Filed on behalf of: Askeladden LLC
`
`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. 8,540,152
`
`_____________
`
`PETITION FOR INTER PARTES REVIEW
`
`
`
`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. 8,540,152
`
`_____________
`
`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 ............................................................... 2
`
`V.
`
`SUMMARY OF THE ’152 PATENT..................................................................... 3
`
`A.
`
`B.
`
`The Claimed Subject Matter........................................................................... 3
`
`Prosecution History ........................................................................................ 5
`
`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: A Historical View of Loyalty Programs .............................. 10
`
`Ground of Rejection - Claims 1-20 are obvious in view of
`Postrel, Sakakibara, and MacLean............................................................... 14
`
`VIII. Conclusion ................................................................................................................. 60
`
`- i -
`
`
`
`EXHIBITS
`
`1001 ― U.S. Patent No. 8,540,152;
`
`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. 8,540,152 (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. 8,540,152 (“’152
`
`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 ’152 Patent
`
`on other grounds. Petitioner is not aware of any litigation involving the ’152 Patent.
`
`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 ’152 Patent, are
`
`the subjects of CBM review proceedings, assigned CBM2014-00095 (“’023 CBM”)
`
`and CBM2014-00096 (“’550 CBM”). The ’023 and ’550 Patents are also the subject of
`
`an infringement 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-
`
`1 Loyalty Conversion Systems Corporation purports to be the owner of the ’152
`
`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 ’152 Patent.
`
`- 1 -
`
`
`
`00655 (“American Airlines Litigation”).2
`
`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 ’152 Patent is eligible for IPR and that Petitioner is
`
`not barred or estopped from requesting IPR.
`
`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 ’152 Patent on the grounds
`
`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 -
`
`
`
`that each is obvious (§ 103) in view of US 2005/0021399 (Postrel), US 6,721,743
`
`(Sakakibara), and US 2002/0143614 (MacLean), and (ii) that each of those claims be
`
`found unpatentable.
`
`V.
`
`SUMMARY OF THE ’152 PATENT
`A.
`The Claimed Subject Matter
`The ’152 Patent has 20 claims, of which Claims 1, 7, 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) to entity independent funds (e.g., credit
`
`card loyalty program points),
`
`-
`
`the entity agreeing to compensate a commerce partner (e.g., 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 said non-negotiable credits are loyalty points of the loyalty program
`
`possessed by a member (e.g., the airline loyalty program’s airline miles),
`
`- wherein the loyalty points are maintained in a loyalty program account owned
`
`or controlled by the entity,
`
`- wherein the entity redeems the loyalty points for entity services that the entity
`
`- 3 -
`
`
`
`provides to the member (e.g., airline redeems the miles for an airline ticket),
`
`- wherein said entity independent funds are different loyalty points of a different
`
`loyalty program of a commerce partner (e.g., credit card points are loyalty
`
`points of the credit card company, which is not the airline),
`
`- wherein the different loyalty points are redeemable by the commerce partner
`
`for services that the commerce partner provides to the member,
`
`- wherein said entity independent funds are possessed by the member and are
`
`maintained in a funds account (e.g., credit card loyalty program account),
`
`- wherein the funds account is neither owned or controlled by the entity or by
`
`any subsidiary or parent of the entity (e.g., airline does not control the credit
`
`card loyalty program account),
`
`- wherein the entity does not accept the entity independent funds as payment for
`
`any of the entity services (e.g., airline does not accept credit card points as
`
`payment for an airline ticket);
`
`-
`
`a computer detecting a set of two or more interactions earning additional non-
`
`negotiable credits for the member in accordance with terms-of-use of the
`
`loyalty program, wherein the computer adds the additional non-negotiable
`
`credits to the loyalty program account (e.g., computer 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
`- 4 -
`
`
`
`subtracting a quantity of the non-negotiable credits from the loyalty program
`
`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 (e.g., computer subtracts the amount of
`
`airline miles from the customer’s mileage account, based on those miles having
`
`been converted to credit card points),
`
`- wherein the conversion operation occurrence causes the subtracting of the
`
`non-negotiable credits from the loyalty program account to occur
`
`approximately concurrently with an addition of a corresponding quantity of
`
`entity-independent funds being added to the funds account per the conversion
`
`operation occurrence (e.g., the airline miles are subtracted from the customer’s
`
`mileage account approximately concurrently with credit card points being
`
`added to the customer’s credit card loyalty program account).
