Intercurrency Software LLC v. Phemex Ltd

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Intercurrency Software LLC (Texas)
  • Defendant: Phemex Limited (Singapore)
  • Plaintiff’s Counsel: Garteiser Honea, PLLC
• Case Identification: 2:24-cv-00380, E.D. Tex., 05/23/2024
• Venue Allegations: Venue is alleged to be proper because Defendant is not a resident of the United States and may be sued in any judicial district. The complaint also asserts that Defendant conducts regular business in and has committed acts of infringement within the Eastern District of Texas.
• Core Dispute: Plaintiff alleges that Defendant’s cryptocurrency trading platform infringes three patents related to systems for conducting financial transactions in a user's preferred currency, even when the underlying asset is priced and traded in a different market currency.
• Technical Context: The technology at issue involves integrating real-time currency exchange data into financial trading platforms to provide users with price certainty in their local currency, thereby removing the risk and complexity of separate, post-trade currency conversions.
• Key Procedural History: The complaint notes that the patents-in-suit have been assigned to the Plaintiff and have been cited during the prosecution of patents issued to other entities, including Bank of America. It also proactively argues for the patent eligibility of the claims, asserting they overcame prior art challenges during examination and are not directed to abstract ideas.

Case Timeline

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

U.S. Patent No. 10,062,107 - Consolidated Trading Platform

• Patent Identification: U.S. Patent No. 10062107, "Consolidated Trading Platform," issued August 28, 2018.

The Invention Explained

• Problem Addressed: The patent’s background section describes the difficulties faced by investors trading assets outside of their home currency (Compl. ¶15). Prior systems required transactions to be conducted in the asset's native market currency (e.g., U.S. Dollars), forcing investors to perform separate bulk currency conversions before and after trading, which exposed them to exchange rate fluctuations and made it impossible to know the exact profit or loss at the time of the transaction (’107 Patent, col. 1:52-60).
• The Patented Solution: The invention proposes a "consolidated trading platform" that integrates currency conversion at a "transactional level" (’107 Patent, col. 1:63-65). It describes a "three-tier architecture" comprising a brokerage, a market exchange, and a currency exchange, which work together to present prices, quotes, and settlements to the user in their preferred currency by using a "prevailing exchange rate" obtained at the time of the transaction (’107 Patent, Abstract; col. 2:23-38). This provides the trader with certainty regarding the value of the transaction in their own currency.
• Technical Importance: The described technology aims to remove the friction and financial uncertainty of currency conversion from the process of international securities trading (Compl. ¶19; ’107 Patent, col. 1:61-67).

Key Claims at a Glance

• The complaint asserts independent claim 1 (Compl. ¶35).
• Essential elements of Claim 1 include:
  • Providing a trading server coupled to one or more currency exchange servers and one or more market exchange servers.
  • Receiving an indicator of a preferred currency from a trader.
  • Causing a client computer to display an asset in the preferred currency while it is traded in a market currency, which involves determining and using a prevailing exchange rate.
  • Conducting a transaction of the asset by transmitting a request to a market exchange server.
  • Receiving a settlement notification when the transaction is performed.
  • Performing a currency conversion of the transaction from the market currency to the preferred currency using a calculated prevailing exchange rate obtained right before the transaction.
• The complaint does not explicitly reserve the right to assert dependent claims, though this remains a possibility.

U.S. Patent No. 10,776,863 - Method and Apparatus for Displaying Trading Assets in a Preferred Currency

• Patent Identification: U.S. Patent No. 10776863, "Method and Apparatus for Displaying Trading Assets in a Preferred Currency," issued September 15, 2020.

The Invention Explained

• Problem Addressed: The patent, which is a continuation of the application leading to the ’107 Patent, addresses the same problem of exchange rate uncertainty in international trading (’863 Patent, col. 1:52-60).
• The Patented Solution: The invention describes a method where a trading server, coupled to currency and market exchanges, displays asset prices to a user in their preferred currency (’863 Patent, col. 10:1-17). The system is configured to determine a prevailing exchange rate right before a transaction occurs, ensuring that the price displayed and the final settlement value in the preferred currency are aligned, thereby preventing "uncertainty in currency exchanges in another time" (’863 Patent, Abstract).
• Technical Importance: The technical approach is designed to give traders real-time, actionable price information in a currency they understand, abstracting away the complexities of the underlying market and foreign exchange operations (Compl. ¶19; ’863 Patent, col. 2:29-38).

Key Claims at a Glance

• The complaint asserts independent claim 1 (Compl. ¶51).
• Essential elements of Claim 1 include:
  • Coupling a trading server to one or more currency and market exchange servers.
  • Receiving an indicator of a preferred currency from a trader.
  • Causing a client computer to display the asset in the preferred currency, with its valuation changing in accordance with a constantly updated prevailing exchange rate.
  • Conducting a transaction of the asset.
  • Receiving a settlement notification, where the trading server calculates the exchange rate right before the transaction.
• The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 11,449,930 - Method and Apparatus for Trading Assets in Different Currencies

• Patent Identification: U.S. Patent No. 11449930, "Method and Apparatus for Trading Assets in Different Currencies," issued September 20, 2022.
• Technology Synopsis: Continuing the same theme, this patent describes a system and method for trading assets across different currencies. The core concept involves a trading server that integrates with both market and currency exchanges to dynamically calculate and display costs in a trader’s preferred currency, and then executes the transaction using a just-in-time exchange rate to provide price certainty and avoid subsequent currency fluctuation risk (Compl. ¶¶17-19; ’930 Patent, Abstract).
• Asserted Claims: The complaint asserts independent claim 12 as exemplary (Compl. ¶67).
• Accused Features: The complaint alleges that Defendant’s trading platform, specifically its trading servers coupled to one or more currency exchange servers and market exchange servers, infringes this patent (Compl. ¶67).

