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`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`____________
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`____________
`
`
`
`Askeladden LLC
`Petitioner
`
`v.
`
`Sean McGhie and Brian Buchheit
`Patent Owner
`
`
`
`____________
`
`Case IPR2015-00133
`Patent 8, 297, 502
`____________
`
`
`Before SALLY C. MEDLEY, Administrative Patent Judge
`
`
`
`
`
`
`PATENT OWNER’S PRELIMINARY RESPONSE
`
`
`
`
`TABLE OF CONTENTS
`
`
`TABLE OF AUTHORITIES ………………………………………….
`LIST OF PETITIONER’S EXHIBITS ………………………………..
`LIST OF PATENT OWNERS’ EXHIBITS…………………………….
`I.
`INTRODUCTION …………………………………………..
`II.
`CLAIM CONSTRUCTION……………………………………
`III. PETITIONER’S 35 USC 103 GROUNDS DEFICIENT………
`IV.
`IMPROPER REAL PARTY OF INTEREST…………………..
`V. CONCLUSION ………………………………………………..
`
`
`
`
`Page(s)
`iii
`iv
`ix
`1
`13
`14
`53
`61
`
`
`
`ii
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`
`
`TABLE OF AUTHORITIES
`
`
`CASES
`
`
`STATUTES
`
`35 U.S.C. §103 ……………………………………………………….. 5, 41, 46
`
`Page(s)
`
`
`
`
`
`
`
`iii
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`
`
`LISTS OF EXHIBITS
`
`PETITIONER’S EXHIBITS
`
`
`1501
`
`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
`
`web site: "Air rewards"
`
`1508
`
`Wayback Machine archive dated January 4, 1997, for Citibank web
`
`site: "Citibank Cards and Services"
`
`1509
`
`Wayback Machine archive dated December 1, 1998, for American
`
`Express web site: "Rewards Cards"
`
`1510
`
`Wayback Machine archive dated June 21, 2000, for American Express
`
`
`
`iv
`
`
`
`web site: "Shopping rewards"
`
`1511
`
`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
`
`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
`
`web site: "Cruise Partners"
`
`1523
`
`S&H Green Points - About S&H (available at
`
`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
`
`web site: “Welcome to AA.com”
`
`1526
`
`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
`
`1527
`
`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.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)
`
`
`
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`
`
`viii
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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
`
`Creative Business: Substitutes and Complements
`
`2007
`
`Strategic Report for Southwest Airlines
`
`2008
`
`Using Points.com to Combine Miles and Points: A Good Deal?
`
`2009
`
`Loyalty Traveler Examines Points.com Exchange Value
`
`2010
`
`Proprietary Programs vs. Coalition Loyalty
`
`2011
`
`Declaration of Independence?
`
`The Economics Behind Customer Loyalty: Using Coalition Program
`
`2012
`
`Assets to Turbo-Charge Results
`
`2013 What Miles & Points are Worth: Airline Miles
`
`2014 MacLean Prosecution History Response of 12-02-2005
`
`2015 MacLean Prosecution History Response of 08-23-2006
`
`2016 MacLean Prosecution History Response of 03-05-2008
`
`2017 MacLean Prosecution History Response of 06-27-2011
`
`
`
`ix
`
`
`
`Email 1: from Brian Buchheit to Justin Oliver and Frank DeLucia on
`
`2018
`
`December 12, 2014, 11:41 AM
`
`2019
`
`Email 2: Response to Email 1
`
`Email 3: from Brian Buchheit to Justin Oliver on December 12, 2014,
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`12:11 PM
`
`Email 4: from Justin Oliver and Frank DeLucia to Brian Buchheit on
`
`December 22, 2014, 11:27 AM
`
`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
`
`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
`
`Email 7: Response to Justin Oliver, AskeladdenIPR and Sean McGhie
`
`from Brian Buchheit on December 31, 2014, 10:44 AM
`
`Email 8: From Justin Oliver to Brian Buchheit, AskeladdenIPR and
`
`Sean McGhie on January 13, 2015, 6:15 PM
`
`Email 9: Response to Justin Oliver, AskeladdenIPR and Sean McGhie
`
`on January 14, 2015, 8:08 AM
`
`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
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`
`
`%2024_nine%20i)
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`2035
`
`U.S. Patent No. 8,595,055 to MacLean, et al.
