Schoeneckers v. Biz Effective Ltd

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Schoeneckers, Inc., d/b/a BI Worldwide (Minnesota)
  • Defendant: Biz-Effective Ltd., d/b/a Centrical (Israel)
  • Plaintiff’s Counsel: Rivkin Radler LLP; Carlson Caspers Vandenburgh & Lindquist PA
• Case Identification: 1:22-cv-10278, S.D.N.Y., 12/05/2022
• Venue Allegations: Venue is alleged based on Defendant’s operation of an office in New York City, which it lists as its headquarters, and its business dealings with companies headquartered in the district.
• Core Dispute: Plaintiff alleges that Defendant’s enterprise gamification platform infringes three patents related to portable and customizable incentive applications that can be embedded on third-party websites.
• Technical Context: The technology involves "gamification" platforms, a software-as-a-service (SaaS) tool used by enterprises to increase user or employee engagement by offering rewards, points, and other incentives for performing specific actions within a digital environment.
• Key Procedural History: The complaint details significant pre-suit history, including a March 2020 notice letter from Plaintiff to Defendant regarding the '764 and '421 patents. The parties engaged in correspondence, but allegedly failed to resolve the dispute. Plaintiff filed a prior lawsuit in May 2021, which was voluntarily dismissed after Defendant identified intervening court decisions it suggested could invalidate the patents. Plaintiff then submitted these decisions to the U.S. Patent and Trademark Office during the prosecution of a related application, which subsequently issued as the '339 patent, prompting the filing of the current lawsuit.

Case Timeline

Date	Event
2007-07-18	Earliest Priority Date for '764, '421, and '339 Patents
2007-01-01	Plaintiff's predecessor (Bunchball) allegedly launched gamification industry
2014-07-01	'764 Patent Issued
2017-10-03	'421 Patent Issued
2018-01-01	Plaintiff (BI Worldwide) purchased Bunchball
2020-03-01	Plaintiff sent notice letter to Defendant regarding '764 & '421 patents
2020-07-01	Plaintiff sent claim chart to Defendant
2021-05-03	Plaintiff filed prior lawsuit against Defendant
2021-09-16	Plaintiff submitted court decisions to USPTO for pending application
2022-11-15	'339 Patent Issued
2022-12-05	Complaint Filing Date

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

U.S. Patent No. 8,768,764

• Patent Identification: U.S. Patent No. 8,768,764, "Method and System for Embedding a Portable and Customizable Incentive Application on a Website," issued July 1, 2014.
• The Invention Explained:
  • Problem Addressed: The patent's background section describes two problems with website incentive programs at the time: each website had to independently develop its own custom software, and these programs were written for a specific site, making them difficult to customize or port to other sites ('764 Patent, col. 1:25-44).
  • The Patented Solution: The invention provides a centralized incentive system, hosted on a "second site," that offers a portable incentive application which can be easily embedded onto multiple "first sites" ('764 Patent, col. 3:10-54). This system tracks user activities on the first sites and manages rewards like points, levels, and achievements through a central engine and database, as depicted in the system architecture of Figure 1 ('764 Patent, Abstract; Fig. 1).
  • Technical Importance: This architecture enabled a scalable, "Software as a Service" (SaaS) model for gamification, allowing website operators to add sophisticated engagement features without costly and time-consuming custom development (Compl. ¶11, 19).
• Key Claims at a Glance:
  • The complaint asserts at least independent system Claim 1 and independent method Claim 10 (Compl. ¶30).
  • Essential elements of independent Claim 1 include:
    • A processor.
    • An incentive application database configured to receive and store activity information of a first viewer from a first Web site and a second viewer from a second Web site.
    • A memory.
    • An incentive application engine resident in the memory configured to provide an incentive application to be embedded in the first and second Web sites, award incentive information based on viewer activity, and provide that information back to the respective Web sites to incentivize further activity.

