DCT

7:24-cv-00279

CardWare Inc v. Apple Inc

Log In

I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 7:24-cv-00279, W.D. Tex., 11/04/2024
  • Venue Allegations: Plaintiff alleges venue is proper because Defendant Apple maintains regular and established places of business in the Western District of Texas and has committed acts of infringement within the district.
  • Core Dispute: Plaintiff alleges that Defendant’s Apple Pay, Apple Wallet, and associated hardware infringe six patents related to technology for secure electronic payments, including methods for generating and using limited-use or "tokenized" payment information.
  • Technical Context: The technology at issue addresses security vulnerabilities in digital payment systems by replacing static credit card numbers with dynamic, limited-use data to protect consumers from fraud in both online and in-person transactions.
  • Key Procedural History: The complaint alleges that Defendant was aware of Plaintiff’s technology and related patents since a meeting with the inventor in 2017 and was formally put on notice of infringement on or around October 10, 2023, which may be relevant to allegations of willful infringement.

Case Timeline

Date Event
2011-12-01 CardWare Inc. founded in California
2013-03-15 Earliest Priority Date for all Asserted Patents
2017-01-01 Apple allegedly became aware of CardWare's technology
2019-07-02 U.S. Patent No. 10,339,520 Issued
2020-04-21 U.S. Patent No. 10,628,820 Issued
2020-10-20 U.S. Patent No. 10,810,579 Issued
2021-11-16 U.S. Patent No. 11,176,538 Issued
2022-05-10 U.S. Patent No. 11,328,286 Issued
2023-04-04 U.S. Patent No. 11,620,634 Issued
2023-10-10 Apple allegedly put on notice of infringement
2024-03-01 Apple Cash Virtual Card Number feature launched with iOS 17.4
2024-11-04 Complaint Filed

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

U.S. Patent No. 10,339,520 - "MULTI-FUNCTIONAL CREDIT CARD TYPE PORTABLE ELECTRONIC DEVICE," issued on July 2, 2019.

The Invention Explained

  • Problem Addressed: The patent’s background section describes the security vulnerabilities of conventional credit cards, such as those with a magnetic stripes or RFID chips, which are susceptible to theft and compromise. It also notes that more advanced smart cards are often incompatible with the widespread existing credit card reader infrastructure (ʼ520 Patent, col. 1:31-2:8).
  • The Patented Solution: The invention is a portable electronic device designed to enhance security while maintaining compatibility. It can emulate a traditional credit card by dynamically generating a programmed magnetic field that can be read by standard magnetic card readers. Its core security feature is the ability to generate a "limited-duration" or "limited-use" credit card number for a specific transaction, replacing the user's static card information and thereby reducing the risk of fraud if the transaction data is intercepted (ʼ520 Patent, Abstract; col. 2:14-30).
  • Technical Importance: This technology provided a method for implementing dynamic, token-based security for payment transactions while remaining compatible with the vast, pre-existing infrastructure of magnetic stripe readers (ʼ520 Patent, col. 2:1-8).

Key Claims at a Glance

  • The complaint asserts one or more claims, including at least independent method claim 10 (Compl. ¶37).
  • Essential elements of independent claim 10 include:
    • Accepting user input of issued payment information at a touch screen display of an electronic device.
    • Receiving wirelessly a static device account number for storage on the electronic device.
    • Dynamically generating a one-time limited-use number based on factors like user information, time, merchant, and transaction details.
    • Using the static device account number together with the dynamically generated one-time limited-use number in place of the issuer-provided payment information to make a payment transaction.
  • The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 10,628,820 - "MULTI-FUNCTION ELECTRONIC PAYMENT DEVICE," issued on April 21, 2020.

The Invention Explained

  • Problem Addressed: Like the ʼ520 Patent, this patent addresses the security risks inherent in traditional payment cards and the challenge of introducing new, secure technologies that work with legacy payment systems (ʼ820 Patent, col. 1:35-2:8).
  • The Patented Solution: The patent describes a multi-function electronic payment device and system for conducting secure transactions. The solution involves using a device to generate limited-use payment numbers (tokens) that replace static card data. It specifically claims an online payment system comprising a "thin payment device" (like a smartphone or smart card) and a "personal computing device" that work together to generate and convey this limited-use payment information for transactions (ʼ820 Patent, Abstract; col. 22:11-37).
  • Technical Importance: The invention provides a system architecture for secure online payments that leverages a user's local device to generate dynamic data, enhancing security for card-not-present transactions (ʼ820 Patent, col. 11:51-12:16).

Key Claims at a Glance

  • The complaint asserts one or more claims, including at least independent system claim 11 (Compl. ¶45).
  • Essential elements of independent claim 11 include:
    • An online payment system comprising a "thin payment device" with no fixed payment numbers visible thereon.
    • The system also comprises a "personal computing device" with a processor, memory, wireless interface, and display.
    • The system is configured to wirelessly obtain card device payment account information.
    • The processor is operable to generate limited-use payment information based on the account information.
    • The system is configured to generate and convey complete payment information, including the limited-use information, to be used in place of card issuer payment information.
  • The complaint does not explicitly reserve the right to assert dependent claims.