`
`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 the converted loyalty points
`
`(i.e., credit card points) but not the pre-converted loyalty points (i.e., airline miles).
`
`Prosecution History
`B.
`The ’152 Patent issued from USPAN 13/901,175 (“’175 Application), filed on
`
`May 23, 2013. The ’152 Patent purports to be 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. However, such domestic benefit claim is improper
`- 5 -
`
`
`
`under 35 U.S.C. § 120, inasmuch as the ’175 and ’451 Applications were never co-
`
`pending. Accordingly, the effective filing date of the ’152 Patent is limited to the
`
`actual filing date of May 23, 2013. It is noted that the ‘451 Application purports to be
`
`(1) a continuation-in-part of USPAN 13/168,814 (filed on June 24, 2011); (2) a
`
`continuation-in-part of USPAN 12/759,506 (filed on April 13, 2010); (3) a
`
`continuation-in-part of 12/720,743 (filed on March 10, 2010); and (4) a continuation-
`
`in-part of USPAN 11/420,255 (filed on May 25, 2006).
`
`Prior to initial examination, the applicants filed a terminal disclaimer over
`
`USPANs 13/681,479 and 13/681,493. The applicants also filed an Information
`
`Disclosure Statement concurrently with filing the application, which included over
`
`800 citations. On July 29, 2013, the USPTO allowed the originally-filed claims, and
`
`the applicant paid the issue fee that day. The patent issued on September 24, 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
`
`should be understood as waiving alternative claim constructions in any Article III
`
`litigation involving the ’152 or related patent(s) using different rules of construction.
`
`“Entity” (independent Claims 1, 7, and 13): The ’152 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 ’152 Patent also states that the invention
`- 6 -
`
`
`
`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, 7, and 13): The ’152 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.) In this 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 ’152 Patent. The ’152 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.”
`- 7 -
`
`
`
`(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, 7, and 13): The ’152 Patent
`
`does not specifically define this term, but states that one problem with non-negotiable
`
`credits is that “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). However, these
`
`vendors accept entity independent funds. (Ex 1001, 5:5-14, 42-52.) In this proceeding,
`
`Petitioner interprets the term to mean funds acceptable as payment by at least one
`
`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 ’152 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 ’152 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
`- 8 -
`
`
`
`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
`
`A claim is obvious under 35 U.S.C. § 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 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, as do each of the
`
`other independent claims. The Board has previously ruled that silence in the reference
`
`concerning a negative limitation may fully meet the limitation. (Ex parte Cheng, Appeal
`
`- 9 -
`
`
`
`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: A Historical View of Loyalty Programs
`B.
`Merchant Loyalty Programs
`
`As described in the expert declaration of Mr. Matthew A. Calman (Ex 1002, ¶¶
`
`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
`
`3 The ’152 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.)
`
`- 10 -
`
`
`
`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, the prospect of which drove consumer interest in these programs. (See, e.g.,
`
`Ex 1024.) Each loyalty program had particular redemption criteria in accordance with
`
`the program’s terms and conditions. For instance, an airline rewards program may
`
`have permitted a customer to exchange a certain number of points for a free airline
`
`flight or an upgrade. (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, ¶¶ 28-29; 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 was well-established prior to the filing of the ’152 Patent. 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, users could electronically
`
`submit a reward redemption request at their leisure by, e.g., filling out a web form in a
`
`GUI. (See, e.g., Ex 1028; Ex 1029; Ex 1030.) Alternatively, the reward redemption was
`- 11 -
`
`
`
`conducted in the form of an online checkout, using points as a payment source. For
`
`instance, since at least June 2000, customers could redeem AMEX membership
`
`reward points for merchandise via its web site. (Ex 1002, ¶¶ 34-40; Ex 1006.)
