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Alexsam Inc. v. MasterCard Int'l Inc.

Refusal to Pay Royalties Provides Standing to Pursue Declaration of Patents' Invalidity

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MEMORANDUM & ORDER   This is an action for breach of a patent license agreement, brought by Plaintiff Alexsam, Inc. (“Alexsam”) against Defendant MasterCard International Inc. (“MasterCard”). (Compl. 1). The Court is in receipt of three Reports and Recommendations by Magistrate Judge Stephen M. Gold, dated June 11, 2018 (“June R&R”), October 16, 2018 (“October R&R”) and December 5, 2018 (“December R&R”). (ECF Nos. 186, 200, 204). Alexsam objects to the June and December R&Rs. (ECF Nos. 188, 205). MasterCard objects to the December R&R. (ECF No. 204). Neither party objects to the October R&R. For the reasons discussed below, Alexsam’s objections are denied in their entirety. MasterCard’s objection is granted. Accordingly, the June and October R&Rs are adopted in full and the December R&R is adopted in part. BACKGROUND MasterCard processes payments between the banks of merchants and credit card holders. (Compl. 3). Alexsam holds two business method patents1 for a multi-card transaction processing system. (Id. 2). The novel aspect of Alexsam’s system is its use of bank identification numbers to process prepaid cards on devices normally used for credit card transactions. (June R&R 3). This allows phone cards, gift cards, medical cards and customer loyalty cards to function like credit cards. In a May 2005 agreement, Alexsam granted MasterCard a license to use the patents. (ECF No. 1-6, “License Agmt.”). MasterCard in turn agreed to pay royalties for each transaction it processed using the patented method, and to provide a monthly accounting thereof. (Id. §§4.1, 4.2). Alexsam sued for breach of the license agreement on May 14, 2015, alleging that MasterCard violated its royalty and reporting obligations. (Compl.

21-27). MasterCard argues that Alexsam’s underlying patents are invalid based on recent Federal Circuit case law, and seeks a declaration of their invalidity from this Court. (Answer

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