`
`Paper No. _________
`Date Filed: ________
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`Askeladden LLC
`Petitioner
`v.
`Loyalty Conversion Systems Corporation
`Patent Owner
`_____________
`
`Case _____________
`U.S. Patent No. 8,523,063
`
`_____________
`
`PETITION FOR INTER PARTES REVIEW
`
`
`
`TABLE OF CONTENTS
`
`Table of Contents
`I.
`MANDATORY NOTICES UNDER 37 C.F.R. § 42.8(a)(1)............................... 1
`
`A.
`
`B.
`
`C.
`
`D.
`
`Real Party-in-Interest Under 37 C.F.R. § 42.8(b)(1) ................................... 1
`
`Related Matters Under 37 C.F.R. § 42.8(b)(2) ............................................. 1
`
`Lead and Back-Up Counsel Under 37 C.F.R. § 42.8(b)(3)......................... 2
`
`Service Information Under 37 C.F.R. § 42.8(b)(4)...................................... 2
`
`II.
`
`PAYMENT OF FEES UNDER 37 C.F.R. § 42.103 ............................................ 2
`
`III. GROUNDS FOR STANDING UNDER 37 C.F.R. § 42.104(a)........................ 2
`
`IV.
`
`IDENTIFICATION OF CHALLENGE UNDER 37 C.F.R. §
`42.104(b) AND RELIEF REQUESTED ............................................................... 3
`
`V.
`
`SUMMARY OF THE ’063 PATENT..................................................................... 3
`
`A.
`
`B.
`
`The Claimed Subject Matter........................................................................... 3
`
`Prosecution History ........................................................................................ 6
`
`VI.
`
`CLAIM CONSTRUCTION UNDER 37 C.F.R. § 42.104(b)(3) ......................... 6
`
`VII. ARGUMENTS ........................................................................................................... 9
`
`A.
`
`B.
`
`C.
`
`Statement of the Law...................................................................................... 9
`
`Background .................................................................................................... 10
`
`Grounds of Rejection .................................................................................. 15
`
`1.
`
`2.
`
`Ground 1: Claims 1-5, 8-10, and 12 are obvious in
`view of Postrel and Sakakibara......................................................... 15
`
`Ground 2: Claims 6, 7, 11, and 13-20 are obvious in
`view of Postrel, Sakakibara, and MacLean...................................... 40
`
`VIII. Conclusion ................................................................................................................. 60
`
`- i -
`
`
`
`EXHIBITS
`
`1001 ― U.S. Patent No. 8,523,063;
`
`1002 ― Declaration of Matthew Calman;
`
`1003 ― U.S. Patent Application Publication No. 2005/0021399 (“Postrel”);
`
`1004 ― U.S. Patent Application Publication No. 2002/0143614 (“MacLean”);
`
`1005 ― U.S. Patent No. 6,721,743 (“Sakakibara”);
`
`1006 ― Wayback Machine archive dated June 20, 2000, for American Express web
`
`site: “How to redeem or transfer your points online;”
`
`1007 ― Wayback Machine archive dated June 20, 2000, for American Express web
`
`site: “Air rewards;”
`
`1008 ― Wayback Machine archive dated January 4, 1997, for Citibank web site:
`
`“Citibank Cards and Services;”
`
`1009 ― Wayback Machine archive dated December 1, 1998, for American Express
`
`web site: “Rewards Cards;”
`
`1010 ― Wayback Machine archive dated June 21, 2000, for American Express web
`
`site: “Shopping rewards;”
`
`1011 ― Wayback Machine archive dated December 9, 2003, for Marriott Rewards
`
`web site: “Air Mileage;”
`
`1012 ― Wayback Machine archive dated November 25, 2002, for Starwood Hotels &
`
`Resorts web site: “Transfer : Airlines;”
`- ii -
`
`
`
`1013 ― Wayback Machine archive dated June 19, 2000, for United Airlines web site:
`
`“Mileage Plus partners;”
`
`1014 ― Wayback Machine archive dated July 17, 2004, for WebFlyer web site:
`
`“Mileage Converter;”
