Digital Retail Apps Inc v. Sams Club West

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Digital Retail Apps, Inc. (Ontario, Canada)
  • Defendant: Sam's Club West, Inc. d/b/a Sam's Club (Arkansas)
  • Plaintiff’s Counsel: Siebman, Forrest, Burg & Smith, LLP; Sheridan Ross P.C.
• Case Identification: 2:21-cv-00184, E.D. Tex., 05/26/2021
• Venue Allegations: Plaintiff alleges venue is proper because Defendant operates retail locations, including a Sam's Club at 3310 N. Fourth Street, Longview, Texas, within the district, and has allegedly committed acts of infringement there through the use of its "Scan & Go" system.
• Core Dispute: Plaintiff alleges that Defendant’s “Scan & Go” mobile self-checkout service infringes patents related to systems and methods for facilitating and verifying secure in-store purchases using a customer's mobile device.
• Technical Context: The technology concerns mobile commerce solutions that aim to eliminate traditional checkout lines in brick-and-mortar retail stores by allowing customers to scan, pay for, and verify purchases directly on their smartphones.
• Key Procedural History: The patents-in-suit were previously asserted in Digital Retail Apps, Inc. v. H-E-B, LP (W.D. Tex.), which was dismissed without a final judgment on the merits. A claim construction order was issued in that prior case, in which the court construed several terms, finding some indefinite and giving a specific construction to "wirelessly transmitting... unique token" that excluded photographing or scanning. Plaintiff states these constructions are erroneous and not binding.

Case Timeline

Date	Event
2012-03-23	Earliest Priority Date for '781 and '506 Patents
2016-01-01	Defendant launches "Scan & Go" service (approx. per year)
2016-02-16	'781 Patent Issued
2018-04-03	'506 Patent Issued
2021-05-26	Complaint Filed

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

U.S. Patent No. 9,262,781 - "System and Method for Facilitating Secure Self Payment Transactions of Retail Goods," issued February 16, 2016 ('781 Patent)

The Invention Explained

• Problem Addressed: The patent identifies the inconvenience and delays of traditional retail checkout processes as a source of lost sales for retailers (Compl. ¶ 18; ’781 Patent, col. 1:47-54). It also notes that existing in-store mobile payment solutions often require interaction with proprietary hardware or rely on paper receipts for verification, which are vulnerable to falsification and slow down the customer's exit (’781 Patent, col. 2:16-41).
• The Patented Solution: The invention describes a system where a consumer uses a self-payment application on their mobile device to scan items, process payment, and receive a unique digital token, such as a QR code, representing the completed purchase (’781 Patent, Abstract; Fig. 2). This unique token is then presented to the retailer upon exit for verification, replacing the need for a paper receipt and streamlining the process (’781 Patent, col. 3:11-20). The system is designed to provide security for the retailer while giving the consumer control over the payment process (’781 Patent, col. 7:1-11).
• Technical Importance: The technology aimed to merge the convenience of e-commerce with the tactile experience of in-person shopping, addressing a key challenge in the evolution of brick-and-mortar retail (Compl. ¶¶ 18, 21).

Key Claims at a Glance

• The complaint asserts at least independent claim 1 (Compl. ¶ 29).
• Claim 1 (System):
  • A system comprising a server with one or more processors and a non-transitory storage medium.
  • The server is configured to execute steps including: receiving item and payment information from a consumer's mobile device.
  • Transmitting a request for payment authorization to a payment processing system.
  • Receiving a response indicating whether payment was approved.
  • Creating a data record in a database for the completed purchase.
  • Generating a unique token associated with the data record.
  • Transmitting the unique token to the mobile device for use by the consumer to verify the purchase.
  • Receiving a request from a retailer electronic device to verify the unique token.
  • Transmitting information to the retailer electronic device indicating whether the unique token is valid.

