Court Opinion

ID: 2808721
Source: CourtListenerOpinion
Date Created: 2015-06-16 16:01:45.852519+00
Date Added: 2024-06-11T11:30:10.278467
License: Public Domain

NOTE: This disposition is nonprecedential.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-MHS-
CMC, 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
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 Con-
sumer 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”) fol-
lowing 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 pa-
tent”) 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 pre-
paid 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.
ALEXSAM, INC.   v. THE GAP, INC.                           3

    Figure 1, found in both patents, illustrates the multi-
function 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.
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 hav-
    ing an electronic gift certificate card unique iden-
    tification 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 proces-
    sor; and
    d. said processing hub activating an account cor-
    responding to the electronic gift certificate card
    unique identification number with a balance cor-
    responding to the electronic gift certificate activa-
    tion 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 hav-
    ing 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;
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 re-
    tail point-of-sale device, said bank processing hub
    computer receiving electronic gift certificate card
    activation data when said electronic gift certifi-
    cate card is swiped through said point-of-sale de-
    vice, said electronic gift certificate card activation
    data comprising said unique identification num-
    ber of said electronic gift certificate card and an
    electronic gift certificate activation amount; and
    c. a gift certificate card computer under gift certif-
    icate 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 cer-
    tificate card, said gift certificate card account
    comprising balance data representative of an elec-
    tronic 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 “com-
puter which provides front-end point-of-sale device man-
agement 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
6                                ALEXSAM, INC.   v. THE GAP, INC.

a “computer, other than a processing hub, that is main-
tained by a bank, that facilitates the card transaction and
that is remote from the pre-existing standard retail point-
of-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 pro-
cessing services to retailers. SVS started as part of Na-
tional 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.
ALEXSAM, INC.   v. THE GAP, INC.                            7

    After the invalidity trial, the court held a separate in-
fringement 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 substan-
tial 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 ap-
plicant’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 con-

    1  The activities at issue occurred before the enact-
ment of the Leahy-Smith America Invents Act (“AIA”),
8                                    ALEXSAM, INC.   v. THE GAP, INC.

tains the basic rule for determining priority . . . [and] also
provides basic protection for the inventive process, shield-
ing 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 gov-
erned 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 con-
    ducted under section 135 or section 291, another
    inventor involved therein establishes, to the ex-
    tent permitted in section 104, that before such
    person’s invention thereof the invention was made
    by such other inventor and not abandoned, sup-
    pressed, or concealed, or
    (2) before such person’s invention thereof, the in-
    vention was made in this country by another in-
    ventor 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 re-
    duction to practice of the invention, but also the
    reasonable diligence of one who was first to con-
    ceive and last to reduce to practice, from a time
    prior to conception by the other.
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 prac-
tice, and diligence. Scott v. Koyama, 281 F.3d 1243, 1246
(Fed. Cir. 2002); see also Research Corp. Techs. v. Mi-
crosoft 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 deter-
mined based upon underlying factual determinations.”).
     Because the parties do not dispute that the SVS sys-
tem contains every element of the asserted claims of the
patents-in-suit, our analysis is two-fold. First, we consid-
er 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 reduc-
tion 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.
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 sub-
stantial 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 organiza-
tion 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.
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 K-
Mart 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 applica-
tion date of the patents-in-suit. Alexsam’s Br. 39 (cita-
tions 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 pro-
gram was “experimental use.” Id. at 40–41.
    Gap was able to show the Kmart system was prac-
ticed under actual working conditions. The record evi-
dence 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”
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 activa-
     tions, is what I can see highlighted there.
     Q. Okay. And how do you know those are re-
     demptions 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 ac-
     tually processed Kmart gift cards using point-of-
     sale activation?
     A. Yes, I do. We first started processing transac-
     tions for Kmart in May of 1997.
J.A. 1236. Regarding the fact that the May 1997 transac-
tions 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?
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 tell-
    ing 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 con-
    sumers to come to a Kmart store and purchase a
    Kmart gift card and have it activated at the point-
    of-sale; agreed?
    A. It was available in some stores. Now, whether
    or not the Kmart employees would allow a con-
    sumer 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 men-
    tioned, have you seen any documents that show
    those?
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 transac-
tions 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 inven-
tion’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
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 Dili-
               gence 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 rea-
sonable 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
16                                ALEXSAM, INC.   v. THE GAP, INC.

skilled in the art could understand the invention.” Bur-
roughs 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, set-
      tled 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 corrobo-
rating evidence, preferably by showing a contemporane-
ous 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 corrobo-
ration 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 contempo-
raneous 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
ALEXSAM, INC.   v. THE GAP, INC.                           17

that he set up a test system that processed such a trans-
action 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 devel-
opment, 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 agree-
ment 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 envi-
    ronment, 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 re-
    scheduled 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 in-
    cluded a swipe reader for cards, and there was no
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 success-
     ful test.
Id. at 11, 43 (citations omitted).
    Though Alexsam introduced testimony that the Mei-
jer/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 evi-
dence. 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 PX-
162), 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
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 trans-
    actions for MCI prepaid phone cards?
    Mr. Dorf: I have no idea at all. It didn’t have any-
    thing to do with us.
J.A. 1900–01. Alexsam did not introduce any other doc-
uments at trial showing that the testing of the Mei-
jer/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: trans-
mitting 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 exhib-
it [(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 quota-
tion marks and citation omitted). However, this docu-
ment is dated August 19, 1997, a month after the date
Mr. Dorf applied for his first patent, and is not “contem-
poraneous” corroboration of an October 1996 date.
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 re-
duced 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 Ele-
              ments of the Patents-in-Suit
    In denying JMOL, the district court held “the jury
could have found that Mr. Dorf . . . was the first to con-
ceive 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 activa-
tion 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
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 demon-
strate 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 con-
ceived 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.
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 sys-
tem—PX-162, PX-178, PX-142, PX-174, PX-154, and PX-
241—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 dis-
trict 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 argu-
ments 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