IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
)
AFFINION LOYALTY GROUP, INC., )
)
Plaintiftl )
)
v. )
)
MARITZ INC., )
)
Defendant. )
)
EXPERT REPORT OF BRUCE BOLGER
1. Background and Qualifications
I graduated from the University of Caiifornia at Santa Barbara in 1975, magna cum laude,
with a doubie major in history and French. I first entered the incentive business in l984, when I
joined Incentive Marketing magazine as the editor. I was subsequentiy promoted to publisher in
i99G. In 1993, I ieft Incentive magazine to serve as show director for the New York Premium
Incentive Show until l995. At this time, I left to Start Scliing Communications Inc., a media,
marketing and technology company specializing in the incentive marketplace. My currriculae
vitae is attached to this report as Appendix l.
I am being compensated for my time in this matter at the rate of $250 pei hour. My
compensation is not contingent in any way on the outcome of this case. I have not testified as an
expert at any trial or deposition in the last four years,
` ` ` I have authored the following pubiications in the last 10 years:
i I Associations Can Grab the Reins, Motivation Strategies, Fall 2005 edition
The Best Days Lie Ahead, Motivation Strategies, Summer Edition, 2005
t Exhibit 5
I The Science That Supports Soft Metrics, Business Performance Management, tune 2005
The Promise of People Performance Management, Spring 2005
Meetings Update Reflect Our Focus on Performance, Motivation Strategies, Winter 2005.
The Great Industry Power Shift, Motivation Strategies, December 2004
Rapid Change and Vast Opportunity, Motivation Strategies, Fall 2004
Consumer and Employee Motivation: Make the Connection, Summer 2004
10 Steps to Designing an Effective Incentive Program, Employee Relations Today, Spring 2004
2004 Show Pairing Marks New Era, Motivation Strategies, Spring 2004»
Principles of Results~Based Incentive Program Design, Incentive Marketing Association, 2004.
What's Ahead for Winners and Losers, Motivation Strategies, Winter 2004
New Research Gives Planners Ammunition, Corporate and Incentive Travel, January 2004
Wilt New Forum Raise Barriers to Entry, The Counselor, October 2003
The Cash/NonCasl1 Diiemrna, Human Resource Executive, January 2003
How to Win at Internet Publishing, Sales Marketing Network at Info—now.com, 1999
Incentive Travel Overview, Sales Marketing Network at IuI`o~now.com, 1999
Premium Incentive Overview, Sales Marketing Network at lnfo—now.c0m, 1999
Motivating Your Middle 60%, Sales Marketing Network at Info—now,com, 1999
I Promotion Guide, Sales Marketing Network at Info-now.com, 1999
A Step—by-Step Guide to a Successful Incentive Travel Program, Sales Marketing Network at
Info-now.com, 1999
Creating a Successful Premium Incentive Program, Sales Marketing Network at Ir1fo—now.corn,
_ 1999
i Targeted Business Development, Sales Marketing Network at Info—now.coin, 1999
Going it Alonemlndividual Incentive Travel, Sales Marketing Network at Info—now.corn, 1999
2
International Incentive Solutions, Sales Marketing Network at Info-nowcorn, 1999
The New Marketing, Sales Marketing Network at Info~now.cern, l999
Strategic Incentive ?rogram Design: Critical Steps to Endure an Effective Performance
Improvement System, Advertising Specialty Institute, 1998
Short Escapes in France, Fodor's 1993, 1996
Short Escapes in Britain, Fodor's 1993, 1996
Short Escapes in New York, Fodors 1993, 1996
Short Escapes in New England, Fociofs, 1996
2. Opinions
I have been asked to epine on whether certain ofthe asserted claims ofthe patents in
suit——U.S. Patent Nos. 5,774,870 ("tl1e '8'70 putent"——e1aim 1); 6,009,412 ("the ‘412 patent".
claims 1, 10, 18, 27, 35, and 36); and 6,578,012 ("ti1e'012 patent"·-claim 1)»»—are anticipated,
obvious, or otherwise invalid pursuant to 35 U.S.C. sections 102 and 103. I understand that claim
29 of the ‘S70 patent has also been asserted, but I have not been asked to opine on its validity.
Analyses of other claims are not made here as I understand no other claims are presently part of
the case. If that changes, I am prepared to opine as to the validity of those claims.
In conducting this analysis, I have reviewed numerous materials, including the patents-in
—suit and their tile histories, numerous documents produced in the case, and numerous pieces of
prior art, as detailed in Appendix 2.
I have also been asked to opine on whether certain information not disclosed bythe
patent applicants and/or their attorneys to the United States Patent and Trademark Office
i ("PTO") during prosecution ofthe patents in suit was material to patentability.
3
I reserve the right to modify this report and/or offer additional testimony in light of
additional evidence developed in this case, additional disclosures in interrogatory answers
provided by plaintiff or third patties, contrary opinions or evidence offered by any witness, or as
otherwise appropriate.
3. introduction
The '870 patent was tiled Dec. 14, i995 and issued on June 30, i998; the '4l2 patent is a
continuation ofthe '870 patent and was issued Dec. 28, l999; and the 'Ol2 patent is a
continuation ofthe '4l2 potent and issued June 10, 2003.
The three patents at issue in this case me entitled “Fully Integrated On—Line Interactive
Frequency and Award Redemption Prograrn." One of ordinary skili in the art, having fully read
the specification and tile histories ofthcse patents, would view thc purported invention as a
system for implementing and managing an online consumer incentive program. The features of
this program would include an integrated platform incorporating three systems that: l) allow the
user to snake purchases through an online catalog; 2) calculate, award, and track points based
upon those purchases, and; 3) allow the user to access an online award catalog and redeem points
for an award.
As stated by the examiner, the '870 (parent) patent was ailowed because “it is the specific l
embodiment of the frequency database, coupled with a product catalog, item which purchase of
goods may be made, and an awards catalog, from which awards maybe redeemed, that renders
the invention distinct over the prior art. Several references have been cited giving specific
embodiments of electronic commerce system and incentive award programs, however, none
suggest or disclose combining the features of both to create the invention ofthe instant
application? Notice ofAllowancc, p. 2.
4
These elements are embodied in a variety of incentive systems prevalent well before the
time ofthe filing of the application leading to the '8'7O patent. The concept uf u p0i:1ls·based
award system linked to purchases has existed for over 100 years in the form of trading stamps,
which are defined as "gummed stamps given by a retailer, usually for each 10 cents of purchase,
to be pasted in a saver book to accumulate 1,200 or l,500, then redeemable for premiums
presented in the stamp-company catalog." (Incentives in Marketing, George Meredith and Robert
Fried, National Premium Sales Executives, 1977, pp. 308 and 482.)
