When LevelUp was sued for patent infringement by an individual plaintiff, Jack Barron (“Barron”), it scored an aggressive win in part because of a finding that its mobile app was akin to an electronic credit card.  According to the court’s order, LevelUp is the creator of an app, “that allows users to pay for goods and services by scanning a two-dimensional bar code.”   “Merchants can install a LevelUp scanner which can read the two dimensional LevelUp barcode either from a display on the customer’s mobile phone or from a printed card.”

The patent in suit asserted by Barron was U.S. Patent No. 7,499,873 entitled, “Communication Through a Financial Services Network.”  The ’873 patent claimed methods for communicating a message from a sender to a recipient in possession of a unique identifier.  Each claim of the ’873 patent requires that a message be delivered to a recipient at a, “transaction terminal.”

LevelUp asserted that summary judgment of non-infringement should be granted because the LevelUp application does not communicate messages to users at a, “transaction terminal.”  On July 7, 2014, Judge Hillman granted LevelUp’s motion for summary judgment of non-infringement.

The court agreed with LevelUp’s construction of “transaction terminal” to mean, “a device that communicates financial transaction information for authorization via a secure financial network.”  Plaintiff Barron did not offer its own claim construction but instead argued that a variety of devices can be used as a transaction terminal.

Based on the construction, the court found that the, “users cell phone as used in the LevelUp service does not function as a transaction terminal.”  The Court concluded instead that, “the cell phone in the LevelUp is used to display a bar code” and the phone, “acts merely as a proxy for a credit card; it is an electronic version of a printed card carrying a user’s identifying information.”   In addition, “[t]he user’s phone never connects to a financial network or communicates transaction information.”