Free Redacted Document - District Court of Delaware - Delaware

Case 1 :04-cv-00858-SLR Document 368 Filed 1 1/04/2005 Page 1 of 4
IN THE UNl'l‘E.D STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
rmt. PATENT cons., `
Plaintiff; i
"" ca. 04-ess-sta
TELECHECK SERVICES, INC., FILE;) UNDER SEAL
ELECTRONIC CLEARING HOUSE, INC., PURSUANT TO PROTECTIVE ORDER
XPRESSCHEX, INC. and NOVA
INFORMATION SYSTEMS, INC.
Defendants. i

BECLARATION OF STEPHEN A. SCI-IUTZE IN SUPPORT OF ELECTRONIC
CLEARING HOUSE, INCJS AND XPRESSCHEX, INCRS MOTION FOR
SUMMARY JUDGM ENT GF `NONJNFRINGEMENT
I, STEPHEN A. SCHUTZE, hereby declare:
1. I was asked by the law firms ot`O’Melveny & Myers LLP and Bclasco Jacobs
& Townsley, LLP to provide an expen opinion in this matter regarding alleged
infringement of U.S. Patent Nos. 5,484,988 {the "‘988 Patent") on behalf of defendants
Nova Information Systems, Inc., (“`t~lova") and Electronic Clearing House, Inc., and
Xpresschex, Inc. (collectively "IEZCHO"). I submitted my Expert Report on September
20, 2005.
2. 1 am the Managing Director of`Forwarci Financial Consulting, i hold a
Bachelor of Science degree in Education from Ohio Northern University and completed
coursework towards rny 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 policy 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 them to better compete.
4. I am currently on the Steering Committee ot`NACHA’s Electronic Check
Council and 1 am the immediate past Chairman ofthe council. Prior to becoming
Chairman ofthe Electronic Check Council, I was the leader ofthe Councii’s Point of Sale
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Case 1 :04-cv-00858-SLR Document 368 Filed 1 1/04/2005 Page 2 of 4
Work Group. I served on BITS’ Advisory Council, ABA’s Payments Systems
Committee and ABA’s Deposit Account Fraud Committee, as wcii 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 Safckecping, as wcii as serving as Manager of th FSTC
c:Che:ck project.
6. I am submitting this declaration in support 0fEIcctr0x1ic Clearing House,
Incfs and XpressCh¢x, Incfs Motion for Summary Judgment ¤fN0~n-infringcmcnzl
7. ECHO markets two pmint—of—sa}e ciactrcnic check conversion systems, one
under thc generic titic "E1cctr0nic Check C0r1versi0n" (fbrmcriy XpressC0nvcrsi0n,
hereinafter “ECC S¢—:rvicc" for short) and the other under the title VISA POS Check
Scwicc. Both systems are able to clear certain types of checks through the U.S. National
Auzomatcd Charing House, ccmmonky known as and referred to herein as the ACH
Network.
8. During thc: week of September 5, 2005, I was provided with a Vcrifonc Omni
3200 point-0t`—saEc ("POS") terminal connected to 6. RDM EC6000i MICR~Réa.dcr. This
POS terminal/NHCR—Readar combination was activated cn a live merchant account for
me by ECHO.
9. During that wcclg I ram various types of checks through the POS
terminal/MICR·Rcadcr combination, including checks drawn cm banks Bam the
following countries: U.S., Canada, France, Australia, England, Israel, Belgium, and
India. I also ran a facsimile of 2. U.S. check drawn 011 my bank account. I am informed
and believe that copies of these checks were produced by Nova to plaintiff in this
iitigation.
IO. { observed that checks with the IVHCR Hncs printed in a font called CMCJZ,
rather than E} 3B font, (ix., thc Israeli and French checks) returned thc following
message on thc POS terminal displayzkcchctcd ¥ ran each such check two to
three times and the same message was displayed on FOS terminal. Certain foreign
countries including, without limitation, Israel, France, Spain and most Spanish speaking
countries usc 2. font called CMC-? to print characters for magnetic recognition on checks.
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Case 1 :04-cv-00858-SLR Document 368 Filed 1 1/04/2005 Page 3 ot 4
The 1}.5., Canada, Australia, the UK., and india, among others, print MKZR on checks in
El3B font.
1 1. The check facsimile returned the same response on the POS terminal display;
]i‘=d¤*?'¤'=·¤l l ran the check two to three times and the same message was
displayed ori PGS terminal. I am 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 check returned the following message to the POS terminal:
]i‘*di'*?'i‘*d Iunderstand that this means that
Rsdacted Instead, this item must be
Redacted
13. For the Austraiian, English, Belgian, and indian checks, the POS terminal
displayed the foliowing message: ]i‘*di"‘?'i‘*d I am informed
and believe that this means that ]i*=·=l¤f'¤*=·=l
Redacted
id. The alpha—numeric display-screen on the POS terminal that l used to run the
various checks mentioned above did not dispiay any portion ofthe 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 Cornmerciai Code
Section UCC §3- I O4, where the customer has filled in information relating to the party to
be paid, date, and amount, andthe customer has signed the check. In my opinion, a
check that has not been filled out and signed is not a negotiable instrurnent, as that term is
used in the patent—in—suit.
i declare under penalty of perjury under the iaws of the United States of America
that the foregoing is true and correct.
Executed this 28th day ofGctober, 2005.
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Case 1:04-cv-00858-SLR Document 368 Filed 11/04/2005 Page 4 of 4
CERTIFICATE OF SERVICE
I, Francis DiGiovaimi, hereby certify that on October 28, 2005, a true and correct
copy of the foregoing document was caused to be served in the nianner indicated on the
attorneys of record at the following addresses:
VIA E-MAIL AND HAND VIA E-MAIL AND HAND DELIVERY
DELIVERY William J. Marsden, Esquire
Richard K. Herrmann, Esquire F ish & Richardson, PC.
Morris James llitchens 9l9 N. Market Street, Suite 1100
& Williams LLP FO. Box 1l14
222 Delaware Avenue, 10th Floor Wilmington, DE 19899-l 1l4
Wilmington, DE 19801
VIA E-MAIL AND HAND VIA E·-MAIL AND FIRST CLASS MAIL
DELIVERY Russell E. Levine, Esquire, P.C.
Richard D. Kirk, Esquire Kirkland & Ellis LLP
The Bayard Firm 200 East Randolph Drive
222 Delaware Avenue, 9th Floor Chicago, Illinois 60601
P.O. Box 25l30
Wilmington, DE 19899
VIA E~MAIL AND FIRST CLASS VIA E-MAIL AND FIRST CLASS MAIL
MAIL Dale M. Cendali, Esquire
Mark C. Scarsi, Esquire O’l\/ielveny & Myers LL?
O’l\/Ielveny & Myers LLP Times Square Tower
400 S. Hope Street 7 Times Square
Los Angeles, CA 9007}. New York, NY l0036
/s/ Francis DiGiovanni
Francis DiGiovanni (#3 189)