UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

Pay-Plus Solutions, Inc. Petitioner

v.

StoneEagle Services, Inc. Patent Owner

Patent No. RE44,748 Filing Date: December 14, 2012

Issue Date: February 4, 2014 Title: MEDICAL BENEFITS PAYMENT SYSTEM

Inter Partes Review No. [To Be Assigned]

PETITION FOR INTER PARTES REVIEW UNDER 35 U.S.C. §§ 311-319 AND 37 C.F.R. § 42.100 ET SEQ.

i

TABLE OF CONTENTS

Exhibits ..................................................................................................................................... vii

I. MANDATORY NOTICES UNDER 37 C.F.R. § 42.8(b) .................................... 1

A. Real Party-In-Interest ........................................................................................ 1

B. Related Matters ................................................................................................... 1

C. Lead and Back-Up Counsel .............................................................................. 1

D. Power of Attorney and Service Information ................................................. 1

II. PAYMENT OF FEES – 37 C.F.R. § 42.103 ............................................................ 2

III. REQUIREMENTS FOR INTER PARTES REVIEW: 37 C.F.R. § 42.104 ........................................................................................................................... 2

A. Grounds For Standing ...................................................................................... 2

B. Identification of Challenged Claims and Relief Requested ......................... 2

IV. SUMMARY OF THE ’748 PATENT ....................................................................... 4

A. Brief Description ................................................................................................ 4

B. Summary of the Prosecution History of the ’748 Patent............................. 5

V. CLAIM CONSTRUCTIONS UNDER 37 C.F.R. § 42.104(b)(3) ........................ 6

A. Constructions of “Medical Services Terminal,” and “Stored-Value Card” / “Stored-Value Card Account” ................................ 6

B. Construction of “Single-Use Stored-Value Card Account” ........................ 7

VI. LEVEL OF ORDINARY SKILL IN THE ART ................................................. 10

VII. OVERVIEW OF THE PRIOR ART ...................................................................... 10

A. Kennedy ............................................................................................................ 10

B. Watson ............................................................................................................... 12

ii

C. vPayment Interview ......................................................................................... 14

D. Allen ................................................................................................................... 14

E. Wells ................................................................................................................... 15

F. Image Statement Products .............................................................................. 16

VIII. THERE IS A REASONABLE LIKELIHOOD THAT AT LEAST ONE CLAIM OF THE ’748 PATENT IS UNPATENTABLE .................................................................................................... 17

A. Claim 7: obvious over (a) Kennedy, Watson and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells ................................................................................................................... 19

i. Preamble: “A method of facilitating payment of adjudicated health care benefits to a healthcare provider on behalf of a payer” ........................................................... 19

ii. Limitation [a]: “adjudicating a benefit payment by evaluating a benefit claim under the terms of an applicable medical benefits policy and calculating an amount of a payable benefit” ............................................................. 20

iii. Limitation [b]: “creating a unique stored-value card account by one or more computers, the stored-value card account being chargeable only up to an authorized amount” ............................................................................. 21

Limitation [c]: “allocating funds within an account designated by a payer to the stored-value card account by one or more computers in the amount of the adjudicated benefit payment” ...................................................... 21

iv. Limitation [d]: “generating an explanation of benefits associated with the payment” ............................................................. 34

v. Limitation [e]: “creating a file containing the stored-value card account number, the adjudicated benefit payment amount, a card verification value code, an

iii

expiration date, and the explanation of benefits by one or more computers” ..................................................................... 35

Limitation [f]: “sending the file to the healt hcare provider” ................................................................................................ 35

B. Claim 13: obvious over (a) Kennedy, Watson & vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells ................................................................................................................... 41

i. Preamble: “A system for payment of health care benefits combining payment terms and an explanation of benefits” ...................................................................... 41

ii. Limitation [a]: “an explanation of benefits describing medical services provided to a patient by a health care provider, an amount billed by the health care provider and an amount paid by the patient's insurance company” ............................................................................ 41

iii. Limitation [b]: “a payment mechanism associated with the explanation of benefits, the payment mechanism merging a stored value card account number an adjudicated benefit payment amount, a card verification value code, and an expiration date with the explanation of benefits into a document by one or more computers” ..................................................................... 42

iv. Limitation [c]: “wherein funds in the amount of a single, adjudicated benefit payment are allocated within an account designated by the insurance company to a unique, single-use, stored value card account, the stored-value card account being chargeable only up to an authorized amount, and wherein the document is sent to the healthcare provider as payment for the medical services.” ............................... 43

C. Claim 19: obvious over (a) Kennedy, Watson & vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells ................................................................................................................... 44

iv

i. Preamble: “A computer implemented method for combining payment of health care benefits with an associated explanation of benefits” ................................................... 45

ii. Limitation [a]: “receiving an explanation of benefits related to medical services provided by a health care provider” ................................................................................................ 45

iii. Limitation [b]: “receiving authorization to pay at least a portion of submitted charges associated with the explanation of benefits and the associated funds for payment” ......................................................................................... 45

iv. Limitation [c]: “allocating funds within an account designated by a payer to a unique, stored-value card account in an amount equal to the adjudicated benefit payment by one or more computers, the stored-value card account being chargeable only up to the authorized amount”.................................................................. 46

v. Limitation [d]: “merging the explanation of benefits with the stored-value card account number, the adjudicated benefit amount of payment, a card verification value code, and an expiration date in a file” ......................................................................................................... 47

D. Claim 25: obvious over (a) Kennedy, Watson and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells .......................................................................................... 47

i. Preamble: “A system for payment of health care benefits to a health care provider” .................................................... 47

ii. Limitation [a]: “an administration system operable to receive a benefit claim from the health care provider and to generate an explanation of benefits for the benefit claim along with an approved payment, wherein the amount of approved payment is adjudicated by evaluating the benefit claim under the terms of an applicable medical benefits policy” .............................. 47

v

iii. Limitation [b]: “a card processing system operable to allocate funds within an account designated by a payer to a stored-value card account in an amount equal to the approved payment by one or more computers, the card processing system also operable to merge the explanation of benefits with the stored-value card account number by one or more computers, the adjudicated amount of payment, a card verification value code, and an expiration date in a file and to send the file to the health care provider as payment for the benefit claim” ..................................... 48

E. Claim 8, 14, 20, and 26: obvious over (a) Kennedy, Watson, and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells .......................................................................................... 49

i. Kennedy Combined with Watson and vPayment Interview ................................................................................................ 50

ii. Kennedy Combined with Allen ......................................................... 51

iii. Kennedy Combined with Wells ......................................................... 51

F. Claim 9, 15, 21, and 27: obvious over (a) Kennedy, Watson, vPayment Interview and Image Statement Products, (b) Kennedy, Allen and Image Statement Products and (c) Kennedy, Wells and Image Statement Products ......................................... 52

G. Claims 10, 16, 22, and 28: obvious over (a) Kennedy, Watson and vPayment Interview and (b) Kennedy and Wells ................................................................................................................... 54

i. Kennedy Combined with Watson and vPayment Interview ................................................................................................ 55

ii. Kennedy Combined with Wells ......................................................... 56

H. Claims 11, 12, 17, 18, 23, 24, 29, and 30: obvious over (a) Kennedy, Watson and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells .......................................................... 57

vi

i. Kennedy Combined with Watson and vPayment Interview ................................................................................................ 58

ii. Kennedy Combined with Allen ......................................................... 59

iii. Kennedy Combined with Wells ......................................................... 59

IX. CONCLUSION........................................................................................................... 60

vii

EXHIBITS

Title Ex. #

Declaration of Thomas N. Turi (“Turi Declaration”) 1001

U.S. Patent No. RE44,748 to Allen 1002

The file history of U.S. Patent No. RE44,748 1003

David. W. Gillman, et al. v. StoneEagle Services, Inc., Case No. CBM2013-

00047 (U.S.P.T.O. Patent Trial and Appeal Board, Feb. 18, 2014)

1004

U.S. Patent Application Publication No. 2007/0005403 to Kennedy et al.,

filed on June 30, 2006 (“Kennedy”)

1005

U.S. Patent No. 5,991,750 to Watson, filed on October 24, 1997, issued on

November 23, 1999 (“Watson”)

1006

LeRoy H. Graw, Purchasing Credit Cards Introduction, www.ipscmi.org/

tipsandsolutions/purchasingcredit.php (retrieved from August 19, 2006 archive at

https://web.archive.org/web/20060819120418/www.ipscmi.org/tipsandsolutions/pur

chasingcredit.php) (“vPayment Interview”)

1007

GE Pre-Authorization SystemTM, http://www.gebusinessmarketplace.com/int_

preauth.htm (retrieved from August 12, 2003 archive at https://web.archive.org/

web/20030812180305/http://www.gebusinessmarketplace.com/int_preauth.htm)

(“GE Pre-Authorization”)

1008

viii

How vPayment Works, http://www.gebusinessmarketplace.com/ int_vpayment2.

htm (retrieved from October 10, 2003 archive at https://web.archive.org/web/

20031010171903/http://www.gebusinessmarketplace.com/int_vpayment2.htm)

(“How vPayment Works”)

1009

Viewpointe and Payformance Collaborate To Provide Image Statement

Products, http://www.payformance.com/contactus/press/

ViewpointePayformanceIS.pdf (dated September 30, 2002; retrieved from March

22, 2006 archive at https://web.archive.org/web/20060322175410/ http://

www.payformance.com/contactus/press/ViewpointePayformanceIS.pdf) (“Image

Statement Products”)

1010

Health Care Claim Payment/Advice 835 Electronic Data Interchange Transaction Set

Implementation Guide, March 2003, Washington Publishing Corporation (“835

Implementation Guide”)

1011

Thrifty Revolutionizes Electronic Commission Payments to Travel Agents, July 9,

1996, PR Newswire (“Thrifty Commission Payments”)

1012

Help on the Way for Pay? ASTA Touts NPC Commission Express, August 11,

1997, Travel Agent (vol. 287, iss. 5) (“NPC Commission Express”)

1013

National Processing Co. Activates Pay-Tracking Site, June 15, 1999, Travel

Weekly (“NPC Pay-Tracking”)

1014

ix

NPC Offers Currency Conversion of Travel Commissions with the Launch of NPC

Global Payment Network Free Currency Conversion for Travel Agency Commissions

from Vendors, October 16, 1998, www.hospitalitynet.org (“NPC Offers

Currency Conversion”)

1015

Health Alliance Medical Plans, Inc. Selects National Processing Company for Complete

Electronic Settlement Solution: NPC's AcceleratedPay(SM) to Provide Automation of

Payment and Settlement Functions, December 6, 2001, PR Newswire (“Health

Alliance Selects NPC”)

1016

Humana Announces Emphesys and New Wave of Services to Expand Consumer And

Physician Control of Health Decisions: New Technology and Consumer-Centric

Programs Combine to Increase Choice, November 29, 2001, PR Newswire

(“Humana Announces Emphesys”)

1017

Advanced Business Fulfillment (ABF) Launches Healthpayers USA: New System

Saves Clients Significant Money by Reducing Postage and Eliminating Envelope

Charges, February 3, 2003, PR Newswire (“ABF Launches Healthpayers

USA”)

1018

Blue Cross and Blue Shield Association and Payformance Corporation Sign National

Agreement, November 30, 2004, Business Wire (“BCBSA and Payformance

Sign National Agreement”)

1019

x

National Processing Company to Support HealthLink Electronic Payment Processing,

July 1, 2003, National Processing, Inc. Press Release (“NPC to Support

HealthLink”)

1020

U.S. Patent Application Publication No. US 2005/0209964 to Allen et al.,

filed on February 19, 2004, and published on September 22, 2005 (“Allen”)

1021

U.S. Patent No. 6,901,387 to Wells et al., filed on June 14, 2002, and issued

May 31, 2005 (“Wells”)

1022

Report of Robert M. Allen as to the alleged patent infringement by Petitioner,

dated October 1, 2014 and produced by Patent Owner in the co-pending

litigation (“Allen Expert Infringement Report”)

1023

Rebuttal Expert Report of Robert M. Allen to Invalidity Expert Report of Thomas N.