`
`1015 ― 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-pay-
`
`off-for-some-credit-card-users-1.aspx);
`
`1016 ― 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.);
`
`1017 ― Memorandum Opinion and Order, issued September 3, 2014, in Loyalty
`
`Conversion Systems Corp. v. American Airlines, Inc., Case No. 2:13-cv-00655
`
`(E.D. Tex.);
`
`1018 ― 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);
`
`1019 ― Patent Owner’s Preliminary Response (Paper No. 14), in Covered Business
`
`Method Patent Review of U.S. Patent No. 8,511,550 (assigned CBM2014-
`
`00096);
`
`- iii -
`
`
`
`1020 ― USPTO Assignment Records for U.S. Patent No. 8,523,063 (as of September
`
`28, 2014);
`
`1021 ― Wayback Machine archive dated August 16, 2000, for United Airlines web
`
`site: “Car Rental Partners;”
`
`1022 ― Wayback Machine archive dated June 20, 2000, for United Airlines web site:
`
`“Cruise Partners;”
`
`1023 ― S&H Green Points – About S&H (available at
`
`http://www.greenpoints.com/info/inf_aboutsh.asp);
`
`1024 ― Wayback Machine archive dated November 27, 1999, for Green Points “The
`
`Points You’ve Been Waiting For;”
`
`1025 ― Wayback Machine archive dated April 15, 1998 for American Airlines web
`
`site: “Welome to AA.com;”
`
`1026 ― Security and Exchange Commission Letter from the Chief: Accountant Issues
`
`Related to Internet Operations, October 18, 1999, available at
`
`http://www.sec.gov/info/accountants/staffletters/calt1018.htm;
`
`- iv -
`
`
`
`1027 ― The Emerging Issue Task Force of the Financial Accounting Standards Board
`
`(“FASB”), “Accounting for ‘Points’ and Certain Other Time-Based of
`
`Volume-Based Sales Incentive Offers, and Offers for Free Products or
`
`Services to be delivered in the future”, Issue No. 00-22 (2001), available at
`
`http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blob
`
`where=1175820904620&blobheader=application/pdf&blobheadername2=C
`
`ontent-Length&blobheadername1=Content-
`
`Disposition&blobheadervalue2=79563&blobheadervalue1=filename=abs00-
`
`22.pdf&blobcol=urldata&blobtable=MungoBlobs;
`
`1028 ― Stone et al., User Interface Design and Evaluation, Interactive Technologies
`
`(April 29, 2005);
`
`1029 ― U.S. Patent No. 5,513,359; and
`
`1030 ― George Bond, “Gateways to the Internet”, Byte Magazine, pp. 229-31 (Sept.
`
`1995).
`
`- v -
`
`
`
`Askeladden LLC petitions for Inter Partes Review (“IPR”) under 35 U.S.C. §§
`
`311-319 and 37 C.F.R. § 42 of Claims 1-20 of U.S. Patent No. 8,523,063 (“’063
`
`Patent”) (Ex 1001)1. For the reasons set forth below, there is a reasonable likelihood
`
`of finding at least one of those claims unpatentable.
`
`I.
`
`MANDATORY NOTICES UNDER 37 C.F.R. § 42.8(a)(1)
`A.
`Real Party-in-Interest Under 37 C.F.R. § 42.8(b)(1)
`
`Askeladden LLC (“Petitioner”) is the real party-in-interest for this petition.
`
`Related Matters Under 37 C.F.R. § 42.8(b)(2)
`B.
`Petitioner is concurrently filing another petition for IPR against the ’063 Patent
`
`on other grounds. To Petitioner’s knowledge, the ’063 Patent has never been the
`
`subject of any litigation.
`
`Petitioner notes that U.S. Patent Nos. 8,313,023 and 8,511,550 (“’023 Patent”
`
`and “’550 Patent,” respectively), which share common domestic priority claims with
`
`the ’063 Patent, are the subjects of covered business method (CBM) review
`
`proceedings, assigned CBM2014-00095 (“’023 CBM”) and CBM2014-00096 (“’550
`
`CBM”), respectively. The ’023 and ’550 Patents are also the subject of an infringement
`
`1 Loyalty Conversion Systems Corporation purports to be the owner of the ’063
`
`Patent by virtue of various assignments, none of which are known to have been
`
`recorded with the USPTO. (Ex 1020.) For the sake of convenience, “Patent Owner”
`
`as used herein should be deemed to refer to the actual owner(s) of the ’063 Patent.
