Loyal-T Systems LLC v. American Express Company & American Express Travel…

Background

Loyal-T Systems LLC alleged that American Express Company and American Express Travel Related Services Company, Inc. infringed United States Patent Nos. 8,712,839 and 10,210,537. The patents concern systems and methods for administering customer loyalty programs using a token, a merchant’s point-of-sale system, an association network, and a separate communication network.

Loyal-T alleged that the defendants’ Plenti Program infringed Claim 1 of the ’839 patent. It also alleged that the defendants’ Membership Rewards Program infringed Claims 1 and 11 of the ’537 patent and Claim 1 of the ’839 patent. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that Loyal-T had not plausibly alleged patent infringement.

Plenti Program

The court held that Loyal-T had not plausibly alleged that the Plenti Program infringed Claim 1 of the ’839 patent. The First Amended Complaint provided factual support for only four of the claim’s seventeen elements. For the other thirteen elements, Loyal-T largely repeated the patent’s claim language and asserted, on information and belief, that the Plenti Program satisfied those elements.

The court explained that a patent complaint must give the alleged infringer notice of what activity or device is accused of infringement. A plaintiff need not prove infringement at the pleading stage, but it must provide factual allegations explaining why infringement is plausible. The court found that Loyal-T had not explained how the Plenti Program satisfied most of the claim’s limitations, including the core concept of using an existing association network. The court also rejected Loyal-T’s request for discovery because discovery is not a substitute for adequately pleading a claim.

The court therefore granted the motion to dismiss the infringement claims concerning the Plenti Program in Counts III and IV.

Membership Rewards Program

The court separately addressed the claims concerning the Membership Rewards Program.

For Claim 1 of the ’537 patent, the court focused on the requirement that the loyalty card not provide payment tender and be separate from the payment card. Loyal-T’s allegations and briefing acknowledged that an American Express credit card served both as the loyalty card and as the payment card in the Membership Rewards Program. The court held that this arrangement fell outside the plain scope of the claim. It also held that Loyal-T could not use the doctrine of equivalents to avoid the express separation requirement because doing so would eliminate that claim limitation.

For Claim 11 of the ’537 patent and Claim 1 of the ’839 patent, the court focused on language stating that the token could not be used as tender. The court concluded that the patents’ claims and specifications treated a credit card or credit card number as a possible token. Because Loyal-T identified no other feature of the Membership Rewards Program that could qualify as the token, the court treated the American Express credit card as both the token and the payment tender.

The court rejected Loyal-T’s argument that the card could function as a token first and as tender later. It reasoned that the card would remain the token even when used for payment, and that accepting Loyal-T’s interpretation would make the limitation that the token cannot be used as tender meaningless. The court also relied on the ’839 patent’s prosecution history. During patent examination, the applicant added the limitation that the token could not be used as tender to distinguish prior art in which a credit card had to be used as tender. The court held that this history disclaimed coverage of a credit card functioning as both token and tender. Because the ’537 patent resulted from a continuation application, the court held that the same disavowal applied to Claim 11 of that patent.

The court concluded that the Membership Rewards Program did not plausibly infringe Claim 1 of the ’537 patent, Claim 11 of the ’537 patent, or Claim 1 of the ’839 patent, either literally or under the doctrine of equivalents. It therefore granted the motion to dismiss the Membership Rewards claims in Counts I, II, III, and IV.

Disposition

Judge John G. Koeltl granted the defendants’ motion to dismiss the First Amended Complaint without prejudice to Loyal-T’s ability to file an amended complaint within 21 days. The order states that if Loyal-T does not file an amended complaint within 21 days, the dismissal will be with prejudice. The Clerk was directed to close all pending motions.

Classification note

This is classified as a procedural order because the court granted a Rule 12(b)(6) motion to dismiss for failure to state plausible claims, even though the court analyzed the patent allegations and claim scope.