UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
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`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
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`
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`Askeladden LLC
`Petitioner
`
`v.
`
`Sean McGhie and Brian Buchheit
`Patent Owner
`
`
`
`____________
`
`Case IPR2015-00123
`Patent 8, 523, 063
`____________
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`Before SALLY C. MEDLEY, Administrative Patent Judge
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`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
`
`____________
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`
`
`Askeladden LLC
`Petitioner
`
`v.
`
`Sean McGhie and Brian Buchheit
`Patent Owner
`
`
`
`____________
`
`Case IPR2015-00123
`Patent 8, 523, 063
`____________
`
`
`
`
`
`
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`
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`
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`
`
`Before SALLY C. MEDLEY, Administrative Patent Judge
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`
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`
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`PATENT OWNER’S PRELIMINARY RESPONSE
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`
`
`
`TABLE OF CONTENTS
`
`
`Page(s)
`iii
`TABLE OF AUTHORITIES ………………………………………….
`iv
`LIST OF PETITIONER’S EXHIBITS ………………………………..
`ix
`LIST OF PATENT OWNER’S EXHIBITS…………………………….
`I.
`1
`CLAIM CONSTRUCTION……………………………………
`II.
`103 GROUNDS DEFICIENT …………………………………… 6
`III.
`IMPROPER REAL PARTY IN INTEREST…………………..
`45
`IV. CONCLUSION ………………………………………………..
`52
`
`
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`
`
`ii
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`
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`TABLE OF AUTHORITIES
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`
`Page(s)
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`CASES
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`
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`STATUTES
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`35 U.S.C. §103 ……………………………………………………….. 5, 41, 46
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`
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`
`
`iii
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`
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`LISTS OF EXHIBITS
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`PETITIONER’S EXHIBITS
`
`
`1501
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`U.S. Patent No. 8,523,063
`
`1502
`
`Declaration of Matthew Calman
`
`1503
`
`U.S. Patent Application Publication No. 2005/0021399 ("Postrel")
`
`1504
`
`U.S. Patent Application Publication No. 2002/0143614 ("MacLean")
`
`1505
`
`U.S. Patent No. 6,721,743 ("Sakakibara")
`
`1506
`
`Wayback Machine archive dated June 20, 2000, for American Express
`
`web site: "How to redeem or transfer your points online”
`
`1507
`
`Wayback Machine archive dated June 20, 2000, for American Express
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`web site: "Air rewards"
`
`1508
`
`Wayback Machine archive dated January 4, 1997, for Citibank web
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`site: "Citibank Cards and Services"
`
`1509
`
`Wayback Machine archive dated December 1, 1998, for American
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`Express web site: "Rewards Cards"
`
`1510
`
`Wayback Machine archive dated June 21, 2000, for American Express
`
`
`
`iv
`
`
`
`web site: "Shopping rewards"
`
`1511
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`Wayback Machine archive dated December 9, 2003, for Marriott
`
`Rewards web site: "Air Mileage"
`
`1512
`
`Wayback Machine archive dated November 25, 2002, for Starwood
`
`Hotels & Resorts web site: "Transfer: Airlines"
`
`1513
`
`Wayback Machine archive dated June 19, 2000, for United Airlines
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`web site: "Mileage Plus partners"
`
`1514
`
`Wayback Machine archive dated July 17, 2004, for WebFlyer web site:
`
`"Mileage Converter"
`
`1515
`
`MacDonald, Jay, Experience rewards pay off for some credit card
`
`users, Bankrate.com, November 17, 2003 (available at http: / / www.
`
`bankrate.com/finance/credit-cards /experience-rewards-pav-off-for-
`
`some-credit-card-users-i.aspx)
`
`1516
`
`Claim Construction Memorandum Opinion and Order, issued
`
`September 2, 2014, in Loyalty Conversion Systems Corp. v. American
`
`Airlines, Inc., Case No. 2:13-cv-00655 (E.D. Tex.)
`
`1517
`
`Memorandum Opinion and Order, issued September 3, 2014, in
`
`
`
`v
`
`
`
`Loyalty Conversion Systems Corp. v. American Airlines, Inc., Case
`
`No. 2:13-cv-00655 (E.D. Tex.)