`
`- 1 -
`
`
`
`suit in the U.S. District Court for the Eastern District of Texas, captioned as Loyalty
`
`Conversion Systems Corp. v. American Airlines, Inc., Case No. 2:13-cv-00655 (“American
`
`Airlines Litigation”).2 The present Petitioner is not a privy of any party in that
`
`litigation or the related CBMs.
`
`C.
`
`Lead and Back-Up Counsel Under 37 C.F.R. § 42.8(b)(3)
`
`LEAD COUNSEL
`
`BACK-UP COUNSEL
`
`Robert H. Fischer, Reg. No. 30,051
`
`Frank A. DeLucia, Reg. No. 42,476
`
`Fitzpatrick, Cella, Harper & Scinto
`
`Fitzpatrick, Cella, Harper & Scinto
`
`1290 Avenue of the Americas
`
`1290 Avenue of the Americas
`
`New York, NY 10104
`
`New York, NY 10104
`
`(212) 218-2100 (o)/(202) 218-2200 (f)
`(212) 218-2100 (o)/(202) 218-2200 (f)
`D.
`Service Information Under 37 C.F.R. § 42.8(b)(4)
`Petitioner consents to service by email at AskeladdenIPR@fchs.com.
`
`II.
`
`PAYMENT OF FEES UNDER 37 C.F.R. § 42.103
`
`The USPTO may charge Deposit Account No. 50-3939 for any fees associated
`
`with the present petition (referencing docket number 02208.043011).
`
`III. GROUNDS FOR STANDING UNDER 37 C.F.R. § 42.104(a)
`Petitioner certifies that the ’063 Patent is eligible for IPR and that Petitioner is
`
`2 The Court issued a Claim Construction Memorandum Opinion and Order (Ex 1016)
`
`and Memorandum Opinion and Order (Ex 1017) on Sept. 2 and 3, 2014, respectively.
`
`- 2 -
`
`
`
`not barred or estopped from requesting IPR. Neither Petitioner nor any privy thereof
`
`has been served with an infringement complaint involving the ’063 Patent.
`
`IV.
`
`IDENTIFICATION OF CHALLENGE UNDER 37 C.F.R. § 42.104(b)
`AND RELIEF REQUESTED
`
`Petitioner requests (i) review of Claims 1-20 of the ’063 Patent on the grounds
`
`set forth below and (ii) that each of those claims be found unpatentable.
`
`Ground
`
`Claim(s)
`
`Basis for Invalidity
`
`1
`
`2
`
`1-5, 8-10, and 12 Obvious (§ 103) in view of US 2005/0021399
`
`(Postrel) and US 6,721,743 (Sakakibara)
`6, 7, 11, and 13-20 Obvious (§ 103) in view of Postrel, Sakakibara, and
`
`US 2002/0143614 (MacLean)
`
`V.
`
`SUMMARY OF THE ’063 PATENT
`A.
`The Claimed Subject Matter
`The ’063 Patent has 20 claims, of which Claims 1, 8, and 13 are written in
`
`independent form. In general, the claims are directed to a method employing a
`
`computer for managing loyalty points (e.g., frequent flyer miles) issued by an entity
`
`(e.g., airline). Representative Claim 1 recites the following steps in principal part:
`
`- An entity (e.g., airline), agreeing to permit transfers or conversions of non-
`
`negotiable credits (e.g., airline miles of airline loyalty program) to entity
`
`independent funds (e.g., credit card loyalty program points) in accordance with
`
`a fixed credits-to-funds ratio (e.g., conversion/transfer based on an exchange
`
`rate between airline miles and credit card points);
`
`- 3 -
`
`
`
`-
`
`the entity agreeing to compensate a commerce partner (e.g., the credit card
`
`company) by paying an amount in cash or credit (e.g., a monetary valuation
`
`associated with the airline miles) for each non-negotiable credit redeemed by
`
`the commerce partner;
`
`- wherein the non-negotiable credits are loyalty points of a loyalty program of the
`
`entity (e.g., airline miles are loyalty points of the airline’s loyalty program),
`
`- wherein the entity independent funds are loyalty points of a different loyalty
`
`program of the commerce partner (e.g., credit card points are loyalty points of
`
`the credit card, which is not the airline);
`
`- wherein the entity independent funds are redeemable under terms-of-use of the
`
`different loyalty program for consumer partner goods or for consumer partner
`
`services (e.g., credit card points are redeemable under the credit card loyalty
`
`program’s terms-of-use towards goods or services listed in a credit card loyalty
`
`program catalog),
`
