Wolverine Barcode IP LLC v. Costco Wholesale Corp

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Wolverine Barcode IP LLC (Texas)
  • Defendant: Costco Wholesale Corporation (Washington)
  • Plaintiff’s Counsel: Ramey LLP
• Case Identification: 7:24-cv-00307, W.D. Tex., 11/27/2024
• Venue Allegations: Plaintiff alleges venue is proper because Defendant maintains a regular and established place of business in the district and has committed acts of infringement there.
• Core Dispute: Plaintiff alleges that Defendant’s systems for conducting offline commercial transactions using a barcode for personal identification infringe a patent related to using a unique "User ID Barcode" as an alternative to conventional payment methods.
• Technical Context: The technology provides a method for processing payments by scanning a barcode linked to a user's account, aiming to circumvent the costs and hardware requirements of traditional credit card or NFC-based systems, especially for low-value "micro-payments."
• Key Procedural History: Plaintiff identifies itself as a non-practicing entity and notes that its predecessors-in-interest have entered into settlement licenses with other entities. The complaint argues at length that the patent marking requirements of 35 U.S.C. § 287(a) do not apply, asserting that no licensee produced a "patented article" and that it will limit its claims to method claims if necessary.

Case Timeline

Date	Event
2010-09-21	’689 Patent Priority Date
2016-03-08	’689 Patent Issue Date
2024-11-27	Complaint Filing Date

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

U.S. Patent No. 9,280,689 - "Method and Apparatus for Conducting Offline Commerce Transactions"

• Patent Identification: U.S. Patent No. 9,280,689, “Method and Apparatus for Conducting Offline Commerce Transactions,” issued March 8, 2016.

The Invention Explained

• Problem Addressed: The patent addresses the inefficiency of using conventional credit cards for "micro payment" purchases, where transaction processing costs can be prohibitively high. It also notes the limitations of emerging RFID and NFC technologies, which required specialized readers not yet widely deployed at vendor sites. (’689 Patent, col. 1:23-43).
• The Patented Solution: The invention proposes a system where a user is identified by a unique barcode ("User ID Barcode") generated from a personal identifier, such as a cell phone number. This barcode is distinguished from product barcodes by a "special character." This allows ubiquitous point-of-sale barcode scanners to capture the user's identity, which is then sent to a central "User Vendor Management Server" (UVM) to process the transaction against a pre-funded or credit-based account, bypassing traditional credit card networks. (’689 Patent, Abstract; col. 2:34-52). The overall system architecture is depicted in Figure 1(b). (’689 Patent, Fig. 1(b)).
• Technical Importance: The claimed method sought to enable fast, low-cost electronic payments for small-value goods by leveraging existing, widespread retail infrastructure (barcode scanners) rather than requiring vendors to invest in new, specialized hardware. (’689 Patent, col. 2:48-52).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 2-3. (Compl. ¶8).
• Independent Claim 1 recites a multi-step method for conducting offline electronic commerce transactions, with key elements including:
  • Providing a personal code to a user.
  • Converting the personal code into a "User ID Barcode" that includes a "special character" to distinguish it from a product barcode.
  • Storing the personal code in a "User Vendor Management Server" and establishing a user account with a credit limit.
  • At a vendor, scanning product barcodes and the User ID Barcode.
  • A vendor server detecting the User ID Barcode and forwarding it with the purchase price to the User Vendor Management Server.
  • The User Vendor Management Server comparing the price with the user's available funds and, if sufficient, sending an approval signal back to the vendor.
  • Repeating these steps for subsequent purchases. (’689 Patent, col. 17:31-18:29).
• The complaint reserves the right to assert additional claims. (Compl. ¶9).

III. The Accused Instrumentality

Product Identification

• The complaint accuses Defendant’s "systems, products, and services that conducting offline transactions that use a barcode as a method of personal identification." (Compl. ¶8).

Functionality and Market Context

• The complaint alleges that Defendant "maintains, operates, and administers" systems that allow for offline transactions using a barcode for identification. (Compl. ¶8). The complaint does not provide further technical details about the operation of the accused systems or their specific market context beyond alleging that Defendant put the claimed inventions "into service." (Compl. ¶8).

