Free Statement - District Court of Arizona - Arizona

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David P. Irmscher (Indiana State Bar No. 15026-02) John K. Henning (Indiana State Bar No. 25203-49) Baker & Daniels LLP 111 East Wayne Street, Suite 800 Fort Wayne, IN 46802 Telephone: 260-424-8000 Facsimile: 260-460-1700 Ray Harris (Arizona State Bar No. 007408) Paul Moore (Arizona State Bar No. 019912) Fennemore Craig 3003 North Central Avenue, Suite 2600 Phoenix, AZ 85012-2913 Telephone: 602-916-5000 Facsimile: 602-916-5999 Attorneys for the defendant, Omron Corporation UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, CAUSE NO. CV04-0400 PHX PGR STATEMENT OF FACTS IN SUPPORT OF OMRON CORPORATION' S SECOND MOTION FOR SUMMARY JUDGMENT (Oral Argument Requested)) Defendant

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Plaintiff,
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vs.
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Omron Corporation,
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FENNEMORE CRAIG, P.C.
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The defendant, Omron Corporation ("Omron"), submits its Statement Of Facts In Support Of Omron Corporation' Second Motion For Summary Judgment ("Omron' s s Second Statement Of Facts"): Hypercom' Second Amended Complaint s
1.

On July 12, 2004, Hypercom Corporation ("Hypercom") filed its First

Amended Complaint against Omron and Verve, L.L.C. ("Verve"). See Plaintiff' First s Amended Complaint ("First Am. Compl."), filed July 12, 2004.
2.

On June 6, 2006, after significant discovery into the merits of Hypercom' s

claims against Omron and Verve, Hypercom filed its Second Amended Complaint ("Second Amended Complaint"). See Plaintiff' Second Amended Complaint ("Second s
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Am. Compl."), filed June 6, 2006.
3.

Hypercom' claims in the Second Amended Complaint are based on s

lawsuits filed in federal district court by Verve against Hypercom alleging infringement of U.S. Patent Nos. 4,678,895 ("the ` Patent") and 4,562,341 ("the ` Patent"), and an 895 341 administrative proceeding in the United States International Trade Commission ("ITC") initiated by Verve alleging infringement of U.S. Patent No. 5,012,077 ("the ` Patent"). 077 See Second Am. Compl. at ¶¶ 41, 53, 60.
4.

The ` 077, ` 341, and ` Patents involved in the patent infringement 895

lawsuits and the ITC proceedings filed by Verve against Hypercom cover technology for Point Of Sale ("POS") terminals, e.g, credit and debit card processing machines. See Exhibits 47, 49, and 50 to Hypercom Corporation' Statement Of Facts In Opposition To s Omron' Motion For Summary Judgment, filed on December 23, 2005 ("Hypercom' s s SOF In Opposition To Omron' First MSJ"), the ` s 077, ` 341, and ` Patents.1 895
5.

Hypercom claims that Omron engaged in a civil conspiracy with Verve to

file patent infringement actions without probable cause and "for the purpose of exacting monetary tribute from Hypercom." Second Am. Compl. at ¶ 82.
6.

Hypercom' claims against Omron include three counts: civil conspiracy for s

abuse of process and malicious prosecution; malicious prosecution; and aiding and abetting abuse of process and malicious prosecution. Id. at ¶¶ 81-99. The Patent Assignment Agreements Between Omron and Verve
7.

Omron is a Japanese company that develops, markets, and manufactures

electronic and sensory devices in the United States. Omron' patented technology s includes electronic relays, switches, timers and sensory devices, certain medical
1

Pursuant to the Arizona District Court local rules, Omron is not refiling exhibits that have been filed previously with the Court. However, for ease of reference, Omron will attach a courtesy copy of those previously filed exhibits to the bench brief provided to the Court.
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equipment, and onboard equipment for automobiles. See Exhibit 1 to Omron' Statement s Of Facts In Support Of Omron Corporation' Motion For Summary Judgment filed on s November 18, 2005 ("Omron' SOF In Support Of First MSJ"), Deposition of Tetsuyuki s Nakano, dated March 2-3, 2005 ("Nakano Depo."), at pp. 5:20-6:22, 8:18-20, 220:9-21, and 223:20-224:3.2
8.

Tetsyuki Nakano is Executive Director for Omron North America IP, which

develops systems to manage patents in the United States. Id. at pp. 5:8-6:22.
9.

Verve is a patent holding company, and does not make or sell any products.

Id. at pp. 56:17-57:8; Exhibit 2 to Omron' SOF In Support Of First MSJ, Deposition of s Kevin Imes, dated March 10, 2005 ("Imes Depo."), at p. 17:6-13; see also First Am. Compl., ¶¶ 8-13. 3
10.

Omron assigned certain patents to Verve because Omron had limited use for

them, and patent licensing and enforcement was not a focal point of Omron' business. s Exhibit 1 to Omron' SOF In Support Of First MSJ, Nakano Depo. at p. 78:2-21. s
11.

The first Assignment Agreement, Patent Assignment Agreement Between

Omron Corporation And Verve, L.L.C., Agreement No. 081303 (the "First Assignment"), became effective on August 15, 2003. Exhibit 3 to Omron' SOF In Support Of First s MSJ, First Assignment, p. 1.
12.

Mr. Nakano executed the First Assignment on behalf of Omron on

August 13, 2003. Id. at p. 6; see also Exhibit 1 to Omron' SOF In Support Of First MSJ, s Nakano Depo. at p. 5:3-9.
"A deposition or an extract therefrom is authenticated in a motion for summary judgment when it identifies the names of the deponent and the action and includes the reporter' certification that the deposition is a true record of s the testimony of the deponent." Orr v. Bank of America, NT & SA, 285 F.3d 764, 774 (9th Cir. 2002). Exhibit 1 to Omron' Statement Of Facts In Support Of First MSJ contained the cover page of Mr. Nakano' deposition s s transcript, which provides the names of the deponent and the action, and the reporter' certification. s Omron authenticated the deposition testimony of Kevin Imes by attaching to Exhibit 2 to Omron' Statement Of s Facts In Support Of First MSJ the cover page of Mr. Imes' deposition transcript and the reporter' certificate. See s s Orr, 285 F.3d at 774.
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13.

Mr. Nakano authenticated the First Assignment, which was marked as

Exhibit 3 at his deposition, during his March 2, 2005, deposition, by identifying the document and confirming that he signed the document on behalf of Omron.4 See Exhibit 1 to Omron' SOF In Support Of First MSJ, Nakano Depo., pp. 42:18-43:8, 44:11-16. s
14.

Under the First Assignment, Omron assigned to Verve its rights, title, and

interest to the ` Patent, including accrued causes of action for patent infringement. 895 Exhibit 3 to Omron' SOF In Support Of First MSJ, First Assignment, ¶ 2.1. s
15.

The First Assignment provides that:

Verve has succeeded to all of OMRON' right, title, and standing . . . to s institute and prosecute all suits and proceedings, and to take all actions that Verve, in its sole discretion, may deem necessary or proper to collect, assert, or enforce any claim, right, or title of any kind under the Patents. . . . Id.

