Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_18-cv-06862/USCOURTS-cand-4_18-cv-06862-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 15:1126 Patent Infringement

---

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SALES TRANSACTION SYSTEMS, LLC., 

Plaintiff, 

vs. 

POYNT, CO., 

Defendant.

CASE NO. 18-cv-06862-YGR 

ORDER DENYING MOTION TO DISMISS

Re: Dkt. No. 31 

Plaintiff Sales Transaction Systems, LLC (“STS”) brings this action against Poynt Co. 

(“Poynt”) for patent infringement. (Dkt. No. 24 (“FAC”) ¶¶ 30-45.) Specifically, plaintiff alleges 

that defendant has infringed upon U.S. Patent No. 9,684,893 (the “’893 Patent”), which is entitled 

“Apparatus and Method for a Wireless Point of Sale Terminal.” (See id. ¶¶ 6, 30-45.) Now before 

the Court is defendant’s motion to dismiss plaintiff’s complaint for patent ineligibility under 35 

U.S.C. § 101 (“Section 101”). (Dkt. No. 31 (“MTD”).) Having carefully considered the pleadings 

and the papers submitted, as well as oral argument from counsel on June 11, 2019, and for the 

reasons set forth more fully below, the Court DENIES defendant’s motion to dismiss. In summary, 

the Court finds that it must perform claim construction before resolving the issue. 

I. BACKGROUND

Plaintiff alleges as follows: 

The ’893 Patent was issued by the United States Patent and Trademark Office (“USPTO”) 

on June 20, 2017 and is owned by plaintiff, who has, by assignment, received all right, title, and 

interest from the inventor. (FAC ¶¶ 6-7; see also Dkt. No. 24-1 (“Patent”).) The ’893 Patent 

“identifies and sets out to solve several problems relating to conducting secure transactions using 

wireless devices.” (Id. ¶ 8.) Specifically, the ’893 Patent identifies the following problems: (i) 

people often carry multiple cards that use magnetic stripes to conduct credit or bank card 

transactions and such devices have changing security issues, with which the banking industry 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 1 of 9
2 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

cannot always keep up (id. ¶ 8); (ii) standard transactions share the customer’s private data, such 

as card number, name, and/or expiration date data for its own purposes (id. ¶ 9); (iii) the risks 

associated with sharing credit and bank card data has evolved into a significant technical problem 

as more transactions have begun to involve wireless communications, such as WiFi, Bluetooth, 

RFID, NFC, and cellular communications (id. ¶ 10). Such that now, (a) these transactions involve 

the exchange and/or storage of private data, which is vulnerable to hacking and other security 

breaches; (b) there are also Internet-specific problems, including the possibility for criminals to 

intercept wireless transmissions and obtain data without either party being aware that a breach of 

security has occurred and without being physically present; and (c) the Internet has made it much 

easier to use fraudulently obtained data via e-commerce, where the user is not physically present 

and does not have to interact with a salesperson. (Id.) 

To address these problems, the ’893 Patent “proposes a technological solution . . . , 

including creating a secure customer identifier that is based on the customer’s private data, such as 

bank card data, but does not include any private identifying information when transmitted to the 

merchant.” (Id. ¶ 13 (citing Patent at 7:29-31).) “This prevents the customer’s private data from 

being shared with merchants, but still allows card transactions to take place using the traditional 

financial structure.” (Id. (citing Patent at 1:49-50).) “This solution offers a technical solution to 

the technical problems posed by conducting such financial transactions wirelessly.” (Id. ¶ 14.) 

Defendant “Poynt makes, uses, sells, and/or offers to sell provides [sic] various mobile 

point of sales terminals for processing bankcards, including credit cards, using near-field 

communications via wireless communication network, including at least the Poynt Smart 

Terminal and Poynt 5 (the ‘Poynt Products’).” (Id. ¶ 16.) Poynt also sells and offers for sale, 

along with the Poynt Products, software, applications, and APIs (collectively, “Software”), 

including Software “that is configured to operate in conjunction with the Poynt Products to 

provide therewith various payment capabilities, including but not limited to the Poynt OS, Poynt 

HQ, and other apps Poynt offers in the Poynt App Marketplace, including but not limited to eThor 

and Lightning (the Poynt Products provided with such Software referred to herein as the ‘Accused 

Systems’).” (Id.) 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 2 of 9
3 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

The Accused Systems are “made or especially adapted for infringement of the ’893 Patent 

because they include the features . . . which cause the Poynt Products and Software to infringe on 

the ’893 Patent.” (Id. ¶ 17.) 

On October 3, 2018, plaintiff, through its counsel, formally notified Poynt’s CEO Osamaa 

Bedier, via FedEx letter, that products made, used, sold, or offered for sale by Poynt, including the 

Accused Systems, infringed the Asserted Patent, including a chart detailing the infringement of an 

exemplary claim. (Id. ¶ 28.) Poynt received this letter on or about October 4, 2018. (Id.) 