`
`1518
`
`Patent Owner's Preliminary Response (Paper No. 17), in Covered
`
`Business Method Patent Review of U.S. Patent No. 8,313,023
`
`(assigned CBM2014¬00095);
`
`1519
`
`Patent Owner's Preliminary Response (Paper No. 14), in Covered
`
`Business Method Patent Review of U.S. Patent No. 835113550
`
`(assigned CBM2014¬00096)
`
`1520
`
`USPTO Assignment Records for U.S. Patent No. 8,523,063 (as of
`
`September 28, 2014)
`
`1521
`
`Wayback Machine archive dated August 16, 2000, for United Airlines
`
`web site: "Car Rental Partners"
`
`1522
`
`Wayback Machine archive dated June 20, 2000, for United Airlines
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`web site: "Cruise Partners"
`
`1523
`
`S&H Green Points - About S&H (available at
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`http://www.greenpoints.com/info/inf aboutsh.asp);
`
`1524
`
`Wayback Machine archive dated November 27, 1999, for Green Points
`
`
`
`vi
`
`
`
`"The Points You've Been Waiting For"
`
`1525
`
`Wayback Machine archive dated April 15, 1998 for American Airlines
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`web site: “Welcome to AA.com”
`
`1526
`
`Security and Exchange Commission Letter from the Chief: Accountant
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`Issues Related to Internet Operations, October 18, 1999, available at
`
`http://www.sec.gov/info/accountants/staffletters/calt1018.htm
`
`1527
`
`The Emerging Issue Task Force of the Financial Accounting Standards
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`Board ("FASB"), "Accounting for Points' and Certain Other Time-
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`Based of Volume-Based Sales Incentive Offers, and Offers for Free
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`Products or Services to be delivered in the future," Issue No. 00-22
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`(2001), available at http: / /www.fasb.orglcs /BlobServer? Blobkey=id
`
`&blobnocache=true&blobwhere= 117 5 820904 620&blobheader= a-
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`Dl2hcation/t)df&blobheadername2=Content-Length blobheadervalue1
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`=Content-Disposition&blobheadervalue2 = 79 5 6 3&blobheadervalue
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`1= filenameabs00¬22.pdf&b1obco1 urldata&blobtableMungoBlobs
`
`1528
`
`Stone, et al., User Interface Design and Evaluation, Interactive
`
`Technologies (April 29, 2005)
`
`1529
`
`U.S. Patent No. 5,513,359
`
`
`
`vii
`
`
`
`1530
`
`George Bond, “Gateways to the Internet,” Byte Magazine, pp. 229-31
`
`(Sept. 1995)
`
`viii
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`
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`
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`PATENT OWNERS’ EXHIBITS
`
`IATA Special Report – The Price of Loyalty
`
`2001
`
`2002
`
`Definition of Commerce, from Oxford
`
`2003
`
`Definition of Partner, from Yahoo
`
`2004
`
`Definition of Loyalty Program, from Wikipedia
`
`2005
`
`An Open Economy in the Loyalty Rewards Space – Good for Whom
`
`2006
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`Creative Business: Substitutes and Complements
`
`2007
`
`Strategic Report for Southwest Airlines
`
`2008
`
`Using Points.com to Combine Miles and Points: A Good Deal?
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`2009
`
`Loyalty Traveler Examines Points.com Exchange Value
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`2010
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`Proprietary Programs vs. Coalition Loyalty
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`2011
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`Declaration of Independence?
