Cloud IPQ: Enhancing Your Cloud IpQ®

With three new filings in February 2019 against household names like Macy’s, Best Buy, and Lululemon, Vindolor, LLC—a non-practicing entity—has expanded its contactless “tap-to-pay” point-of-sale patent litigation assault to a total of 14 unsuspecting defendants. Formed in April 2017 in Texas as a Foreign Limited Liability Company, Vindolor acquired the rights to U.S. patent 6,213,391 (the ‘391 patent), the sole asserted patent in each of Vindolor’s fourteen lawsuits, nearly a year later. Vindolor purchased the ‘391 patent from Customedia Technologies, L.L.C., another non-practicing entity controlled by the inventor of the ‘391 patent, William Henry Lewis. In April 2018, a year after forming and a month after acquiring the ‘391 patent, Vindolor’s patent litigation campaign began. Within the past year, and prior to launching its three most recent suits, Vindolor filed 11 other patent infringement suits asserting the ‘391 patent against companies such as Disney, Trader Joes, Petco, Restoration Hardware, Total Wine, and Crate & Barrel. Unsurprisingly, Vindolor had filed a majority of its 14 lawsuits in the U.S. District Court for the Eastern District of Texas. However, it filed its new trio of lawsuits in what is quickly becoming the post-TC Heartland “rocket-docket” of patent litigation, the U.S. District Court for the Western District of Texas.

In its detailed complaints, Vindolor alleges infringement of its newly acquired ‘391 patent which claims priority to September 1997, has no other patent-related family members, and expired 18 months ago. The sole asserted patent relates to portable electronic personal identification and authentication systems, and in particular, using a uniquely identifying trait (e.g., biometric information) to create an “access code” based on a resulting identification profile. Essentially, the ‘391 patent discloses a system for identifying an individual either by generating an identification profile based on a distinctive biometric characteristic possessed by that person (e.g., voice analysis, finger print, facial scan, DNA, etc.), or by verifying a digital “signature” representation assigned to that person. The biometric information or digital signature may then be used to enhance both the security and convenience of conducting contactless electronic transactions.

In particular, Vindolor alleges infringement via the defendants’ use of near field communication (NFC)-enabled (which powers contactless payments through a type of radio frequency identification also known as RFIC) point-of-sale terminals (POS Terminals) offering contactless payments and process of credit transactions. More specifically, Vindolor alleges infringement through the accused POS terminals’ compatibility with various payment platforms, including Microsoft Wallet, Wells Fargo Wallet, MasterPass, Samsung Pay, Android Pay, Google Pay, Google Wallet, Apple Pay, and PayPal mobile as used with a variety of Android, iOS, and/or Windows smartphones and related mobile apps.

While Vindolor has already filed more than a dozen lawsuits pertaining to the ‘391 patent, and even though 10 of Vindolor’s previous 11 suits have already terminated, primarily resulting in uncontested dismissals (i.e., likely settlement), it is hard to see an end in sight to Vindolor’s patent litigation assault. When Apple Pay launched in September 2014, for example, a mere 200,000 merchant locations were ready to accept contactless payments. That number jumped to over two million merchant locations by early February 2016. Scaling that to include Samsung Pay, Android Pay, Google Pay, Google Wallet, PayPal mobile, Microsoft Wallet, Wells Fargo Wallet, and MasterPass, in addition to Apple Pay, the number of companies finding themselves playing defense to Vindolor’s infringement campaign could grow significantly.

In an interesting twist, Unified Patents—a member-based organization whose primary function is to deter patent abuse by reducing the number of non-practicing entity assertions—filed a petition for inter partes review (IPR) with the Patent Trial and Appeal Board (PTAB) against Vindolor and the ‘391 patent in December 2018. In particular, Unified asserts that a combination of three prior art references anticipate and render obvious multiple claims of Vindolor’s ‘391 patent. The PTAB has not yet issued an Institution Decision on Unified’s IPR petition. That said, Unified has filed more patent challenges than all other third-party petitioners combined, and is the most successful third-party solution with an 83% success rate. Should Unified be successful in its challenge, it could put an end to what appears to be an unyielding infringement assault by Vindolor. The concern on many people’s minds, however, is whether Vindolor’s patent campaign will have any meaningful impact on a merchant’s ability to offer the convenience of tap-to-pay checkout to its customers beyond nuisance value litigation. As the challenge from Unified is still in the early stages, and while there remains open litigation instigated by Vindolor, only time will tell.