Monticello Enterprises LLC v. Petco Health & Wellness Co Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Monticello Enterprises LLC (Maryland)
  • Defendant: Petco Health & Wellness Company, Inc., and Petco Animals Supply Stores, Inc. (Delaware)
  • Plaintiff’s Counsel: Manatt, Phelps & Phillips, LLP; George Brothers Kincaid & Horton LLP
• Case Identification: 6:23-cv-00761, W.D. Tex., 11/09/2023
• 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 a Satellite Support Center in San Antonio and retail stores in Waco, and have committed acts of infringement therein.
• Core Dispute: Plaintiff alleges that Defendant’s website, iOS application, and in-store point-of-sale terminals, through their use of Apple Pay, infringe six patents related to simplified payment processing APIs for web browsers, mobile applications, and in-person transactions.
• Technical Context: The technology at issue concerns methods for streamlining e-commerce and point-of-sale transactions by using application programming interfaces (APIs) to reduce the number of user interactions required to complete a purchase.
• Key Procedural History: The complaint notes that this case is related to active litigation brought by Monticello against other major retailers, including Macy's and Starbucks. The complaint also alleges that several leading providers of online payment services have taken licenses to the asserted patents.

Case Timeline

Date	Event
2014-03-31	Earliest Priority Date for ’408, ’186 Patents
2014-04-01	Earliest Priority Date for ’266, ’139, ’828, ’497 Patents
2017-11-21	U.S. Patent No. 9,824,408 Issues
2018-11-06	U.S. Patent No. 10,121,186 Issues
2020-05-05	U.S. Patent No. 10,643,266 Issues
2021-05-11	U.S. Patent No. 11,004,139 Issues
2022-10-04	U.S. Patent No. 11,461,828 Issues
2022-10-11	U.S. Patent No. 11,468,497 Issues
2023-11-09	Complaint Filing Date

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

U.S. Patent No. 9,824,408 - Browser Payment Request API (Issued Nov. 21, 2017)

The Invention Explained

• Problem Addressed: The patent's background section describes the problem of simplifying and managing online purchases, noting that users often have to enter payment and shipping data repeatedly across different merchant sites, which is a cumbersome process. (’408 Patent, col. 3:20-33).
• The Patented Solution: The invention proposes an updated browser with a payment request Application Programming Interface (API) that serves as a standardized intermediary for communicating payment data between a merchant's website and the browser. (’408 Patent, Abstract). This API allows the browser to retrieve stored payment data and transmit it to the merchant upon user interaction, aiming to reduce the number of steps needed to complete a purchase. (’408 Patent, col. 4:1-12).
• Technical Importance: This approach sought to create a more universal checkout experience, moving payment data management from individual merchant sites to the browser level to provide a faster and more secure transaction process. (Compl. ¶17).

Key Claims at a Glance

• The complaint asserts independent method claim 43. (Compl. ¶29).
• Essential elements of Claim 43 include:
  • Receiving an interaction with a site, the site being presented in a browser.
  • Transmitting, from the site via a browser payment request API, a request for authorized payment data usable across multiple sites.
  • Receiving the authorized payment data from the browser, via the browser payment request API.
  • Submitting the authorized payment data to a payment processor for processing a purchase.
• The complaint reserves the right to assert additional claims. (Compl. ¶25).

U.S. Patent No. 10,121,186 - System and Method of Using a Browser Application Programming Interface for Making Payments (Issued Nov. 6, 2018)

The Invention Explained

• Problem Addressed: The patent identifies the friction and complexity of existing online payment processes, particularly the need for users to manually enter payment and address information, which can deter purchases. (’186 Patent, col. 3:20-33).
• The Patented Solution: The invention describes a method where a merchant site transmits a payment request to a browser via a browser API. The browser, in turn, communicates with a separate payment service to obtain authorized payment data, and then provides a response back to the merchant site via the API to complete the transaction. (’186 Patent, Abstract; Fig. 17D). This architecture separates the merchant site from the payment service, with the browser API acting as the communication protocol.
• Technical Importance: This method standardizes the communication protocol between a merchant site and a payment service, allowing for a streamlined payment flow that is managed by the browser rather than requiring complex integrations on the merchant's end. (Compl. ¶17).