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`The Economics Behind Customer Loyalty: Using Coalition Program
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`2012
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`Assets to Turbo-Charge Results
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`2013 What Miles & Points are Worth: Airline Miles
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`2014 MacLean Prosecution History Response of 12-02-2005
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`2015 MacLean Prosecution History Response of 08-23-2006
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`2016 MacLean Prosecution History Response of 03-05-2008
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`2017 MacLean Prosecution History Response of 06-27-2011
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`
`
`ix
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`
`
`Email 1: from Brian Buchheit to Justin Oliver and Frank DeLucia on
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`2018
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`December 12, 2014, 11:41 AM
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`2019
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`Email 2: Response to Email 1
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`Email 3: from Brian Buchheit to Justin Oliver on December 12, 2014,
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`12:11 PM
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`Email 4: from Justin Oliver and Frank DeLucia to Brian Buchheit on
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`December 22, 2014, 11:27 AM
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`Email 5: Response to Email 4 from Brian Buchheit to Justin Oliver and
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`Frank DeLucia on December 22, 2014, 1:06 PM
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`Email 6: Response to Email 5 from Justin Oliver and Frank DeLucia,
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`AskeladdenIPR, and Sean McGhie on December 23, 2014, 11:24 AM
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`Email 7: Response to Justin Oliver, AskeladdenIPR and Sean McGhie
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`from Brian Buchheit on December 31, 2014, 10:44 AM
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`Email 8: From Justin Oliver to Brian Buchheit, AskeladdenIPR and
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`Sean McGhie on January 13, 2015, 6:15 PM
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`Email 9: Response to Justin Oliver, AskeladdenIPR and Sean McGhie
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`on January 14, 2015, 8:08 AM
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`IAM: New Banking Group Launches with Focus On Improving Patent
`
`Quality (available at: http://www.iam-magazine.com / Blog/ Detail.
`
`x
`
`2020
`
`2021
`
`2022
`
`2023
`
`2024
`
`2025
`
`2026
`
`2027
`
`
`
`
`
`2028
`
`2029
`
`aspx?g=972d0d5d-d116-42fd-945d-82ac28c33b3a)
`
`Patent Quality Initiative FAQ (available at:
`
`http://www.patentqualityinitiative.com/about%20pqi/faq)
`
`Patent Quality Initiative Leadership Team (available at:
`
`http://www.patentqualityinitiative.com/about%20pqi/team)
`
`The Clearing House Executive Management (available at:
`
`2030
`
`http://www.theclearinghouse.org/about-tch/tch-executives/executive-
`
`management)
`
`The Clearing House Payments Executives (available at:
`
`2031
`
`http://www.theclearinghouse.org/about-tch/tch-executives/payments-
`
`executives)
`
`The Clearing House Association Executives (available at:
`
`2032
`
`http://www.theclearinghouse.org/about-tch/tch-executives/association-
`
`executives)
`
`Press Release: “Patent Quality Initiative Launched to Facilitate Better
`
`2033
`
`Patents and Fewer Disputes”
`
`Press Release: “Patent Quality Initiative Challenges the Validity of Five
`
`2034
`
`Patents by Filing Nine IPRs” (available at:
`
`http://www.patentqualityinitiative.com/news/press%20releases/2014_oct
`
`
`
`xi
`
`
`
`%2024_nine%20i)
`
`2035
`
`U.S. Patent No. 8,595,055 to MacLean, et al.
`
`Liu, Jack C. “Bitcoin backed corporate currencies are coming”
`
`2036
`
`(available at: http://jackcliu.com/post/102166140017/bitcoin-backed-
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`corporate-currencies-are-coming)
`
`Winship, Tim “Looming Bankruptcies Threaten Airline Miles”
`
`2037
`
`(available at: http://www.smartertravel.com/travel-advice/Looming-
`
`bankruptcies-threaten-airline.html?id=10712)
`
`xii
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`
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`Pursuant to 37 C.F.R. § 42.207(a), the owners of U.S. Patent No. 8, 523,
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`063 (“the ‘063 patent”), Sean McGhie and Brian Buchheit ("Patent Owner"),
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`hereby submits the following Preliminary Response in response to the Petition
`
`for Inter Partes Review ("IPR") Review of the ‘063 patent; Ex 1001. The ‘063
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`patent is one of three related patents being challenged by the Petitioner in co-
`
`pending IPR petitions, the others being IPR2015-00122, IPR2015-00124,
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`IPR2015-00125, IPR2015-00133, and IPR2015-00137. Patent owners request
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`that the Board determines the grounds of IPR2015-00123 are deficient for
`
`reasons stated herein.
`
`I.
`
`CLAIM CONSTRUCTION
`
`In the present IPR, it is important to construe what is meant by a “loyalty
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`program of an entity” as well as a “loyalty program of a commerce partner” in
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`context of the patent and in context of the prior art relied upon in the asserted
`
`grounds.
