Jury Sides with Patent Company in Gift Card Case (May 6, 2013)
A bid by a group of big-name retailers to invalidate patents related to prepaid cards has failed in federal court, leaving the merchants subject to future legal action by the holder of the patents. The case dates back to 2010, when patent holder Alexsam Inc. sued retailers, including Best Buy, JC Penney, Barnes & Noble, The Gap, McDonald’s and Home Depot over patents on technology used to activate and reload prepaid gift cards. The defendant companies joined together and claimed the patents—issued in 1999 and 2001—should be ruled invalid because they didn’t cover a new idea when issued and Alexsam made misstatements during the application process.
But a federal jury in the Eastern District of Texas has sided with Alexsam, upholding the patents. The trial only dealt with the validity of the patents, according to a report by Bloomberg, but with the court victory in hand Alexsam will proceed with separate cases on infringement against each of the retailers, who all have made slightly different arguments as to why they weren’t in infringement of the patents.
Alexsam has sued several other major companies over the same two patents in recent years, with mixed results. In 2011, a jury in the same Texas federal district ruled that Pier 1 did not infringe on the patents, in a verdict currently being appealed by Alexsam. Shell Oil Co., another defendant in the same suit, settled for an undisclosed sum in 2008. In 2007, Alexsam won a $10.1 million verdict over telecom provider IDT Corp. for violation of the patents in the company’s prepaid calling cards and gift cards. IDT is appealing that judgment in Federal Circuit Court.