Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-14-01564/USCOURTS-ca13-14-01564-0/pdf.json

Parties Involved:
Alexsam, Inc.
Cross-Appellant
Direct Consumer Services, LLC
Appellant
Gap, Inc.
Appellant

Document Text:

NOTE: This disposition is nonprecedential.

United States Court of Appeals 

for the Federal Circuit ______________________ 

ALEXSAM, INC.,

Plaintiff-Cross-Appellant

v.

THE GAP, INC., DIRECT CONSUMER SERVICES, 

LLC,

Defendants-Appellants

______________________ 

2014-1564, 2014-1705

______________________ 

Appeals from the United States District Court for the 

Eastern District of Texas in No. 2:13-cv-00004-MHSCMC, Judge Michael H. Schneider.

______________________ 

Decided: June 16, 2015

______________________ 

 PHILIP DALE SEGREST, JR., Husch Blackwell LLP, 

Chicago, IL, argued for plaintiff-cross-appellant. Also 

represented by THOMAS HART WATKINS, Austin, TX.

ALAN M. FISCH, Fisch Sigler LLP, Washington, DC, 

argued for defendants-appellants. Also represented by 

JEFFREY MATTHEW SALTMAN, ROY WILLIAM SIGLER; PETER 

SCOOLIDGE, New York, NY. Defendant-appellant The 

Case: 14-1564 Document: 77-2 Page: 1 Filed: 06/16/2015
2 ALEXSAM, INC. v. THE GAP, INC. 

GAP, Inc. also represented by JENNIFER ROBINSON, Fisch 

Sigler LLP, Washington, DC; DAVID M. SAUNDERS, San 

Jose, CA. 

______________________ 

Before MOORE, CLEVENGER, and WALLACH, Circuit 

Judges.

WALLACH, Circuit Judge.

Defendants-appellants The Gap, Inc. and Direct Consumer Services, LLC (collectively, “Gap”) appeal the final 

judgment of the United States District Court for the 

Eastern District of Texas, and plaintiff-cross-appellant

Alexsam, Inc. (“Alexsam”) cross-appeals. The district 

court denied judgment as a matter of law (“JMOL”) following a jury trial in which the jury found Alexsam’s 

patents not invalid as anticipated and also not infringed 

by Gap. For the reasons set forth below, we reverse the 

court’s denial of JMOL with respect to anticipation and 

hold the patents-in-suit invalid. We do not reach the 

issue of infringement. 

BACKGROUND

I. Alexsam’s Patents

United States Patent Nos. 6,000,608 (“the ’608 patent”) and 6,189,787 (“the ’787 patent”) (collectively, “the 

patents-in-suit”) are titled “Multifunction Card System”

and “Multifunctional Card System,” respectively, and 

name Robert Dorf as the inventor. The two patents share 

a common specification, and have an effective filing date 

of July 10, 1997. They disclose “a multifunction card 

system which provides a multifunction card capable of 

serving” as a system for activating various types of prepaid cards, such as a phone card, debit card, or loyalty 

card, at a point-of-sale (“POS”) device, such as a cash 

register. ’608 patent, Abstract. 

Case: 14-1564 Document: 77-2 Page: 2 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 3

Figure 1, found in both patents, illustrates the multifunction card system 108 which “comprises a plurality of 

cards 101, a sponsor bank processor 102, and a processing 

hub 103, which serves as the nerve center of the system 

108.” Id. col. 4 ll. 20–23; ’787 patent col. 4 ll. 26–29. 

According to the patents, “[i]n order to achieve the desired 

functionality, the system 108 uses existing banking 

networks in a unique and novel way to gain access to 

virtually all existing retail [POS] devices 105.” ’608

patent col. 4 ll. 25–28; ’787 patent col. 4 ll. 31–35. A POS 

device can include “stand-alone POS terminals, cash 

registers with POS interfacing, computers with POS 

interfacing, and other similar devices which can be used 

to access the banking system.” ’608 patent col. 4 ll. 29–32; 

’787 patent col. 4 ll. 35–38. As used in the patents, the 

claimed POS device “includes all such devices, whether 

data entry is effected by swiping a card through the 

device or by manual entry.” ’608 patent col. 4 ll. 32–35; 

’787 patent col. 4 ll. 39–41. 

’608 patent fig.1; ’787 patent fig.1.

Case: 14-1564 Document: 77-2 Page: 3 Filed: 06/16/2015
4 ALEXSAM, INC. v. THE GAP, INC. 