`
`
`
`The Patent Owner defines a loyalty program of an entity to mean “a program
`
`backed by the entity” meaning the value of the loyalty points of the entity’s loyalty
`
`program is guaranteed or secured by the entity.” Similarly, the loyalty program of
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`the commerce partner means “a program backed by the commerce partner”
`
`meaning the value of the loyalty points of the commerce partner’s program is
`
`
`
`1
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`
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`guaranteed or secured by the commerce partner. An issuer of points (as opposed to
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`a distributer of points) is the company that creates the points (from nothing) then
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`backs the value of the points.
`
`
`
`One of ordinary skill in the art would use this meaning in context of the
`
`claims at issue, as evidenced by the following, for example. Ex. 2036 notes
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`“Quora credits, American Airline miles, Esso points, reddit Gold. What are these
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`things backed by? The companies that issue them”. Ex. 2037 notes “Unlike
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`dollars deposited in a checking account, which in most cases are insured by the
`
`FDIC, miles come and go with the airlines that operate the mileage program.”;
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`“Often in the case of an airline declaring bankruptcy, the miles simply disappear
`
`because when the carrier’s assets are sold, miles are viewed as a liability …”;
`
`“when Midway was a partner in the programs of Continental and Northwest, but it
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`did not operate its own program. So no miles were lost (when it went bankrupt).”
`
`Thus, per the above, Midway did not back the program’s points, so it would be
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`considered a distributor of points, not an operator. Midway was a member of a
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`networked loyalty program, which issued network points.
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`
`
`Using an analogy, US currency is currency of the US government (backed
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`by the US government). A bank may distribute US minted currency, but the US
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`government is the issuer (that backs the value of the currency). Similarly, in a
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`networked loyalty program, multiple venders may distributed program points, but
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`
`
`2
`
`
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`the network operator issues the points and backs the value of the points. Stated
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`different, a merchant providing network points is not able to create new networked
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`points from nothing, but can purchase and distribute points created or issued by a
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`network operator.
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`
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`Our specification is clearly consistent with the above proposed definition as
`
`are our claims. For example, our claims include numerous limitations consistent
`
`with Patent Owner’s proposed claim construction. Claim 1 includes “the entity
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`agrees to compensate a commerce partner by paying an amount in cash or credit
`
`for each non-negotiable credit redeemed by the commerce partner” (because the
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`entity backs the loyalty points of its program); “wherein the entity independent
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`funds are loyalty points of a different program of the commerce partner” (explicitly
`
`requires the program used to be different); “wherein the entity independent funds
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`are redeemable under terms-of-use of the different loyalty program for commerce
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`partner goods and commerce partner services”; “wherein the terms-of-use of the
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`different loyalty program does not permit commerce partner goods or commerce
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`partner services to be exchanged for the non-negotiable credits in absence of the
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`non-negotiable credits being transferred or converted into the entity independent
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`funds of the different loyalty program” (because the different entities back the
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`different types of points of the different programs); “earning additional non-
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`negotiable credits for the loyalty program member in accordance with the terms-of-
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`
`
`3
`
`
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`use of the loyalty program” (the entity establishes how members earn points, issues
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`the points in accordance with these terms added to the entity’s account maintained
`
`for the member). Other claims (independent and dependent) are consistent with
`
`the above. Thus, it is clear that numerous claimed limitations are imposed
`
`consistent with the proposed definition.
`
`
`
`Petitioner proposes claim construction for the terms “entity” “non-negotiable
`
`credits” and “entity independent funds.” These proposed definitions by the
`
`Petitioner are consistent with our proposed definitions for “loyalty program of the
`
`entity” and “loyalty program of the commerce partner.”
