[00:00:43] Speaker 01:
The next argued case is number 191418, Gracia against Walgreen Company.

[00:00:51] Speaker 01:
Mr. Walgreen.

[00:00:52] Speaker 01:
Mr. Warson.

[00:00:54] Speaker 04:
Good morning, Your Honors.

[00:00:55] Speaker 04:
Matt Warson for William Gracia.

[00:00:59] Speaker 04:
We ask that this court reverse the district court's grant of a motion to dismiss.

[00:01:05] Speaker 04:
Mr. Gracia alleges in his second amended complaint that the Walgreens point of sale device

[00:01:14] Speaker 04:
performs each of the six steps claimed in his method.

[00:01:21] Speaker 04:
And specifically, Mr. Gratia alleges that the Walgreens point of sale device contains what is called a kernel.

[00:01:31] Speaker 04:
In paragraph 18 of the Second Amendment Complaint, page 30 of the appendix,

[00:01:38] Speaker 04:
Mr. Greci alleges Walgreens Equinox device contains, quote, a communications console, end quote, which is the combination of a graphical user interface and an application's programmable interface.

[00:01:54] Speaker 04:
The Walgreens device contains the kernel, which contains interface routines, security and control functions, and logic to manage a set of commands and responses

[00:02:07] Speaker 04:
to retrieve the necessary data from the card to complete a transaction."

[00:02:13] Speaker 04:
End quote.

[00:02:16] Speaker 04:
Mr. Gracia alleges that the kernel within the Walgreens point of sale device matches up with what he claims as the communications console, which is a combination of interfaces that both receives and requests information.

[00:02:36] Speaker 02:
Well, the one problem I have, I don't have any problem with your allegation that the Colonel is the communication console, but then elements four and five of the claim have certain requirements of the communication console, certain functions that must perform.

[00:02:54] Speaker 02:
And my problem is in paragraph 24 and 25 of the complaint, you then don't have the Colonel performing those functions.

[00:03:04] Speaker 02:
For example, in paragraph 25, Walgreens EMV-POS requests and receives authorization identification from the token presentment server.

[00:03:17] Speaker 02:
There's no question the token presentment server is not part of the kernel, and yet that's exactly one of the claim limitation requirements that the communication console perform, not that a separate offsite server perform.

[00:03:31] Speaker 04:
The allegation is that the communications console is made up in part of the API.

[00:03:40] Speaker 04:
And so the API is alleged to be within the kernel and within the point of sale device.

[00:03:50] Speaker 04:
So skipping up to paragraph 24.

[00:03:52] Speaker 03:
What is the token presentment server?

[00:03:55] Speaker 03:
What is that?

[00:03:57] Speaker 04:
That would be the token service provider

[00:04:02] Speaker 03:
off-site server that provides the token is that the bank or the credit card company correct that's that's their server that that's correct and so that's not that's not doesn't have anything to do with the kernel right well that's correct now is on this point of sale card reader the kernel is on the point of sale card reader

[00:04:26] Speaker 04:
And the point of sale card reader also contains software applications, firmware, including the API, which sets up a communication with the token service provider.

[00:04:42] Speaker 04:
So the allegations of the complaint are that the API, one side of the connection resides on the point of sale device.

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and establishes a connection with the outside server.

[00:05:00] Speaker 03:
Are you saying that the token presentment server, which is the server that belongs to the credit card company, is part of the claimed communications console?

[00:05:15] Speaker 04:
No.

[00:05:17] Speaker 04:
No, Your Honor.

[00:05:18] Speaker 04:
The communications console is

[00:05:21] Speaker 03:
made up of... Can you understand why reading paragraph 25, it looks like the way that sentence, the allegation is written, it's tracking the claim language such that in terms of parallelism, one would think that you are alleging here that the token presentment server maps onto the claimed at least one communications console?

[00:05:46] Speaker 04:
I think the confusion would arise if

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You are thinking strictly of a tangible object.

[00:05:54] Speaker 04:
And we're dealing in the intangible of software, which is what this kernel is and what the API is.