Multi-Patent Capsules

  • U.S. Patent No. 10,810,579

    • Patent Identification: U.S. Patent No. 10,810,579, titled “SMART TOKENIZING PAYMENT CARD AND DEVICE AND TRANSACTION PROCESSING THEREOF, SYSTEM AND METHOD,” issued on October 20, 2020 (Compl. ¶23).
    • Technology Synopsis: The patent describes systems and methods for "smart tokenizing" payment cards and devices. This technology focuses on generating and processing limited-use payment data (tokens) to secure transactions against fraud, similar to the other patents-in-suit.
    • Asserted Claims: At least independent method claim 19 (Compl. ¶53).
    • Accused Features: The complaint alleges that Apple’s systems for handling secure payments in Apple Pay and Apple Wallet, which use tokenized credentials, infringe this patent (Compl. ¶¶33, 53).

  • U.S. Patent No. 11,176,538

    • Patent Identification: U.S. Patent No. 11,176,538, titled “MULTI-FUNCTION SMART TOKENIZING ELECTRONIC PAYMENT DEVICE,” issued on November 16, 2021 (Compl. ¶25).
    • Technology Synopsis: This patent covers a multi-function electronic payment device capable of smart tokenization. The invention relates to generating dynamic, limited-duration payment numbers for transactions to enhance security over traditional static card numbers.
    • Asserted Claims: At least independent claim 19 (Compl. ¶61).
    • Accused Features: The complaint accuses Apple’s electronic payment ecosystem, including Apple Pay and Apple Wallet, of infringing by implementing similar tokenization features (Compl. ¶¶33, 61).

  • U.S. Patent No. 11,328,286

    • Patent Identification: U.S. Patent No. 11,328,286, titled “MULTI-FUNCTION ELECTRONIC PAYMENT CARD AND DEVICE SYSTEM,” issued on May 10, 2022 (Compl. ¶27).
    • Technology Synopsis: The patent describes a system involving a multi-function electronic payment card and device. The technology centers on replacing static payment information with dynamically generated, limited-use data to secure transactions.
    • Asserted Claims: At least independent claim 20 (Compl. ¶69).
    • Accused Features: The infringement allegations target Apple's products and services that facilitate secure electronic payments, such as Apple Pay and Apple Wallet (Compl. ¶¶33, 69).

  • U.S. Patent No. 11,620,634

    • Patent Identification: U.S. Patent No. 11,620,634, titled “MULTI-FUNCTION SMART TOKENIZING ELECTRONIC PAYMENT DEVICE,” issued on April 4, 2023 (Compl. ¶29).
    • Technology Synopsis: This patent relates to a smart tokenizing electronic payment device. The invention focuses on generating limited-use payment numbers for transactions to improve security, particularly for use in devices that interact with existing payment infrastructure.
    • Asserted Claims: At least independent claim 1 (Compl. ¶77).
    • Accused Features: The complaint alleges that Apple’s devices and payment platforms, which utilize tokenization for secure transactions, infringe this patent (Compl. ¶¶33, 77).

III. The Accused Instrumentality

  • Product Identification: The complaint defines the "Accused Products" as the Apple Card, Apple Cash, Apple Pay, Apple Wallet, and all Apple-branded electronic devices that support these services, including the iPhone, iPad, Apple Watch, Mac computers, and the Apple Vision Pro (Compl. ¶33).
  • Functionality and Market Context:
    • The Accused Products provide a system for users to make secure electronic payments. Users can add their existing credit or debit card information to the Apple Wallet application, which then provisions a device-specific token (often called a Device Account Number or DAN) for that card on the device (Compl. ¶¶2-3). This token, rather than the user's actual card number, is used for in-store NFC "tap-to-pay" transactions and for online payments through Apple Pay (Compl. ¶¶1, 3). The complaint alleges this functionality replaces static issued card details with limited-use payment information to protect against fraud (Compl. ¶2).
    • The complaint positions Apple as a leading manufacturer whose payment technologies are integrated across its entire product ecosystem, making them a significant force in the mobile payments market (Compl. ¶3).

IV. Analysis of Infringement Allegations

The complaint references exemplary claim charts attached as exhibits but does not include them in the filing. The infringement theory is therefore summarized below in prose based on the complaint's narrative allegations.

  • '520 Patent Infringement Allegations: The complaint alleges that the Accused Products directly infringe at least method claim 10 of the ’520 Patent (Compl. ¶37). The theory suggests that Apple's devices, when used for Apple Pay or similar services, practice the claimed method by: (1) accepting a user's payment card information via the device's touch screen; (2) wirelessly receiving a "static device account number" (which Plaintiff may equate to Apple's DAN) from payment networks for storage; and (3) for each transaction, dynamically generating a "one-time limited-use number" (which Plaintiff may equate to a transaction-specific cryptogram) and using it together with the static device account number to complete the payment, in place of the user's actual credit card details (Compl. ¶¶37, 40-41).

