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  • Writer's pictureYork Faulkner

Lost in Interpretation: How Claim Construction Doomed AlexSam’s Case Against Cigna

. . . However, the qualifying language, “unmodified existing,” proved to be an unfortunate choice of words. . . .


In AlexSam, Inc. v. Cigna Corp., et al., No. 2022-1599 (Fed. Cir. Apr. 1, 2024) (“Decision”), the Federal Circuit affirmed the district court’s ruling on summary judgment that Cigna did not infringe the asserted claims of AlexSam’s U.S. Patent No. 6,000,608 (the ’608 Patent), which issued on December 14, 1999. AlexSam filed its complaint against Cigna on March 18, 2020—three years after the ’608 patent expired—seeking pre-expiration damages for Cigna’s alleged infringement.


The claims of the ’608 patent are directed to a “multifunction” system that allows healthcare providers to access and retrieve a patient’s healthcare data simply by reading the patient's credit or debit card with standard point-of-sale equipment. The claimed system therefore provides an integrated system in which both payment and medical data processing functions utilize the same card processing equipment. AlexSam alleged that Cigna’s use of its customers’ “Consumer-Driven Health Plan debit cards” infringed the asserted claims of the ’608 patent. Decision at 3.


Central to the court’s decision was its interpretation of a single claim term, "unmodified existing standard point-of-sale device," that appeared within each of the asserted patent claims. In drafting and prosecuting the ’608 patent claims, the patentee likely intended that the claim language would simply mean that the device’s card payment processing functions can, without modification, alternatively be used to access and retrieve patient medical data. However, the qualifying language, “unmodified existing,” proved to be an unfortunate choice of words because the term “existing” was later interpreted to mean “as of the filing date of the patent,” which was July 10, 1997.

 

In 2005, during the first lawsuit that AlexSam filed to enforce the ’608 patent, the court construed the claim term "unmodified existing standard point-of-sale device” to mean “a terminal, for making purchases, that is of the type in use as of July 10, 1997, and that has not been reprogrammed, customized, or otherwise altered with respect to its software or hardware for use in the card system.” Decision at 4 (citing AlexSam, Inc. v. Datastream Card Servs. Ltd., No. 2:03–CV–337, 2005 WL 6220095, at *9 (E.D. Tex. June 10, 2005)) (emphasis added). Consequently, the court’s construction effectively froze the patents’ claims in time by limiting their scope to payment terminals in use when the patent’s application was filed or to their subsequently manufactured clones.


Notably, that construction of "unmodified existing standard point-of-sale device” was adopted in each of the more than thirty subsequent lawsuits filed by AlexSam involving the ’608 patent. Decision at 4. The construction was even affirmed in an earlier appeal in which the Federal Circuit emphasized that “AlexSam needed to prove both that these systems made use of terminals ‘of the type in use as of July 10, 1997,’ and also that those terminals ‘ha[d] not been reprogrammed, customized, or otherwise altered with respect to [their] software . . . for use in the card system.” Decision at 6-7 (quoting AlexSam, Inc. v. IDT Corp., 715 F.3d 1336, 1341 (Fed. Cir. 2013)).


The courts’ claim construction likely posed few obstacles in AlexSam’s early lawsuits involving equipment that was in use before the '608 patent issued. However, the claim construction presented a significant challenge to AlexSam in its later lawsuit against Cigna, which was filed more than 20 years after the 1997 cut-off date imposed by the courts’ interpretation of the claims. In an expert report submitted in opposition to Cigna’s motion for summary judgment of non-infringement, AlexSam’s expert conceded that “while modifications and software updates may have been implemented in [point-of-sale] devices since 1997,” the expert asserted that “they still function as a [point of service] device in 1997 would function regarding the ’608 patent’s technology.” Decision at 8. The expert elaborated that none of the modifications and software updates made to the devices were necessary or “required” to enable the point-of-sale equipment to alternatively access and retrieve patient information. Id. at 6.


In rejecting the expert’s opinion, the district court observed that “‘[a]t no point in either [AlexSam’s expert’s] report or [a fact witness’s] deposition did either one offer any evidence ‘whether modifications have, in fact, been made for any reason’ to the [point-of-sale] terminals used in the accused system,’ as required by IDT.” Decision at 8 (emphasis in original). The district court concluded therefore that “‘[although] AlexSam need not necessarily have conclusive proof at this summary judgment stage that every transaction occurred at an ‘unmodified standard [point of service] device,’ it does need enough evidence from which a reasonable jury could conclude that the transactions did actually occur at ‘unmodified standard [point-of-sale] device[s].’” Id. (emphasis in original).


Because AlexSam failed to show Cigna’s use of at least one unmodified point-of-sale device, the district court entered summary judgment in Cigna’s favor. The Federal Circuit affirmed based on its prior encounter with the ’608 patent in the IDT case. AlexSam’s proffered expert’s opinion addressed only the first prong of the Federal Circuit’s claim construction—proof “that these systems made use of terminals ‘of the type in use as of July 10, 1997.’” Id. at 6-7. The expert, however, failed to demonstrate that the 1997 era functions in Cigna’s devices “‘ha[d] not been reprogrammed, customized, or otherwise altered.’” Id. at 8 (quoting IDT, 715 F.3d at 1341). The fact that none of the modifications to the 1997 era functions were needed to enable the claimed patient data access function failed to dissuade the Federal Circuit from its conclusion that Cigna’s equipment did not meet the “unmodified” equipment claim element and therefore did not infringe the ’608 patent.


In conclusion, this case underscores the need for precision when drafting patent claims and further exemplifies the enduring effect of an initial adverse claim construction arising from unnecessary ambiguity in claim language. The inclusion of the “unmodified existing” language in the claims without more precise context made the claims vulnerable to literal interpretation. And the courts’ initial rigid interpretation of the claim limitation effectively immunized later-developed products from the claims’ reach. As a consolation to AlexSam, the difficulties imposed by the courts’ claim construction were merely embryonic during much of the early enforcement of the patent. But by the time AlexSam sued Cigna, the point-of-sale technology had changed, and the claim construction difficulties had matured into an insurmountable obstacle that facilitated Cigna’s success on summary judgment in completely avoiding the patent’s reach.

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