DCT
4:22-cv-01040
Sqwin SA v. Walmart Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Sqwin, SA (Swiss Confederation)
- Defendant: Walmart Inc. (Delaware)
- Plaintiff’s Counsel: Renner Otto
- Case Identification: 4:22-cv-01040, E.D. Tex., 12/11/2022
- Venue Allegations: Plaintiff alleges venue is proper because Walmart is subject to personal jurisdiction, has committed alleged acts of infringement, and maintains a regular and established place of business within the Eastern District of Texas, including multiple Supercenter store locations.
- Core Dispute: Plaintiff alleges that Defendant’s Walmart Pay mobile payment system infringes three patents related to methods and systems for conducting secure online transactions.
- Technical Context: The technology concerns systems for securely authenticating and processing financial transactions initiated from a customer's mobile device at a physical point-of-sale terminal.
- Key Procedural History: The complaint does not specify any prior litigation, licensing history, or administrative proceedings concerning the patents-in-suit. The three asserted patents are part of the same patent family, stemming from a common priority application.
Case Timeline
| Date | Event |
|---|---|
| 2012-12-21 | Priority Date for '176, '572, and '168 Patents |
| 2018-08-07 | U.S. Patent 10,043,176 Issued |
| 2020-04-14 | U.S. Patent 10,621,572 Issued |
| 2021-12-07 | U.S. Patent 11,195,168 Issued |
| 2022-12-11 | Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 11,195,168 - "Online transaction system," issued December 7, 2021
The Invention Explained
- Problem Addressed: The patent family seeks to address the need to securely establish the identity of a customer making a mobile payment to prevent unauthorized use and fraud (e.g., ’176 Patent, col. 1:15-18).
- The Patented Solution: The invention proposes a dual-channel authentication method. A point-of-sale (POS) system sends transaction details and a unique, one-time code to a payment system via a first network path. In parallel, the customer's mobile device sends the same unique code along with account information to the payment system via a second, separate network path. The payment system confirms the transaction only if the unique codes from both paths match, thereby linking the specific POS terminal to the specific customer's device for that single transaction (’168 Patent, Abstract; ’176 Patent, col. 2:27-59).
- Technical Importance: This architecture enhances security by verifying two independent information streams—one from the merchant and one from the customer—without requiring the customer's device to directly connect to the potentially insecure local network of the merchant for anything beyond receiving the initial code (’176 Patent, col. 2:27-36).
Key Claims at a Glance
- The complaint asserts independent claim 1 (Compl. ¶19, 21).
- Claim 1 (Method) requires the steps of:
- obtaining a unique one-time digital code that identifies the financial transaction;
- communicating the unique digital code from the POS system to the mobile device, where the mobile device connects to a network using the code as a one-time password;
- generating transaction data by the POS system;
- transmitting the transaction data and unique code from the POS system over a first digital network path;
- transmitting the unique code and user account information from the mobile device over a second digital network path;
- receiving an indication of whether the unique codes from the first and second paths match; and
- offering clearance for the transaction when the codes match.
- The complaint reserves the right to assert additional claims (Compl. ¶20).
U.S. Patent No. 10,621,572 - "Online transaction system," issued April 14, 2020
The Invention Explained
- Problem Addressed: As with the related patents, the technology aims to improve the security and reliability of mobile payment systems (’572 Patent, col. 1:12-23).
- The Patented Solution: This patent claims a system comprising a POS system, a mobile device application, and an associated wireless network. The solution builds on the dual-channel concept by adding another layer of authentication: a "mobile identifying code" (defined as an IMSI, IMEI, or MAC address). This device-specific hardware identifier is transmitted along with the unique transaction code, creating a stronger link between the transaction and the physical device being used (’572 Patent, Abstract, Claim 12).
- Technical Importance: By incorporating persistent, device-level hardware identifiers (e.g., MAC address) into the transaction flow, the system can tie a payment authorization not just to a piece of information (the one-time code) but to a specific, unique piece of hardware (’572 Patent, col. 7:25-40).
Key Claims at a Glance
- The complaint asserts independent claim 12 (Compl. ¶24, 26).
- Claim 12 (System) requires:
- a POS system configured to generate a unique digital code and transaction data;
- an application on a mobile device configured to receive the unique code;
- a wireless network where the mobile device uses the unique code as a one-time password to connect, and the network receives a "mobile identifying code" (IMSI, IMEI, or MAC address) from the device;
- the POS system configured to transmit transaction data, the unique code, and the mobile/network identifying codes to a payment system via a first path;
- the mobile application configured to transmit the unique code, the mobile/network identifying codes, and account information to the payment system via a second path; and
- the POS system configured to receive an indication of a match from the payment system and offer clearance.
