DCT
2:25-cv-01202
Cardtek Intl Ltd v. Target Corp
Key Events
Complaint
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: CardTek International, Ltd. a/k/a Cardtek International, Inc. (Delaware)
- Defendant: Target Corporation (Minnesota)
- Plaintiff’s Counsel: Hicks Johnson PLLC; Cadwell Clonts Reeder & Thomas LLP; The Heartfield Law Firm
- Case Identification: 2:25-cv-01202, E.D. Tex., 12/09/2025
- Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Texas because Target maintains a permanent and continuous presence, operates retail stores, and has allegedly committed acts of infringement within the district.
- Core Dispute: Plaintiff alleges that Defendant’s Target App and associated point-of-sale systems infringe three patents related to systems and methods for converging multiple, independent payment sources into a single point-of-sale transaction.
- Technical Context: The technology at issue addresses the consolidation of different payment and benefit sources, such as credit cards and loyalty rewards, into a single, streamlined transaction, a feature of increasing importance in mobile retail applications.
- Key Procedural History: The complaint alleges that Plaintiff provided Defendant with actual knowledge of the patents-in-suit via a letter dated September 18, 2020, a fact that may be central to the allegations of willful infringement.
Case Timeline
| Date | Event |
|---|---|
| 2002-06-20 | Priority Date for ’593, ’770, and ’818 Patents |
| 2006-05-02 | U.S. Patent No. 7,039,593 Issued |
| 2013-12-03 | U.S. Patent No. 8,600,770 Issued |
| 2020-04-21 | U.S. Patent No. 10,628,818 Issued |
| 2020-09-18 | Plaintiff allegedly sent notice letter to Defendant |
| 2025-12-09 | Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 7,039,593 - "Payment Convergence System and Method", issued May 2, 2006
The Invention Explained
- Problem Addressed: The patent describes the inefficiency of prior art "multi-application" smart cards, where different payment accounts (e.g., a credit card and a health insurance plan on the same card) were kept separate. A merchant or provider had to access each application "horizontally" in separate steps to complete a single transaction involving multiple payors, a process described as requiring considerable time and expense ('593 Patent, col. 2:38-54).
- The Patented Solution: The invention proposes a method to "vertically" combine or converge information from multiple independent payment sources into a single payment vehicle for a single transaction ('593 Patent, col. 2:28-34). At a point-of-sale (POS) terminal, "convergence information" stored on a "portable storage medium" is used to process the transaction by determining the order and amount to be paid from a primary source and a secondary source, all within a single process ('593 Patent, Abstract; col. 4:35-52).
- Technical Importance: This approach was designed to streamline complex, multi-payor transactions by automating the allocation of payments between different sources at the point of service, thereby reducing manual processing ('593 Patent, col. 4:15-22).
Key Claims at a Glance
- The complaint asserts independent Claim 1 (Compl. ¶19).
- Essential elements of Claim 1 include:
- A method of payment for a transaction comprising the steps of: establishing a transaction total;
- storing convergence information on a portable storage medium, said convergence information including data about a plurality of payment sources and processing instructions including order information for utilization of said sources;
- obtaining said convergence information from the storage medium at a point of sale terminal;
- processing the order information by the point of sale terminal to determine a primary payment source to be utilized first and at least one secondary payment source to be utilized after;
- utilizing the convergence information to communicate electronically with the primary and secondary payment sources to secure payment.
- The complaint states that Target has infringed "one or more claims" of the patent, reserving the right to assert additional claims (Compl. ¶17).
U.S. Patent No. 8,600,770 - "Payment Convergence System and Method", issued December 3, 2013
The Invention Explained
- Problem Addressed: As a continuation of the application leading to the ’593 Patent, this patent addresses the same technical problem: the cumbersome, sequential, and independent processing of separate payment applications stored on a single card ('770 Patent, col. 2:25-58).