Relevant here, plaintiff further alleges that “the ’893 Patent is given the presumption of 

validity. Since becoming aware of the ’893 Patent and the basis for infringement on or about 

October 4, 2018, Poynt has not established by clear and convincing evidence that the ’893 Patent 

is invalid for any reason, nor has Poynt challenged the validity of the ’893 Patent in any federal 

court or before the USPTO.” (Id. ¶ 39.) 

The ’893 Patent includes two independent claims, Claims 1 and 5. In their briefing, parties 

offer Claims 1 and 5, respectively, as representative. (See Dkt. No. 35 (“Opp.”) at 4-5; MTD at 2-

3.) Claim 1, offered by the plaintiff as representative, reads as follows: 

1. A merchant point of sale (POS) transaction terminal, for acceptance of 

bankcard payment pursuant to a sales transaction, comprising: 

a. the merchant POS transaction terminal is a mobile and portable wireless 

device with a built-in interface to a cellular wireless communication 

network that communicates wirelessly via the wireless communication 

network to a remote payment system; 

b. the merchant POS transaction terminal received input of a merchant 

identifier that identifies the merchant to the remote payment system, and 

wherein the merchant identifier identifies a retail establishment, and 

generates transaction specific data such as a transaction reference number, 

date and time, and a payment amount; 

c. the merchant POS transaction terminal receives and accepts input of 

bankcard data from a customer with a customer identifier, for a payment 

by the bankcard for a sales transaction and assembles a payment 

authorization request record with the merchant identifier, the transaction 

specific data and the customer bankcard data and wirelessly transmits the 

payment authorization request record from the merchant POS transaction 

terminal for the payment for the sales transaction to the remote payment 

system for forwarding via a gateway to a card authorization network; and 

d. the merchant POS transaction terminal then wirelessly receives from the 

remote payment system a payment approval record for the sales 

transaction. 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 3 of 9
4 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

(Patent at 14:31-59.) 

Claim 5, offered by defendant as representative, reads as follows: 

5. A method for a merchant point of sale (POS) transaction terminal, for 

acceptance of bankcard payment pursuant to a sales transaction, comprising 

the steps of: 

a. providing the merchant POS transaction terminal with an embedded 

mobile and portable wireless device with a built-in interface to a cellular 

wireless communication network that communicates wirelessly via the 

wireless communication network to a remote payment system; 

b. receiving by the merchant POS transaction terminal input of a merchant 

identifier that identifies the merchant to the remote payment system, and 

wherein identifying by the merchant identifier a retail establishment, and 

generating by the merchant POS transaction terminal transaction specific 

data such as a transaction reference number, date and time, and a payment 

amount; 

c. receiving and accepting by the merchant POS transaction terminal input of 

bankcard data from a customer with a customer identifier for a payment by 

the bankcard for a sales transaction and assembling by the merchant POS 

transaction terminal a payment authorization request record with the 

merchant identifier, transaction specific data and the customer bankcard 

data and transmitting wirelessly by the merchant POS transaction terminal 

the payment authorization request record for the payment for the sales 

transaction to the remote payment system for forwarding via a gateway to 

a card authorization network; and 

d. receiving wirelessly by the merchant POS transaction terminal from the 

remote payment system a payment approval record for the sales 

transaction. 

(Patent at 15:5-16:10.) 

II. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss an 

action for failure to allege “enough facts to state a claim to relief that is plausible on its face.” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the 

plaintiff pleads factual content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 

‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted 

unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations 

in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 4 of 9
5 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). 

Nonetheless, the Court is not required to “‘assume the truth of legal conclusions merely because 

they are cast in the form of factual allegations.’” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 

2011) (quoting W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981) ). Therefore, mere 

“conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to 

dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004). Furthermore, “‘[a] plaintiff 

may plead [him]self out of court’” if he “plead[s] facts which establish that he cannot prevail on 

his . . . claim.” Weisbuch v. County of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 1997) 

(quoting Warzon v. Drew, 60 F.3d 1234, 1239 (7th Cir. 1995)).

III. ANALYSIS

Poynt’s motion argues that the patent-in-suit fails to claim patent-eligible subject matter 

under Section 101 in light of the Supreme Court’s decision in Alice Corp. Pty. Ltd. v. CLS Bank 

International. (See MTD (citing Alice, 573 U.S. 208, 217 (2014)).) The question of whether a 

claim recites patent-eligible subject matter under Section 101 is ultimately a question of law. 