`- wherein terms-of-use of the different loyalty program does not permit
`
`commerce partner goods or commerce partner services to be exchanged for the
`
`non-negotiable credits in absence of the non-negotiable credits being
`
`transferred or converted into the entity independent funds of the different
`
`loyalty program (e.g., the credit card loyalty program prohibits purchasing its
`
`catalog goods/services using airline miles directly, without first converting to
`
`credit card loyalty program points);
`- 4 -
`
`
`
`-
`
`a computer for the loyalty program of the entity establishing an account for
`
`non-negotiable credits of a loyalty program member (a computer for the airline
`
`loyalty program establishes a customer’s airline mileage program account);
`
`-
`
`the computer detecting a set of two or more interactions earning additional
`
`non-negotiable credits for the loyalty program member in accordance with
`
`terms-of-use of the loyalty program, wherein the computer adds the additional
`
`non-negotiable credits to the account (e.g., the computer for the airline loyalty
`
`program receives at least two transactions which earn additional airline miles
`
`for the customer, and adds them to the customer’s miles balance); and
`
`-
`
`responsive to an indication of a conversion operation occurrence, the computer
`
`subtracting a quantity of the non-negotiable credits from the account, said
`
`subtracted quantity of non-negotiable credits comprising at least a quantity of
`
`non-negotiable credits that were converted or transferred to a new quantity of
`
`entity independent funds using the fixed credits-to-funds ratio (e.g., the
`
`computer for the airline loyalty program subtracts the amount of miles from
`
`the customer’s mileage account, based on those miles having been converted to
`
`credit card points).
`
`This conversion allows the user to make a purchase from the commerce partner (e.g.,
`
`via the credit card loyalty program’s catalog), who accepts as payment the converted
`
`loyalty points (i.e., credit card points) but not the pre-converted loyalty points (i.e.,
`
`airline miles).
`
`- 5 -
`
`
`
`Prosecution History
`B.
`The ’063 Patent issued from USPAN 13/863,605 (“’605 Application), filed on
`
`April 16, 2013. The ’063 Patent purports to be (1) a continuation of USPAN
`
`13/542,451 (“’451 Application”), which was filed on July 5, 2012 and issued as U.S.
`
`Patent No. 8,342,399 on January 1, 2013; (2) a continuation of USPAN 13/681,479
`
`(“’479 Application”), which was filed on November 20, 2012 and issued as U.S.
`
`Patent No. 8,684,265 on April 1, 2014; (3) a continuation of USPAN 13/681,493
`
`(“’493 Application”), which was filed on November 20, 2012 and issued as U.S.
`
`Patent No. 8,668,146 on March 11, 2014; and (4) a continuation-in-part of USPAN
`
`11/420,255 (“’255 Application”), which was filed on May 25, 2006 and issued as U.S.
`
`Patent No. 7,703,673 on April 27, 2010.
`
`Prior to initial examination, the applicants filed a terminal disclaimer over the
`
`‘479 and ‘493 Applications. The applicants also filed two Information Disclosure
`
`Statements, one concurrently with the filing of the application and the other the
`
`following day, which included over 800 citations across 4 citation forms. The PTO
`
`issued a Notice of Allowance on July 15, 2013, allowing the originally-filed claims.
`
`The applicant paid the issue fee that same day, and the patent issued on September 3,
`
`2013.
`
`VI. CLAIM CONSTRUCTION UNDER 37 C.F.R. § 42.104(b)(3)
`Petitioner submits the following constructions for the claim terms below, in
`
`accordance with their broadest reasonable interpretation. Nothing asserted herein
`
`- 6 -
`
`
`
`should be understood as waiving alternative claim constructions in any Article III
`
`litigation involving the ’063 or related patent(s) using different rules of construction.
