Liberty Peak Ventures LLC v. Visa Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Liberty Peak Ventures, LLC (Texas)
  • Defendant: Visa Inc. and Visa USA. Inc. (Delaware)
  • Plaintiff’s Counsel: BRAGALONE OLEJKO SAAD PC
• Case Identification: 1:23-cv-00716, W.D. Tex., 06/21/2023
• Venue Allegations: Plaintiff alleges venue is proper in the Western District of Texas because Defendants maintain a regular and established place of business in the district, including at least one office and global IT Center in Austin, Texas, where employees allegedly develop infringing payment processing products.
• Core Dispute: Plaintiff alleges that Defendant’s digital payment products, services, and networks, including its contactless "Tap to Pay" and "Tokenization" functionalities, infringe nine patents related to secure financial transactions, smartcard technology, and data reconciliation.
• Technical Context: The technology at issue involves foundational methods for securing digital payments, a market segment defined by high transaction volumes and the need for interoperability and robust fraud prevention.
• Key Procedural History: The complaint alleges that Plaintiff's affiliate notified Defendants of the asserted patent portfolio, then owned by American Express, as early as April 3, 2018, and provided access to claim charts in September 2018. These allegations of pre-suit knowledge form the basis of the willful infringement claims.

I.A. Case Timeline

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

II.A. U.S. Patent No. 8,851,369 - Systems and Methods for Transaction Processing Using a Smartcard

Issued October 7, 2014

The Invention Explained

• Problem Addressed: The patent addresses challenges in conventional RFID-based payment transactions related to supporting multiple different payment systems on a single device (Compl. ¶98).
• The Patented Solution: The invention describes a smartcard that receives a payment request and determines which payment system to use by consulting a "payment directory information stored on the smartcard." The smartcard then transmits an identifier for the selected payment system to the point-of-sale (POS) terminal, enabling the terminal to route the transaction to the correct network, such as VisaNet. (Compl. ¶98, 120; ’369 Patent, Abstract).
• Technical Importance: This approach allows a single transaction instrument, such as a contactless card or mobile wallet, to select from multiple payment applications, enhancing interoperability in a diverse payment ecosystem (Compl. ¶98).

Key Claims at a Glance

• The complaint asserts infringement of at least claim 1 (Compl. ¶119).
• Independent claim 1 of the ’369 Patent recites a method comprising the essential elements of:
  • Receiving, at a smartcard, a payment request for a transaction;
  • Determining, by the smartcard, a first payment system for processing the transaction;
  • Wherein the determining step includes the smartcard querying payment directory information stored on the smartcard; and
  • Transmitting, by the smartcard, an identification of the first payment system to a POS device, where the identification is usable by the POS device to transmit a first authorization request to that payment system.
• The complaint does not explicitly reserve the right to assert dependent claims for the ’369 Patent.

II.B. U.S. Patent No. 8,584,938 - Wireless Transaction Medium Having Combined Magnetic Stripe and Radio Frequency Communications

Issued November 19, 2013

The Invention Explained

• Problem Addressed: The patent addresses the security risks of conventional payment cards where the account number is fixed and unchanging, making it vulnerable to compromise if lost or stolen (Compl. ¶¶65-66).
• The Patented Solution: The invention proposes a computer-based system that proactively improves security by altering the account number for transactions. It describes a method of creating a "second account code" for a transaction by replacing a "first portion" of an original "first account code" with new data, while ensuring a "second portion" of both codes remains associated. This creates a dynamic account number that is difficult for a thief to predict. (Compl. ¶65; ’938 Patent, col. 18:1-8).
• Technical Importance: This method provides a proactive security measure by enabling an account number to be changed over time, a concept foundational to modern tokenization technologies that replace static account numbers with dynamic, limited-use surrogates (Compl. ¶¶66, 67).

Key Claims at a Glance

• The complaint asserts infringement of at least claim 14 (Compl. ¶¶136-137).
• Independent claim 14 of the ’938 Patent recites a method comprising the essential elements of:
  • Replacing, by a computer-based system, a first portion of a first account code with data to create a second account code;
  • Wherein a second portion of the second account code is associated with a second portion of the first account code; and
  • Wherein the second account code may be used for a transaction.
• The complaint does not explicitly reserve the right to assert dependent claims for the ’938 Patent.

