Recent Successes
May 6, 2013
On Friday, May 3, 2013, a federal jury returned a verdict rejecting the contentions of seven major retailers that claims of U.S. Patent Nos. 6,000,608 and 6,189,787, issued to gift card pioneer Robert E. Dorf and his company Alexsam, Inc., were invalid. The patents cover technology for activating gift cards and other prepaid card products using the standard credit card terminals deployed at retail point-of-sale locations. The verdict rebuffed the defendants’ arguments that alleged prior art systems, including the earliest point-of-sale activation (POSA) system designed by industry giant Ceridian Stored Value Systems (SVS) for Kmart, predated the novel system that Mr. Dorf made and patented. This is the third jury verdict upholding the validity of the Alexsam patents.
Fitch Even partner and Alexsam counsel Timothy P. Maloney provided these comments:
This is another important milestone in our efforts to defend and enforce Alexsam’s patent rights for this fundamental technology. In addition to the two original prosecutions in the U.S. Patent and Trademark Office (USPTO) and six subsequent reexaminations initiated in the USPTO by various industry players, the validity of Alexsam’s patents has now been reconfirmed by three separate federal juries. This result puts an end to the invalidity challenges in this court, and permits Alexsam to focus on infringement and damages.
Mr. Dorf proved out his inventions in the Fall of 1996 in a POSA system for prepaid cards that he designed and built for telecom giant MCI, Meijer, and Michigan National Bank. As the jury found, work on an equivalent POSA system built by Ceridian/SVS for Kmart did not begin until after Mr. Dorf’s system was operating successfully in the marketplace, and was not reduced to practice until at least August 1997. SVS lost the inventive race by a year. Mr. Dorf introduced this technology to the industry, not SVS or anyone else.
The jury also rejected a separate assertion that the technology of the Alexsam patents emanated from former prepaid phone card provider WorldDial Network Services, Inc. The evidence showed that Mr. Dorf conceived and developed his inventions on his own after recognizing the serious commercial drawbacks of earlier POSA offerings such as WorldDial’s.
A third challenge alleging that a software programmer was improperly omitted as a co-inventor on the Alexsam patents was also rejected. The verdict confirmed Alexsam’s position that programmer Jay Levenson of SSTi had performed only routine, non-inventive programming tasks at Mr. Dorf’s direction. Levenson’s trial testimony regarding his alleged contributions was also contradicted by SSTi’s own business records, which identified another SSTi programmer as having performed the work in question.
With the Alexsam patents having again been found valid, the litigation now shifts to seven upcoming infringement trials against the named defendants, which are Best Buy Co., Inc., Barnes & Noble, Inc., J. C. Penney Company, Inc., Toys “R” Us Inc., McDonald’s Corporation, The Gap Inc., and The Home Depot, Inc. SVS, which described itself during the trial as “one of the world’s largest processors of gift cards,” has contractual indemnity obligations to four of the defendants. According to an SVS witness who testified during public aspects of last week’s trial, Kmart—SVS’s second gift card customer—ordered over 10 million cards at the “very beginning” of its program in 1997, and SVS now provides prepaid card processing services for over 650 other customers. The Alexsam patents will not expire until July 2017.
Alexsam’s lead trial attorneys were Steven C. Schroer and Timothy P. Maloney of Fitch, Even, Tabin & Flannery and Harry “Gil” Gillam and Melissa R. Smith of Gillam & Smith in Marshall, Texas, along with Fitch Even attorneys Alison A. Richards, Joseph F. Marinelli, David A. Gosse, and Nicole L. Little.