Claim 34 of the ’608 patent is representative:

34. A system comprising:

a. at least one electronic gift certificate card having an electronic gift certificate card unique identification number encoded on it, said electronic 

gift certificate card unique identification number 

comprising a bank identification number [“BIN”] 

approved by the American Banking Association 

for use in a banking network; 

b. a transaction processor receiving electronic gift 

card activation data from an unmodified existing 

standard retail point-of-sale device, said electronic 

gift certificate card activation data including said 

unique identification number and an electronic 

gift certificate card activation amount;

c. a processing hub receiving directly or indirectly 

said activation data from said transaction processor; and

d. said processing hub activating an account corresponding to the electronic gift certificate card 

unique identification number with a balance corresponding to the electronic gift certificate activation amount. 

’608 patent col. 16 ll. 15–33 (emphases added). 

Claim 1 of the ’787 patent is representative:

1. A multifunction card system, comprising:

a. at least one electronic gift certificate card having a unique identification number encoded on it, 

said identification number comprising a bank 

identification number approved by the American 

Banking Association for use in a banking network, 

said identification number corresponding to said 

multifunction card system;

Case: 14-1564 Document: 77-2 Page: 4 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 5

b. a bank processing hub computer under bank 

hub software control and in communication over a 

banking network with a pre-existing standard retail point-of-sale device, said bank processing hub 

computer receiving electronic gift certificate card 

activation data when said electronic gift certificate card is swiped through said point-of-sale device, said electronic gift certificate card activation 

data comprising said unique identification number of said electronic gift certificate card and an 

electronic gift certificate activation amount; and

c. a gift certificate card computer under gift certificate card software control and in communication 

with said bank processing hub for activating a gift 

certificate card account in a gift certificate card 

database corresponding to said electronic gift certificate card, said gift certificate card account 

comprising balance data representative of an electronic gift certificate activation amount. 

’787 patent col. 11 l. 47–col. 12 l. 4 (emphasis added). 

Though similar, the patents-in-suit differ from each 

other in important ways. The ’787 patent provides for a

“pre-existing standard retail point-of-sale device,” id. col.

11 ll. 57–58, which is a “terminal for making purchases at 

a retail location of the type in use as of July 10, 1997.” 

J.A. 2367. The ’608 patent discloses that this device is 

“unmodified,” ’608 patent col. 11 l. 49, which the district 

court construed to mean a terminal that “has not been 

reprogrammed, customized, or otherwise altered with 

respect to its software or hardware for use in the card 

system.” J.A. 2322. The claims of the ’608 patent refer to 

a “processing hub,” which the court construed as a “computer which provides front-end point-of-sale device management and message processing for card authorizations 

or activations.” J.A. 2366. By contrast, the ’787 patent 

claims recite a “bank processing hub computer,” which is 

Case: 14-1564 Document: 77-2 Page: 5 Filed: 06/16/2015
6 ALEXSAM, INC. v. THE GAP, INC. 

a “computer, other than a processing hub, that is maintained by a bank, that facilitates the card transaction and 

that is remote from the pre-existing standard retail pointof-sale device.” J.A. 2367. 

II. The SVS Gift Card System

Gap is a customer of Ceridian Stored Value Solutions, 

Inc. (“SVS”), a provider of gift cards and gift card processing services to retailers. SVS started as part of National Citibank, and began processing “electronic benefit 

programs” for the state of Ohio, in which it replaced paper 

food stamps with electronic cards. In 1990, as a way to 

ensure its card numbers were unique and distinguishable 

from those of other companies, SVS obtained a BIN. 

III. Proceedings

On March 17, 2010, Alexsam filed suit against Gap 

and several other defendants in the Eastern District of 

Texas, claiming defendants’ use of SVS gift card systems 

infringed claims of the ’608 and ’787 patents. Gap denied 

these allegations, and asserted non-infringement and 

invalidity counterclaims. The district court severed the 

matter into separate cases for each group of defendants. 

At the invalidity trial, Gap argued that the asserted 

claims of the ’608 and ’787 patents were anticipated by 

the SVS electronic gift card system (“the SVS system”) 

because the SVS system was disclosed in December 1996, 

predating the July 10, 1997, effective filing date of the 

patents-in-suit. Alexsam’s expert conceded that the SVS 

system met every limitation of the asserted claims, but 

asserted that the SVS system did not qualify as prior art 

because Mr. Dorf had actually conceived the inventions of 

the ’608 and ’787 patents before December 1996. The jury 

agreed with Alexsam and returned a general verdict 

finding that the claims were not invalid on the basis of 

anticipation. 

Case: 14-1564 Document: 77-2 Page: 6 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 7

After the invalidity trial, the court held a separate infringement trial to determine whether Gap infringed 

claims 1 and 19 of the ’787 patent. On June 7, 2013, the 

jury found that Gap did not infringe the asserted claims.