This concept is also embodied in the traditional coupon plan detined by Meredith et al. as
"a continuous program offering a variety of premiums for coupons, labels or other tokens from
one or more products (p. 482)." A Brown & Williamson promotion that began back in 1949
rewarded customers a stamp for each pack of cigarettes purchased, redeemable for merchandise
in an award catalog. These prior art incentive systems incorporated available technology to most
efficiently implement these customer loyalty programs. For example, the Brown & Williamson
system included a "tape—produced typewriter. . .used to give a personal touch to 90 types of form
letters, and, more recently, the company had begun using [BM Mag Card Il systems. . .†to send
out letters to customers who had redeemed their stamps over time. These letters were customized
T to customers "witl1 as personal a flavor as is possible to attain" to recognize customers tor their
loyalty (Meredith et al., p. 299.)
?oints—based award catalogs and frequency databases were common in the early 1990s.
For example, the Holiday lun Priority Club offered an awards catalog with merchandise at least
. asearly as 1990, which enabled frequent guests to redeem points for awards at specitic point
_ levels based on their number of stays.
Z 5
Upon the advent of online services in the late 1980s and early 1990s, businesses began to
move commerce operations onto online systerns. This was evident in the area of ecommerce at
Eeast as early as 1990, with an online shopping service offered by Prodigy (Despite Prodigy's
Shortcornings, You Can Still Reap Big Bonuses, PC Computing, vol., no. 9, p. 290, Sept. 1990).
This was shortly followed by similar online shopping services offered by other proprietary
networks such as AOL, Genie, and CompuServe. (U.S. News & World Report, January 24,
l 994).
By 1994, a mowing number oforgarrizations were offering online shopping malls and
catalogs, typically via World Wide Web services (Mall Hopping on the Internet, Network World,
Oct. 10, 1994). By November of that year, some 21,700 commercial storeironts were officially
registered on the Internet (Businessweek, p. Sl, Nov. l4, l994.) "In fact,†the article added,
"when it comes to almost anything but video on demand——electronic shopping, banking,
publishing, infomation services——the internet looks like the medium of choice? -
As businesses moved their sales online, it was natural for incentive programs to follow.
First, incentives were needed to attract customers (Power Vision and LA Online Share a
Common Goal: Let Your Fingers do the Shopping, Computer Shopper, Feb. 1993, vol. 13, no. 2,
p. 783.) Once the customers came, the companies had to retain them. Thus, companies began
offering rewards to customers for making online purchases. (Online Shopping is Moving Out of
the Gray and Into the Black, Computer Shopper, Oct. 1994, vol. 14, No. l0, p. 64.) It was
anticipated that online Frequent Buyer programs, particularly those operated over the Internet,
would become part ofthe comrnercial mainstream. (Is It Time for Web Surfers to Fill Out
Frequent Browser Point Applications?, Adweelc, November 1995.). Indeed, as corporations
rnoved online, they brought their tried—a11d—t1ue frequency programs to the internet. For example,
6
when Hilton Hotels launched its "Hilton internet Concierge"——-which allowed guests to "mal
as well. Welcome to HiltonNet! New Hilton Internet Concierge Rolls Out the "Virtnal" Red
Carpet, PR Newswire; August 2l, 1995.
By early 1994, companies were testing online merchandise award catalogs in which
people could view merchandise and place orders online. It was also obvious that online
technology could facilitate the systems that supported incentive award catalogs, points tracking,
and redemption. (Incentive, Feb. 1994, p. 23.) Before the filing of the 'SYO patent, companies,
including defendant Maritz inc., had developed and/or contemplated programs that included
online redemption of award points. See MAR 113138-1 E3 142 (describing an ‘°on1ine catalog of
lviaritz tnerchandise . . . for imrnediate orders" as a redemption option), MAR 113133-1 13137,
1081 76-108182; U.S. Patent No. 5,794,2lO (tiled December 11, 1995) (disclosing a system in
which "digita1 cash" is awarded in real time for on-line behavior and is immediately available for
redemption online).
Moving the classic bricks and mortar frequent buyer program to the internet was an
obvious development that was triggered bythe emergence of viable electronic commerce
platforms in the early l990‘s. As recognized bythe Canadian patent oftlce in rejecting a related
application: "There is nothing new about points—based incentive programs in themselves. ..Nor is
there anything new about assembling networks of computers so as to quickly and efficiently
communicate data between them. . This leaves as the discovery at the heart of this application the
realization that by harnessing the abilities ofthe Internet, certain efficiencies can be gained in the
administration of a points incentive program (page 2, line 17 to page 3, line 17.) The incentive
award plan itself has not changed (and, even if it had, those details would be left to the
7
professional skill ofthe marketing people designing it), it is now simply specifying the use of
online comrnttnications instead of teiephones and mail, web pages instead of paper catalogs,
databases instead of paper records, and the use of sottware to automate a known incentive plan
management method? Use of this technology would have been obvious to one of ordinary skill
in the art at the time the *870 patent was tiled.
4. Anaiysis
A. Legal Standards
When conducting an invalidity analysis, it is my understanding that an issued patent
carries with it a presumption of validity. Thus, one challenging the validity of that patent must
present ciear and convincing evidence of invalidity.
1. Anticipation.
lt is my understanding that anticipation requires the presence of each and every element
ofthe claimed invention in a single prior art disclosure. To be anticipatory, the reference must
qualify as prior art under Section 102 of thc Patent Act. The reference must also enable one of
ordinary skill in the art to make, construct, and/or practice the claimed invention.
2. Obviuusness
Title 35 U.S.C. Section 103 states that a patent may not be obtained "if the differences
between the subject matter sought to be patented and the prior art are such that the subject matter
as a whole would have been obvious at the time of the invention to one of ordinary skilt to which
said subject matter pertains? As opposed to anticipation, multiple references may be considered
when analyzing whether an invention was obvious, When considering multiple references, there
must have been a motivation to combine the teaching of those references.
8
Several secondary considerations may also relevant when determining whether a claimed
invention would have been obvious of one of ordinary skill in the art at the time ofthe invention:
l) scope and content of the prior art; 2) differences between the prior art and the claims at issue;
3) level of ordinary skill in the art, and 4) secondary considerations, such as commercial success,
copying, licenses, long felt need, praise and skepticism, prior failure of others, and unexpected
resuits. These factors will be discussed in further detail below.
3. Materiality
lt is my understanding that there is more than one standard for determining whether a
piece of prior art is material to patentability. One such standard, the "reasonable examiner"
standard, dictates that a piece of art is material if a reasonable examiner would have considered
such prior art important in decidin whether to allow the application. The second standard
established by the PTO states that:
[l]nfonnation is material to patentability when it is not cumulative to infomation already
of record or being made of record in the application and,
1) it establishes, by itself or in combination with other
infomation, aiprima facie case of unpatentability of a claim; or
2) it refates, or is inconsistent with, a position the application takes in: (i)
[o]pposing an argument of unpatentability relied on by the Office or (ii)
[alsserting an argument of patentability?
37 C.F.R. Section l.56.
4. Claim Interpretation
it is my understanding that terms are given their ordinary and customary meaning as
viewed by one of ordinmy skill inthe art at the time of the invention, in light of the specification
and file history, Further, a patentee can act as his or her own iexicographer and define any term
used in any claim. ln conducting my analysis, I gave the claim language its ordinary and l
9
customary meaning as understood by one of ordinary skill in the art having read the claim and
the specification.
