DCT

3:22-cv-01778

AuthWallet LLC v. Hotelscom LP

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Name: AuthWallet, LLC v. Hotels.com, L.P.
  • Case Identification: 3:22-cv-01778, N.D. Tex., 08/12/2022
  • Venue Allegations: Plaintiff alleges venue is proper because Defendant has a regular and established place of business in the district, has committed alleged acts of infringement in the district, and conducts substantial business there.
  • Core Dispute: Plaintiff alleges that Defendant’s online platforms and services infringe a patent related to using a mobile device for out-of-band confirmation of financial transactions.
  • Technical Context: The technology concerns methods for enhancing the security of electronic payments by introducing a real-time, out-of-band verification step via a user's mobile device before a transaction is finalized.
  • Key Procedural History: The complaint does not mention any prior litigation, Inter Partes Review (IPR) proceedings, or licensing history related to the patent-in-suit.

Case Timeline

Date Event
2008-11-08 U.S. Patent No. 8,099,368 Earliest Priority Date
2012-01-17 U.S. Patent No. 8,099,368 Issued
2022-08-12 Complaint Filed

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

  • U.S. Patent No. 8,099,368, "Intermediary Service and Method for Processing Financial Transaction Data with Mobile Device Confirmation," issued January 17, 2012

The Invention Explained

  • Problem Addressed: The patent's background section describes the difficulty for consumers and merchants in balancing security against convenience in electronic transactions. It specifically notes that detecting fraudulent or erroneous transactions is often delayed until a customer reviews a billing statement, and that managing multiple payment instruments can be cumbersome (’368 Patent, col. 1:49-68).
  • The Patented Solution: The invention proposes an "intermediary service" that operates between the merchant's acquirer and the customer's issuing bank (’368 Patent, col. 2:36-42). When a customer initiates a transaction, this service sends an "out-of-band" notification to the customer's mobile device. This message allows the customer to review and explicitly confirm or deny the transaction in real-time before it is fully authorized, sometimes also allowing for the selection of a different payment method from a pre-registered list (’368 Patent, Abstract; col. 3:4-22). This process aims to reduce fraud by requiring active, real-time confirmation from the user on a separate device.
  • Technical Importance: This approach introduces a real-time, user-involved security layer into the payment authorization flow, seeking to detect fraud at the moment of transaction rather than retrospectively.

Key Claims at a Glance

  • The complaint asserts infringement of claims 1-29 (Compl. ¶8, 10-11). Independent claim 1 is representative.
  • Independent Claim 1 recites a method performed by a server, comprising the essential elements of:
    • Receiving an authorization request for a transaction from a requester.
    • Authenticating the request.
    • Retrieving stored customer information, including data defining "multiple payment instruments" and a mobile device address.
    • Generating and transmitting a "transaction indication message" to the mobile device, where the message includes transaction information and specifies a response that "allows a selection of a payment instrument from at least two of the multiple payment instruments."
    • Receiving a "customer confirmation message" from the mobile device that "includes a selected payment instrument."
    • Obtaining account information for the selected instrument from an issuing institution.
    • Providing the obtained account information to the requester to complete the transaction.
  • The complaint broadly asserts claims 1-29, implicitly reserving the right to assert any of these claims, including dependent claims.

III. The Accused Instrumentality

  • Product Identification: The complaint accuses "online platforms, products and services" that are maintained, operated, and administered by Hotels.com (Compl. ¶8).
  • Functionality and Market Context: The complaint alleges that the accused instrumentalities "facilitate utilizing a mobile device to provide out of band communications notifying a customer of a financial transaction request" (Compl. ¶7, 8). The functionality is described at a high level, without reference to specific features of the Hotels.com website or mobile application. The complaint does not provide sufficient detail for a more granular analysis of the accused instrumentality's operation or market positioning.

