DCT

1:23-cv-00231

Calabrese Stemer LLC v. Wise US Inc

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 1:23-cv-00231, W.D. Tex., 04/24/2023
  • Venue Allegations: Venue is alleged to be proper in the Western District of Texas because the Defendant maintains a regular and established place of business in the district and has committed alleged acts of infringement within the district.
  • Core Dispute: Plaintiff alleges that Defendant’s international debit card and associated payment notification system infringe a patent related to methods for notifying a customer of a transaction over a separate communication channel without requiring a response.
  • Technical Context: The technology resides in the financial technology (fintech) sector, specifically addressing methods to improve transaction security by providing out-of-band, real-time alerts to consumers when their payment card is used.
  • Key Procedural History: The complaint details the prosecution history of the patent-in-suit and its parent applications, highlighting the patent office's reasons for allowance, which centered on the use of two separate communication channels and processing transactions without requiring a customer response. The complaint also references a successful appeal to the Patent Trial and Appeal Board (PTAB) for a related patent and discusses later patents from other inventors in the field to assert the non-routine nature of the claimed invention.

Case Timeline

Date Event
2005-03-11 '564 Patent Priority Date
2006-07-12 Amendment filed in parent '310 patent prosecution
2007-11-11 Notice of Allowability issued in parent '310 patent prosecution
2010-11-05 Detailed Action issued in parent '706 patent prosecution
2013-12-04 Detailed Action issued in '564 patent prosecution
2014-07-22 U.S. Patent No. 8,783,564 Issues
2016-03-16 PTAB Decision on Appeal issued for related '069 patent
2022-11-29 Alleged date of Defendant’s awareness of the '564 Patent
2023-04-24 First Amended Complaint Filing Date

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

  • Patent Identification: U.S. Patent No. 8,783,564, “Transaction Notification and Authorization Method,” issued July 22, 2014.
  • The Invention Explained:
    • Problem Addressed: The patent's background section identifies the risk of financial loss from fraudulent or mistaken payment card transactions, which can be difficult and costly to correct after completion (ʼ564 Patent, col. 1:22-43). It notes that existing security measures can be overly "intrusive" and negatively impact the user experience (ʼ564 Patent, col. 1:44-47).
    • The Patented Solution: The invention proposes a method where a financial institution, upon receiving a transaction authorization request from a merchant via a first communication channel, checks a customer's profile (ʼ564 Patent, FIG. 2). If the customer has opted-in, the system sends a notification (e.g., an SMS message) to the customer's wireless device over a second, separate communication channel (ʼ564 Patent, col. 1:63-65). Critically, the system proceeds to authorize the transaction without waiting for or requiring a response to the notification from the customer, thereby providing a non-intrusive, one-way alert (ʼ564 Patent, col. 2:1-3).
    • Technical Importance: The complaint alleges that this "vertical" two-channel architecture—separating the merchant-to-institution authorization channel from the institution-to-customer notification channel—was a novel improvement over prior art systems that required a "horizontal" link between a customer's device and the merchant's terminal (Compl. ¶¶11-12).

Key Claims at a Glance

  • The complaint asserts independent claim 9 (Compl. ¶50). Claim 9 depends from and incorporates all the limitations of independent claim 1.
  • The essential elements of independent claim 1 are:
    • Receiving a request to authorize a transaction for an account via a first transmission channel.
    • Determining if the account includes a request for notification of transactions.
    • Notifying the customer via a second transmission channel, only if notification is requested.
    • The second transmission channel must be "distinct from the first transmission channel."
    • Authorizing the transaction "without requiring a response from the customer."
  • Dependent claim 9 adds the limitation that the steps of notifying and authorizing are performed "substantially concurrently" (ʼ564 Patent, col. 6:39-42).

III. The Accused Instrumentality

  • Product Identification: The complaint identifies the accused instrumentality as Defendant's "Wise Payment Transaction System ('Wise PTS')," which includes the Wise international debit card, customer account portal, and the Wise mobile application (Compl. ¶¶23, 27, 33).
  • Functionality and Market Context:
    • The Wise PTS is alleged to be a system for processing debit card transactions (Compl. ¶27). The complaint alleges that the system provides customers with the option to receive "instant spending notifications" and to "track business expenses" through the Wise mobile app (Compl. ¶29). A screenshot from the Wise website shows a settings page titled "How do I manage my notifications?," indicating users can select notification preferences for their "Wise card" transactions via push notifications to the app (Compl. p. 16). The complaint alleges that these notifications are sent while the underlying transaction is authorized without requiring a real-time response from the user (Compl. ¶36).
    • The complaint presents the Wise card as "The most international debit card in the world" (Compl. ¶23). It alleges that Wise operates in the U.S. through partnerships with sponsoring banks like Community Federal Savings Bank and Evolve Bank and Trust (Compl. ¶24).