`
`In addition to the AMEX example, the concept of loyalty programs and web
`
`site redemptions was described in U.S. Patent Appl. Pub. No. 2005/0021399
`
`(“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
`
`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).)
`
`Loyalty Point Conversion to Another Merchant’s Store Credit
`
`According to the ’152 Patent, the issuing entity may restrict redemption of
`
`loyalty credits only to the entity’s own goods/services. (Ex 1001, 1:39-45.) However,
`
`adaptations to work around this restriction, such as the redemption of one merchant’s
`
`loyalty points for another merchant’s store credit, have been known prior to the ’152
`
`Patent application. For instance, since at least June 2000, AMEX has provided an
`
`option to convert its membership reward points into store credit of independent
`
`merchants (e.g., Saks Fifth Avenue). (Ex 1010.) A customer was able to perform such
`
`conversion online at the AMEX web site. (Ex 1006; see also Ex 1013; Ex 1014; Ex
`
`1015; Ex 1021; Ex 1022.) Providing this conversion option enhanced the appeal of
`
`the loyalty points, leading to increased commerce.
`- 12 -
`
`
`
`Loyalty Point Conversion to Another Merchant’s Loyalty Program Points
`
`The ’152 Patent also asserted that while consumers often accumulate credits
`
`across multiple credit-earning programs from different merchants, “a customer may
`
`have no need for the products or services listed by the [merchant] for which” points
`
`from each individual program may be redeemed. (Ex 1001, 1:40-1:42.) However,
`
`while loyalty point redemption at some merchants may have been limited to only their
`
`own products, many merchants have, for some time, permitted conversion of their
`
`loyalty points into points of another merchant’s loyalty program. (Ex 1002, ¶¶ 30-33.)
`
`For instance, since at least June 2000, AMEX has given its customers the
`
`option to convert their AMEX membership reward points to loyalty program points
`
`for various airlines, including through an online conversion process. (Ex 1006; Ex
`
`1007; see also Ex 1011; Ex 1012.) The conversion was performed in accordance with a
`
`conversion ratio of AMEX membership rewards points to airline loyalty program
`
`points. (Ex 1007.) After the conversion, the customer could have used the converted
`
`points to purchase an airline ticket. (Ex 1006; Ex 1007.) (Ex 1002, ¶¶ 30-33.) This
`
`concept was also described in Postrel, where a user can repeatedly exchange individual
`
`merchant loyalty points, for instance, Smith Pizzeria rewards points and Blockbuster
`
`points, into exchange points (e.g., VISA points), to use aggregated exchange points
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`“for the purpose of purchasing an item that he may otherwise be unable to obtain
`
`with the points aggregation.” (Ex 1003, ¶¶ [0030]; [0046].) (Ex 1002, ¶¶ 32-33.)
`
`As this practice of loyalty point conversion was already commonplace long
`- 13 -
`
`
`
`before the ’152 Patent filing, adaptations of this concept to specific applications
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`would have been well within the skills of an ordinary artisan.
`
`Similarities between Loyalty Point Conversions and Monetary Currency Conversions
`
`Likewise, a person of ordinary skill would be familiar with the well-known
`
`conversion between different monetary currencies. For instance, travelers have been
`
`able to exchange U.S. dollars for most worldwide foreign currencies, at banks and
`
`even dedicated currency exchange businesses for decades. The quantity of exchanged
`
`currency is determined in accordance with a conversion ratio (i.e., exchange rate)
`
`between the two currencies. (Ex 1002; ¶¶ 41-45.)
`
`Given an appreciation of these foundational concepts, the person of ordinary
`
`skill in the art would have regarded the subject matter claimed in the ’152 Patent as
`
`clearly obvious, in view of the prior art that is discussed below. (Ex 1002, ¶¶ 46-48.)
`
`C.