Turi, dated November 3, 2014 and produced by Patent Owner in the co-

pending litigation (“Allen Invalidity Rebuttal Report”)

1024

Patent Owner Stoneeagle Services, Inc.’s Preliminary Response, IPR2014-01414 1025

Curriculum Vitae - Thomas N. Turi 1026

U.S. Patent Application Publication No. US 2007/0172312 to Selwanes et

al., filed on March 7, 2003, and published on September 2, 2004

1027

1

Through counsel, Petitioner Pay-Plus Solutions, Inc. (“PPS”) hereby petitions

for inter partes review under 35 U.S.C. §§ 311-319 and 37 C.F.R. § 42 of all issued

claims 7-30 of U.S. Patent No. RE44,748 (“the ’748 Patent”).

I. MANDATORY NOTICES UNDER 37 C.F.R. § 42.8(b)

A. Real Party-In-Interest

PPS is the real party-in-interest for this petition. PPS is wholly-owned by

Premiere Healthcare Exchange, Inc.

B. Related Matters

On August 29, 2013, StoneEagle Services, Inc. (“Patent Owner”) filed a

complaint asserting U.S. Patent No. RE43,904 against PPS and its parent company in

the Middle District of Florida, and amended that complaint on February 7, 2014 to

assert the ‘748 Patent also See StoneEagle Services, Inc. v. Pay-Plus Solutions, Inc. et. al.,

Civil Action No. 8:13-cv-2240-T-33MAP. On August 29, 2014, PPS filed IPR Case

No. 2014-01414 seeking inter partes review of U.S. Patent No. RE43,904.

C. Lead and Back-Up Counsel

LEAD COUNSEL Michael S. Pavento (Reg. No. 42,985) (MPavento@kilpatricktownsend.com) Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street, Suite 2800 Atlanta, GA 30309-4528 T: 404.815.6213; F: 404.541.4676

BACK-UP COUNSEL Russell A. Korn (Reg. No. 54,236) (RKorn@kilpatricktownsend.com) Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street, Suite 2800 Atlanta, GA 30309-4528 T: 404.745.2552; F: 404.393.6548

D. Power of Attorney and Service Information

A power of attorney is filed herewith according to 37 C.F.R. § 42.10(b). A copy

2

of this petition, in its entirety, is being served to the address of the attorney of record.

PPS may be served at the lead counsel address above.

II. PAYMENT OF FEES – 37 C.F.R. § 42.103

The required fee is being paid through the Patent Review Processing System.

Any additional fees may be charged to Deposit Account No. 20-1430.

III. REQUIREMENTS FOR INTER PARTES REVIEW: 37 C.F.R. § 42.104

A. Grounds For Standing

PPS certifies that the ’748 Patent is available for inter partes review and that PPS

is not barred or otherwise estopped from requesting inter partes review challenging the

identified claims on the grounds identified herein.

B. Identification of Challenged Claims and Relief Requested

PPS requests review of claims 7-30 of the ’748 Patent based on the following

reasons, for which a detailed explanation of how each claim is unpatentable, including

identification of where each element of each claim is found in the cited prior art

references and the relevance of the prior art references is later provided.

Ground 1: Claims 7-8, 10-14, 16-20, 22-26, and 28-30 are obvious under §

103(a) in view of Kennedy, Watson and vPayment Interview.

Ground 2: Claims 7-8, 11-14, 17-20, 23-26, and 29-30 are obvious under §

103(a) in view of Kennedy and Allen.

Ground 3: Claims 7-8, 10-14, 16-20, 22-26, and 28-30 are obvious under §

103(a) in view of Kennedy and Wells.

3

Ground 4: Claims 9, 15, 21, and 27 are obvious under § 103(a) in view of

Kennedy, Watson, vPayment Interview and Image Statement Products.

Ground 5: Claims 9, 15, 21, and 27 are obvious under § 103(a) in view of

Kennedy, Allen and Image Statement Products.

Ground 6: Claims 9, 15, 21, and 27 are obvious under § 103(a) in view of

Kennedy, Wells and Image Statement Products.

These references are prior art under 35 U.S.C. § 102 to the ’748 Patent, which

has an effective filing date of December 5, 2006. Kennedy, filed before December 5,

2006, is prior art under § 102(e). Watson, issued more than one year before December

5, 2006, is prior art under § 102(b). vPayment Interview, published on the Internet

before December 5, 2006, is prior art under 35 U.S.C. § 102(a).1 Allen published on

September 22, 2005, is prior art under 35 U.S.C. § 102(b). Wells, issued May 31, 2005,

is prior art under 35 U.S.C. § 102(b). Image Statement Products, was published on the

Internet before December 5, 2006, and is prior art under 35 U.S.C. § 102(a). 2

1 This webpage, published at http://www.ipscmi.org/tipsandsolutions/purchasing credit.php,

archived Aug. 19, 2006 by Internet Archive’s “Wayback Machine” and may be

downloaded at: https://web.archive.org/web/20060819120418/www.ipscmi.org/

tipsandsolutions/purchasingcredit.php.

2 This PDF, archived Mar. 22, 2006 by Internet Archive’s “Wayback Machine” may be

downloaded by at: https://web.archive.org/web/20060322175410/http://www. Payformance

4

IV. SUMMARY OF THE ’748 PATENT

A. Brief Description

The ’748 Patent relates to “[a] method of facilitating payment of healthcare

benefits to [sic] on behalf of a payer comprising the step of electronically transmitting

a stored-value card account payment of the authorized benefit amount concurrently

with an explanation of benefits.” Ex. 1002 at Abstract. The patent purports to solve

the problems of cost and delay associated with “Payers” (e.g., 3rd party administrators,

insurers) having to print checks and explanation of benefit (EOB) forms to be mailed

to healthcare providers. Id. at 1:28-46. The patent discloses loading a stored-value card

account with funds equal to the amount of the approved claim, merging an EOB for

the claim with the stored-value card account information to generate an image file,

and then electronically transmitting the image file to a provider. Id. at 3:39-49. The

’748 Patent states that “[f]or the purposes of this patent specification, stored-value

cards and stored-value card accounts shall also include financial instruments known as

credit cards, debit cards and EFT cards.” Id. at 1:56-59.

Thus, the alleged invention of the ’748 patent is to pay a healthcare provider by

sending her a file that includes a stored-value card account number and EOB

information. The file may also include the security verification code and the expiration

date of the stored-value card. Id. at 3:61-65. Funding for the payment is associated

.com/contactus/press/ViewpointePayformanceIS.pdf.

5

with an account tied to the stored-value card account number. The healthcare

provider then enters the stored-value card account number into a point of sale

(“POS”) terminal to effect receipt of the payment via known financial networks.

B. Summary of the Prosecution History of the ’748 Patent

The ’748 Patent issued Feb. 4, 2014 and is a reissue of U.S. Patent No.

7,792,686 (the “’686 Patent”), issued on Sept. 7, 2010. Cancelled claims 1-6 were the

issued claims from the ’686 Patent and claims 7-30 were added during re-issue. An

Office Action dated Feb. 26, 2013, rejected claims 7-22 for obviousness-type double

patenting. Ex. 1003 at 54-60. Patent Owner then filed a terminal disclaimer in relation

to Application No. 13/358,620, which issued as U.S. Patent No. RE43,904. Id. at 73.

On Oct. 30, 2013, a Notice of Allowance issued for claims 7-22. Id. at 174-185.

Patent Owner paid the issue fee the same day. Id. at 226-227. On Nov. 8, 2013,

Patent Owner filed a Petition for Withdrawal from Issue, a Request for Continued

Examination, and an Amendment. Id. at 232-251. The basis for withdrawing the

claims from issue was that the claims were unpatentable:

The claims are unpatentable because independent claims 7, 11, 15,

and 19 recite “transferring” funds from an account designated by

a payer to the stored-value card. This limitation is erroneous and

is not supported by the specification. The funds are not

transferred from an account—instead, they are allocated within

the account. The limitation requiring transfer of funds contradicts

the specification and renders the claims unpatentable.

6

Id. at 235. The Amendment replaced “transferring from” in claims 7, 11, 15, and 19

with “allocating within,” id. at 241-251, and added claims 23-30 to recite that the

“stored-value card” of claims 7, 11, 15, and 19 is a credit card or debit card. Id.

On Dec. 13, 2013, a second Notice of Allowance issued allowing claims 7-30.

Id. at 270-280. The notice stated that “[t]he combined art fails to disclose the single-

use stored value card that is loaded with funds equal to the authorized benefit

payment or prefunded with an amount equal to a single, adjudicated benefits payment,

and creating a computer-generated image file containing the single-use stored-value

card account number, a card verification value code, an expiration date, an

explanation of benefits.” Id. at 278.

V. CLAIM CONSTRUCTIONS UNDER 37 C.F.R. § 42.104(b)(3)

A claim subject to inter partes review (“IPR”) is given its “broadest reasonable

construction in light of the specification of the patent in which it appears.” 37 C.F.R.

§ 42.100(b). Claims are given their plain meaning unless inconsistent with the

specification. In re Zletz, 893 F.2d 319, 321 (Fed. Cir. 1989). Using those standards

solely for purposes of this proceeding, PPS proposes below constructions for certain

terms of the ’748 Patent claims and submits that all other claim terms should be given

their plain and ordinary meaning.

A. Constructions of “Medical Services Terminal,” and “Stored-Value Card” / “Stored-Value Card Account”

On August 19, 2013, an unrelated party filed Case No. CBM2013-00047 to

7

challenge the validity of U.S. Patent No. RE43,904, which is also a reissue of the ’686

Patent. The PTAB denied institution of the requested CBM review, finding the prior

art cited by the petitioner to be insufficient. Ex. 1004 at 9-10, 15-17. In its decision

denying institution, the PTAB construed several claim terms of the ’904 Patent,

including the following:

• “medical services terminal” as “a machine for charging medical services;”

• “stored-value card” / “stored-value card account” as “credit card, debit card, or

EFT card” and “credit card account, debit card account, or EFT card account,”

respectively.

Ex. 1004 at 11-12. PPS proposes that the PTAB adopt these prior constructions of

the terms “medical services terminal” and “stored-value card” / ”stored-value card

account.” The ’904 Patent and the ’748 Patent share the same specification; thus,

common terms used in the same context in the claims of both patents should be

construed identically.

B. Construction of “Single-Use Stored-Value Card Account”

PPS proposes that the term “single-use, stored-value card account” found in

Claim 13 be construed to mean “a stored-value card account that may be used to

make a single payment.” See Ex. 1002 at 2:10-19. In CBM2013-00047, Patent Owner

proposed construing “single-use” to mean “associated with a benefit payment to a

health care provider – and not any other type of payment.” Ex. 1004 at 13. In its

decision on the petition, the PTAB agreed “that ‘single-use’ would have been

8

understood to mean that an account was associated with a single type of card to be used

with a single type of services terminal and no other type of payment terminal,” id., but

did not appear to specifically address whether such a card would be used for more

than one payment for a single type of service.

PPS respectfully asserts that a construction defining a “single-use stored-value

card account” to mean that the account is associated with a single type of card to be

used with a single type of services terminal and no other type of payment terminal, or a

similar meaning, is not the appropriate construction of that term and should not be

adopted in this IPR. The ordinary meaning of “single-use” in these claims is to signify

that something can be used only once, not that something can be used for only one

purpose. In other words, the ordinary meaning of “single-use” is distinct from that of

“single-purpose.” Consistent with the ordinary meaning of “single-use,” the ’748

Patent specification describes that a “unique card number [is] generated and assigned

to a single payment.” Ex. 1002 at 2:21-22 (emphasis added). This description

confirms that the contemplated single-use stored-value card account is one that can

be used to make a single payment for medical services, i.e., it may be used only once.