`
`
`
`
`
`
`
`
`xii
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`
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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, 297,
`
`502 (“the ‘502 patent”), Sean McGhie and Brian Buchheit ("Patent Owner"),
`
`hereby submits the following Preliminary Response in response to the Petition
`
`for Inter Partes Review ("IPR") Review of the ‘502 patent; Ex 1001. The ‘502
`
`patent is one of three related patents being challenged by the Petitioner in co-
`
`pending IPR petitions, the others being IPR2015-00122, IPR2015-00123,
`
`IPR2015-00124, IPR2015-00125, and IPR2015-00137. Patent owners request
`
`that the Board determines the grounds of IPR2015-00133 are deficient for
`
`reasons stated herein.
`
`
`I.
`
`
`
`
`INTRODUCTION
`
`The ‘502 patent and related patents (there are twenty eight patents total –
`
`twenty five (25) issued and three pending issue) relate to transferring a member’s
`
`loyalty points across loyalty program boundaries in accordance with an agreement
`
`between two program operators. The petition notes the substantial number of
`
`references filed for the ‘502 patent, which is a result of diligent searching of all
`
`known prior art and of properly presenting this information to the USPTO
`
`Examiner, who has examined these references using his extensive knowledge of
`
`this field and has continuously found the claimed subject matter to be patentable
`
`
`
`1
`
`
`
`over this prior art.
`
`
`
`Loyalty programs are structured marketing efforts that reward loyalty (Ex.
`
`2004) and attempt to affect future consumer behavior. This behavior is altered by
`
`providing loyalty points to members of the loyalty program, which are subject to
`
`the terms and conditions imposed by the loyalty program operator. Members can
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`earn and spend the points as guided by the program operator, and per the
`
`restrictions imposed on the program. Effectively, loyalty points are the “carrot”
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`that guides consumer behavior. Restrictions and conditions (imposed by loyalty
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`program operators after the members have earned points) are the “stick” that helps
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`mold or shape the consumer behavior.
`
`
`
`A simplistic depiction of a loyalty program used below shows that the most
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`basic elements are that loyalty programs require memberships, where members can
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`earn points in that member’s account. The points can be used to purchase rewards
`
`offered by the loyalty program.
`
`
`
`
`
`2
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`
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`Consumer behavior is shaped since a member may have an upcoming flight (in an
`
`airline loyalty program) and choose an airline that he is a member of, if he/she
`
`receives a free seat upgrade for that flight, even if the competing airline is cheaper
`
`as a default, since paying for an upgraded ticket would be more expensive in
`
`absence of the upgrade earned through point accumulation. Thus, loyalty is
`
`rewarded, and the business running the program receives a benefit of increased
`
`patronage. If a member does not meet membership criteria (established by the
`
`loyalty program operator and subject to change even after points are earned),
`
`previously earned points can expire and/or be lost entirely. (Ex. 2006 and 2007)
`
`
`
`Successful loyalty programs receive more business on average from their
`
`loyalty program members than from non-members (Ex. 2012). Consumer
`
`behavior is shaped by the programs conditions and restrictions (like requiring a
`
`certain number of points within a time period to receive a reward). To shape
`
`behavior using the “structured marketing effort” that is a traditional loyalty
`
`program, the earned points must be non-negotiable and the program operator must
`
`maintain a level of control – else the shaping of consumer behavior is sacrificed
`
`and the purpose of the of a traditional loyalty program of the ‘502 Patent is not
`
`served.
`
`This is believed to be the general context in which the patent’s innovations
`
`3
`
`
`
`
`
`
`
`are to be analyzed/assessed by one of ordinary skill in the art. With the above as a
`
`background the ‘502 patent includes material limitations to create a bridge between
`
`two different loyalty programs, each with their own program specific boundaries.