- The complaint reserves the right to assert additional claims (Compl. ¶25).
U.S. Patent No. 10,043,176 - "Online transaction system," issued August 7, 2018
- Patent Identification: U.S. Patent No. 10043176, "Online transaction system," issued August 7, 2018 (Compl. ¶27).
- Technology Synopsis: The ’176 Patent claims a method for performing a financial transaction where a mobile device connects to a wireless network associated with a POS system using a unique, one-time digital code as a password. The method requires forwarding a device-specific "mobile identifying code" (e.g., IMSI, IMEI, or MAC address) from the mobile device to the network. Both the POS and mobile device transmit separate data packages to a payment system for matching and transaction authorization (’176 Patent, Abstract, Claim 1).
- Asserted Claims: Independent Claim 1 is asserted (Compl. ¶29, 31).
- Accused Features: The complaint alleges that the Walmart Pay system, which utilizes a mobile app, a POS terminal, and a back-end payment system, infringes the claimed method (Compl. ¶13, 29, 31).
III. The Accused Instrumentality
Product Identification
- The accused instrumentality is the "Walmart Pay" mobile payment system, which is a feature integrated within the Walmart mobile application (Compl. ¶11, 13).
Functionality and Market Context
- The complaint alleges the system operates as follows: a Walmart POS terminal generates and displays a unique QR code for a transaction. A customer uses the Walmart app on their mobile device to scan this QR code, which contains a "unique digital code." The app then transmits this code and the user's "Walmart Pay account identity" to the Walmart payment system. Concurrently, the POS terminal separately transmits the transaction information and the same unique digital code to the payment system. The transaction is completed when the payment system matches the codes from both sources (Compl. ¶13). An image in the complaint depicts a user scanning a QR code on a point-of-sale screen to make a payment (Compl. p. 5). The complaint alleges that Walmart derives financial benefits from Walmart Pay (Compl. ¶16).
IV. Analysis of Infringement Allegations
The complaint references exhibits with detailed infringement allegations that were not filed with the public document; the following analysis is based on the narrative allegations in the complaint body.
'168 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| obtaining a unique one-time digital code that identifies the financial transaction; | The Walmart POS system generates a unique digital code included in a QR code displayed on the checkout screen. | ¶13 | col. 2:41-44 |
| communicating... the unique digital code... wherein the mobile device connects to a network using the unique digital code... as a one-time password...; | The POS system displays the QR code, which the customer scans with the Walmart app. The complaint alleges the mobile device "connects to a network using the unique digital code." | ¶13 | col. 2:13-16 |
| transmitting the transaction data, the unique digital code, and information associated with the POS system from the POS system a first digital network path; | The POS system "separately transmits the transaction information, including the unique digital code, to the Walmart payment system." | ¶13 | col. 2:47-50 |
| transmitting the unique digital code and account information associated with a user of the mobile device from the mobile device via a second digital network path; | The Walmart app transmits "the unique digital code and her Walmart Pay account identity" from the mobile device. | ¶13 | col. 2:50-53 |
| receiving an indication as to whether the unique digital code... match the unique digital code...; and offering clearance... when the code... match... | The Walmart payment system "uses the unique digital codes to match the payment information and transaction information and complete the transaction." | ¶13 | col. 2:53-62 |
- Identified Points of Contention:
- Scope Questions: A primary issue may be whether scanning a QR code to transfer a data string via an existing internet connection meets the claim limitation of "connects to a network using the unique digital code as a one-time password." The patent specification appears to describe using the code to gain access to a network itself (e.g., a local WLAN), which may differ from the operation of the accused system (’176 Patent, col. 8:8-12).
- Technical Questions: The complaint does not specify the mechanism by which the mobile device "connects to a network using the unique digital code." The central dispute may turn on evidence demonstrating whether the code functions as a network credential (as claimed) or merely as an application-layer transaction identifier.