II.C. U.S. Patent No. 8,814,039 - Methods for Processing a Payment Authorization Request Utilizing a Network of Point of Sale Devices

Issued August 26, 2014

• Technology Synopsis: The complaint alleges this patent addresses problems with conducting transactions from remote locations where merchants lack immediate access to financial institutions for payment authorization (Compl. ¶88). The claimed solution is a computer-based system that receives a query from a POS device, uses a payment system directory to locate an appropriate "candidate payment system," and facilitates the transmission of an authorization request to, and receipt of an authorization from, that candidate system (Compl. ¶89).
• Asserted Claims: Claim 1 is asserted (Compl. ¶153).
• Accused Features: The accused features are Visa’s payment network systems (e.g., VisaNet) that process transactions from mobile wallets and contactless cards, which are alleged to query an onboard payment system directory (Compl. ¶¶91, 92).

II.D. U.S. Patent No. 8,794,509 - Systems and Methods for Processing a Payment Authorization Request Over Disparate Payment Networks

Issued August 5, 2014

• Technology Synopsis: The patent addresses problems in supporting multiple, disparate payment systems for a single transaction (Compl. ¶90). The invention is a computer-based system that queries a payment system directory to select an appropriate payment system based on information like the transaction type or instrument issuer, and then sends the authorization request to the selected system (Compl. ¶90).
• Asserted Claims: Claim 1 is asserted (Compl. ¶170).
• Accused Features: The accused features are Visa's computer-based systems and payment network (VisaNet) that process transactions initiated from mobile wallets by querying a payment system directory to select and route the transaction to the correct payment system (Compl. ¶¶91-93, 171).

II.E. U.S. Patent No. 7,953,671 - Methods and Apparatus for Conducting Electronic Transactions

Issued May 31, 2011

• Technology Synopsis: The complaint describes this invention as providing security for transactions using digital wallets (Compl. ¶52). The patented solution involves a computer system that forwards a "challenge" to a client's "intelligent token" (e.g., mobile device), receives a "challenge response," and in response assembles credentials including an encryption key to secure the transaction (Compl. ¶¶52, 188).
• Asserted Claims: Claim 1 is asserted (Compl. ¶187).
• Accused Features: The accused systems are those that conduct user enrollment for mobile wallets like Google Pay, which allegedly involves a challenge-response process to verify the consumer and provision credentials for transactions (Compl. ¶¶53-57).

II.F. U.S. Patent No. 9,195,985 - Method, System, and Computer Program Product for Customer-Level Data Verification

Issued November 24, 2015

• Technology Synopsis: The patent addresses authorizing transactions for customers who have more than one transaction instrument (e.g., a physical card and a mobile wallet token) linked to a single account (Compl. ¶58). The invention involves a computer system that, upon receiving a request from a first instrument, determines a second instrument corresponding to the same user and analyzes transaction data from both to authorize the transaction, thereby improving fraud detection (Compl. ¶58).
• Asserted Claims: Claim 1 is asserted (Compl. ¶204).
• Accused Features: The accused instrumentalities are Visa’s tokenization and payment processing systems, where a transaction initiated with a token (the first instrument) is de-tokenized to the underlying Primary Account Number (PAN) (the second instrument), and data from both are analyzed to authorize the transaction (Compl. ¶¶59-64).

II.G. U.S. Patent No. 7,587,756 - Methods and Apparatus for a Secure Proximity Integrated Circuit Card Transactions

Issued September 8, 2009

• Technology Synopsis: The patent describes a method for securing proximity (e.g., RFID) transactions without increasing transaction time (Compl. ¶70). The solution involves a merchant system and a proximity integrated circuit (PIC) device that each determine an "action analysis result" based on factors like Offline Data Authentication (ODA) and risk management. Based on both results, the merchant system requests an authorization response from the issuer. (Compl. ¶¶70, 222; '756 Patent, Abstract).
• Asserted Claims: Claim 1 is asserted (Compl. ¶221).
• Accused Features: The accused features are Visa’s payment systems that require EMV-compliant merchant terminals to perform risk analysis (e.g., ODA, expired check) and communicate with Visa's payment applications on cards/devices to generate cryptograms and secure transactions (Compl. ¶¶71, 74-81).