The specification and claims of the ’748 Patent both distinguish between the

concepts of single-use and single-purpose as for the stored-value card account. As to

the account having a single purpose, the specification and claims describe the account

as only being chargeable through a specific type of terminal. For example, after

describing that a card account can be used for making only a single payment, the

9

specification separately explains: “Furthermore, the stored-value card account

payment may only be charged through a medical services terminal.” Id. at 2:25-26.

Similarly, independent claim 13 recites the single-use limitation: “a unique, single-use,

stored-value card account, the stored-value card account being chargeable only up to

an authorized amount” and claim 16, which depends from claim 13, separately

specifies the single-purpose limitation: “the stored-value card account is only chargeable

through a medical services terminal.” Id. at 5:66-6:1, 6:10-12. Thus, the concept of

limiting a stored-value card account to be chargeable through only a specific type of

terminal (i.e., single-purpose) is separate and distinct from the concept of the account

being used for making a single payment (i.e., single-use).

Mr. Allen, the sole inventor named on the ’748 Patent, confirms the above in

the Allen Invalidity Rebuttal Report, by referring to his “…novel idea to merge a

single purpose (i.e., medical benefits only) card having an authorization limit set

to the exact amount of the adjudicated claim, with an EOP/RA.” Ex. 1024 at 9

(emphasis added). Thus, the inventor himself acknowledges that a stored-value card

has a “single-purpose” if it can be used to make payments for only medical benefits.

Again, this single-purpose limitation (“only chargeable through a medical services

terminal”) is separately recited in dependent claim 16. Thus, the “single-use”

limitation of independent claim 13 is necessarily different. PPS submits that the

broadest reasonable construction of “single-use stored-value card account” is a

stored-value card account that can be used to make only a single payment.

10

VI. LEVEL OF ORDINARY SKILL IN THE ART

In CBM2013-00047, Patent Owner asserted that a person of ordinary skill in

the art for U.S. Patent No. RE43,904, which is also a reissue of the ’686 Patent, is

“someone who has several years of experience in claims adjudication, card programs,

and card processing.” PPS agrees that characterization also is appropriate here.

VII. OVERVIEW OF THE PRIOR ART

The prior art references cited herein must be considered within the context of

the then-existing state of the art in the healthcare payments industry. By at least 2002,

industry players were contemplating automated systems that could accept and

adjudicate insurance claims from providers, explain which claims were allowed, and

pay providers electronically for the allowed claims. For example, see Ex. 1027 ¶¶

[0031], [0039] (describing a system for facilitating multi-party transactions:

“…provider submits a claim for payment to the insurer using existing techniques. The

claim is processed… and the provider then accesses a payment portal (e.g., a secure

web site) provided by the insurer… The payment portal lists authorized payments for

the provider and may include an explanation of benefits related to the services

provided by the provider.”) This exemplary system of this patent application

transferred benefits payments from the insurance payer to the provider via a stored-

value card. Id. at [0042] (“The payment is then processed using existing credit card,

debit card, stored value or smart card techniques”). The payer could ensure that the

stored-value card was used to pay for only medical services by verifying the device

11

code associated with the POS terminal used to request payment. Id. at [0025] (“… the

insurer system 150 determines whether the input device type code matches defined

healthcare provider codes. If not, this indicates that the information has been entered

at an input device that is not associated with a healthcare provider…”). It was even

recognized that the insurer could issue its own stored-value cards and thereby

capitalize on the associated interchange fees. Id. at: [0048]-[0049] (“The insurer, as

issuer of the provider card and/or member card, collects interchange fees from the

merchant acquirer when the provider card or the member card are used for

conventional credit, debit, stored value or smart card transactions… This results in

interchange fees being charged when the provider card is used to obtain payment…”).

Systems such as that disclosed in [1027] was being developed to address the

inefficiency of sending benefit payments to providers using paper checks. Id. at [0005].

Thus, it was well-known before the priority date of the ‘748 Patent that electronic

payments were preferable to payments by checks and that associating explanations of

benefits with an electronic payment would allow for easy reconciliation.

A. Kennedy

Kennedy discloses a system for permitting real-time payment of healthcare

charges from multiple sources of payment. See Kennedy at Abstract. A healthcare

provider enters information at a point of service (“POS”) terminal regarding the

patient and a treatment. Id. at [0031]. An electronic claim is generated based on that

information and is electronically transmitted to a third party payer over a network. Id.

12

at [0031], [0054]. The claim is processed by querying a database and using information

therefrom to determine whether the patient is covered/eligible, to determine the

features of the patient's coverage, and to determine the permitted charge for the

treatment provided under the claim. Id. at [0054]. The insurer generates EOB data and

transmits it to the provider for display at the POS terminal. Id. In some embodiments,

a third party processor submits claims from the provider to a health network, receives

the EOB data in response, and forwards the EOB data to the provider. Id. at [0072].

The EOB data may be sent in an electronic remittance advice (“ERA”) format,

such as the ANSI 835 standard. Id. at [0057]. The EOB data may include payment

information for the payment from the insurer to the healthcare provider. Id. at [0032],

[0082]. The payment may be completed via an ACH transfer. Id. at [0064].

The EOB data is used to generate an EOB statement for display at a POS

terminal and may include the amount of the claim submitted, an agreed to payment,

adjustments to the claimed amount, and the patient responsibility. Id. at [0057]. The

patient’s credit card or debit card information is included in the EOB statement so the

patient can authorize payment of the owed amount. Id. at [0062], Fig. 7. After

payments are received from patients and/or third party payers, the provider’s

accounts receivable is updated. Id. at [0064].

B. Watson

Watson, assigned to GE Capital, is directed to electronic authorization of

financial transactions, and in particular, to electronic authorization of specific

13

predetermined transactions. See Watson at 1:7-9. Watson discloses setting limitations

on transactions during account establishment, such as an account balance limit and

limits on categories of goods or services according to standard industrial codes (SIC).

Id. at 4:46-60. Such parameters can include transaction limits, account balance limits,

limitations on categories of goods or services, etc. Id. An account manager issues a

pre-authorization request for a specific purchase, the request including transaction

parameters such an amount of the purchase and a merchant identifier. See, id. at 5:1-

21. “One or more of the pre-authorization parameters may be specified while others

may not be specified thus permitting the spectrum of possible options for such

criteria.” Id. at 5:22-25. A personal computer may be used to generate and submit pre-

authorization requests over the Internet. Id. at 4:61-67, 5:12-27.

The account manager may present an account number to a merchant upon the

rendering of goods or services. The disclosed payment process “has application to

businesses such as the insurance industry wherein account manager 202 may play the

role of a claims adjuster disclosing an account number to merchant 206 for payment

of services rendered for an insurance claim.” id. at 9:24-31. The account manager may

define a specific transaction identifier (e.g. an insurance claim number) and associate it

with the transaction to facilitate reconciliation. See Id. at 4:19-34. A payment may be

made to the merchant or provider by presenting a transaction card or other credit

card-like credentials and an authorization may be routed through credit card

companies (e.g., Visa, Amex, MasterCard). Id. at 9:14-16, Fig. 2, 2:24-29.

14

C. vPayment Interview

vPayment Interview includes the transcript of an interview of GE’s Mike

O’Malley about vPayment, the GE payment service that is the subject of Watson. Per

O’Malley, the service “runs on the MasterCard railroad track” and allows

authorization of specific payment amounts. vPayment Interview at 2. A website is

used to request a payment card number and set a cap on the transaction amount. A

payment card number and its expiration date and card verification code are generated,

which the user provides to a merchant or provider as payment. Id. at 3. The card

information may be faxed to the merchant or provider. Id. For reconciliation

purposes, the transaction record may include exact PO numbers or account codes. Id.

D. Allen

Robert M. Allen, the sole inventor of the ’748 Patent, is one of three named

inventors of Allen. The alleged “present invention” of Allen “is a method of

providing a distinct payment number for the purpose of replacing the current process

for insurance and warranty claim payments via credit card.” Allen at [0008]. “The

payment number has a fixed charge limit, variable expiration options, the ability to

track directly with claim and contract information.” Id. “The payment number in

accordance with the present invention may be a credit card number.” Id. The payment

number may be “a physical payment number, as commonly associated with a credit

card,” or “a virtual payment number.” Id.

The payment method begins with “receiving a request from a merchant for a

15

payment associated with a claim.” Id. at [0029]. Next, verification of coverage may be

provided,” giving the merchant “a guarantee that the services provided to the claimant

are covered under a valid contract with a service contract administrator.” Id. at [0012].

“A payment number is then generated having the predetermined limit amount and a

predetermined expiration date.” Id. at [0029]. “A request is then sent to load funds

equal to the predetermined limit amount.” Id. A confirmation is generated and

associated with the payment number to assist with reconciliation. Id. The payment

number is transmitted to the merchant as payment for the claim. Id. Approval and

denial indicators are associated with payment numbers and a “reconciliation

transaction repository” is created. Id.

E. Wells

Like Watson, Wells lists GE Capital as its assignee. Wells discloses using a pool

of limited use account identifiers, associated with, but separate and distinct from, a

master account, to facilitate the purchase of items from merchants. See Wells,

Abstract. A pool of limited use account identifiers, each identifier for use with an

individual transaction, is assigned to a client upon the client requesting opening of a

master account. Id. at 16:53-55.

To make a payment, purchase order information (including the total amount

purchased) is submitted to an account management system. Id. at 18:6-12. The system

selects a limited use account identifier from the pool. Id. at 18:24-27. The system then

submits a preauthorization request that includes the selected limited use account

16

identifier and may include the total purchase amount and merchant identification,

such as name, SIC code, or standard MID code. Id. at 18:34-59. After this pre-

authorization, the system provides the limited use account identifier and the purchaser

may present it to the merchant by phone, fax, or over the Internet. Id. at 19:3-24.

Wells also discloses that “[t]he limited use account identifiers selected… may

each be a unique code,” id. at 17:3-7, and each identifier may be formatted as payment

card numbers, processed and routed using existing payment networks, id. at 17:12-15,

such as using a 16 digit number for MasterCard or a 15 digit number for American

Express. Id. at 17:12-15 and 17-20.

F. Image Statement Products

Image Statement Products is a press release describing that bank statements

could be generated using check images. Image Statement Products at 1. According to

the release, a Data Transformation Engine received statement data from the financial

institutions, retrieved check images from an archive, and “insert[ed] the check images

electronically into individual statements.” Id. The combined statements could be

transmitted to the financial institution customer or stored and rendering on behalf of

the financial institution. Id.

The described technology thus enabled bankers to take advantage of new

federal law that allows banks to use check images rather than the original physical check to

facilitate check-clearing processes between cooperating financial institutions.” Id. (emphasis added).

In other words, banks could cash checks using images of physical checks, rather than

17

the physical checks themselves. “For bank customers, image statements will allow

consumers to track their transaction history easily and efficiently.” Id.

VIII. THERE IS A REASONABLE LIKELIHOOD THAT AT LEAST ONE CLAIM OF THE ’748 PATENT IS UNPATENTABLE

As detailed below, these cited prior art references (with the exception of Allen,

none were not before the Examiner during prosecution of the ’748 Patent) show that

all limitations of claims 7-30 were known in the art and did not define novel or

unobvious concepts. Claims 7-30 merely recite combinations of common prior art

elements according to known methods to yield predictable results and/or which can

be easily achieved from the use of known techniques to improve similar devices,

methods, or products in the same way. The cited references provide ample teaching,

suggestion and/or motivation that would have led one of ordinary skill to modify

and/or combine the applicable teachings to arrive at the claimed inventions. MPEP §

2143 (A, C, G).

The point of novelty of the ’748 Patent claims, according to the Notice of

Allowance, is a “single-use stored value card that is loaded with funds equal to the

authorized benefit payment or prefunded with an amount equal to a single,

adjudicated benefits payment, and creating a computer-generated [] file3 containing

the single-use stored-value card account number, a card verification value code, an

3 The Notice of Allowance actually mentioned an “image file,” but none of the

independent claims of the ’748 Patent requires an “image file.”