12 16. 13 14

At the same time, Verve "grant[ed] back to OMRON and OMRON' s

customers/clients to be agreed upon by Verve and OMRON a non-exclusive, worldwide, irrevocable, perpetual, royalty-free, fully paid-up, license under the Patents to reproduce,
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make, have made, use, import, offer for sale and sell any products or services." Id. at
16

¶ 2.3.
17 17. 18 19 18. 20 21

The First Assignment also required Verve "to use its best efforts to

maximize the Collected Licensing Revenue generated from the Patents." Id. at ¶ 3.2. Finally, the First Assignment required Verve to pay Omron a percentage of

the "Collected Licensing Revenue," defined as "the gross total revenue received by or through Verve from the sale, license, transfer, or disposition of any of the Patents minus
22

APPLIED DEDUCTIONS." Id. at ¶¶ 1.4, 3.1.
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On October 14, 2003, Omron assigned to Verve additional patents ­

4

Under Federal Rule of Evidence 901(b)(1), a document can be authenticated by a witness who signed the document. Orr, 285 F.3d at 774 n.8, citing 31 Wright & Gold, Federal Practice & Procedure: Evidence § 7106, 43 (2000).

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including the ` Patent ? under Patent Assignment Agreement Between Omron 341 Corporation And Verve, L.L.C., Agreement No. 101403, (the "Second Assignment"). See Exhibit 4 to Omron' SOF In Support Of First MSJ, Second Assignment. s
20.

Mr. Nakano authenticated the Second Assignment, which was marked as

Exhibit 6-A during his March 2, 2005, deposition, by identifying the document and confirming that he signed it on behalf of Omron. Exhibit 1 to Omron' SOF In Support s Of First MSJ, Nakano Depo., pp. 90:20-91:16, 92:20-93:8.
21.

In terms similar to the First Assignment for the ` Patent, the Second 895

Assignment conveyed to Verve Omron' rights, title, and interest in the ` Patent, s 341 including its right to prosecute any patent infringement actions or otherwise enforce both patents, providing: Verve has succeeded to all of OMRON' right, title, and standing to s receive all rights and benefits pertaining to the Patents, to institute and prosecute all suits and proceedings, and to take all actions that Verve, in its sole discretion, may deem necessary or proper to collect, assert, or enforce any claim, right, or title of any kind under the Patents, whether arising before or after the Effective Date. Exhibit 4 to Omron' SOF In Support Of First MSJ, Second Assignment, ¶ 2.1. s
22.

As with the First Assignment, Verve granted back to Omron and its

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customers and clients a "non-exclusive, worldwide, irrevocable, perpetual, royalty-free,
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fully paid-up license" for the ` Patent. Exhibit 4 to Omron' SOF In Support Of First 341 s
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MSJ, Second Assignment, ¶ 2.3.
20 23. 21 22

Also like the First Assignment, the Second Assignment required Verve to

maximize the Collected Licensing Revenue generated from the patents and pay Omron a percentage of the revenue generated by the sale, license, transfer or disposition of the ` 340
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and ` Patents. Exhibit 4 to Omron' SOF In Support Of First MSJ, Second 341 s
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Assignment, ¶¶ 3.1-3.2.
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P HOENIX

On March 19, 2004, Omron and Verve entered into a third assignment

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agreement, Patent Assignment Agreement And License Agreement Between Omron Corporation And Verve, L.L.C., Agreement No. 031804 (the "Third Assignment"). Exhibit 5 to Omron' SOF In Support Of First MSJ ("Exhibit 5"), Third Assignment, p. 1. s
25.

Mr. Galasso signed the Third Assignment on behalf of Verve on March 17,

2004, while Mr. Nakano signed on behalf of Omron on March 19, 2004. Id. at p. 9.
26.

Mr. Nakano authenticated the Third Assignment, which was marked as

Exhibit 6 at his deposition, during his March 2, 2005, deposition. Exhibit 1 to Omron' s SOF In Support Of First MSJ, Nakano Depo., p. 90:12-19.
27.

Under the Third Assignment, Omron assigned to Verve its right, title, and

interest in 11 additional patents. Exhibit 5 to Omron' SOF In Support Of First MSJ, s Third Assignment, p. 1 and ¶ 1.1.
28.

Omron also granted to Verve an exclusive license to another 9 patents. Id.

at ¶ 1.1.1.
29.

Further, the Third Assignment amended and superseded certain provisions

of the First and Second Assignments, under which the ` 895, ` 340, and ` Patents 341 originally had been assigned. Id. at p. 1 and ¶¶ 3.1-3.4.
30.

Specifically, the Third Assignment clarified that:

VERVE understands that OMRON' license to [the patents] extends to S OMRON' present customers and clients for the products and services they s receive from OMRON. Id. at ¶ 3.1.
31.

The Third Assignment further clarified Omron' continuing licensing rights: s

"OMRON is granted the right to sub-license and cross-license [the patents] to OMRON' s present and future business partners and customers." Id. at ¶ 3.2.
32.

To effectuate Omron' licensing rights, the Third Assignment included a s

"Right to Notice" provision which provided: "VERVE further agrees to allow OMRON the opportunity to first determine within thirty (30) days after VERVE notifies OMRON
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whether a potential licensee is a present customer or client of OMRON prior to VERVE contacting, notifying, or filing suit against that potential licensee." Id. at ¶ 3.4.
33.

Paragraph 3.4 further clarified that:

OMRON and VERVE agree and understand that prior to the effective date of this Agreement, VERVE has already provided OMRON the opportunity to determine whether certain potential licensees or parties were a present customer or client of OMRON and that VERVE has already contacted, notified or filed suit against such certain potential licensees or parties. Id.
34.

The Third Assignment also required Omron to provide to Verve, upon

request, certain information related to the assigned patents: "OMRON shall deliver to VERVE non-confidential documentation pertaining to the ASSIGNED PATENTS and LICENSED PATENTS, including copies of non-confidential correspondence to or from potential licensees of the technology claimed in the ASSIGNED PATENTS and LICENSED PATENTS." Id. at ¶ 2.6.
35.

On April 1, 2004, two weeks after executing the Third Assignment, Omron

and Verve executed Addendum 1-033004 To Patent Assignment And License Agreement No. 031804 (the "Addendum"). Exhibit 6 to Omron' SOF In Support Of First MSJ, s Addendum, p. 1.
36.

Mr. Nakano authenticated the Addendum, which was marked as Exhibit 10

at his deposition, during his March 3, 2005, deposition. Exhibit 1 to Omron' SOF In s Support Of First MSJ, Nakano Depo., p. 133:10-21.
37.

The Addendum clarified the Third Assignment to expressly "grant OMRON

the right to sub-license [the patents] to OMRON' present and future business partners s and customers without limitation or waiver." Exhibit 6 to Omron' SOF In Support Of s First MSJ, Addendum, p. 1.
38.

More specifically, the Addendum provides:

OMRON' right to sub-license and cross-license applies also to those S
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parties who are initially approved by OMRON under section 3.4 [of the Third Assignment], as well as those parties against whom VERVE has already filed suit. Id. at ¶ 2.0.
39.