IV. Analysis of Infringement Allegations

The complaint references "Exhibit B" for detailed support of its infringement allegations but does not include this exhibit in the filing (Compl. ¶9). In the absence of a claim chart, the infringement theory is based on the general allegations in the complaint. Plaintiff alleges that Defendant’s online platforms directly infringe the ’368 Patent by performing the patented method of using a mobile device for out-of-band transaction notification (Compl. ¶7-8).

No probative visual evidence provided in complaint.

  • Identified Points of Contention:
    • Architectural Questions: A central issue may be whether the Hotels.com system architecture maps onto the architecture described in the patent. The patent consistently depicts an "Intermediary Service" as a distinct entity separate from the merchant, acquirer, and issuing institution (’368 Patent, Fig. 2B-C). The court may need to determine if the functionality allegedly performed by Hotels.com itself can be considered the claimed "intermediary service" or if the patent requires a separate, third-party entity.
    • Technical Questions: The infringement analysis may focus on whether any notification sent by Hotels.com performs the specific functions recited in the claims. For example, what evidence supports the allegation that a Hotels.com notification "allows a selection of a payment instrument from at least two of the multiple payment instruments" as part of a confirmation flow, as required by claim 1? The complaint does not specify how this claim element is met.

V. Key Claim Terms for Construction

  • The Term: "intermediary service"

  • Context and Importance: This term appears throughout the patent and is central to its architecture. The definition will be critical to determining whether the system allegedly operated by Hotels.com—a merchant—can infringe a patent that describes a service operating between other financial entities.

  • Intrinsic Evidence for Interpretation:

    • Evidence for a Broader Interpretation: The detailed description defines the invention as a "transaction processing service that operates as an intermediary" (’368 Patent, col. 2:36-39), which could suggest a functional rather than strictly structural role.
    • Evidence for a Narrower Interpretation: The patent’s figures consistently depict the "Intermediary Service" (204) as a separate and distinct block from the "Merchant/POP" (106), "Acquirer" (108), and "Issuing Institution" (110) (’368 Patent, Figs. 2A-C, 5). This visual separation may support an interpretation that the service must be a distinct entity from the merchant or its acquirer.

  • The Term: "transaction indication message... specifying a response that allows a selection of a payment instrument from at least two of the multiple payment instruments"

  • Context and Importance: This limitation from claim 1 defines a specific capability of the required mobile notification. Practitioners may focus on this term because infringement will depend on whether the accused Hotels.com notifications provide this specific, interactive functionality.

  • Intrinsic Evidence for Interpretation:

    • Evidence for a Broader Interpretation: An argument could be made that any message that leads a user to a screen where a payment method can be changed or selected meets this limitation, even if it is not a single, integrated step.
    • Evidence for a Narrower Interpretation: Figure 3D of the patent explicitly shows a representative user interface for such a message, which includes a drop-down menu (244) to "Please select payment instrument" directly within the confirmation screen (’368 Patent, Fig. 3D). This embodiment may support a narrower construction requiring the selection to be an integrated part of the out-of-band confirmation message itself.

VI. Other Allegations

  • Indirect Infringement: The complaint alleges that Hotels.com induces infringement by actively encouraging and instructing its customers on how to use its products and services in an infringing manner (Compl. ¶10). It also alleges contributory infringement on the same basis (Compl. ¶11).
  • Willful Infringement: Willfulness is alleged based on the assertion that Hotels.com "has known or should have known of the '368 patent and the technology underlying it from at least the date of issuance of the patent" (Compl. ¶10, 11).

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

  • A core issue will be one of architectural scope: does the claim term "intermediary service" require a structurally separate entity from the merchant and its acquirer, as depicted in the patent’s figures, or can it be read to cover functionality performed by the merchant’s own online platform?
  • A key evidentiary question will be one of functional performance: does the accused Hotels.com system send a transaction notification that performs the specific, two-part function required by Claim 1—confirming a transaction and allowing the user to select from at least two different payment instruments as part of that confirmation flow?