18

expiration date, an explanation of benefits.” Ex. 1003 at 278. This is consistent with

the inventor’s own characterization of his “…novel idea to merge a single purpose

(i.e., medical benefits only) card having an authorization limit set to the exact amount

of the adjudicated claim, with an EOP/RA.” Ex. 1024 at 9. The explanations below

show that this idea was obvious in view of Kennedy and the other cited references.

Kennedy discloses a file that combines an EOB with payment information

about a payment from an insurer to a healthcare provider. See, e.g., Kennedy at [0082]

(“… the provider is notified that $50 is being paid to the provider as part of the EOB

or electronic remittance advice (ERA)”). The payment from the insurer may be

processed “using a conventional ACH banking network.” Id. at [0064]. While

Kennedy does not expressly note that this payment can be made by way of a payment

card, it was common knowledge long before the critical date of the ’748 Patent that

any payment, regardless of industry or purpose, could be made using any available

payment modality, including ACH transfer, payment cards, check, cash, etc. And it

was specifically known that payment cards could be used for making payments from

insurers to healthcare providers for medical benefit claims. See, e.g., Ex. 1027 at ¶

[0042] (describing payment means insurer to healthcare provider: “The payment is

then processed using existing credit card, debit card, stored value or smart card

techniques (i.e., through issuer bank).”) Card transactions also are settled via

conventional ACH networks. See, Ex. 1001 at ¶ 22. Thus, it would have been obvious

to add to the Kennedy system any of the payment card mechanisms taught by the

19

other cited prior art references, i.e., the vPayment card disclosed by Watson and

vPayment Interview, the electronic purchasing card disclosed by Wells, or the virtual

payment card taught by Allen. It would have been trivial to include such payment card

information in Kennedy’s EOB. The EOB file already includes patient credit card

information (Kennedy at [0062], Fig. 7), so adding additional insurer payment card

information would have been a simple exercise.

A. Claim 7: obvious over (a) Kennedy, Watson and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells

Claim 7 is rendered obvious under 35 U.S.C. § 103 by (a) Kennedy in view of

Watson and vPayment Interview [Ground 1], (b) Kennedy in view of Allen [Ground

2] and (c) Kennedy in view of Wells [Ground 3], as explained herein below.

i. Preamble: “A method of facilitating payment of adjudicated health care benefits to a healthcare provider on behalf of a payer”

Kennedy discloses the method recited in the preamble of claim 7. Kennedy

describes a healthcare provider submitting a claim to a health care network, insurer, or

other payer. See, e.g., Kennedy at [0031] (“Some systems are implemented by the

provider entering information at the POS terminal regarding the patient and a

treatment. Such information is used to generate an electronic claim that is submitted

to the third party payer, with EOB data generated and returned in real-time fashion by

the insurer (or an estimating system) for display at the POS terminal.”) Kennedy

further describes adjudication of the claim by an administrator, generation of EOB

20

information that is transmitted to the provider, displaying an EOB at the provider,

using the EOB information to submit a request for payment from an MSA account,

and “expedit[ing] an automatic payment to the provider (by the health network).” See,

e.g., id. at [0031], [0054], [0064]. Kennedy also provides an example in which “[t]he

claim is sent to the health plan (step 1330), and on a real-time basis the health plan

responds with EOB information (step 1340), including covered amount and patient

responsibility….” and “[a]t step 1350, the provider is notified [of the amount] being

paid to the provider as part of the EOB or electronic remittance advice (ERA).” Id. at

[0081], [0082]. Thus, Kennedy discloses the recited “method of facilitating payment of

adjudicated health care benefits to a health care provider on behalf of a payer.”

ii. Limitation [a]: “adjudicating a benefit payment by evaluating a benefit claim under the terms of an applicable medical benefits policy and calculating an amount of a payable benefit”

Kennedy discloses Limitation [a]. For example, “an electronic claim is

generated by the host and sent through the network (step 514) to the third party payer

(at one of the health networks 116), where at step 516 the claim information is

processed by the DBMS 120 (and the patient/insured information is retrieved at the

database 122.” Id. at [0054]. “[T]he DBMS will query the database 122 to make sure

that the patient is covered/eligible, determine the features of the patient's coverage

(co-pays, deductibles, etc.), and determine the permitted charge for the treatment

rendered by the provider under the claim.” Id. at [0054]. Kennedy also describes that

21

“[t]he claim is sent to the health plan (step 1330), and on a real-time basis the health

plan responds with EOB information (step 1340), including covered amount and

patient responsibility…. Id. at [0081] and [0057] (EOB message “includ[es] Claim

Payment (amount of claim submitted, treatment/service codes, etc.), Claim

Adjustment (agreed to payment, adjustments to claimed amount, patient

responsibility, etc.)”).

iii. Limitation [b]: “creating a unique stored-value card account by one or more computers, the stored-value card account being chargeable only up to an authorized amount”

Limitation [c]: “allocating funds within an account designated by a payer to the stored-value card account by one or more computers in the amount of the adjudicated benefit payment”

Kennedy does not itself disclose limitations [b] and [c] of claim 7. Kennedy

discloses payment of an adjudicated benefit amount from a health network to a

medical services provider via an ACH transaction, rather than by way of a unique

stored-value card account. See, id. at [0064] However, each of Watson and vPayment

Interview, Allen, and Wells discloses the stored-value card account payment

mechanism described in the ’748 Patent. Limitations [b] and [c] of claim 7 would have

been obvious over each of the cited combinations of references, as explained below.

It was well-known in the prior art that insurance payments could be made from

one entity to another via an ACH transfer, a stored-value card, a bank check and/or a

variety of other payment mechanisms. See, e.g., ’748 Patent at 3:26-27 (describing prior

22

art: “Administrator 40 then generates… a check for the benefits payment.”); Allen at

[0003] (“… many service institutions require the insurance company to provide a

credit card so that immediate payment is made. While the insurance company might

prefer to send a check…”); Kennedy at [0064] (“…the financial network 110 may

process payments (using a conventional ACH banking network) from the health

network 116 to the provider…”). See, also, Ex. 1027 at ¶ [0042] (describing payment

from insurer to healthcare provider: “The payment is then processed using existing

credit card, debit card, stored value or smart card techniques (i.e., through issuer

bank).”) Replacing the ACH payment mechanism used in Kennedy for making

payments from the heath network to the provider with a stored-value card payment

mechanism or any other available payment mechanism would have been obvious to

one of ordinary skill in the art. The use of a stored-value card is simply a replacement

payment modality for a paper check or an ACH transaction, and each of the payment

modalities have the same predictable result: the transfer of funds from one entity to

another. See, e.g., Ex. 1001 at ¶ 77.

Mr. Allen argues in the Allen Invalidity Rebuttal Report that “payment of

healthcare benefits with a virtual card was not well-known or understood in the

industry before December of 2006 or viewed as a substitute for an ACH payment at

that time,” as demonstrated by the fact that “it was not until June 2014 that the X12

standards committee approved inclusion of virtual cards as a payment method in the

new re-association remittance standards for healthcare payments.” See Ex. 1024 at 8.

23

However, with this approval, the X12 committee simply allowed for a format change

to the standard 835 file (ERA) so that its predefined fields could accommodate

payment card information. The X12 committee’s approval of this change in 2014 does

not demonstrate a prior lack of understanding that stored-value cards could have been

used to make benefit payments from insurers to healthcare providers.

Moreover, a credit card payment from an insurer a payer (e.g., an insurer) to a

healthcare provider payee triggers an ACH transfer from the credit card company’s

account to the payee’s account and is therefore functionally equivalent to a direct

ACH transfer from the payer to the payee in terms of how the underlying funds are

received by the payee. Ex. 1001 at ¶ 22. From the payee’s perspective, the only

meaningful differences between receiving a credit card payment rather than a direct

ACH transfer from the payer are: (1) the higher service fee charged by the credit card

company, calculated as a percentage of the charged amount, compared to the low flat

fee for receiving a direct ACH transfer; and (2) the payee is not required to enroll with

the payer to receive the ACH transfer triggered by the credit card transaction by virtue

of the payee’s pre-existing credit card merchant account. See, e.g., id. at ¶ 47.

Also, it is commonly understood that an issuing credit card company pays a

percentage of the service fee generated by the card association’s interchange fees back

to the payer. See, e.g., Ex. 1027 at ¶ [0048] (“Briefly, the interchange fee is paid by the

merchant acquirer to the issuer. The interchange fee compensates the issuer for the

time after settlement with the merchant acquirer and before the issuer recoups the

24

settlement value from the cardholder.”) For an insurer or a payment service that

makes a significant amount of benefit payments, the fees received from the credit card

company represent a meaningful additional revenue opportunity. This revenue

opportunity was the primary motivation for payment services to adopt the use of

payment cards to make benefit payments to providers. See, e.g., Ex. 1027 at ¶ [0048]-

[0049] (“The insurer, as issuer of the provider card and/or member card, collects

interchange fees from the merchant acquirer when the provider card or the member

card are used for conventional credit, debit, stored value or smart card transactions.

The interchange fee may be charged when the second function (e.g., authorization) is

selected… This results in interchange fees being charged when the provider card is

used to obtain payment…”); Ex. 1001 at ¶ 47.

Mr. Allen also argues in the Allen Invalidity Rebuttal Report that paying

medical benefits payments using stored-value cards offer many advantages over

payments via ACH or even paper checks: “Provider can receive payments faster”;

“Easy for the Provider to reconcile the payment with what is being paid for”;

“Provider Enrollment to Accept Cards more Efficient than ACH”; “Provider

acceptance of cards for payment can expedite cash flow”; “Elimination of Paper”; and

“Fraud Protection”. Ex. 1024 at 11. However, all of these so-called benefits of stored-

value cards were commonly known and well-understood in payment processing,

regardless of industry sector, long before the critical date of the ’748 Patent. For

example, Mr. Allen’s own prior art patent publication touts the very same benefits of

25

using stored-value cards to auto insurance claims. See, e.g., Allen at [0003] (“The

benefit of receiving credit card information is the speed in which funds and payment

can be guaranteed”); [0021] (“An advantage… is the elimination of overcharges due

to fraud or oversight...”); and [0022] (“Another advantage… is the elimination of the

costs associated with the reconciliation processes…”). That such benefits were well-

known only confirms that there was ample motivation for a skilled person to use

payment card mechanisms, like those taught by Watson and vPayment Interview,

Allen and Wells, to make medical benefits payments in systems like the one disclosed

by Kennedy. Therefore, it would have been obvious to combine Kennedy with each

of: (i) Watson and vPayment Interview; (ii) Allen; and (iii) Wells. As explained below,

each of these prior art combinations clearly discloses limitations [b] and [c] of claim 7.

Kennedy in Combination with Watson and vPayment Interview

Kennedy in combination with Watson and vPayment Interview discloses

limitations [b] and [c] of claim 7. As discussed above, both Watson4 and vPayment

4 See Ex. 1009: How vPayment Works (“The vPayment system serves as a bridge

between the customer’s Accounts Payable or procurement system and the credit card

authorization system at Total Systems (TSYS). . . . TSYS uses GE Corporate Payment

Services’ patented Pre-Authorization technology.”); see, also, Ex. 1008: GE Pre-

Authorization (“GE Corporate Payment Services has developed a patented approach to

paying for goods and services by bankcard (Patent No. 5,991,750). The GE Pre-

26

Interview disclose details of GE’s vPayment service, which uses a virtual stored-value

card payment mechanism. The method and system of Watson “includes an account

establishment phase of an account process wherein an account manager approaches a

card issuer to establish an account in an establish account step.” Watson at 4:35-38.

