." The definition of what constitutes such a block is therefore critical.
- Intrinsic Evidence for Interpretation:
  - Evidence for a Broader Interpretation: The specification describes allocating "blocks of numbers for specific object classes" to an encoder to enable "quasi-autonomous" operation (’967 Patent, col. 8:5-12). This could support defining an "allocated block" as any set of numbers reserved for an encoder's use, regardless of the specific software mechanism.
  - Evidence for a Narrower Interpretation: The patent shows specific database tables for managing block allocation (e.g., Table GTIN A 141 in Fig. 14) (’967 Patent, col. 33:24-43). A party could argue that an "allocated block" requires a formal structure and management system as depicted in these more detailed embodiments.

VI. Other Allegations

Indirect Infringement: The complaint alleges inducement by asserting that Defendant provides encoded RFID tags to its customers with instructions and software (e.g., the CheckNet platform) for using them in an infringing manner for item tracking (Compl. ¶¶72-73). It also pleads infringement under 35 U.S.C. § 271(f), alleging Defendant supplies encoding data from its U.S. headquarters to foreign locations with the intent that it be used to make infringing tags (Compl. ¶67).
Willful Infringement: The complaint alleges willful infringement based on two grounds: first, that Defendant received actual notice of infringement via a letter dated April 24, 2024 (Compl. ¶76); and second, that Defendant was aware of the patent and the infringement risk by monitoring the widely publicized litigation between ADASA and Avery Dennison, a direct competitor (Compl. ¶80).

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

A central issue will be one of evidentiary proof: Can Plaintiff definitively trace the RFID tags it analyzed back to Defendant's manufacturing and encoding processes, or will Defendant be able to attribute the allegedly infringing data structure to other suppliers or to customer-driven specifications beyond its control?
The case will also turn on a question of claim scope: How will the court construe the term "uniquely corresponding to," added during reexamination? The definition of this term will be critical in determining whether simply using a fixed bit prefix to designate a range of serial numbers falls within the boundaries of the patented invention.
Finally, a key question for potential damages will be willfulness: Given the complaint’s detailed allegations regarding the prior, high-profile litigation on the same patent against a competitor, the court will have to determine whether Defendant knew of, or was willfully blind to, the high risk of infringement.