Alexsam, Inc. v. Aetna, Inc.
| Decision Date | 11 September 2020 |
| Docket Number | No. 3:19-cv-01025 (VAB),3:19-cv-01025 (VAB) |
| Court | U.S. District Court — District of Connecticut |
| Parties | ALEXSAM, INC., Plaintiff, v. AETNA, INC., Defendant. |
AlexSam, Inc. ("Plaintiff" or "AlexSam") has sued Aetna, Inc. ("Aetna" or "Defendant") for patent infringement related to Claims 32 and 33 of United States Patent Nos. 6,000,608 (the "'608 Patent"). Second Am. Compl., ECF No. 57 (Dec. 6, 2019). Aetna has moved to dismiss the Second Amended Complaint. Mot. to Dismiss, ECF No. 65 (Jan. 10, 2020).
For the following reasons, the motion to dismiss is GRANTED.
AlexSam may move for leave to file an amended pleading by October 9, 2020, to the extent the deficiencies identified in this ruling can be addressed.
AlexSam brings this patent infringement action Second Am. Compl., ECF No. 57 ¶ 1 (Dec. 6, 2019) ("SAC") (emphasis in original). Claim 32 states:
Ex. A., ECF No. 57-1 at A-11 (Dec. 6, 2019) ("Patent 6,000,608"). Relatedly, Claim 33 states: "The multifunction card system of claim 32, wherein the unique identification number further compromises a medical identification number." Id.1
The '608 Patent "was duly and legally issued by the United States Patent and Trademark Office ('USPTO') on December 14, 1999" and "was assigned to AlexSam, Inc. in 2003." SAC ¶¶ 13-14. On July 10, 2012, "[a]n ex parte Reexamination Certificate was issued . . . which re-affirmed a number of the claims of the '608 Patent," excluding Claims 32 and 33. Id. ¶ 16. "The primary purpose of the '608 Patent [allegedly] is to implement a multifunction card system, such as one that utilizes a rechargeable pre-paid card, a pre-paid card with a loyalty function, or a medical information card that will perform as [a] normal bank card . . . to purchase goods andservices." Id. ¶ 17. The inventor, Robert Dorf, allegedly sought to invent "a multifunction card system that utilized his special-purpose computer, referred to as the Processing Hub, that worked with the existing banking network and that utilized a bank identification number (BIN) to allow for the use of a multi-function card." Id. ¶¶ 13, 21. He allegedly "invented a new computer to avoid the limitations of the conventional systems at the time." Id. ¶ 22. "The '608 Patent [allegedly] provides practical technological solutions to specific problems" in point-of-sale devices and banking networks by providing "a technological solution to the existing challenges by offering a multifunction card system that (1) did not have the security problems of pre-activated cards, (2) did not require special hardware for the merchant, and (3) provided all the convenience to consumers of normal bank cards." Id. ¶¶ 25-26.
AlexSam alleges that:
[t]he primary innovative feature offered by '608 Patent was to introduce a Processing Hub that: (1) operates as a compatible component of a banking network; (2) communicates with the retailers to perform the specialized multi-card transactions (such as activating the card); (3) allows these specialized functions to be performed on an existing unmodified POS device, and (4) does not interfere with normal debit/credit card functions for purchasing of goods and services at any merchant POS device.
Id. ¶ 27. Allegedly, "[a] unique, novel, and inventive concept of the '608 Patent is the implementation of a new Processing Hub within a banking network and the intelligence of the Processing Hub can manage the different functions of each account," id. ¶ 28; "[a] Processing Hub that [allegedly] is 'transparent' to the POS device, yet still intercepts and processes all the specialized transactions necessary to support multifunction cards, and still allow[s] merchants to keep their same POS devices," id. ¶ 29.
Mr. Dorf's invention allegedly Id. ¶ 30. His solutions allegedly are "more technically difficult to implement . . . due to the specific components that must be integrated with a banking network and still maintain the compliance of the highly regulated transaction process." Id. (citations omitted).