Both parties moved for JMOL relating to anticipation 

and infringement. The court found there was substantial 

evidence to support the jury’s findings of no anticipation 

of Alexsam’s patents-in-suit and no infringement by Gap. 

Gap appeals the invalidity decision and Alexsam 

cross-appeals the infringement decision. This court 

possesses jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) 

(2012). 

DISCUSSION

I. Standard of Review

We review the grant or denial of a motion for JMOL 

under the law of the regional circuit. ClearValue, Inc. v. 

Pearl River Polymers, Inc., 668 F.3d 1340, 1343 (Fed. Cir. 

2012) (citing Summit Tech., Inc. v. Nidek Co., 363 F.3d 

1219, 1223 (Fed. Cir. 2004)). “The Fifth Circuit reviews 

the grant or denial of JMOL de novo. If there is substantial evidence opposed to [JMOL] . . . [it] should be denied.” 

Id. (alterations in original) (internal quotation marks and 

citation omitted). 

II. Anticipation

“A person is not entitled to a patent if ‘before the applicant’s invention thereof the invention was made in this 

country by another who had not abandoned, suppressed, 

or concealed it.’” Mycogen Plant Sci., Inc. v. Monsanto 

Co., 243 F.3d 1316, 1331 (Fed. Cir. 2001) (quoting 35 

U.S.C. § 102(g) (1994)).1 “Section 102(g) of title 35 con1 The activities at issue occurred before the enactment of the Leahy-Smith America Invents Act (“AIA”), 

 

Case: 14-1564 Document: 77-2 Page: 7 Filed: 06/16/2015
8 ALEXSAM, INC. v. THE GAP, INC. 

tains the basic rule for determining priority . . . [and] also 

provides basic protection for the inventive process, shielding in particular the creative steps of conception and 

reduction to practice.” Mahurkar v. C.R. Bard, Inc., 79 

F.3d 1572, 1577 (Fed. Cir. 1996). “[P]riority of invention 

‘goes to the first party to reduce an invention to practice 

Pub. L. No. 112–29, § 3, 125 Stat. 284, 285–93 (2011), 

after which § 102 no longer includes subsection (g). 

Therefore all references to § 102 are to the earlier version 

of the statute, 35 U.S.C. § 102(g)(2) (2006), which governed the activities at issue in this case. See AIA 

§ 3(n)(1), 125 Stat. at 293 (providing that the relevant 

AIA amendments apply only to applications and patents 

with an effective filing date of March 16, 2013, or later). 

Section 102(g) states in full:

A person shall be entitled to a patent unless 

(g)(1) during the course of an interference conducted under section 135 or section 291, another 

inventor involved therein establishes, to the extent permitted in section 104, that before such 

person’s invention thereof the invention was made 

by such other inventor and not abandoned, suppressed, or concealed, or 

(2) before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or 

concealed it. In determining priority of invention 

under this subsection, there shall be considered 

not only the respective dates of conception and reduction to practice of the invention, but also the 

reasonable diligence of one who was first to conceive and last to reduce to practice, from a time 

prior to conception by the other.

 

Case: 14-1564 Document: 77-2 Page: 8 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 9

unless the other party can show that it was the first to 

conceive the invention and that it exercised reasonable 

diligence in later reducing that invention to practice.’” Id.

(quoting Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir. 

1993)). Priority is a question of law, based on subsidiary 

findings of fact related to conception, reduction to practice, and diligence. Scott v. Koyama, 281 F.3d 1243, 1246 

(Fed. Cir. 2002); see also Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859, 867 (Fed. Cir. 2010) (“This 

court . . . reviews without deference whether a patent is 

entitled to an earlier priority date.”); Price, 988 F.2d at

1190 (“Priority is a question of law which is to be determined based upon underlying factual determinations.”). 

Because the parties do not dispute that the SVS system contains every element of the asserted claims of the 

patents-in-suit, our analysis is two-fold. First, we consider whether there is substantial evidence such that the 

jury could find the SVS system was reduced to practice 

before July 10, 1997—the filing date of Mr. Dorf’s patent 

application—and is therefore prior art. See Cooper v. 

Goldfarb, 154 F.3d 1321, 1327 (Fed. Cir. 1998) (“A reduction to practice can be either a constructive reduction to 

practice, which occurs when a patent application is filed, 

or an actual reduction to practice.”). Second, if the SVS 

system was reduced to practice before July 10, 1997, we 

consider whether Alexsam can show that Mr. Dorf either 

(A) reduced his invention to practice first, or (B) was the 

first party to conceive of the invention and then diligently 

reduced that invention to practice. Mycogen, 243 F.3d at 

1332. 