If Omron sought to sub- or cross-license a party that Verve had already sued

for patent infringement, the Addendum required Omron to reimburse Verve "for all of its reasonable third-party attorney fees, out-of-pocket costs and expert witness fees which VERVE has incurred in its attempts to obtain COLLECTED LICENSING REVENUE from the licensed party." Id. at ¶¶ 3.0-5.0. The ` 895 Patent, Its Claims, And Verve' Lawsuit In Michigan s
40.

The ` Patent, which Omron assigned to Verve in the First Assignment, 895

covers technology for an electronic cash register and payment system. First Am. Compl., ¶ 30; Defendant Omron Corporation' Answer To Plaintiff' First Amended Complaint s s ("Answer To First Am. Compl."), ¶ 30.
41.

Claim 1 of the ` Patent covers technology for "a system that requires an 895

electronic cash register." See Exhibit 50 to Hypercom' SOF In Opposition To Omron' s s First MSJ, the ` Patent. 895
42.

On September 11, 2003, several weeks after Verve and Omron signed the

First Assignment, Verve filed a lawsuit for infringement of the ` Patent against 895 Hypercom, Verifone, Inc., and Lipman USA, Inc., in the United States District Court for the Eastern District of Michigan ("the Michigan Action"). See First Am. Compl., ¶¶ 1920; Answer To First Am. Compl., ¶¶ 19-20.
43.

In the Michigan Action, Verve claimed upon information and belief that

Hypercom' products, including but not limited to the T7 Series POS terminals, infringed s the ` Patent. See Exhibit 33 to Hypercom' SOF In Opposition To Omron' First 895 s s MSJ, Complaint And Jury Demand at ¶ 5.
44.

Omron did not participate in Verve' prosecution of the Michigan Action. s

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Exhibit 7 to Omron' SOF In Support Of First MSJ, Deposition of Raymond Galasso s ("Galasso Depo."), dated March 11, 2005, p. 94:9-23.5 The ` 341 Patent, Its Claims, And Verve' Lawsuit In Texas s
45.

The ` Patent, which Omron assigned to Verve in the Second 341

Assignment, covers technology for an electronic cash register. First Am. Compl., ¶ 30; Answer To First Am. Compl., ¶ 30.
46.

Claim 1 of the ` Patent refers to "a keyboard having keys for cash 341

registration and for initiating customer credit inquiries." See Exhibit 49 to Hypercom' s SOF In Opposition To Omron' First MSJ, the ` Patent. s 341
47.

On February 4, 2004, Verve filed a complaint against Hypercom in the U.S.

District Court for the Western District of Texas ("the Texas Action"), and claimed upon information and belief that Hypercom' products, including but not limited to the s ICE6000 terminals, infringed the ` Patent. See Exhibit 36 to Hypercom' SOF In 341 s Opposition To Omron' First MSJ, Complaint (Jury Trial Demanded) at ¶ 5. s
48.

Omron did not participate in Verve' prosecution of the Texas Action. s

Exhibit 7 to Omron' SOF In Support Of First MSJ, Galasso Depo., p. 94:9-23. s The ` 077 Patent, Its Claims, And Verve' Lawsuit In The International Trade Commission s
49.

Verve also filed a Verified Complaint Under Section 337 Of The Tariff Act

19

Of 1930, As Amended, with the United States International Trade Commission ("the ITC
20

Action") on July 31, 2004, alleging upon information and belief that numerous defendants
21

­ including Hypercom ­ infringed the ` assigned to Verve by Omron. See Exhibit 38 077
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to Hypercom' SOF In Opposition To Omron' First MSJ, In re Certain Point of Sale s s
23

Component Parts Thereof, Investigation No. 337-TA-524, filed July 31, 2004 ("the ITC
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FENNEMORE CRAIG, P.C.
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5

Omron authenticated the deposition testimony of Raymond Galasso by attaching to Exhibit 7 to Omron' Statement s Of Facts In Support Of First MSJ the cover page of Mr. Galasso' deposition transcript and the reporter' certificate. s s See Orr, 285 F.3d at 774.
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Complaint").
50.

In the ITC Action, Verve alleged upon information and belief that

Hypercom' products, including but not limited to the ICE6000 and the T8 terminals, s infringed claims 1 and 2 of the ` Patent. Id. at ¶ 10. 077
51.

Claim 1 of the ` Patent covers "a card discriminator for automatically 077

discriminating whether a card to be used is a credit card or a debit card by reading said data stored on said card." See Exhibit 47 to Hypercom' SOF In Opposition To Omron' s s First MSJ, Claim 1 of the ` Patent. 077
52.

Claim 2 of the ` Patent covers "[t]he credit and debit card processing 077

terminal of claim 1, wherein said credit processor and said debit processor includes key input means." Id., Claim 2 of the ` Patent. 077
53.

The ` Patent covers a credit and debit card processing terminal that is 077

capable of automatically discriminating between a credit and debit card, after the card is swiped, without any additional input from the cashier or the card owner. See Exhibit 47 to Hypercom' SOF In Opposition To Omron' First MSJ, the ` Patent; see also Exhibits s s 077 1a and 1b to Omron' SOF In Support Of Second MSJ, Expert Report Of Charles Berman s ("Berman Report"), at pp. 8-12, ¶¶ 32-48.6 Evidence Disproving Existence Of Conspiracy
54.

Hypercom has argued that discovery would reveal that Omron conspired

with Verve to "fil[e] lawsuits against Hypercom in distant and inconvenient forums for purposes of harassment." See Plaintiff Hypercom' Opposition To Defendant Verve' s s Motion To Stay Discovery And Supplemental Brief In Opposition To Verve' Motion To s Dismiss For Lack Of Personal Jurisdiction, filed August 12, 2004, p. 7.
The Expert Report Of Charles Berman is attached to a sworn affidavit, signed by Mr. Berman, affirming that the report is a true and accurate copy of his report, and that all of the statements made in the report are correct. See Exhibit 1 to Omron' SOF In Support Of Second MSJ. The Berman Report is filed as Exhibit 1a and 1b due to the s size of the document.
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55.

During discovery, Hypercom has received from Omron all documents

regarding the Assignment Agreements and related communications between Omron and Verve. See Joint Case Management Report, Section F, filed November 14, 2005 (outlining the discovery conducted to date).
56.

Hypercom has deposed a Rule 30(b)(6) corporate representative from

Omron, Tetsuyuki Nakano. See Exhibit 8 to Omron' SOF In Support Of First MSJ, s Amended Notice Of Videotaped Rule 30(b)(6) Deposition Of Omron Corporation, served February 23, 2005.
57.

Hypercom has deposed the two principals of Verve, Raymond Galasso and

Kevin Imes. See generally Exhibit 2 to Omron' SOF In Support Of First MSJ, Imes s Depo.; Exhibit 7 to Omron' SOF In Support Of First MSJ, Galasso Depo. s
58.

Hypercom has deposed Omron' legal counsel who assisted with drafting s

the Assignment Agreements, Herbert Kerner. See Exhibit 2 to Omron' SOF In Support s Of Second MSJ, Deposition of Herbert Kerner, dated May 17, 2006 ("Kerner Depo.").7
59.

