Rewards Programs Sued for Patent Infringement

Latest update on the case is here.
On January 23, Source, Inc. (a California corporation) filed suit against 38 rewards programs for patent infringement. They say that several patents issued to a Patrick D. McCarthy of Louisville, KY (one in 1990, one in 1993, one in 1994, and one in 1999) had been obtained by Source, and that the defendants infringed upon it willfully and deliberately and used it to “reap unjustified profits.” Source is demanding an injunction against all the programs and, of course, an unspecified amount of money to include compensation for the infringement, plus costs, interest, fees, and treble damages.
The list of defendants is huge and includes some rather familiar names around these parts: Access Development Corporation, bCorner.com, Inc., Belcaro Group, Inc., Big Co-Op, Inc., Intefral Technologies, Inc., 77BlueLLC, Ebates Shopping.com, Inc., Electronic Scrip Incorporated, The Ezshoppen Company, FatWallet.com, Inc., iGive.com Holdings, LLC, JellyFish, Inc., Jet Set Joe Corporation, Little Grad, Inc., MBC Direct, LLC, Mall Networks, Inc., Misermart.com, Inc., Mezl Media, Inc., Mothers Work, Inc., OC Rebates, Pinnacle Communications International, Inc., Qdeals, Inc., QuickRewards Network, Inc., Shop.com, Simplicity Group, LLC, Spree.com Corporation, Tricordia, LLC, Tuition Fund, LLC, Webloyalty.com, Inc., Zions First National Bank, Alliance Card, Inc., Family Network, Inc., JPMorgan Chase & Co., Golden Retriver Systems, LLC, Summit State Bank, Nietech Corporation, U.S. Bancorp and U.S. Bank.
You can view the full text of the lawsuit here.
I contacted several of the companies involved for their reaction to the suit.
Alessandro Isolani, the founder and CEO of Ebates, said that the patents were vague and didn’t describe Ebates’ operational model at all. He insisted that Ebates was the first website of its kind and said that the company would defend itself aggressively against these claims.
FatWallet, via Steve in Customer Support, responded to say that FatWallet had not yet been contacted in any way by Source, Inc. Should it happen, though, this would “have no impact on our ability in continuing to provide all of our existing services to our customers.”
This is not the first time that Source, Inc. has gone after companies it feels are infringing upon its patents.
In April of 2004, Upromise gave in to Source’s demands and settled their lawsuit out of court.
In April of 2006, Rewards Network, Inc. also gave in to Source and agreed to settle their 2004 lawsuit (for the whopping sum of $1,000).
The company behind BabyMint, NestEggz, StockBack, and FundraiserRewards, Vesdia Corporation, has already paid Source’s licensing fees.
Are companies paying Source, Inc., because they feel Source’s patent claim is legitimate, or is it because it’s just cheaper and easier to pay them off than to fight a lengthy court battle, and in east Texas of all places? (Why east Texas? Because Marshall, Texas has a judge that’s very pro-patent troll.) If Source has a legitimate claim, why have they waited this long to go after some of these players, like Ebates, which has been at this rewards program business since the beginning? And why, exactly, is Source going after the rewards programs and not the affiliate programs like Commission Junction and Linkshare, whose business models are much more in line with what McCarthy’s original patents describe?
Something here just seems a little…strange.
I’d like to hear more reactions from other rewards programs; please leave a comment to this post or email me directly; thanks!

Share this: