Realsource v. Best Buy, Circuit City, Starbucks, Williams-Sonoma, Pottery Barn, Seattle's Best Coffee, Costco, Lowe's (CAFC 2007-1387, -1439) (non-precedential)

In the early 1990s, Realsource provided pay telephone services and placed pay telephones on military bases in Alaska. Appellant's Br. at 7. Due to the practical difficulties associated with collecting coins from phones located so far from its Texas headquarters, Realsource chose to use phone cards to operate these phones. Id. At the time, phone cards were preloaded with a monetary value. Because no activation was necessary to use them, the cards could be used by whoever possessed them, and they thus were sometimes stolen during the shipping process. Id.

To resolve this dilemma, Realsource devised a system that allowed it to ship phone cards without any value stored on them. Id. at 8. When a customer wished to purchase a phone card, the vendor utilized equipment including, inter alia, a card reader and a modem to activate and to add value to the card. Id. The equipment used by the card vendor communicated with Realsource's computer in Texas to accomplish this task. Id. In 1998, Realsource disclosed this invention in the '136 patent.

Reduced to its essence, a transaction following the method and apparatus taught in the patent goes as follows: First, a customer presents a debit card to a cashier. The cashier swipes the debit card through a card reader and uses her keypad to input the value that the customer wishes to add (if the debit card is being activated) or subtract (if the customer is making a purchase). The terminal sends the ID information retrieved from the card via the card reader, as well as the ID information stored on the terminal, to a computer, which then determines whether the pieces of information match and, accordingly, whether the debit card is being used at a location authorized by the retailer. If so, the cashier receives a validation message, and the transaction proceeds.

The district court construed 15 disputed terms, at which point Realsource conceded non-infringement.

Realsource appealed.

Realsource mounts its major attack on the district court's construction of the term "ID information [stored on the debit card]" as that term is used in the disputed claims. See Appellant's Br. at 22. The district court construed this term to mean "encrypted data, excluding the card number, stored on the debit card in the form of merchant ID, store ID, or terminal ID." Realsource, 514 F. Supp. 2d at 953. This construction was "dispositive of the entire case," id. at 960, because none of the defendants' debit cards are encoded with a merchant ID, store ID, or terminal ID; in fact, the only information they contain relevant to this proceeding is the card number, a piece of information specifically excluded from the district court's construction of the term. Best Buy Br. at 19; Costco Br. at 26-27; SWCP Br. at 14; see also Realsource, 514 F. Supp. 2d at 953. Furthermore, the card number stored on the defendants' cards is not encrypted. See, e.g., Costco Br. at 26.

Realsource asserts that the ordinary meaning of "ID information," in the context of data stored on the debit card, includes the card number. Appellant's Br. at 28. "ID information," when considered in isolation, perhaps does not compel the contrary conclusion reached by the district court. Neither the district court nor this court, however, is permitted to determine the meaning of a disputed claim term "in a vacuum." Medrad, Inc. v. MRI Devices Corp., 401 F.3d 1313, 1319 (Fed. Cir. 2005). Instead, we must read claims "in the context of the written description and the prosecution history." Id. These two sources, taken together, make clear that Realsource did not "regard[] its invention," 35 U.S.C. § 112, to encompass systems, such as those used by the defendants, whose debit cards contain no information other than the card number.

While the claim specified "ID information," the court interpreted it to be synonymous with "ID property."

The claims as originally submitted utilized the term "ID property," not "ID information." See Jt. Appx. at 176, 178. During prosecution, however, the patent examiner objected to the use of the word "property" because "in the ordinary sense of the word, [property] is not something that can be stored" electronically. Id. at 197. Realsource thereafter changed "property" to "information" B something that can be stored electronically B to placate the patent examiner by "more clearly defin[ing] applicants' inventive concept." Id. at 207. Realsource at no time indicated that the change was one of substance rather than semantics. In fact, the explanation of the substitution strongly suggests that the terms should be considered synonymous.

Without the "ID property/information" having the card number, non-infringement was a snap, because all the accused product debit cards simply stored the card number as the identifier.

The specification clearly demonstrates that the card number is not encompassed by the term "ID property" through its continued reference to ID property and card number as separate entities.

Realsource made a argument about claim differentiation that was off-base.

In addition, claim differentiation here has no effect on whether "ID information [stored on the debit card]" includes the card number. Realsource argues that this doctrine compels the conclusion that "ID information" in claims 1 and 5 includes the card number because dependent claims 2 and 6 cover the method of claims 1 and 5 wherein "ID information is selected [from a group] consisting of merchant ID, terminal ID, and store ID." Appellant's Br. at 26-27. As an initial matter, the doctrine of claim differentiation is a presumption, not a rigid rule. Comark Commc'n, Inc. v. Harris Corp., 156 F.3d 1182, 1187 (Fed. Cir. 1998). If a patent's specification makes clear the scope of the claim language, claim differentiation cannot be used to broaden the claim's scope. Multiform Dessicants, Inc. v. Medzam, Ltd., 133 F.3d 1473, 1480 (Fed. Cir. 1998). That aside, Realsource's argument is inherently flawed. While claim differentiation may indicate that the scope of an independent claim is broader than that of a dependent claim, Phillips, 415 F.3d at 1315, it does not speak to what exactly is encompassed by the independent claim. Thus, while claim differentiation may suggest that merchant ID, store ID, and terminal ID are not the only pieces of information that may qualify as "ID information," it does not mandate that any specific piece of information B such as the card number -- be included in the definition of the term.

Affirmed.