- The Patented Solution: The patent claims a system, rather than a method, for payment convergence. The system comprises a "portable storage medium" that stores information for primary and secondary payment sources as well as "convergence information." This convergence information contains instructions that are readable by a POS terminal to determine the "appropriate combination and order of utilization" of the payment sources to create a "single payment vehicle" for a transaction ('770 Patent, col. 12:1-21 (Claim 1)). The system enables electronic communication with the payment sources through the POS terminal ('770 Patent, col. 12:13-16).
- Technical Importance: The technology provides a systemic framework for integrating disparate financial accounts at the point of sale, aiming to reduce transaction friction and administrative burden ('770 Patent, col. 4:10-14).
Key Claims at a Glance
- The complaint asserts at least Claim 7, and references a claim chart for independent Claim 1 (Compl. ¶38).
- Essential elements of independent Claim 1 include:
- A payment convergence system comprising: a portable storage medium;
- primary payment source information stored on the storage medium;
- at least one secondary payment source information stored on the storage medium; and
- convergence information stored on the storage medium, comprising instructions readable by a point of sale terminal for determining an appropriate combination and order of utilization of the payment sources to provide a single payment vehicle.
- The complaint alleges infringement of "one or more claims," reserving the right to assert others (Compl. ¶36).
U.S. Patent No. 10,628,818 - "Payment Convergence System and Method", issued April 21, 2020
- Patent Identification: U.S. Patent No. 10628818, "Payment Convergence System and Method", issued April 21, 2020 (Compl. ¶49).
- Technology Synopsis: Continuing the same patent family, the ’818 Patent claims a payment convergence system comprising a POS terminal and a processor configured to execute a "payment protocol." The protocol uses "convergence information" provided to the terminal to determine the combination and order for using primary and secondary payment sources for a transaction, with this determination being made prior to completing the transaction (’818 Patent, col. 12:4-14 (Claim 1)).
- Asserted Claims: The complaint asserts at least Claim 7, with an accompanying claim chart for independent Claim 1 (Compl. ¶54).
- Accused Features: The accused features for this patent are the Target App and POS terminals, which allegedly allow a customer to combine rewards or "saved deals" as a primary payment source with funds from a credit card, debit card, or gift card as a secondary payment source in a single transaction (Compl. ¶55).
III. The Accused Instrumentality
- Product Identification: The accused instrumentalities are Target's point-of-sale terminals, the Target Application ("Target App"), and associated backend servers (Compl. ¶18).
- Functionality and Market Context: The complaint alleges that the Target App, particularly its "Wallet" feature, allows customers to pay for purchases by combining multiple payment sources (Compl. ¶7, ¶21). At checkout, a customer presents a barcode or QR code generated by the app to the POS terminal (Compl. ¶22). The system is alleged to then automatically process the transaction by first applying eligible rewards and "saved deals" (identified as the "primary payment source") to qualifying items and then charging any remaining balance to a user-provided payment source such as a credit or debit card (the "secondary payment source") (Compl. ¶23). The complaint alleges this entire process of converging payment sources occurs at the point of sale after the total transaction amount is determined (Compl. ¶24).
IV. Analysis of Infringement Allegations
No probative visual evidence provided in complaint.
’593 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| storing convergence information on a portable storage medium...including data about a plurality of payment sources | The Target App, running on a customer's mobile device, stores information about multiple payment sources, such as Target Circle rewards and a user's credit or debit card. | ¶24 | col. 4:55-59 |
| obtaining said convergence information from said storage medium at a point of sale terminal | A customer presents a barcode or QR code generated by the Target App at Target's POS terminal to initiate payment. | ¶22 | col. 10:25-29 |
| processing of said order information by said point of sale terminal to determine...a primary payment source...and at least one secondary payment source | The POS system processes the information from the app to identify rewards and "saved deals" as the primary source and the user-provided card as the secondary source. | ¶23 | col. 4:48-52 |
| utilizing of said convergence information to communicate electronically...to secure payment of said...payment amount | The app and POS system automatically process payment information from both sources to consummate the transaction. | ¶22 | col. 12:1-6 |
’770 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| a portable storage medium | A customer's mobile device running the Target App, which the complaint alleges functions as a "portable storage medium." | ¶10 | col. 12:1 |
| primary payment source information stored on said storage medium | Information regarding Target Circle rewards and "saved deals" available for redemption is stored within the Target App. | ¶23, ¶39 | col. 6:52-56 |
| at least one secondary payment source information stored on said storage medium | Payment information for a user's credit card, debit card, or gift cards is stored within the Target App's Wallet feature. | ¶22, ¶39 | col. 6:52-56 |
| convergence information...comprising instructions readable by a point of sale terminal for determining appropriate combination and order of utilization | The Target App contains logic that generates a barcode/QR code representing instructions for the POS terminal to apply rewards first and then charge the remaining balance to the stored card. | ¶24 | col. 4:44-53 |
- Identified Points of Contention:
- Scope Questions: A central dispute may concern whether a modern smartphone running a software application falls within the scope of the term "portable storage medium". The patents' specifications heavily feature "Smart Card" technology, which possessed different technical characteristics and was prevalent when the priority application was filed in 2002.