[00:06:03] Speaker 03:
Yes, but we're also now, at this point, trying to make sure we correctly decipher the content of your complaint.

[00:06:11] Speaker 03:
If I could understand what

[00:06:14] Speaker 03:
Why did you bother to say the sentence the way you did about the Walgreens EMV POS requests and receives an authorization identification reference from the token presentment server?

[00:06:27] Speaker 03:
And you say that right after the claimed limitation about receiving information from the at least one communications console.

[00:06:39] Speaker 04:
We're directing our allegations against the point of sale device.

[00:06:43] Speaker 04:
which contains the kernel, which is this interface, which is a program which allows various tangible and intangible entities to communicate with one another.

[00:06:57] Speaker 02:
But on paragraph 25, or on no other paragraph in the complaint, did you allege that it is the kernel that receives the identification reference?

[00:07:08] Speaker 02:
You allege that it comes not from the Colonel, but from the token presentment server.

[00:07:13] Speaker 02:
So I'm struggling, given that this is your second amended complaint.

[00:07:17] Speaker 02:
So you've had three shots at this.

[00:07:20] Speaker 02:
And you have not yet made an allegation that anything in the Walgreen device amounts to a communication console that receives an authorization identification reference, as required by the claim.

[00:07:35] Speaker 02:
In fact, your express allegation is,

[00:07:38] Speaker 02:
that it's the token presentment server that does the receiving.

[00:07:41] Speaker 02:
And that can't possibly meet your claim limitation.

[00:07:46] Speaker 02:
All of your other arguments, even if I agreed with every other argument you have made about element three and otherwise, you have in my mind completely and utterly failed to even make an allegation that their device has one of the infringing required elements of your claim.

[00:08:02] Speaker 04:
Well, directing your attention to paragraph 25, the POS device requests and receives an authorization identification reference from the token service provider.

[00:08:18] Speaker 02:
Yes.

[00:08:20] Speaker 02:
And element four says requesting at least one electronic identification reference from the communication console.

[00:08:28] Speaker 04:
Which is an interface.

[00:08:29] Speaker 02:
So the communication console is the thing

[00:08:33] Speaker 02:
from which you have to request the electronic identification reference.

[00:08:37] Speaker 02:
And you're saying in this paragraph that it's from the token presentment server, not from the kernel.

[00:08:43] Speaker 04:
The communications console is

[00:08:47] Speaker 04:
an interface.

[00:08:48] Speaker 04:
It's a combination of two interfaces.

[00:08:50] Speaker 02:
But it's not the token presentment server, and that's where you allege this comes from.

[00:08:54] Speaker 04:
We do not allege that.

[00:08:56] Speaker 02:
We allege... Paragraph 25.

[00:08:58] Speaker 04:
In paragraph 25, we do not allege that.

[00:09:00] Speaker 04:
We allege that the point of sale device is requesting and receiving.

[00:09:06] Speaker 03:
We also allege in paragraph... Requesting and receiving from what, though?

[00:09:09] Speaker 03:
What are you alleging in paragraph 25 is the communications console.

[00:09:16] Speaker 04:
It's requesting and receiving from the communications console, which has established that connection.

[00:09:23] Speaker 03:
In the Walgreens accused system, what in the context of paragraph 25 are you identifying as being the alleged communications console?

[00:09:34] Speaker 03:
The kernel, which is including the API.

[00:09:37] Speaker 03:
Does it say kernel right here?

[00:09:39] Speaker 03:
It says token presentment server here.

[00:09:42] Speaker 04:
Actually, it says that the POS device is performing the infringing steps of requesting and receiving.

[00:09:50] Speaker 04:
And I would reiterate that... No, but that's not the question.

[00:09:54] Speaker 02:
The question isn't whether the POS device is receiving.

[00:09:57] Speaker 02:
The question is what is the POS device receiving from?

[00:10:01] Speaker 02:
Element 5 says receiving the at least one electronic identification reference from the at least one communication console.

[00:10:10] Speaker 02:
So it has to be receiving it from the communication console.

[00:10:14] Speaker 02:
And you clearly have this POS device receiving it from the token presentment server.