U.S. Patent No. 9,779,421

• Patent Identification: U.S. Patent No. 9,779,421, "Method and System for Embedding a Portable and Customizable Incentive Application on a Website," issued October 3, 2017.
• The Invention Explained:
  • Problem Addressed: The patent, a continuation of the application leading to the '764 patent, addresses the same technical problem: the inefficiency and lack of portability of custom-developed website incentive programs ('421 Patent, col. 1:33-44; Compl. ¶11).
  • The Patented Solution: The invention describes a system architecture where an incentive application, provided from a central network site, can be embedded across multiple different host websites ('421 Patent, col. 4:10-44). It uses an Application Programming Interface (API) to communicate between the host site and the central incentive engine, allowing the host site to integrate gamification features that are managed and customized by the central service ('421 Patent, col. 4:45-56).
  • Technical Importance: This technology facilitated a reusable and standardized method for deploying engagement mechanics, which was a foundational development for the commercial gamification industry (Compl. ¶11-12).
• Key Claims at a Glance:
  • The complaint asserts at least independent system Claim 1 and independent method Claim 12 (Compl. ¶56).
  • Essential elements of independent Claim 1 include:
    • A hardware processor and memory.
    • An incentive application storage for receiving and storing activity information from a first viewer on a first website and a second viewer on a second website, where the information is received via an API.
    • An incentive application engine configured to retrieve the activity information, award incentives, and provide the awarded incentive information back to the embedded applications on the respective websites.

Multi-Patent Capsule: U.S. Patent No. 11,501,339

• Patent Identification: U.S. Patent No. 11,501,339, "Method and System for Embedding a Portable and Customizable Incentive Application on a Website," issued November 15, 2022.
• Technology Synopsis: Continuing the same patent family, the '339 Patent describes a system for providing a portable and customizable incentive application to a "first site" from a "second site" over a data network ('339 Patent, col. 1:27-51). The system is designed to overcome the need for each website to create its own bespoke, non-portable incentive software by centralizing the logic and data storage, thereby making gamification features easily deployable across different online platforms (Compl. ¶11).
• Asserted Claims: The complaint asserts infringement of at least claims 1 and 12, and provides specific allegations for independent system Claim 1 and independent method Claim 22 (Compl. ¶79, 80-93, 94-102).
• Accused Features: The accused instrumentality is the Centrical gamification platform, which the complaint alleges is a portable and customizable system that incentivizes employees and competes directly with Plaintiff's own platform (Compl. ¶13).

III. The Accused Instrumentality

• Product Identification: The accused product is Defendant Centrical's gamification platform, which was previously marketed under the name GamEffective (Compl. ¶13, n.1).
• Functionality and Market Context: The complaint alleges that the Centrical platform is a Software as a Service (“SaaS”) product that "incentivizes employees to use their websites" (Compl. ¶13, 19). Plaintiff asserts that the platform is designed to be embedded within other systems, citing Centrical's own advertising materials that allegedly show integrations with third-party platforms such as Salesforce, Yammer, and SAP SuccessFactors (Compl. ¶17, Ex. E-H). For example, Exhibit G to the complaint is described as a screenshot from a video review allegedly showing the Centrical platform embedded within the Salesforce user interface (Compl. ¶13, n.5, Ex. G). The complaint positions the Centrical platform as a direct competitor to its own Bunchball Nitro product, alleging that the companies have competed for customers on "numerous occasions" (Compl. ¶14).

IV. Analysis of Infringement Allegations

The complaint references claim chart exhibits (Ex. S, T, U) that were not included with the filed document. Accordingly, the infringement allegations are summarized below in prose based on the narrative in the complaint.

• '764 and '421 Patents Infringement Allegations
  The core of the infringement theory for both the '764 and '421 patents centers on the architecture of the Centrical platform (Compl. ¶19). The complaint alleges that Centrical provides a single, centralized system that is embedded within the websites or platforms of multiple different customers (Compl. ¶17). Plaintiff alleges this architecture meets the claim requirement of an incentive application that works with "more than one website" and uses a central "database" or "storage" to receive and store user activity information from those multiple sites (Compl. ¶19). The plaintiff supports this allegation by referencing Centrical's marketing materials showing its platform integrated into various enterprise systems (Compl. ¶17) and by arguing that a different architecture—using entirely separate systems for each customer—would be "highly inefficient" and is therefore "highly unlikely" (Compl. ¶20). The dispute articulated in the pre-suit correspondence focused on whether Centrical's system used a single database for multiple websites and whether its embedded applications qualified as operating on "websites" under the claims (Compl. ¶17, 19).