It is my understanding that the plaintiff in this matter, Afiinion Loyalty Group, Inc., has
not provided its positions regarding claim interpretation. Thus, which claim limitations will be
disputed by the parties is left to speculation. Accordingly, I reserve the right to supplement or
modify this report based on claim interpretations or other positions advanced by Aftinion or
rulings ofthe Court on matters of claim interpretation.
5. The Level of Ordinary Skill in the Art
It is my opinion that one of ordinary skill in the art would be someone with
approximately one to two years experience designing, selling, and/or implementing incentive
pYOgl'HII'lS.
5. Claim 1 ofthe ‘87B Patent is invalid as Anticipated and/or Obvious
Claim l provides: A system for an incentive award program, including a computer
system accessible for on-line interactive communication with users, said computer system
· comprising: l
A first memory area for storing product catalog, said product catalog including product
descriptions and product prices for each product available for purchase;
A second memory area for storing an awards catalog, said awards catalog including an
award description and award points value for each award; and,
A frequency database storing account information for each enrolled user of said incentive
award program.
It is my opinion that one of ordinary skill in the art would have understood the term
"onlir1e," as used in this claim and throughout the other patents-in-suit, to mean a computer
network allowing users to exchange information on a real—tirne basis. The term "online" was not
l 0
limited to the Internet, but included other proprietary networks, such as America Online,
Prodigy, and Compuscrvc, as well as private commercial networks, such as Apollo and Sabre.
This definition is supported by the specification ofthe patents at issue. For instance, the
Detailed Description of the Preferred Embodiment describes "access via an on-line provider such
as AOL, CompuServe," as well as ‘°direct access to the internet, such as via Netscape? Based on
this language, it is apparent that the terms "on—line†and "internet†were not viewed as
interchangeable by the applicant. l
A. Radissorfs Look tu Book Program Anticipatcs Claim I
One of ordinary skill in the art would understand the term “First Memory area†to mean a
location for storing a product catalog, and the term "Secor1d Memory area" to mean a separate
location for storing an awards cataiogwas opposed to a single memory area that stores both the
products-t`or—sale catalog and the awards catalog.
lt is my opinion that claim l ofthe '87O patent is anticipated by Radisson's "Look to
Bc0k" program, which is the comnierciat embodiment of U.S. Patent No. 5,483,444 (the '444
patent~-priority date Oct. 26, l993). This program was directed to an online system for awarding
r credits to persons who book travel-related reservations; and discloses every element of Claim l
ofthe ‘87U patent.
"A iirst memcpy area for storing product catalog, said product catalog including
product descriptions and product prices for each product available for purchase"
The "Lool< to Book" program offered travel agents a catalog of products for sale
l available in the °"l`rave1 Reservations Network" (col. 3, line l3-col. 4, line 13). Travel agents
- were provided with fate infomtation and soil Capabilities directly from Radissoifs Pierre
reservation system. (CC 004546 et seq.). U
I The commercial embodiment of the '444 patent is the “Lool< to Boolc" travel agent incentives program developed
by Radisson Hotels international (col. 3, lines 7~l 1.)
Q l l
"A second memory area for storing an awards, said awards catalog including an award
description and award points value for each award"
Travel agents enrolled in the “Lcok to B0ek" program were provided with paper and
electronic versions of a catalog containing awards the travel agents could receive by redeeming
their earned points. (CC 0045684583; TRLWMTZ 44088-93). The electronic award catalog
contained award descriptions and point values required for redemption. (TRL—MRZ 44088-93).
"A Eregucncy database storing account information for each emolled user of said
incentive award progi;am"
The "Lo01< to Bool<:†program also utilized a frequency database for storing and managing
award accounts that included a method of calculating and issuing credits based on purchases
(col. 4, line through col. 5, Eine 16). Travel agents could enroll on-line simply by inciuding their
name in the "SZ†field when making their first Radisson reservation. (CC 004545). Thereafter,
the agent could enter that same information in the "SI" field when making reservations and the
"Look to Book" program would automatically calculate and award points to the agent's account.
This allowed enrolled travel agents to "focus on [their] clients while {Radisson} track[od] your
points" (TRL-MTZ 44088; CC 004561).
It is my opinion that the "l.ook to Book" program discloses the subject matter of Claim I
ofthe '870 patent in sufilcient detail to enable one of ordinary skill in the art to make and use the
claimed system without undue experimentation.
B. Ciaim 1 Would Have Been Obvious to One of Ordinary Skill in
the Art
Even if the °‘Look to Book" program were not anticipatory, it is my opinion that the
subject matter of Claim 1 would have been obvious to one of ordinary skiil in the art. As
discussed above in the introduction, and, as recognized by the examiner in the notice of
allowance, the concepts of ecommerce (online product catalogs) and consumer incentive
12
programs (frequency database and award catalogs) were not new in 1995. These three elements
are disclosed in numerous prior ari references, each of which are in the e-commerce and/or
incentive program fields of art.
For example, a memory area for storing an online product catalog containing product
descriptions and prices is found in the following references: (lr) the "Look to Book" program-
see, for example, CC 004546, TRL—MTZ 44088-93, '444 patent col. 3, lines 32 to 49; (2) U.S.
Patent N0. 5,592,378 patent ("the ’37S patent")--see, for example, coi. 2, line 37-col. 3, line E9;
col. 14, lines 1-6; (3) U.S. Patent N0. 5,710,887 patent-—-see, for example, col. 3, lines 18-26;
col. 7, lines 7-16; col. E0, line 56-col. 1 1, line 3; (4) U.S. Patent No. 5,724,424 patent ("The '424
patent")—see, for example, col. 3, lines 13-25; col. 4, lines 53-56. -
As discussed above in the introduction, award catalogs have been known in the incentive
business since the advent of trading stamps over 100 years ago. Storing these catalogs in a
computer memory area would have been obvious to one of ordinary skill in the art. ln fact, the
following references show award catalogs stored in a computer memory area: (1) The "L0olc to
Book" program -·--see for example, TRL-MTZ 4408844092; (2) Incentive, Feb. 1994, p. 23
("the Quinn ArticIe"), discussing "a merchandise catalog where users can view images of items
and place orders online?
Frequency databases that store customer information and point balances have also been
known in the incentive business for decades. Such databases are specifically disclosed in: (E)
U.S. Patent No. 5,025,372 —~ sec for example col. 1, l. 10 — col. 6, 1. 55; (2) the "Look to Book"
program———see, for example, TRL-MRZ 44089-93, CC 004545, CC 004561, ‘444 patent col. 4,
line 15—co1. 6, line 17; (3) '887 patent—see, for example, col. 3, lines 25~29; col. 7, lines 7-53;
col. 27, line 60-col. 28, Eine 10.
