Filed on behalf of: Askeladden LLC
`
`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. 8,540,152
`
`_____________
`
`DECLARATION OF MATTHEW CALMAN
`
`ASKELADDEN 1502
`
`

`

`TABLE OF CONTENTS
`
`I.
`
`II.
`
`III.
`
`IV.
`
`Introduction ..................................................................................................1
`
`Professional Background ..............................................................................1
`
`A.
`
`B.
`
`C.
`
`Education............................................................................................2
`
`Professional Career .............................................................................2
`
`Honors, Awards, Publications, and Speeches......................................6
`
`Basis for Opinion..........................................................................................7
`
`Technical Background ................................................................................12
`
`A.
`
`B.
`
`C.
`
`D.
`
`Loyalty Programs..............................................................................13
`
`Conversion of Loyalty Points............................................................15
`
`Loyalty Programs and the Internet ....................................................18
`
`Comparison with Monetary Currency Conversion ............................20
`
`V.
`
`The ’152 Patent...........................................................................................22
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`F.
`
`G.
`
`H.
`
`I.
`
`J.
`
`Claim 1 .............................................................................................24
`
`Claim 2 .............................................................................................46
`
`Claim 3 .............................................................................................48
`
`Claim 4 .............................................................................................50
`
`Claim 5 .............................................................................................55
`
`Claim 6 .............................................................................................61
`
`Claim 7 .............................................................................................62
`
`Claim 8 .............................................................................................86
`
`Claim 9 .............................................................................................88
`
`Claim 10 ...........................................................................................89
`
`- i -
`
`

`

`K.
`
`L.
`
`M.
`
`N.
`
`O.
`
`P.
`
`Q.
`
`R.
`
`S.
`
`T.
`
`Claim 11 ...........................................................................................90
`
`Claim 12 ...........................................................................................93
`
`Claim 13 ...........................................................................................96
`
`Claim 14 .........................................................................................124
`
`Claim 15 .........................................................................................125
`
`Claim 16 .........................................................................................125
`
`Claim 17 .........................................................................................126
`
`Claim 18 .........................................................................................127
`
`Claim 19 .........................................................................................128
`
`Claim 20 .........................................................................................129
`
`- ii -
`
`

`

`I, Matthew Calman, of Charlotte, North Carolina, declare that:
`
`I.
`
`1.
`
`Introduction
`
`In view of my scientific and technical knowledge relating to financial
`
`services, I have been retained in this Inter Partes Review as an independent expert
`
`to provide my opinions on the subject matter recited in the claims of U.S. Patent
`
`No. 8,540,152 (“‘152 Patent”), particularly in view of the state of the field at the
`
`time of the filing of that patent and various publications (“references”) that predate
`
`the priority date.
`
`II.
`
`2.
`
`Professional Background
`
`I am currently Managing Director of Calman & Co. LLC, a consulting
`
`practice focused on innovation management and intellectual property for financial
`
`services. I am a member of the steering committee of the Federal Reserve Mobile
`
`Payments Industry Workgroup, which was formed by the Federal Reserve Banks
`
`of Boston and Atlanta to facilitate formations of an effective and secure mobile
`
`payments environment in the United States. I am also a board member of the
`
`Association of Managers of Innovation and its affiliated AMI Foundation.
`
`- 1 -
`
`

`

`A.
`
`Education
`
`3.
`
`I attended Carnegie Mellon University from 1982-1985 for applied
`
`mathematics. In 1999, I obtained my Master of Business Administration from
`
`Georgia State University’s Executive MBA program.
`
`B.
`
`Professional Career
`
`4.
`
`From 1985 until 1986, I was employed as a systems converter at Premier
`
`Systems. During this period, I worked on a variety of bank system conversion
`
`projects for a product called “BondMaster”, which performed bondholder and
`
`corporate debt recordkeeping functions for banks in the Corporate Trust business.
`
`In that work, I was involved in both hardware and software installation,
`
`configuration and programming, data conversion, and training. Generally, these
`
`projects concerned bondholder account computer systems and software for a
`
`variety of banks, including Indiana National Bank, Commerce Union Bank and
`
`Bank of America. These client banks paid for timesharing services of BondMaster
`
`and had the ability to program and customize the BondMaster system to suit their
`
`business needs.
`
`5.
`
`From 1986 until 1995, I was the Vice President of Corporate Trust
`
`Automation for Commerce Union Bank and its successors (Sovran Bank,
`
`C&S/Sovran Bank, and NationsBank). During this time, I managed computer
`
`operations for a datacenter with multiple Prime minicomputers running
`- 2 -
`
`