A. The SVS System Was Reduced to Practice Before 

July 10, 1997

Gap’s primary argument on appeal is that the SVS 

system is prior art that invalidates the patents-in-suit 

because it was reduced to practice in May 1997, several 

months before the filing date of the patents-in-suit. 

Case: 14-1564 Document: 77-2 Page: 9 Filed: 06/16/2015
10 ALEXSAM, INC. v. THE GAP, INC. 

Alexsam counters that the date of the SVS system’s 

reduction to practice is disputed, and the jury had substantial evidence to find “that the SVS system was not 

actually reduced to practice until August 1997.” 

Alexsam’s Br. 33. In order to show that the SVS system 

has a date prior to when it was publicly available in 

August 1997, Gap had the burden to show SVS had (1) 

reduced its invention to practice first, or (2) it was the 

first party to conceive of the invention and then diligently 

reduced that invention to practice. Mycogen, 243 F.3d at 

1332. Gap argues only the first point, i.e., that SVS was 

the first to reduce its invention to practice. 

In May 1996, SVS developed an electronic gift card 

system for Mobil Oil (“Mobil”), and implemented Phase I, 

in which it sold cards pre-loaded with money (known also 

as “hot cards”) to customers. A “design document,” dated 

January 3, 1996, stated that “enhancements over the 

current product will be incorporated in Phase II.” J.A. 

415, 423. The document also states that in Phase II of the 

gift card deployment, SVS conceived of activating Mobil 

gift cards at a POS device: “Phase II implementation will 

be accomplished by activation through a POS transaction 

(if sold through the dealer) or at the time of shipment to a 

purchaser such as a third party incentive sales organization or end user.” J.A. 427. Mobil did not deploy Phase II 

in 1996. 

On December 17, 1996, SVS created another design 

document outlining a gift card system configured for 

Kmart, Inc. (the “Kmart system”). The Kmart system’s 

gift card numbers began with SVS’s BIN and the design 

document states that “[c]ards will be activated through a 

POS transaction that provides SVS with the card number, 

initial value, store identifier, date, and time stamp.” J.A. 

590. Alexsam’s expert, Mr. Baker, conceded that the 

Kmart system disclosed all elements of the asserted 

claims in the patents-in-suit. Accordingly, we turn to 

whether the Kmart system had been reduced to practice. 

Case: 14-1564 Document: 77-2 Page: 10 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 11

Gap argues it “introduced documentary evidence . . . 

corroborating the reduction to practice of the Kmart 

implementation of the SVS gift card system at least as 

early as May 1997. Kmart piloted the SVS gift card 

system in certain of its stores beginning on May 8, 1997.” 

Gap Br. 16 (citing J.A. 1236, 1270, 851). According to 

Gap, the Kmart pilot program ran until July 1997, and it 

rolled out nationally in August 1997. Alexsam counters 

that “[i]t was well within the jury’s purview to find that 

GAP did not prove, with clear and convincing evidence, an 

actual reduction to practice before Mr. Dorf filed his 

patent applications in July 1997” given that “the jury 

heard evidence of an experimental pilot program by KMart starting in May 1997, but . . . the program was not 

announced and rolled out to the public under actual 

working conditions until August 1997,” after the application date of the patents-in-suit. Alexsam’s Br. 39 (citations omitted) (citing J.A. 1267–74). According to 

Alexsam, Gap could not “confirm that the alleged pilot 

program transactions occurred under actual working 

conditions” and the jury reasonably found the pilot program was “experimental use.” Id. at 40–41. 

Gap was able to show the Kmart system was practiced under actual working conditions. The record evidence indicates there was reduction to practice by May 

1997. To demonstrate reduction to practice, the inventor 

must have: “(1) constructed an embodiment or performed 

a process that met all the limitations and (2) determined 

that the invention would work for its intended purpose.” 

In re Omeprazole Patent Litig. v. Apotex Corp., 536 F.3d 

1361, 1373 (Fed. Cir. 2008) (internal quotation marks and 

citation omitted). 

Documentary evidence presented to the jury showed 

six transactions performed using the Kmart system on 

May 8, 1997. See J.A. 851. Exhibit DX-2, shows an 

example of such transactions, with transaction code “7” 

Case: 14-1564 Document: 77-2 Page: 11 Filed: 06/16/2015
12 ALEXSAM, INC. v. THE GAP, INC. 

indicating an activation transaction, and code “4,” a 

purchase transaction. 

J.A. 851.