`
`Ground of Rejection - Claims 1-20 are obvious in view of Postrel,
`Sakakibara, and MacLean
`Postrel is a U.S. patent application that published on January 27, 2005.
`
`Sakakibara is a U.S. patent that issued on April 13, 2004. MacLean is a U.S. patent
`
`application that published on October 3, 2002. Postrel, Sakakibara, and MacLean
`
`qualify as prior art under 35 U.S.C. § 102(b) regardless of whether the ’152 patent is
`
`entitled to its May 25, 2006 priority date. Although applicants cited Postrel,
`
`Sakakibara, and MacLean during prosecution, applicants did not emphasize their
`
`significance from the other 800-odd cited references which they cited, and there is no
`
`- 14 -
`
`
`
`indication they received the Examiner’s individual attention over the applicants’ other
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`cited references. The Examiner did not cite any prior art or issue any prior art
`
`rejections during prosecution of the ’152 patent.
`
`Petitioner’s other concurrently filed IPR petition against the ’152 Patent relies
`
`on MacLean as a primary reference. Those grounds of rejection based on MacLean
`
`are not redundant with the grounds herein based on Postrel because, although
`
`MacLean is a stronger reference overall in that it clearly depicts values of non-
`
`negotiable credits and entity independent funds after a conversion (see all claims) (see,
`
`e.g., Figs 6A-6I), in other respects each reference is stronger than the other for
`
`different claims or limitations. For instance, MacLean provides greater detail on
`
`performing various functions in a single human-to-machine interaction session
`
`(Claims 6, 12, and 20) and subtracting non-negotiable credits approximately
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`concurrently with adding entity independent funds (Claims 1, 7, and 13), whereas
`
`Postrel provides greater detail regarding the use of processors and memory in
`
`computers (Claims 13-20), terms-of-use for earning loyalty points (Claims 1-6), and
`
`redeeming loyalty points following conversion from non-negotiable credits to entity
`
`independent funds (Claim 12). That Postrel stands on its own as a primary reference
`
`against the ‘152 Patent is established in this Petition.
`
`Claims 1-20 of the ’152 patent are invalid in view of Postrel, Sakakibara, and
`
`MacLean. First, Claims 1-20 require agreeing to permit conversions (i.e., aggregation
`
`or exchange). Postrel describes an agreement, in the form of an “exchange rate and
`- 15 -
`
`
`
`fee structure . . . set amongst [i.e., agreed upon by] the merchants [e.g., Smith Pizzeria]
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`and the exchange server operator [e.g., VISA].” (Ex 1003, ¶ [0045]; see also [0056]
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`(“Groups of clusters may also form marketing agreements amongst themselves to
`
`allow points aggregation amongst clusters.”).)
`
`Claims 1-20 require non-negotiable credits. As discussed above, non-negotiable
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`credits are credits which are accepted only by the granting entity of the credits. In this
`
`regard, Postrel states that “it is also recognized that users may end up with many
`
`loyalty point accounts, each having relatively small numbers of points … It is
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`therefore desired to provide a loyalty point system that allows users to aggregate
`
`loyalty points earned from these various merchants into a central exchange account,
`
`wherein the aggregated loyalty points may be advantageously used to purchase goods
`
`or services from any merchant in the system.” (Ex 1003, ¶ [0008].) Postrel also states
`
`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
`
`1003, ¶ [0041].) In addition to redemption at the individual merchant, Postrel’s loyalty
`
`points may be subject to a “restriction on use.” (Ex 1003, ¶ [0032].) Postrel’s
`
`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
`
`for services at another merchant (e.g., Delta Airlines or Bloomingdale’s), which has
`
`long been the standard practice. (Ex 1002, ¶¶ 51-53, 98-100, 145-147.) Moreover,
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`such concept is explicitly disclosed in Sakakibara.
`- 16 -
`
`
`
`Sakakibara describes a system that allows a user to convert loyalty points of a
`
`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 services (a
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`negative limitation, see Section VII(A), supra). (Ex 1002, ¶¶ 53, 100, 147.)
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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 preferably would not have been accepted as payment with
`
`another merc
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