`
`As relevant to the claims at issue herein, Petitioner is providing proposed
`
`constructions for the following claim terms:
`
`“Entity” (independent Claims 1, 8, and 13)
`
`The ’063 Patent states that entities “often reward consumers for utilizing their
`
`services with certain credits … [which] can often be applied towards products and/or
`
`services provided by a granting entity or its affiliates.” (Ex 1001, 1:32-35.) The ’063
`
`Patent also states that the invention relates to “a system … in which non-negotiable
`
`funds … earned from consumer incentive activities … are converted into negotiable
`
`funds[.]” (Ex 1001, 3:60-64.) For the purposes of this proceeding, Petitioner interprets
`
`the term to mean an organization that has a rewards program for a consumer.
`
`“Non-negotiable credits” (independent Claims 1, 8, and 13)
`
`The ’063 Patent states that non-negotiable credits “may not be redeemable on
`
`an open market” (Ex 1001, 4:17-19), “generally have no value outside of an
`
`environment (building, Web site, etc.) of the … entity” (Ex 1001, 6:36-38), and
`
`include casino credits, and hotel and car rental loyalty points. (Ex 1001, 6:38-55.) One
`
`intrinsic feature of non-negotiable credits is their “restriction on usage to goods
`
`and/or services of the [granting] entity[,]” thereby limiting their usefulness since “a
`
`consumer may have no need for the products or services listed by the entity for which
`
`the non-negotiable credits can be redeemed.” (Ex 1001, 1:39-42.) For purposes of this
`- 7 -
`
`
`
`proceeding, Petitioner interprets the term to mean credits which are accepted only by
`
`the granting entity of the credits.
`
`It is noted that the patent owner in the ’023 and ’550 CBMs proposed that this
`
`term be construed as “credits which have redemption restrictions imposed by the
`
`granting entity.” (Ex 1018, pp. 11, 15-16; Ex 1019, pp. 15-17.) However, such a
`
`construction here would be inconsistent with the ’063 Patent. The ’063 Patent states
`
`that, in addition to restricting usage to the granting entity’s goods/services,
`
`“additional restrictions and limitations can be placed upon the non-negotiable credits
`
`that lessen the usefulness of non-negotiable credits from the consumer's perspective.”
`
`(Ex 1001, 1:42-45.) As such, while additional restrictions may be imposed upon
`
`credits already constituting non-negotiable credits, the “non-negotiable” nature of the
`
`credits is defined by the usage restriction to the granting entity, and any additional
`
`restrictions or limitations are merely optional.
`
`“Entity independent funds” (independent Claims 1, 8, and 13)
`
`The ’063 Patent does not specifically define this term, but states that one
`
`problem with non-negotiable credits is that vendors “will not accept … the credits …
`
`for commercial transactions” (Ex 1001, 4:19-21), based on the inherent usage
`
`restriction of non-negotiable credits “to goods and/or services of the [granting]
`
`entity” (Ex 1001, 1:39-40). On the other hand, these various vendors accept entity
`
`independent funds. (Ex 1001, 5:5-14, 42-52.) For purposes of this proceeding,
`
`Petitioner interprets the term to mean funds acceptable as payment by at least one
`- 8 -
`
`
`
`entity different from the original granting entity of the non-negotiable credits.
`
`It is noted that the patent owner in the ’023 and ’550 CBMs proposed that this
`
`term be construed as “funds that are independent of restrictions on redemption
`
`imposed by the entity that granted the corresponding non-negotiable credits.” (Ex
`
`1018, pp. 11, 17-20; Ex 1019, pp. 15, 17-18.) However, such a construction would be
`
`inconsistent with the ’063 Patent, inasmuch as certain entity-imposed restrictions tied
`
`to the non-negotiable credits can still persist with the entity independent funds.
`
`As one of many possible examples, the ’063 Patent describes that
`
`non-negotiable credits can be airline miles, for which an airline may impose
`
`restrictions in the form of black-out dates. (Ex 1001, 6:21-27.) If airline miles of one
`
`airline (e.g., United) are converted into airline miles of another airline (e.g., Delta), the
`
`Delta miles are then entity independent funds. Yet, Delta miles could be subject to the
`
`same black-out dates as the United miles. As such, the construction of entity
`
`independent funds should rely on its plain understanding that these funds are no
`
`longer subject to the inherent restriction from non-negotiable credits of accepted only
`
`by the granting entity of the credits.
`
`VII. ARGUMENTS
`A.
