Rewards Programs Sued for Patent Infringement

February 1, 2008 · 5 comments

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,, Inc., Belcaro Group, Inc., Big Co-Op, Inc., Intefral Technologies, Inc., 77BlueLLC, Ebates, Inc., Electronic Scrip Incorporated, The Ezshoppen Company,, Inc., Holdings, LLC, JellyFish, Inc., Jet Set Joe Corporation, Little Grad, Inc., MBC Direct, LLC, Mall Networks, Inc.,, Inc., Mezl Media, Inc., Mothers Work, Inc., OC Rebates, Pinnacle Communications International, Inc., Qdeals, Inc., QuickRewards Network, Inc.,, Simplicity Group, LLC, Corporation, Tricordia, LLC, Tuition Fund, LLC,, 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!

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{ 5 comments… read them below or add one }

Renee February 4, 2008 at 3:14 pm

Just writting to say that I really enjoy your site. Also I read your article on the infringement . Could you please explain to me exactly what was infringed.. Confused in Il…


jason cuban February 4, 2008 at 6:20 pm

Hello, I love your site and i’m a QuickRewards Network member, can you please fill me in on what’s going on with the lawsuit. I love QuickRewards I wouldn’t want anything bad to happen to them. Wow suing 38 companies, looks like someone (source inc) is money hungry. I don’t believe QuickRewards would ever “reap unjustified profits”. I don’t think they stole anyone’s idea. Please fill me in on what’s going on.
Thank you,


Connie C February 5, 2008 at 9:54 pm

I just sent you an email. I really appreciate you keeping me up to date on all the ins and outs of thse programs. Make sure you check your email.


Becky February 6, 2008 at 11:19 am

Renee — don’t feel bad, the whole mess really is confusing. In a nutshell, Source, Inc. thinks they own a patent that covers how rewards programs work, and they want licensing fees. They’re suing in a Texas court that’s known to be very friendly to patent infringement claims. They don’t want to shut the rewards programs down, just to make them pay licensing fees. Rewards programs will have to cave in or fork out attorney costs to fight this thing.
Jason — doing my best to keep you informed, just stay tuned to CompareRewards for the latest! I can tell you that QuickRewards has told me they’re planning to stick around for years to come.
Connie — got your mail and replied; thanks a bunch!


Ginger February 6, 2008 at 2:13 pm

What a saga! It is interesting to see all the info you are digging up Becky.
For those that don’t know and have never researched very deep on the Internet, a lot of what Becky finds is not free to her. She is having to pay several sources to bring you this info. Be sure to support her sites, click her links, and do what you can to help her defray her costs.
Also, I hope that if anyone has info, can send her leads or anything to help that you will email Becky. She is working very hard to give us all the truth about this whole matter.


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