Catuity says that the judge in the Federal Court of Australia legal
commenced by Welcome Real Time against Catuity for patent infringement in
Australia has released his decision. The judge adopted a very broad
interpretation of the laws and facts of this case and found that Catuity and
its subsidiaries did infringe on this Australian WRT patent.
Catuity and our legal counsel believe there are multiple grounds for appeal.
The ruling, effectively, opines that the printed “receipt” for a transaction
using a smart card constitutes a printed “coupon”. The ruling also concludes
that the “index file” commonly used in a smart card is a consumer “behaviour
file”. These conclusions are a significant departure from traditional
Australian and industry meanings and interpretations. In addition the ruling
ignores key descriptions of the invention in the patent and presents a
characterisation of the invention that is neither referred to nor supported by
the written claims. The conclusions, if upheld on appeal, would result in a
fundamental change in the meaning of commonly used words in Australia.
In this case, Catuity was the defendant and based on our interpretation of the
patent, we had little choice but to argue our case. We, and our legal counsel,
obviously did not expect this outcome and do not agree with the conclusions.
Catuity has maintained and continues to believe that this case and the
will have limited impact on Catuity’s business plans. We believe the impact on
customers and potential customers should be minimal for the reason outlined in
this release. We are discussing the ruling with them to determine what, if
impact the ruling, and any technical changes we may make, could have on their
Catuity can avoid infringement of the WRT patent, for example, by simply
ceasing to print anything or by printing only messages that are not a
or “evidence a transaction”, or by making small changes to file and other
design features. The ruling concludes that Catuity only infringes the patent
the first time a smart card is used at a merchant to participate in a program;
there is no on-going infringement. The ruling also implies that the first
Transcard system, launched in trials in 1995, did not infringe the patent and
one (i.e. one of many) small design change incorporated in late 1996, caused
The current version of the Catuity product can be easily modified to work
around the areas we were held to infringe. For example we can display messages
on terminal screens or revert to the 1995 design in the one area that was held
to infringe. Alternatively, Catuity could change the way the first transaction
at a merchant occurs, and avoid infringement of the patent. Any one of these
modifications should resolve the infringement issue. The modifications can be
completed in a short time so the ruling will have little impact on the future
technical operation of the Catuity product in Australia.
The Catuity product has been generally accepted by the market as being the
product and these modifications are not expected to diminish the many
substantial advantages the Catuity product offers.
Irrespective of these matters, the facts remain that this case relates only to
Australia and does not have any jurisdiction or precedent value in the
market since there is no similar patent grant in the United States where the
patent laws are different. Catuity’s business focus is the American market and
our major relationships are with the leading providers of the payment
infrastructure in the United States and our primary customers are in America.
The patent issue only involves smart cards and does not impact our product as
it relates to magnetic stripe cards, a key benefit of our product scope.
Catuity has always and continues to maintain that the Courts are not the best
place to resolve issues of this nature. In the market, the best product with
the best benefits, price and service will prevail. At a time when the market
has the momentum to move forward, all participants in the smart card industry
should be active in establishing standards and procedures and creating a forum
to discuss and resolve these issues in an efficient, fair and timely manner.
Catuity believes the American market will set the international standards for
the integration of loyalty programs with payment and that the release of draft
standards later this year could provide an opportunity for the
procedures to resolve issues common to all smart card industry participants.
In Australia we would prefer a “mediation of the patent issues” by key
participants rather than continuing litigation. There are a number of
Australian patents issued and pending, some or all of which may impact
Welcome Real Time and other market participants.
Catuity is currently working to resolve this matter as quickly as possible.
Catuity has a range of options and will commence an appeal of this Australian
court decision if no more appropriate solution is forthcoming. From the
judgement (and the Court is still to issue orders which may impact our
understanding of the judgement), it appears that Catuity can make relatively
small changes to its product and move forward, without any further threat of
infringement of the WRT Australian or any other corresponding patent.