`

`BondMaster as well as “ShareMaster” and “CertMaster”, which performed
`
`bondholder, shareholder, and corporate debt, equity and hybrid security
`
`recordkeeping functions for banks in the Corporate Trust business. I also provided
`
`system support to a private communications network for multiple bank locations,
`
`both for my employer and for client banks across the United States, such as First
`
`Alabama Bank, Commerce Bank of Kansas City, Star Bank of Cincinnati, and First
`
`Union National Bank. At its peak, the Corporate Trust recordkeeping system
`
`under my management serviced over one million bondholders and shareholders.
`
`Both CertMaster and ShareMaster supported securities and payments in multiple
`
`currencies with the necessary user interfaces, accounting and system controls.
`
`6.
`
`From 1996 until 2003, I was a Senior Vice President in Transaction
`
`Services, first at NationsBank, and continuing following NationsBank’s 1998
`
`acquisition of Bank of America (the resulting entity continued to use the name
`
`Bank of America). During this time period, I led transition projects in facilities,
`
`software, customer conversion and process design for cash, check and ACH
`
`platforms.
`
`7.
`
`From 2003 until 2006, I was Process Design Executive for Bank of
`
`America’s Check 21 check image program, which implemented the Check 21 Act
`
`- 3 -
`
`

`

`enacted in 2004 to permit use of electronic check images. I led the team that
`
`designed and implemented image check processing.
`
`8.
`
`From 2006 until 2013, I was R&D Executive for Bank of America and
`
`headed the bank’s internal research at the Gateway Innovation Lab, which Bank of
`
`America founded to promote innovation in financial services. At the same time, I
`
`was also in charge of the bank’s external research collaboration with the
`
`Massachusetts Institute of Technology (“MIT”) Media Lab (known as “The Center
`
`for Future Banking”), and directed sponsored research for the bank with Carnegie
`
`Mellon University’s Human Computer Interaction Institute. I led the Bank of
`
`America Innovation Enablement team in the development of emerging payment
`
`and loyalty technologies, particularly focused on smartphones and tablets with
`
`technologies such as check image deposits, contactless payments, cloud payments,
`
`machine vision, data analytics, social norms applied to spending, online and
`
`mobile user interfaces, customer loyalty programs and offers, personal budgeting
`
`and goal tracking, and live video interactions. My team at Bank of America tested
`
`hundreds of concepts and prototypes with customers in our lab to assess the
`
`viability and desirability of solutions for online, mobile, merchant, ATM, and
`
`branch channels. In that time, I was named as inventor on 253 worldwide patent
`
`applications assigned to Bank of America with several in the field of customer
`
`loyalty programs with online and mobile interactions.
`
`- 4 -
`
`

`

`9.
`
`Since my initial employment at Premier Systems beginning in 1985, I
`
`have worked in the fields of financial services technology, payments, customer
`
`interactions and operations. I have worked extensively in software programming,
`
`transaction processing, fraud prevention, currency and payments, systems design
`
`and integration, process design, online and mobile banking, and prototyping. I have
`
`worked in bank operations supporting multi-currency accounting and multi-
`
`currency payments. I have worked with industry standards workgroups, such as
`
`the American National Standards Institute’s X9 workgroup (“ANSI X9”) and the
`
`Financial Services Technology Consortium (“FSTC”), as well as industry security
`
`and fraud-fighting workgroups, such as the Financial Services Information Sharing
`
`and Analysis Center (“FS-ISAC”) and the SmartCard Alliance.
`
`10.
`
`I hold a Six Sigma Black Belt certification (a set of techniques and tools
`
`for process improvement) and have extensive experience in design and
`
`improvement of paper, image, and electronic process design, implementation,
`
`measurement and testing in a high-volume environment processing tens-of-
`
`millions of transactions per day. These process designs include the integration and
`
`incorporation of communications and networking methods that connect bank-to-
`
`bank, bank-to-government, bank-to-customer and bank-to-network. In several
`
`cases, my work directed the development of new standards for communications
`
`network utilization for banking transactions, for example inter-bank check image
`
`- 5 -
`
`