13
It is my opinion that one of ordinary skill in the art wouid have been motivated to
combine these well known concepts. ln order to operate any type of purchase-based incentive
program, these functions go hand~·in-hand: it is necessary to have a means for people to make
purchases; a means to track points or credits earned based on those purchases, and a means of
offering awards that can be obtained with those points or credits. These three functions have
been combined since the earliest days of the trading stamps. As discussed above, as new
technology developed, the means ofperforrning these functions evoived accordingiy.
Additionaily, the motivation to combine these functions can be found in numerous other
prior art references, including:
1) A November 1995 Adweek article on Frequent Buyer Programs, in which Michael
Srehmge wrote, "Every enterprise that offers loyalty promams is wel1—positioned to bring them to
the Net."
2) An article discussing the "Look to Book" program inthe August l995 edition of CEO
magazine, which stated: “R,adisson recently began offering simiiarly convenient online booking
directly to potential guests†through an Internet Web page.
3) A September 1995 Cyberspace Mails promotion offering users a product directory
from which they could purchase products and participate in a frequent bu yer club wherein each
dollar spent on the site earned one point that could be redeemed for gifts (Catalog Age, Sept. 1,
1995, p. 80.) Cyberspace Mails Inc. tiled a trademark application related to this system on
March 23, 1995. The claimed first use in commerce was the same day. See U.S. Trademark
Application No. 74650191.
14
4) An article in the Nov. 28, 1995 edition of Newsbytes discussing Prodig}/’s Internet
shopping mall and its ability to track a shoppers history and enabling "Prodigy and its
participating retail partners to develop special sales incentive programs and electronic coupons?
5) The ’378 patent (tiling date Aug. 19, 1994) describing an online computerized order
entry system and method operating over a 'l`CPflQP (Transmission Control Protocol/Internet
Protocol) network combined with incentive promotions. Specifically, the '378 patent discloses a
product catalog storing products and descriptions of those products (cols. 2 and 3, Summary of
the invention; col. S, lines 1-26; col. E4, lines 26-47, and Figures 2, 18, and 19). This patent
further discloses the use of incentives, including "product-to—product cross sell, free gills, dollar
or percentage off a line item, the order, the shipping or the handling coupons, a gift, a coupon, a
` discount, a payment type discount, a shipment service level discount, and shipping and handling
discount" (col. 20, lines '/·l9).
6) The *887 patent (tiling date Aug. 29, 1995) disclosing an online computer system and
method for electronic commerce combined with the use of coupons and "Frequent Buyer
lncentives" (col. 27, line 60 to col. 28, line 17.) It also discloses the use of a frequency database
in connection with operating a frequent buyer promotion (col. 3, line 25-29; col. 4, lines 49-51;
col. 7, lines 17-22; col. 9, line 62-col. 10, line 2; col. 27, line 60 to col. 28, line 17). Information
stored in this database includes name, address, methods available to the participant for payment,
and points issue in frequent buyer programs. Id.
7) U.S. Patent Nc. 5,794,210 ("the '2l0 patent" — filed December E 1, 1995) discloses a
system for rewarding participants with "digital cash" for reviewing online advertisements sent
via e-mail. (Abstract, col. lt), 1]. 9 — 57). Participants could then redeem their "digital cash" for
“positively priced infonnation," such as music, magazines, and newspaper articles. Id.
15
It is therefore my opinion that the subject matter of Ciaim l of the ‘S70 patent wouid have
been obvious to one of ordinary skill in the art in light of any combination ofthe disclosures of
the references discussed above.
C. The Applicant Failed to Disclose the Correct Inventorship of the
Patent to the PTO and the Patent is Therefore Invalid Under Section
I 02{0
It is my understanding that one is not entitled to a patent if "he did not himself invent the
subject matter sought to be patented? It is my opinion that the soie named inventor of the '870
patent did not invent the subject matter of claimil himseltl
As discussed above, it is my opinion that the "L»ook to Book" program anticipates Claim
i ofthe '870 patent. The sole named inventor ofthe '870 patent, Mr. Thomas Storey, is also
listed as an inventor nf` the '444 patent, the commercial embodiment ofwhich is the “L00k to
Book†program. The ‘444 patent also lists four other individuals, Mr. Scott Heintzmarn, Ms.
Barbara Monsoon, Mr. Steven Medina, and Mr. Gregory Malark, as inventors. Because the
subject matter of the 'AAA patent and Claim l of the '870 patent are identical, it is my opinion that
the ’870 patent is invalid pursuant to 35 U.S.C. Section 102(f) for failure to name all ofthe
correct inventors.
_ 6. The '412 patent
A. Claims 1, 18, and 35
Claim lof the '¢ti2 patent provides: A method for implementing an on·line incentive
program, said method comprising the steps of:
providing an Intemet webpage accessible to at least one user, via a computer system, for
on-line interactive communications between said user and said Internet webpage;
; offering, on said Internet webpage, at least one product for sale to said user,
16
determining whether said user qualifies for one or more award points based on said user's
response to purchase said at least one product;
calculating said award points according to a preprogrammed formula if said user qualities
for said award points, and
issuing said award points to an account of said user if said user quaiiiies for said award
points, wherein said award points are redeemable by said user for an award.
I. Plaintiffs Apparent Claim Construction Would Render Claim 1
Anticipated by the '887 Patent
It is my opinion that, if plaintiffs apparent ciairn construction is adopted by th Court,
Claim 1 of`rhe'¢1l2 patent would be anticipated by the '887 patent. As discussed above, the '887
patent discloses a computer system and method for an eiectronio commerce system supporting a
points·based frequent buyer program. The '887 patent discloses each and every eiernent of Claim
1 ofthe '4l2 patent,
{providing an Internet webpage accessible to at least one user, via a computer
system, for on~line interactive communications between said user and said
Internet webpage"
The system disclosed inthe *887 patent provides an internet webpage that is accessibie by
a customer using a World Wide Web browser application and allows the customer to interact
with the system via a TCP/IP connection. See, for example, tig. 2 (Customer Contact System);
cot. l2, lines 1-28. A customer can enter the "electronic mall†disclosed in the 'RR'7 patent via
this "user interface" and interact with the system. See, for example, Fig. 1, col. 6, ll. 26 —» 57.
"ot`fering, on said Internet webpage, at least one product for sale to said user"
Customers visiting the '887 patent's "electronic storefront" via the "user interface" may
purchase products offered sale through the Customer Contact System (cot. 3, lines 19-26; col. 6,
l. 4 — col. 7, l. 63, col. 10, line 56~ col. ll, iine 3; col. 12,1l. 1 ——28, 34 ··~42).
"determinin whether said user gualifies for one or more award points based on sail
user's response to purchase said at least one product"
17
The ‘887 patent also discloses a point—based frequent buyr program based on purchases
made throughthe system (col. 27, line 6{)—co1. 28, line 17). According to these programs, points
are issued to a customer's Frequent buyer account rather than instantaneous price discounts. Id.
Users may redeem these points at various levels to receive awards. Inherent in such a program is
a method for determining whether the customer qualities for award points based on his or her
purchase. Otherwise, there would be no process by which the user could accumulate points in
his or her frequent buyer account.
