Consolidated Transaction Processing LLC v. Ace Hardware Corp

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Consolidated Transaction Processing LLC (Nevada)
  • Defendant: Ace Hardware Corporation (Delaware)
  • Plaintiff’s Counsel: Beaty Legal PLLC
• Case Identification: 4:23-cv-01072, E.D. Tex., 12/06/2023
• Venue Allegations: Venue is alleged to be proper based on Defendant maintaining established places of business, specifically retail store locations, within the Eastern District of Texas.
• Core Dispute: Plaintiff alleges that Defendant’s e-commerce website and associated systems infringe two patents related to dynamically generating user-specific product offerings by integrating product data from multiple sources with customer-specific data.
• Technical Context: The patents address e-commerce technology from the late 1990s that sought to create personalized online shopping experiences by moving beyond static, one-size-fits-all digital catalogs.
• Key Procedural History: The complaint notes that the patents-in-suit descend from a patent application filed in 1999. No other significant procedural events, such as prior litigation or administrative challenges, are mentioned in the complaint.

Case Timeline

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

U.S. Patent No. 8,712,846 - "Sending Targeted Product Offerings Based on Personal Information," Issued Apr. 29, 2014

The Invention Explained

• Problem Addressed: The patent describes prior art e-commerce systems as being constrained by the limitations of traditional retail, such as operating from a single company's inventory and using the internet as a simple advertising medium akin to a digital catalog, which resulted in high costs and limited product selection (ʼ846 Patent, col. 2:63-3:14).
• The Patented Solution: The invention proposes a centralized system that receives product data from a "plurality of distributors" and combines it with "customer data," including personal and location information, to dynamically generate and display user-specific product offerings or customized catalogs (ʼ846 Patent, Abstract; col. 3:44-52). For example, the system could display a catalog with academic pricing for a student or one with corporate discounts for a business person, effectively creating multiple, distinct shopping experiences from a single backend system (ʼ846 Patent, col. 6:6-16).
• Technical Importance: This approach represented a shift from static, one-to-many e-commerce to a dynamic, personalized model capable of aggregating products from multiple sources, which could enable more competitive pricing and a wider selection of goods (ʼ846 Patent, col. 9:23-43).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 3 and 4 (Compl. ¶32).
• Independent Claim 1 recites a computer-implemented method comprising the key steps of:
  • Receiving product data for a plurality of products from a plurality of distributors.
  • Receiving customer data, including location information derived from an IP address.
  • Generating, based at least in part on the customer data, user-specific product offerings.
  • Sending automated messages containing the user-specific product offerings to the customers.

U.S. Patent No. 8,396,743 - "Sending Targeted Product Offerings Based on Personal Information," Issued Mar. 12, 2013

The Invention Explained

• Problem Addressed: As with its continuation, the ’846 patent, the ’743 patent identifies the limitations of early e-commerce systems that mimicked traditional, inventory-bound retail models and lacked personalization (ʼ743 Patent, col. 2:63-3:14).
• The Patented Solution: The invention describes a method where product data from multiple distributors and customer data (including location information from an IP address) are processed to generate a "user-specific product offering" (ʼ743 Patent, Abstract; col. 12:36-54). The system is designed to create customized portfolios and targeted advertising based on individual purchase patterns or other personal data (ʼ743 Patent, col. 5:7-20).
• Technical Importance: The technology aimed to improve the "computerized backbone" of e-commerce by enabling a merchant to use aggregated product and customer data to deliver a more personalized and expansive shopping experience than was possible with static catalogs from single distributors (Compl. ¶20).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claim 4 (Compl. ¶37).
• Independent Claim 1 recites a computer-implemented method comprising the key steps of:
  • Receiving product data for a plurality of products from a plurality of distributors.
  • Receiving customer data, including location information derived from an IP address associated with the customer.
  • Generating, based at least in part on personal information concerning a customer location, a user-specific product offering.
  • Sending automated messages containing the user-specific product offering to customers.

III. The Accused Instrumentality

Product Identification

The accused instrumentalities are Defendant's website, https://www.acehardware.com, and the associated servers and backend systems that power it (Compl. ¶9).

