DCT

9:25-cv-00120

Secure Mobile Transactions LLC v. Prosperity Bank

Log In

I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 9:25-cv-00120, E.D. Tex., 04/08/2025
  • Venue Allegations: Venue is alleged to be proper based on Defendant Prosperity Bank having regular and established places of business within the Eastern District of Texas, and due to acts of infringement allegedly occurring within the district through its customers' use of mobile payment systems.
  • Core Dispute: Plaintiff alleges that Defendant’s support for mobile payment systems that use tokenization, such as Apple Pay, infringes patents related to methods for securely conducting transactions at a point-of-sale terminal without transmitting financial account numbers.
  • Technical Context: The technology at issue involves replacing a customer's primary account number with a substitute value, or "token," during mobile payment transactions to enhance data security and reduce fraud.
  • Key Procedural History: The complaint notes that the asserted patent family has been cited during the prosecution of other patent applications by companies in the payment industry, but it does not mention any prior litigation, inter partes review proceedings, or specific licensing history concerning the patents-in-suit.

Case Timeline

Date Event
2007-01-03 Earliest Priority Date (’596, ’285, ’647 Patents)
2017-10-17 U.S. Patent No. 9,792,596 Issues
2020-01-20 U.S. Patent No. 10,546,285 Issues
2022-03-29 U.S. Patent No. 11,288,647 Issues
2025-04-08 Complaint Filed

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

U.S. Patent No. 9,792,596 - "Mobile Phone Based Rebate Device for Redemption at a Point of Sale Terminal," issued October 17, 2017

The Invention Explained

  • Problem Addressed: The patent describes a need for a unified system to manage multiple retailer loyalty and reward programs on a mobile device, noting that traditional single-source programs lack scalability and that consumers are often hesitant to provide personal data to numerous different retailers ('596 Patent, col. 1:21-46).
  • The Patented Solution: The invention proposes a system where various loyalty programs are aggregated into a single "virtual account" on a user's mobile device. To redeem an offer, the user presents a "unique code" (not a financial account number) at a point-of-sale (POS) terminal. This code is sent to a remote computer system, including an "accounting server" and an "authentication, authorization and accounting (AAA) server," which validates the transaction against the user's virtual account and authorizes the POS terminal to complete it without the merchant ever handling the user's sensitive financial data ('596 Patent, Abstract; col. 4:24-40).
  • Technical Importance: The technology aimed to provide a trusted, centralized service for consumers to manage rewards and for retailers to engage with mobile customers, enhancing security by separating the transaction process from the underlying financial account numbers ('596 Patent, col. 1:40-46).

Key Claims at a Glance

  • The complaint asserts infringement of at least independent claim 1 ('596 Patent, col. 7:62 - col. 8:31; Compl. ¶23).
  • Essential elements of Claim 1 include:
    • A method of enabling a POS terminal to execute a transaction with a mobile device without the terminal ever receiving a financial account number.
    • Receiving a "unique code and not a financial account number" at a remote computer system from the POS terminal.
    • Routing the unique code to an "accounting server."
    • Determining a "virtual account ID."
    • Routing the transaction to an "AAA server" for authorization.
    • Communicating an authorization message back to the POS terminal, again without communicating the financial account number.
  • The complaint reserves the right to assert additional claims (Compl. ¶23).

U.S. Patent No. 10,546,285 - "Mobile Phone Based Transactions at a Point of Sale Terminal," issued January 28, 2020

The Invention Explained

  • Problem Addressed: The patent addresses the same technical problem as its parent '596 Patent: the challenge of securely and efficiently integrating mobile devices with retailer point-of-sale systems for transactions and loyalty programs ('285 Patent, col. 1:21-46).
  • The Patented Solution: The invention describes a method performed by a POS system. The POS system receives a "mobile transaction specific unique code" from a mobile device, but not a financial account number. This code is routed to a remote computer system, where an "accounting server" uses information within the code to determine a "device specific virtual account ID" and authorize the transaction. The authorization is then sent back to the POS system, completing the transaction without the financial account number ever being exposed to the merchant or transmitted from the POS system ('285 Patent, Abstract; col. 9:20-col. 10:2).
  • Technical Importance: This patent further details a system architecture for secure mobile transactions, emphasizing the use of transaction-specific codes and device-specific virtual identifiers as a means to conduct commerce without exposing sensitive payment credentials ('285 Patent, col. 2:30-50).

Key Claims at a Glance

  • The complaint asserts infringement of at least independent claim 7 ('285 Patent, col. 9:20-col. 10:2; Compl. ¶40).
  • Essential elements of Claim 7 include:
    • A method performed by a POS system to execute a transaction without receiving a financial account number from a mobile device.
    • Receiving a "mobile transaction specific unique code" from the mobile device.
    • Routing this unique code to a "remote computer system."
    • The unique code contains information that enables an "accounting server" to determine a "device specific virtual account ID" sufficient for authorization.
    • Receiving an authorization message back at the POS system, without receiving the financial account number.
  • The complaint reserves the right to assert additional claims (Compl. ¶41).