`

`exchange, remote customer check image deposit, check image quality assurance,
`
`and check image fraud prevention. My work in Corporate Trust involved debt,
`
`equity and hybrid securities, specifically the systems, operations and accounting
`
`for corporate actions such as offerings, mergers, stock splits, reverse splits,
`
`dividend and coupon payments, dividend reinvestment, and redemptions which
`
`involved the conversion, retirement, issuance and management of credit balances
`
`of shares, units, and cash-in-lieu payments.
`
`C.
`
`Honors, Awards, Publications, and Speeches
`
`11.
`
`Since 1986, I have regularly been a speaker and instructor at financial
`
`industry workshops and conferences for organizations including the American
`
`Bankers Association, Bank Administration Institute, Financial Services
`
`Roundtable, KPMG, McKinsey, Microsoft, Mobey Forum, and the Product
`
`Development and Management Association, as well as government agencies and
`
`regulators including the Federal Financial Institution Examination Council, various
`
`Federal Reserve Banks, the Federal Bureau of Investigation, and the Central
`
`Intelligence Agency.
`
`12.
`
`I have taught graduate-level classes as a visiting lecturer at Carnegie
`
`Mellon University, Georgia State University, University of North Carolina, and
`
`Vanderbilt University. My talks emphasize innovation leadership and the
`
`adaptation of emerging technology to the challenges of financial services.
`- 6 -
`
`

`

`13.
`
`I am a named inventor on twenty-eight U.S. patents in the fields of image
`
`processing, transaction processing, financial services technology, and mobile
`
`payments, the first of which was filed in August 4, 2005. I am a named inventor
`
`on four foreign patents in Mexico, Australia and China in the field of image
`
`processing. I am a named inventor on a total of 253 patent applications worldwide,
`
`both published and unpublished, from my career at Bank of America.
`
`14.
`
`My Curriculum Vitae is attached, which provides additional information
`
`regarding my qualifications, including a list of awards and honors I have earned,
`
`publications I have authored, and patents on which I am a named inventor.
`
`III. Basis for Opinion
`
`15.
`
`My opinions set forth below are based on my education, training,
`
`experience, and the content of the references considered. My understanding of the
`
`relevant law, as discussed below, is based on my discussions with counsel for
`
`Askeladden LLC.
`
`16.
`
`I have been asked to consider and provide my opinions on the claims of
`
`the ’152 Patent, including the technical subject matter and the application of
`
`various references that predate the filing of the ’152 Patent. In particular, I have
`
`been asked to consider what one of ordinary skill in the art would have understood
`
`from the ’152 Patent, whether certain references disclose or suggest the features
`
`- 7 -
`
`

`

`recited in the claims of the ’152 Patent, and whether one of ordinary skill in the art
`
`would have had reason to combine certain references to arrive at the claimed
`
`subject matter.
`
`17.
`
`My opinions concerning the application of the references to the claimed
`
`subject matter and the state of the art are provided based on what a person of
`
`ordinary skill in the art (i.e., the technical field of the invention) would have
`
`understood at the time of the alleged invention of the ’152 Patent, which I have
`
`been asked to initially assume is May 25, 2006 (“the priority date”).
`
`18.
`
`In evaluating the content of the prior art references and their application to
`
`the claims of the ’152 Patent, I understand that one must put himself in the position
`
`of a person of ordinary skill in the art. In my opinion, the person of ordinary skill
`
`is a hypothetical concept referring to one who thinks along the lines of
`
`conventional wisdom at the time. I believe 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.
`
`19.
`
`I have been informed that subject matter claimed in a patent is obvious if a
`
`person of ordinary skill in the art at the time the alleged invention was made would
`
`- 8 -
`
`