Intellectual Ventures I LLC v. Capital One Fin. Corp., 850 F.3d 1332, 1338 (Fed. Cir. 2017) 

(“Patent eligibility under § 101 is an issue of law[.]”); In re Roslin Inst. (Edinburgh), 750 F.3d 

1333, 1335 (Fed. Cir. 2014) (same). The Federal Circuit has identified certain factual questions 

underlying the Section 101 analysis. See Berkheimer v. HP Inc., 881 F.3d 1360, 1368–69 (Fed. 

Cir. 2018). A district court may resolve the issue of patent eligibility under Section 101 by way of 

a motion to dismiss. See, e.g., Secured Mail Sols. LLC v. Universal Wilde, Inc., 873 F.3d 905, 912 

(Fed. Cir. 2017) (affirming determination of ineligibility made on 12(b)(6) motion); Content 

Extraction & Transmission LLC v. Wells Fargo Bank, Nat'l Ass'n, 776 F.3d 1343, 1345 (Fed. Cir. 

2014) (same).

Section 101 “defines the subject matter that may be patented under the Patent Act.” Bilski 

v. Kappos, 561 U.S. 593, 601 (2010). Under Section 101, the scope of patentable subject matter 

encompasses “any new and useful process, machine, manufacture, or composition of matter, or 

any new and useful improvement thereof.” Id. (quoting 35 U.S.C. § 101). These categories are 

broad, but they are not limitless. Section 101 “contains an important implicit exception: Laws of 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 5 of 9
6 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

nature, natural phenomena, and abstract ideas are not patentable.” Alice, 134 S.Ct. at 2354 

(citation omitted). These three categories of subject matter are excepted from patent-eligibility 

because “they are the basic tools of scientific and technological work,” which are “free to all men 

and reserved exclusively to none.” Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 

66, 71 (2012) (citations omitted). The Supreme Court has explained that allowing patent claims 

for such purported inventions would “tend to impede innovation more than it would tend to 

promote it,” thereby thwarting the primary object of the patent laws. Id. However, the Supreme 

Court has also cautioned that “[a]t some level, all inventions embody, use, reflect, rest upon, or 

apply laws of nature, natural phenomena, or abstract ideas.” Alice, 134 S.Ct. at 2354 (alteration, 

internal quotation marks, and citation omitted). Accordingly, courts must “tread carefully in 

construing this exclusionary principle lest it swallow all of patent law.” Id. 

In Alice, the Supreme Court refined the “framework for distinguishing patents that claim 

laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible 

applications of those concepts” originally set forth in Mayo, 566 U.S. at 77. Alice, 134 S.Ct. at 

2355. This analysis, known as the “Alice” framework, proceeds in two steps as follows:

First, we determine whether the claims at issue are directed to one of those patentineligible concepts. If so, we then ask, “[w]hat else is there in the claims before 

us?” To answer that question, we consider the elements of each claim both 

individually and “as an ordered combination” to determine whether the additional 

elements “transform the nature of the claim” into a patent-eligible application. We 

have described step two of this analysis as a search for an “ ‘inventive concept’ ”—

i.e., an element or combination of elements that is “sufficient to ensure that the 

patent in practice amounts to significantly more than a patent upon the [ineligible 

concept] itself.” 

Id. (alterations in original) (citations omitted); see also In re TLI Commc'ns LLC Patent Litig., 823 

F.3d 607, 611 (Fed. Cir. 2016) (describing “the now familiar two-part test described by the 

Supreme Court in Alice”). 

 No bright-line test exists for separating abstract ideas from concepts that are sufficiently 

concrete so as to require no further inquiry under the first step of the Alice framework. See, e.g., 

Alice, 134 S.Ct. at 2357 (noting that “[the Supreme Court] need not labor to delimit the precise 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 6 of 9
7 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

contours of the ‘abstract ideas’ category in this case”); DDR Holdings, LLC v. Hotels.com, L.P., 

773 F.3d 1245, 1256 (Fed. Cir. 2014) (observing the same). As a result, in evaluating whether 

particular claims are directed to patent-ineligible abstract ideas, courts often begin by 

“compar[ing] claims at issue to those claims already found to be directed to an abstract idea in 

previous cases.” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016). 

 The patent-at-issue in this case bears relevant similarities to the one addressed by the 

Federal Circuit in Inventor Holdings, LLC v. Bed Bath and Beyond, Inc., 876 F.3d 1372 (Fed. Cir. 

2017). There, as here, “[t]he claimed invention relate[d] to a method purchasing goods at a local 

point-of-sale system[.]”1 Id. at 1374. In Inventor Holdings, the court noted that “[t]he idea that a 

customer may pay for items ordered from a remote seller at a third-party’s local establishment is 

the type of fundamental business practice that, when implemented using generic computer 

technology, is not patent-eligible under Alice[.]”2 Id. at 1378. 

