DCT
2:17-cv-00150
Digital Verification Systems LLC v. Square Inc
Key Events
Complaint
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Digital Verification Systems, LLC (Texas)
- Defendant: Square, Inc. (Delaware)
- Plaintiff’s Counsel: HARPER IP GROUP, Group
- Case Identification: 2:17-cv-00150, E.D. Tex., 02/23/2017
- Venue Allegations: Venue is alleged to be proper in the Eastern District of Texas because Defendant Square, Inc. regularly conducts business in the district, including offering for sale and selling the accused products and services.
- Core Dispute: Plaintiff alleges that Defendant’s point-of-sale systems, including its Contactless and Chip Reader, infringe a patent directed to a system and method for creating and embedding a unique digital identification module into a single electronic file for authentication purposes.
- Technical Context: The technology relates to digital signatures and user authentication for electronic documents, a foundational element of secure e-commerce and modern point-of-sale transaction processing.
- Key Procedural History: Subsequent to the filing of this complaint, an Inter Partes Review (IPR) proceeding was initiated against the patent-in-suit (IPR2018-00746). The proceeding resulted in the cancellation of claims 23-39 of the ’860 patent, as reflected in a certificate issued May 1, 2020. Of the claims explicitly asserted in the complaint (1, 23, 26, 30, and 39), only claim 1 remains presumptively valid, significantly narrowing the scope of the dispute as originally pleaded.
Case Timeline
| Date | Event |
|---|---|
| 2008-01-02 | ’860 Patent Priority Date (Application Filing) |
| 2015-06-09 | ’860 Patent Issue Date |
| 2017-02-23 | Complaint Filing Date |
| 2018-03-06 | IPR2018-00746 Filed |
| 2020-05-01 | IPR Certificate Issued (Claims 23-39 Cancelled) |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 9,054,860 - “Digital Verified Identification System and Method,” issued June 9, 2015
The Invention Explained
- Problem Addressed: The patent’s background section identifies a need for more robust authentication of electronic signatures, noting that common methods are “rather difficult to authenticate” and verifying the signatory’s identity has become an “arduous, if not impossible task.” (’860 Patent, col. 1:31-36).
- The Patented Solution: The invention proposes a system that generates a "digital identification module" based on verification data provided by an entity (e.g., a person signing a document) (’860 Patent, col. 1:45-49). This module, which can contain both a visible "primary component" (like a signature image) and hidden "metadata components" (like time, date, location, or a MAC address), is then embedded into an electronic file (’860 Patent, col. 2:25-36). A key feature is that the module can be created to be operable only with a single, pre-selected electronic file, becoming inactive if the file is altered or the module is moved (’860 Patent, col. 4:24-28, 40-48).
- Technical Importance: The technology aims to create a stronger, verifiable link between a specific electronic document and an authenticated individual, thereby increasing the security and reliability of electronic transactions. (’860 Patent, col. 1:37-45).
Key Claims at a Glance
- The complaint asserts independent claims 1 (system) and 26 (method) as representative examples, while reserving the right to assert others. As noted, claim 26 has since been cancelled via IPR.
- Independent Claim 1 (System):
- A digital verified identification system comprising at least one digital identification module associated with an entity.
- A module generating assembly that receives a verification data element from the entity and creates the digital identification module.
- The module is disposable within an electronic file and has a primary component to associate it with the entity.
- Crucially, the module is “cooperatively structured to be embedded within only a single electronic file.”
- Independent Claim 26 (Method) [CANCELLED]:
- A method comprising receiving a verification data element from an entity.
- Creating a digital identification module for the entity that includes a primary component.
- Embedding the module into an electronic file.
- The module is “cooperatively structured to be embedded within only a single electronic file.”
III. The Accused Instrumentality
Product Identification
The accused instrumentalities are Square’s "Point-of-Sale terminals and Square Contactless and Chip Reader" available on its website. (Compl. ¶9).
Functionality and Market Context
The complaint alleges these products include the function of "electronically signing and authenticating an electronic document by a verified signatory." (Compl. ¶9). Specifically, it alleges the systems receive verification data, such as data structures from an EMV chip card, and create authentication elements (e.g., an "EMV chip signature") that are disposed within an electronic document to authenticate it. (Compl. ¶15, ¶18). The complaint does not provide further detail on the products' market positioning or commercial importance.
IV. Analysis of Infringement Allegations
The complaint’s infringement allegations are presented in narrative form rather than claim charts. The following tables summarize the core theory for the representative claims. No probative visual evidence provided in complaint.
