DCT
2:24-cv-00795
Flexshopper Inc v. Katapult Holdings Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Flexshopper Inc (Delaware)
- Defendant: Upbound Group, Inc. (Delaware), Acima Holdings LLC (Utah), and Acima Digital LLC (Utah)
- Plaintiff’s Counsel: Quinn Emanuel Urquhart & Sullivan LLP
- Case Identification: 2:24-cv-00795, E.D. Tex., 01/09/2025
- Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Texas because Defendants maintain a regular and established place of business in Plano, Texas, employ numerous individuals in the district, and have committed acts of infringement in the district by providing eCommerce lease-to-own solutions to consumers and retailers.
- Core Dispute: Plaintiff alleges that Defendants’ Acima Leasing eCommerce solutions infringe five U.S. patents related to the integration of rent-to-own (RTO) payment options into third-party online retail websites.
- Technical Context: The technology at issue is in the financial technology (FinTech) sector, focusing on systems that allow online merchants to seamlessly offer lease-to-own financing as a payment option during the checkout process.
- Key Procedural History: The complaint alleges that Defendants had pre-suit knowledge of the patents through multiple channels, including direct disclosure during merger/acquisition discussions in September 2022; constructive notice via Plaintiff’s patent marking; and actual knowledge from the prosecution of patent applications by Defendants' subsidiary, where several of the asserted patents were cited as prior art.
Case Timeline
| Date | Event |
|---|---|
| 2013-05-31 | Earliest Priority Date for all Asserted Patents |
| 2018-10-18 | U.S. Patent No. 10,089,682 Issues |
| 2019-05-07 | U.S. Patent No. 10,282,778 Issues |
| 2021-01-12 | U.S. Patent No. 10,891,687 Issues |
| 2021-10-05 | ’778 Patent allegedly cited in prosecution of Defendant's subsidiary's patent application |
| 2022-05-26 | ’687 Patent’s application allegedly cited by Defendant's subsidiary |
| 2022-09-02 | Plaintiff and Defendants allegedly execute a non-disclosure agreement |
| 2022-09-14 | Plaintiff and Defendants allegedly hold meeting to discuss potential transaction |
| 2023-05-19 | ’682 Patent allegedly cited in prosecution of Defendant's subsidiary's patent application |
| 2024-04-23 | U.S. Patent No. 11,966,969 Issues |
| 2024-08-20 | U.S. Patent No. 12,067,611 Issues |
| 2024-09-30 | Original Complaint Filed |
| 2025-01-09 | First Amended Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 11,966,969 - “Computer Implemented System and Method for a Rent-to-own Program”
The Invention Explained
- Problem Addressed: The patent addresses historical limitations of the RTO market, where consumers were confined to brick-and-mortar stores with limited inventory or faced cumbersome and inefficient online RTO processes (Compl. ¶¶22, 28). For online merchants, integrating RTO options was often complicated, leading to lost sales opportunities (Compl. ¶22).
- The Patented Solution: The invention describes a method for integrating an RTO payment option directly into a third-party e-commerce website’s user interface (Compl. ¶31). Upon selection by a consumer, the system provides an interface embedded within the retailer’s own website, creating a “unified transaction screen” that allows the consumer to apply for financing and complete the transaction without being redirected to a separate financial services site (’682 Patent, col. 3:13-24; Compl. ¶44).
- Technical Importance: This technological approach is designed to create a “frictionless experience” for the consumer, which can reduce checkout friction and cart abandonment, thereby increasing sales conversion rates for e-commerce merchants (Compl. ¶¶24, 39).
Key Claims at a Glance
- The complaint asserts independent claim 1 (Compl. ¶92).
- The essential elements of Claim 1 include:
- communicating with an e-commerce website to integrate an RTO payment option into its user interface;
- in response to a consumer selecting the RTO option, providing an interface for communication with an RTO management system that is embedded within the e-commerce website to create a unified transaction screen;
- receiving identifying data for the item to be purchased;
- receiving identifying information about the consumer through the interface;
- providing a spending limit and RTO transaction terms to the consumer through the interface;
- receiving the consumer's acceptance of the RTO terms; and
- providing a payment confirmation to the e-commerce website.
- The complaint does not explicitly reserve the right to assert dependent claims for this patent.
U.S. Patent No. 12,067,611 - “Computer Implemented System and Method for a Rent-to-own Program”
The Invention Explained
- Problem Addressed: The patent addresses the same technical problems as the ’969 Patent, concerning the difficulty of integrating RTO financing into mainstream e-commerce in a user-friendly manner (Compl. ¶¶22, 28).