U.S. Patent No. 11,288,647 - "Radio Device Based Transactions at a Point of Sale Terminal," issued March 29, 2022

Technology Synopsis

Continuing the technology of the parent patents, the ’647 Patent describes a method for conducting secure transactions at a POS terminal using a "radio device" (e.g., a smartphone) ('647 Patent, col. 1:21-46). The system avoids exposing the user's financial account number by instead using a transaction-specific unique code, which is processed by a remote system to authorize the payment against a virtual account ('647 Patent, Abstract).

Asserted Claims

The complaint asserts infringement of at least independent claim 7 (Compl. ¶58).

Accused Features

The accused features are those within Prosperity Bank's card authentication system that enable mobile payments via EMVCo compliant tokens at NFC-enabled merchant terminals (Compl. ¶¶56-57).

III. The Accused Instrumentality

Product Identification

The "Accused Instrumentality" is identified as Prosperity Bank's card authentication system, which facilitates mobile payments using the bank's debit and credit cards with services like Apple Pay (Compl. ¶¶20, 38, 56).

Functionality and Market Context

The complaint alleges that the accused system enables a Prosperity cardholder to add their card to a mobile wallet. When paying at an NFC-enabled POS terminal, the user's mobile device transmits an EMVCo-compliant payment "token" and a cryptogram, rather than the card's actual Primary Account Number (PAN) (Compl. ¶¶20-21). This token is routed through payment networks to a Token Service Provider (TSP), which converts the token back to the PAN and forwards it to Prosperity Bank for authorization. The complaint alleges that the merchant only receives the token, never the PAN, and points to a third-party diagram to illustrate this process (Compl. p. 11, Fig. 6). Prosperity's website promotes this functionality to its customers, as shown in a screenshot stating "Apple Pay™ Now Available" (Compl. p. 8, ¶20).

IV. Analysis of Infringement Allegations

U.S. Patent No. 9,792,596 Infringement Allegations

Claim Element (from Independent Claim 1) Alleged Infringing Functionality Complaint Citation Patent Citation
receiving by a remote computer system from a physical point of sale (POS) terminal, a unique code and not a financial account number... The payment network and/or Token Service Provider (TSP), acting as the "remote computer system," receives a payment token and cryptogram from the merchant's POS system. This token is not the user's actual financial account number. ¶21 col. 7:62-67
routing said unique code without said financial account number to an accounting server; The payment network routes the token to the TSP, which the complaint alleges functions as the claimed "accounting server." ¶21 col. 8:1-2
determining a virtual account ID; The TSP uses the received token to look up the corresponding Primary Account Number (PAN), which the complaint equates to the claimed "virtual account ID." ¶21 col. 8:3-4
routing the transaction to an authentication, authorization and accounting (AAA) server...to authorize said physical point of sale (POS) system... The transaction, now associated with the de-tokenized PAN, is routed to the issuer (Prosperity Bank), which the complaint alleges functions as the "AAA server," for authorization. ¶21 col. 8:5-13
communicating an authorization message for the transaction without also communicating said financial account number to said physical POS terminal... An authorization response is sent back through the network to the merchant's POS terminal; this response contains the token, not the actual financial account number. ¶21 col. 8:14-21
  • Identified Points of Contention:
    • Scope Questions: A central question may be whether the distributed components of the modern payment ecosystem (acquirer, payment network, TSP) can be collectively mapped to the more consolidated "remote computer system" and "accounting server" described in the patent. The defense may argue a mismatch between the patent's architecture and the accused system's.
    • Technical Questions: It may be disputed whether an EMV payment "token," a temporary credential for a payment transaction, is equivalent to the "unique code" associated with a "virtual account" as described in the patent, particularly where the patent's specification focuses heavily on aggregating loyalty and rebate programs rather than executing standard financial payments.