`

`have had reason (whether, for instance, common sense, explicit statements in the
`
`references, suggestions in the references, or the state of the art at the time) to
`
`combine or modify the disclosures of one or more references to arrive at the
`
`claimed subject matter.
`
`20.
`
`I am being compensated for this matter at my normal hourly rate of $340.
`
`My compensation is not dependent on the outcome of the matter.
`
`21.
`
`I have reviewed the ’152 Patent, as well as:
`
` Exhibit 1503 ― U.S. Patent Application Publication No.
`
`2005/0021399 (“Postrel”);
`
` Exhibit 1504 ― U.S. Patent Application Publication No.
`
`2002/0143614 (“MacLean”);
`
` Exhibit 1505 ― U.S. Patent No. 6,721,743 (Sakakibara”);
`
` Exhibit 1506 ― Wayback Machine archive dated June 20, 2000, for
`
`American Express web site: “How to redeem or transfer your points
`
`online”;
`
` Exhibit 1507 ― Wayback Machine archive dated June 20, 2000, for
`
`American Express web site: “Air rewards”;
`
` Exhibit 1508 ― Wayback Machine archive dated January 4, 1997, for
`
`Citibank web site: “Citibank Cards and Services”;
`
`- 9 -
`
`

`

` Exhibit 1509 ― Wayback Machine archive dated December 1, 1998,
`
`for American Express web site: “Rewards Cards”;
`
` Exhibit 1510 ― Wayback Machine archive dated June 21, 2000, for
`
`American Express web site: “Shopping rewards”;
`
` Exhibit 1511 ― Wayback Machine archive dated December 9, 2003,
`
`for Marriott Rewards web site: “Air Mileage”;
`
` Exhibit 1512 ― Wayback Machine archive dated November 25, 2002,
`
`for Starwood Hotels & Resorts web site: “Transfer : Airlines”;
`
` Exhibit 1513 ― Wayback Machine archive dated June 19, 2000, for
`
`United Airlines web site: “Mileage Plus partners”;
`
` Exhibit 1514 ― Wayback Machine archive dated July 17, 2004, for
`
`WebFlyer web site: “Mileage Converter”;
`
` Exhibit 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-
`
`pay-off-for-some-credit-card-users-1.aspx);
`
` Exhibit 1521 ― Wayback Machine archive dated August 16, 2000, for
`
`United Airlines web site: “Car Rental Partners”;
`
` Exhibit 1522 ― Wayback Machine archive dated June 20, 2000, for
`
`United Airlines web site: “Cruise Partners”;
`
`- 10 -
`
`

`

` Exhibit 1523 ― S&H Green Points – About S&H (available at
`
`http://www.greenpoints.com/info/inf_aboutsh.asp);
`
` Exhibit 1524 ― Wayback Machine archive dated November 27, 1999,
`
`for Green Points “The Points You’ve Been Waiting For”;
`
` Exhibit 1525 ― Wayback Machine archive dated April 15, 1998 for
`
`American Airlines web site: “Welome to AA.com”;
`
` Exhibit 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; and
`
` Exhibit 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.org/cs/BlobServer?blobkey=id&blobnocache=true&bl
`
`obwhere=1175820904620&blobheader=application/pdf&blobheaderna
`
`me2=Content-Length&blobheadername1=Content-
`
`Disposition&blobheadervalue2=79563&blobheadervalue1=filename=a
`
`bs00-22.pdf&blobcol=urldata&blobtable=MungoBlobs;
`
`- 11 -
`
`

`

` Exhibit 1528 ― Stone et al., User Interface Design and Evaluation,
`
`Interactive Technologies (April 29, 2005);
`
` Exhibit 1529 ― US Patent No 5,513,359; and
`
` Exhibit 1530 ― George Bond, “Gateways to the Internet”, Byte
`
`Magazine, pp. 229-31 (Sept. 1995).
`
`IV. Technical Background
`
`22.
`
`The claims of the ’152 Patent are directed to converting non-negotiable
`
`credits, such as loyalty points as airline miles, into another form of usable credit
`
`independent from the entity, such as credit card points.
`
`23.
`
`As one of ordinary skill in the art would be well familiar with, at the time
`
`of the ’152 Patent, throughout commerce, and particularly in the retail, travel, and
`
`financial industries, businesses have long used creative ways to bring in and retain
`
`customers. This is because businesses recognize the value of building
`
`relationships with customers through repeat business. As customers become more
`
`and more familiar with the business and its products/services, additional sales are
`
`expected from these customers. In addition, once a relationship is established, the
`
`customer is less likely to consider and switch to the business’s competitors for
`
`similar products/services. With customer relationships in mind accordingly, at the
`
`time of the ’152 Patent, the person of ordinary skill would have been familiar with
`
`the fact that many businesses rely on loyalty programs to attract and retain
`
`- 12 -
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`