"calculating said award points according to a preprogigammed formuia if said user
gulities for said award points" `
As stated above, the points based frequent buyer program disclosed in the ’887 patent
issues points to a user‘s frequent buyer account. Inherent in such a program is a method by
which those award points are calculated following the user‘s purchase.
"issuing said award points to an account of said user if said user gualities for said
award points, wherein said award points are redeemable by said user for an award"
One of ordinary skill in the art, having read the specification and tile history ofthe '4l2
patent, would understand that this claim limitation requires that points be issued to the usc-:r's
account immediately upon completion of the user's purchase transaction. In the specification, the
applicant specifically distinguished the *412 patent from the prior art that allowed processing
time before awarding points:
1 However, while such progams may enhance the selection of prizes, there is still the
problem of obtaining the credit instrument for redeeming the awarded points. In
addition, the enrollee must allow for processing time before the bonus points are recorded
and made available as redeemable credit. Thus, the immediacy effect of the reward is
lacking in these conventional incentive programs. Col. 1, 11. 51 ~»- 59.
Another advantage of the subject invention is that it awards bonus points immediately
upon purchase of a (sic) merchandise. Col. 2, li. 3 - 5.
i 8
One of ordinary skiil in the art would also read this claim limitation as requiring that the
issued points be immediately available for redemption. Again, the appiicant repeatedly stated
that this was an important element ofthe invention:
The present invention is further advantageous in that it provides bonus points which are
immediately rnade available for redemption.
Another advantage ofthe present invention is that it allows the customer to select a prize
immediateiy upon award of the bonus points.
A further advantage of the present invention is that it allows a customer to order a prize
and redeem the awards points towards the ordered prize immediately upon the award of
the bonus points, thus enhancing the immediacy effect of the reward program.
Coi. 2, ll. 6 —- l7. Accordingly, this claim requires that points be immediately issued and
avaiiable for redemption upon completion of a qualifying transaction through the claimed
Internet webpage ("the immediacy effect"). p
It appears that plaintiff wiil argue that this claim does not require the immediacy effect
and thus covers any system awarding points that are redeemable for an award. Under this
interpretation, which I believe to be incorrect, the *887 patent would anticipate Claim l. As
discussed above, the system of the '887 patent issues points to a use1·’s lrequent buyer account
based on purchases made bythe user from the electronic store front. Col. 27, line 60—coE. 28,
Eine 17. The user is then able to redeem those points at various levels to obtain actual price
discounts on later purchases, Accordingly, if this claim element is construed not to require that
the points be awarded immediately and be immediately available for redemption, th *887 patent
discloses every eiement of Claim l.
Further, were plaintiffs apparent (albeit incorrect) claim construction to apply and hence
Claim 1 be anticipated by the *887 patent, it is my opinion that the '8 87 patent discloses the _
19
subject matter of Claim l of the '4i2 patent in sufiicient detail to enable one of ordinary skill in
the art to maire and use the claimed system without undue experimentation
2. Claim 1 Would Have Been Obvious to One of Ordinary Skill in
the Art
Regardless of which interpretation is adopted, it is my opinion that the subject matteriof
Claim l would have been obvious to one of ordinary skill in the art.
a. The '887 Patent
` As discussed above, the '887 patent discloses every element of Claim 1, as properly
interpreted, except the immediacy effect. But this immediacy effect would have been obvious to
one of ordinary skill in the art based on the disclosures contained in the 'SS'7 patent.
According to the '887 patent, once a customer selects a product to purchase through the
Internet webpage, the system arranges for immediate payment. First, the system queries the
customer for a payment method, such as the type of credit card (i.e. Visa) to be used. The
system then obtains the information necessary to perform a credit check ofthe user, including
name, address, amount ofthe transaction, etc. After obtaining this infomation, the system
connects to a "Paymcnt Handicr," which authorizes the transaction through an external payment
network, such as VlSAnet. Col. l2, ll. 34 — 65.
It would have been obvious to one of ordinary skill in the art to award points to the user’s
frequent buyer program immediately upon authorization of the credit transaction as required by
Claim I ofthe '·¢‘+i2 patent. Once the sponsoring company has received payment, there would be
no reason to delay the issuance of points to the users account. In fact, in Figure 5, the incentive
program used by the '88'7 patent is directly iiriked to both the electronic storefront and the
"payment handler? Immediately issuing the points to the user's frequency account would be
known by one of ordinary skill in the art to increase the motivational effect ofthe program due to
20
the impact instant gratification has on the user. In other words, it was known throughout the
incentives industry that the faster the user receives the award, the more motivational the
incentive program would be. Using this knowledge, and the teachings of the ‘887 patent, it is my
opinion that Claim 1 of the *412 patent would have been obvious to one of ordinary skitl in the
art.
b. The '887 Patent and U.S. Patent No. 5,794,210
The ’887 patent, as discussed thoroughly above, discloses every element of Claim 1, as
properly construed, except the immediacy effect. U.S. Patent No. 5,794,2lO {"the ‘2l O po.tent"
tiled December l 1, 19952) discloses a system by which users are awarded "digital cash," in the
form of“cyber coins," for viewing advertisements over the Internet. Known as "attention
brokerage," this system provides eotisumers with an incentive, or “digital cas}i,†to review
advertising materials offered by participating merchants. See col. 10, ll. 39 »~» 57. This digital
cash can be delivered over a computer network, such as the internet, to the user‘s personal
computer. See claim 26, col. 23, ll. 52 —- 54. In addition, this delivery can be cffeetuated in "rcal
time," or immediately upon the user‘s review ofthe advertisement, and can then be redeemed by
the user for “positive1y priced int"ormation,†such as music, magazines, or newspaper articles.
Sec Claim 29, col. 10, ll. 9 — 38.
It is my opinion that one of ordinary skill in the art would have been motivated to
combine the teachings of these two pieces of prior art. This motivation can be found in the
experience of one of ordinary skill in the art and from the specific teachings of the art. Both
references disciose e-commerce systems using incentives to influence the user's behavior.
i _ c. _ _ 'fhe "Look to Book" Progam I The '444 Patent
2 The inventor of the *2 E O patent, Mr. Nat Goldhaber, filed a trademark application related to the system disclosed in
the '2I0 patent on February E9, 1993. See Application Serial No. 74/360345, MARl{)8’74S—108755; MAR t08243-
108263.
_ 21 U
The "Look to Book" program and '444 patent are described thoroughly above with
reference to Claim l of the 'S'7O patent. There are only two elements of Claim I ofthe '4l2
patent not specifically disclosed by this program: (1) offering a product for sale through an
Internet Web page; and (2) points being immediately available for redemption upon completing
an online transaction. However, implementing these features in light ofthe “Look to Book"
program and the '444 patent would have been obvious to one of ordinary skill in the art.