`
`
`
`In preparing this pre-se brief, the Patent Owner was explaining the basic
`
`concept to his eight year old daughter using terms that made clear sense to her (else
`
`she was just humoring her father, which is possible). My wife gives my children a
`
`“sticker” rewards when they complete math worksheets for her successfully
`
`(without screaming about it too much). This sticker reward program permits my
`
`daughter to purchase rewards with the stickers. My daughter’s school also
`
`rewards positive behavior with ‘behavior coins’ which they can use to buy little
`
`things on certain Fridays. I asked my daughter if she could use mom’s stickers to
`
`purchase things from the school store, or the opposite, which she responded “of
`
`course not daddy – they are just different.” I asked my daughter if the stickers or
`
`coins were the same as real coins (US Mint currency) or real dollars, and she
`
`laughed like I was being silly and said of course they were different, real stores
`
`accept money but not mom’s stickers or the school store coins. This simple
`
`example (provided to my daughter who was asking what daddy was working on) is
`
`a great example of loyalty programs and the non-negotiable nature of the points.
`
`My wife (and the school) both reserves the right to take away stickers (or coins) for
`
`bad behavior. The items able to be purchased from the stickers/coins are each
`
`
`
`4
`
`
`
`constrained to mom-approved or school-approved (often donated) items. The
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`stickers and/or school-coins (which are plastic fake coins in this case) are provided
`
`as part of a behavior modification system, analogous to the loyalty program
`
`systems that reward consumer loyalty.
`
`
`
`With the above as a background the ‘502 patent includes material limitations
`
`to create a bridge between two different loyalty programs, each with their own
`
`program specific boundaries.
`
`
`
`
`By default, there is no bridge between different loyalty programs. That is, a person
`
`
`
`can belong to multiple different loyalty programs but cannot spend points earned
`
`from a first loyalty program for rewards provided by a second loyalty program due
`
`to hard program boundaries. As noted above, these program boundaries are non-
`
`trivial as they exist and are required to ensure that the loyally programs can serve
`
`their intended function of shaping consumer behavior. If points were freely
`
`
`
`5
`
`
`
`transferrable and made into negotiable funds (like a baseline currency) the loyalty
`
`program loses all consumer behavior shaping effects (Ex. 2006 and 2007). That
`
`is, if earned points were “cash” currency, the flyer of the earlier example, would
`
`“cash out” their points and fly with Airline 2 (instead of Airline 1) if airline 2 (in
`
`absence of the loyalty reward incentive) offered a better cash deal for a given
`
`transaction. The persuasive force of rewards to ensure loyalty requires the
`
`existence of a program boundary, which favors patronage of a loyalty program
`
`operator’s services over those of competitors. (Ex. 2006)
`
`
`
`This persuasive force present in the example above (and a traditional loyalty
`
`program having a strong program boundary across which non-negotiable credits
`
`are not able to easily cross) is a direct result of conditions imposed upon already
`
`granted points, which lock the redemption of these loyalty points into services
`
`provided by a specific vender. The loyalty point operators do not want points to
`
`be negotiable or to be fungible across the program boundaries – else their function
`
`as a persuasive force for guiding/shaping future member behavior diminishes
`
`substantially.
`
`
`
`Another significant point with traditional loyalty programs is there is an
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`inherent tension between customer desires and those of the loyalty program
`
`operator (e.g., the business providing the program). The customer wants to
`
`minimize costs paid by the customer and to maximize the benefit received for that
`
`
`
`6
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`
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`cost. The business wants to maximize profit, which includes minimizing costs.
`
`Providing additional benefits to a customer, however, generally increases the cost
`
`to the business. Minimizing costs paid by the customer lowers the businesses
`
`profits. Ideally, the business desires to provide something of perceived customer
`
`value, which has a minimal cost to the business. This would cause that business’s
`
`services/goods to be preferred over those of a competitor without increasing the
`
`cost to the business. Loyalty programs are a vehicle used by many businesses to
`
`achieve these ends. Airlines, for example, have excess capacity (empty seats) in
`
`many of their flights some of which are premium seating. It costs the airlines
`
`nothing additional (or negligibly different) to place a person in an otherwise
`
`unused seat. Airlines, however, do not want otherwise paying customers to fill the
`
`“vacant seat” since this lowers the Airlines profits (an otherwise paying customer
`
`is converted to a non-paying one in such a situation and the airlines profit for that
`
`flight is decreased by the cost of one seat). Airline loyalty programs typically
`
`implement blackout dates to match this business specific reality around times when
`
`expected excess capacity is low (so that loyalty points cannot be used for these
`
`flights). Airlines increase the “pressure” on program members by having points
`
`expire over time and/or by requiring moderately high thresholds before points can
`
`be expended. Expiring points and usage thresholds accomplish multiple goals of
`
`the Airlines. The first is to encourage additional usages of the program to earn
`
`
`
`7
`
`
`
`sufficient points (before point expiration) to earn a customer desired reward.