• Identified Points of Contention:

  • Scope Questions: A primary issue for the court may be whether the term "website" (or "network site") as used in the patents can be construed to read on an embedded application within a distinct enterprise software environment like Salesforce. The complaint suggests Centrical initially disputed this, arguing its program did not operate on "websites" (Compl. ¶17). The resolution of this claim construction question may be dispositive for infringement.
  • Technical Questions: The complaint highlights a key factual dispute regarding the technical architecture of the Centrical platform. The central question is whether the platform uses a single, shared "database" or "storage" to receive information from multiple, distinct customer environments, as required by the claims. The complaint alleges that Centrical refused to provide a "high level logical architecture diagram" that could resolve this question during pre-suit discussions, leaving the precise operation of the accused system as a critical point for discovery and contention (Compl. ¶21).

V. Key Claim Terms for Construction

• The Term: "website" / "network site" (e.g., '764 Patent, Claim 1)

• Context and Importance: This term is critical because infringement hinges on whether the Centrical platform operates on "more than one" such site. Practitioners may focus on this term because Defendant's alleged integration into distinct enterprise platforms (like Salesforce or Yammer) must qualify as operating on separate "websites" for the allegations to hold. The complaint notes this was an early point of contention (Compl. ¶17).

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification describes the system operating over a "data network" like the "world-wide web or Internet" and does not appear to explicitly limit a "site" to a publicly accessible domain ('764 Patent, col. 3:23-28). This could support an interpretation where any distinct, network-accessible software environment constitutes a "site."
  • Evidence for a Narrower Interpretation: The patent's description of "e-commerce over the Internet" and its figures depicting a "first site" with general offerings could be argued to teach a more conventional understanding of a "website" ('764 Patent, col. 1:25-33; Fig. 1). A defendant may argue this context limits the term to traditional websites and excludes embedded components within a larger, closed enterprise platform.

• The Term: "an incentive application database configured to receive and store information...from more than one of said first Web sites" ('764 Patent, Claim 1)

• Context and Importance: This term is central to the architectural dispute. The infringement case rests on the allegation that Centrical uses a common backend database for its multiple customers. The construction of "configured to receive and store" will determine whether a modern multi-tenant database architecture, which might logically segregate customer data, meets this limitation.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The claim language focuses on what the database is "configured to" do, not how the data is ultimately stored or partitioned. This may support a reading that any database system capable of receiving data from multiple sources infringes, regardless of internal data siloing. The patent's goal of creating a "universally portable incentive application" could imply a single, centralized backend is envisioned ('764 Patent, col. 1:39-41).
  • Evidence for a Narrower Interpretation: A defendant might argue that to be "configured to receive and store information from more than one" site, the database must do more than simply co-locate logically separate data. They could argue the claim implies the data from multiple sites is stored in a functionally related manner to be used by the incentive engine, an interpretation that a strictly siloed multi-tenant architecture might not satisfy.

VI. Other Allegations

• Indirect Infringement: The complaint alleges both induced and contributory infringement. Inducement is alleged based on Centrical "directly encourag[ing] its customers to use the platform in a way that results in infringement." Contributory infringement is alleged on the basis that the platform is not a "staple article of commerce suitable for substantial non-infringing uses" (Compl. ¶50, 73, 103).
• Willful Infringement: The complaint alleges willful infringement based on pre-suit knowledge. It explicitly states that Centrical was notified of the '764 and '421 patents via a letter in March 2020, more than two years before the complaint was filed (Compl. ¶15). The complaint alleges Centrical "willfully infringed and continues to willfully infringe" the patents-in-suit (Compl. ¶51, 74, 105).

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

• A core issue will be one of definitional scope: can the term "website," rooted in the patent's description of e-commerce, be construed to cover discrete applications embedded within separate, third-party enterprise software platforms like Salesforce, as the complaint alleges?
• A key evidentiary question will be one of technical architecture: does Centrical’s platform in fact utilize a single, common "database" that receives and stores data from its multiple customers in a manner that satisfies the claim limitations, or is its architecture—perhaps a multi-tenant system with strict data siloing—structured to avoid this requirement?
• A third question will concern willfulness: given the detailed history of pre-suit communications starting in March 2020, including the exchange of claim charts and a prior lawsuit, did Centrical's continued accused conduct rise to the level of objective recklessness required to support a finding of willful infringement and potential enhanced damages?