Though it does not utilize an internet webpage, the Look to Book program does disclose
offering travel products for sale through an online system using a computenbased display by
which the travel agent can access the system (TRL-MTZ 44088—89,) One of ordinary skill in the
art at the time would have known that the Internet would provide a more convenient and
accessible platform for managing an online incentive program such as "Leek to Book†than
would proprietary networks. Thus, it would have been obvious to one of ordinary skill in the art
use the technological features of the lntemet in implementing a program such as "Look to
Booth"
The Look to Book program also awarded points tothe travel agents frequency account
immediately afler the agent made a reservation, Col. 4, l. 16 — col. 5, l. 44. But these points
were not available for redemption until after the guest completed the reservation (i.e. stayed in
the hotel and paid for the room). Col. 5, ll. 34 — 44. One of ordinary skill in the art would
realize the purpose of this delay period to be to ensure that points could not be redeemed before
the sponsoring merchant received payment for the reservation. One of ordinary skill in the art
would have known that, if the program was structured such that payment was received
_ immediately upon the user's making ofthe reservation, there would be no reason to provide a
delay period before the usefs earned points could be redeemed. By eliminating the delay period,
22
the points would be immediately available for redemption. It is therefore my opinion one of
ordinary skill in the art, using his or her own knowledge andthe teachings of the "Look to Rook"
program, would have found the subject matter of Claim l obvious.
d. The ’88'7 patent and the ‘°Look to Book" Pro ggam
Both of these systems are described in thorough detaii above. One of ordinary sirili in the
art, using the Internet, points based frequent buyer program, and credit card authorization
teachings of the '887 patent and theionline frequent buyer program of the "Look to Bool<"
program would have found the subject matter of Claim l obvious.
One of ordinary skili in the art wouid have been motivated to combine the teachings of
these two references. Specifically, both references relate to e-commerce systems in which users
earn and accumuiate points that are redeemabie for an award in a frequent buyer program. The
'887 patent also speaks to combining proprietary networks, such as AOL and Cornpuserve, with
internet based commerce. 'SS7 patent, col. 7, Il. 57 ·- 63 ("For example, existing commercial
services having proprietary electronic storeironts (e. g. Amerea Online or Compuserve's home
shopping forums) will probably want to continue to use those storefronts even if they become
networked into a broader electronic commerce architecture provided by this invention").
Additionally, thc motivation to move consumcnbascd incentive programs from a
proprietary online network (or paper for that matter) to the Internet was specifically disclosed in
numerous references, including:
1) The '887 patent itseii which, as discussed above, discloses the sale of products over an
Internet Web page in combination with a frequenbbuyer program and the desire to incorporate
existing proprietary networks into the system.
23
2) A September 1995 Cyberspace Malls Internet promotion offering users an online
product directory irom which they could purchase products and participate in a frequent buyer
club wherein each dollar spent on the site earned one point that could be redeemed for gifts
(Catalog Age, Sept. l, 1995, p. 80.; Cyberspace Malls TM Registration).
3) The Quinn Article, discussing the use of online award catalogs.
It is therefore my opinion that one of ordinary skill in the art would havebeen motivated
to combine the teachings ofthe '887 patent and the "Look to Book" program and that this
combination renders the subject matter of Claim E of the ’4i2 patent obvious.
e. The 'S87 Patent, "Look to Book" program, and the '2lO Patent
The combination of the '887 patent and the Look to Book program is discussed directly
above. The '2l() patent, as discussed above, discloses the ability to immediately issue "digita1
cash" to the user's account upon the user viewing an advertisement on an Internet page. The user
can then redeem this "digital eash" for "positively priced information," such as magazines,
newspaper articles, or music.
The combination of these three pieces of art would have rendered the subject matter of
Claim 1 ofthe '4l 2 patent obvious to one of ordinary skill in the art. One of ordinary skill in the
art would have been motivated to combine these references for the reasons discussed above.
By adding the immediacy effect taught by the '2lG patent to the ecommerce and frequent
buyer progam teachings of the '887 patent and the "Look to Book" program, one of ordinary
skill in the art would have known such programs could issue points immediately and allow
immediate redemption. Accordingly, the subject matter of Claim 1 of the '4l2 patent would have
been obvious to one of ordinary skill in the art and is therefore invalid.
24
Claim 18 has all of thc same limitations as Claim 1, except xhat Claim 18 is a system
claim, whereas Ciaim I is a method claim Claim 35 also contains the same limitations as Claim
1 except thai it rcfcrs to the scsfswarc for performing the steps of thc method of Claim 1. Each of
the prior art patents discussed above include computer systems and software for managing their
methods. Accordingly, it is my opinion that Ciaims 18 and 35 are also invalid for the reasons
discussed above.
B. Ciaims 10, 27, and 36
Claim 10 provides: A method for redeeming incentive awards in an an-line incentive
program, said method comprising the steps 0E
implementing am 012-1inc incentive program that issues award points to users, wherein
said award pointa are rcdcemabie by said user for an award;
implementing an Internat webpage accessible, via a computer system, to a least one user
of said cm·linc incentive program for 0n~1inc interactive commmications between said
user and said Internet webpage;
offcring, on said Internat webpage, at least one redeemable award available to said user
for exchange of said award points, and
permitting said user to initiate a process to receive said at least one redeemable award for
exchange of said award points issued to said user through said on-liuc incentive program.
Om: of ordinary skill in thc an at thc time of thc invention would have understood the
language "impicmc-snting an online incentive pr0gram" to mean implementing a program which
rewards users for 0n—linc activity. In the context of thc '4l2 patent, the specification makes pEain
that this online activity can only be thc online purchase of products. In other words, the
"inccntivizcd" behavior is the online purchase of products.
U U This understanding finds support in the claim language iiscli According to thc claim, the
n online incentive program "issues award points to users, wherein said award points are
25
redeemable by said user for an award." One of ordinary skill in the art would read this language
g as requiring that these award points be issued in response tn some online behavior. Tn light of
the specification, it is clear that- this behavior is the online purchase of products.
For example, the patent is titled "Fully Integrated On—Line Interactive Frequency and
Award Redemption Program? The specification repeatedly refers to an online catalog and
product home page through which consumers may purchase goods. The specification also makes
clear that the claimed incentive program is designed to induce loyalty with respect to purchases
through the online system. See, ag., Abstract, col. 2, lines 4·~6; fig. 1; fig. 2; fig. 3; col. 3, line
l3—col. 5, iine 58.) In fact, the specification does not refer to any other behavior to be
*incentivized' other than purchases made through the online catalog. »
This construction finds further support in the prosecution history of the patents-in-suit.
As the examiner of the 'S7O stated in the Notice of Aliowance:
it is the specific embodiment of the frequency database, coupled with a product catalog,
from which purchase of goods may be made, and an awards catalog, from which awards
maybe redeemed, that renders the invention distinct over the prior art. Several references
have been cited giving specific embodiments of electronic commerce system and
incentive award programs, however, none suggest or disclose combining the features of
both to create the invention of the instant application.
