POS Patent Holder Sues Nordstrom, Macy’s and JCPenney

Written by Evan Schuman
April 7th, 2010

Card Activation Technologies, the same POS patent holder that has sued dozens of major chains and settled with many of them (including Sears, OfficeMax, TJX and McDonald’s), has now sued 10 more chains for handling debit card transactions in a way that too closely follows its patent.

The new defendants are Nordstrom, JCPenney, Macy’s, Lane Bryant, Blockbuster, Fashion Bug, Cabela’s, Guess, Panera Bread and Starbucks. The case was filed in the United States District Court for the Western District of Missouri.

But an attorney involved in the case suggested that JCPenney, Starbucks, Panera Bread, Guess and Cabela’s are actively discussing a settlement. Typically, such a settlement would involve the chain licensing the patent from Card Activation and then continuing its POS operations without change.

Mark J. Peterson, an attorney representing Card Activation, stressed that although 10 chains were being sued, only five have been served official papers.

He also indicated it was not because Card Activation hadn’t gotten around to it. Peterson said more information about those chains would likely be available within a couple of weeks.

Card Activation said it has sent “almost 500” letters to various retailers threatening Patent litigation.

The case revolves around Patent 6,032,859, which was issued March 7, 2000. (See the full text of the Patent.) The process envisioned a system for debit transactions, but it is also being applied to giftcard uses. When a chain handles such transactions both in-store and online, that’s where the Patent conflict crops up.


9 Comments | Read POS Patent Holder Sues Nordstrom, Macy’s and JCPenney

  1. Jestep Says:

    This is such a generic process, that the patent should never have been granted in the first place. I’m really surprised that the retailers haven’t challenged the patent’s legality, as I can only see it as overly broad and unenforceable.

  2. Dan Stiel Says:

    Sure there are legitimate patents. Others are dubious at best.

    Any retailer who has ever fallen victim to patent abuse knows it is much, much cheaper to pay-off the abuser than to spend the energy fighting them off.

    Given that, one retailer who seems especially intolerant of patent abuse and is not included on your list is Walmart. Did I miss something?

  3. Moonbeam Says:

    Patents are supposed to be issued for ideas and inventions that are new. If the target of a lawsuit can prove that a patent was issued erroneously — that the idea was already in use when the patent was filed — the patent office or a federal court can find the patent invalid.

    I’ve been installing similar systems since 1986. I’m surprised that a patent would be released for technology that had been existence for over a decade.

  4. Evan Schuman Says:

    Some of the attorneys for the retailers involved have in fact raised the invalid patent issue. But it’s that easy an argument. The Patent Office–in theory–forced the company to go through all the prior art and the other legal hoops. That patent also had a comment period and the retail attorneys would have to explain why they didn’t bring this up when they were supposed to (DURING that comment period). (This assumes they didn’t. If they DID, things look a lot brighter for them.) The other counter is essentially, “A ton of patents are fairly obvious once they’re sketched out. But if you’ve been using this process for years, why didn’t YOU try and Patent it? You either didn’t want to bother or you didn’t recognize it as being worthy of Patent protection. We did and we filed and we won and you didn’t say a word. SO you don’t have much of a leg to stand on now.”
    Not saying that I agree with that argument, but it’s one that can be made.
    On the flip side, most of these settlements are supposedly confidential. If the company is willing to settle for a low enough license fee (say, perhaps, $10?), they can say that they’ve settled with no one knowing that they caved. Then they have an impressive list of new licensees, which increases the pressure on the remaining retailers. And, yes, as Dan mentioned, it is indeed worthy of note that Wal-Mart’s name isn’t here yet.

  5. Steve Sommers Says:

    Well I’m confused. In reading the patent it appears we have been infringing on this patent since about 1989, when we first started integrating POS with the credit and debit card networks and fully integrated gift cards since 1994. This patent was issued in 2000. Should I be expecting a letter and will they ask for licesing fees prior to the patent filing date?

  6. James Lin Says:

    I think you are only responsible for periods after they notify you of the infringement.

  7. Steve Sommers Says:

    My point is, how can they patent a technology that already existed at the time? My understanding is that this is called “prior art” — unless there is some nuance within the filing that I am overlooking which makes the patent unique (but then again, maybe not).

  8. Evan Schuman Says:

    The premise of prior art is flawed, as is much of the Patent system. The obligation to find the prior art is the inventor, who has a strong incentive to not find any. It’s then opened up for comment, but unless you’ve heard of the effort, the rivals aren’t likely to know to even look. Then the Patent is issued and the “true prior art” examples get hit with Patent violation claims and they generally consider it less expensive to just pay the license fee instead of going to court.

  9. James Lin Says:

    The patent was issued in 2000, but applied in 1997 and is linked to provisional application filed in 1996. It could be improvements on existing prior art. Surely the POS debit/charge card system in stores today are not the same as that of 1994.


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