- Technical Questions: The analysis may turn on whether applying store-issued rewards or discounts before charging a credit card constitutes the "convergence" of multiple independent "payment sources" as taught by the patents. An argument could be made that the patents envisioned the combination of distinct third-party financial accounts (e.g., insurance and a line of credit), not the application of a retailer's own loyalty benefits.
V. Key Claim Terms for Construction
- The Term: "portable storage medium"
- Context and Importance: This term's construction is foundational to the infringement case. Plaintiff's theory requires this term to be broad enough to read on a smartphone running the Target App. The patents' focus on "Smart Cards" from the early 2000s creates a potential point of dispute.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The claims use the general term "portable storage medium" without limiting it to a "Smart Card." The specification also contemplates that the invention is not limited to Smart Cards, referencing an "other data storage medium" ('593 Patent, col. 5:46-47).
- Evidence for a Narrower Interpretation: The Background and Detailed Description sections of the patents repeatedly and almost exclusively use "Smart Card" as the embodiment of the invention, which may suggest that the scope of the claims should be interpreted in light of this specific context ('593 Patent, col. 1:21-col. 2:65).
- The Term: "payment source"
- Context and Importance: The definition of this term is critical for determining whether the accused functionality performs the claimed "convergence." Practitioners may focus on whether store-issued rewards or discounts, which may not represent a standalone financial account, qualify as a "primary payment source."
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The patents describe third-party payment information as including "loyalty credit (i.e. credit earned for customer loyalty, similar to frequent flyer program)" ('593 Patent, col. 6:47-49), which could support Plaintiff's allegation that Target Circle rewards are a payment source.
- Evidence for a Narrower Interpretation: The primary examples provided in the specification involve combining distinct, third-party financial instruments like a dental insurance plan, a healthcare line of credit, and a patient's credit card ('593 Patent, Fig. 2; col. 6:33-51). This could support an interpretation that a "payment source" must be an independent financial account, not an internal discount mechanism.
VI. Other Allegations
- Indirect Infringement: The complaint alleges inducement by asserting that Target provides the Target App and associated instructions that encourage and enable customers to perform the allegedly infringing acts of combining payment sources (Compl. ¶28, ¶43, ¶59).
- Willful Infringement: Willfulness allegations are based on Target's alleged actual knowledge of the patents-in-suit as of its receipt of a letter from Cardtek on September 18, 2020. The complaint alleges that Target's continued conduct after this date constitutes willful infringement (Compl. ¶31, ¶46, ¶62).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of definitional scope: can the term "portable storage medium", rooted in the patents' explicit context of early-2000s "Smart Card" technology, be construed to cover a modern smartphone executing a software application?
- A key question will be one of technical and functional scope: does the accused system's process of applying proprietary loyalty rewards before charging a conventional credit card constitute the "convergence" of multiple independent "payment sources" as claimed, or is there a fundamental mismatch between this functionality and the patents' teachings, which focus on combining distinct third-party financial accounts?
- An evidentiary question regarding damages will be whether the September 18, 2020 letter provided notice that was sufficiently specific to support a finding of willful infringement for Defendant’s subsequent conduct.