U.S. Patent No. 9,934,506 - "System and Method for Facilitating Secure Self Payment Transactions of Retail Goods," issued April 3, 2018 ('506 Patent)

The Invention Explained

• Problem Addressed: As a continuation of the application leading to the '781 Patent, the '506 Patent addresses the same technical problems of inefficient checkout lines and insecure verification methods in retail environments (’506 Patent, col. 2:3-46).
• The Patented Solution: The '506 Patent describes a method for "spot-checking" a consumer's purchase. This involves a retailer's electronic device receiving a unique token from the consumer's mobile device, transmitting a verification request to a server, and receiving a response indicating validity (’506 Patent, claim 1). The method focuses on the verification interaction between the consumer, the retailer's device, and a back-end server to confirm a legitimate purchase at the point of exit (’506 Patent, Abstract).
• Technical Importance: This technology provides a specific method for implementing a secure, digital-first loss prevention and verification process, moving away from manual, paper-based checks (Compl. ¶ 19).

Key Claims at a Glance

• The complaint asserts at least independent claim 1 (Compl. ¶ 33).
• Claim 1 (Method):
  • A computer-implemented method for spot-checking and verifying a consumer's in-store purchase.
  • A retailer electronic device receiving a unique token from the consumer's mobile device.
  • The retailer device transmitting a verification request with the token to a server.
  • The retailer device receiving a response from the server indicating validity.
  • Displaying an indication of validity on the retailer device.
  • Prompting a user of the retailer device for a response indicating the purchase has been inspected and approved.
  • The retailer device transmitting information to the server that the purchase has been inspected and approved.

III. The Accused Instrumentality

Product Identification

• The "Sam's Club Scan & Go" service and its related equipment, back-end system(s), and server(s), collectively referred to as the "Accused System" (Compl. ¶ 5).

Functionality and Market Context

• The Scan & Go service is a feature within the Sam's Club mobile application that allows customers to "shop, scan and skip the checkout line" (Compl. ¶ 23).
• Based on the complaint, the functionality involves customers using their smartphones to download the app, scan item barcodes as they shop, pay for the items directly within the app using a preferred payment method, and show a resulting QR code on their phone to an employee on their way out of the store (Compl. ¶ 23). A screenshot in the complaint outlines these steps for the user. (Compl. p. 8).
• The complaint alleges the service was launched in 2016 and subsequently extended to all Sam's Club stores in the United States (Compl. ¶ 22).

IV. Analysis of Infringement Allegations

The complaint alleges that infringement of at least Claim 1 of each patent-in-suit is detailed in claim charts attached as Exhibits 5 and 6 (Compl. ¶¶ 24-25). As these exhibits were not filed with the complaint, the infringement theory is summarized below based on the complaint's narrative allegations.

• '781 Patent Infringement Allegations (Prose Summary)
  The complaint alleges that the Accused System constitutes an infringing system under Claim 1 of the '781 Patent (Compl. ¶ 29). The theory suggests that the Sam's Club servers, in communication with the Scan & Go mobile application, perform the claimed steps. The system allegedly receives item information (when a user scans a barcode) and payment information (when a user pays in the app) from the consumer's mobile device (Compl. ¶ 23). It then communicates with payment processors to authorize the transaction, creates a data record of the sale, generates a unique token (the QR code), and transmits it back to the user's mobile app (Compl. ¶ 23). The final steps are met when a Sam's Club employee's device scans the QR code, which sends a verification request to the system's servers, and the servers confirm the purchase is valid (Compl. ¶ 23).

• '506 Patent Infringement Allegations (Prose Summary)
  The complaint alleges that the use of the Accused System constitutes infringement of the method of Claim 1 of the '506 Patent (Compl. ¶ 33). The infringement theory suggests that the "spot-checking" method is performed at the exit of Sam's Club stores (Compl. ¶ 23). A retailer electronic device (operated by an employee) receives the unique token by scanning the QR code displayed on the consumer's mobile device (Compl. p. 8). This act of scanning allegedly causes the retailer device to transmit a verification request to the server. The server's response confirming the purchase is received by and displayed on the retailer device. While the complaint does not explicitly detail the "inspection and approval" steps, the theory implies that the employee's action of scanning the code and allowing the customer to exit satisfies these limitations.

