InComm Wins Patent Infringement Lawsuit Against Blackhawk Network

Published in CSP Daily News

Jury awards $3.5 million in damages over source code

ATLANTA -- InComm, a prepaid product and transaction services company, said that a jury in the U.S. District Court for the Western District of Wisconsin returned a unanimous verdict last week finding Blackhawk Network Inc. liable for infringing two claims of InComm's U.S. Patent No. 7,578,439, entitled "System and Method for Authorizing Stored Value Card Transactions."

The jury further awarded InComm approximately $3.5 million in damages as a result of Blackhawk's repeated use of InComm's patented computer system and method over the past two years.

According to an InComm statement, after apologizing to the jury for its behavior, Blackhawk-- which describes itself as "not a technology company"--announced that it had begun taking steps to remove the infringing source code, and thus the related computer program capabilities, from its platform immediately following the infringement verdict.

InComm will now seek a permanent injunction prohibiting Blackhawk from further infringement for the remaining life of its patent.

It declined to discuss the matter further. and Blackhawk did not respond to a CSP Daily News request for comment by press time. In a statement, it said that the patent infringement case against Blackhawk was filed by e2Interactive Inc. and InComm on Oct. 14, 2009, and related to eight lines of source code that--according to Blackhawk--were part of its gift card activation platform, but not used.

Blackhawk said that it has since removed the portions of the unused code found to infringe. This modification has no effect on how Blackhawk operates and has no impact on its customers, the company said.

On Feb. 28, 2012, the jury directed Blackhawk to pay the damages to the plaintiff for the period from August 2009 through February 2012, with no further payments due as the result of Blackhawk's removal of the lines of code. While the damages represent an immaterial impact to Blackhawk's financial results for these periods, Blackhawk is weighing whether to file an appeal, it said.

The same court previously found that Blackhawk did not infringe the claims of a second patent asserted by InComm relating to adding value to customer accounts at retail points of sale, according to the company.

Pleasanton, Calif.-based Blackhawk Network, a subsidiary of Safeway Inc., is a provider of prepaid and financial payments products for consumers and businesses. The company's Gift Card Mall reaches more than 165 million people through a network of grocery, big-box, convenience, pharmacy and specialty stores and is available through Internet retailers including GiftCardMall.com. Its business solutions include reward and incentive programs, custom-designed Visa prepaid cards and fulfillment options.

InComm continues to grow its patent portfolio, which currently includes more than 110 patents worldwide relating to stored-value card processing technologies and related fields, and it will continue to vigorously enforce its rights, it said.

A marketer, distributor and technology innovator of stored-value gift and prepaid products, InComm uses its point-of-sale (POS) transaction technology and payment solutions to improve retail product sales and customer experiences. With approximately $15 billion in retail sales transactions processed in 2011, Atlanta-based InComm is the nation's largest provider of gift cards, prepaid wireless products, reloadable debit cards, digital music downloads, content, games, software and bill payment solutions. It partners with consumer brand leaders around the world to provide approximately 250,000 retail locations the products and services their customers demand.