[00:10:20] Speaker 02:
I'm sorry, but this is just an open and shut case.

[00:10:23] Speaker 04:
If I could direct the court's attention to column 10 of the 555 patent, this is page 21 of the appendix.

[00:10:33] Speaker 04:
And starting at line 29 of, again, column 10,

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A program apparatus, scripts, often calls these APIs or sections of code residing on the user computerized devices.

[00:10:49] Speaker 04:
For example, a web browser running on a user computer, cell phone, or other device can download a section of JavaScript or other code from a web server and then use this code to in turn interact with the API of a remote internet server system

[00:11:08] Speaker 04:
as desired.

[00:11:10] Speaker 04:
And so the allegations of this complaint are that the kernel serves as the interface on the POS device, which allows the POS device not only to establish a connection using the API, which is specifically alleged in paragraph 24, the Walgreens POS establishes a connection using a token presentment server API

[00:11:38] Speaker 04:
related to the EMV token service provider.

[00:11:42] Speaker 04:
That API is alleged to be used to establish this connection, yes, with the remote server, but as the specification makes clear, the API residing on the POS device is enabled to communicate with that remote server.

[00:12:04] Speaker 04:
None of these allegations are claiming

[00:12:07] Speaker 04:
that the remote server is necessary for Walgreens to perform each step of this method.

[00:12:16] Speaker 04:
I'm into my rebuttal time.

[00:12:18] Speaker 01:
We'll save the rebuttal, and let's hear from the other side.

[00:12:29] Speaker 01:
Mr. White.

[00:12:30] Speaker 00:
Yes, good morning, Your Honors.

[00:12:31] Speaker 00:
I'm Jason White, and I'm here today on behalf of Walgreens.

[00:12:34] Speaker 00:
May it please the Court

[00:12:35] Speaker 00:
The district court was correct in dismissing the second amended complaint because the allegations do not set forth a viable infringement claim.

[00:12:43] Speaker 00:
The primary fault with the second amended complaint is that to satisfy different claim limitations, it identifies three or maybe four now different components as the communications council.

[00:12:54] Speaker 00:
We can see that in paragraphs 18 and then 24 and 25, as you've pointed out.

[00:13:00] Speaker 00:
In paragraph 24, it identifies an EMV token service provider as the communications council.

[00:13:08] Speaker 00:
And then in paragraph 25, it identifies the token presentment server as the supposed communications council.

[00:13:16] Speaker 00:
That's two different things in contrast to paragraph 18, where the allegation is that the communications council is in the point of sale terminal where you check out, swipe your card.

[00:13:25] Speaker 00:
So that's at least three different points or components that have been alleged to be this communications council.

[00:13:30] Speaker 00:
These inconsistencies alone are enough to render the second-minute complaint inoperative, and the Justice Court was correct in dismissing for that reason alone.

[00:13:38] Speaker 00:
I want to talk briefly about the kernel argument.

[00:13:42] Speaker 00:
That's something that was not, I don't think, actually explicitly made in the second-minute complaint, so I don't think you even need to consider it.

[00:13:48] Speaker 00:
But if you do reach it on the merits, it's also not a viable theory.

[00:13:52] Speaker 00:
I think you run into the same problems that you have identified in the third limitation, the fourth limitation, and the fifth.

[00:13:59] Speaker 00:
And I'm just going to focus on the fourth and fifth limitations here.

[00:14:02] Speaker 00:
The fourth limitation requires requesting an electronic identification reference from the communications council.

[00:14:09] Speaker 00:
And then the fifth limitation requires requesting the electronic identification reference, I'm sorry, receiving the electronic identification reference

[00:14:16] Speaker 00:
from the Communications Council.

[00:14:17] Speaker 01:
But you don't have to put all your evidence in the complaint.

[00:14:20] Speaker 01:
The dismissal on the complaint, the complaint is accompanied by all sorts of presumptions that this, why wasn't this premature?

[00:14:33] Speaker 00:
It wasn't premature for several reasons.

[00:14:35] Speaker 00:
First, as Judge Moore pointed out, the plaintiff here got three bites at the apple.