When asked “what type of gift card transactions are 

shown here on this page [of Exhibit DX-2]?,” an SVS 

software developer, Michael Hasty replied:

A. Well, there’s redemptions, point-of-sale activations, is what I can see highlighted there.

Q. Okay. And how do you know those are redemptions and point-of-sale activations?

A. That last column to the right under code, the 4 

is redemptions, and the 7 is POS activations. 

J.A. 1269. This document shows people were using the 

cards to complete actual gift card transactions at POS 

terminals in the Kmart stores in May 1997. An SVS 

witness, Mr. Willis, also explained that the processing 

was done using POS devices:

Q. Now, we saw the [Kmart] design document, 

Mr. Willis, but do you know if the SVS system actually processed Kmart gift cards using point-ofsale activation?

A. Yes, I do. We first started processing transactions for Kmart in May of 1997.

J.A. 1236. Regarding the fact that the May 1997 transactions were part of a pilot program, Alexsam’s attorney 

asked, and Gap’s witness, Mr. Hasty, answered: 

Q. [Y]ou described those as test transactions, did 

you not?

Case: 14-1564 Document: 77-2 Page: 12 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 13

A. Well, they’re pilot transactions. . . . [T]hey were 

used to prove out the system. 

Q. Okay. But these were not sales of Kmart gift 

cards to consumers, were they?

A. I don’t know if they were or not. They were 

people in the stores buying them. It could have 

been employees. It could have been somebody 

who asked for them. I don’t think they were telling people about it, but I think if somebody asked 

to use it, they would give it to them. 

Q. Well, those transactions were before the public 

launch of the Kmart gift card program; agreed?

A. That was before it was announced, yes.

Q. And before the system was available for consumers to come to a Kmart store and purchase a 

Kmart gift card and have it activated at the pointof-sale; agreed?

A. It was available in some stores. Now, whether 

or not the Kmart employees would allow a consumer to buy one, I don’t know.

J.A. 1302–03 (emphases added). Mr. Hasty also testified:

Q: What do you mean by [piloted]?

A: Well, what I said is, you pilot the program in 

certain select stores so that you have—you can 

run through all the operational procedures, make 

sure that the clerks know what they’re doing with 

the gift cards, make sure that all the systems are 

working before you expose it to a nationwide 

rollout. 

Q: Okay. And these earlier transactions you mentioned, have you seen any documents that show 

those? 

Case: 14-1564 Document: 77-2 Page: 13 Filed: 06/16/2015
14 ALEXSAM, INC. v. THE GAP, INC. 

A. Yes, I have.

Q. And are they in [Exhibit] DX 2?

A. They’re in the back of [Exhibit] DX 2, yes.

J.A. 1267–68. In light of the extensive testimony and 

corroborating technical documents demonstrating the 

Kmart system was being used in May 1997 (by either 

customers or Kmart employees), we conclude the Kmart 

system was not theoretical testing or experimental use, 

but rather that it was fielded and worked for its intended 

purpose. Cooper, 154 F.3d at 1327 (“When testing is 

necessary, the embodiment relied upon as evidence of 

priority must actually work for its intended purpose.”); 

Newkirk v. Lulejian, 825 F.2d 1581, 1583 (Fed. Cir. 1987)

(“Proof of actual reduction to practice requires more than 

theoretical capability . . . .”).

Indeed, Alexsam does not argue that the system rolled 

out publicly in August 1997 was any different than the 

model used in the pilot program in May 1997. See Oral 

Arg. at 20:15–21:40 available at www.cafc.uscourts. 

gov/oral-argument-recordings/14-1564/all. The transactions in May 1997 included both POS gift card activations 

and purchase transactions, each of which was successful. 

To the extent Alexsam also relies on several cases 

from our predecessor court to argue that the Kmart 

system was not reduced to practice because it was not 

available to the public until August 1997 and was only 

“internal testing,” Alexsam’s Br. 40, it misunderstands 

the law. “In tests showing the invention’s solution of a 

problem,” courts do not “require[] commercial perfection 

nor absolute replication of the circumstances of the invention’s ultimate use. Rather, they have instead adopted a 

common sense assessment. This common sense approach 

prescribes more scrupulous testing under circumstances 

approaching actual use conditions when the problem 

Case: 14-1564 Document: 77-2 Page: 14 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 15

includes many uncertainties.” Scott v. Finney, 34 F.3d 

1058, 1063 (Fed. Cir. 1994). 

B. Alexsam Failed to Show a Conception Date and Diligence Prior to May 1997

Because the Kmart system predates the filing date of 

the patents-in-suit under the pre-AIA standard, we turn 

now to whether Alexsam can demonstrate that Mr. Dorf 

(1) was the first party to conceive of the invention and 

then diligently reduced that invention to practice, or (2) it 

reduced its invention to practice first prior to May 1997. 