• Identified Points of Contention:

  • Scope Questions: A central question may be whether optically scanning a QR code from a consumer's screen with a retailer's device constitutes "wirelessly transmitting said unique token to a retailer electronic device" as required by claim 1 of the '781 Patent, or "receiving from the consumer's mobile device... a unique token" as required by claim 1 of the '506 Patent. The non-binding construction from the prior H-E-B case, which held that "wirelessly transmitting" does not include "photographing or scanning," suggests this will be a critical point of dispute (Compl. ¶ 27).
  • Technical Questions: Analysis may focus on whether the Accused System's exit procedure meets the specific method steps of "spot-checking" from claim 1 of the '506 Patent, which includes prompting a user for and transmitting an "inspected and approved" confirmation. Evidence will be required to show that the act of scanning a QR code and letting a customer pass inherently performs these affirmative confirmation steps.

V. Key Claim Terms for Construction

• The Term: "wirelessly transmitting said unique token to a retailer electronic device" ('781 Patent, claim 1).

  • Context and Importance: This term is critical because the infringement allegation hinges on whether the act of a retailer scanning a QR code displayed on a consumer's phone satisfies this limitation. Defendant may argue this is an optical capture, not a wireless data transmission, a position supported by the construction in the prior H-E-B litigation (Compl. ¶ 27).
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification discusses communication via "wireless network, a wired network, or a combination thereof" (’781 Patent, col. 10:35-39) and mentions various communication methods, which may support an argument that the claims are not limited to a specific type of wireless protocol.
    • Evidence for a Narrower Interpretation: The specification also explicitly describes Near-Field Communication (NFC) as an alternative method for capturing the token, where information is captured "through a contactless terminal or NFC-enabled device" (’781 Patent, col. 10:16-22). This could be used to argue that "transmitting" implies a direct data protocol like NFC or Wi-Fi, rather than an optical reading of a displayed image.

• The Term: "spot checking" ('506 Patent, claim 1).

  • Context and Importance: Practitioners may focus on this term because it defines the core method of the asserted '506 Patent claim. The prior H-E-B court construed it as "physically or visually inspecting (1) purchase items and (2) either a receipt or token to verify a consumer's purchase" (Compl. ¶ 27). Whether the Scan & Go exit procedure meets this two-part definition will be a key factual question.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The term is used in the patent title and throughout the specification, suggesting it is a general descriptor for the verification process. The summary of the invention describes verifying a purchase using a mobile device without limiting it to a specific sequence of physical inspection (’506 Patent, col. 2:54-62).
    • Evidence for a Narrower Interpretation: The detailed description defines a "spot check procedure" as one in which "the retailer physically or visually inspects the consumer or his or her purchase items and receipt after the transaction is conducted" (’781 Patent, col. 7:59-65, incorporated by reference into the '506 Patent). This language could support a narrower construction requiring a distinct physical inspection step in addition to the token verification.

VI. Other Allegations

• Indirect Infringement: The complaint does not contain specific factual allegations to support claims of induced or contributory infringement.
• Willful Infringement: The complaint does not explicitly plead willfulness or allege that Defendant had pre-suit knowledge of the patents-in-suit.

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

1. A core issue will be one of definitional scope: can the term "wirelessly transmitting," in the context of the '781 Patent, be construed to encompass the optical scanning of a QR code from one device's screen by another? The outcome of this claim construction dispute, informed by the non-binding precedent from the H-E-B case, may be determinative for the '781 Patent.

2. A central evidentiary question will be one of functional performance: does the Sam's Club "Scan & Go" exit procedure, as actually practiced in stores, satisfy all steps of the "spot-checking" method claimed in the '506 Patent? Specifically, what evidence demonstrates that the process includes the claimed steps of prompting for and transmitting a confirmation that the purchase has been "inspected and approved"?