 

1

 The representative claims in Investor Holdings read as follows: 

8. A method of processing a payment for a purchase of goods, comprising the steps of: 

 receiving at a point-of-sale system a code relating to a purchase of goods; 

determining if said code relates to a local order or to a remote order from a remote seller; 

if said code relates to a remote order, then 

determining a price for said remote order, 

receiving a payment for said remote order, and 

transmitting to said remote seller data indicating that said payment has been received for 

said remote order. 

25. A method for a remote seller to process a payment for the sale of goods, comprising the 

steps of: 

receiving a remote order for a purchase of goods from a customer; 

generating a code and a purchase price for said remote order; 

transmitting said code and said purchase price to the customer; 

providing order data for use by a point-of-sale system of a local seller in receiving a 

payment for said remote order; 

initiating, responsive to said payment data, a shipment of said goods; and 

receiving a payment for said remote order from said local seller. 

41. A method [for] submitting a payment for a purchase of goods, comprising the steps of: 

transmitting an order for goods to a remote merchant; 

receiving a code and a purchase price for said order from said remote merchant; 

providing at least one of said code and said purchase price for use by a point-of-sale 

system of a local seller in processing a payment for said order; 

submitting said payment to said local seller at said point-of-sale system; and 

receiving said goods from said remote merchant. 

Id. (citations omitted). 

2

 Procedurally, the Federal Circuit addressed not with a Section 101 motion, which the 

district court had granted and the circuit had previously affirmed, see Inventor Holdings, 876 F.3d 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 7 of 9
8 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

 The claims at issue here similarly present the idea of transmitting payment information 

using generic computer technology.3 (See Patent at 14:31-59; 15:5-16:10.) However, according to 

plaintiff, these claims also introduce an added element of security – namely a method by which to 

conceal a customer’s personal bankcard information through the use of “a customer identifier.” 

(See, e.g., id. at 14:46-56.) Whether this element of security saves the ’893 Patent from invalidity 

turns on the meaning of the terms used to describe the element, including but not limited to 

“customer identifier,” “merchant identifier,” “transaction specific data,” and “payment 

authorization request,” among others. (See id.) Thus, as claim construction has not yet occurred 

in this case, the Court finds that it cannot, at this juncture, adjudicate the issue of whether the 

patent is directed to patent-ineligible ideas. See Bancorp Servs., L.L.C. v. Sun Life Assurance Co. 

of Can. (U.S.), 687 F.3d 1266, 1273-74 (Fed. Cir. 2012) (noting “that it will ordinarily be 

desirable—and often necessary—to resolve claim construction disputes prior to a § 101 analysis, 

for the determination of patent eligibility requires a full understanding of the basic character of the 

claimed subject matter”). 

\\ 

\\ 

\\ 

\\ 

\\ 

 

at 1377, but defendant’s motion for attorney’s fees under Section 285, brought on the grounds that 

in light of Alice, the plaintiff’s claims were objectively without merit. Id. The Federal Circuit 

affirmed the district court’s decision to award attorney’s fees and found that the plaintiff’s 

assertion of the claims above was not only patent-ineligible under Section 101 and Alice, but also 

exceptionally weak. See id. at 1378-80. 

3

 Plaintiff’s argument that the patent-at-issue is directed to a machine and is therefore not 

abstract also fails. As a preliminary matter, plaintiff does not provide, and the Court is not aware 

of, any binding authority that suggests that claims toward a machine are, by their nature, not 

abstract. (See Opp. at 10-11 (citing to district court cases only).) Moreover, the claims asserted 

here fail to teach anything about the machine or how it is relevant to the method described. (See

Patent at Claims 1, 5.) Plaintiff’s assertion during oral argument that the patent’s instruction 

regarding “transformation logic” does not so teach as it deals with data and software rather than 

hardware. (See, e.g., Patent at 9:31-52.) 

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 8 of 9
9 

1 

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 

27 

28 

United States District Court 

Northern District of Californi

a

IV. CONCLUSION

For the foregoing reasons, the Court DENIES defendant’s motion to dismiss plaintiff’s 

claims as patent-ineligible under Section 101. Accordingly, and as noted on the record during the 

June 11 hearing, the Court SETS a Markman hearing on claim construction for Wednesday, 

December 11, 2019 on the Court’s 2:00 p.m. calendar. The Court further refers the action to 

Magistrate Judge Thomas Hixson for a settlement conference to be completed no later than fortyfive days from any order on claim construction. 

This Order terminates Docket Number 31. 

IT IS SO ORDERED. 

Dated: June 19, 2019 

YVONNE GONZALEZ ROGERS

UNITED STATES DISTRICT COURT JUDGE

Case 4:18-cv-06862-YGR Document 42 Filed 06/19/19 Page 9 of 9