Mahurkar, 79 F.3d at 1577. In other words, “priority of 

invention ‘goes to the first party to reduce an invention to 

practice unless the other party can show that it was the 

first to conceive the invention and that it exercised reasonable diligence in later reducing that invention to 

practice.’” Id. (quoting Price, 988 F.2d at 1190). 

When a defendant has established a prior invention, 

the burden of production shifts to the patentee to come 

forward with evidence and argument to the contrary. 

Research Corp. Techs., 627 F.3d at 870 (“A patent is 

presumed valid and the party asserting invalidity has the 

burden of persuasion to show the contrary by clear and 

convincing evidence. The challenger has the burden of 

going forward with invalidating prior art. The patentee 

then has the burden of going forward with evidence to the 

contrary, i.e., the patentee must show that the prior art 

does not actually invalidate the patent or that it is not 

prior art because the asserted claim is entitled to the 

benefit of an earlier filing date.”) (citations omitted); Tech. 

Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1329 

(Fed. Cir. 2008) (“That ultimate burden never shifts, 

however much the burden of going forward may jump 

from one party to another as the issues in the case are 

raised and developed.”). 

“[T]he test for conception is whether the inventor had 

an idea that was definite and permanent enough that one 

Case: 14-1564 Document: 77-2 Page: 15 Filed: 06/16/2015
16 ALEXSAM, INC. v. THE GAP, INC. 

skilled in the art could understand the invention.” Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 

1228 (Fed. Cir. 1994). 

Conception is complete only when the idea is so 

clearly defined in the inventor’s mind that only 

ordinary skill would be necessary to reduce the 

invention to practice, without extensive research 

or experimentation. . . . An idea is definite and 

permanent when the inventor has a specific, settled idea, a particular solution to the problem at 

hand, not just a general goal or research plan he 

hopes to pursue.

Id. 

“[T]he inventor must prove his conception by corroborating evidence, preferably by showing a contemporaneous disclosure.” Id. The “rule of reason” is used to 

evaluate the sufficiency of corroboration evidence. In 

applying the rule of reason test, this court examines “all

pertinent evidence” to determine the “credibility of the 

inventor’s story.” Price, 988 F.2d at 1195. “This ‘rule of 

reason’ analysis does not alter the requirement of corroboration for an inventor’s testimony. The inventive facts 

must not rest alone on testimonial evidence from the 

inventor himself.” Brown v. Barbacid, 276 F.3d 1327, 

1335 (Fed. Cir. 2002). Alexsam was thus required to 

introduce corroborating evidence, preferably a contemporaneous disclosure indicating prior conception followed by

diligence, or prior reduction to practice. 

i. Alexsam Cannot Show Actual Reduction to Practice

Prior to July 1997

Gap contends Alexsam “failed as a matter of law to 

establish that Mr. Dorf reduced his invention to practice 

prior to the SVS system.” Alexsam argues that “[i]f the 

test transactions in the [Kmart system] in May 1997 are 

considered a reduction to practice, then Mr. Dorf testified 

Case: 14-1564 Document: 77-2 Page: 16 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 17

that he set up a test system that processed such a transaction in October 1996 confirming ‘all of the elements of 

what had to be done. . . . I believe we did do that.’” 

Alexsam’s Br. 42 (quoting J.A. 1895–97). According to 

Alexsam, the district court was correct that “the jury 

could have found that Mr. Dorf reduced his invention to 

practice first” and there was “substantial evidence to 

support such finding by the jury.” Id. at 38 (internal 

quotation marks and citation omitted). Alexsam supports 

this assertion by contending “Mr. Dorf gave extensive, 

detailed testimony of the entire course of development, 

testing, and reduction to practice, and his oral testimony 

was corroborated by exhibits confirming course of development, including the testing and reduction to practice.” 

Id. at 43 (citations omitted). Specifically, Alexsam relies 

on testing Mr. Dorf conducted of a system at Meijer stores 

for the activation of MCI phone cards to demonstrate an 

October 1996 reduction to practice date. 

In May 1996, Mr. Dorf signed a non-disclosure agreement with Michigan National Bank to provide part of a 

“banking network” for his system. Alexsam explains that 

Mr. Dorf 

testified about discussions with Meijer and MCI 

(as corroborated by an email [] from July 1996) 

about doing test transactions in a workplace environment, transmitting data from an actual Meijer 

point-of-sale device, through Meijer’s in-store 

bank computers to Meijer hub bank computers[,] 

then to a bank, and to his company. He set up 

testing, as corroborated by an email from August 

1996 rescheduling the testing. The tests were rescheduled again, as corroborated by another email 

[] dated September 11. . . . 