`

`customers. With these loyalty programs, customers are rewarded for their frequent
`
`business.
`
`A.
`
`Loyalty Programs
`
`24.
`
`Loyalty programs are designed to encourage customers to stay with a
`
`particular business, by offering various incentives for repeat business. These
`
`programs also entice first-time customers into trying the business’s
`
`products/services with an expectation of building a customer relationship.
`
`25.
`
`The person of ordinary skill in the art would have been familiar with the
`
`commonplace use of loyalty programs for many years in a variety of industries. In
`
`the travel industry, there is ubiquitous use of airline frequent flyer programs and
`
`hotel rewards programs. Likewise in the financial industry, loyalty programs been
`
`used with financial services such as credit cards. The S&H Green Stamps program
`
`dates back to the 19th century, with a variety of merchants, particularly grocers,
`
`giving denominated paper stamps to customers in proportion to the amount of their
`
`spending. (Ex. 1523.)
`
`26.
`
`Generally with respect to these programs, customers earned loyalty points
`
`through repeated transactions with the business offering the program. A
`
`customer’s loyalty points would accumulate, resulting in the customer having a
`
`balance of points with the program.
`
`- 13 -
`
`

`

`27.
`
`The appeal of the loyalty programs was driven by the customer’s ability to
`
`redeem loyalty points for value. With some early loyalty programs, loyalty points
`
`were redeemable only for merchandise and/or services provided by the
`
`corresponding business itself. Often, a variety of merchandise and/or services was
`
`offered in exchange for loyalty point redemption, with the more valuable selections
`
`generally requiring the redemption of more loyalty points. As such, customers had
`
`incentive to accrue loyalty points, for the chance to redeem them for the more
`
`valuable selections.
`
`28.
`
`As mentioned, airline frequent flyer programs have been a popular form of
`
`loyalty program, with these programs first being introduced around the 1970’s.
`
`The programs encouraged customers to earn loyalty program points (generally
`
`known as “frequent flyer miles”) by taking flights on a particular airline. The
`
`quantity of earned points typically depended on the distance of the undertaken
`
`flight. The program points could be redeemed for a free flight or to upgrade an
`
`existing flight. In addition, many such programs contained tiered status levels,
`
`each tier offering greater benefits such as service upgrades or accelerated point
`
`accumulation. In order to reach the next tier, a customer generally accumulated a
`
`threshold quantity of points, often within a certain time period (e.g., annually).
`
`- 14 -
`
`

`

`29.
`
`Credit card loyalty programs were also well-known, and one popular such
`
`program was the American Express Membership Rewards program, which was
`
`affiliated with American Express credit cards and dated at least back to the 1990’s.
`
`(Ex. 1506; see also Ex. 1508; Ex. 1509; Ex. 1515.) I have personal knowledge and
`
`experience with this, as an American Express cardholder and Membership
`
`Rewards program participant during the 1990’s. Under these programs,
`
`participants earned loyalty points through purchases with the credit card, e.g.,
`
`American Express card. The amount of earned loyalty points was typically
`
`calculated based on the monetary amount of purchases that the participant spent
`
`using the credit card. The program points could be redeemed for a variety of
`
`merchandise or services, and the loyalty program often maintained a catalog of
`
`redeemable merchandise/services. I personally recall this based on my experience
`
`as a customer with American Express during the relevant period.
`
`B.
`
`Conversion of Loyalty Points
`
`30.
`
`When loyalty programs were in their infancy, the programs were often
`
`confined to specific businesses, such as grocers, that sponsored the program. I
`
`have personal knowledge and experience with this, as a participant in early airline
`
`mileage loyalty programs dating back to the 1980’s. In the beginning, customer
`
`participants in the program could only earn points by transacting with sponsoring
`
`businesses, and could only redeem the points for the program’s merchandise or
`
`- 15 -
`
`