  • '820 Patent Infringement Allegations: The complaint alleges that the Accused Products directly infringe at least system claim 11 of the ’820 Patent (Compl. ¶45). The infringement theory appears to map Apple's ecosystem to the claimed "online payment system." Under this theory, an Apple device like an iPhone or Apple Watch functions as the "thin payment device" with no visible fixed numbers, while the device's processor and/or Apple's backend servers constitute the "personal computing device." The system is alleged to infringe by wirelessly obtaining account information, generating limited-use payment information (tokens), and conveying this information to merchants for online transactions instead of the static card issuer data (Compl. ¶¶45, 48-49).

  • Identified Points of Contention:

    • Scope Questions: A central dispute may arise over whether Apple's tokenization architecture fits the specific terminology of the claims. For the ’520 Patent, a question is whether Apple's Device Account Number (DAN) can be properly construed as a "static device account number" that is used "together with" a dynamically generated number, as the claim requires. For the ’820 Patent, a question is whether a general-purpose smartphone like an iPhone qualifies as a "thin payment device" under a proper construction of that term in light of the patent's specification.
    • Technical Questions: The infringement analysis will likely require a detailed technical comparison of the data flows and cryptographic processes. A key question for the ’520 Patent is what evidence shows that the accused system uses a static number and a dynamic number "together" in the specific manner claimed to replace the issuer information. For the ’820 Patent, a question is how the elements of the claimed "personal computing device" (processor, memory, wireless interface, display) are met by Apple's distributed system of on-device software and backend servers.

No probative visual evidence provided in complaint.

V. Key Claim Terms for Construction

  • Term from '520 Patent, Claim 10: "static device account number"

    • Context and Importance: This term appears central to the infringement theory for the ’520 Patent. Its construction will determine whether the token (Device Account Number) provisioned to an Apple device falls within the scope of the claim. The case may turn on whether Apple's DAN is considered "static" in the context of the overall transaction process.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The patent uses the term "identification data" broadly to refer to the information stored in memory that can be selected for a transaction, which could support an interpretation that encompasses various forms of tokenized identifiers (’520 Patent, col. 2:35-37).
      • Evidence for a Narrower Interpretation: The specification's focus on emulating traditional magnetic stripe cards could support an argument that the claimed "account number" must more closely resemble a traditional Primary Account Number (PAN) in its static nature, potentially distinguishing it from Apple's more complex tokenization system (’520 Patent, col. 4:35-46).

  • Term from '820 Patent, Claim 11: "thin payment device"

    • Context and Importance: Practitioners may focus on this term because the accused user-facing products are powerful, multi-function smartphones and smartwatches. The definition of "thin payment device" will be critical to determining if these general-purpose computers can be considered part of the claimed specialized "online payment system."
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: Claim 11 itself only requires that the device be "thin" and have "no fixed payment numbers visible thereon," without imposing further functional or size limitations.
      • Evidence for a Narrower Interpretation: The specification includes embodiments that depict card-like form factors or dedicated payment devices (e.g., ’820 Patent, Fig. 11). This could support a narrower construction that excludes devices, like an iPhone, whose primary purpose is not payment.

VI. Other Allegations

  • Indirect Infringement: The complaint alleges inducement of infringement, stating that Apple provides user manuals, promotional materials, and technical support that instruct and encourage its customers to use the Accused Products in a manner that practices the claimed methods (Compl. ¶¶39, 47). It also alleges contributory infringement, asserting that Apple Pay is a material component of the claimed inventions, is not a staple article of commerce, and has no substantial non-infringing use (Compl. ¶¶40, 48).
  • Willful Infringement: The complaint alleges willful infringement based on pre-suit knowledge. It claims Apple has been aware of CardWare's technology since a 2017 meeting and was explicitly notified of its infringement of the Asserted Patents on or around October 10, 2023, more than a year before the complaint was filed (Compl. ¶¶4, 36, 42).

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

  • A core issue will be one of technical scope: does Apple's implementation of payment tokenization, which uses a Device Account Number (DAN) and transaction-specific cryptograms, map onto the specific architecture described in the asserted claims, particularly the requirement in the '520 Patent for using a "static device account number" "together with" a "dynamically generated one-time limited-use number"?
  • A second key issue will be one of definitional boundaries: can the term "thin payment device" from the '820 Patent, described in a specification that includes card-like embodiments, be construed broadly enough to read on a general-purpose, multi-function device like an iPhone or Apple Watch?
  • A third central question will be one of knowledge and intent: what evidence will be presented regarding the alleged 2017 meeting and 2023 notice letter, and will it be sufficient to support the claim that Apple's alleged infringement was willful, potentially exposing it to enhanced damages?