*870 patent, Notice of Allowance, p. 2. Further, in the Notice of Aiiowance for the 'Ol2 patent,
the examiner stated that an online awards catalog was present in the art, citing the Quinn articie,
but that there was no motivation to combine that teaching with references disclosing an online
product catalog. 'Ol2 patent Notice of Allowance, p. 2. Thus, according to the examiner, online
redemption alone was known in the art before the tiling date ofthe patents-in-suit andthe only
reason these claims were allowed was the speciic combination of such an awards catalog with a
` product catalog and frequency database. Knowing this, and having read the specitication, one of
26
ordinary skill in the art would understand the claim element "implementing an online incentive
program" as requiring the online purchase of goods bythe user.
It is also my opinion that, as discussed in more detail above, one of ordinary skill in the
art would also understand that the "online incentive program" must immediately issue award
points to a user upon completion of an online purchase, and that those award points must be
immediately redeemable by the user for an award (the "immediacy effect").
1. Under Plaintiffs Apparent Claim Construction, The '887 1’atent
Would Anticipate Claim 10
It is my opinion that the '887 patent would anticipate plaintiffs apparent construction of
Claim l0 ofthe '4l2 patent in that, as riiscussed above, it utilizes internet Web pages;
implements an online incentive program awarding points for the online purchase of products;
and offers awards in exchange for those award points. The only additional requirement of Claim C
l0 is that the user must be able to "initiate a process to receive said at least one redeemable
award for exchange of said award points issued to said user through said on-line incentive
program? This feature is disclosed in the ‘887 patent in that it discloses online redemption
where "customers may redeem points at various levels to obtain actual price discounts" for future
in-store purchases (col. 37, line 60—col. 28, line 18.)
Again, it appears that plaintiff will argue this claim does not require the immediacy
effect. This contention is addressed above and will not be repeated here. Linder such a claim
construction argument, the '887 patent would be anticipatory because every element ofthe claim
is found in the *887 patent. However, if as I believe to be the case, the immediacy effect is
required, Claim 10 ofthe '4l2 patent would not be anticipated by the *887 patent.
It also appears that plaintiff will argue that the claim term “implementing an online
incentive program" does not require the online purchase of products. instead, it will apparently
27
contend that Claim l0 requires only online redemption. Under such an interpretation, Claim 10
would be anticipated by the '887 patent. As discussed above, the 'SS7 patent discloses every
element of this claim (including the issuance and redemption of points, even under plaintiffs
apparent interpretation) including the online purchase of products. Removing this step would p
still render the claim anticipated by the *887 patent.
Z. Maritz Developed the Idea of an Online Award Catalog and Online
Redemption Before the Effective Filing Date of the '412 Patent _
As evidenced by the Quinn article, Maritz was testing an online award catalog at least as
early as February E994 (‘°Interactive award catalogs .. . Maritz is testing a merchandise catalog
where users can view images of items and place orders online"). By October 1995, Moritz was
developing its "GoldMail" program. See MAR 1 13139—l13142; MAR l 13}.33-1 13137; MAR
108176-108182; MAR 208745-108755).
"imglementing an online incentive orogarn that issues award points to users,
wherein said award points are redeemable by said user for an award"
The Goldmail program was an "online incentive programf as per plaintiffs expected
argument that this claim requires only online redemption. The Goldmail program is also an
"online incentive progra1n" according to my interpretation of that claim language in that it
rewarded users for reading advertisements online (ie. the activity being "incentivizecl" was
occurring online). See MAR l13139—~l 13142; MAR 113l33-l §3137; MAR 108176—108l82;
MAR 108745-108755 .
Pursuant to this program, users were sent e»mail advertisements and were awarded
incentives for reading the advertisement. Id. These incentives included award credits issued to
the user’s account. MAR 113136, MAR 113340, MAR 113141. Thus, the program issued award
points to the user’s account, said credits being redeemable for an award.
28
"imglementing an Internet webpage, via a computer system, to at ieast one user of said
online incentive program for online interactive communications between said user and
said internet webgage"
The Goldmail progam also used an Internet webpage that was accessible by the user for
interactive, online communication. Users of the Goldrnail program could enroll over a World
Wide Webpage via the Internet (MAR 113135, 113139) and could click on hyperlinks encioscd
in e—rnailed advertisements that were "hotlinks" to the webpages ofparticpating merchants.
"offering, on said Internet webpage, at least one redeemable award available to gd
user for exchange of said award points" and "permitting said user to initiate a process to
receive said atleast one redeemable award for exchange of said award points issued to said
user though said online incentive progarn?
Goldmail participants were provided with an incentive, such as award credits, for every
advertisement they read. One method by which Maritz contemplated users redeeming these
incentives was through "[a}n online catalog of Maritz merchandise . . . for immediate orders."
MAR ll3l40, MAR 113117, MAR 113140. Thus, the Goldmail system offered awards online
for the exchange of award credits and permitted the user to initiate a process for exchanging
those points through an online catalog. Based on these documents, it is clear that Maritz
developed the idea of online redemption before the patents-in—suit were tiled.
3. Claim 10 Would Have Been Obvious to One of Ordinary Skill in the Art
Even if Claim 10 is not anticipated bythe *887 patent, it would have been obvious to one
of ordinary skill in the art at the time of the effective filing date of the ’4l2 patent.
a. The "Loolc to Book" Program and the '88'7 Patent
As discussed above, the '444 patent and '887 disclose online incentive programs that
award points to a user's account that may be redeemed for awards. Though redemption did not
occur online, the '444 patent utilized an online catalog that users could view. TRL—MTZ 44088-
93. The ‘S87 patent did offer customers the ability to “redeern points at various levels to obtain
29
actual price discounts" in subsequent internet shopping sessions, though not through a separate
online awards catalog. Col. 27, ll. 60 — 67.
As discussed above, one of ordinary skill in the art would have been motivated to
combine the teachings of these two references. Gne of ordinary skill in the art, using these
teachings, would have found the subject matter of Claim l0 obvious.
b. The Quinn Article andthe "Look to Book" program or the '887
East
The disclosures contained inthe "Look to Bool<" program andthe '887 patent are
discussed at length above. The specific concept of online redemption through online award
catalogs was also known in the industry before the time of filing. ln the Quinn article, the author
highlighted that online merchandise award catalogs ‘“where users can view images of items and
place orders online" were being tested in the incentive industry at least as early as February
1994.
l Because all of these references relate to incentive programs, and specifically loyalty
based frequent buyer programs, one of ordinary skill in this art clearly would have been
motivated to combine the teachings of each. Based on the combination ofthe Quinn article and
the "Lool< to Book" program or the '887 patent, one of ordinary skill in the art would have found
the subject matter of Claim 10 obvious.