Verve did not routinely keep Omron informed of, or coordinate the

prosecution of, Verve' lawsuits: s Q. (BY MR. LEACH) During the time that Verve has been prosecuting lawsuits against various companies relating to the Omron patents, have you periodically kept Herb Kerner informed of the progress of any of those proceedings? No. Have you had communications with Mr. Kerner to coordinate any aspects of those proceedings? With Mister -- no. Nope. Have you had any communications with anyone else at Omron to keep them informed or to coordinate with them --

A. Q. A. Q.
7

Omron authenticates the deposition testimony of Herbert Kerner by attaching to Exhibit 2 to Omron' Statement Of s Facts In Support Of Second MSJ the cover page of Mr. Kerner' deposition transcript and the reporter' certificate. s s See Orr, 285 F.3d at 774.
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1

A.
2

No. -- the status of those proceedings? No.

Q.
3

A.
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Exhibit 7 to Omron' SOF In Support Of First MSJ, Galasso Depo., p. 94:9-23. s
60.

Omron did not participate in Verve' evaluation of potential infringement of s

the Omron-assigned patents. Exhibit 1 to Omron' SOF In Support Of First MSJ, Nakano s Depo., pp. 157:10-159:15, 162:21-163:4.
61.

Kevin Imes, a principal of Verve, confirmed that Mr. Galasso' law firm s

was the only entity involved in investigating, targeting, licensing or enforcing any of the Omron-assigned patents: Q. As of the end of October, 2003, did Verve have anyone else who was involved in any way in investigating, targeting, licensing or enforcing any of the Omron patents other than the Simon, Galasso & Frantz law firm? Were there any licensing agents or anyone else involved? I don' believe so. t

A.

See Exhibit 2 to Omron' SOF In Support Of First MSJ, Imes Depo., p. 58:8-14. s
62.

In accordance with its contractual rights, Omron only affirmed that

Hypercom did not qualify as a business partner. Exhibit 1 to Omron' SOF In Support Of s First MSJ, Nakano Depo., pp. 60:7-62:4; see also Exhibit 5, Third Assignment, ¶ 3.4.
63.

Omron has not been involved in Verve' prosecution of any claim against s

Hypercom. Exhibit 1 to Omron' SOF In Support Of First MSJ, Nakano Depo., pp. s 159:1-5, 161:1-162:7; see also Exhibit 7 to Omron' SOF In Support Of First MSJ, s Galasso Depo., p. 94:9-23.
64.

Verve' principal, Raymond Galasso, testified in his deposition that Verve, s

rather than Omron, evaluated the Omron-assigned patents for potential infringement claims. Exhibit 7 to Omron' SOF In Support Of First MSJ, Galasso Depo., p. 28:16-25. s
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65.

The only agreements between Omron and Verve are those contained in the

written Assignment Agreements, all of which have been disclosed. Exhibit 1 to Omron' s SOF In Support Of First MSJ, Nakano Depo. pp. 92:8-11, 134:2-135:208; see supra, pp. 3-8.
66.

Kevin Imes testified that there were no agreements, other than the written

Assignment Agreements, between Omron and Verve, or between the outside counsel or individual representatives of Omron and Verve: Q. As of the end of October 2003, were there any other agreements between Omron and Verve other than the ones that I' marked in ve your deposition here today? Not that I' aware of. m Were there any agreements between Omron and Raymond Galasso, to your knowledge? Not to my knowledge, no. Were there any agreements between Omron and the Simon, Galasso & Frantz law firm, to your knowledge? No. Were there any agreements between Verve and the Simon, Galasso & Frantz law firm? I don' believe so. t Were there any written agreements of any type between you and Raymond Galasso at this time? No. Were there any agreements between you and the Simon, Galasso & Frantz law firm at this time? I don' believe so. t

A. Q. A. Q. A. Q. A. Q. A. Q. A.
8

Mr. Nakano confirmed that the only agreements between Omron and Verve are those listed in Exhibit 11 to his deposition, Omron Corporation' Second Set Of Responses To Hypercom' First Set Of Interrogatories, served s s February 28, 2005. A copy of Exhibit 11 to Mr. Nakano' deposition was attached as part of Exhibit 1 to Omron' s s Statement Of Facts In Support Of First MSJ to clarify and give context to Mr. Nakano' deposition testimony. s
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Q.

As of the end of October, 2003, did Verve have anyone else who was involved in any way in investigating, targeting, licensing or enforcing any of the Omron patents other than the Simon, Galasso & Frantz law firm? Were there any licensing agents or anyone else involved? I don' believe so. t ******

A.
4 5

Q.
6 7

Now, thus far I' identified agreements that have been produced by ve Omron up through Exhibit 12. Are there any other agreements between Verve and Omron? Not that I' aware of, no. m Have there ever been any agreements at any time, other than the ones that we' identified? ve I don' believe so. t To your knowledge, are there or have there ever been any agreements between Omron and Ray Galasso separately? Not that I' aware of, no. m To your knowledge, have there ever been any agreements between Omron and Simon, Galasso & Frantz? Not that I' aware of. m To your knowledge, have there ever been any agreements between Omron and you? No. Are there any agreements between Verve and Herb Kerner? I don' believe so. t

A.
8

Q.
9 10 11 12

A. Q. A.

13

Q.
14 15 16 17

A. Q. A.

18

Q.
19

A.
20 21 22 23 24 25 26
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Exhibit 2 to Omron' SOF In Support Of First MSJ, Imes Depo., pp. 57:13-58:14, 82:11s 83:5.
67.

The ITC recognized that the public assignment agreements recorded with

the U.S. Patent and Trademark Office to document the assignment of patents from Omron to Verve were "ministerial" filings that need not "lay out the full agreement between the parties." See Exhibit 60 to Hypercom' SOF In Opposition To Omron' First MSJ, Order s s
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No. 40 at 21.
68.

As the ITC explained, "[t]he existence of the assignment itself is a matter of

public record and constitutes notice of Verve' interest in the ` patent." Id. at 21-22. s 077
69.

Laurence Pretty, Hypercom' proposed expert witness, admitted during his s

deposition that Omron' actions and conduct were consistent with Omron' rights under s s the Assignment Agreements. Q. And with respect to the various contracts between Omron and Verve, did Omron do anything that is inconsistent with the rights that it had under those contracts? Omron and Verve acted in accordance with what their contracts between themselves permitted them to do.

A.

Exhibit 3 to Omron' SOF In Support Of Second MSJ, Deposition of Laurence Pretty, s dated June 23, 2006, p. 190:19-25. He further admitted that there is "nothing inherently
12

wrong with a patent holding company." (Id. 189:12-18)
13 70. 14 15

Omron facilitated access to a potential witness, the inventor of the ` 077

Patent. See Exhibit 23 to Hypercom' SOF In Opposition To Omron' First MSJ, Nakano s s Depo. at pp. 149:5-151:1.
16 71. 17 18 72. 19 20 73. 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
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Omron also recommended a local attorney, Mr. Okada, who had worked for

Omron for many years. Id. at pp. 150:15-151:1 and 152:11-22. Omron did not, by contrast, obstruct discovery or tell any witness what to

say to Verve' adversaries. Id. at pp. 150:15-151:1 and 153:12-20. s In fact, Omron offered to provide Hypercom with contact information for

the inventor of the ` Patent: 077 A: I do recall that we did provide the respondents in the ITC his contact information and Ingenico and so forth, and when we had a face-to-face meeting with Mr. Nakano, myself and the counsel for Ingenico, we discussed the inventor, and I cannot remember exactly, but there ­ we had volunteered to give them his contact information. I don' remember how t that turned out, but it was ­ we thought if he' relevant, he' relevant, and s s our situation is at that point we' just someone who is responding to a re subpoena and document request that we provide information to the parties.
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See Exhibit 2 to Omron' SOF In Support Of Second MSJ, Kerner Depo. at pp. 205:8s 211:16.
74.