- The Patented Solution: The invention is a method performed by an e-commerce server that includes an RTO "plug-in" integrated with the site's e-commerce application (Compl. ¶118, Claim 16). After a consumer selects the RTO control element, the e-commerce server receives a plurality of RTO-specific user interfaces from a back-end RTO system and presents them to the consumer to facilitate the transaction through the e-commerce website, thereby retaining control of the user experience (’682 Patent, col. 4:41-51; Compl. ¶39).
- Technical Importance: This architecture allows an e-commerce retailer to offer a sophisticated, externally managed financial product while maintaining a seamless and uninterrupted checkout flow for its customers (Compl. ¶39).
Key Claims at a Glance
- The complaint asserts independent claim 16 (Compl. ¶118).
- The essential elements of Claim 16 include:
- providing, by an e-commerce server, an e-commerce website that includes an RTO plug-in for integrating a selectable RTO control element;
- after selection of the RTO control element, receiving from an RTO system a plurality of RTO user interfaces for provision to the consumer device;
- facilitating completion of the RTO transaction through the e-commerce website using the RTO user interfaces;
- the RTO user interfaces performing functions including: providing item data to the RTO system, receiving transaction eligibility status, receiving consumer information, and providing a spending limit and transaction terms.
- The complaint does not explicitly reserve the right to assert dependent claims for this patent.
Multi-Patent Capsule: U.S. Patent No. 10,089,682
- Patent Identification: U.S. Patent No. 10,089,682, titled “Computer Implemented System and Method for a Rent-to-own Program,” issued on October 18, 2018 (Compl. ¶142).
- Technology Synopsis: The patent claims a system comprising a consumer device, an RTO system with a management application, and an e-commerce server (Compl. ¶145). The server executes an RTO plug-in to integrate a selectable RTO control element into its checkout interface and, upon selection, provides the consumer with RTO user interfaces received from the RTO management application to complete the transaction on the e-commerce site (Compl. ¶145).
- Asserted Claims: Independent Claim 1 (Compl. ¶145).
- Accused Features: The accused system is alleged to comprise Defendants' RTO system and plug-in, third-party e-commerce servers, and consumer computer devices, which collectively perform the claimed functions (Compl. ¶¶147-152).
Multi-Patent Capsule: U.S. Patent No. 10,282,778
- Patent Identification: U.S. Patent No. 10,282,778, titled “Computer Implemented System and Method for a Rent-to-own Program,” issued on May 7, 2019 (Compl. ¶173).
- Technology Synopsis: The patent claims a system where a retailer computer device includes a retailer application and an Application Program Interface (API) (Compl. ¶176). The retailer application invokes a command of the API directed to an RTO plug-in to execute an RTO payment routine, facilitating a tightly integrated communication flow between the retailer's native application and the RTO functionality (Compl. ¶176).
- Asserted Claims: Independent Claim 1 (Compl. ¶176).
- Accused Features: Defendants’ Acima eCommerce solution, which is marketed as providing a "Robust API" for integration with partner websites (Compl. ¶¶93, 186).
Multi-Patent Capsule: U.S. Patent No. 10,891,687
- Patent Identification: U.S. Patent No. 10,891,687, titled “Computer Implemented System and Method for a Rent-to-own Program,” issued on January 12, 2021 (Compl. ¶204).
- Technology Synopsis: This patent claims a system including an e-commerce server configured for communication with a consumer device and an RTO system (Compl. ¶207). The server comprises an e-commerce application and an integrated RTO plug-in that, after a consumer selects an RTO control element, provides RTO user interfaces received from the RTO management application to complete the transaction through the e-commerce website (Compl. ¶207).
- Asserted Claims: Independent Claim 1 (Compl. ¶207).
- Accused Features: The system allegedly comprises Defendants' RTO system and RTO plug-in in combination with third-party e-commerce servers that use the technology (Compl. ¶¶209-213).
III. The Accused Instrumentality
Product Identification
The accused instrumentalities are Defendants' "Acima Leasing" and "Acima eCommerce" lease-to-own solutions (Compl. ¶57). These solutions include products such as software, website "plug-ins," and Application Program Interfaces (APIs) provided to third-party e-commerce entities (Compl. ¶¶57, 93).
Functionality and Market Context
The accused products are provided to online retailers using e-commerce platforms like BigCommerce, Shopify, and Magento (Compl. ¶93). They function by integrating an "Acima" payment option into the retailer's checkout user interface (Compl. ¶94). When a consumer selects this option, an interface allegedly appears embedded within the retailer's website, allowing the consumer to apply for and finalize an RTO transaction (Compl. ¶95). A screenshot in the complaint depicts the "Acima" logo as a selectable payment method on a checkout screen (Compl. p. 43). Defendants market this as a "frictionless experience" in which "customers can complete their transaction without leaving your site" (Compl. ¶39).