`
`
`
`The Petitioner notes that non-negotiable credits are accepted only by the
`
`granting entity” which more properly should state that non-negotiable credits are
`
`only accepted per terms of the loyalty program of the entity” as the entity could
`
`through its loyalty program could permit others to redeem the non-negotiable
`
`credits. In other words, the entity has backed or guaranteed the valuation of the
`
`non-negotiable credits that it issues so this entity can (and often does) establish
`
`terms for the loyalty program with regard to redemption of these entity-backed
`
`points. Our definition more closely matches the additional limitations of the
`
`claims that include in claim 1 “wherein the entity independent funds <which are
`
`limited to a different loyalty point of the commerce partner > are redeemable under
`
`terms-of-use of the different loyalty program”; claim 13 “wherein non-negotiable
`
`
`
`4
`
`
`
`credits of the non-negotiable account have been earned by the specific member
`
`through activities related to the loyalty program” “wherein the loyalty program
`
`redeems the non-negotiable credits for a restricted list of goods or services”
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`“wherein said non-negotiable credits and the entity independent funds have
`
`different restrictions-on-use established by the terms-of-use of the loyalty program
`
`and established by the terms-of-use of the different loyalty program.” This wasn’t
`
`an issue affecting the grounds asserted in the IPRs based on MacLean for purposes
`
`of the initial institution decision determination – yet this slightly broader definition
`
`is more consistent with the meaning of the claims (which is why although we
`
`previously didn’t challenge the Petitioner’s claim construction for the limited
`
`purpose of the initial institution decision, we reserved rights to challenge it later –
`
`so that no file-wrapper based limitation is inadvertently imposed on the ‘063
`
`patent; should the Board disagree we invite the Board to use the above construction
`
`for the IPR2015-00122 determination which is being concurrently decided by the
`
`same panel).
`
`
`
`With the above clarifications, the Petitioner’s claim construction on these
`
`three terms (other than the slight modification to the definition of non-negotiable
`
`credits) may be used by the Board. Patent Owners expressly reserves the right to
`
`challenge the claim construction asserted by the Petitioner should the IPRs be
`
`instituted and should claim construction of these three terms be at issue at such a
`
`
`
`5
`
`
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`time.
`
`II.
`103 GROUNDS DEFICIENT
`A. Combination of Postrel and Sakakibara is Improper
`
`
`
`Sakakibara is silent in regards to a networked loyalty program, such as the
`
`one taught by Postrel. Claims 1-5, 8-10, and 12 were asserted as being obvious in
`
`light of Postrel in view of Sakakibara. No proper motivation is provided for this
`
`combination, and the asserted grounds fail as a result.
`
`
`
`Pages 15- 19 of the Petition appears to be the only places in the Petition
`
`where support for combining Postreal in view of Sakakibara exists. Pages 15-17
`
`attempt to characterize individual teachings of Postrel and Sakakibara (in manners
`
`not necessarily accurate).
`
`
`
`Page 17 asserts “one of ordinary skill in the art would have recognized that
`
`Postrel’s individual merchant loyalty points would preferably have been accepted
`
`only by the merchant but would not have been accepted as payment with another
`
`merchant …” This is a false statement. Postrel’s entire purpose is to establish a
`
`networked loyalty program, having points accepted by multiple merchants. These
`
`points are explicitly fungible (last sentence of para 0036) and are explicitly
`
`negotiable (para 0063: “The term point is used to reference any earned value that
`
`has a cash equivalent or negotiable worth …”); See also para 0063 first sentence,
`
`para 0044, first sentence. This statement proposes a modification EXPLICILTY
`
`
`
`6
`
`
`
`adverse to the intended purpose and principle of operation of Postrel. After
`
`making this unsupported statement (page 17) no reasoning is provided for this
`
`significant change that is adverse to Postrel’s teachings. Subsequent assertions on
`
`page 17 include “Indeed, both references are directed to loyalty points earned by
`
`customer activity”. This is a statement unrelated to the proposed modification.
`
`Page 17 continues with “Second, both references describe withdrawing points from
`
`one loyalty program and converting them to another loyalty program’s points.”
`
`This is unrelated to the asserted change. Further, it is a statement of commonality,
`
`which means no change would be necessary for Postrel to possess these asserted
`
`features. Hence, it does not provide a rational underpinning to make a change to
`
`Postrel’s teachings. Page 17 continues with “While Postrel does not state in detail
`
`that loyalty points issued by a merchant are only accepted as payment by that
`
`merchant (indeed is provides directly contradictory evidence), this was a well
`
`understood feature of loyalty points, as clarified by Matthew Calman and as
`
`evidenced by Sakakibara. This is an assertion possibly suitable for “official
`
`notice” not for combining references under 35 USC 103. Moreover, the referenced
`
`declaration by the paid expert fails to provide any proper motivation and simply
`
`repeats what was stated in pages 15-19 of the Petition).