`

`services. However, as these programs became increasingly popular and branched
`
`out from groceries and merchandise, businesses and programs began forming
`
`partnerships with other businesses and programs, especially those involving
`
`complementary products in adjacent industries. For example, by mid-year 2000,
`
`United Airlines had formed partnerships with various hotel chains such as Hilton
`
`and Marriott, various car rental agencies such as Avis and Hertz, and various cruise
`
`partners such as Norwegian Cruise Line. (Ex. 1521; 1522.) With these
`
`partnerships in place, customers of the United Airlines frequent flyer program were
`
`able to redeem their frequent flyer points (“miles”) for credit with any of these
`
`partner businesses. (Ex. 1513.) I personally recall this, as a customer of air travel
`
`during the relevant period.
`
`31.
`
`Partnerships also expanded for loyalty programs involving credit cards.
`
`For example, by mid-year 2000, the American Express Membership Rewards
`
`program included partnerships with businesses across different industries,
`
`including airlines, retail shopping, car rental agencies, and vacation destinations.
`
`(Ex. 1506; see also Ex. 1511; Ex. 1512.) These partnerships allowed American
`
`Express Membership Rewards participants to redeem their points for merchandise
`
`or credit at any of these partner businesses. For example, their points could be
`
`redeemed for store credit at Saks Fifth Avenue. (Ex. 1510.) Again, I personally
`
`- 16 -
`
`

`

`recall this, based on my customer experience with the American Express
`
`Membership Rewards program during this relevant period.
`
`32.
`
`Accordingly, at the time of the ’152 Patent, one of ordinary skill would
`
`been familiar with the option redemption methodology described above. As is
`
`evidence from the discussion above, not only was the optional redemption of
`
`loyalty points at partnership businesses well-known, so was the conversion of
`
`points to points with the partnership business’s loyalty programs. Using the
`
`American Express Membership Rewards example again, by mid-year 2000, the
`
`program formed partnerships with major airlines such as Delta Airlines, US
`
`Airways, and Continental Airlines, and participants could convert American
`
`Express Membership Rewards points to frequent flyer miles (loyalty points) on a
`
`particular airline (e.g., Delta Airlines SkyMiles). (Ex. 1507.) In another example,
`
`as early as 1988, S&H Green Stamps could be converted to frequent flyer miles
`
`(loyalty points) on a particular airline (e.g., Delta Airlines SkyMiles).
`
`33.
`
`The quantity of converted partnership business loyalty program credit
`
`(e.g., frequent flyer miles) depended both on the quantity of original loyalty
`
`program points (e.g., American Express Membership Rewards points) being
`
`redeemed and on an established conversion ratio of original loyalty program points
`
`to business partner loyalty program points. (Ex. 1507 (“Membership Rewards
`
`- 17 -
`
`

