Free Redacted Document - District Court of Delaware - Delaware

Case 1 :04-cv-00858-SLR Document 474 Filed 1 1/22/2005 Page 1 of 4
IN TIE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
LMI. PATENT CORP.,
Plaintiff,
"" ca. 04-sss»st.s
TELECHECK SERVICES, INC., FRED UNDER SEAL
ELECTRONIC CLEARING HOUSE, *NC·· ronsoanr TO Pnorncrrvn onnen
XPRESSCHEX, INC. and NOVA
INFORMATION SYSTEMS, INC.,
Defendants.
DECLARATION OF STEPHEN A. SCHUTZE IN SUPPORT OF ELECTRONIC
CLEARING HOUSE, INC.’S AND XPRESSCHEX, INC.’S BRIEF IN
OPPOSITION TO "LML’S MOTION FOR SUMMARY JUDGMENT NO. 2:
FOR A RULING THAT ECHO INFRINGES CLAIMS 1, 2, 4, 5, 6, 9, It}, 11, AND
15 OF THE ‘9S8 PA'I`ENT”
I, STEPHEN A- SCHUTZE, hereby declare:
I. I was asked by the law firms of O’i\/Ielveny & Myers LLP and Belasco Jacobs
& Townsley, LLP to provide an expert opinion in this matter regarding alieged
infringement of U.S. Patent Nos. 5,484,988 (the "‘988 Patent") on behalf of defendants
Nova information Systems, Inc., ("Nova") and Electronic Ciearing House, Inc., and
Xpresschex, Inc. (collectively "ECHO"). I snbniitted. my Expert Report on September
20, 2005.
2. I am the Managing Director of Forward Financial Consulting. Ihold a
Bachelor of Science degree in Education from Ohio Northern University and completed
coursework towards my Masters degree at Wayne State University in Michigan.
3. Prior to launching Forward Financial Consulting, I was the Director of
eStrategies at the American Bankers Association (the “ABA”’). I oversaw electronic
commerce poiicy development, helped formulate legislative and regulatory positions on
electronic commerce and payment system issues, and fostered awareness of electronic
commerce among member banks to enable there to better compete.
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Case 1 :04-cv-00858-SLR Document 474 Filed 1 1/22/2005 Page 2 of 4
4. I am cnrrently on the Steering Committee of NACHA’s Electronic Check
Conncii and I am the immediate past Chairman of the council. Prior to becoming
Chairman ofthe Electronic Check Council, 1 was the ieader of the Council’s Point of Sale
Work Group. I served on BI'l`S’ Advisory Council, ABA’s Payments Systems
Committee and ABA’s Deposit Account Fraud Committee, as well as an advisor to the
ECCHO Board.
5. Before coming to the ABA, I was Senior Vice President at Bank of America
in Business Transformation, directing payment systems strategies, check imaging
strategic planning and Check Safekeeping, as well as serving as Manager of the FSTC
eCheck project.
6. Iam submitting this declaration in support of Electronic Clearing House,
Inc.’s and XpressChex, Incfs Brief in Opposition to “LML’s Motion For Summary
Judgment No. 2: For A Ruling That BCI-{O infringes Claims l, 2, 4, 5, 6, 9, l0, tl, And
[5 Of The ‘988 Patent".
7. ECHO markets two point—of—sale electronic check conversion systems, one
under the generic title "Electronic Check Conversion" (formerly XpressConversion,
hereinafter "ECC Service" for short) and the other under the title VISA POS Check
Service. Both systems are able to clear certain types of checks through the U.S. National
Automated Clearing House, commoniy known as and referred to herein as the ACI-I
Network.
8. During the week of September 5, 2005, I was provided with a RW-¤€·‘lZ€=l]
R9 tj] gujljg tj] connected to a RE lj aug lj This
POS terrninah*MICR-Reader combination was activated on a tive merchant account for
me by ECHO.
9. During that week, Iran various types of checks through the POS
terminal/MICR—Reader combination, including checks drawn on banks from the
following countries: U.S., Canada, France, Australia, England, Israel, Belgium, and
India. I also ran a t`acsimiIe of a U.S. check drawn on my bank account. I am informed
and believe that copies of these checks were produced by Nova to plaintiff in this
iitigation.
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Case 1 :04-cv-00858-SLR Document 474 Filed 1 1/22/2005 Page 3 of 4
l0. l observed that checks with the MICR lines printed in a font called CMC—’7,
rather than E13B font, (i.e., the Israeli and French checks) returned the following
message on the POS terminal dispiayc RE=d·Et€'tBd I ran each such check two to
three times and the same message was displayed on the POS terminal. Certain foreign
countries including, without limitation, Israel, France, Spain and most Spanish speaking
countries use a font called CMC-7 to print characters for magnetic recognition on checks.
'“l‘he U.S., Canada, Australia, the U.K., and india, among others, print MICR on checks in
El3B font.
ll. The check facsimile returned the same response on the POS terminal display:
RE tl €tC¥ElI1 Z ran the check two to three times and the same message was
displayed on the POS terminal. Iain informed and believe that the MICR reader was
unable to read the MICR lines on this check because the MICR characters lacked
magnetization lying within the required range.
12. The Canadian checlr returned the following message to the POS terminal:
Re Cl 3.EIB lj I understand that this means that the check
may not be converted to an electronic item for clearance. Instead, this item must be
Re tl acts d
13. For the Australian, English, Belgian, and Indian checks, the POS terminal
displayed the following message: Rodullted I ain informed
and believe that this means thatP,edaetE·.d
14. The alphanumeric display-screen on the POS terminal that I used to run the
various checlrs mentioned above did not display any portion of the MICR line.
15. As one skilled in the art of check handling and processing, l understand that
checks take on the status of negotiable instruments, under Uniform Commercial Code
Section UCC § 3-104, where the customer has filled in information relating to the party
to be paid, date, and amount, and the customer has signed the check. In my opinion, a
check that has not been filled out and signed is not a negotiable instrument, as that term is
used in the patent-in—suit.
16. I am aware that automated clearing houses exist in foreign countries and that
they can be communicated with.
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Case 1 :04-cv-00858-SLR Document 474 Filed 1 1/22/2005 Page 4 of 4
Nov 15 U5 12:119 Stephen H. Schutzee 8U433DO80'? p.2
17. In my opinion, one of ordinary skill in the ari would not conclude that the
VisaN et network to be an automated clearinghouse as that term is understood in the
relevant field of eiectronic check conversion.
i declare under penalty of peijury under the laws of the United States of America
that the foregoing is true and correct.
Executed this 151:11 day of November, 2005.
STEPHEN A. S ZE Mh
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