[00:14:40] Speaker 00:
They filed their first complaint.

[00:14:41] Speaker 00:
We moved to dismiss and pointed out some of the inconsistencies.

[00:14:44] Speaker 00:
They filed the first amended complaint.

[00:14:46] Speaker 00:
We moved to dismiss that or discuss dismissing that.

[00:14:49] Speaker 00:
And then they filed the second amended complaint, which was their third bite at the apple.

[00:14:53] Speaker 00:
And nowhere across any of these opportunities to plead a case could they put forth a viable infringement claim.

[00:14:59] Speaker 00:
So I think it's pretty customary in courts around the country to dismiss with prejudice at this stage after you've been given three bites at the apple.

[00:15:06] Speaker 00:
And while you don't have to prove your case, you at least have to put forth an argument that hangs together or could be viable.

[00:15:12] Speaker 00:
So here, the allegation was that the district court didn't assume all facts as being true.

[00:15:17] Speaker 00:
I think that's exactly wrong.

[00:15:19] Speaker 00:
Here, the district court did assume all the allegations as being true.

[00:15:22] Speaker 00:
And it's the assumption that they are true that runs into problems here, because the arguments are inconsistent and don't hang together.

[00:15:28] Speaker 02:
Is this patent being asserted against other entities to your knowledge?

[00:15:32] Speaker 00:
It has been, yes.

[00:15:34] Speaker 02:
Has or is currently?

[00:15:35] Speaker 00:
Well, I don't know if any of them are still pending other than our case.

[00:15:39] Speaker 00:
that has been asserted many times.

[00:15:41] Speaker 02:
While I think this complaint is deficient, you no doubt know that.

[00:15:47] Speaker 02:
You heard the argument.

[00:15:48] Speaker 02:
But the one problem I have with the lower court's opinion was sort of the moreover thrown in at the end about divided infringement.

[00:15:56] Speaker 02:
And so I just am wondering if there is a need for me to clarify that in light of possible other cases that would be affected by it.

[00:16:05] Speaker 02:
I'm not at all convinced that that was right.

[00:16:10] Speaker 02:
It doesn't mean you lose.

[00:16:11] Speaker 02:
You win.

[00:16:12] Speaker 02:
But I'm just wondering if there's a need to clarify that point.

[00:16:17] Speaker 00:
Yeah, I'm sorry.

[00:16:17] Speaker 00:
I just don't know the answer to that.

[00:16:18] Speaker 00:
I know there were several other cases.

[00:16:21] Speaker 00:
The round, I think, of cases that were filed along with this one, I think, have all been resolved.

[00:16:25] Speaker 00:
I think ours is the only one left from the latest round before the Illinois Chicago district courts.

[00:16:30] Speaker 00:
I just don't know the answer to that.

[00:16:32] Speaker 00:
And I think you're right, you don't need to reach that point in affirming the district court decision here.

[00:16:37] Speaker 00:
And it would just be a district court decision, if left in place, that would possibly be argued as persuasive, but obviously not mandatory.

[00:16:44] Speaker 02:
Yeah, but the only reason that this district court, she concluded that there was divided infringement is because she concluded that when the claim says receiving, and all of receiving is done by the up-sale device,

[00:17:02] Speaker 02:
But it says where you're receiving the thing from provided by a server or whatever.

[00:17:09] Speaker 02:
That to me didn't create an instance of divided infringement and I would hate to see the law of divided infringement move in that direction because

[00:17:20] Speaker 02:
all these kinds of telecom or authorization claims are always going to tell you where you're getting the information from.

[00:17:26] Speaker 02:
It doesn't suddenly bring those servers into the claim.

[00:17:30] Speaker 02:
And if it did, we would have a lot more claims that weren't capable of infringement under the law of divided infringement if that were the correct law.

[00:17:37] Speaker 02:
So I have just a little bit of concern over the breadth of the divided infringement.

[00:17:43] Speaker 02:
But even in her opinion, you can see it was sort of a moreover at the end.

[00:17:46] Speaker 02:
Moreover, if the other three reasons don't hold, here's another.