While allegedly more technically complicated, "the '608 Patent is more viable to merchants, more marketable, and more user acceptable in the marketplace," id., because it allegedly "addresses specific technical problems and limitations with prior art card systems," id. ¶ 31.2 The '608 Patent allegedly also "describes enhancements to incentivize customers to use specific cards and/or purchase specific products and/or purchase at specific merchants using loyalty cards, by establishing a centralized database to automatically track 'loyalty points.'" Id. ¶ 32. Mr. Dorf allegedly provided a solution to the various technological problems "by inventing new cards, new devices, and a new system." Id. ¶ 33.
The Processing Hub allegedly "accepted transactions from retailer POS devices for the multifunction cards, such as card activation or recharge, and processed and/or transmitted those transactions in order to complete (authorize) those transactions or reject them if not valid." Id. ¶ 34. Another allegedly critical component of Mr. Dorf's system is the banking network, as "the card transaction [must] be transmitted to the Processing Hub, [and] also to other banks and financial institutions that must participate in these transactions." Id. ¶ 36. Specifically, "the combination of the unmodified pre-existing standard point-of-sale device, transaction processor, and Processing Hub into a system that allows for the multifunction card system to access debitcard databases and medical databases [allegedly] was not generic or conventional in 1997." Id. ¶ 37.
Claims 32 and 33 are allegedly "tied to a particular machine - the Processing Hub - and machine system - the multifunction card system." Id. ¶ 38. They allegedly "made possible the use of multifunction cards without the need for separate, stand-alone system and equipment thereby solving a technical problem within the medical goods and services industry." Id. ¶ 40. AlexSam alleges that "Claims 32 and 33 of the '608 Patent include a Processing Hub that was not previously available in the industry." Id. Specifically, the patented system was not available in the medical goods and services industry until 2003 or 2004; meaning "[Mr. Dorf's] invention [allegedly] pre-dated by many years the flexible spending account (FSA) and health savings account (HSA) products that are offered today." Id. ¶ 41.
From 1997 until 2003, Mr. Dorf allegedly "practiced his inventions and met with major retailers, MasterCard, Visa, Discover, health plans and doctors in an effort to connect them to his Processing Hub." Id. ¶ 42. In fact, in 1997, FSAs and HSAs allegedly "were several years away from being introduced or even permitted." Id. ¶ 46.
After receiving his patents, Mr. Dorf allegedly created a business, Intelligent Card Solutions, Inc. (ICS), "which offered a processing platform to process transactions for Michigan National Bank, MCI[, . . . he [allegedly] had a joint venture with Mr. Ron Lauder of RSL company[,] [and he] also owned a BIN from MasterCard." Id. ¶ 43. The "Processing Hub with ICS [allegedly] allowed his company to process different types of card products and transactions, such as phone cards, health cards, and gift cards." Id. ¶ 44.
After working to build his business, Mr. Dorf allegedly "was unable to compete with larger companies." Id. ¶ 48. He allegedly "founded AlexSam in 2003 to which was assigned allrights to enforce the '608 Patent." Id. ¶ 48. AlexSam allegedly "has licensed the AlexSam Patents to Humana, WEX Health (formerly, Evolution Benefits) and Unitedhealthcare in the medical card industry." Id. ¶ 49.
Aetna allegedly "owns, operates, advertises, and/or controls the website, www.aetna.com" and "sells, advertises, offers for sale, uses, or otherwise provides, . . . Health Savings Account ("HSA") Visa Debit Cards, Flexible Spending Account ("FSA") Visa Debit Cards, Health Reimbursement Account ("HRA") Visa Debit Cards and the PayFlex Card." Id. ¶ 50.
On June 16, 2015, "AlexSam [allegedly] sent Aetna a letter . . ., informing them that 'at least the following products require a license under the '608 Patent: Aetna Health Care FSA Debit Card and Aetna HAS Visa Debit Card.'" Id. ¶ 52 (citing Pl.'s Ex. E, ECF No. 57-5 (Dec. 6, 2019) ("2015 Notice Letter to Aetna")).
As of 2011, AlexSam alleges that PayFlex Holdings, Inc. ("PayFlex"), "an account-based health plan administrator with its HealthHub technology platform, became a wholly owned subsidiary of Aetna." Id. ¶ 53.
On July 10, 2015, AlexSam allegedly sent a letter to PayFlex "informing them that 'at least the following products require a...
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