Furthermore, “the billing account issued by the account issuer . . . includes details of

the account number.” Watson at 6:3-6. Account numbers are well known to be

unique identifiers of an account. See, e.g., Ex. 1001 at ¶ 77. Therefore, Watson

discloses “creating a unique stored-value card account,” as required by limitation [b]

of claim 7. In addition, Watson discloses that “[d]uring the establishment of an

account, limitations on transactions relating to that account are negotiated” and that

they “generally include items such as transaction limits, account balance limit,” and

“may include single transaction limits or aggregate limitations upon successive

transactions.” Watson at 7:45-52, 1:58-60. Therefore Watson’s unique stored-value

account could be configured to be “chargeable only up to an authorized amount,” as

further required by limitation [b] of claim 7.

With respect to “allocating funds within an account designated by a payer to a

stored-value card account by one or more computers in the amount of the adjudicated

benefit payment,” as required by limitation [c] of claim 7, Watson discloses “issu[ing]

Authorization System™ is a business-to-business payment solution that eliminates

check writing and provides key controls that prevent card misuse.”)

27

a pre-authorization request 224 to card issuer 214, in the preferred embodiment, using

a personal computer that is electronically coupled to card issuer 214” in which “one

or more transaction parameters including a quote amount resulting from the

quotation process.” Id. at 8:30-42. Thus, the card issuer pre-authorizes a charge

against the card account for the quote amount, which effectively allocates the

corresponding funds within the account. Watson specifies that “such a process has

application to businesses such as the insurance industry wherein account manager 202

may play the role of a claims adjuster disclosing an account number to merchant 206

for payment of services rendered for an insurance claim” and thus the quote amount

clearly can be the amount of an adjudicated benefit payment. Id. at 9:28-32.

The disclosure of vPayment Interview parallels that of Watson in many

respects and further emphasizes the teaching thereof with respect to stored-value card

payments. For example, vPayment Interview discloses “assigning end users a unique

credit card number for a specific purchase.” vPayment Interview at 2. vPayment

Interview further discloses limiting the value assigned to the unique credit card

number to the amount of an invoice:

Here’s how it works. Let’s say I want to pay a subscription invoice

for Cool Tools. I log into the website and request a payment

number, cap the value, and set a date that you have to process it

by. In the user-defined field I enter, ‘Cool Tools, invoice number

XYZ,’ or whatever accounting string I want. That information

appends to the transaction. I hit submit, and then ‘boop boop

28

beep,’ a card number, an expiration date, and a CVC (credit card

verification code) number comes back.

Id. at 3.

Given the combined teaching of Watson, vPayment Interview and Kennedy, it

would have been obvious that benefits payments from an insurer to a medical services

provider could have been made via a stored-value card account, rather than an ACH

transfer. Watson notes both that stored-value card transactions were ubiquitous

(Watson at 1:13-17: “Modernly, more and more transactions in commerce have come

to rely upon the convenience of utilizing a transaction card such as a credit card for

the purchasing of goods and services. As credit cards have become more ubiquitous,

so also has the infrastructure supporting the use of credit cards in commerce.”) and

that its own stored-value card payment process was applicable to the insurance

industry (Id. at 9:28-32: “such a process has application to businesses such as the

insurance industry…”). As Mr. Turi confirms, it would have been obvious to

incorporate the vPayment card mechanism of Watson and vPayment Interview into

the Kennedy system to effect payment from an insurer to a healthcare provider,

because doing so merely requires swapping one known payment modality for another.

See Ex. 1001 at ¶¶ 80-81.

Kennedy in Combination with Allen

Kennedy in combination with Allen also discloses limitations [b] and [c] of

claim 7. The disclosure of Allen is cursory and does not provide operational details of

29

many aspects of the described system, such as the creation of a unique stored-value

card account. However, it is clear that creation of such an account is a prerequisite

step in the disclosed system. For example, Allen describes that “[t]he payment number

processor may then request the load of funds from the bank responsible for funding

the payment number as is typical with a credit card transaction process. The load of

funds is the [sic] executed 55 as requested and a confirmation of the load of funds in

[sic] generated 60.” Allen at [0029]. Allen also describes how funds are transferred

out of the underlying stored-value card account to complete the payment transaction:

“As is common is financial transaction processing, a daily sweep of the bank accounts

can be taken and the appropriate transactions recorded and transmitted at that time.”

Id. at [0032]. Therefore, Allen inherently teaches that a stored-value card account

must first be created before funds can be loaded into it or swept out of it.

Allen further discloses that the stored-value card account is unique and is

chargeable only up to an authorized amount. For example, Allen discloses the use of a

“distinct payment number for the purpose of replacing the current process for

insurance and warranty claim payments via credit card. The payment number has a

fixed charge limit, variable expiration options, the ability to track directly with claim and

contract information, and the ability to upload into administration systems.” Id. at

[0008] (emphasis added). As another example, Allen discloses that in response to a

payment request from a merchant for a service, a “predetermined limit amount is then

authorized” and a “a payment number is then generated having the predetermined

30

limit amount.” Id. at [0029]. Therefore, Allen discloses “creating a unique stored-value

card account by one or more computers, the stored-value card account being

chargeable only up to an authorized amount” as per limitation [b] of claim 7.

Allen also discloses “allocating funds within an account designated by a payer

to the stored-value card account by one or more computers in the amount of the

adjudicated benefit payment,” as per limitation [c] of claim 7. For example, Allen

discloses that, after generating the payment number, “[a] request is then sent to load

funds equal to the predetermined limit amount 50” and “[t]he load of funds is the [sic]

executed 55 as requested and a confirmation of the load of funds in [sic] generated

60.” Id. at [0029]. Allen also makes clear that the loaded funds are allocated to the

stored-value card account from the payer’s account by describing that the loaded

funds are ultimately debited from the program administrator bank account: “The

program administrator bank account 157 is debited for the processed loads 155.”

Allen further contemplates use of its methods “to provide payment to a merchant

relating to an insurance claim.” Id. at [0018]. In such an embodiment, the

predetermined limit amount is the amount of an adjudicated benefit payment.

With respect to the requirement that the steps of limitations [b] and [c] of claim

7 are performed “by one or more computers,” Allen describes the use of a database

for storing payment-related information and the use of a known credit card

transaction process. See, id. at [0028] - [0030]. Also, Mr. Turi explains that one of

31

ordinary skill in the art would recognize that the payment process described in Allen

would typically be implemented using computers. See Ex. 1001 at ¶ 87.

It would have been obvious to one of ordinary skill in the art to incorporate the

stored-value card payment methods disclosed by Allen into the Kennedy system to

effect payment from the insurer to the healthcare provider, particularly if the insurer

wanted to make, or the provider had wanted to receive, payments by credit card. Allen

itself recognizes that insurers were capable of making benefit payments to service

providers using stored-value cards: “When an insured needs a repair or replacement

product, many service institutions require the insurance company to provide a credit

card so that immediate payment is made. While the insurer might prefer to send a

check, the delay in printing, delivering, depositing and clearing such funds are not

attractive to the service provider. The benefit of receiving credit card information is

the speed in which funds and payment can be guaranteed.” Allen at [0003]. Although

a lack of industry standards for incorporating payment card information in an 835

ERA may have delayed widespread use of payment cards by insurers to healthcare

providers, it was nonetheless well-known that benefit payments could be made to such

providers using stored-value cards and that using stored-value cards could offer certain

benefits over ACH transfers. See, e.g., Ex. 1027 at [0042], [0048]-[0049]. Mr. Turi

confirms that using the stored-value card payment methods of Allen in the Kennedy

system would have been obvious because doing so merely requires swapping one

known payment modality for another. See Ex. 1001 at ¶¶ 88-90.

32

Kennedy in Combination with Wells

Kennedy in combination with Wells also discloses limitations [b] and [c] of

claim 7. Wells discloses “creating a unique stored-value card account by one or more

computers, the stored-value card account being chargeable only up to an authorized

amount,” as per limitation [b]. For example, Wells discloses that “a client requests to

open a master account having access to a pool of limited use account identifiers for

use with individual transactions.” Wells at 16:53-55. Wells further discloses that “[t]he

limited use account identifiers selected, in some embodiments, may each be a unique

code” and that “[i]n one currently preferred embodiment, the limited use account

identifiers are each formatted as payment card numbers,” such as MasterCard or

Amex, which “allow[s] them to be processed and routed using existing payment

networks.” Id. at 17:3-7; 17:12-20. In addition, Wells discloses limiting the amount

that can be charged to a limited use account identifier by preauthorizing the number

only for the total purchase amount of a proposed transaction. See, e.g., id. at 18:34-55

(“The pre-authorization request includes the limited use account identifier selected at

706 and information from the purchase order (e.g., such as the total purchase amount

of the proposed transaction).”). Then, when a payment request is submitted by a

merchant to an account issuer, “[i]f the data, such as transaction amount and

merchant, match then the transaction may be approved.” Id. at 19:50-51.

Wells also discloses “allocating funds within an account designated by a payer

to the stored-value card account by one or more computers in the adjudicated benefit

33

amount,” as per limitation [c] of claim 7. The preauthorization of a specific amount,

described above, refers to allocating funds within the master account to the stored-

value account represented by the limited use account identifier.

With respect to the requirement that the steps of limitations [b] and [c] are

“performed by one or more computers,” Wells discloses that “a computer-assisted

method [that] includes hardware, software and telecommunications components that

cooperatively achieve the technical effect of [the] improved electronic purchasing

transaction system.” Wells at Abstract.

Again, given the combined teachings of Wells and Kennedy, it would have

been entirely obvious that payments from an insurer could have been made to a

medical services provider using a stored-value card (e.g., a corporate credit card)

instead of an ACH transfer. Wells itself acknowledges that stored-value card

transactions were ubiquitous in the prior art: “Many… transactions… involve the use

of a transaction card, such as a credit or debit card, for providing payment for a

product or service…. As such cards have become more ubiquitous, so also has the

infrastructure supporting the use of such cards.” Wells at 1:17-23. As Mr. Turi

confirms, it would have been obvious to one of ordinary skill to incorporate the

stored-value card payment methods disclosed in Wells into the Kennedy system to

effect payment from the insurer to the healthcare provider, merely swapping one

known payment modality for another. See Ex. 1001 at ¶¶ 95-97.

34

iv. Limitation [d]: “generating an explanation of benefits associated with the payment”

Kennedy discloses “generating an explanation of benefits associated with the

payment.” For example, Kennedy discloses that “[i]n response to the information

submitted with the electronic claim and the query of the database 122, an electronic

EOB data packet is created at the health network.” Kennedy at [0055]. Kennedy

provides an example demonstrating that the EOB message is associated with a

payment: “The claim is sent to the health plan (step 1330), and on a real-time basis the

health plan responds with EOB information (step 1340), including covered amount

and patient responsibility…,” and “the provider is notified [of the amount] being paid

to the provider as part of the EOB or electronic remittance advice (ERA).” Kennedy

at [0081], [0082]. Furthermore, Kennedy discloses generating EOB messages that

“include Claim Payment (amount of claim submitted, treatment/service codes, etc.)

[and] Claim Adjustment (agreed to payment, adjustments to claimed amount, patient

responsibility, etc.)” information. Kennedy at [0057]. As previously discussed,

Kennedy describes that the payment from the health network to the provider may be

accomplished via an ACH transfer. However, it is clear that the EOB data or ERA of

Kennedy is “associated with the payment” as required by limitation [d] of claim 7, because

that data includes the amount of the payment that the provider should expect in an

ACH transfer.

35

v. Limitation [e]: “creating a file containing the stored-value card account number, the adjudicated benefit payment amount, a card verification value code, an expiration date, and the explanation of benefits by one or more computers”

Limitation [f]: “sending the file to the health care provider”

Kennedy does not itself disclose “creating a file containing the stored-value

card account number, the adjudicated benefit payment amount, a card verification

value code, an expiration date, and the explanation of benefits by one or more

computers,” as per limitation [e], or “sending the file to the health care provider,” as

per limitation [f], because, as discussed in Section VIII(A)(iii) above, Kennedy

discloses payment of an adjudicated benefits amount from a health network to a

medical services provider via an ACH transaction, rather than by way of a unique

stored-value card account. See, e.g., Kennedy at [0064]. However, each of Watson and

vPayment Interview, Allen, and Wells discloses the stored-value card account

payment mechanism described in the ’748 Patent and motivations for combining the

teachings of those references with Kennedy were also discussed in Section

VIII(A)(iii). Given the combined teachings of the references, limitations [e] and [f] of

claim 7 would have been entirely obvious, as explained below.