`
`Additional usages (that earns points) results in increased sales/profits for the
`
`airlines. Another goal is to restrict the usage data to “burn” points on flights that
`
`the consumer may not otherwise take. Without black-out usage dates and
`
`expiration restrictions a member would most likely “hold” points to spend them on
`
`a flight they would otherwise have to pay for. The airlines prefers to permit an
`
`additional flight that would not otherwise occur (thus no profit is given up) using
`
`excess capacity (thus negligible costs are incurred from the airline perspective).
`
`Yet another advantage of setting expiration dates is breakage of points. Breakage
`
`of points is an intentional feature of many loyalty programs. By breakage, a set of
`
`previously awarded loyalty points disappear if not redeemed with a fixed time
`
`period. This is highly advantageous to loyalty program operators since they
`
`provided a customer perceived benefit (points at the time of use) without incurring
`
`a cost (zero cost for redemption of these points since they expired). So between
`
`breakage and point pressure a statistical cost of providing points as a customer
`
`incentive is significantly decreased (the airline incurs no or minimal cost for you
`
`taking an extra “trip” in an otherwise unused seat and incurs no cost for points that
`
`expire). Airlines balance the costs of administrating a loyalty program plus the
`
`costs of implementing the program (redemption costs) against the benefits
`
`(additional profit through customer behavior shaping) received from the program.
`
`
`
`8
`
`
`
`Restrictions and conditions imposed on a program, membership requirements,
`
`restrictions on a fungibility of points, the non-negotiable nature of loyalty points,
`
`and other factors are all intentionally balanced in context of a specific business
`
`when implementing a viable loyalty program (Ex. 2001, 2005, 2012).
`
`
`
`Stated differently, many “advantages” from a consumer standpoint are
`
`disadvantages from a program operator standpoint – by design. For example, as
`
`noted above expiration dates on points provide for breakage and point pressure –
`
`which are advantageous from a program operator perspective, but are not preferred
`
`by customers. Stating that it would be advantageous to remove these intentionally
`
`imposed restrictions since customers would be happier is true from a customer
`
`perspective, but not true from a loyalty operator one. One of ordinary skill
`
`implementing loyalty points would not disregard an intentionally imposed feature
`
`(expiration date, which results in lock in and point pressure to decrease operator
`
`costs) in absence of a benefit greater than the additional costs incurred by
`
`removing these restrictions. In other words, simple statements like “one of
`
`ordinary skill would modify an airline program to remove restrictions because
`
`customers would like this” are demonstrably false statements of motivation, in that
`
`such a statement ignores fundamental and intentionally implemented features of a
`
`loyalty program. If black-out dates were not an advantage to the loyalty operator –
`
`they would not be implemented in the first place. The loyalty program operator
`
`
`
`9
`
`
`
`knows that the blackout dates are not preferred by customers, nor are expiration
`
`dates on points. This is part of the tension between customers and loyalty
`
`program operators, which is an essential feature to successful traditional loyalty
`
`programs. In traditional loyalty programs with intentional features as detailed
`
`above, the non-negotiable nature of loyalty points is critical. Loyalty points of
`
`many programs are intentionally not transferrable between members or across
`
`program boundaries, since transferring points in such a manner can circumvent
`
`restrictions and conditions (like expiration dates). A customer may desire to avoid
`
`these imposed restrictions (which help shape the customer behavior in a manner
`
`intended by the program operator while lowering program costs), but one of
`
`ordinary skill in loyalty programs knowing and understanding the essential purpose
`
`of the restrictions and the resulting requirements of non-negotiability and strong
`
`program boundaries would not find such a change obvious. Such statements are
`
`analogous to a statement that blocking a fuel line of an automobile is advantageous
`
`as it will decrease fuel consumption of that vehicle and provide environmental
`
`benefits from burning less fuel. Strictly speaking, the above statement is true, but
`
`the purpose of an automobile is to permit travel and the modification (blocking
`
`fuel) cases the reference to be unsuitable for its intended purpose. One cannot
`
`take the “fuel conserving” benefits of blocking a fuel line and combine them with
`
`the transportation benefits of an automobile – as these two features are in tension
`
`
`
`10
`
`
`
`with each other. Similarly, one cannot remove or modify essential features of a
`
`loyalty program (relied upon to allow the references to operate as intended) and
`
`change them to add another (but conflicting) feature that is in tension with the first
`
`teaching. This is attempted (improperly) throughout the petition, as will be
`
`explained herein, and is improper. One of ordinary skill recognizes that non-
`
`negotiability of points is an essential feature of many loyalty programs, which is
`
`linked to restrictions and conditions. You cannot remove or change these
`
`essential features without changing the nature and operating principles of the
`
`underlying loyalty program.