Functionality and Market Context

The complaint alleges that the accused systems offer targeted products over a communications network by performing a method that includes receiving product data from multiple distributors, receiving personal information from customers, and using that combined data to generate and convey user-specific product offerings via automated messages (Compl. ¶14). The complaint contends that such automation and user-specific customization are crucial for businesses to distinguish themselves in the modern online retail market (Compl. ¶22). No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

The complaint references but does not attach claim chart exhibits (Compl. ¶¶32, 37). The analysis below is based on the narrative infringement theory presented in the complaint's body.

’846 Patent Infringement Allegations

’743 Patent Infringement Allegations

• Identified Points of Contention:
  • Scope Questions: A central question may be whether Defendant's business model, which primarily presents itself as a single retailer, meets the "plurality of distributors" limitation. The analysis could depend on whether Ace Hardware acts as a first-party seller for products it sources from various suppliers, or as a marketplace platform for third-party sellers. The complaint alleges the latter model without providing specific details of Defendant's operations (Compl. ¶14).
  • Technical Questions: The complaint alleges infringement based on the use of "personal information" (Compl. ¶14), while the claims specifically require generating offerings based on "location information derived from an IP address" (e.g., ’846 Patent, cl. 1). A potential point of dispute is whether Plaintiff can provide evidence that Defendant's system specifically uses IP-address-derived location data for this purpose, as opposed to other forms of personal or location data (e.g., user-selected store location).

V. Key Claim Terms for Construction

• The Term: "plurality of distributors"

  • Context and Importance: This term appears in the first limitation of both asserted independent claims and is foundational to the patent's described departure from single-retailer e-commerce. The viability of the infringement claim may hinge on whether Defendant’s system, as a primarily first-party retailer, can be said to receive data from and select among a "plurality of distributors" in the manner contemplated by the patent.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification does not provide an explicit definition of "distributor," which may leave room to argue it includes any of the various upstream suppliers a large retailer like Ace Hardware might use.
    • Evidence for a Narrower Interpretation: The specification describes a "Distributor Selection sub-system" that polls different distributors for availability and price to "fill the order" (ʼ846 Patent, col. 9:8-23). Figure 5 depicts distinct distributors being selected from, which suggests they are independent entities involved in the fulfillment of a customer's order, not merely suppliers to the primary retailer (ʼ846 Patent, Fig. 5).

• The Term: "user-specific product offering"

  • Context and Importance: This term defines the output of the claimed method. Its construction will be critical to determining what type of website personalization infringes. Practitioners may focus on this term because the parties may dispute whether displaying locally available inventory or pricing constitutes a "user-specific product offering," or if the term requires a more targeted promotion, discount, or customized message.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification gives examples of generating different catalogs for different user types, such as a student seeing academic pricing while a business user sees corporate discounts, suggesting that a tailored catalog view qualifies as an "offering" (ʼ846 Patent, col. 6:6-16).
    • Evidence for a Narrower Interpretation: Dependent claims in both patents recite that the "offering" includes items like "a coupon, an electronic coupon, a promotional offer, an exclusive sale, an incentive, [or] a rebate" (e.g., ’846 Patent, cl. 2). A defendant may argue this list informs a narrower construction of the term in the independent claim, requiring more than simply filtering product listings.

VI. Other Allegations

• Indirect Infringement: The complaint does not plead specific facts to support claims of induced or contributory infringement. The allegations are focused on direct infringement by the Defendant (Compl. ¶¶32, 37).
• Willful Infringement: The complaint does not include specific factual allegations to support willfulness, such as pre-suit knowledge of the patents or egregious conduct. The prayer for relief includes a request for a declaration that the case is exceptional under 35 U.S.C. § 285, but the basis for this request is not detailed in the body of the complaint (Compl. ¶C, p. 9).

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

• A core issue will be one of definitional scope: can the term "plurality of distributors", which the patent contrasts with single-retailer models, be construed to read on the operations of a large, first-party retailer that sources its inventory from numerous suppliers? The outcome may depend on whether Ace Hardware's website functions as a multi-vendor marketplace or a traditional online store.
• A key evidentiary question will be one of technical proof: what evidence will be presented to show that the accused website performs the specific functions recited in the claims, particularly the use of "location information derived from an IP address" to "generat[e]... a user-specific product offering"? The complaint makes a high-level allegation of this functionality, but demonstrating the precise mechanism will be critical.