Key Claims at a Glance

• The complaint asserts independent method claim 32. (Compl. ¶35). The complaint text contains a likely scrivener's error, referencing "exemplary claim 12" but then quoting the language of independent claim 32.
• Essential elements of Claim 32 include:
  • Transmitting, from a site to a browser via a browser API, a request associated with a purchase that identifies a payment service.
  • Receiving, from the browser and via the browser API, a response to the request based on data received at the browser from the payment service.
• The complaint reserves the right to assert additional claims. (Compl. ¶31).

U.S. Patent No. 10,643,266 - System and Method for In-app Payments (Issued May 5, 2020)

• Technology Synopsis: This patent addresses simplified payment flows specifically for in-app purchases on a mobile device. The solution involves a merchant application transmitting a payment request to a separate software module on the device (e.g., a digital wallet) via an API, which then retrieves authorized payment data from the device's memory and returns it to the application to complete the payment. (’266 Patent, Abstract).
• Asserted Claims: Independent method claim 1 is asserted. (Compl. ¶41).
• Accused Features: The accused instrumentality is Petco's iOS application, which allegedly transmits an Apple Pay Request to an Apple Pay module on an iOS device to process payments. (Compl. ¶41.a).

U.S. Patent No. 11,004,139 - System and Method for Providing Simplified In Store Purchases and In-app Purchases Using a Use-interface-based Payment API (Issued May 11, 2021)

• Technology Synopsis: This patent describes methods for simplifying payments for both in-app and in-store purchases. The in-app solution involves an application transmitting a payment request to a module on the device that controls the user interface, which then retrieves authorized payment data and returns it to the application. The in-store method involves a server transmitting an interactive interface to a user's browser for identifying and purchasing products in a brick-and-mortar store. (’139 Patent, Abstract).
• Asserted Claims: Independent method claim 25 is asserted. (Compl. ¶47).
• Accused Features: The accused instrumentality is Petco's iOS application, which allegedly transmits an Apple Pay Request to the Apple Pay module that controls the user interface on an iOS device. (Compl. ¶47.a).

U.S. Patent No. 11,461,828 - System and Method for Receiving Data at a Merchant Device From a User Device Over a Wireless Link (Issued October 4, 2022)

• Technology Synopsis: This patent is directed to point-of-sale transactions, describing a method where a communication link is established between a mobile device and a separate merchant device (e.g., a POS terminal). The method claims a specific two-part user input sequence to confirm payment: a first input comprising a physical button press, and a second input comprising a security measure like a fingerprint or facial scan, which then triggers the retrieval of payment data from the mobile device's memory. (’828 Patent, Abstract).
• Asserted Claims: Independent method claim 1 is asserted. (Compl. ¶53).
• Accused Features: The accused instrumentalities are Petco's in-store POS terminals, which allegedly establish a wireless NFC link with a customer's Apple device and are used in a process that involves a physical button press and Face ID/Touch ID authentication to complete an Apple Pay transaction. (Compl. ¶53.a).

U.S. Patent No. 11,468,497 - System and Method for Receiving Data at a Merchant Device From a User Device Over a Wireless Link (Issued October 11, 2022)

• Technology Synopsis: This patent, similar to the ’828 Patent, covers point-of-sale transactions. A merchant device establishes a wireless link with a user device, which then displays purchase information. The merchant device receives payment data after the user provides a "single-interaction" that both confirms the payment and serves as a security measure, causing the user device to retrieve the payment data from its memory. (’497 Patent, Abstract).
• Asserted Claims: Independent method claim 1 is asserted. (Compl. ¶59).
• Accused Features: The accused instrumentalities are Petco's in-store POS terminals, which allegedly use NFC to communicate with a customer's Apple device and receive payment data after the user confirms payment via a "single-interaction" using Face ID or Touch ID. (Compl. ¶¶59.a-b).

III. The Accused Instrumentality

Product Identification

• The accused instrumentalities are Petco’s website (petco.com), its iOS mobile application, and its in-store Point-of-Sale (“POS”) terminals. (Compl. ¶19).