`
`
`
`Pages 18-19 characterize teachings of Postel from the Petitioner’s
`
`perspective without mentioning Sakakibara, until the last paragraph on page 19.
`
`
`
`7
`
`
`
`The last paragraph on page 19 states “Based on the teachings of the prior art
`
`discussed above, Claims 1-5, 8-10, and 12 are invalid as obvious over Postrel and
`
`Sakakibara. The obviousness of limitations not discussed in this section is readily
`
`apparent in the chart below.” At best, this is an improper conclusory statement.
`
`
`
`The Supreme Court in KSR noted that the analysis supporting a rejection
`
`under 35 U.S.C. 103 should be made explicit. The Court quoting In re Kahn, 441
`
`F.3d 977, 988, 78 USPQ2d 1329, 1336 (Fed. Cir. 2006), stated that “[R]ejections
`
`on obviousness cannot be sustained by mere conclusory statements; instead, there
`
`must be some articulated reasoning with some rational underpinning to support the
`
`legal conclusion of obviousness.” It is consistently held, such as in re Lizer
`
`(Appeal 2009-001858) that a generic benefit is not proper motivation, when no
`
`explanation is provided.
`
`
`
`The asserted grounds of rejection for claims 1-5, 8-10, and 12 (as well as 6-
`
`7, 11, and 13-20 that rely on Sakakibara for which no proper motivation has been
`
`provided) in the Petition assert a rejection of obvious without providing some
`
`articulated reasoning with some rational underpinning to support the legal
`
`conclusion of obviousness, as detailed above. The asserted grounds fail as a
`
`result, and the Board should not institute on these grounds on this basis.
`
`B. Combination of Postrel and MacLean is Improper
`
`In the petition (pages 40-44), claims 6, 7, 11, and 13-20 were are asserted as
`
`8
`
`
`
`
`
`
`
`unpatentable based on 35 USC 103 in view of a combination of Postrel (properly
`
`Postrel/Sakakibara) in view of MacLean. This combination is improper, so the
`
`relied upon grounds for claims 6, 7, 11, and 13-20 fail, and the petition should not
`
`be instituted for this reason.
`
`
`
`As an overview, Postrel describes a networked loyalty program having two
`
`different types of points, merchant points and exchange points. The networked
`
`program operator of Postrel backs both types of points. That is, even if a merchant
`
`that previously distributed the networked points goes out of business, the members
`
`of the networked program retain their points. If the networked loyalty program
`
`operator goes out of business, both types of the networked loyalty program points
`
`are forfeited (such as in an event of bankruptcy of the networked program
`
`operator). The network program operator establishes terms under which its
`
`networked loyalty program operators. The network program points are distributed
`
`by multiple venders (who have to pay the networked operator for the points and for
`
`new point originations) and redeemed by multiple venders participating in the
`
`networked loyalty program. Postrel lacks teachings for crossing the networked
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`loyalty program boundaries. That is, activities possible within the program
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`boundaries of the networked loyalty program are unrelated to our claims. They are
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`also unrelated to MacLean’s teachings, which require a transaction center, which is
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`not a program operator, to perform exchanges outside of the boundaries of any
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`
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`9
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`loyalty programs. To do so, a first set of points within program boundaries of a
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`first LP operator are converted to cash, which is a negotiable fund outside any
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`program boundaries. Then, the cash is used to purchase points within the program
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`boundaries of a different program. Each program operator must establish deposit
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`and withdrawal rates (which are cash rates for buying/selling points). The
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`attempted combination doesn’t make sense, as it forces intra-program activities to
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`be combined with an extra-program exchange. The combination would not be
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`performed by one of ordinary skill understanding the teachings of Postrel and
`
`MacLean as a result.