First, however, it is instructive to note that Mr. Allen alleges in the Allen

Infringement Report that limitations [e] and [f] of claim 7 are satisfied by sending a

healthcare provider a first fax containing an EOB, followed by a second fax

containing payment card information. Ex. 1023 at 18-22. Mr. Allen further alleges that

36

these claim limitations are also satisfied by mailing a provider a single envelope

containing a hardcopy EOB and a separate document listing payment card

information. Id. at 28-31. Both such methods were practiced long before the critical

date of the ’748 Patent for delivering EOBs together with payments, i.e., checks,

demonstrating that there was absolutely nothing inventive about limitations [e] and [f]

of claim 7. See, e.g., Ex. 1001 at ¶ 40-46.

In its Preliminary Response for IPR2014-01414, Patent Owner also argues that

modifying the EOB disclosed in Kennedy to include payment card information for

the insurer’s payment “would render Kennedy either unsatisfactory or inoperable”.

Ex. 1026 at 13. In essence, Patent Owner argues that Kennedy’s EOB is intended to

be presented to the patient, modifying it to include the insurer’s payment card number

thus would render it noncompliant with certain data security standards and could give

rise to fraudulent use by the patient. Even if assumed to be correct, however, these

arguments merely suggest that the modified EOB should not be presented to the

patient, or perhaps that the provider be sent two Kennedy EOBs one with the card

information for payment from the insurer to the provider and one with the patient’s

card information for a payment from the patient to the provider. These arguments in

no way establish that modifying Kennedy’s EOB to include the insurer’s payment

card information would not otherwise have been obvious.

37

Kennedy in Combination with Watson and vPayment Interview

Kennedy in combination with Watson and vPayment Interview discloses

limitations [e] and [f] of claim 7. As discussed in reference to limitation [d] of claim 7,

the Kennedy EOB file includes the adjudicated benefit payment amount and the

explanation of benefits. See, e.g., Kennedy at Fig. 7. Given the obviousness to

incorporate the stored-value card payment method of Watson and vPayment

Interview into the Kennedy system (see Section VIII(A)(iii) above), it also would have

been obvious (and part of the vPayment process) to include in Kennedy’s EOB the

payment card information disclosed by Watson and vPayment Interview for the

insurer’s payment to the provider.

For example, Watson states that “payment presentment 228 takes the form of

presentment of a transaction card or other credit card-like credentials bearing an

account number as previously assigned for use by account user 204.” Watson at 9:13-

16. vPayment Interview discloses logging into a website and, upon submitting a

payment number request, “a card number, an expiration date, and a CVC (credit card

verification code) number comes back” that can be faxed as payment. vPayment

Interview at 3. It would have been obvious to include all of this credit card payment

information in Kennedy’s EOB in the same way that the patient’s credit card

information is included therein. Thus, the combination of Kennedy with Watson and

vPayment Interview discloses “creating a file containing the stored-value card account

number, the adjudicated benefit payment amount, a card verification value code, an

38

expiration date, and the explanation of benefits by one or more computers,” as per

limitation [e] of claim 7.

Kennedy’s EOB is of course sent to the healthcare provider, as required by

limitation [f] of claim 7. See, e.g., Kennedy at [0055] (“… an electronic EOB data

packet is created at the health network (step 518) and sent from the DBMS 120 back

to the provider host.”); see also Kennedy at [0057], [0071], [0038]. Moreover, vPayment

Interview describes receiving a card number, expiration date and CVV code from a

web-based process and faxing that information to the provider to pay a specific

invoice. vPayment Interview at 3.

Kennedy in Combination with Allen

Kennedy in combination with Allen also discloses limitations [e] and [f] of

claim 7. Kennedy’s EOB includes the adjudicated benefits payment amount and the

explanation of benefits. See, e.g., Kennedy Fig. 7. Given the obviousness to

incorporate the stored-value card payment method of Allen into the Kennedy system

(see Section VIII(A)(iii) above), it would have been obvious (and part of the Allen

payment method) to include in Kennedy’s EOB the card payment information

disclosed by Allen for making a payment from the insurer to the provider.

For example, Allen discloses that a “payment number in accordance with the

present invention may be a credit card number,” having a predetermined expiration

date. Allen at [0018]-[0019]. Further, it was well-known in the art that some credit

cards could not be charged without providing associated CVV codes. It thus would

39

have been obvious to include a CVV code with transmitted payment information. See,

e.g., Ex. 1001 at ¶ 105-106. The fact that Kennedy’s EOB message includes the

patient’s credit card information confirms that it would have been obvious to also

include the insurer’s payment card information. Thus, Kennedy in combination Allen

discloses “creating a file containing the stored-value card account number, the

adjudicated benefit payment amount, a card verification value code, an expiration

date, and the explanation of benefits by one or more computers,” as per limitation [e]

of claim 7.

Kennedy’s EOB is sent to the healthcare provider, as required by limitation [f].

See, e.g., Kennedy at [0055] (“… an electronic EOB data packet is created at the health

network (step 518) and sent from the DBMS 120 back to the provider host.”); see also

Kennedy at [0057], [0071], [0038]. Similarly, Allen discloses submission of payment by

faxing stored-value card payment information to the service provider. Allen at [0004].

Kennedy in Combination with Wells

Kennedy in combination with Wells also discloses limitations [e] and [f] of

claim 7. Kennedy’s EOB includes the adjudicated benefits payment amount and the

explanation of benefits. See, e.g. Kennedy, Fig. 7. Given the obviousness to

incorporate the stored-value card payment method of Wells into the Kennedy system

(see Section VIII(A)(iii) above), it would have been obvious (and part of the Wells

payment method) to include in Kennedy’s EOB the payment card information of by

Wells for making the payment from the insurer to the provider.

40

Wells discloses that “[t]he limited use account identifiers selected, in some

embodiments, may each be a unique code” and that “[i]n one currently preferred

embodiment, the limited use account identifiers are each formatted as payment card

numbers,” such as MasterCard or Amex, which “allow[s] them to be processed and

routed using existing payment networks.” Wells at 17:3-7, 17:12-20. Wells also notes

that “In some embodiments, the limited use account identifier is presented along with

information identifying an expiration date of the 25 limited use account identifier.” Id.

at 19:23-26. Further, it was well-known that some credit cards could not be charged

without providing associated CVV codes. Thus, it would have been obvious to

include a CVV code in the transmitted payment information. See, e.g., Ex. 1001 at ¶

107-108. It would have been obvious to include this credit card payment information

in Kennedy’s EOB message in the same way that the patient’s credit card information

is included therein. Thus, Kennedy in combination with Wells teaches “creating a file

containing the stored-value card account number, the adjudicated benefit payment

amount, a card verification value code, an expiration date, and the explanation of

benefits by one or more computers,” as per limitation [e] of claim 7.

Kennedy’s EOB message is sent to the healthcare provider, as required by

limitation [f] of claim 7. See, e.g., Kennedy at [0055] (“…EOB data packet is created at

the health network (step 518) and sent… back to the provider host.”); see also id. at

[0057], [0071], [0038]. Similarly, Wells discloses submission of payment by faxing

stored-value card payment information to the service provider. Wells at 19:15-26.

41

B. Claim 13: obvious over (a) Kennedy, Watson & vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells

Claim 13 is rendered obvious under 35 U.S.C. § 103 over (a) Kennedy in view

of Watson and vPayment Interview [Ground 1], (b) Kennedy in view of Allen

[Ground 2] and (c) Kennedy in view of Wells [Ground 3], as explained below.

i. Preamble: “A system for payment of health care benefits combining payment terms and an explanation of benefits”

The system recited in the preamble of claim 13 is disclosed by Kennedy for the

same reasons and based on the same evidence noted in Section VIII(A)(i) above

regarding the preamble of claim 7 and the reasons and evidence described below for

limitations [a]-[c] of claim 13.

ii. Limitation [a]: “an explanation of benefits describing medical services provided to a patient by a health care provider, an amount billed by the health care provider and an amount paid by the patient's insurance company”

As discussed above with respect to limitation [d] of claim 7, Kennedy discloses

generating the recited “an explanation of benefits” associated with a benefits payment.

See reasons and evidence set forth in Section VIII(A)(iv) above with respect to

limitation [d] of claim 7. Kennedy further discloses that its EOB message “describ[es]

medical services provided to a patient by a health care provider, an amount billed by

the healthcare provider and an amount paid by the patient's insurance company.” For

example, Kennedy discloses that the generated EOB message is in the ANSI 835

industry standard format and includes “treatment/service codes,” the “amount of the

42

claim submitted,” “adjustments to claimed amount,” and an “agreed to payment.”

Kennedy at [0057], [0071]. Therefore, limitation [a] of claim 13 is met by Kennedy.

iii. Limitation [b]: “a payment mechanism associated with the explanation of benefits, the payment mechanism merging a stored value card account number an adjudicated benefit payment amount, a card verification value code, and an expiration date with the explanation of benefits into a document by one or more computers”

Limitation [b] of claim 13 is substantially similar to limitation [e] of claim 7.

Accordingly limitation [b] of claim 13 is met by each of (a) the combination of

Kennedy with Watson and vPayment Interview, (b) the combination of Kennedy and

Allen, (c) the combination of Kennedy and Wells. See reasons and evidence set forth

in Section VIII(A)(v) above with respect to limitation [e] of claim 7.

Although limitation [b] of claim 13 recites a “document,” whereas limitation [e]

of claim 7 recites a “file,” both limitations are equally disclosed by each of the three

prior art combinations. An electronic document is simply an electronic file containing

data that a software application uses to render an image or representation of a

document (e.g., PDF, Microsoft Word document, JPEG). See, e.g., Ex. 1001 at ¶ 116.

Given the disclosure in each of vPayment Interview, Allen, and Wells of faxing

stored-value card payment information and Kennedy’s disclosure of an EOB

combined with payment information (see, e.g., Kennedy at [0082] (“… the provider is

notified that $50 is being paid to the provider as part of the EOB or electronic

remittance advice…”)), it would have been obvious to one of ordinary skill in the art

43

to combine the EOB and payment information into a single document for fax or

other transmission to a healthcare provider. See Kennedy at [0057], [0071]; vPayment

Interview at 3; Allen at [0004]; Wells at 19:15-26. Moreover, given that it was common

practice for third party payment distribution services to receive a native ANSI 835-

formatted file, generate a human-readable document representing that file, and to

include ACH payment information or an image of a check therein, doing the same

with a stored-value card account number would have been a mere design choice in

each of the prior art combinations. See Ex. 1001 at ¶¶ 40-46.

Limitation [b] of claim 13 also differs from limitation [e] of claim 7 in that it

recites a “payment mechanism,” meaning that the recited document itself is used to

trigger the payment from the insurer to the provider. Again, this aspect of limitation

[b] is satisfied by the noted prior art combinations because each of vPayment

Interview, Allen and Wells discloses faxing the recited stored-value card payment

information to a service provider and each of these faxes is a “payment mechanism.”

See, e.g., vPayment Interview at 3; Allen at [0004]; Wells at 19:15-26.

iv. Limitation [c]: “wherein funds in the amount of a single, adjudicated benefit payment are allocated within an account designated by the insurance company to a unique, single-use, stored value card account, the stored-value card account being chargeable only up to an authorized amount, and wherein the document is sent to the health care provider as payment for the medical services.”

Limitation [c] of claim 13 is substantially similar to the limitations [b], [c], and

[f] of claim 7, collectively. Accordingly, limitation [c] of claim 13 is met for the reasons

44

set forth in Section VIII(A)(iii) and Section VIII(A)(v) above with respect to

limitations [b], [c], and [f] of claim 7.