`Statement of the Law
`
`The proposed grounds of rejection rely on 35 U.S.C. § 103. A claim is obvious
`
`under § 103 when “the differences between the claimed invention and the prior art
`
`are such that the claimed invention as a whole would have been obvious before the
`
`- 9 -
`
`
`
`effective filing date of the claimed invention to a person having ordinary skill in the
`
`art to which the claimed invention pertains.” 35 U.S.C. § 103(a); see KSR Int’l Co. v.
`
`Teleflex Inc., 550 U.S. 398 (2007).
`
`In that regard, a person of ordinary skill in the art at the time of May 25, 2006,
`
`would have had either (i) a Bachelor’s degree with two (2) years of experience in
`
`marketing, or (ii) a Masters of Business Administration (M.B.A.) degree or higher, as
`
`well as knowledge of Internet web page design and development, and knowledge of
`
`customer loyalty programs. (Ex 1002, ¶ 18.)
`
`As indicated above, Claim 1 includes a negative limitation. Likewise, each of
`
`the other independent claims includes a comparable negative limitation. The Board
`
`has previously ruled that silence in the reference concerning a negative limitation may
`
`fully meet the limitation. (Ex parte Cheng, Appeal 2007-0959, p. 6 (BPAI 2007) (non-
`
`precedential) (stating that silence in a reference as to whether specific data was
`
`transferred anticipated a negative limitation that the data was not transferred); Ex parte
`
`Chang, Appeal 2009-013592, pp. 7-8 (BPAI 2012).)
`
`Background
`B.
`Petitioner provides below a historical view of loyalty programs, which would
`
`have been known and understood to one of ordinary skill in the art at the time of the
`
`’063 Patent filing.
`
`Merchant Loyalty Programs
`
`As described in the expert declaration of Mr. Matthew A. Calman (Ex 1002, ¶¶
`- 10 -
`
`
`
`1-29), merchant loyalty programs have existed since at least the 1970’s. (See, e.g., Ex
`
`1023.) Common examples of such long-standing programs include airline rewards
`
`(e.g., United or American Airlines award miles) and credit card rewards (e.g.,
`
`American Express (“AMEX”) membership reward points or MBNA Mastercard
`
`points). Merchants created these loyalty programs both to entice business with new
`
`customers and to encourage repeat business by existing customers over competing
`
`merchants. (See generally, Ex 1026; Ex 1027.) Typically, customers accumulated
`
`program points in these loyalty programs through successive transactions with the
`
`respective merchant.3 For instance, in the case of airline rewards programs, a
`
`customer typically received a certain quantity of program points corresponding to the
`
`distance of a purchased flight. In the case of credit card rewards, a customer typically
`
`received a certain quantity of program points according to a value of purchases
`
`charged to the credit card. (Ex 1002, ¶¶ 24-29.)
`
`Redeeming Awards Using Loyalty Points
`
`With these loyalty programs, customers redeemed their accumulated points for
`
`rewards. (See, e.g., Ex 1024.) The prospect of redeeming for rewards drove the
`
`consumer interest in these programs. Each loyalty program had particular redemption
`
`criteria in accordance with the terms and conditions of the program. For instance, an
`
`3 The ’063 Patent refers to these points of certain loyalty programs as “non-negotiable
`
`credits” and a merchant behind a loyalty program as an “entity.” (Ex 1001, 1:29-37.)
`
`- 11 -
`
`
`
`airline rewards program may have permitted a customer to exchange a certain number
`
`of points for a free airline flight or an upgrade to an existing flight. (Ex 1025.) A credit
`
`card reward program may have permitted a customer to exchange points for
`
`merchandise, gift cards, discounts, or even cash. Customers typically redeemed their
`
`points by submitting a request and identifying the desired reward. (Ex 1002, ¶¶ 27-29.)
`
`Such redemption rewards have been in place at least as early as the 1990’s. (Ex
`
`1002, ¶ 29; Ex 1008; Ex 1009.)