IV. Analysis of Infringement Allegations
11,966,969 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| communicating, via a network, with an e-commerce website to integrate a rent-to-own (RTO) payment option into a user interface of the e-commerce website; | Defendants' systems communicate with third-party e-commerce websites to create and integrate the Acima RTO payment option into the checkout interface. | ¶94 | col. 4:41-51 |
| in response to a consumer selecting the RTO payment option, providing an interface for communicating between the consumer and an RTO management system to complete an RTO payment transaction, the interface embedded within the e-commerce website to provide a unified transaction screen to the consumer; | After a consumer selects Acima, Defendants provide an interface that is embedded within the retailer's site, allowing the consumer to transact with the Acima RTO system without leaving the site. The complaint includes a screenshot allegedly showing an Acima interface displayed within the frame of a third-party jewelry retailer's website (Compl. p. 44). | ¶95 | col. 4:41-51 |
| receiving identifying data corresponding to an item to be purchased using the RTO payment option, the identifying data describing the item, a price of the item, a type of the item... | Defendants' system receives data about the item selected by the consumer from the e-commerce website, such as its description and price. A screenshot provided shows a cart page with item details and price (Compl. p. 45). | ¶96 | col. 6:53-58 |
| receiving, through the interface for communicating with the RTO management system, identifying information of the consumer; | Through the embedded interface, Defendants' system receives identifying information from the consumer, such as a phone number. A screenshot allegedly shows an interface requesting a consumer's mobile number (Compl. p. 46). | ¶97 | col. 6:43-46 |
| providing, through the interface for communicating with the RTO management system, a spending limit and RTO transaction terms corresponding to the item... | Defendants' system provides the approved consumer with a spending limit and lease agreement terms for the selected item. | ¶98 | col. 6:47-52 |
| receiving, through the interface... an indication of the consumer’s acceptance of the RTO transaction terms; | Defendants' system receives the consumer's agreement to the lease terms to finalize the transaction. | ¶99 | col. 6:64-67 |
| providing a payment confirmation to the e-commerce website for the item. | Upon completion of the RTO transaction, Defendants' system informs the e-commerce website that payment is confirmed, allowing the retailer to fulfill the order. | ¶100 | col. 2:37-41 |
12,067,611 Patent Infringement Allegations
| Claim Element (from Independent Claim 16) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| providing, by an e-commerce server including an e-commerce application via a network, an e-commerce website to a consumer device... | Third-party e-commerce entities use their servers and applications, in conjunction with Defendants' products, to provide their websites to consumers. | ¶120 | col. 4:41-44 |
| ...the e-commerce server further including a rent-to-own (RTO) plug-in integrated with the e-commerce application... to integrate a RTO control element in the e-commerce user interface... | The e-commerce server includes Defendants' integrated RTO plug-in, which creates the selectable Acima RTO payment option on the checkout page. | ¶121 | col. 4:41-48 |
| after selection of the RTO control element, receiving from a RTO system... via the RTO plug-in, a plurality of RTO user interfaces for provision to the consumer device... to facilitate completion of the RTO transaction through the e-commerce website | After the consumer selects Acima, the e-commerce server allegedly receives user interfaces from Defendants' RTO system and provides them to the consumer to complete the transaction on the retailer's site. | ¶122 | col. 4:48-51 |
| ...the one or more than one RTO user interface: providing the identifying data corresponding to the good selected... to the RTO system | The RTO user interfaces provided to the consumer are used to transmit data about the selected product to Defendants' back-end RTO system. | ¶122 | col. 6:53-58 |
| ...receiving an indication that the good is transaction-eligible | The interfaces receive a notification from the RTO system indicating whether the selected product is eligible for an RTO transaction. | ¶122 | col. 6:59-60 |
| ...receiving one or more inputs via one of the one or more than one RTO user interface, the one or more inputs providing identifying information of a consumer | The interfaces receive personal information from the consumer needed for the lease application. | ¶122 | col. 6:43-46 |
| ...providing a spending limit and RTO transaction terms via the one or more than one RTO user interface in response to a signal received from the RTO system | The interfaces display a spending limit and lease terms to the consumer, which are determined by and received from the RTO system. | ¶122 | col. 6:47-52 |
Identified Points of Contention
- Scope Questions: A central question may be the construction of "interface embedded within the e-commerce website" (’969 Patent) and completing a transaction "through the e-commerce website" (’611 Patent). The dispute may focus on whether the accused system, which presents Defendants' user interface elements within the retailer's webpage (Compl. p. 44), meets the claimed level of integration, or if it functions more like a framed, separate application that would not be considered truly "embedded" or "through" the retailer's site.