Limitation [c] of claim 13 specifies that the combined EOB and stored-value

card account information is sent to a healthcare provider “as payment for the medical

services,” whereas claim 7 does not include such a limitation. However, as noted in

Section VIII(A)(v) above, this requirement is met by all of the cited prior art

combinations because each of vPayment Interview, Allen and Wells discloses faxing

the recited unique stored-value card account information to a provider to pay a

specific invoice. See, e.g., vPayment Interview at 3; Allen at [0004]; Wells at 19:15-26.

Limitation [c] also specifies a “single-use” stored value card account. Again,

this limitation is met by the cited prior art combinations because each of vPayment

Interview, Allen and Wells discloses the generation of a unique one-time use payment

card. However, even “single-use” is deemed to mean “associated with a benefit

payment to a health care provider – and not any other type of payment” at least the

combinations of (i) Kennedy, Watson and vPayment Interview and (ii) Kennedy and

Wells disclose this, as explained in Section VIII(G) below.

C. Claim 19: obvious over (a) Kennedy, Watson & vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells

Claim 19 is rendered obvious under 35 U.S.C. § 103 over each of (a) Kennedy

in view of Watson and vPayment Interview [Ground 1], (b) Kennedy in view of Allen

[Ground 2] and (c) Kennedy in view of Wells [Ground 3], as explained below.

45

i. Preamble: “A computer implemented method for combining payment of health care benefits with an associated explanation of benefits”

The preamble is met for the same reasons and based on the same evidence

noted in Section VIII(A)(i) with respect to the preamble of claim 7 and for the

reasons and evidence set forth below with respect to limitations [a]-[c] of claim 19.

ii. Limitation [a]: “receiving an explanation of benefits related to medical services provided by a healthcare provider”

Limitation [a] of claim 19 is substantially similar to limitation [d] of claim 7, but

requires “receiving” an EOB related to medical services. Limitation [a] is disclosed by

Kennedy for the reasons noted in Section VIII(A)(ii) and because Kennedy also

describes that a “provider submits a claim to the health plan and receives back EOB

information in the form of an ERA.” Kennedy at [0071]. Kennedy also describes a

“web host/server that runs applications using POS terminals 102 for generating

claims from the provider, submitting those claims to the health plan, receiving back

the ERA message and forwarding the ERA message to the provider” and that the

ERA message can be in the ANSI 835 format which includes “treatment/service

codes” relating to the provided medical services. Id. at [0072], [0057].

iii. Limitation [b]: “receiving authorization to pay at least a portion of submitted charges associated with the explanation of benefits and the associated funds for payment”

Kennedy discloses limitation [b] of claim 19. As noted, Kennedy discloses a 3rd

party “receiving back the ERA message and forwarding the ERA message to the

46

provider” and that the ERA message can be in ANSI 835 format. Id. at [0072], [0057].

Kennedy also notes that ANSI 835 format includes “Claim Payment (amount of claim

submitted, treatment/service codes, etc.) [and] Claim Adjustment (agreed to payment,

adjustments to claimed amount, patient responsibility, etc.)” Id. at [0057]. After receipt

of EOB information, Kennedy notes that “the financial network 110 may process

payments (using a conventional ACH banking network) from the health network 116

to the provider, by electronically processing a bank transaction that debits a health

network bank account (for the amount of any insurance payment for the treatment of

the patient) and that credits such amount to a bank account of the provider (step

534).” Id. at [0064]. Kennedy also discloses notifying a provider that it “is being

paid… as part of the EOB or electronic remittance advice (ERA).” Id. at [0082]. Thus,

Kennedy makes clear that receipt of an ERA message is “receipt of authorization to

pay at least a portion of submitted charges associated with the explanation of benefits

and the associated funds for payment” as per limitation [b] of claim 19.

iv. Limitation [c]: “allocating funds within an account designated by a payer to a unique, stored-value card account in an amount equal to the adjudicated benefit payment by one or more computers, the stored-value card account being chargeable only up to the authorized amount”

Limitation [c] of claim 19 is substantially similar to limitations [b] and [c] of

claim 7, collectively. Thus, limitation [c] of claim 19 is met for the same reasons noted

in Section VIII(A)(iii) above for limitations [b] and [c] of claim 7.

47

v. Limitation [d]: “merging the explanation of benefits with the stored-value card account number, the adjudicated benefit amount of payment, a card verification value code, and an expiration date in a file”

Limitation [d] of claim 19 is substantially similar to limitation [e] of claim 7.

Thus, limitation [d] of claim 19 is met for the same reasons and based on the same

evidence noted in Section VIII(A)(v) above for limitation [e] of claim 7.

D. Claim 25: obvious over (a) Kennedy, Watson and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells

Claim 25 is rendered obvious under 35 U.S.C. § 103 over (a) Kennedy in view

of Watson and vPayment Interview [Ground 1], (b) Kennedy in view of Allen

[Ground 2] and (c) Kennedy in view of Wells [Ground 3], as explained below.

i. Preamble: “A system for payment of health care benefits to a health care provider”

The preamble is met for the same reasons and based on the same evidence

noted in Section VIII(A)(i) with respect to the preamble of claim 7 and for the

reasons and evidence set forth below with respect to limitations [a]-[b] of claim 25.

ii. Limitation [a]: “an administration system operable to receive a benefit claim from the health care provider and to generate an explanation of benefits for the benefit claim along with an approved payment, wherein the amount of approved payment is adjudicated by evaluating the benefit claim under the terms of an applicable medical benefits policy”

Limitation [a] of claim 25 is substantially similar to limitations [a] and [d] of

claim 7, collectively, with the further requirement of “an administration system

operable to receive a benefit claim from the health care provider” and that the

48

administration system generates the EOB and an approved payment. Therefore,

limitation [a] of claim 19 is disclosed by Kennedy for the reasons noted in Section

VIII(A)(ii) and Section VIII(A)(iv) above and because Kennedy discloses generating

of an electronic claim at the provider, transmitting the claim to a system at a health

network or another third party payer, processing the claim based on the patient’s

coverage by querying databases (i.e., evaluating the claim under the terms of an

applicable medical benefits policy), generating EOB information, transmitting EOB

information to the provider in ANSI 835-format (ERA) which includes the “agreed to

payment,” and processing payments by a health network via ACH (indicating that

payment information was included in the EOB information). See, e.g., Kennedy at

[0054], [0055], [0057], [0064]. Therefore, Kennedy clearly discloses the administration

system of contemplated by claim 25.

iii. Limitation [b]: “a card processing system operable to allocate funds within an account designated by a payer to a stored-value card account in an amount equal to the approved payment by one or more computers, the card processing system also operable to merge the explanation of benefits with the stored-value card account number by one or more computers, the adjudicated amount of payment, a card verification value code, and an expiration date in a file and to send the file to the health care provider as payment for the benefit claim”

Limitation [b] of claim 25 is substantially similar to limitations [b], [c], [e], and

[f] of claim 7. Therefore limitation [b] of claim 25 is met for the reasons and evidence

set forth in Section VIII(A)(iii) and Section VIII(A)(v) above with respect to

49

limitations [b], [c], [e], and [f] of claim 7. While limitation [b] of claim 25 explicitly

requires a “card processing system operable to” perform the recited functions (e.g.

allocating funds to a stored-value card account, merging EOB with stored-value card

information), this recitation is clearly met by each of the cited prior art references.

Specifically, each of Watson, vPayment Interview, Allen and Wells indicates that its

stored-value card functionalities are computer-implemented and Kennedy describes a

computer-implemented system for generating EOB information in ANSI 835-format.

See, e.g., Watson at 4:61-67, 5:12-27, 8:9-15; vPayment Interview at 3; Allen at [0028],

[0030]; Wells at Abstract; Kennedy at [0037], [0054], [0057], [0071]. Each of these

computer-implemented systems is or includes a card-processing system.

E. Claim 8, 14, 20, and 26: obvious over (a) Kennedy, Watson, and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells

Dependent claims 8, 14, 20 and 26 further limit independent claims 7, 13, 19,

and 25, respectively, by requiring “[reconciling the charged card account / wherein the

charged card account is reconciled] to confirm that the health care provider has

received payment.” Claims 8, 14, 20 and 26 are invalid under 35 U.S.C. § 103 over

each of (a) Kennedy combined with Watson and vPayment Interview [Ground 1], (b)

Kennedy combined with Allen [Ground 2], and (c) Kennedy combined with Wells

[Ground 3]. The preambles of claims 8, 14, 20 and 26 are addressed above with

respect to the preambles of claims 7, 13, 19, and 25, respectively.

50

i. Kennedy Combined with Watson and vPayment Interview

Kennedy in combination with Watson and vPayment Interview teaches and/or

suggests reconciling the charged card account to confirm that the healthcare provider

has received payment, as claimed. The obviousness to combine the references was

explained in Section VIII(A) with respect to claim 7. In addition, Watson discloses a

system and method in which an account manager may define a transaction identifier

and associate it with the preauthorization of a transaction and that “the transaction

identifier is included with the generic billing information (e.g., transaction amount,

merchant information, etc.) thus allowing an account manager to reconcile their

accounting from a billing account information containing the transaction having the

transaction identifier associated thereto with a pre-transaction assignment of a

traditional identifier such as purchase order number, work order number, or insurance

claim number.” See Watson at 4:18-34. Likewise, vPayment Interview discloses that

“vPayment offers all the benefits of control and reconciliation” and that a user can

input a description and accounting information at the time of requesting the stored-

value card account number to facilitate later reconciliation. See vPayment Interview at

3 (“when a user requests a vPayment number on demand, they can manually input a

description and accounting information into the record, so reconciliation is easy.”).

Therefore, Kennedy in combination with Watson and vPayment Interview meets the

requirements of each of claims 8, 14, 20 and 26.

51

ii. Kennedy Combined with Allen

Kennedy in combination with Allen teaches and/or suggests reconciling the

charged card account to confirm that the healthcare provider has received payment.

The obviousness to combine the references was explained in Section VIII(A) with

respect to claim 7. Allen also discloses that after a stored-value card number is used by

a merchant to request payment, “[t]he merchant receives the payment and the

merchant payment is tracked and reconciled with the payment number and the claim

identifier.” Allen at [0014]. Allen also touts that its methods allow a payer (e.g., an

insurer) to “easily reconcile the transactions to the appropriate claims thereby greatly

reducing the time required for reconciliation…” Allen at [0022]. Thus, Kennedy

combined with Allen meets the requirements of each of claims 8, 14, 20 and 26.

iii. Kennedy Combined with Wells

Kennedy in combination with Wells teaches and/or suggests reconciling the

charged card account to confirm that the healthcare provider has received payment.

The obviousness to combine the references was explained in Section VIII(A) with

respect to claim 7. In addition, in relation to FIG. 8, Wells discloses “an exemplary

reconciliation process 800 performed by account management system 105 to process

transactions which were conducted using features of embodiments of the present

invention” in which “a nightly settlement file is received from issuer processor (or, in

some embodiments, from an account issuer),” “[t]he settlement file include[ing] a list

of different limited use account identifiers which were used in completed

52

transactions,” “account summary information” is generated, and it is “determin[ed]

whether the purchase order identifier and transaction amount match from internal

records match the data listed in the account summary, thereby performing a

reconciliation of the transaction.” See, Wells at 21:28-22:23. Therefore, Kennedy in

combination with Wells meets the requirements of each of claims 8, 14, 20 and 26.

F. Claim 9, 15, 21, and 27: obvious over (a) Kennedy, Watson, vPayment Interview and Image Statement Products, (b) Kennedy, Allen and Image Statement Products and (c) Kennedy, Wells and Image Statement Products

Dependent claims 9, 15, 21, and 27 further limit independent claims 7, 13, 19,

and 25, respectively, by requiring that “a computer-generated image of a physical card

is provided in the [transmitted file / transmitted document / merged file / file].”