Kerner further testified: And in this memo or letter, e-mail, Mr. Galasso tells the Japanese lawyer to instruct the inventor not to discuss anything with anybody about the patent until they' had a chance to discuss it first; correct? ve That' what he said. s Did you know that Raymond Galasso was going to provide him with that instruction? No. This document was produced to us by Omron. Do you know how Omron came into possession of this? We might have been blind copied on it, but to your question, you asked did we know he was going to provide this to him. We did not know ahead of time. We were providing to Verve the same service we were providing to the respondents, basically putting them in contact with the inventor who could have been hard to find, and also trying to be sympathetic with a former Omron employee which is being contacted by a lawyer at your home regarding a patent totally out of left field, we didn' want to create that situation, we didn' t t think it' good for anyone, so we -- we wanted to contact him, Mr. s Nakano wanted to contact him. He didn' want to put his friend in t that position, informed him of the patent and -- and the proceeding, and then we provided his contact information. I want to hesitate on that. I don' remember how that went -- how that went, whether or t not they needed the contact information from us, but I know we volunteered to provide that information to everyone. For Verve it was only different because we also knew the name of a lawyer locally who we -- who we thought was a good English/Japanese gobetween and recommended him as a lawyer.

Q

A Q A Q A

Id. at pp. 209:25-210:16 (emphasis added).
75.

In addition, Omron voluntarily produced all of the Assignment Agreements

to the parties in the ITC Action when those documents were requested from Omron. Id. at pp. 193:19-194:22; see also Exhibit 60 to Hypercom' SOF In Opposition To Omron' s s First MSJ, Order No. 40 at 23.
76.

In his deposition, Hypercom' in-house counsel and chief legal officer, s

Douglas Reich ("Reich"), had the following to say about a settlement meeting on
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September 16, 2004, regarding claims filed by Verve against Hypercom: [T]hey may have reserved their evaluation of it, but we clearly demonstrated why we believed they didn' infringe the t patents that were at that time being asserted against us. I am not sure that there was much conversation about the actual infringement because we didn' really go into that t much detail about the claims in the patents. . . .[W]e attempted to go through maybe one or more of the patents, but it became obvious that that was going to be a very lengthy process. And then we got down to more of a discussion about well, how we can resolve this matter between us and Verve. See Exhibit 24 to Hypercom' SOF In Opposition To Omron' First MSJ, Deposition of s s Douglas Reich ("Reich Depo."), dated March 23, 2005 at pp. 39:15-40:2 (emphasis added).
77.

Mr. Nakano, Omron' Rule 30(b)(6) representative, has testified that he did s

not even "know specifically which patent [Verve' claims against Hypercom] concerned s [or] which Hypercom product was involved" at the time of the September 16, 2004, meeting. Exhibit 23 to Hypercom' SOF In Opposition To Omron' First MSJ, Nakano s s Depo. at p. 157:2-7.
78.

In any case, an independent evaluation of Verve' claims against Hypercom s

would have been costly. Id. at p. 73:11-14.
79.

Hypercom' representative, Mr. Reich, testified that Omron referred to a s

"significant number of patents that Omron had with . . . potential application to Hypercom' business," and offered a licensing arrangement for those patents. Exhibit 24 s to Hypercom' SOF In Opposition To Omron' First MSJ, Reich Depo. at pp. 34:21-35:3 s s (emphasis added).
80.

When asked if Hypercom knows of any evidence that "Omron knew

Hypercom was not infringing any of the patents when it assigned those patents to Verve," Hypercom' Rule 30(b)(6) designated witness (Reich) answered: "I am not aware of such s evidence . . . ." Id. at pp. 128:20-129:3.
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81.

And when asked whether a reasonable attorney could have concluded that

Hypercom infringed the assigned patents, Hypercom responded: "I don' have a basis for t saying whether some else could make that conclusion or not." Id. at 104:22-105:3.
82.

Reich, Hypercom' chief legal officer and 30(b)(6) designate, testified: s Q: So Hypercom doesn' have any specific evidence other than what' in t s the ITC and which you don' actually know about to support the t claim that there was an unwritten agreement? I believe that' correct. s

A: Id. at 72:16-20.
83.

Omron consistently relied on the advice of its counsel regarding the

Assignment Agreements: A: . . . I have to tell you that I never consulted anyone about Verve. All information came from Herb Kerner. He himself through his network talked about Verve, and then he ­ my understanding was that he through this consultation felt that Verve is a reliable company. So were you relying upon Herb Kerner at that time to vouch or speak for Verve? Of course, I trusted Herb Kerner, and I had a basis [for] that confidence I had in Kerner. ***** Q. . . . You were relying on Mr. Kerner to tell you about Verve being reliable. I think you used the work "trust", but that was perhaps not the best word, but you were relying on Mr. Kerner to tell you Verve was a good company; right? Yes.

Q. A.

A.

***** Q. . . . Were there any sort of communications prior to the meeting in the summer of 2003 that led up to the assignment of the ` 895 paten and the ` 200 patent from Omron to Verve? A. I understand. My recollection is that our counsel, Mr. Kerner, suggested that we assign these two patents, which were quite old patents, to Verve. ***** A. I always had a business with Verve through Mr. Kerner. And so I think Mr.
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1 2 3

Galasso signed this through Mr. Kerner' connection. s Q. A. So generally your business with Verve was conducted through Mr. Herb Kerner? Yes, you are right. And would Mr. Kerner have communications with Verve that you did not participate in? Yes. Did Mr. Kerner have communications with Verve that you did not participate in?

4

Q.
5 6 7

Q.

Mr. Irmscher: Same objection.
8 9 10 11 12 13 14 15

The Witness (through interpreter): I' sure he had a telephone conversation with m them. By Mr. Leach: Q. And your practice was that he would relate to you the substance of the communications he had with Verve? Is that correct? A. Yes, that' my understanding s ***** Q. A. So did you participate in any telephone conversations where you discussed, negotiated any terms of any of the agreements with Verve? I ­ there was no participation from me. So do I understand that you ­ after the meeting in the summer of 2003, you never spoke directly with Verve in connection with negotiations of any agreements between Omron and Verve?

16

Q.
17 18

Mr. Irmscher: You mean on the telephone or live?
19

Mr. Leach: Telephone.
20

A.
21 22 23 24 25

I was corrected. About the agreement, you said, that conversation about the agreement. No, absolutely not. *****

Q.

Now, even ­ yesterday I asked you whether you knew in advance that Verve was going to file a lawsuit against Hypercom. Would you agree with me that at least your attorney, Herb Kerner, knew in advance that Verve was going to file a lawsuit against Hypercom? As I repeatedly said, I had all the information coming through Herb Kerner so if I knew it, then Herb Kerner knew it too.