U.S. Patent No. 10,546,285 Infringement Allegations

Claim Element (from Independent Claim 7) Alleged Infringing Functionality Complaint Citation Patent Citation
receiving from the Internet capable mobile device a mobile transaction specific unique code without also receiving any financial account number... The merchant's NFC-enabled POS terminal receives a payment token and cryptogram from the cardholder's smartphone, but not the actual PAN. ¶39 col. 9:26-29
routing to a remote computer system the mobile transaction-specific unique code without also routing any financial account number... The merchant's system, via the acquirer, routes the token and cryptogram to the payment network for processing. ¶39 col. 9:30-33
...said mobile transaction-specific unique code including information enabling an accounting server to determine, from said mobile transaction-specific unique code...a device specific virtual account ID sufficient to authorize... The token contains information (such as a BIN) used by the payment network to identify the correct TSP ("accounting server"), which in turn uses the token to determine the PAN ("virtual account ID") and validate the transaction. The complaint provides a diagram illustrating this token provisioning and transaction flow (Compl. p. 9, Fig. 5; p. 11, Fig. 6). ¶39 col. 9:34-39
receiving an authorization message for the transaction without also receiving any financial account number from said Internet capable mobile device; The POS terminal receives a final authorization message confirming the transaction, which contains the token, not the PAN. ¶39 col. 9:41-10:2
  • Identified Points of Contention:
    • Scope Questions: As this claim is drafted from the perspective of the "physical point of sale (POS) system," a potential issue is whether all claimed steps are performed by a single entity. The complaint alleges that Prosperity and its affiliates operate as a "unitary business venture," which may be an attempt to address potential divided infringement arguments (Compl. ¶7).
    • Technical Questions: The dispute will likely focus on whether the functions of the accused system's TSP align with the functions of the claimed "accounting server," and whether the de-tokenization of a payment token to a PAN is equivalent to determining a "device specific virtual account ID" as the term is used in the patent.

V. Key Claim Terms for Construction

  • The Term: "accounting server"

    • Context and Importance: This term is a critical component of the claimed methods. The complaint's infringement theory depends on mapping this term to the Token Service Provider (TSP) in the accused EMV payment flow. Practitioners may focus on this term because its construction could determine whether the accused system's architecture falls within the claim scope.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The specification describes the server's functions, such as "processes and stores the transactional data for each virtual account ID" and is used to "determine the Virtual Account ID" from a discount code ('285 Patent, col. 4:25-28, col. 7:15-18). Plaintiff may argue that any component performing these core data processing and identification functions meets the definition.
      • Evidence for a Narrower Interpretation: The specification also describes the "accounting server" as managing "loyalty program rules, currencies, and transactional data" ('285 Patent, col. 4:30-33). A defendant may argue this context limits the term to systems for aggregating rewards programs, not purely financial payment processing systems like a TSP. The patent's figures also depict a single, centralized "Accounting Server," which could be used to argue against a distributed-entity interpretation ('285 Patent, Fig. 1).

  • The Term: "financial account number"

    • Context and Importance: The central premise of the invention is avoiding the transmission of this number to the POS terminal. The infringement allegation hinges on the idea that the EMV token used in the accused system is not a "financial account number." Its definition is therefore dispositive.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The patents do not appear to provide an explicit definition, suggesting the term should be given its plain and ordinary meaning, i.e., the Primary Account Number (PAN) printed on a physical card.
      • Evidence for a Narrower Interpretation: A defendant could argue that a payment token, which "looks like a PAN" and functions as a stand-in for a financial account for a given transaction, falls within a broader definition of "financial account number" (Compl. p. 12, step 2). Therefore, the POS terminal does receive a form of financial account number, and there is no infringement.

VI. Other Allegations

  • Indirect Infringement: The complaint alleges both inducement and contributory infringement across all asserted patents. Inducement is predicated on Prosperity Bank's alleged actions of "actively marketing," "instructing," and "encouraging" customers to use mobile payment services like Apple Pay with their Prosperity cards (Compl. ¶¶25, 43, 61, 74). Contributory infringement is alleged on the basis that the accused system's tokenization features are specially designed for infringement and are not staple articles of commerce with substantial non-infringing uses (Compl. ¶¶27, 45, 63, 82-84).
  • Willful Infringement: Willfulness is alleged based on Prosperity's knowledge of the patents "at least as of the date when it was notified of the filing of this action" (Compl. ¶¶32, 50, 68). The allegations also assert that Prosperity's actions are "objectively reckless as to the risk of infringing valid patents" (Compl. ¶86).

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

  • A core issue will be one of definitional scope: Can key claim terms such as "accounting server" and "virtual account ID", which arise from a specification focused on aggregating loyalty and rebate programs, be construed to read on the distinct, standardized components of a modern EMV payment tokenization system, such as a Token Service Provider (TSP) and a Primary Account Number (PAN)?
  • A key evidentiary question will be one of technical mapping: Does the accused system's distributed architecture—involving a mobile device, a merchant POS, an acquirer, a payment network, a TSP, and an issuer—align with the more centralized system architecture depicted and described in the patents, or is there a fundamental mismatch in technical operation?
  • A central legal question will be one of liability for divided infringement: Given that the claimed methods involve steps performed by numerous independent entities in the payment chain, can the Plaintiff establish that Prosperity Bank directs or controls the entire process to such an extent that it can be held liable for infringement of the complete method claim?