He testified that the test used Meijer point-of-sale 

equipment that existed before July 1997 and included a swipe reader for cards, and there was no 

Case: 14-1564 Document: 77-2 Page: 17 Filed: 06/16/2015
18 ALEXSAM, INC. v. THE GAP, INC. 

evidence of those terminals being modified in any 

way. There was also corroborating evidence of 

Mr. Dorf ordering actual, physical cards from 

Unique Embossing at that time. Mr. Dorf also 

testified that his system was completely tested 

and reduced to practice before November 7, 1996, 

when he received a handwritten note from MCI 

thanking him for the work leading to his successful test.

Id. at 11, 43 (citations omitted). 

Though Alexsam introduced testimony that the Meijer/MCI prepaid phone card system was theoretically 

capable of activating gift cards, it does not demonstrate it 

actually reduced the system to practice or successfully 

tested it, nor does it offer persuasive corroborating evidence. See J.A. 1715 (Mr. Dorf testifying: “What it

demonstrated is that we could build a system capable of 

implementing a desire to activate MCI prepaid phone 

cards.”). “Proof of actual reduction to practice requires 

more than theoretical capability.” Newkirk, 825 F.2d at 

1583. In one instance, Mr. Dorf stated “the exact method 

for establishing the communication link for an MCI 

Electronic Gift Certificate has not been finalized with 

Susan Hunter, although we did review the [Electronic 

Gift Card] with her.” J.A. 2218 (emphasis added). In 

another document, dated November 11, 1996 (Exhibit PX162), shortly after the Meijer/MCI phone card testing, Mr. 

Dorf stated that he had not established a system for 

activating gift cards and had “suggestions” for various 

possibilities of doing so. J.A. 4045. 

“[T]here can be no actual reduction to practice if the 

constructed embodiment or performed process lacks an 

element . . . or uses an equivalent of that element.” Eaton 

v. Evans, 204 F.3d 1094, 1097 (Fed. Cir. 2000). Mr. Dorf 

testified he was not knowledgeable about Meijer’s POS 

Case: 14-1564 Document: 77-2 Page: 18 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 19

system, including whether Meijer made modifications to 

its terminal software, as required by the ’608 patent:

Gap Attorney: So what did Meijer have to do to 

make their system compatible to allow for transactions for MCI prepaid phone cards?

Mr. Dorf: I have no idea at all. It didn’t have anything to do with us. 

J.A. 1900–01. Alexsam did not introduce any other documents at trial showing that the testing of the Meijer/MCI phone card system was tested using an 

unmodified POS terminal, let alone that it was successful. 

Alexsam also fails to show reduction to practice of a 

second element required by both patents-in-suit: transmitting an activation amount from the POS terminal. 

During the trial, Mr. Baker asserted that the November 

1996 document demonstrated the Meijer system included 

the element of transmitting an “activation amount” from 

the POS terminal, but conceded the document did not 

describe this element: 

Gap Attorney: Well, we’ve also established that 

having the activation amount entered and sent 

isn’t actually described in the paragraph that you 

identify, that you’ve identified in the November 

11, 1996 memo; correct?

Mr. Baker: Correct

J.A. 1976. Alexsam nevertheless argues “[a]nother exhibit [(PX-211)] that Mr. Dorf sent to Mr. Hadley of MCI 

corroborates describes [sic] concepts and documents Mr. 

Dorf reviewed with MCI when our first confidentiality 

agreement was signed.” Alexsam’s Br. 9 (internal quotation marks and citation omitted). However, this document is dated August 19, 1997, a month after the date 

Mr. Dorf applied for his first patent, and is not “contemporaneous” corroboration of an October 1996 date. 

Case: 14-1564 Document: 77-2 Page: 19 Filed: 06/16/2015
20 ALEXSAM, INC. v. THE GAP, INC. 

Alexsam counters it is contemporaneous because it is 

describing a prior time and states: “[t]he cards may have 

specific values or the consumer may choose a value to be 

added.” J.A. 1149. However, the document makes no 

mention of an activation amount, or the technical details 

for using that amount. 