A.
26
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1

Q.
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
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Did Herb Kerner tell you when he asked you to sign Exhibit 4 that Verve planned to file suit on this patent or the ` patent the following week? 895 I do not think that he told me. He might have known but he did not say that I should sign this document Number 4 because of the lawsuit.

A.

See Exhibit 23 to Hypercom' SOF In Opposition To Omron' First MSJ, Nakano Depo. s s at pp. 16:6-14; 25:4-10; 40:10-19; 93:22-95:3; 129:18-133:6; 141:11-142:6. Verve' Pre-Filing Investigation Of Patent Infringement Claims Against Hypercom s
84.

Prior to filing any infringement lawsuits, Kevin Imes of Verve evaluated the

claims and specifications of the ` 077, ` 341, and ` Patents and compared those claims 895 to publicly available information on Hypercom' products. See Exhibit 51 to Hypercom' s s SOF In Opposition To Omron' First MSJ, Imes Depo., pp. 35:12-37:7, 72:7-25, 77:8-23. s
85.

Imes testified that as part of his evaluation he "[l]ooked at [Hypercom' s]

products relative to the claims and specifications of the ` patent." Id. at p. 37:6-7. 895
86.

With respect to the ` Patent, Imes "[r]eviewed the [` 341 341] patent relative

to Hypercom' products that were available online to determine whether or not the s features and functions of the patent were covered by any of Hypercom' products." Id. at s p. 72:11-25.
87.

With respect to the ` Patent, Imes' evaluation included "[r]eading the 077 s

patent and the functions and features of the patent and looking at Hypercom products relative to the functions and features described in the patent." Id. at pp. 77:17-78:7.
88.

Imes also evaluated the ` Patent by using a Hypercom terminal at an 077

Office Max store to make a purchase to determine whether the terminal was capable of "card discrimination and reading different card types." Id. at pp. 78:12-81:25.
89.

Verve provided further information to the ITC regarding Imes' evaluation s

of the ` Patent. See Exhibit 4 to Omron' SOF In Support Of Second MSJ, Verve 077 s L.L.C.' Additional Information On Testing And Infringement Provided At Request Of s
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Respondents And ITC Investigation Staff.
90.

Imes tested the Hypercom ICE6000 at an Office Max store to "determine if

such POS terminal devices determine whether the card type being used was a credit or debit card based upon information embedded in the credit card or debit card without human intervention and then processes the transaction as either a credit or debit transaction." Id. at p. 2 (Bates-stamped LP004809).
91.

Imes further explained Verve' construction of the claim "without human s

intervention" to mean "determining the type of card (notwithstanding type of transaction or where some or all of the transaction was performed) based on information embedded in the card without user intervention." Id. at p. 3 (Bates-stamped LP004810).
92.

Verve further explained that the Hypercom ICE6000 terminal was a POS

terminal that (1) did not require selection of transaction type, i.e., credit or debit, before determining the card type without user intervention, and (2) has the capability to process check cards or bank cards as a credit or debit card while performing a debit transaction. Id. at pp. 4-5 (Bates-stamped LP004811-12).
93.

Chris Walton, an attorney with the law firm of Simon Galasso & Franz,

P.L.C., and counsel for Verve in the ITC, Texas, and Michigan Actions, also conducted a pre-suit infringement investigation prior to filing the ITC Action. See Exhibit 5 to Omron' SOF In Support Of Second MSJ, Declaration of Christopher S. Walton, Esq. In s Response To Order No. 40 Ordering Complainant To Show Cause Why Sanctions Should Not Be Imposed, filed in the ITC Action on May 20, 2005 ("05/20/05 Walton Declaration"), at ¶ 2.
94.

Walton "reviewed and analyzed the ` Patent, and construed at least 077

claims 1 and 2 of the ` Patent to verify the reasonableness of Verve' infringement 077 s position. The analysis performed by the Simon Galasso firm was conducted independently of any claim construction or infringement review undertaken by Verve."
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Id. at ¶ 2.
95.

Walton confirmed that as part of his infringement evaluation he reviewed

the claims, the specifications, the prosecution file history, the technical references, and the prior art references in the ` Patent. Id. at ¶¶ 4-5. 077
96.

After construing the claims of the ` Patent, Walton reviewed product 077

specification literature, which described the features, functionality and operational capabilities and limitations, for Hypercom POS terminals accused of infringement. Id. at ¶ 6.
97.

Walton then compared his interpretation of claims 1 and 2 with Hypercom' s

product specification literature. This analysis was conducted independently from the analysis and testing conducted by Verve. Id. Omron' and Verve' Fact And Expert Witnesses s s Support A Reasonable Infringement Claim
98.

Hypercom has consistently maintained that its POS terminals do not infringe

14

the relevant patents because: (1) the T8 and ICE 6000 terminals cannot automatically
15

discriminate between credit and debit cards; and (2) its terminals do not qualify as
16

electronic cash registers within the meaning of those patents. Exhibit 6 to Omron' SOF s
17

In Support Of Second MSJ, Main Report Of Laurence H. Pretty, Expert For Plaintiff
18

Hypercom Corporation On Patent Litigation Procedure, at 33 and 39.
19 99. 20 21

Verve retained Brad Gulko as its expert witness in the other Arizona case,

Hypercom v. Verve, L.L.C., CV-05-0365-PHX-FJM. See Exhibit 7 to Omron' SOF In s Support Of Second MSJ, Summary Of Opinions Of Brad Gulko ("Gulko Report") at p. 3,
22 23 100. Omron also retained Gulko as its expert witness and disclosed on April 17, 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

attached to Affidavit Of Brad Gulko.9

The Summary Of Opinions Of Brad Gulko is attached to a sworn affidavit, signed by Mr. Gulko, affirming that the report is a true and accurate copy of his report, and that all of the statements made in the report are correct. See Exhibit 7 to Omron' SOF In Support Of Second MSJ. s
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2006, the same Gulko Report prepared on behalf of and at the direction of Verve. Id.
101. As part of his investigation on behalf of Verve, Gulko evaluated the claims

in the ` 077, ` 341, and ` Patents, and reviewed information about Hypercom' T7, T8 895 s and ICE6000 POS terminals, and concluded that (1) "[t]here is sufficient information in the public domain to provide a reasonable suspicion that the Hypercom Terminals possesses [sic] characteristics falling within the scope of the patent claim language," and (2) "[t]here is presently substantial evidence that the Hypercom Terminals can be configured to fall within the scope of the patent claims." Id. at p. 3.
102. Like Walton, Gulko reviewed the patents, the prosecution histories for the

patents, and Hypercom product literature. Id. and Exhibit 3 attached to Gulko Report.
103. Gulko opined that the Hypercom T7 terminal could be configured to

"discriminate between debit and credit cards." Moreover, Gulko relied on Hypercom manuals for software used with the T7 terminal to show four examples of the T7 terminal' capability to add separate items to produce a sum of the amount owed. Exhibit s 7 to Omron' SOF In Support Of Second MSJ, Gulko Report at pp. 6-7. s
104. Finally, Gulko opined that the T7 terminal could be construed as an

"electronic cash register" as that term is defined in the claims of the ` Patent. Id. 341
105. This part of Gulko' opinion is based on a Claim-Construction Order by the s

