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Restricted Spending Solutions, LLC v. Allow Card of America

September 28, 2010

RESTRICTED SPENDING SOLUTIONS, LLC, PLAINTIFF,
v.
ALLOW CARD OF AMERICA, INC.; PALM DESERT INVESTMENTS; WACHOVIA CORP.; PNC FINANCIAL SERVICES GROUP, INC.; PAYJR, INC.; CARDLAB, INC.; THE BANCORP INC.; DISCOVER FINANCIAL SERVICES; DISCOVER BANK; BANK OF AMERICA CORP.; COMMERCE BANCSHARES, INC.; UMB FINANCIAL CORP.; FIFTH THIRD BANCORP; MASTERCARD INTERNATIONAL, INC.; VISA U.S.A., INC.; U.S. BANCORP; DEFENDANTS.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Plaintiff Restricted Spending Solutions LLC ("RSS") is the assignee of U.S. Patent Number 6,044,360 (the " '360 Patent"), a system for allocating funds in pre-established customer accounts. Essentially, the patented invention empowers an individual who is actually responsible for funding purchases made on a particular credit or debit card--such as a parent or an employer--to set limitations on what the cardholder may purchase with the card. Plaintiff charges that Defendants, a host of credit-card companies and financial institutions, have infringed on its patent by making, using, and selling "teen cards" and "corporate cards," which allow parents/employers to monitor and control purchases made by their children/employees. They claim that these cards fall within the scope of the '360 Patent. Defendants have moved for summary judgment on grounds of invalidity, arguing that the relevant claims of the '360 Patent are anticipated by an earlier patent held by Defendant VISA U.S.A. Inc. ("VISA"). For the reasons explained below, Defendants' motion for summary judgment is granted.

BACKGROUND

I. The '360 Patent

The '360 Patent describes a system for "transferring funds, such as periodic allowance payments," to pre-established customer accounts for use by designated third-party recipients. (360 Patent, Ex. A to Compl., 1:11-12). According to the patent, the system provides the transferor with control over how the recipient uses the received funds and gives the transferor an accounting of all purchases made with the funds. (Id. at 3:55-65; 4:1-31.) The system also allows the transferor to set restrictions on the amounts of money that may be spent on "particular classes of goods and services." (Id. at 13:5-7.) The patent states that "the primary advantage of the present invention is that an itemized statement is issued to the account holder periodically, i.e., weekly or monthly, providing an accounting of how the set aside funds were spent." (Id. at 3:55-58.)*fn1 In distinguishing the invention from the prior art, the patent further explains that, unlike systems described in earlier patents, the invention of the '360 Patent allows the transferor to set limits "on how the money may be spent and then receive a subsequent accounting of how the money was actually spent." (Id. at 2:12-15.)

In lay terms, the '360 Patent describes a process that allows a "parent" to transfer funds to a special account for the use and benefit of a designated "child."*fn2 The child may then use the funds to make approved purchases, while the parent retains ultimate authority to place limitations upon the funds. The funds may only be accessed subject to the parent's restrictions. For example, a parent might deposit $100 into a child's account with the following caveat: Junior may use the funds in this account to buy text books and groceries, but he may not use the funds to purchase alcohol, tobacco, or R-rated movie tickets. (Id. at 2:5-9.) Presumably, when Junior then attempts to use the card to purchase a case of beer, the card will be declined and the system will notify the seller that funds are not available for this purchase. The '360 Patent also contemplates that a parent might opt to transfer funds into a child's account "automatically" and/or "periodically." (Id. at 11:55-64; 13:33-34.) For instance, Claim 34 contemplates that a parent might elect to deposit funds on a weekly or monthly basis. (Id. at 15:8-9.) Thus, the hypothetical parent might elect to automatically deposit Junior's $100 monthly allowance directly into his account, while perpetually maintaining restrictions on Junior's ability to purchase alcohol, tobacco, or R-rated movie tickets.

Michael Picciallo is the inventor of the '360 Patent. Plaintiff contends that Picciallo conceived of the system while working as the manager of a roller skating rink in 1996. Picciallo recalled that parents frequently dropped their children off at his rink with cash. Once the parents were gone, however, the children would leave the rink and spend the cash elsewhere. "Parents would later pick up their children from the roller skating rink, ignorant as to where their children actually spent their money." (Pl.'s Br. at 1.) On April 16, 1996, Picciallo filed a three-page handwritten disclosure with the Patent Office, describing his "very simple" idea for an "Allowance Card." (Ex. D to Thompson Decl., RSS 001483-1490.) The disclosure states, in part:

A major credit card company [such as] Visa, Master Card, Discovery [sic], Amex will be the support. Say John Doe has a card such as those stated above. He has a son and daughter in high school and wants to give them a monthly allowance but is afraid of just handing out money and where they are spending it. He has the card company issue two allowance cards under his main account. He tells the card company to take $80.00 a month, charge it to his account, and put $40.00 to each of the children's allowance cards. They can only spend that $40.00, no more[. I]f they choose to spend it quicker or slower within the month it is their choice[. T]he parent is disciplined not to give them anymore money until the next month and the kids are disciplined by the Allowance Card constraints.*fn3 (Id.) The Patent Office initially rejected Picciallo's application because it did not include any claims that complied with 35 U.S.C. § 112, which requires that a claim use "full, clear, concise, and exact" terms. (Id. at RSS 001507-1510.) In response, Picciallo amended his claims and supplemented them with declarations from two computer programmers, who averred that the submitted claims were sufficient to allow a person of ordinary skill in the art to implement the invention. (Ex C. to Thompson Decl., RSS 000174.) Picciallo also submitted his own supporting declaration, which states in part: "My patent claims cover two concepts. The first is an allowance account that is automatically and periodically funded (see claims 78-96). The other is an allowance account having periodic transaction limits for particular classes of goods and services (see claims 97-115)." (Ex C. to Thompson Decl., RSS 000157.)

Picciallo filed his amended application in June 1997 and ultimately succeeded in obtaining the '360 Patent on March 28, 2000. (Id; 360 Patent, Ex. A to Compl.) Claim 8 of the patent is particularly significant for purposes of the instant order. It describes:

A computer-based method for allocating funds in pre-established accounts for use by customers, comprising: creating for each customer a customer account file containing a record of funds deposited for said customer; automatically transferring periodically to said account file depositor funds for use by said customer; limiting the amount of funds in said customer account file that may be spent on particular classes of goods and services in response to command instructions from the fund depositor; and verifying each transfer from said customer account file requested by said customer to determine whether the requested funds exceed the limit set for the goods and services to be purchased. (Id. at 13:28-34.) The patent also explains that the preferred embodiment of the claim would rely on existing credit-card systems and banking infrastructure:

Banking and credit card institutions have already encoded merchants and service providers with this information for billing purposes, so that it would not be difficult to similarly encode an approval request in a debit card point-of-sale transaction........

The system of the present invention is also extremely versatile because of its ready adaptability to existing banking networks. (Id. at 11:15-19; 12:38-40.) Nowhere in the claims or elsewhere in the patent is there any explicit mention of or emphasis on the account's ability to "accumulate" funds under the described system.

II. The VISA Patent

Defendants contend that the claims of the '360 Patent are actually anticipated by U.S. Patent Number 5,500,513 (the "'513 Patent"), which was issued to three VISA researchers in March 1996, more than a year before Picciallo filed his ultimately successful patent application. ('513 Patent, Ex A. to Thompson Decl.) The '513 Patent describes a system for the "automatic control of purchasing, in particular using credit cards[,]" which "merges a company's purchasing system with a ...


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