Functionality and Market Context

• The complaint alleges that these instrumentalities all enable customers using certain Apple devices to complete purchases using the Apple Pay service. (Compl. ¶19). The complaint provides visual evidence showing the integration of Apple Pay into these platforms. Figure 1 of the complaint shows a checkout screen from Petco.com on a Mac computer prominently featuring a "Buy with Apple Pay" button. (Compl. ¶20, Fig. 1). Similarly, Figure 2 shows a screenshot from the Petco iOS app on an iPhone where an "Apple Pay" button is presented in the cart review screen. (Compl. ¶21, Fig. 2). Figure 3 provides a photograph of an NFC-enabled POS terminal at a Petco store that displays the "Apple Pay" logo to encourage its use for in-store purchases. (Compl. ¶22, Fig. 3). Plaintiff alleges that by implementing this functionality, Defendants provide a simplified and secure shopping experience. (Compl. ¶17).

IV. Analysis of Infringement Allegations

’408 Patent Infringement Allegations

Claim Element (from Independent Claim 43)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
A method comprising: receiving an interaction with a site, the site being presented in a browser;	Petco receives a customer interaction when a user clicks the "Apple Pay" button on the Petco website, which is displayed in a browser.	¶29.a	col. 52:50-52
transmitting, based on the interaction and from the site, via a browser payment request application programming interface that defines a protocol for communicating authorized payment data between the site and the browser, a request associated with a potential purchase on the site,	In response to the click, Petco's website allegedly transmits an Apple Pay Request to the customer's browser using either the Apple Pay JS API or the W3C Payment Request API.	¶29.b	col. 52:53-60
wherein the request seeks the authorized payment data and wherein the authorized payment data is usable across multiple sites;	The Apple Pay Request seeks authorized payment data from the customer's device. This data is allegedly in the form of an encrypted Apple Pay token that is usable across multiple sites.	¶29.b	col. 52:60-63
receiving the authorized payment data from the browser, via the browser payment request application programming interface; and:	Petco's website allegedly receives the requested Apple Pay authorized payment data, including the encrypted token, from the browser via the Apple Pay JS API or the W3C Payment Request API.	¶29.c	col. 52:64-67
submitting the authorized payment data to a payment processor for processing a purchase.	Petco allegedly passes the Apple Pay token and other information to its payment processor to complete the purchase.	¶29.d	col. 53:1-3

• Identified Points of Contention:
  • Scope Questions: A central question may be whether the accused "Apple Pay JS API or the W3C Payment Request API" fall within the scope of the claimed "browser payment request application programming interface." The construction of this term will be critical.
  • Technical Questions: The complaint alleges the "encrypted Apple Pay token" is "usable across multiple sites." A factual dispute may arise regarding the technical characteristics of this token and whether it is, in fact, designed for or capable of use across multiple, unaffiliated merchant sites as required by the claim.

’186 Patent Infringement Allegations

As noted in Section II, the complaint references "exemplary claim 12" but quotes the language of independent claim 32. This chart analyzes claim 32, which is explicitly quoted in the complaint.

Claim Element (from Independent Claim 32)	Alleged Infringing Functionality	Complaint Citation	Patent Citation
A method comprising: transmitting, from a site, to a browser and via a browser application programming interface that defines a protocol for communicating data between the site and a browser, a request associated with a potential purchase,	Petco's website allegedly prepares and transmits an Apple Pay Request to the customer's browser using either the Apple Pay JS API or the W3C Payment Request API in response to a customer's selection of Apple Pay.	¶35.a	col. 152:30-38
wherein the request identifies a payment service which can be used to process a payment; and:	The Apple Pay Request allegedly identifies Apple Pay as the payment service that can be used to process the payment.	¶35.a	col. 152:38-40
receiving, from the browser and via the browser application programming interface, a response to the request based on data received at the browser from the payment service, the data received being in response to a communication, based on the request, from the browser to the payment service.	Petco's website allegedly receives a response from the browser via the Apple Pay JS API or W3C Payment Request API. The complaint alleges this response is based on data (the encrypted Apple Pay token) received by the browser from a "secured location on the device" in response to a communication from the browser to that secured location.	¶35.b	col. 152:41-48

• Identified Points of Contention:
  • Technical Questions: A key question will be the source of the data received by the browser. The claim requires the browser to receive data from the payment service. The complaint alleges the browser receives data from a "secured location on the device." The case may turn on whether the "secured location on the device" is technically part of the "payment service" or a separate entity, which could create a mismatch with the claim language.
  • Scope Questions: The construction of "payment service" will be a focal point. What evidence exists to define whether this term refers to a remote server entity, a software module on the device, or a combination of both?

