Bytemark, Inc. v. Xerox Corp

• Decision Date: 10 January 2022
• Docket Number: 17 Civ. 1803 (PGG)
• Parties: BYTEMARK, INC., Plaintiff, v. XEROX CORP., ACS TRANSPORT SOLUTIONS, INC., XEROX TRANSPORT SOLUTIONS, INC., CONDUENT INC., and NEW JERSEY TRANSIT CORP. Defendants.
• Court: U.S. District Court — Southern District of New York

BYTEMARK, INC., Plaintiff, v. XEROX CORP., ACS TRANSPORT SOLUTIONS, INC., XEROX TRANSPORT SOLUTIONS, INC., CONDUENT INC., and NEW JERSEY TRANSIT CORP. Defendants.

No. 17 Civ. 1803 (PGG)

United States District Court, S.D. New York

January 10, 2022

MEMORANDUM OPINION

Paul G. Gardephe United States District Judge

Plaintiff Bytemark, Inc. brings this action against Defendants Xerox Corp., ACS Transport Solutions, Inc., Xerox Transport Solutions, Inc. (collectively, the “Xerox Entities”), Conduent Inc., and New Jersey Transit Corp. (collectively, “Defendants”), asserting claims for patent infringement, breach of contract, trade secret misappropriation, unfair competition, and unjust enrichment. (See Second Am. Cmplt. (“SAC”) (Dkt. No. 74) ¶¶ 1, 3)

After this litigation was commenced, the patents on which Bytemark's original patent infringement claims were premised were found invalid in an unrelated action in the Eastern District of Texas. Bytemark, Inc. v. Masabi Ltd., No 216CV00543JRGRSP, 2018 WL 7272023, at *1 (E.D. Tex. Nov. 26 2018), report and recommendation adopted No.216CV00543JRGRSP, 2019 WL 7882728 (E.D. Tex. Feb. 7 2019), aff'd, 792 Fed.Appx. 952 (Fed. Cir. 2020). Bytemark then stipulated to the dismissal of its patent infringement claims in the instant case. (Dkt. Nos. 94, 95)

In July 2019, Bytemark obtained two new patents. (Pltf. Br., Ex. A (Dkt. No.105-1); Ex. B (Dkt. No. 105-2)) On May 29, 2020, Bytemark moved for leave to file a Third Amended Complaint (“TAC”) that includes patent infringement claims premised on the two new patents. (Dkt. No. 104) Defendants opposed the application, arguing futility and unfair prejudice. (Dkt. No. 107) On March 31, 2021, this Court issued a short order granting Bytemark leave to amend. (Dkt. No. 138). The purpose of this opinion is to explain the Court's reasoning.

BACKGROUND^[1]

I. FACTS^[2]

Plaintiff Bytemark provides “a secure mobile ticketing platform for transit, tourism, and events though smartphone apps, point-of-sale plugins, and open APIs.” (TAC (Dkt. No. 105-4) ¶ 3) Bytemark alleges that it entered into a series of confidentiality agreements with ACS Transport Solutions. and Xerox Transport Solutions. for the purpose of developing joint bids to provide mobile ticketing solutions to prospective clients in the mass transit industry. (Id. ¶ 29) After Bytemark disclosed its trade secrets and proprietary information, the Xerox Entities allegedly cut Bytemark out of the bidding process and used Plaintiff's intellectual property and trade secrets to secure a contract with New Jersey Transit. (Id. ¶¶ 33, 35, 37-39) Conduent has allegedly assisted the Xerox Entities in utilizing Plaintiff's proprietary technology, and worked together with the Xerox Entities and New Jersey Transit to sell Plaintiff's proprietary technology to prospective customers, including in New Jersey Transit's MyTix system. (See id. ¶¶ 36, 47) Bytemark seeks damages related to Defendants' alleged misuse of Bytemark's patent-protected property and trade secrets.

In the TAC, Bytemark alleges that it owns trade secrets related to the design of applications, technical support systems, and back-end management technical support and service of its mobile ticketing applications. (Id. ¶¶ 84, 113) Bytemark also alleges that it owns two patents related to its visual validation mobile ticketing applications - Patent No. 10, 346, 764 (the “‘764 patent”), and Patent No. 10, 360, 567 (the “‘567 patent”; together, the “child patents”). (Id. ¶¶ 21-22, Ex. A (‘764 Patent) (Dkt. No. 105-1), Ex. B (‘567 Patent) (Dkt. No. 105-2)) The ‘764 Patent was issued on July 9, 2019, and the ‘567 Patent was issued on July 23, 2019. (See Pltf. Br., Ex. A (‘764 Patent) (Dkt. No. 105-1) at 2, Ex. B (‘567 Patent) (Dkt. No. 105-2) at 2)^[3] The ‘764 patent is entitled “Method and System for Distributing Electronic Tickets with Visual Display for Verification.” (Pltf. Br., Ex. A (‘764 Patent) (Dkt. No. 105-1) at 2) According to the patent abstract, the ‘764 patent “discloses a novel system and method for distributing electronic ticketing such that the ticket is verified at the entrance to venues by means of an animation or other human perceptible verifying visual object that is selected by the venue for the specific event.” (Id.) The patent abstract further explains that this ticketing technology improves the ticket and payment experience for consumers and merchants by “remov[ing] the need [for] a bar-code scanner on an LCD display, ” “speed[ing] up” the ticket verification process, and allowing for ticket verification “in the absence of a network connection.” (Id.)