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`
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`To elaborate and support the above, Postrel establishes a global universal
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`network based rewards program (para 0042, third sentence) that utilizes the
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`infrastructure of a typical credit card network (abstract, first sentence; para 0026
`
`defining this infrastructure). Postrel allows its network points to be “branded”
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`(para 0030) while leveraging existing contractual relationships of a credit card
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`network (para 0031). The point information regardless of branding is held in a
`
`central server (para 0033) of Postrel’s networked loyalty program. By leveraging
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`the credit card network, points (of both types available in the networked program)
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`must have a par value (para 0036, last sentence) and points of the networked
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`program are earned by a customer across many merchants (para 0036, first
`
`sentence). Points held in the central network are redeemed by swiping a credit
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`
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`10
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`
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`card (last sentence of para 0039) at a POS that allows the points to be used as cash
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`equivalent at credit card accepting merchants (referenced against a cash equivalent
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`value). If a person is willing to incur credit card ‘network’ fees, branded
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`merchant points can be unbranded and turned into credit card pre-paid credit,
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`which is referred to as exchange points (para 0043, last few sentences). In other
`
`words, the two different types of points in Postrel’s networked loyalty program
`
`determine who (the user or a merchant) is responsible for transaction fees (of the
`
`credit card network). A person could lose points because of the transaction fees to
`
`‘unbrand’ his or her points (first sentence of para 0045) because a merchant in the
`
`program typically pays the transaction fees (para 0052), yet unbranding incurs a
`
`service fee that the user pays (which is able to be paid using the cash-value of
`
`points, causing a ‘loss’ of points). Without points being fungible (thereby making
`
`them negotiable), they cannot be exchanged per Postrel’s teachings. The default
`
`fungibility of points (last sentence of para 0036) and the fact that points have a
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`cash equivalent (para 0063 “The term point is used to reference any earned value
`
`that has a cash equivalent or negotiable worth …” is what allows the credit card
`
`network to be utilized. Branding of points can permit a “fake” number of
`
`merchant specific points to be attributed to a customer. Regardless of this
`
`branding, each point has a cash value, which is what the centralized system really
`
`uses. In other words a pizza business can brand a dollar’s worth of exchange
`
`
`
`11
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`
`
`points “1000 Pizza points” and a supermarket can brand a dollar’s worth of
`
`exchange points “200 SuperMart points” (FIG. 12), yet aggregating and redeeming
`
`these points will always be handled at two dollar worth (total) of exchange points
`
`each (see para 0043-0045). There may be ‘unbraiding’ charges (see first sentence
`
`of para 0045 and para 0046) that is a service fee. These network points regardless
`
`of branding are accumulated in a network loyalty program that includes many
`
`different retailers that issue and redeem the network points. Aggregated network
`
`points are effectively pre-paid credit card currency that are accepted by every
`
`merchant that accepts as equivalent to credit card payments (para 0047). From
`
`Postrel’s teachings, all points (merchant or exchange) are handled as if they are
`
`pegged to a single currency value on a per point basis. This is what allows points
`
`to be treated like cash by the credit card network. All redemptions are cash
`
`equivalent exchanges, which are made using a credit card. This is a significant
`
`limitation imposed on the networked loyalty program points in order to leverage
`
`the credit card infrastructure. (Therefore, concepts such as offering rewards that
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`effectively cost a loyalty point operator nothing – like rewarding otherwise unused
`
`capacity are not possible using Postrel’s networked loyalty system. Instead,
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`redemption options are restricted to cash-equivalent transactions purchased via a
`
`credit card. The fundamental equities of balancing costs verses profit from shaping
`
`consumer behavior are therefore not possible, which is the purpose of the claimed
`
`
`
`12
`
`
`
`invention – maintaining a beneficial LP that shapes behavior for an entity while
`
`softening the boundaries defined by program restrictions such as black-out dates,
`
`reward restrictions, etc. typically needed to maintain this balance. This balance is
`
`why the transactions of the claims occur across program boundaries with a
`
`commerce partner, with whom a specific relationship with the entity exists - such
`
`as the potential beneficial relationship between Hotels and Airlines, with regard to
`
`program loyalty – as discussed in the overview section.)