Northern District of California in Verifone, Inc. v. Verve LLC, et al., 04-02795, in which the court construed the term "electronic cash register" in the ` and ` Patents to 341 895 mean "an electronic device capable of both calculating a sum to be paid and automatically conducting credit inquiries using data stored on a customer' card." See Exhibit 7 to s Omron' SOF In Support Of Second MSJ, Gulko Report at p. 7; Exhibit 8 to Omron' s s SOF In Support Of Second MSJ, VeriFone, Inc. v. Verve, LLC, et al., No. C 04-02795 WHA, California Claim-Construction Order dated June 10, 2005, at p. 1.
106. Based on the Northern District of California' construction, Gulko opined s
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that the T7 is capable of "both calculating a sum to be paid and automatically conducting credit inquiries using data stored on a customer' card." Id. s
107. In addition, Gulko relied on Hypercom' materials providing that "most T7 s

models include an ` RS232 Electronic Cash Register (ECR) interface, allowing the terminals to use the ECR for transaction amount entry and to print receipts.' Exhibit 7 to " Omron' SOF In Support Of Second MSJ, Gulko Report at p. 7. s
108. With respect to the ICE6000, Gulko opined that Hypercom' product s

literature supported the conclusion that the ICE6000 could automatically discriminate between debit and credit cards based on information encoded in the card. Id. at p. 6.
109. Gulko further opined that the ICE6000 has characteristics of the term

"electronic cash register," as that term is defined in the ` Patent and the Northern 077 District of California' Claim-Construction Order. Id. s
110. Hypercom' materials represent that the ICE6000 is capable of "(1) s

inputting the amount(s) to be paid by a customer for each particular good or service and (2) performing mathematical functions thereon, if necessary." Id. at p. 8.
111. The ICE6000 also has a display for showing cash registration, a keyboard

for cash registration, and a control unit in the form of a CPU for running the HyperWare software program that performs cash registration. Id.
112. Therefore, Gulko concluded that based on the evidence, it is reasonable to

conclude that the ICE6000 infringes the ` 341, ` and ` Patents. Id. at pp. 6-8. 895 077
113. The evidence demonstrating that Hypercom' products infringe the ` s 077,

` 341, and ` Patents is not just limited to the pre-filing infringement analysis performed 895 by Verve' counsel (Chris Walton) and Verve' principal (Kevin Imes), or the expert s s witness opinions of Brad Gulko. James Dunlop, an engineer and fact witness with TAEUS Engineering Intellectual Property, investigated the ICE6000 terminals used at PetCo, a pet supplies retail store in Colorado. See Exhibit 9 to Omron' SOF In Support s
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Of Second MSJ, "USPN 5,012,077 vs. Hypercom ICE6000 Patent Analysis Report" ("Dunlop Report").10
114. Dunlop' investigation included making two purchases of goods at PetCo s

and paying for one with a credit card and the other with a debit card. Id. at p. 3.
115. During the credit and debit card transactions, Dunlop swiped each card

through the ICE6000 without providing any information to the cashier about the type of card being used. Id. at pp. 3, 5, 10.
116. With the credit card purchase, the ICE6000 terminal processed the

transaction and requested a signature without requiring any input from the cashier or Dunlop as to credit or debit. Conversely, after swiping a debit card, the ICE6000 proceeds to ask for the card owner' pin number, again without requesting any additional s information from the card owner regarding the type of card being used. Id. at pp. 10-12.
117. Therefore, Dunlop' investigation showed that "no identification had to be s

given to the cashier or machine to identify the use of a debit or credit card. The displays shown on the Hypercom ICE6000 prompted the consumer to either enter their PIN or signature depending on the card used." Id. at p. 3.
118. Dunlop recorded both of the debit and credit card transactions on a video

recorder, and a copy of the recordings was disclosed as an attachment to his report. See Exhibit 9 to Omron' SOF In Support Of Second MSJ.11 s
119. Gulko also performed on behalf of Omron an investigation similar to

Dunlop' as documented in Gulko' supplemental expert report. See generally Exhibit 7 s, s to Omron' SOF In Support Of Second MSJ, Supplemental Report of Brad Gulko s ("Supplemental Gulko Report").
The Expert Report Of James Dunlop is attached to a sworn affidavit, signed by Mr. Dunlop, affirming that the report is a true and accurate copy of his report, and that all of the statements made in the report are correct. See Exhibit 9 to Omron' SOF In Support Of Second MSJ. s
11 10

A copy of the recordings is attached to the bench brief provided to the Court.

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120. Gulko personally observed the ICE6000 in use at PetCo stores in California

and confirmed that the ICE6000 "automatically discriminate[s] between debit and credit card types, without human intervention." Id. at p. 7.
121. "In the case of a credit card, a signature line was automatically provided in

the touch sensitive screen of the ICE6000." Id.
122. "In the case of a debit card, a prompt was automatically provided on the

touch screen of the ICE6000 requesting the entry of a PIN code. In none of the cases was the clerk informed whether the card was [a] debit card or a credit card, nor was [the] card type information requested from the purchaser." Id.
123. "In each case, credit card processing was automatically selected for the

credit card, and debit card processing was automatically selected for the debit card, without human intervention." Id.
124. Gulko further opined that the ICE6000 is designed to be connected to an

"electronic cash register," and is, in fact, connected to electronic cash registers at PetCo stores in San Rafael and San Francisco, California. Id. at p. 8.
125. Gulko opined that the software code for the T7 and T8 terminals sold by

Hypercom provides specific settings that would allow these terminals to "be configured to automatically provide debit processing for debit cards and credit card processing for credit cards." Id. at pp. 8-9.
126. Testing protocols for the T7 terminal also indicate that "[w]hen properly

configured, the expected behavior of the T7 terminal requires that a certain BIN range be automatically processed as debit cards, without manual intervention." Id. at p. 9.
127. Based on Gulko' personal inspection of the ICE6000 terminals, he s

concluded that these POS terminals contain all of the elements of claim 1 of the ` 077 Patent, including: (a) "a credit processor for effecting credit card processing,"
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1

(b)
2

"a debit processor for effecting debit card processing," "a card discriminator for automatically (without manual intervention) discriminating whether a card to be used is a credit card or a debit card," "an activator for activating one of the debit or credit card processors in response to data provided by the payment card."

(c)
3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

(d) Id. at p. 11.

128. Gulko further confirmed that PetCo' ICE6000 "plausibly contains all of the s

elements of claim 4 of the ` Patent, including: 077 (a) (b) (c) (d) "a card processing system containing a touch panel," "a processor for effecting card processing on the basis of information on the card," "a discriminator automatically discriminating between types of cards based on information on the card," "a processing activator for acting types of transactions depending on the types of information automatically discriminated by the card discriminator," and "a touch panel controller for changing key arrangements."