III. The Accused Instrumentality

Product Identification

• The accused products are Defendant's "Phemex platforms and systems," which constitute a "full service cryptocurrency exchange platform" (Compl. ¶30). The complaint collectively refers to these as the "Accused Instrumentalities."

Functionality and Market Context

• The Phemex platform allows users to conduct spot, derivatives, and futures trading in cryptocurrency (Compl. ¶3). The complaint alleges that the platform operates using "trading servers coupled to one or more currency exchange servers, and one or more market exchange servers" to implement the infringing functionality (Compl. ¶35(i)). The core accused function is the system's ability to display asset values and execute trades in a user's preferred currency, which necessitates an underlying real-time currency conversion mechanism. A screenshot from the Phemex website describes the offering as "The Most Efficient Crypto Trading and Investment Platform" (Compl. p. 8). The complaint alleges that Defendant generates substantial revenue from the operation of these platforms (Compl. ¶34).

IV. Analysis of Infringement Allegations

’107 Patent Infringement Allegations

’863 Patent Infringement Allegations

The complaint’s infringement allegations for the ’863 Patent are less detailed than for the ’107 Patent, primarily consisting of a single paragraph that incorporates earlier allegations by reference (Compl. ¶51, ¶47). The following chart is constructed based on the exemplary assertion of Claim 1 and the incorporated infringement theories.

• Identified Points of Contention:
  • Scope Questions: A primary question may be whether the patent's "three-tier architecture" of distinct brokerage, market exchange, and currency exchange servers—a model from the traditional finance era—can be construed to read on the potentially more integrated or decentralized infrastructure of a modern cryptocurrency exchange.
  • Technical Questions: What evidence does the complaint provide that the accused platform calculates the "prevailing exchange rate" "right before the transaction takes place," as required by the claims to solve the uncertainty problem? The court may need to examine whether the platform's actual method of determining and applying exchange rates—which could involve caching, internal liquidity pools, or other mechanisms—meets this specific temporal requirement.

V. Key Claim Terms for Construction

• The Term: "trading server"

  • Context and Importance: This term is foundational to all asserted claims. Its construction will determine whether the accused Phemex servers fall within the scope of the invention. Practitioners may focus on this term because the patent appears to describe it in the context of a traditional, centralized "brokerage," and the defense may argue that the architecture of a cryptocurrency exchange is fundamentally different.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The claims themselves do not limit the "trading server" to a specific type of financial institution. Plaintiff may argue that any server system that provides the claimed functions—receiving user currency preference, displaying converted prices, and executing trades—constitutes a "trading server". The patent also refers to it as a server provided by a "financial institution" generally (’107 Patent, col. 3:22-24).
    • Evidence for a Narrower Interpretation: The specification consistently illustrates the "trading server" as the "brokerage" (208) in its "3-tier architecture," depicted as a distinct entity from the "currency exchange" (206) and "asset exchange" (210) (’107 Patent, Fig. 2B). Defendant may argue this implies a segregated architecture not present in its integrated platform.

• The Term: "prevailing exchange rate... obtained... right before the transaction takes place"

  • Context and Importance: This phrase captures the core technical solution to the problem of price uncertainty. The timing it requires is critical. Infringement may turn on whether the accused platform's method for determining rates is sufficiently contemporaneous with the trade to meet this limitation.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: Plaintiff may argue that "right before" does not require a literal, instantaneous query, but rather that the rate must be current enough to "prevent uncertainty in currency exchanges in another time" (’107 Patent, Claim 1), which could encompass recently cached or updated rates.
    • Evidence for a Narrower Interpretation: Defendant may argue that the patent’s explicit goal of solving the uncertainty problem requires a specific, just-in-time calculation to lock in a rate for that specific transaction. Language describing the execution of the transaction "with the calculated prevailing exchange rate obtained at the transaction" (’107 Patent, Claim 1) may support an interpretation that the rate calculation is an inseparable part of the execution step itself.

VI. Other Allegations

• Indirect Infringement: The complaint alleges that Defendant induces infringement by taking "active steps... such as advertising an infringing use, which supports a finding of an intention for the accused product to be used in an infringing manner" (Compl. ¶43, ¶59, ¶75).
• Willful Infringement: Willfulness is alleged on two grounds. First, it is alleged based on post-suit knowledge arising from the filing and service of the complaint (Compl. ¶39, ¶55, ¶71). Second, the complaint alleges pre-suit willful blindness, asserting that Defendant has a "practice of not performing a review of the patent rights of others first for clearance" before launching products (Compl. ¶44, ¶60, ¶76).

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

• A core issue will be one of technological scope: can the claims, which are rooted in a "three-tier architecture" of distinct brokerage, market, and currency exchange servers from the pre-cryptocurrency financial world, be construed to read on the integrated server infrastructure of the accused cryptocurrency platform?
• A central evidentiary question will be one of operational equivalence: does the accused Phemex platform in fact calculate and apply a "prevailing exchange rate" "right before the transaction takes place," as the claims require to eliminate price uncertainty, or does it employ a functionally different pricing and conversion mechanism that falls outside the specific solution taught by the patents?
• The case may also hinge on a question of patent eligibility under 35 U.S.C. § 101: despite the complaint’s arguments, a court will have to determine whether the claims are directed to the abstract idea of currency conversion applied in a financial context, and if so, whether they contain a sufficient "inventive concept" to be patent-eligible.