'572 Patent Infringement Allegations
| Claim Element (from Independent Claim 12) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| a point-of-sale (POS) system configured to generate a unique digital code that identifies a financial transaction... | The Walmart POS system generates a unique QR code containing a digital code for the transaction. | ¶13 | col. 11:20-25 |
| an application in a mobile device... configured to receive the unique digital code from the POS system; | The Walmart app on a customer's mobile device is used to scan the QR code displayed on the POS screen. | ¶13, p. 5 | col. 11:26-29 |
| a wireless network... wherein the mobile device uses the unique digital code as a password to connect... the wireless network configured to receive a mobile identifying code that identifies the mobile device, the mobile identifying code including at least one of an... (IMSI)... (IMEI)... and a... (MAC) address... | The complaint alleges a connection using the code but does not specify that an IMSI, IMEI, or MAC address is received by the network as part of that connection process. | ¶13 | col. 11:30-43 |
| wherein the POS system is configured to transmit the transaction data, the unique digital code, the mobile identifying code, the network identifying code... to a payment system via a first digital network path; | The complaint alleges the POS system transmits transaction data and the unique code, but does not allege it transmits a mobile or network identifying code. | ¶13 | col. 12:8-14 |
| wherein the application... is configured to transmit the unique digital code, the mobile identifying code, the network identifying code, and account information... to the payment system via a second digital network path; | The complaint alleges the app transmits the unique code and "Walmart Pay account identity," but does not specify if this identity includes the claimed device-specific codes (IMSI, IMEI, MAC). | ¶13 | col. 11:51-57 |
- Identified Points of Contention:
- Scope Questions: Does the alleged "Walmart Pay account identity" (Compl. ¶13) satisfy the specific definition of "mobile identifying code," which the claim limits to an IMSI, IMEI, or MAC address? The complaint does not provide facts to support this equivalence.
- Technical Questions: What evidence demonstrates that the accused system transmits, receives, and matches the specific device and network identifiers required by claim 12, beyond the unique transaction code? The complaint's description focuses on the transaction code and a general "account identity," raising questions about whether the other claimed codes are present in the accused system's data flows.
V. Key Claim Terms for Construction
For the ’168 and ’572 Patents
- The Term: "connects to a network using the unique digital code as a password"
- Context and Importance: This phrase is central to the infringement analysis for all asserted patents. Its construction will likely determine whether the accused system's architecture falls within the scope of the claims. Practitioners may focus on this term because if it is construed to require gaining access to a network (like Wi-Fi), the plaintiff's case may face challenges, whereas a broader construction covering an application-layer session could favor the plaintiff.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The patent specification mentions using services like a "social network" or "webmail service" for the second data path (’176 Patent, Fig. 1), which are application-layer concepts and could suggest the term "connects" is not limited to the network layer.
- Evidence for a Narrower Interpretation: The specification repeatedly refers to connecting to a "wireless local area network" (WLAN) and describes the code as a "password for enabling" network access (’176 Patent, col. 8:10-12). Language like "automatic enabling of network access" also suggests the code functions as a credential to grant a network connection, not just identify an application session (’176 Patent, col. 2:63-64).
For the ’572 and ’176 Patents
- The Term: "mobile identifying code including at least one of an international mobile subscriber identity (IMSI) number, an international mobile equipment identity (IMEI) number, and a media access control (MAC) address"
- Context and Importance: The infringement reading for the ’572 and ’176 Patents depends on whether the "Walmart Pay account identity" allegedly transmitted by the accused app qualifies as one of the specific, enumerated identifiers.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification of the parent ’176 patent occasionally uses more general phrasing like "or any other unique identification number of the mobile device," which could be argued to encompass other types of identifiers (’176 Patent, col. 7:24-26).
- Evidence for a Narrower Interpretation: The claim language itself provides the strongest evidence for a narrow construction. It provides an explicit, closed list of three specific, technical, hardware-level identifiers. Established principles of claim construction suggest that such explicit enumeration is intended to be limiting and does not extend to different classes of identifiers, such as a user-generated account name or email address.
VI. Other Allegations
- Indirect Infringement: The complaint includes conclusory allegations of indirect infringement for all three patents but does not plead specific facts to support the knowledge and intent elements, such as identifying instructions in user manuals or specific advertising that would encourage infringing acts (Compl. ¶33, 41, 49).
- Willful Infringement: Willfulness is alleged for all three patents based on "information and belief" that Walmart possessed "actual or constructive knowledge" of the patents (Compl. ¶35, 43, 51). The complaint does not specify the basis for this alleged knowledge (e.g., a pre-suit notice letter). The allegation regarding the '168 Patent appears to contain a typographical error, referencing knowledge of the '572 Patent within the count for infringement of the '168 Patent (Compl. ¶35).
VII. Analyst’s Conclusion: Key Questions for the Case
The resolution of this dispute will likely depend on the court's interpretation of key claim terms and the factual evidence presented regarding the technical operation of the Walmart Pay system. The central questions raised by the complaint are:
- A core issue will be one of definitional scope: can the claim phrase "connects to a network using the unique digital code as a password," which the patent specification links to gaining WLAN access, be construed to cover the alleged application-layer data exchange in the Walmart Pay system, where a user scans a QR code over an existing internet connection?
- A key evidentiary question will be one of technical proof: does the "Walmart Pay account identity" as alleged in the complaint constitute a "mobile identifying code" as narrowly defined in the asserted claims of the '572 and '176 Patents to include an IMSI, IMEI, or MAC address, or is there a fundamental mismatch between the claim requirements and the accused system's functionality?