`
`
`
`MacLean provides teachings that bridge a strong boundary between two
`
`different loyalty programs. These teachings require that each of two or more
`
`program establishes a deposit value and a withdrawal value for its points. (para
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`0044, second sentence; para 0062, first sentence; para 0062 defining withdrawal
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`rate deposit rate and liability rate; para 0064, first sentence; para 0064, last
`
`sentence; para 0021; para 0023, second sentence; para 0027; para 0031, last
`
`sentence; para 0037). Without the deposit and withdrawal rates being established
`
`that are baselined against a currency value, MacLean cannot function in
`
`accordance with its declared principles of operation and MacLean cannot be used
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`for its intended purpose.
`
`
`
`Grounds asserted in the petition for combining Postrel and MacLean are
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`presented between pages 40 and 44. Page 41 asserts that Postrel provides
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`teachings for granting/redeeming points in a single session. Page 42 stages that
`
`
`
`13
`
`
`
`Postrel’s teachings should be combined with those of MacLean for reasons
`
`unknown (that is there is no asserted modification of Postrel being asserted and
`
`there is no asserted deficiency of Postel’s teachings that MacLean allegedly
`
`overcomes.” Page 42 states that “MacLean’s point exchange web site with a web-
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`based redemption option such as the VISA catalog link from Postrel. Postrel
`
`(without modification) includes the VISA link that it describes. Page 42 continues
`
`with “Such a combination would result in a points exchange system more
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`attractive, valuable, and responsive to members owing an increased convenience
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`and to having more redemption options available by virtue of the linked catalog.
`
`Again, Postrel (unmodified) has the linked catalog. There is no provided
`
`motivation that provides an articulated reasoning as to why Postrel’s teachings
`
`should be changed per teachings of MacLean.
`
`
`
`Page 42 then asserts that Postrel teaches a claimed limitation and asserts that
`
`MacLean also teaches this claimed limitation. If both taught the limitation, there is
`
`no reason to modify the teachings of Postrel per the teachings of MacLean. Page
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`43 then asserts that is would have been obvious to modify the teachings of
`
`MacLean and Postrel in this regard. No modification of Postrel is being is
`
`asserted. The Petition then asserts (page 43) “… because doing so ensures that
`
`Postel’s commerce partner can become notified of the conversion operation so that
`
`it would update and maintain accurate accounting records or its loyalty points
`
`
`
`14
`
`
`
`liability and confirm/ reconcile such records with any points that may be received
`
`as a result of the conversion.” In Postrel’s teachings, all accounting records are
`
`maintained by the network loyalty program operator (See abstract stating the
`
`central server of the networked loyalty program or a acquiring bank of the credit
`
`card network maintains account records; see also FIG. 12 ). No notification is
`
`required (other than the notifications that Postrel teachings per FIG. 12, 13 and
`
`corresponding specification portions). This statement fails to prove any articulated
`
`reasoning for why one would modify the teachings of Postrel per teachings of
`
`MacLean. Page 43 continues with “As both Postrel and MacLean relate to
`
`converting loyalty points of different programs, a person of ordinary skill in the art
`
`would have appreciated that communications for executing a conversion
`
`transaction, such as those taught by MacLean, are applicable towards the Postrel
`
`system to process the transactions.” Postrel does not convert loyalty points of
`
`different programs (all activities occur within the networked loyalty program,
`
`where points are generally fungable between merchants and redeeming venders).
`
`This is a conclusory statement without any articulated reasoning.
`
`
`
`Page 43-44 of the Petition states Postrel leverages a credit card network
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`(which includes VISA within it). Page 44 states that it would be obvious to
`
`combine Postreal and MacLean in this regard (undefined – so it is unsure what the
`
`modification of Postrel per MacLean’s teachings is being asserted) because doing
`
`
`
`15
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`
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`so allows a user of Postrel’s system to accumulate all of his aggregated or
`
`exchange points into a same account as points earned with the commerce partner
`
`itself, using, in one example, use of a credit card (VISA). Postrel’s network
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`system allows for the aggregation of points earned (para 0044, first sentence). This
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`statement is unrelated to any modification being made of Postrel and is therefore
`
`unrelated to modifying Postrel’s teachings with those of
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