More Relief For Retailers: Giftcard Patent Case Unlikely To Be Appealed As Plaintiff Is Running Out Of Money

Written by Evan Schuman
July 27th, 2011

The dozens of major retail chains that have been sued for giftcard patent violations have received more good news. As the rapidly dissolving cases against them dissolved yet further, the suing vendor released a statement saying that an appeal of an unfavorable key ruling is becoming less likely as its dollars run short.

The vendor, Card Activation Technologies (CAT), has sued quite a few major chains over the last years, including RadioShack, 7-Eleven, Nordstrom, Macy’s, Starbucks, JCPenney, Sears, OfficeMax, TJX, McDonald’s, Walgreens, Barnes & Noble, Aeropostale, Lane Bryant, Blockbuster, Fashion Bug, Cabela’s, Guess, Panera Bread, Giorgio Armani, Caché, Denny’s, Sunglass Hut Trading and the Brown Group Retail (doing business as Famous Footwear). But CAT’s position began to implode earlier this month when a federal judge invalidated all but three of its claims against the retailers. That move followed a preliminary report from the U.S. Patent Office that it was also about to invalidate all of CAT’s claims. CAT then surrendered its last claims, pending an appeal.

In a statement issued on July 22, CAT said that it expects the Patent Office to make its preliminary report final. “We anticipate that the [Patent Office] will likewise make a final determination that the ‘859 Patent is invalid. Consequently, we will be required to appeal in both the Delaware [federal court] Action and the [Patent Office] reexamination proceeding.”

The statement made clear, though, that neither appeal may ever happen.

“Although we strongly disagree with the Court’s Order and what we presume will be the findings of the PTO, we are mindful of the economic realities facing the company at this juncture,” the CAT statement said. “The realities of Card’s financial status surely impact our ability to appeal these decisions. The costs of appeal, as well as the cost of maintaining an ongoing entity, are estimated to reach $750,000.00 over the next two years. It is also important to understand that success on appeal means the action will be returned to the Delaware District Court for further proceedings regarding the validity of the patent. It is also common for the Federal Circuit Court of Appeals to affirm a trial court’s ruling without written explanation.”

CAT said it would hold a briefing on August 2. But then, as though it didn’t really want anyone to attend its briefing, it said in the statement that little would be said during the briefing. “Please bear in mind that we know, and expect, our adversaries to be listening on this call. Consequently, the company will not be inclined or able to fully disclose all of its strategies.”


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.