Claims 9, 15, 21, and 27 are invalid under 35 U.S.C. § 103 over each of (a) the

combination of Kennedy, Watson, vPayment Interview and Image Statement

Products [Ground 4], (b) the combination of Kennedy, Allen and Image Statement

Products [Ground 5], and (c) the combination of Kennedy, Wells and Image

Statement Products [Ground 6]. The preambles of claims 9, 15, 21, and 27 are

addressed above with respect to the preambles of claims 7, 13, 19, and 25,

respectively.

For the reasons set forth in Section VIII(A) above with respect to claims 7, it

would have been obvious to (a) combine Kennedy with Watson and vPayment

Interview, (b) combine Kennedy with Allen and (c) combine Kennedy with Wells. In

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addition, it would have been obvious to have applied the teaching of Image Statement

Products to each such combination of references. Image Statement Products discloses

inserting images of a physical payment modality (a check) into a statement. Ex. 1010

at 2. Image Statement Products also discloses that banks could use “check images rather

than the original physical check to facilitate check-clearing processes between cooperating financial

institutions.” Id. (emphasis added). In other words, banks could cash checks using

images of physical checks, rather than the physical checks themselves. Therefore,

based at least on Image Statement Products, it was within the knowledge of a person

skilled in the art that an image of a payment mechanism could be used to render a

payment. It follows, therefore, that an image of a stored-value card could have been

used to render payment instead of a physical card or an alphanumeric card number.

See, e.g., Ex 1001 at ¶157.

It important to appreciate that, before the priority date of the ’748 Patent, the

vast majority of medical service providers were not equipped to receive ANSI 835-

formatted EOB/ERA data files. See, e.g., Ex. 1001 at ¶ 33. Because of this, there was

a need for payers or third party administrators to create and make available to the

medical service providers human-readable files (e.g. image files, PDFs, and other

formats displayed in human-readable format by common software applications)

containing EOB and payment information, in lieu of ANSI 835-formatted files. This

practice was well-known and widely-performed in the industry. Id. In fact, it was

common practice at the time for third party payment distribution services to receive

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native ANSI 835-formatted files, generate human-readable versions of those files, and

to include either ACH payment information or an image of a check. Id. at ¶¶ 34-36.

Given the above-noted well-known need and common practice in the industry

and the disclosure in Image Statement Products of using an image of a payment

instrument (a check) to effect payment, it would have been obvious to one of ordinary

skill in the art to create a human-readable file containing the information from the

ANSI 835-formatted EOB/ERA data file of Kennedy together with the stored-value

card payment information of each of Watson and vPayment Interview, Allen and

Wells, and to include in that file an image of an associated physical stored-value card.

The decision to present stored-value card information in an image of a physical card,

rather than as alphanumeric text alone, would have been a mere design choice

between two well-known and widely-used options. One skilled in the art would have

been motivated to present stored-value card information in an image of a physical

card so as to make such information more easily and quickly recognizable on the

EOB statement. See, e.g., Ex. 1001 at ¶ 157.

G. Claims 10, 16, 22, and 28: obvious over (a) Kennedy, Watson and vPayment Interview and (b) Kennedy and Wells

Dependent claims 10, 16, 22, and 28 further limit independent claims 7, 13, 19,

and 25, respectively, by requiring that “the stored-value card account is only

chargeable through a medical services terminal.” Claims 10, 16, 22, and 28 are invalid

under 35 U.S.C. § 103 over each of (a) the combination of Kennedy, Watson, and

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vPayment Interview [Ground 1], and (b) the combination of Kennedy and Wells

[Ground 3]. The preambles of claims 10, 16, 22, and 28 are addressed above with

respect to the preambles of claims 7, 13, 19, and 25, respectively. As discussed in

Section V(A), the recited “medical services terminal” should be construed to mean “a

machine for charging medical services.” In other words, a medical services terminal is

simply a typical POS device that has the ability to accept forms of stored-value cards

and is located at medical service provider’s location. This interpretation is supported

by Mr. Turi’s understanding. See Ex. 1001 at ¶ 144.

i. Kennedy Combined with Watson and vPayment Interview

Kennedy in combination with Watson and vPayment Interview teaches and/or

suggests that “the stored-value card account is only chargeable through a medical

services terminal,” as per claims 10, 16, 22, and 28. The obviousness to combine the

references was explained in Section VIII(A) with respect to claim 7. In addition,

Watson discloses that the stored-value card account number could be associated with

a SIC to bar all categories of transactions other than those relating to medical services.

See Watson at 1:45-60 (“A merchant 106 is assigned a specific standard industrial code

corresponding to their predominate business function. For business transactions that

adhere to the SIC coding, transactions originating at a point of sale terminal having a

restricted SIC identifier may be unable to obtain proper authorization to complete a

transaction with an account user”). See, also, id. at 4:35-45 and 9:28-32. Using Watson’s

account control mechanisms, it would have been a simple exercise to ensure that a

56

particular stored-value card number could be used only at a POS terminal coded with

SIC or similar code corresponding to medical services (i.e., so the account could be

chargeable only through a medical services terminal). See, e.g., Ex. 1001 at ¶ 145. See,

also, Ex. 1027 at ¶ [0025] (“Exemplary existing credit card, debit card, stored value

card or smart card systems assign a code such as a merchant category code (MCC) or

a standard industry code (SIC) to vendors. This input device type code is transmitted

when the input device 108 communicates with the merchant acquirer system 120…

the insurer system 150 determines whether the input device type code matches

defined healthcare provider codes. If not, this indicates that the information has been

entered at an input device that is not associated with a healthcare provider…”)

ii. Kennedy Combined with Wells

Kennedy in combination with Wells teaches and/or suggests that “the stored-

value card account is only chargeable through a medical services terminal,” as per

claims 10, 16, 22, and 28. The obviousness to combine the references was explained in

Section VIII(A) with respect to claim 7. In addition, Wells discloses submitting a pre-

authorization request for a particular limited use account identifier (stored-value card

account number) and that “the pre-authorization request may further include any of

the following: (i) an identification of the merchant, such as by name, location SIC

code, standard MID [merchant identification] code and the like.” Wells at 18:56-59.

“The merchant, in turn, transmits an authorization request to the account issuer or

payment agent thereof to receive payment,” which may include “an identification of

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the merchant,” and “upon receipt of the payment request, the account issuer

compares the data received from the merchant in the payment request to the data

submitted by account management system.” Id. at 19:27-34; 19:46-49. Finally, “[i]f the

data, such as transaction amount and merchant, match then the transaction may be

approved.” Id. at 19:49-51. Using the Wells account control mechanisms, it would

have been trivial to ensure that a particular stored-value card number could be used

only at a point of sale terminal coded with an SIC or similar type of code

corresponding to medical services (i.e., so that the account could be chargeable only

through a medical services terminal), for such control mechanisms were well known.

See, e.g., Ex. 1001 at ¶ 146; Ex. 1027 at ¶ [0025].

H. Claims 11, 12, 17, 18, 23, 24, 29, and 30: obvious over (a) Kennedy, Watson and vPayment Interview, (b) Kennedy and Allen and (c) Kennedy and Wells

Dependent claims 11 and 12 further limit independent claim 7. Dependent

claims 17 and 18 further limit independent claim 13. Dependent claims 23 and 24

further limit independent claim 19. Dependent claims 29 and 30 further limit

independent claim 25.

Each of claims 11, 17, 23, and 29 require that “the stored-value card is a debit

card.” Each of claims 12, 18, 24 and 30 require that “the stored-value card is a credit

card.” All of claims 11, 12, 17, 18, 23, 24, 29, and 30 are invalid under 35 U.S.C. § 103

over (a) the combination of Kennedy with Watson and vPayment Interview [Ground

1], (b) the combination of Kennedy with Allen [Ground 2], and (c) the combination

58

of Kennedy with Wells [Ground 3]. The preambles of these dependent claims are

addressed above with respect to the preambles of claims 7, 13, 19, and 25. Also,

Kennedy discloses that the service providers may accept payments from the patient

(for the patient portion) using many different types of accounts, including “branded

credit and debit card accounts...” Kennedy at [0030].

i. Kennedy Combined with Watson and vPayment Interview

Kennedy in combination with Watson and vPayment Interview teaches and/or

suggests that the stored-value card is a debit card/credit card. The obviousness to

combine the references was explained in Section VIII(A) with respect to claim 7. In

addition, Watson discloses that payment may be presented in the form of a

transaction card or other credit card-like credentials and vPayment Interview discloses

that the vPayment service “runs on the MasterCard railroad track.” Watson at 9:13-

16; vPayment Interview at 3. It was also known that payments from insurer to

healthcare provider could be made by debit cards or credit cards. See, e.g., Ex. 1027

(“The payment is then processed using existing credit card, debit card, stored value or

smart card techniques (i.e., through issuer bank).”) Therefore, one of ordinary skill

would have recognized that the stored-value card according to Watson and vPayment

Interview could have been either a credit card or a debit card when used in the

Kennedy system, particularly given that the medical services provider described in

Kennedy already had the means to accept credit card and debit card payments from

patients. See, e.g., Ex. 1001 at ¶¶ 148-149.

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ii. Kennedy Combined with Allen

Kennedy in combination with Allen teaches and/or suggests that the stored-

value card is a debit card/credit card. The obviousness to combine the references was

explained in Section VIII(A) with respect to claim 7. In addition, Allen discloses that

“[t]he payment number in accordance with the present invention may be a credit card

number.” Allen at [0019]. Also, it was known in the art that payments from insurer to

healthcare provider could be made by debit cards or credit cards. See, e.g., Ex. 1027

(“The payment is then processed using existing credit card, debit card, stored value or

smart card techniques (i.e., through issuer bank).”) One of ordinary skill in the art

would therefore have easily recognized that the stored-value card contemplated by

Allen could equally have been in the form of a credit card or a debit card when used

in the Kennedy system, particularly given that the medical services provider described

in Kennedy already had the means to accept both types of payments from patients.

See, e.g., Ex. 1001 at ¶¶ 150-151.

iii. Kennedy Combined with Wells

Kennedy in combination with Wells teaches and/or suggests that the stored-

value card is a debit card/credit card. The obviousness to combine the references was

explained in Section VIII(A) with respect to claim 7. In addition, Wells discloses that

its limited use account identifiers may be “each formatted as payment card numbers,

allowing them to be processed and routed using existing payment networks” and that

“[a]ny or all of the … the limited use account numbers may be formatted pursuant to

60

card association or financial institution rules.” Wells at 17:11-17. “For example, the

account numbers may be a 16 digit (as used by MasterCard) or a 15 digit number (as

used by American Express).” Wells at 17:17-19. Also, it was known in the art that

payments from insurer to healthcare provider could be made by debit cards or credit

cards. See, e.g., Ex. 1027 at [0042] (discussing payment “using existing credit card, debit

card, stored value or smart card techniques (i.e., through issuer bank).”) Therefore,

one of ordinary skill in the art would have recognized that the stored-value card of

Wells could have been either a credit card or a debit card when used in the Kennedy

system, particularly given that the medical services provider described in Kennedy

already had the means to accept both types of payments from patients. See, e.g., Ex.

1001 at ¶¶ 152-153.

IX. CONCLUSION

The prior art references identified herein contain pertinent, new and non-

cumulative technological teachings, explicitly or inherently, that were not previously

considered or applied during examination of the ’748 Patent. They establish a

reasonable likelihood of success as to PPS’s assertions that at least one of claims 7-30

of the ’748 Patent is not patent eligible per the grounds presented herein.

Dated: January 14, 2015

Kilpatrick Townsend & Stockton LLP By: /Michael S. Pavento/

Michael S. Pavento, 42,985 Counsel for Petitioner

CERTIFICATE OF SERVICE

Pursuant to 37 C.F.R. §§ 42.8(e) and 42.105(b), the undersigned certifies

that on January 14, 2015 a complete and entire copy of this Petition for Inter

Partes Review has been served on the Patent Owner via Express Mail to the

correspondence address of record as follows:

Smith & Hopen Attn: General Patent Matters 180 Pine Avenue North Oldsmar FL 34677

By:

Michael S. Pavento, 42, 985 Counsel for Petitioner