Other Shoe Drops As USPTO Affirms Second DataTreasury Patent

For the second time this year, the United States Patent and Trademark Office has upheld a patent owned by DataTreasury Corp, a small software company that is suing major banks and processors for infringement of these and other electronic-payments patents it holds. In a document issued earlier this month to attorneys involved in the case, the patent office validated all of the original 43 claims in the DataTreasury patent as well as 24 new ones asserted by the company. The action follows an earlier verdict in which the USPTO validated all but two claims in another DataTreasury patent (Digital Transactions News, July 10, 2007). Both patents are concerned with check imaging and exchange. All of the claims in the latest patent to be upheld, No. 6032137, and in the earlier one, No. 5910988, had been disallowed by a patent examiner in a so-called preliminary office action issued by the patent office in November (Digital Transactions News, Dec. 3, 2006) following a process known as a re-examination. But in his latest decision as well as in the earlier one he issued, examiner Peter C. English agreed with arguments by DataTreasury that the prior art cited in the re-examination request did not show that the company's system was derived from earlier systems or methods. Prior art refers to patents or printed material that anticipates an invention under review and can invalidate a patent if found to be substantial. The re-examination had been requested in 2005 by processor First Data Corp., a defendant in one of DataTreasury's infringement suits. Other defendants include industry heavyweights in banking and processing, among them Bank of America Corp., Citigroup Inc., SVPCO, and ViewPointe Archive Services LLC. All are engaged in check image exchange, the clearing of electronic check images rather than of the original paper documents. The latest DataTreasury patent validated by the re-examination as well as the earlier one have to do with systems for the electronic imaging, storage, and processing of documents, key elements in the image exchange networks that have grown significantly since enactment in 2004 of the Check Clearing Act for the 21st Century. “These re-examination results confirm what we already knew?that DataTreasury's patents are solid,” said a spokesman for Plano, Texas-based DataTreasury in a statement released to Digital Transactions News. “We look forward to the opportunity to argue our case before a jury.” Citing pending litigation, a spokesperson for First Data refused to comment. Now that the patent office has affirmed both patents, some observers are glum about the prospects for defendants in the DataTreasury cases. “It's not good,” says George F. Thomas, chief executive of Radix Consulting Corp., Oakdale, N.Y. “The bankers may say it's no big deal, but it's a big deal.” Thomas, formerly a senior executive with The Clearing House Payments Co. LLC, the parent company of SVPCO, says DataTreasury is likely to use the USPTO decisions on both patents to bolster its arguments in court. Even so, he says, the defendants should press their case. He argues prior art exists that wasn't presented to the USPTO examiner who upheld the patents. “For example, The Clearing House had a working prototype for image returns with a central switch before [DataTreasury] filed that patent,” he says. The latest document issued by the USPTO, known formally as a “Notice of Intent to Issue Ex Parte Re-examination Certificate,” dated Oct. 16, officially reverses the results of the November preliminary office action and closes the re-examination process. It follows a so-called ex parte office action dated Aug. 3 and containing much the same conclusions. The patent office's next step will be to issue a certificate that will be attached to the patent as an enforceable document. A 9-year-old company, DataTreasury has wrung settlements from a number of major companies in a series of suits it has filed over the years to defend its patents. Most notable among these was a 2005 settlement with JPMorgan Chase & Co. in which the banking giant agreed to license DataTreasury's technology and admitted the company's patents were valid.