IV. Analysis of Infringement Allegations

The complaint references a claim chart in "Exhibit B" to support its infringement allegations but does not attach the exhibit. (Compl. ¶9). The narrative theory asserts that Defendant’s systems for conducting offline barcode-based transactions directly infringe claims 1-3 of the ’689 Patent by performing the steps of the claimed method. (Compl. ¶8). The complaint further alleges that "but for Defendant's actions, the claimed-inventions embodiments involving Defendant's products and services would never have been put into service." (Compl. ¶8).

No probative visual evidence provided in complaint.

V. Key Claim Terms for Construction

• The Term: "User Vendor Management Server" (UVM Server)

• Context and Importance: This term defines the central processing hub of the claimed invention. The infringement analysis will depend on whether Costco's backend transaction processing architecture performs the functions ascribed to the "UVM Server." Practitioners may focus on whether the functions of the claimed server can be met by a distributed system or if they must reside in a single, monolithic apparatus.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification describes the UVM Server functionally as a server for "the management of users and vendors" that "processes all purchasing transactions between the user and the vendor." (’689 Patent, col. 3:26-29). This functional language could support an interpretation covering a variety of hardware architectures, including distributed or cloud-based systems that collectively perform these roles.
  • Evidence for a Narrower Interpretation: Figure 4(b) depicts the "UVM server computer 450" as a discrete component containing specific databases for users, products, and vendors. (’689 Patent, Fig. 4(b), col. 12:31-37). This could support an argument that the term requires a more integrated or co-located system than what may be present in the accused instrumentality.

• The Term: "special character"

• Context and Importance: This term is critical for distinguishing a user's identification barcode from a product barcode, which is a key step in the claimed method. The dispute will likely center on what qualifies as a "special character" and whether the accused system uses a technically equivalent mechanism.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification states the character is required "so that the system can distinguish the User ID Barcode from the product data barcode." (’689 Patent, col. 3:19-22). This purpose-driven definition could be read broadly to encompass not just a literal non-alphanumeric symbol but also specific data formats, prefixes, or other structural indicators that achieve the same distinguishing function.
  • Evidence for a Narrower Interpretation: The patent provides a specific example: "a special character such as ‘?’ before they are converted into the barcode format." (’689 Patent, col. 3:15-18). An argument could be made that the term is limited to a prefix in the form of a non-alphanumeric symbol added to the underlying data string prior to barcode generation.

VI. Other Allegations

• Indirect Infringement: The complaint alleges both induced and contributory infringement. It claims Defendant induces infringement by actively encouraging or instructing customers on how to use its products and services to perform the infringing methods. (Compl. ¶10). It alleges contributory infringement on the same basis, adding the assertion that there are "no substantial noninfringing uses" for the accused systems. (Compl. ¶11).
• Willful Infringement: The complaint alleges that Defendant has known of the patent "from at least the filing date of the lawsuit." (Compl. ¶¶ 10, 11). The prayer for relief seeks a finding of willfulness and treble damages if discovery reveals pre-suit knowledge or based on post-suit conduct. (Compl. p. 6, ¶e). This suggests the primary basis for the willfulness claim is post-filing continuation of the allegedly infringing activity.

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

• A central issue will be one of architectural correspondence: does Costco’s potentially distributed, modern backend infrastructure for processing digital membership card transactions constitute the specific, centralized "User Vendor Management Server" architecture recited and depicted in the ’689 patent?
• A key technical question will be one of functional implementation: how does the accused system distinguish a user's barcode from a product barcode, and does that mechanism meet the "special character" limitation as it would likely be construed by the court?
• A significant legal battle may focus on damages and pre-suit conduct: given the Plaintiff’s status as a non-practicing entity and its detailed arguments regarding prior settlements, a core dispute will likely involve whether the patent marking statute (35 U.S.C. § 287) limits pre-suit damages and how that history influences the calculation of a reasonable royalty.