TAKEAWAY: Businesses should thoroughly review licensing agreements to ensure clarity and avoid potential patent infringement risks in the evolving financial technology landscape.
The dispute between AlexSam, Inc. and Aetna, Inc. revolves around U.S. Patent No. 6,000,608, which issued back in December 1999 and covers a multifunction card system used for processing various financial transactions, including medical-related services. AlexSam alleged that Aetna’s Mastercard and VISA-branded health savings account (HAS) debit cards infringed on the ‘608 patent because they enabled users to access pre-tax funds for eligible medical expenses while processing transactions in a manner covered by AlexSam’s patented system. Aetna, however, argued that the Mastercard-branded cards were protected under a licensing agreement between AlexSam and Mastercard, which permitted the use of the patented technology, and that Aetna was a sublicensee of the agreement. Additionally, Aetna claimed that it did not directly use VISA-branded cards in a way that constituted infringement.
The U.S. District Court for the District of Connecticut dismissed AlexSam’s complaint. The court concluded that because of the licensing agreement between AlexSam and Mastercard, Aetna’s use of Mastercard-branded cards could not constitute infringement. Regarding the VISA-branded cards, the court determined that AlexSam failed to sufficiently allege that Aetna engaged in the necessary actions to meet the statutory definition of patent infringement.
On appeal, the Federal Circuit found the scope of the license agreement to be narrower than the scope of the asserted patent claims, meaning not all uses of Mastercard-branded cards were necessarily protected under the license. The court noted that while the ‘608 patent broadly covered a multifunction card system for processing transactions through a central processing hub, the licensing agreement between AlexSam and Mastercard was limited to a specific implementation of the patented technology. The agreement only covered Mastercard’s use of certain card-based healthcare transactions but did not necessarily extend to all functionalities claimed in the ‘608 patent. In other words, the scope of the patent claims is relatively broader than the scope of the license that AlexSam granted to Mastercard in the agreement, such that not every act that infringes the patent would necessarily be covered by the license. The court also held that the District Court did not properly analyze whether Aetna had sufficient involvement in the use of VISA-branded cards to warrant liability. The Federal Circuit vacated and remanded the District Court’s decision.
As the case returns to the lower court, it underscores broader concerns about the enforceability of aging patents in the evolving financial technology sector and the extent to which companies may be held accountable for third-party transactions. Businesses in this space should meticulously review their licensing agreements and ensure clear contractual terms to mitigate the risk of patent infringement.