II.H. U.S. Patent No. 7,668,750 - Securing RF Transactions Using a Transactions Counter

Issued February 23, 2010

• Technology Synopsis: This patent discloses securing radio frequency (RF) transactions by using a transaction counter (Compl. ¶84). A financial transaction request from an RF device to a merchant system includes a "transactions counted value." This value is forwarded to a transaction processor, and the transaction is denied if the counted value exceeds a predefined maximum (Compl. ¶84).
• Asserted Claims: Claim 1 is asserted (Compl. ¶85).
• Accused Features: The accused features are Visa's systems utilizing the EMV standard, where a transaction request from a contactless card includes an Application Transaction Counter (ATC) that indicates the number of transactions performed, which can be used by the issuer to decline a transaction if a threshold is exceeded (Compl. ¶¶86-87).

II.I. U.S. Patent No. 8,150,746 - Global Account Reconciliation Tool

Issued April 3, 2012

• Technology Synopsis: The patent addresses the problem of reconciling financial data from remote systems that use different formats (Compl. ¶101). The invention is a computer-based system for managing and reconciling remote financial data by using standardized and customized templates to extract data from a source system, convert it into a common format, and then reconcile it with master financial data (Compl. ¶¶101-102).
• Asserted Claims: Claim 1 is asserted (Compl. ¶103).
• Accused Features: The accused instrumentality is the Visa DPS (Debit Processing Service) system, which allegedly uses templates (maps) to extract, parse, standardize, and reconcile financial transaction data from multiple formats onto a single platform for issuer accounts (Compl. ¶¶103-107).

III. The Accused Instrumentality

III.A. Product Identification

The complaint identifies the "Accused Instrumentalities" as a broad collection of Visa's products, services, systems, and methods involved in processing digital payments (Compl. ¶33). Key accused products and services include Visa Cards (physical and digital), the VisaNet payment network, Visa Token Service (VTS), Tap to Pay, and Visa DPS (Debit Processing Service) (Compl. ¶¶5, 9, 12, 34, 51).

III.B. Functionality and Market Context

The Accused Instrumentalities facilitate secure digital payment transactions through a "four-party model" involving consumers, merchants, issuers, and acquirers (Compl. ¶6). The complaint provides a diagram illustrating this "Flow of Money" (Compl. p. 5). A central accused functionality is "Tokenization" via VTS, which replaces a card's 16-digit Primary Account Number (PAN) with a unique digital identifier or "token" to protect account information during transactions (Compl. ¶9). The complaint alleges that as of fiscal year 2022, Visa had provisioned over 4 billion such network tokens (Compl. ¶10). Another key functionality is contactless payment ("Tap to Pay"), which uses EMV standards to enable secure transactions when a card or mobile device is held near a POS terminal (Compl. ¶¶8, 40). Visa DPS is identified as a major issuer processing service that handles transaction data reconciliation for financial institutions (Compl. ¶¶12, 103).

IV. Analysis of Infringement Allegations

IV.A. U.S. Patent No. 8,851,369 - Infringement Allegations

Identified Points of Contention

• Scope Questions: A central question may be whether the term "smartcard" as understood in the patent, which issued from a 2008 priority application, can be construed to read on a modern mobile device utilizing software-based Host Card Emulation (HCE) for payments, as alleged by the complaint (Compl. ¶36). Further, the analysis may turn on whether a list of Application Identifiers (AIDs) stored on a chip qualifies as the claimed "payment directory information."