Mr. Dorf did not show that the Meijer/MCI system reduced the invention to practice because Alexsam failed to 

introduce corroborating evidence that the Meijer/MCI

phone card system included the necessary elements of (1) 

using an unmodified POS terminal or (2) transmitting an 

activation amount from the POS terminal. 

ii. Alexsam Can Not Show Prior Conception of Two Elements of the Patents-in-Suit

In denying JMOL, the district court held “the jury 

could have found that Mr. Dorf . . . was the first to conceive and then exercised reasonable diligence in reducing 

that invention to practice.” J.A. 12. On appeal, Gap 

contends “Alexsam’s corroboration evidence fails as a 

matter of law in light of [Mr. Dorf’s] admissions” and 

“Alexsam failed to present legally sufficient evidence of 

prior conception.” Gap Br. 39, 42 (capitalization omitted). 

As explained above, Alexsam introduced no evidence 

that Mr. Dorf had earlier conceived of using “unmodified” 

terminals, as all of the asserted claims of the ’608 patent 

require. See, e.g., ’608 patent col. 16 ll. 15–33 (reciting “a 

transaction processor receiving electronic gift card activation data from an unmodified existing standard retail 

point-of-sale device”) (emphasis added). Alexsam offered 

the August 1997 document (PX-211) to corroborate prior 

conception of this element, however, as noted above, this 

document post-dates the patent application date and

cannot serve as contemporaneous corroborating evidence. 

Even if it were contemporaneous, the document details 

the Meijer/MCI phone system, and Mr. Dorf conceded 

during his testimony that he was not aware of “what the 

Case: 14-1564 Document: 77-2 Page: 20 Filed: 06/16/2015
ALEXSAM, INC. v. THE GAP, INC. 21

actual software was” that was running on the terminals 

in that system. J.A. 1900. Alexsam also relies on PX-226, 

a document dated December 7, 1995—a three-sentence 

cover letter to a confidentiality agreement—to demonstrate Mr. Dorf had conceived of the use of unmodified 

terminals before the filing date of the patents-in-suit. 

However, this evidence is not corroborating, as Mr. Dorf 

himself conceded on cross examination:

Gap Attorney: Actually, I also have a copy of that 

document here in my hand, Mr. Dorf, just so we 

can all see it. You see it there, Mr. Dorf?

Mr. Dorf: Yes.

Gap Attorney: It’s a one-page document, right, sir?

Mr. Dorf: That’s correct.

Gap Attorney: There’s three sentences in it, right, 

sir?

Mr. Dorf: Okay.

Gap Attorney: It doesn’t discuss any—any aspect 

of your alleged inventions, does it, sir?

Mr. Dorf: The document itself? No.

J.A. 1884. PX-226 fails to describe the claim elements of 

using unmodified POS terminals.

Alexsam also cannot show that Mr. Dorf had conceived of the element of transmitting an activation 

amount from the POS terminal. See ’608 patent col. 16 ll. 

15–33; ’787 patent col. 11 l. 47–col. 12 l. 4. At trial, the 

following exchange took place:

Gap Attorney: And this sentence doesn’t disclose 

the fields of data that would be transmitted in the 

point-of-sale activation; correct, sir?

Mr. Dorf: It does not have that particular detail.

Case: 14-1564 Document: 77-2 Page: 21 Filed: 06/16/2015
22 ALEXSAM, INC. v. THE GAP, INC. 

Gap Attorney: But, nonetheless, you believe that 

this is sufficient to show that you had the idea for 

point-of-sale activation; right, sir?

Mr. Dorf: It’s sufficient to put it in my memory, to 

trigger my memory to tell me when I thought 

about it. It’s not sufficient to teach someone how 

to do it. There’s a difference.

J.A. 1870. Despite this concession, Alexsam insists six 

documents relating to the Meijer/MCI phone card system—PX-162, PX-178, PX-142, PX-174, PX-154, and PX241—support an October 1996 conception date. None of 

these six documents describes either (1) using unmodified 

POS terminals, as described above, or (2) transmitting an 

activation amount from the POS terminal—necessary 

aspects to show an October 1996 conception. 

Because Alexsam is unable to corroborate Mr. Dorf’s 

assertion that he had conceived of two essential elements 

of the patents, Alexsam is unable to show a conception 

date prior to the effective filing date of the patents-in-suit, 

i.e., July 10, 1997. For these reasons, the jury lacked 

substantial evidence to find the SVS system did not 

anticipate the patents-in-suit. We thus reverse the district court’s denial of Gap’s motion for JMOL of invalidity.

Because we reverse the district court’s denial of 

JMOL on this basis, we need not reach Alexsam’s arguments in support of JMOL of infringement. See, e.g., 

ClearValue, 668 F.3d at 1345.

CONCLUSION

For the foregoing reasons, the denial of Gap’s JMOL 

motion by the district court is 

REVERSED and REMANDED

Case: 14-1564 Document: 77-2 Page: 22 Filed: 06/16/2015