IV. Analysis of Infringement Allegations

’564 Patent Infringement Allegations

Claim Element (from Independent Claim 1, incorporated into Claim 9) Alleged Infringing Functionality Complaint Citation Patent Citation
receiving a request for authorizing a transaction for an account... via a first transmission channel... The Wise PTS receives debit card authorization requests from merchants for Wise customer accounts via transmission channels. ¶31 col. 5:21-30
determining whether or not the account includes a request for notification to the customer of any transactions; The Wise PTS determines if a customer account has requested transaction notifications, for example, through settings in the Wise customer portal or app. ¶33 col. 7:12-14
notifying the customer via a second transmission channel only if the account includes a request for notification... If a customer has enabled notifications, the Wise PTS sends transaction alerts wirelessly to the customer's device (e.g., via push notification). The complaint provides a screenshot showing "Spending alerts" within the Wise app. ¶34, p. 14 col. 7:14-20
the second transmission channel being distinct from the first transmission channel; The Wise PTS allegedly receives authorization requests from merchants via a first channel and sends customer notifications via a second, distinct channel. ¶35 col. 6:15-18
authorizing the transaction without requiring a response from the customer. The Wise PTS allegedly alerts customers via a real-time message and authorizes the transaction without requiring a customer response to that message. ¶36 col. 2:1-3
Added by Claim 9: said steps of notifying and authorizing are performed substantially concurrently. The Wise PTS is alleged to alert customers with real-time notifications while "substantially concurrently" authorizing the transaction. ¶37 col. 6:39-42

Identified Points of Contention

  • Scope Questions: A potential issue is whether the patent's claims, which often refer to "credit card" and "charge card" transactions, can be read to cover the accused "debit card" system. The specification's inclusion of "debit card" in the list of transaction types may support the Plaintiff's position (ʼ564 Patent, col. 7:6-7).
  • Technical Questions: A factual dispute may arise over the meaning of "substantially concurrently" as required by claim 9. The evidence required to prove that the notification and authorization steps occur within a timeframe that meets this limitation will be a central technical question. Another question is whether the initial, one-time user action of enabling notifications in the Wise app constitutes a "response" that is "required" by the system, which could be argued to place the system outside the scope of the "without requiring a response" limitation.

V. Key Claim Terms for Construction

The Term: "distinct from the first transmission channel"

  • Context and Importance: The patent's novelty, as argued in the complaint, is predicated on its two-channel architecture. The definition of "distinct" is therefore critical to determining the scope of infringement. The question is whether "distinct" requires physical separation, logical separation (e.g., different network protocols), or both.
  • Intrinsic Evidence for a Broader Interpretation: The claim language does not specify the nature of the distinction, which may support an interpretation where any logical or protocol-level separation suffices. The specification notes that by separating the channels, "different communication protocols can be deployed on each channel (e.g., secure versus unsecure)," suggesting a focus on functional rather than purely physical separation ('564 Patent, col. 1:66–col. 2:1, as cited in Compl. ¶13).
  • Intrinsic Evidence for a Narrower Interpretation: A party could argue that the patent's primary embodiment, illustrated in Figure 1, depicts a clear physical separation between the merchant's network and the customer's wireless device. The prosecution history, as cited in the complaint, also emphasizes the separation between the "merchant terminal" and the "customer's mobile device," which could be used to argue for a narrower construction requiring a more tangible separation than what might exist between two data streams over the internet (Compl. ¶15).

The Term: "without requiring a response from the customer"

  • Context and Importance: This limitation distinguishes the claimed invention from interactive authorization methods where a user must approve each transaction. Its construction will determine whether systems with user-configurable notification preferences, like the accused Wise PTS, fall within the claim's scope.
  • Intrinsic Evidence for a Broader Interpretation: A party may argue this term applies only to the real-time authorization of a specific transaction, meaning the system does not halt the authorization process to await a user's reply to the alert for that transaction. The specification contrasts the invention with methods that prompt a customer "for confirmation or refusal of the transaction," supporting the view that "response" refers to a real-time, per-transaction approval ('564 Patent, col. 2:28-30).
  • Intrinsic Evidence for a Narrower Interpretation: A party could argue that if a customer must first access a settings menu and opt-in to receive notifications, the system as a whole functionally "requires a response" from the customer to operate as claimed. This interpretation suggests that the invention covers only purely passive, non-configurable alert systems. However, the patent's own description of checking a "customer profile" may suggest that some level of prior user configuration is contemplated ('564 Patent, FIG. 2, element 13).

VI. Other Allegations

  • Indirect Infringement: The complaint alleges inducement of infringement, stating that Wise encourages its customers and partners to use the infringing Wise PTS through promotional materials and instructions (Compl. ¶¶51, 53).
  • Willful Infringement: Willfulness is alleged based on Defendant's purported knowledge of the '564 patent since at least November 29, 2022 (Compl. ¶52). The complaint further alleges that Defendant engaged in "reckless conduct" and "intentionally took steps to avoid learning the extent of its infringement" (Compl. ¶¶56-57).

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

  • A core issue will be one of claim construction and scope: can the term "distinct transmission channel," rooted in a 2005-priority patent, be construed to cover separate data pathways within a modern, internet-based app ecosystem? Furthermore, does a one-time user action to enable notifications fall outside the claim prohibition against "requiring a response"?
  • A key question will be one of validity in the context of technological evolution: The case will likely test whether the claims of the '564 patent are valid and broad enough to cover modern app-based push notifications, or if such functionalities will be viewed by the court as conventional developments that fall outside the patent's technical contribution, potentially raising challenges under 35 U.S.C. §§ 101, 102, or 103. The plaintiff's extensive discussion of the patent's prosecution history and later related technology appears to be a preemptive effort to frame the invention as foundational.