`
`Loyalty Reward Redemption via Web Site
`
`To one of ordinary skill, the concept of fulfilling loyalty point redemption
`
`requests via e-commerce had already been well-established prior to the filing of the
`
`’063 Patent application. In the pre-Internet era, customers typically redeemed their
`
`points for a reward by submitting a request via mail or telephone. With the Internet
`
`becoming a platform for conducting business in the 1990’s, merchants used web sites
`
`that included user online access to their loyalty programs. With this functionality,
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`users could electronically submit a reward redemption request at their leisure by, e.g.,
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`filling out a web form in a GUI. (See, e.g., Ex 1028; Ex 1029; Ex 1030.) Alternatively,
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`the reward redemption was conducted in the form of an online checkout, using points
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`as a payment source. For instance, since at least June 2000, customers could redeem
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`AMEX membership reward points for merchandise via its web site. (Ex 1002, ¶¶ 34-
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`40; Ex 1006.)
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`In addition to the AMEX example, the concept of loyalty programs and web
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`
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`site redemptions was described in U.S. Patent Appl. Pub. No. 2005/0021399
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`(“Postrel”), which claims domestic priority as early as June 23, 1999. Postrel describes
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`loyalty programs issued by various merchants such as Smith Pizzeria, Blockbuster, and
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`GAP. (Ex 1003, ¶ [0030].) A customer redeems, for instance, Smith Pizzeria rewards
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`points, by “indicat[ing] this to the merchant at the point of sale (which may be over a
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`web site or physically at the restaurant).” (Ex 1003, ¶ [0041] (emphasis added).)
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`Loyalty Point Conversion to Another Merchant’s Store Credit
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`According to the ’063 Patent, the issuing entity may restrict redemption of
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`loyalty credits only to the entity’s own goods/services. (Ex 1001, 1:39-45.) However,
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`adaptations to work around this restriction, such as the redemption of one merchant’s
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`loyalty points for another merchant’s store credit, have been known prior to the ’063
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`Patent application. For instance, since at least June 2000, AMEX has provided an
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`option to convert its membership reward points into store credit of independent
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`merchants (e.g., Saks Fifth Avenue). (Ex 1010.) A customer was able to perform such
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`conversion online at the AMEX web site. (Ex 1006; see also Ex 1013; Ex 1014; Ex
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`1015; Ex 1021; Ex 1022.) Providing this conversion option enhanced the appeal of
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`the loyalty points, leading to increased commerce. (Ex 1002, ¶¶ 30-33.)
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`Loyalty Point Conversion to Another Merchant’s Loyalty Program Points
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`The ’063 Patent also asserted that while consumers often accumulate credits
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`across multiple credit-earning programs from different merchants, “a customer may
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`have no need for the products or services listed by the [merchant] for which” points
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`
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`from each individual program may be redeemed. (Ex 1001, 1:40-1:42.) However,
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`while loyalty point redemption at some merchants may have been limited to only their
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`own products, many merchants have, for some time, offered an option to convert
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`their loyalty points into points of another merchant’s loyalty program. (Ex 1002, ¶¶
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`30-33.)
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`For instance, since at least as early as June 2000, AMEX has given its
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`customers the option to convert their AMEX membership reward points to loyalty
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`program points for various airlines, including through an online conversion process.
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`(Ex 1006; Ex 1007; see also Ex 1011; Ex 1012.) The conversion was performed in
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`accordance with a conversion ratio of AMEX membership rewards points to airline
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`loyalty program points. (Ex 1007.) After the conversion, the customer could have
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`used the converted points to purchase an airline ticket. (Ex 1006; Ex 1007.) (Ex 1002,
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`¶¶ 32, 33.)
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`This concept was also described in Postrel, where a user can repeatedly
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`exchange individual merchant loyalty points, for instance, Smith Pizzeria rewards
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`points and Blockbuster points, into exchange points (e.g., VISA points), to use
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`aggregated exchange points “for the purpose of purchasing an item that he may
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`otherwise be unable to obtain with the points aggregation.” (Ex 1003, ¶¶ [0030];
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`[0046].)
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`As this practice of loyalty point conversion was already commonplace long
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`before the ’063 Patent filing, adaptations of this concept to specific applications
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`
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`would have been well within the skills of an ordinary artisan.
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`Similarities between Loyalty Point Conversions and Monetary Currency Conversions
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`Likewise, a person of ordinary skill would be familiar with the well-known
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`conversion between different monetary currencies. For instance, travelers have been
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`able to exchange U.S. dollars for most worldwide foreign currencies, at banks and
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`even dedicated currency exchange businesses for decades. The quantity of exchanged
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`currency is determined in accordance with a conversion ratio (i.e., exchange rate)
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`between the two currencies. (Ex 1002, ¶¶ 41-45.)