`
`
`
`Two different types of loyalty programs include sole source programs
`
`(referenced in MacLean) and networked programs (like that of Postrel) (Ex. 2010).
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`Sole source programs are operated and run by a single business and by default
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`have strong program boundaries. Networked programs have many different
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`participant businesses (analogous to a storefront being a mall verses a single
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`merchant store) who give the same points which are generally redeemable to any
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`member of the network. Sole source programs are generally non-fungible, non-
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`negotiable, and have strong program boundaries, as detailed above. Networked
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`programs generally have fungible points with minimal restrictions and non-existent
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`or weak boundaries at least between network participants.
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`In the Petition, MacLean is relied upon for teaching the bridging of two
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`11
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`different loyalty point boundaries. MacLean does attempt to address this problem,
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`but does so a manner different from the claimed invention. That is, MacLean
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`requires at least two loyalty program operators to establish a cash redemption value
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`(referred to as a withdrawal value) and a point purchase value (referred to as a
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`deposit value) for their loyalty points. MacLean’s approach results in a strong
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`devaluation. (Ex. 1504 para 0064 last sentence; 2008; 2009) These values are
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`independently established by each loyalty point operator. The values apply to all
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`cash redemptions and sales, regardless of business-to-business affinities or lack
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`thereof. (Ex. 2006)
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`
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`As a networked system, Postrel’s teachings prefer weak boundaries and
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`fungible points, which is adverse to explicit claimed limitations. Postrel basically
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`has one type of “point” that is rewarded throughout the network by various
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`merchants. Postrel’s innovations are to add “branding” to this fungible type of
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`point (last sentence of para 0036). In Postrel, rewarded points must be treated as
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`cash equivalent and must have a fixed single par value (para 0063, fifth sentence
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`from the bottom). Point redemptions are also restricted to cash equivalent values,
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`since Postrel leverages an existing infrastructure of a credit card network (first
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`sentence of Abstract). Postrel, which treats points as cash equivalents (para 0077,
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`last sentence of para 0075), prefers that its disclosed network points have no
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`restrictions (last sentence para 0052; last sentence para 0036). Thus, Postrel’s
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`12
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`
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`network system is unable to minimize loyalty operator costs by providing
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`“rewards” that focus on excess capacity (i.e., proving seat upgrades and flights at
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`slow times as elaborated on above). Postrel’s system does not balance customer
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`shaping benefits against cost trying to optimize both, as do sole source loyalty
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`point systems having strong program boundaries. Hence, Postrel is a different
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`type of system not suffering from the same problems (bridging between two
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`program boundaries without harmfully disrupting the balances struck by a reward
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`system). Instead, network systems, like those detailed in Postrel, maximize
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`revenue by maximizing merchant and customer usages, since profits are obtained
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`through service fees. One of ordinary skill recognizes the differences between
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`Postel’s networked system and a sole source system with a strong boundary Ex
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`2010(noting page 2 Complete Control of Structure; Additional Revenue
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`Opportunity; and Cash Outlay For Points unique to Proprietary model not
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`the Coalition Model of Antonucci); Ex. 2011.
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`
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`II. CLAIM CONSTRUCTION
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`
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`The Petitioner’s claim construction defines the terms “entity”, “non-
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`negotiable credits,” and “entity independent funds.” For purposes of the
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`institution decision only, the Petitioner’s claim construction on these three terms
`
`may be used by the Board. (see notes re: construction in preliminary response of
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`13
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`
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`IPR2025-00123 regarding slight clarifications not believed relevant for the analysis
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`of institution approval/denial in this petition). Patent Owners expressly reserves the
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`right to challenge the claim construction asserted by the Petitioner should the IPRs
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`be instituted and should claim construction of these three terms be at issue at such
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`a time.