[00:17:50] Speaker 00:
Understood, Your Honor.

[00:17:51] Speaker 00:
And there is another reason, too, that we had argued, and it's in the briefs, the requirement in the first limitation that there be a verification token provided by a first user.

[00:18:00] Speaker 00:
So that's another instance of a user, somebody not Walgreens and not under the direction or control of Walgreens, having to do something to kick off the process, if you will.

[00:18:09] Speaker 00:
So I think that is another separate independent basis why there could have been a finding of divided infringement here.

[00:18:14] Speaker 00:
I understand her opinion doesn't say that, but I do think the decision here is supported by that allegation as well.

[00:18:20] Speaker 02:
Yeah, but that verification token, again, is just being received by the encrypted digital media access.

[00:18:27] Speaker 00:
I understand it has to be provided by somebody, though.

[00:18:29] Speaker 00:
So it has to be provided by somebody and then received.

[00:18:32] Speaker 00:
So there's at least an action that somebody else has to take.

[00:18:36] Speaker 00:
It's not just a situation where the end component is performing all the action by receiving or transmitting.

[00:18:42] Speaker 00:
There's some other action that has to happen, which is an action by a user.

[00:18:47] Speaker 03:
Well, aside from that clause, do you agree that this claim could be infringed by a single actor?

[00:18:56] Speaker 00:
I don't know that I can offer you that definitive an answer right now.

[00:19:03] Speaker 00:
I don't want to speak on a turn and say yes or no without going carefully and considering every single limitation.

[00:19:14] Speaker 00:
We hadn't addressed it in the briefs.

[00:19:15] Speaker 00:
I haven't thought that through, so I just hesitate to say a definitive answer.

[00:19:18] Speaker 02:
And you might get sued again.

[00:19:21] Speaker 00:
You never know.

[00:19:21] Speaker 00:
You never know.

[00:19:22] Speaker 00:
Unless your honors have any additional questions, I'll see you back the rest of my time.

[00:19:27] Speaker 01:
Thank you.

[00:19:28] Speaker 01:
Thank you.

[00:19:31] Speaker 01:
We have some rebuttal.

[00:19:33] Speaker 01:
Mr. Horson.

[00:19:38] Speaker 04:
Thank you, Your Honors.

[00:19:39] Speaker 04:
I'd just like to echo Judge Newman's statement or question, and that is that the Rule 12 standard, which was just ignored here, counsel's response to the question, although he said he had a laundry list, the reasoning that this is the second amended complaint, that just doesn't hold up.

[00:20:02] Speaker 04:
It's not as if

[00:20:03] Speaker 04:
The standard review somehow changes.

[00:20:06] Speaker 04:
And what Mr. Greciat did in that second amended complaint is he alleged that the POS device contains a kernel, which is the claimed interface which requests and receives information.

[00:20:22] Speaker 04:
Each of the allegations is focused in on the point of sale device.

[00:20:26] Speaker 04:
That's the allegation.

[00:20:29] Speaker 04:
And that is enough to get past the pleading stage.

[00:20:32] Speaker 04:
That should be accepted as true.

[00:20:35] Speaker 04:
And Mr. Grisha shouldn't be held to the standard where the technical feasibility of his invention is being challenged at this stage of the case.

[00:20:50] Speaker 04:
I would reiterate that the communications console is at bottom a combination of two interfaces.

[00:20:59] Speaker 04:
The plain and ordinary meaning of an interface is a program or a tangible device that bridges the gap between other programs and other devices.

[00:21:11] Speaker 04:
And that's exactly what's alleged in the complaint.

[00:21:15] Speaker 04:
A POS device containing this interface, which is called a kernel,

[00:21:20] Speaker 04:
Mr. Grishia should be given the right to develop evidence on this and prove that it meets the elements of his claim.

[00:21:28] Speaker 04:
If there are no further questions, I'll rest.

[00:21:32] Speaker 01:
Thank you.

[00:21:32] Speaker 01:
Thank you both.

[00:21:33] Speaker 01:
The case is taken under submission.