- Technical Questions: For the ’611 Patent, a key technical question will likely concern the data flow. Claim 16 requires the "e-commerce server" to "receive from a RTO system... a plurality of RTO user interfaces." The complaint alleges this occurs (Compl. ¶122). The infringement analysis may turn on evidence showing whether the retailer's e-commerce server acts as an intermediary that receives and provides these interfaces, or if the consumer's browser communicates directly with Defendants' RTO system to render the interfaces, potentially bypassing a required step at the e-commerce server.
V. Key Claim Terms for Construction
The Term: "unified transaction screen" (from ’969 Patent, Claim 1)
- Context and Importance: This term is central to the claimed benefit of a seamless user experience. Its definition will be critical to determining whether the accused system, which keeps the user on the retailer’s domain but presents a third-party application interface, infringes. Practitioners may focus on whether "unified" implies a single, homogenous technical and visual entity or merely a functional experience where the user is not redirected to a new URL.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The patent specification describes the invention as overcoming the problem of forcing consumers to "leave the e-commerce website" (Compl. ¶40). This suggests a functional definition, where any implementation that avoids a URL redirect could be considered "unified." The complaint highlights Defendants’ own marketing of a "frictionless experience" where "customers can complete their transaction without leaving your site" as evidence of this functionality (Compl. ¶39).
- Evidence for a Narrower Interpretation: The patent figures, such as Figure 39 of the related ’682 Patent, depict an interface that "combines certain visual elements of the host website (e.g., 'Electronics Superstore' order summary interface) with content of the RTO financial services entity (e.g., 'FlexShopper' header...)" (Compl. ¶34). This could support a narrower construction requiring a tangible combination of visual elements from both the retailer and the RTO provider on the same screen.
The Term: "RTO plug-in integrated with the e-commerce application" (from ’611 Patent, Claim 16 and ’682 Patent, Claim 1)
- Context and Importance: The relationship between the "plug-in" and the retailer's "e-commerce application" is a core architectural element of the claimed system. The dispute will likely center on the required level of technical integration.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification suggests the plug-in could be made available through online application stores for platforms like "MAGENTO, VOLUSION, and SHOPIFY" (’682 Patent, col. 4:60-65). This context may support a broader definition where a "plug-in" can be a standard third-party app or extension that communicates with the platform via APIs, which aligns with Defendants’ alleged use of "Pre-built Shopping Cart Plugins" and a "Robust API" (Compl. ¶93).
- Evidence for a Narrower Interpretation: The term "plug-in" itself may imply a component that is loaded and executed directly within the memory space or runtime environment of the host "e-commerce application," rather than a separate service that merely communicates with it over a network. A defendant could argue that a system based purely on API calls between distinct servers does not feature an "integrated plug-in" in the manner described.
VI. Other Allegations
Indirect Infringement
The complaint alleges Defendants induce infringement by providing their e-commerce partners with the accused plug-ins, APIs, and technical documentation, allegedly knowing these tools will be used to build infringing websites (Compl. ¶¶104-107). It also alleges contributory infringement, stating the accused products are a material part of the invention and not staple articles of commerce, as their specific design is for integrating RTO functionality into websites (Compl. ¶¶108-109).
Willful Infringement
The complaint alleges willful infringement based on several grounds for pre-suit knowledge. It alleges Defendants' CEO was directly informed of the patents and infringement during acquisition talks in September 2022 (Compl. ¶¶60-63). It further alleges knowledge through Defendants' subsidiary's own patent prosecution, where the Asserted Patents were cited as prior art against its applications (Compl. ¶¶75-83). The complaint also alleges continued infringement after the filing of the original complaint (Compl. ¶102).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of technical interpretation: how will the term "embedded within the e-commerce website" be construed? The case will likely turn on whether presenting a third-party application in a frame on a retailer's webpage constitutes the "unified transaction screen" required by the ’969 patent, or if a deeper level of software and visual integration is required.
- A key evidentiary question will be one of architectural function: for the ’611 and ’682 patents, what evidence will demonstrate that the retailer's "e-commerce server" is the entity that "receives" user interfaces from the RTO system and "provides" them to the consumer, as opposed to a model where the consumer's browser fetches those interfaces directly from the RTO provider?
- A central factual dispute will concern willfulness: the litigation will likely focus heavily on the substance of the September 2022 discussions between the parties and Defendants' internal awareness of its subsidiary's patent prosecution history to determine if Defendants acted with the knowledge and intent required for enhanced damages.