`

`point conversion”).) Using Delta Airlines as a partnership business example, by
`
`mid-year 2000, a participant could convert 1,000 American Express Membership
`
`Rewards points to 1,000 Delta Airlines SkyMiles frequent flyer miles. (Ibid.) As
`
`such, the conversion ratio of Membership Rewards points to SkyMiles was
`
`1000:1000 (i.e., 1:1). (Ibid.) On the other hand, when converting to Southwest
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`Airlines Rapid Rewards Flight Credits, the conversion ratio was 1000 Membership
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`Rewards points to 1 Rapid Rewards Flight Credit (i.e., 1000:1). (Ibid.)
`
`C.
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`Loyalty Programs and the Internet
`
`34.
`
`Loyalty programs were in existence prior to the development of the
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`Internet. With pre-Internet loyalty programs, customers could redeem points in a
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`variety of ways, such as by telephone, postal mail, and/or in-person contact with
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`the business’s loyalty program. I personally recall loyalty programs distributing
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`catalogs of redeemable items to their customers via postal mail. In many instances,
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`such catalogs included a blank order form for customers to complete and return, to
`
`place a redemption order. For example, S&H Green Stamps dates from 1896 and
`
`are a perfect example of a tangible currency (stamps) collected into an account
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`(books) exchanged for goods (S&H Gifts). (Ex. 1523.)
`
`35.
`
`As Internet access became more prevalent in the 1990’s, loyalty programs
`
`started to establish websites that initially contained information about the program,
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`such as how loyalty points are earned and redeemed. This provided existing and
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`potential customers with online access to information about the program.
`
`36.
`
`As online shopping became more prevalent in the 1990’s, loyalty
`
`programs in-turn adapted their web sites to allow customers’ individual access to
`
`their loyalty program accounts online. Even as early as 1998, the web sites of
`
`many loyalty programs had already been well-developed to the level of providing
`
`participants with point balance access and online redemption of merchandise with
`
`their points. (See Ex. 1525.) For example, in 1999, S&H offered an exchange of
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`“green points” for “valuable rewards: merchandise, frequent flyer miles, and
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`more.” (Ex. 1524.)
`
`37.
`
`For example, by mid-year 2000, on the American Express Membership
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`Rewards web site, participants could view their points (Ex. 1506, “View points”
`
`option on left column) and also redeem their points online for various merchandise
`
`(Ibid. (“How to Redeem Points Online for Shopping, Recreation, Home, Travel,
`
`Disney or Car Rental Rewards”).)
`
`38.
`
`In addition to online merchandise redemption, at least by mid-year 2000,
`
`the American Express Membership Rewards web site also permitted the online
`
`conversion of loyalty points into frequent flyer miles. (Ex. 1506 (“How to
`
`Transfer Points Online to my Frequent Flyer/Guest Account”); see also Ex. 1514.)
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`39.
`
`By 2005, it was also generally understood by the person of ordinary skill
`
`that web pages presented from web sites were a form of graphical user interface.
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`(Ex. 1528 p. 5; Ex. 1530, p. 231.)
`
`40.
`
`Likewise, a person of ordinary skill would be very familiar with the fact
`
`that from their inception, personal computers have been equipped with a processor
`
`and memory and/or other data storage to execute operating system functions and
`
`run installed software and store data. (Ex. 1529, col. 1, lines 34-61.) In one form
`
`of PC organization dating back to at least the early 1990’s, operating system data
`
`was typically retrieved from non-volatile storage, such as a floppy disk or hard
`
`disk, and is loaded into memory to provide a user interface with the user. (Ex.
`
`1529, col. 4, lines 17-27.)
`
`D.
`
`Comparison with Monetary Currency Conversion
`
`41.
`
`A person of ordinary skill would be familiar with currency exchange
`
`concepts as they existed at the time of the ’152 Patent. Indeed, my personal
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`involvement with accounting and payments in multiple currencies dates to the
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`1980’s and 1990’s, including US Dollars, Canadian Dollars, and British Pounds.
`
`Several of the corporate securities for which my operations team had responsibility
`
`provided a payment feature allowing customers to be paid in the currency of their
`
`choosing. Consequently, my team worked with currency exchange, reconcilement
`
`and payments to satisfy those customers. Conventionally in currency exchange, a
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`first currency (e.g., U.S. Dollars) is converted into a second currency (e.g., British
`
`Pounds) in accordance with a published, floating, market-based exchange rate.
`
`The exchange rate between the first currency and the second currency is a ratio
`
`between quantities of the first currency and the second currency. For example, if 1
`
`U.S. Dollar is worth 0.5 British Pounds, then the exchange rate (i.e., conversion
`
`ratio) is 1:0.5. Often, this ratio is displayed in a fractional format (i.e., 0.500). At
`
`the same time, if 1 U.S. dollar is worth 100 Japanese Yen, then the exchange rate is
`
`1:100, or 100.000. Published market exchange rates may be adjusted up or down
`
`by currency exchange agents to incorporate fees or discounts.
`
`42.
`
`Businesses have always treated loyalty points as having intrinsic monetary
`
`value. With respect to accounting practices, businesses generally tracked the
`
`quantity of outstanding points, assessed monetary values relating to the points, and
`
`recorded corresponding liability entries on their financial statements for future
`
`redemptions. At the same time, any sale of loyalty points from one business to
`
`another, such as airline miles sold to a credit card issuer for use as a reward to their
`
`credit card customers for usage, were recorded as current income by the