Claim 27 has the same Eimitations as Claim l0, except that Claim 27 refers to a computer
readable medium for performing the steps of Claim 10. Claim 36 also contains the same
limitations as Claim 1 except that it refers a computer system for performing the steps of the
method of Claim if}. Each ofthe references discussed above include computer systems and
software for managing their methods. Accordingly, it is my opinion that Claims 27 and 36 are
. also invalid for the reasons discussed above
30
7. The '0l2 Patent
Claim l provides: system for an incentive award program, including a computer system
accessible for on—line interactive communication with users, said computer system comprising;
a microprocessor comprising:
a first memory area for storing a product catalog, said product catalog including product
descriptions and product prices for each product available for purchase;
a second memory area for storing an awards catalog, said awards catalog including an
award description and award points value for each award; and
a frequency database storing account information for each enrolled user of said incentive
award program; and
a display for browsing at least one of said product catalog and said awards catalog.
This claim adds only two limitations to Claim 1 ofthe '87(l patent: 1) a microprocessor,
and 2) a display for browsing the product catalog and the awards catalog.3 The term
"microprocessor" appears no where in the specification ofthe 'Ol2 patent. It is my
understanding that another expert is opining on the meaning of this claim term and its impact on
the validity of this claim.
Because ofthe similarities between Claim 1 ofthe '87€) patent and Claim l ofthe ‘Gl2
patent, the examiner rejected Claim l ofthe ’Ol 2 patent for doublepatenting over the *870 patent.
The applicant tiled a terminal disclaimer, after which the examiner allowed the claims to issue.
As the examiner stated in the Notice of Allowance, the addition of these elements in Claim 1
differed from Claim l of the '870 patent "onlyir1 adding an obvious limitation to a means/display
for browsing the product catalog/database? '870 Patent Notice of Allowance, page 2.
Not only would addition of a display have been obvious in light of the ‘870 patent, it also
would have been obvious to one of ordinary skill in the art using common knowledge of the
3 The remaining limitations to this claim are identical to Claim l ofthe *870 patent; thus, the analysis above is
equally applicable to this claim.
3 l
industry. A dispiay would be required in order for a user to view a product cataiog online or to
review the awards catalog online.
Use of a display aliowing a user to view a product catalog or awards catalog is also found
in numerous pieces of prior art. For example, the ‘378 patent discloses the use of pages by which
a user can view a product catalog (col. I4, line 22-60; fig. 19). The ‘8S7 patent also teaches such
a display (col. 3, lines 5-17). Radissonfs "I,,ook to Book" program provided users with a display
for reviewing a product catalog (TRL-MTZ 44088·~44092). Quinn also discloses an online award
catalog "where users can view images of items and place orders online"(1ncentive, Feb. 1994, p.
23.)
Every iimitation of this claim is found in these analogous pieces of prior art. As discussed
above, one of ordinary skill in the att one would have been motivated to combine these
teachings. Accordingly, this claim is invalid as obvious.
8. Secondary Considerations
It is my understanding that certain “secondary considerations" may be considered in
assessing obviousness. The party seeking to rely on such considerations must establish a
"nexus†between the evidence and the merits of the claimed invention.
One secondary consideration is commercial success, that is, success that is due to the
claimed features ofthe invention, as opposed to factors such as advertising and marketing.
Though it appears that substantial points have been issued and redeemed with respect to methods
and systems of Netcentives and Trilegiant Loyalty, it is not clear that this commercial activity is
necessarily related to the patented aspects as opposed to sales or marketing efforts. I am further
aware that Netcentives entered bankruptcy and had its assets liquidated despite ownership of the
rights ofthe patents-in—suit and licenses thereunder.
32 .
Another secondary consideration potentially relevant to obviousness is copying of the l
patented system. I am unaware of any evidence of copying, on the part of Maritz or any other
entity.
I also understand that the existence of iicenses may, with a proper nexus, be relevant to
obviousness. There have been a number of licenses taken under the patents. Out of the
Netcentives bankruptcy, the patents were conveyed to Trilegiant Corp., which granted a iiilly
paid-up iicense to Carlson and its customers for free. I ain unaware of any showing that licenses
were agreed to because of an actual belief in any ofthe pater1ts' validity or enforceability, or in
the belief that the licensees activity was actually covered by any claims ofthe patents. It would
appear that licensees could have been as readily motivated by a desire to avoid costly litigation,
to obtain licenses for a relatively inexpensive cost, or for some other subjective reason.
Other secondary considerations include long—feit need, that is, an industry need that
remains unmet for years; prior failure of others; and unexpected results. In my view there was
nothing unexpected in putting long—utilized incentive programs into an online environment. This
was not a situation where the industry was experiencing difficulty applying on-line technoiogy to
the existing incentive programs of the day, or where others failed in the attempt to do the same.
Considered collectively, the secondary considerations do not work to overcome my
opinions concerning obviousness.
9. Materiality
A. The "L00k to Book" program.
lt is my understanding that the "Looi< to Book†program was first made public in the U.S.
in September 1992 (Radisson Hotels Intematioriai Press Release, "Radisson Hotels International
and Visa USA Unveil World‘s First On-Line Frequency Program for Travel Agents," Sept 22,
33
1992.) The inventors of the "Look to Book†program, including Mr. Storey (the sole~named
inventor ofthe patents at issue), filed an application with thc PTO on Oct. 26, 1993, which
issued as the '444 patent on Jan. 9, 1996. They also filed an international application under the
Patent Cooperation Treaty ("PC'i"’) on May 26, 1994. That application was published on May 4,
l995, over 8 % months before the application that issued as the '8'70 patent was tiled and over
three years before it issued. Despite being publicly available for several years and disclosed in
the U.S. and P.C.T applications, the "Look to Book°’ program was never disclosed to the P.'l`.€}
during the prosecution of the '870 patent.
It is my opinion that the "Look to Book" program and the PCT application that was
published on May 4, 1995 were highly material to the patentability ofthe *870 patent. As ·
discussed above, the "Look to Book" program anticipates Claim 1 of '870 patent and thus
establishes a prima facie case of nnpatentability. As also discussed above, these references
render other asserted claims obvious, alone and in combination with other highly relevant pieces
of prior art. And Storey's failure to name his Radisson co-inventors provides a further ground for
invalidating the patents—in·suit. At a minimum, a reasonable examiner would have found these
references important in deciding whether to allow the claims ofthe patents—in—suit.
B. The Chelliah patent.
The Chelliah patent was tiled Aug. 29, 1995 and issued on Ian. 20, 1998. The *012 patent
was filed Nov. l 1, 1999, and issued June l0, 2003. It is my understanding that the Cheiliah
patent was disclosed to Netcentives at least as early as June 28, 2000, during litigation between
Netcentives and numerous other parties. Despite being made aware ofthe Chelliah patent,
neither Netcentives nor '1`rilegiant disclosed this piece of art to the PTO during prosecution ofthe
'O1 2 patent.
p 34
It is my opinion that the Chelliah patent was highly material to the patentability of the
'012 patnt. As discussed above, Chelliah discloses a system by which users can earn frequent
buyer points for purchases made over the internet as well as a display allowing users to browse a
product catalog. The Chelliah patent, in combination with other art before the examiner, such as
the '444 patent, establishes a prima facie case of unpatentability of Claim i ofthe '€)l 2 patent. It
is also highly material to the '87O and *4E 2 patents such that, if the applicant was aware of
Chelliah duri
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