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`
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`Additionally, the Patent Owner asserts that the term “commerce partner”
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`should be construed to mean “an entity that is an independent entity from another
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`entity, and associated with that other in some commercial activity.” This is
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`consistent in contest of the claims with Petitioner’s definition for “entity
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`independent funds” which are defined in claims 1, 9, 17, 25 as being different
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`loyalty points of the commerce partner. The term “commerce” is to be afforded
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`some meaning. A dictionary definition of "commerce" is "The activity of buying
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`and selling, especially on a large scale". (Ex. 2002). A dictionary definition of
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`"partner" is "One that is united or associated with another or others in an activity or
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`a sphere of common interest, especially: A member of a business partnership."
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`(Ex. 2003). Thus, the ordinary meaning of "commerce partner" is: an entity that is
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`associated with another in some commercial activity. Thus, the ‘063 patent defines
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`a commerce partner to mean: an entity that is an independent entity from another
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`entity, and associated with that other in some commercial activity.
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`14
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`III. The Petition’s 35 USC 103 Grounds Are Deficient
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`A. Combination of MacLean and Postrel is Improper
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`
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`In the petition (pages 30-37), claims 4-6, 12-14, and 17-30 were are asserted
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`as unpatentable based on 35 USC 103 in view of a combination of MacLean and
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`Postrel. This combination is improper, so the relied upon grounds for claims 4-6,
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`12-14, and 17-30 fail, and the petition should not be instituted for this reason.
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`
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`To explain, MacLean provides teachings that bridge a strong boundary
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`between two different loyalty programs. These teachings require that each of two
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`or more programs establishes a deposit value and a withdrawal value for its points.
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`(para 0044, second sentence; para 0062, first sentence; para 0062 defining
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`withdrawal rate deposit rate and liability rate; para 0064, first sentence; para 0064,
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`last sentence; para 0021; para 0023, second sentence; para 0027; para 0031, last
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`sentence; para 0037). Without the deposit and withdrawal rates being established
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`that are baselined against a currency value, MacLean cannot function in
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`accordance with its declared principles of operation and MacLean cannot be used
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`for its intended purpose.
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`
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`Postrel establishes a global universal network based rewards program (para
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`0042, third sentence) that utilizes the infrastructure of a typical credit card network
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`(abstract, first sentence; para 0026 defining this infrastructure). Postrel allows its
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`network points to be “branded” (para 0030) while leveraging existing contractual
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`
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`15
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`relationships of a credit card network (para 0031). The point information
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`regardless of branding is held in a central server (para 0033). By leveraging the
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`credit card network, points must have a par value (para 0036, last sentence) and
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`points of the networked program are earned by a customer across many merchants
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`(para 0036, first sentence). Points held in the central network are redeemed by
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`swiping a credit card (last sentence of para 0039) at a POS that allows the points to
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`be used as cash equivalent at credit card accepting merchants (referenced against a
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`cash equivalent value). If a person is willing to incur credit card ‘network’ fees,
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`branded merchant points can be unbranded and turned into credit card pre-paid
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`credit, which is referred to as exchange points (para 0043, last few sentences). A
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`person could lose points because of the transaction fees to ‘unbrand’ his or her
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`points (first sentence of para 0045) because a merchant in the program typically
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`pays the transaction fees (para 0052). Without points being fungible (thereby
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`making them negotiable), they cannot be exchanged. The default fungibility of
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`points (last sentence of para 0036) and the fact that points have a cash equivalent
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`(para 0063 “The term point is used to reference any earned value that has a cash
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`equivalent or negotiable worth …” is what allows the credit card network to be
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`utilized. Branding of points can permit a “fake” number of merchant specific
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`points to be attributed to a customer. Regardless of this branding, each point has a
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`cash value, which is what the centralized system really uses. In other words a
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`16
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`pizza business can brand a dollar’s worth of exchange points “1000 Pizza points”
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`and a supermarket can brand a dollar’s worth of exchange points “200 SuperMart
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`points” (FIG. 12), yet aggregating and redeeming these points will always be
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`handled at two dollar worth (total) of exchange points each (see para 0043-0045).
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`There may be ‘unbranding’ charges (see firs
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