IV.B. U.S. Patent No. 8,584,938 - Infringement Allegations

Identified Points of Contention

• Technical Questions: The dispute may focus on whether Visa's process of generating a surrogate token that maps to a PAN constitutes "replacing...a first portion" of the PAN, as required by the claim. A diagram provided in the complaint shows Visa exchanging a network token with the PAN stored in a token vault, which may suggest a mapping process rather than a direct replacement of data within the original account code structure (Compl. p. 39).
• Scope Questions: The construction of "account code" will be important, specifically whether it refers to a static data string or a more abstract identifier. Additionally, the meaning of "associated with" will be debated in the context of whether retaining the IIN from the PAN in the token meets this limitation.

V. Key Claim Terms for Construction

V.A. "payment directory information" (’369 Patent, claim 1)

• Context and Importance: The infringement case for the ’369 Patent hinges on whether the list of Application Identifiers (AIDs) stored on Visa's smartcards and mobile payment applications constitutes "payment directory information." The definition will determine if merely storing a list of supported networks meets this claim element or if a more complex directory structure is required.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: Parties may argue that the specification's general description of selecting among different payment systems supports a broad definition where any data used for that selection, including a list of AIDs, qualifies as "directory information."
  • Evidence for a Narrower Interpretation: The detailed description or figures of the patent, such as Figure 5 which shows a directory file ("EF DIR 610") containing issuers and payment types, may be used to argue for a narrower construction requiring a structured file with more than just a simple list of identifiers (’369 Patent, Fig. 5).

V.B. "replacing...a first portion of a first account code with data" (’938 Patent, claim 14)

• Context and Importance: Plaintiff’s infringement theory for the ’938 Patent alleges that Visa's tokenization process meets this limitation. The outcome will likely depend on whether "replacing a portion" is construed to cover the generation of a new, separate data string (a token) that corresponds to an original one (the PAN), or if it requires a more literal modification of the original data structure.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The patent’s background discusses the goal of creating an account number that can "be changed from time to time" to improve security (’938 Patent, col. 18:20-25). This purpose-driven language may support interpreting "replacing" broadly to include any form of substitution that achieves this dynamic-number goal.
  • Evidence for a Narrower Interpretation: The term "replacing" could be interpreted narrowly to mean overwriting a segment of a data string in-place, rather than generating an entirely new surrogate value that is linked to the original, as Visa's tokenization system is described to do (Compl. pp. 37-39).

VI. Other Allegations

VI.A. Indirect Infringement

The complaint alleges that Defendants induce infringement by conditioning access to the VisaNet payment network on the use of the accused technologies (Compl. ¶¶44, 70, 123). It specifically alleges that Visa's "Core Rules" and other requirements compel third parties (such as issuers, acquirers, and merchants) to implement and use EMV standards, the qVSDC transaction path, and tokenization protocols, thereby causing them to perform the steps of the patented methods (Compl. ¶¶19, 44-46, 124).

VI.B. Willful Infringement

The complaint alleges willful infringement based on pre-suit knowledge of the asserted patents. It claims that on multiple occasions beginning on or around April 3, 2018, Plaintiff's affiliate contacted Defendants regarding the "American Express patent portfolio," which includes the asserted patents, and later provided access to a data room containing claim charts for patents in that portfolio (Compl. ¶¶121, 138, 155, 189, 206, 223, 240, 257).

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

• A core issue will be one of technological evolution and claim scope: can claims drafted in the context of earlier smartcard and RFID technologies be construed to cover modern, standardized payment systems like EMV contactless and network tokenization? The case will likely require a detailed analysis of whether Visa’s systems, which create surrogate tokens that map to PANs, meet the specific claim language of "replacing a portion" of an account code, as recited in the ’938 patent.
• A second central question will be one of divided infringement and control: given the multi-party nature of the Visa payment ecosystem, the court will need to determine whether Visa’s network rules and technical standards constitute sufficient "direction or control" over issuers, acquirers, and merchants to hold Visa liable as a single actor for practicing the asserted method claims.
• A key evidentiary question will be one of pre-suit knowledge and willfulness: the complaint alleges specific dates and methods of notice regarding the asserted patent portfolio. The case will examine the substance of these communications to determine whether they established the knowledge and intent required to support the claims for indirect and willful infringement.