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`Given an appreciation of these foundational concepts, the person of ordinary
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`skill in the art would have regarded the subject matter claimed in the ’063 Patent as
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`clearly obvious, in view of the prior art that is discussed below. (Ex 1002, ¶¶ 46-48.)
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`C.
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`Grounds of Rejection
`1.
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`Ground 1: Claims 1-5, 8-10, and 12 are obvious in view of
`Postrel and Sakakibara
`Postrel is a U.S. patent application that published on January 27, 2005.
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`Sakakibara is a U.S. patent that issued on April 13, 2004. Both Postrel and Sakakibara
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`qualify as prior art under 35 U.S.C. § 102(b) regardless of whether the ’063 Patent is
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`entitled to its May 25, 2006 priority date. Although applicants cited Postrel and
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`Sakakibara during prosecution, applicants did not emphasize their significance from
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`the other 800-odd cited references which they cited, and there is no indication they
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`received the Examiner’s individual attention over the applicants’ other cited
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`
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`references. The Examiner did not cite any prior art or issue any prior art rejections.
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`Claims 1-5, 8-10, and 12 require an entity or commerce partner agreeing to
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`permit conversions (i.e., aggregation or exchange). Postrel describes an agreement, in
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`the form of an “exchange rate and fee structure . . . set amongst [i.e., agreed upon by]
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`the merchants [e.g., Smith Pizzeria] and the exchange server operator [e.g., VISA].”
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`(Ex 1003, ¶ [0045]; see also ¶ [0056] (“Groups of clusters may also form marketing
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`agreements amongst themselves to allow points aggregation amongst clusters.”).)
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`Claims 1-5, 8-10, and 12 require non-negotiable credits. As discussed above,
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`non-negotiable credits are credits which are accepted only by the granting entity of the
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`credits. In this regard, Postrel states that “it is also recognized that users may end up
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`with many loyalty point accounts, each having relatively small numbers of points … It
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`is therefore desired to provide a loyalty point system that allows users to aggregate
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`loyalty points earned from these various merchants into a central exchange account,
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`wherein the aggregated loyalty points may be advantageously used to purchase goods
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`or services from any merchant in the system.” (Ex 1003, ¶ [0008].) Postrel also states
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`that the individual merchant loyalty points are redeemable at the individual merchant
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`(e.g., Smith Pizzeria rewards points used to discount a meal at Smith Pizzeria). (Ex
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`1003, ¶ [0041].) In addition to redemption at the individual merchant, Postrel’s loyalty
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`points may be subject to a “restriction on use.” (Ex 1003, ¶ [0032].) Postrel’s
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`merchant loyalty points are consistent with the general concept that loyalty points
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`earned from one merchant (e.g., United Airlines or Macy’s) could not be redeemed
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`
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`for goods or services at another merchant (e.g., Delta Airlines or Bloomingdale’s),
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`which has long been the standard practice. (Ex 1002, ¶¶ 51-53, 96-98.) Moreover,
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`such concept is explicitly disclosed in Sakakibara.
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`Sakakibara describes a system that allows a user to convert loyalty points of a
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`first entity into those of a second entity, in accordance with a fixed credits-to-funds
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`ratio. (Ex 1005, Abstract; 7:7-10.) Claim 9 of Sakakibara states that, prior to
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`conversion, loyalty points issued by a first entity are only redeemable at that entity
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`(i.e., they are non-negotiable). (Ex 1005, 12:64-13:30.) Sakakibara thus explicitly
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`describes that, absent conversion, a second entity (i.e., a commerce partner) does not
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`accept the non-negotiable credits as payment for the second entity’s goods or services
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`(a negative limitation, see Section VII(A), supra) (Ex 1002, ¶¶ 53, 98.)
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`One of ordinary skill in the art would have recognized that Postrel’s individual
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`merchant loyalty points would preferably have been accepted only by the merchant,
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`but would not have been accepted as payment with another merchant, based on the
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`explicit teachings of Sakakibara, which also relates to the general principles of loyalty
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`programs. Indeed, both references are directed to loyalty points earned by customer
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`activity. Second, both references describe withdrawing points f