Authored by: Jeremy J. Gustrowsky
In a significant decision for patent holders, the Federal Circuit has breathed new life into AlexSam, Inc.’s lawsuit against Aetna, Inc., overturning a district court’s dismissal of claims involving multifunction debit and medical services cards. AlexSam holds U.S. Patent No. 6,000,608, which covers a system for cards that can perform multiple functions—like acting as both a debit card and a medical services card—using a central processing hub. The dispute centered on whether Aetna’s Mastercard- and VISA-branded products infringed this patent, and whether Aetna was shielded by a prior license agreement with Mastercard.
The district court had previously sided with Aetna, ruling that the license agreement between AlexSam and Mastercard protected Aetna from infringement claims regarding Mastercard-branded products, and that AlexSam’s allegations about Aetna’s role in the VISA-branded products were too vague. However, the Federal Circuit disagreed, finding that the district court misinterpreted the scope of the license. The court clarified that the license only covered certain types of transactions—specifically, those involving activation or adding value to an account—and not all uses of the cards. Because AlexSam’s patent claims are broader than just activation transactions, some alleged uses could still be unlicensed and potentially infringing.
Additionally, the Federal Circuit found that AlexSam’s complaint contained enough factual detail to plausibly allege that Aetna itself controlled and benefited from the accused VISA card system, rather than merely its subsidiaries or third parties. The court also held that AlexSam had sufficiently alleged both direct and indirect (induced and contributory) infringement, noting that patent holders do not need to prove every detail at the initial pleading stage. Instead, it is enough to provide a clear theory of how the accused products might infringe, supported by factual allegations and expert declarations.
As a result, the Federal Circuit sent the case back to the district court for further proceedings, allowing AlexSam to pursue its claims that Aetna’s Mastercard and VISA products infringe its patent. This decision underscores the importance of careful review of license agreements and the need for courts to accept well-pled factual allegations as true at the motion-to-dismiss stage, especially in complex patent cases.