V. Key Claim Terms for Construction

For the ’408 Patent (Claim 43)

• The Term: "browser payment request application programming interface"
• Context and Importance: This term is the technological core of the claim. The infringement case hinges on whether the APIs that Petco actually uses (Apple Pay JS API, W3C Payment Request API) meet the definition of this term. Practitioners may focus on this term because its construction will determine whether a widely adopted industry standard (W3C Payment Request API) reads on the patent.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification states the disclosure is "novel" and covers an "updated browser having an API" for communicating payment data, suggesting the term could be interpreted broadly to cover various API implementations that achieve this goal. (’408 Patent, col. 4:1-5).
  • Evidence for a Narrower Interpretation: The specification provides specific diagrams and descriptions of the API's operation, such as Figure 17D, which illustrates a specific sequence of communications between the merchant site, browser, commerce server, and payment gateway. A defendant may argue these specific embodiments limit the term's scope to architectures that mirror these diagrams. (’408 Patent, Fig. 17D).

For the ’186 Patent (Claim 32)

• The Term: "payment service"
• Context and Importance: This term is critical because the claim requires the browser to receive data from the "payment service." The complaint alleges Apple Pay is the "payment service" but that the data is received from a "secured location on the device." The case turns on whether that "secured location" is considered part of the "payment service" or is a distinct entity.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The specification discloses embodiments where payment data is stored on a "user device," such as in a "secure element." (’186 Patent, col. 87:11-15). This could support an interpretation where the "payment service" is a distributed system that includes components on the user's device.
  • Evidence for a Narrower Interpretation: The specification also depicts the "payment service" as a remote entity, separate from the "user device/browser," such as the "payment gateway" 1752 in Figure 17E. (’186 Patent, Fig. 17E). This could support an argument that the "payment service" must be a network-based entity separate from the user device itself.

VI. Other Allegations

• Indirect Infringement: The complaint alleges inducement of infringement across all asserted patents, stating that Defendants instruct and encourage customers to use the accused instrumentalities with Apple Pay by "prominently displaying the 'Apple Pay' buy button or logo wherever Apple Pay can be used." (Compl. ¶¶26, 32, 38, 44, 50, 56). The complaint also alleges contributory infringement, asserting that the parts of the Accused Instrumentalities enabling Apple Pay payments have "no substantial non-infringing uses" and were "especially made for use in an infringing manner." (Compl. ¶¶27, 33, 39, 45, 51, 57).
• Willful Infringement: For each asserted patent, the complaint alleges willful infringement. The basis for this allegation is knowledge of the patents "since at least the date of the filing and/or service of this Complaint." (Compl. ¶23). The complaint further alleges that Defendants' continued infringement constitutes an "unjustifiably high risk" and that Defendants "could not reasonably, subjectively believe" that their actions do not constitute infringement or that the patents are invalid. (Compl. ¶¶28, 34, 40, 46, 52, 58).

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

• A core issue will be one of definitional scope: can the term "browser payment request application programming interface," as defined in the patents, be construed to cover widely-adopted, standardized APIs like Apple's JavaScript API and the W3C Payment Request API, which form the basis of the accused online payment systems?
• A key evidentiary question will be one of technical data flow: does the accused Apple Pay system, which retrieves payment data from a secure element on a user's device, align with claim language that requires the browser to receive data from a "payment service," or is there a fundamental mismatch in the claimed versus actual sequence of operations?
• A central dispute for the point-of-sale patents will be one of claim construction and factual mapping: do the user actions required by Apple Pay in a retail store—such as a double-press of a side button followed by a facial scan—meet the specific multi-part input limitations recited in claims directed to in-person wireless transactions?