Loyalty Dispute

Supplier named in lawsuit between Excentus, QuikTrip opens up about charges

Angel Abcede, Senior Editor/Tobacco, CSP

VIRGINIA BEACH, Va. -- Alleging that patents held by loyalty solutions provider Excentus are "invalid," the president of a firm that Excentus is suing opened up about the charges yesterday, saying, "we know that significant prior art exists, and we firmly believe that evidence should invalidate each of the Excentus patents."

The statements focus new attention on the trepidation many retailers feel over adopting loyalty programs, with suits such as the one launched by Excentus naming, among other defendants, QuikTrip and software provider Midax Inc., having yet to be resolved.

"Some of that art goes back to the 1980s," said Jim Nevill, president of Virginia Beach, Va.-based Midax, referring to common process that are beyond the realm of enforceable patents, "in some cases more than 10 years before the first Excentus patent was even filed. In our opinion, it's unfathomable that the patents [were] ever issued in the first place."

Dallas-based Excentus filed a lawsuit against Midax and others alleging claims of patent infringement related to technology used in processing motor-fuel discounts. The case of Excentus Corp. vs. QuikTrip et. al. is pending in Kansas City, Mo., in the U.S. District Court for the Western District of Missouri.

"The U.S. Patent Office, Excentus and those who have licensed our patents believe that the Excentus fuel loyalty patents are valid. Statements by others accused of infringing these patents to the contrary, such as those recently made by Midax, are common. It is unfortunate that an accused infringer has made statements in the press as opposed to in a court proceeding supported by the clear and convincing evidence required by law to challenge a validly issued patent claim," Stacey Smotherman, senior vice president and general counsel for Excentus, said in a statement provided to CSP Daily News.

Midax has denied all of Excentus' allegations and said in a statement that it "is vigorously defending itself against Excentus' claims. Midax believes it has very strong defenses and remains confident in its position under the applicable law."

Midax has filed its own counterclaims against Excentus, asking the court to declare that "Midax has not infringed Excentus' patents and that the patents on which Excentus is relying are invalid. Midax firmly believes its claims are meritorious."

Tulsa, Okla.-based convenience retailer QuikTrip, which declined to comment on this story, filed its own response to the suit late last year, outright denying many of the charges while saying that a majority of them provided insufficient information for QuikTrip to respond.

The original suit, filed in May 2012, also named several companies operating Price Chopper grocery stores out of the Kansas City area. As with QuikTrip, many of the responses to that initial lawsuit came to the courts late last year.

That original suit claimed unspecified damages and alleged among other things that the "Chopper Shopper Fuel Rewards" program infringes on patents owned by Excentus as well as its federally registered "Fuel Rewards" trademark.

Excentus acquired its initial patent portfolio from a company called AutoGas back in 2008. It has since been awarded additional patents and has numerous patent applications pending at the U.S. Patent & Trademark Office, the company said.

In 2009, Excentus filed a similar patent infringement suit against the Pleasanton, Calif.-based Safeway for its "Power Pump Rewards" program that was subsequently discontinued by Safeway and the suit settled in 2010. Soon afterward, Excentus filed a lawsuit against Cincinnati-based Kroger that alleges among other things patent infringement and theft of trade secrets regarding Kroger's fuel-loyalty program. This lawsuit remains pending in Ohio.

While the cases moves through the courts, Midax said it wants to assure its customers and the public that Midax's services continue to be available and reliable. "Midax is still serving thousands of retail customers with customized loyalty programs in the convenience store, community store and grocery retail space," officials noted in a statement. "Whether those loyalty programs entail fuel rewards, e-couponing or any other type of rewards, Midax strives to provide each retailer with a loyalty solution to meet its individual needs, including a payment and loyalty capability on a single card, for example, and 'closed-loop' payment systems which can be deployed in individual chains or between cross-marketing retailers."

But while companies battle over patent issues, some in the industry believe that retailers are paralyzed on the issue of loyalty altogether, as both legal wrangling and confusion over what paradigm to use pose challenges.

Anton Bakker, president, Outsite Networks, Norfolk, Va., said many loyalty programs that tie fuel to groceries are "essentially another fee … and the last thing we need is another swipe fee."

Programs ought to encourage customers to purchase items at the c-store, not the same "six packs and cartons" from supermarkets. "If someone is already my customer and that incremental sale [goes] to another vertical, it's a fee. If I lose a cigarette sale or lose a carton, I pay more."

Angel Abcede, CSP/Winsight By Angel Abcede, Senior Editor/Tobacco, CSP
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