The ‘764 patent contains 28 claims. (Id. at 28-29) Claim 1 addresses

[a] method performed by a computer system for displaying visual validation of the possession of a previously purchased electronic ticket for utilization of a service monitored by a ticket taker comprising:

transmitting a token associated with a previously purchased electronic ticket to a remote display device, wherein the token is a unique identifier and a copy of the unique identifier is stored on a central computer system;

validating the token by matching the token transmitted to the remote display device to the copy of the unique identifier stored on the central computing system to provide a ticket payload to the remote display device;

transmitting to the remote display device a validation display object associated with the ticket payload, the validation display object being configured to be readily recognizable visually by the ticket taker, in order to enable the remote display device to display the validation display object so that upon visual recognition by the ticket taker, the user of the remote display device is permitted to utilize the service monitored by the ticket taker; and

wherein the ticket payload contains code that destroys the validating visual object in a predetermined period of time after initial display or upon some pre-determined input event.

(Id. at 28)

The ‘567 patent is entitled “Method and System for Distributing Tickets with Data Integrity Checking.” (Pltf. Br., Ex. B (Dkt. No. 105-2) at 2) The patent abstract states that the ‘567 patent “discloses a novel system and method for distributing electronic ticketing to mobile devices such that the ticket stored on the device is checked for its integrity from tampering and the device periodically reports on ticket usage with a central server.” (Id.)

The ‘567 patent comprises 16 claims. (Id. at 36-37) Claim 1 addresses

[a] mobile ticketing system for detecting fraudulent activity of tickets using data integrity, comprising:

a mobile device in communication with a server;

a server adapted to receive authentication data for a user account from the mobile device via a data network, and transmit data in the form of a ticket payload that contains code to the mobile device embodying a pass, wherein the pass includes a validation visual object that a ticket taker can rely on as a verification of the pass without using a scanning device and wherein the validation visual object is not accessible until a time selected to be close to the point in time where the ticket has to be presented;

wherein the server is further configured to:

receive the pass with the data from the mobile device and determine if there is any mismatch in the received data of the pass by comparing the received data with the data transmitted;

block the user account in an event of the received data is mismatched with the transmitted data and detected as a fraudulent activity; and

determine the occurrence of the fraudulent activity associated with the user account in connection with the mobile ticketing system and store in a data record associated with the user account a data value indicating the fraudulent activity and in dependence on the data value indicating fraudulent activity, the code in the ticket payload makes the pass, including the validation visual object, no longer available on the device.

(Id. at 36)

Bytemark alleges that Defendants' MyTix mobile application and other sales offerings of visual validation mobile ticketing applications and systems “infringe at least claim 1 of the ‘567 patent . . . and at least claim 1 of the ‘764 patent.” (TAC (Dkt. No. 105-4) ¶¶ 38, 48 49-50, 53, 58, 62-64, 66-67) On July 2, 2019, “Bytemark notified Defendants that their application and system practices” infringe “at least claim 1 of the ‘567 patent and claim 1 of the ‘764 patent.” (Id. ¶¶ 43, 50, 64) “Defendants have continued to use and offer for sale Bytemark's proprietary technology, ” however. (Id. ¶¶ 43, 52-53, 65)

The TAC pleads patent infringement claims against all Defendants premised on the ‘567 patent (id. ¶¶ 44-56) and the ‘764 patent (id. ¶¶ 57-70).

II. PARENT PATENTS

Earlier in this litigation, Bytemark asserted patent infringement claims based on two patents related to its visual validation mobile ticketing applications - Patent No. 8, 494, 967 (the “‘967 patent”), and Patent No. 9, 239, 993 (the “‘993 patent”; together, “the parent patents”). (SAC (Dkt. No. 74) ¶¶ 21-22, Ex. A (‘967 Patent) (Dkt. No. 74-2), Ex. B (‘993 Patent) (Dkt. No. 74-3)) The ‘967 Patent was issued on July 23, 2013, while the ‘993 Patent was issued on January 19, 2016. (See id., Ex. A (‘967 Patent) (Dkt. No. 74-2) at 1, Ex. B (‘993 Patent) (Dkt. No. 74-3) at 1)

Both patents are entitled “Method and System for Distributing Electronic Tickets with Visual Display.” (See id.) According to the patent abstracts, each invention “discloses a novel system and method for distributing electronic ticketing such that the ticket is verified at the entrance to venues by means of an animation or other human perceptible verifying visual object that is selected by the venue for the specific...