’860 Patent Infringement Allegations (Claim 1)
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| A digital verified identification system, comprising at least one digital identification module structured to be associated with at least one entity, | The accused system creates a module, such as "data structures associated with an EMV chip card and/or other authentication elements," associated with an entity (the cardholder). | ¶15 | col. 3:34-37 |
| A module generating assembly structured to receive at least one verification element... and create said at least one digital identification module, | The Square system has a "module generating assembly" that receives verification elements from the EMV chip card to create the module. | ¶15 | col. 3:46-51 |
| Said at least one digital identification module comprising at least one primary component structured to at least partially associate said digital identification module with said at least one entity, | The "EMV authentication codes and optional electronic signatures constitute one example of a primary component." | ¶15 | col. 2:27-31 |
| wherein Said at least one digital identification module is cooperatively structured to be embedded within only a single electronic file. | The module is used with a single electronic file because "Each electronic file is assigned its own authentication verification code and thus the specific module... is only used with that single electronic file." | ¶15 | col. 4:35-40 |
’860 Patent Infringement Allegations (Claim 26 - CANCELLED)
| Claim Element (from Independent Claim 26) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| Receiving at least one verification data element from an entity, | The accused system has a "module generating assembly" that receives verification elements, such as "data structures associated with an EMV chip card." | ¶18 | col. 4:1-5 |
| Creating at least one digital identification module... wherein the digital identification module includes at least a primary component... | The system creates a module where "EMV authentication codes and optional electronic signatures constitute one example of a primary component." | ¶18 | col. 6:10-18 |
| Embedding the at least one digital identification module within an electronic file, wherein Said at least one digital identification module is cooperatively structured to be embedded within only a single electronic file. | The created module is disposed within a single electronic verification document, as "Each electronic file is assigned its own authentication verification code." | ¶18 | col. 4:24-28 |
Identified Points of Contention
- Scope Questions: A central question is whether the "data structures associated with an EMV chip card" (Compl. ¶15) meet the definition of a "digital identification module" as contemplated by the patent, which describes a module with distinct, layered primary and metadata components. (e.g., ’860 Patent, col. 2:25-36).
- Technical Questions: The complaint alleges the "single electronic file" limitation is met because each file gets a unique code. (Compl. ¶15). This raises the question of whether this satisfies the patent's more specific teaching that the module itself is structured to become "inoperable" or be "automatically deleted" if the associated electronic file is manipulated or the module is moved to another file. (’860 Patent, col. 4:35-48).
V. Key Claim Terms for Construction
The Term: "digital identification module"
Context and Importance
The definition of this term is fundamental. The dispute may turn on whether a standard EMV authentication code, as alleged in the complaint, qualifies as the multi-faceted "module" described in the patent.
Intrinsic Evidence for Interpretation
- Evidence for a Broader Interpretation: The patent states the module may include "virtually any file, item, object, or device structured to be embedded or otherwise disposed within an electronic file." (’860 Patent, col. 3:34-37).
- Evidence for a Narrower Interpretation: The specification repeatedly describes the module as comprising both a "primary component" (e.g., a visible signature) and "metadata component(s)" (e.g., hidden data like time or location revealed on mouse-over), suggesting a more complex structure than a simple authentication code. (’860 Patent, Abstract; col. 2:25-36; Fig. 6).
The Term: "cooperatively structured to be embedded within only a single electronic file"
Context and Importance
This limitation appears to be the primary point of novelty and will likely be a focal point of non-infringement arguments. Practitioners may focus on this term because its interpretation will determine whether a unique-per-transaction code infringes, or if a more robust technical lock is required.
Intrinsic Evidence for Interpretation
- Evidence for a Broader Interpretation: The plaintiff's theory suggests this language could be met if a unique module is generated for each electronic file, even if it is not technically locked to it. (Compl. ¶15).
- Evidence for a Narrower Interpretation: The specification suggests a specific technical implementation where the module "may be structured to be embedded, disposed, or otherwise operable only with the pre-selected electronic file" and can be rendered "inoperable" or "automatically deleted" if the file is changed, implying a technical bond between the module and the file. (’860 Patent, col. 4:24-38, 40-48).
VI. Other Allegations
Indirect Infringement
The complaint does not plead specific facts to support a claim for either induced or contributory infringement, such as allegations of Defendant's specific intent or knowledge.
Willful Infringement
The complaint does not allege facts to support a claim for willful infringement, such as pre-suit knowledge of the ’860 patent or its infringement by the accused products.
VII. Analyst’s Conclusion: Key Questions for the Case
- Post-IPR Viability: A threshold issue is the case's viability following the IPR proceeding. With claims 23, 26, 30, and 39 cancelled, can the plaintiff's infringement theory, originally pleaded across multiple claims, be sustained based solely on the surviving system claim 1?
- Definitional Scope: A core issue will be one of claim construction: can the term "digital identification module," which the patent describes as having distinct visible and hidden components, be construed to encompass the "data structures associated with an EMV chip card" generated by the accused point-of-sale systems?
- Technical Mismatch: The central evidentiary question will concern the "single electronic file" limitation. Does the accused Square system create a module that is technically locked to a single file and rendered inoperable if moved, as the patent specification suggests, or is the plaintiff’s allegation based on a broader interpretation that a uniquely generated code satisfies the claim?