IP Law Daily  McDonald’s did not infringe digital rights management patents by using Visa authentication systems
Tuesday, March 6, 2018

 McDonald’s did not infringe digital rights management patents by using Visa authentication systems

By Thomas Long, J.D.

The inventor and owner of two patents related to digital rights management—used to curb unlawful copying of data—failed to plausibly allege that McDonalds’ Corp. obtained a benefit from all of the claim elements of the patents, through its use of various credit card companies’ authorization networks, the U.S. Court of Appeals for the Federal Circuit has held. Therefore, a district court’s dismissal of the patent owner’s infringement suit against McDonald’s was affirmed (Grecia v. McDonald’s Corp., March 6, 2018, Reyna, J.).

William Grecia was the sole inventor and owner of U.S. Patent Nos. 8,533,860 ("the ’860 patent") and 8,402,555 ("the ’555 patent"). The ’860 patent claimed a system "for authorizing access to digital content using a worldwide cloud system infrastructure … comprising connected modules in operation." The preamble of claim 9 of the ’860 patent stated that these modules served to "facilitate access rights between a plurality of data processing devices" such that the "system work[s] as a front-end agent for access rights authentication between the plurality of data processing devices." Claim 12 of the ’555 patent similarly contained a preamble reciting a system to "monitor access to an encrypted digital media" by "working as a front-end agent for access rights authorization between a plurality of data processing devices." Both claims disclosed six modules that received data access requests, authenticated verification tokens provided by the user, and carried out other steps to complete the process of verifying the user’s authorization to access to requested data.

Grecia sued McDonald’s, alleging that McDonald’s infringed claims 9 and 10 of the ’860 patent and claims 12–14 and 24–26 of the ’555 patent "through its use of the tokenization systems of" various credit card companies including Visa Inc., American Express Company, MasterCard Incorporated, and Discover Financial Services (collectively, "Visa"). According to Grecia, McDonald’s used the system of claim 9 each time that McDonald’s put the Visa tokenization system into service—that is, whenever it accepted Visa cards to pay for food purchases. McDonald’s moved to dismiss the complaint, arguing that it did not "use" the claimed system, as required to plausibly plead direct infringement under 35 U.S.C. §271(a). According to McDonald’s, the asserted claims of the ’860 and ’555 patents were drafted to focus on the actions of one entity—Visa—and because Visa possessed and controlled all the claimed systems’ six modules, only Visa could directly infringe the asserted claims under Section 271(a) through use of its authorization network. Grecia argued that he was only required to plead that McDonald’s had put the system as a whole into use and obtained a benefit.

The district court agreed with McDonald’s and dismissed the lawsuit. Grecia relied on Federal Circuit precedent holding that "use" should be broadly interpreted to require only that an accused infringer put the invention into service—that is, controlled the system as a whole and obtained a benefit from it. However, the district court concluded that this holding was limited to divided systems, whereas in this case, Visa possessed all of the allegedly infringing systems’ components. In the district court’s view, McDonald’s conduct was similar to computer systems held not to infringe in other cases, because McDonald’s role in sending customers’ credit card data to Visa was merely part of the environment in which the claimed inventions functioned. On Grecia’s motion for reconsideration, the district court explained that Grecia had pleaded that only the six modules comprised the claimed system, and that Grecia failed to allege that McDonald’s point-of-sale devices were part of the claimed systems.

The Federal Circuit noted that the facts of this case presented a gap in the court’s jurisprudence as to what constituted "use" under Section 271(a). The issue presented was what was considered "use" of a claimed system when the accused infringer must act to put the claimed system into service, but the accused infringer did not appear to possess any element of the claimed system. There was no controlling precedent on this question, the court said.

Neither party had sound arguments, in the appellate court’s view. The precedent relied upon by McDonald’s—and the district court—was inapplicable because the cited case involved a system that was facially drafted in a way that focused on one entity, such that only that entity used the claimed system, which was not the situation here. The Federal Circuit also disagreed with Grecia’s theory of liability, because in the case he relied on, it was undisputed that multiple parties possessed different claim elements, and no single party possessed each and every claim element. In this case, it did not appear that McDonald’s was in possession of any of the six modules described by the relevant claims.

Declining the parties’ invitations to expand its doctrine on the control aspect of "use" of system claims under Section 271(a), the Federal Circuit stated that Grecia’s assertion that McDonald’s obtained "general benefits" from the Visa authentication systems was insufficient to plead infringement. To be actionable under Section 271(a), the alleged benefit must be tangible, not speculative, and must be tethered to the claims. Grecia failed to explain how McDonald’s benefitted from each and every element of the claimed system, the appellate court said, and this failure was decisive. For example, the sixth module—described as a "branding module writing at least one of the verification token or the identification reference into the metadata"—did not appear to benefit McDonald’s at all. The branding module permitted Visa to write the token to a "token vault," for later cross-referencing, but McDonald’s did not receive or store the token. The token was a tool for potential use by Visa to facilitate future Visa transactions. Because Grecia failed to allege that McDonald’s obtained a benefit from each and every claim element, the court concluded that he failed to state a claim upon which relief can be granted based on use of the claimed system under Section 271(a).

The case is No. 2017-1672.

Attorneys: Matthew Michael Wawrzyn (Wawrzyn & Jarvis LLC) for William Grecia. Edward H. Rice (Freeborn & Peters, LLP) for McDonald's Corp.

Companies: McDonald’s Corp.

MainStory: TopStory Patent FedCirNews

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