(e)

Id. at pp. 11-12.
129. Finally, Gulko confirmed that Hypercom also provides support services for

its POS terminals in more than 530 PetCo stores. Id. at p. 6. Additional Evidence That The Infringement Claims Against Hypercom Are Not Objectively Baseless
130. Omron' other expert witness, Charles Berman, opines that Hypercom' s s

ICE 5000/5500 Series POS terminals "INFRINGE at least one claim in each of the ` 341, ` 895, and ` patents, either literally or under the doctrine of equivalents." Exhibit 1a to 077 Omron' SOF In Support Of Second MSJ, Berman Report at ¶¶ 6-7. s

25 26
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131. Berman created claim charts detailing the infringing features of Hypercom' s
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ICE 5000/5500 Series POS terminals. Exhibit 1b to Omron' SOF In Support Of Second s MSJ, Claim Charts attached to Berman Report.
132. Berman opined that claim 1 of the ` 341 patent "claims an electronic cash

register" and that "[t]he Hypercom Terminals perform electronic processing of payments and as such is considered an electronic cash register." Exhibit 1a to Omron' SOF In s Support Of Second MSJ, Berman Report at ¶ 14.
133. Berman further explained that the "electronic cash register" of claim 1

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requires the following features and functions: Claim ICE Series Terminal (5000/5500)

"a keyboard having keys for cash Keyboard, PIN Pad, or Touch-screen registration and for initiating display (Exhibit B, p. 3-4) customer credit inquiries," Touch-screen and Keyboard are used to initiate credit inquiries (Exhibit C, p. 1-16, 1-17, 1-25) "means for performing registration processing," cash Secure CPU & (Exhibit B, p. 3) secure co-processor

"a card reader for reading data Magnetic Stripe Card reader (Exhibit B, recorded in a customer card" p.4) "a communication control unit for communicating with a center provided with a customer file having stored therein at least data relating to the credit standing of a plurality of customers," High Speed Modem "The ICE 5000 and 5500 terminals incorporate the new Hypercom FastPOSTM 9600 bps modem." (Exhibit B, p. 5) ICE terminal communicates with a host to perform transactions such as Balance Inquiry (p. 1-16), Card Verification (117), and/or Authorize Transaction (Exhibit C, p. 1-25)

"a device for converting data CPU/Processor & Touch-screen display relating to the credit standing of a (Exhibit B, p. 3& 4) selected customer sent from the
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center to visible information,"

"The standard configuration for the ICE 5000 and 5500 terminals includes 1.7 inch by 2.6 inch graphic dot matrix touch screen that is capable of character, graphics, and signature display." (Exhibit B, p. 1-04)

"a memory for storing data as to Memory each cash registration and data as to "The ICE 5000 and 5500 terminals credit inquiries," contain a minimum of 1 MB of RAM." (Exhibit B, p. 5) "a control unit responsive to keyboard entries for processing cash registration, controlling transmission of the data read from the card to the center in a credit inquiry message for a selected customer in response to a communication start instruction, and controlling conversion of credit standing data for a selected customer received from the center to visible information." CPU/Processor & HyperWare Software ICE terminal is programmed to perform the following functions related to credit standing of a customer-Balance Inquiry (Exhibit C, p. 1-16), Card Verification (Exhibit C, p. 1-17), and/or Authorize Transaction (Exhibit C, p. 1-25)

Id. at ¶¶ 14-23; see also Exhibit 1b to Omron' SOF In Support Of Second MSJ, Claim s
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Chart for the ` Patent attached as exhibit to Berman Report. 341
134. After reviewing and interpreting the claims and patent file history for the

` Patent, and reviewing product information regarding Hypercom' ICE 5000/5500 341 s terminals, Berman opined that the ICE 5000/5500 terminals met each of the features and

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functions of claim 1 and, therefore, there was a reasonable claim that the ICE 5000/5500 terminals infringe the ` Patent. Id. 341
135. Berman also opined that the ICE 5000/5500 terminals infringed claim 12 of

the ` Patent, which "claims a system for making payments for transactions": 895
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12. A system for making payments for transactions comprising: "first means of setting data relating to a sum payable,"

a POS terminal is designed to make electronic payments/transactions Keyboard, PIN Pad, or Touch-screen display (Exhibit B, p. 2-4)

when performing a debit card transaction, user types in transaction amount (Exhibit C, p.) "a card reader for reading data from Magnetic Stripe Card reader (Exhibit B, bank cards, each having recorded p. 4) therein at least data relating to the account number of the holder of the card," "second means for setting data Software ­ Terminal Setup Function relating to an account number of a store," The terminal is configured with the Terminal ID (Exhibit C, p. 4-24). "means for communicating with a High Speed Modem (Exhibit B, p.5) control center provided with a file having stored therein data relating to the accounts of users and accounts of stores, said control center transferring sums payable from the account of users to the accounts of stores, said communicating means comprising means for transmitting to the control center data relating at least to the account number of the user, the sum payable and data relating to the account number of the store."

Exhibit 1a to Omron' SOF In Support Of Second MSJ, Berman Report at ¶¶ 25, 27-30; s Exhibit 1b to Omron' SOF In Support Of Second MSJ, Claim Chart for the ` s 895 Patent attached as exhibit to Berman Report
136. Again, based on his review of claim 12, the file history, and Hypercom' s

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product information on the ICE 5000/5500 terminals, Berman opined that Hypercom' s terminals include all the features and functions of the ` Patent, and that "it is a 895 reasonable conclusion that the Hypercom Terminals infringe this claim." Exhibit 1a to Omron' SOF In Support Of Second MSJ, Berman Report at ¶ 31. s
137. Finally, Berman opined that ICE 5000/5500 terminals infringed claims 1

and 4 of the ` Patent, which "claims a credit and debit card processing terminal." Id. 077 at ¶¶ 32-48; Exhibit 1b to Omron' SOF In Support Of Second MSJ, Claim Charts for the s

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` Patent attached as exhibit to Berman Report. 077
138. The key inquiry for claims 1 and 4 of the ` 077 Patent is whether the POS

terminal contains the feature of a card discriminator for automatically discriminating between credit and debit cards based on information stored on the card. Exhibit 1a to

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Omron' SOF In Support Of Second MSJ, Berman Report at ¶¶ 36-39 and 45-47. s
139. Hypercom agrees that "[i]n order for any device to infringe the ` 077 patent,

the accused device must automatically discriminate between credit cards and debit cards based solely on the information read when the card is swiped through a card reader." See

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Exhibit 10 to Omron' SOF In Support Of Second MSJ, Hypercom Corporation' s s Statement Of Facts In Support Of Its Motion For Summary Judgment, filed in Verve LLC vs. Hypercom Corp., No. CIV 05-0365-PHX-FJM (D. Ariz.), May 15, 2006, at ¶ 50, n.4.

Claim

ICE Series Terminal (5000/5500)

1. A credit and debit card processing any computer is a terminal; the terminal
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terminal, comprising:

a processor comprising a credit processor for effecting credit card processing on the basis of dates stored on a credit card and a debit processor for effecting debit card processing on the basis of data stored on a debit card;

(b) a card discriminator for automatically discriminating whether a card to be used is a credit or debit card by reading said data stored on said card; and

(c) a processing activator for activating any one of said processors in response to said data automatically discriminated by said card discriminator.

can be a server located on a computer network, with which the ICE Series Terminal communicates and uses the POS terminal operates in communication with a service provider, the service provider operating a server for effecting processing of credit card and debit card transactions; the process for transacting a credit card is inherently different from the process for transacting a debit card, thereby there is a process for effecting credit processing, and a process for