Patent US7177838B1, titled “Method and apparatus for conducting electronic commerce using electronic tokens,” is currently at the center of a major litigation campaign led by AML IP, LLC, a non-practicing entity (NPE).
AML IP, LLC has filed lawsuits against multiple companies, including Chipotle, Krispy Kreme, CVS Pharmacy, AutoZone, and 7-Eleven, alleging infringement of this patent.
So, what does this patent cover? In simple terms, it describes a system for digital transactions using electronic tokens. Imagine purchasing a gift card, a store credit, or a promotional voucher that can be used online. This patent claims a method for issuing, managing, and processing these digital tokens within an e-commerce system.
Why is AML IP, LLC suing all these companies? The patent could potentially apply to digital gift cards, reward points, promo codes, and stored-value transactions, which are common in online retail, food services, and loyalty programs. Companies that rely on these digital payment methods may be targeted for alleged infringement.
Related patents or technologies that existed before this one could play a crucial role in these lawsuits. If similar digital transaction systems existed before the patent’s filing, it could weaken AML IP’s claims.
Let us dive deeper into the specifics of Patent US7177838B1 and how might impact its validity.
Understanding Patent US7177838B1
Patent US7177838B1, titled “Method and Apparatus for Conducting Electronic Commerce Transactions Using Electronic Tokens,” describes a system where vendors issue and maintain electronic tokens that can be used for purchasing or renting products and services. The tokens eliminate the need for third-party financial intermediaries like banks, reducing transaction overhead and allowing vendors to control token pricing and distribution.
Source: Google Patents
Its four key features are:
#1. Vendor-issued electronic tokens – The vendor directly issues electronic tokens that customers can purchase using credit cards, checks, or money orders. These tokens can then be used to buy or rent products and services from the same vendor.
#2. Elimination of third-party financial institutions – Unlike traditional e-commerce systems that rely on banks or centralized organizations to manage digital payments, this system allows vendors to handle transactions internally.
#3. Software rental and licensing control – Vendors can use tokens to implement flexible software rental models, including time-based access, usage-based rentals, and rental extensions without re-downloading software.
#4. Micropayment facilitation – By using tokens instead of direct credit card transactions, the system enables micropayments for low-cost digital services, such as renting a single-use software application or accessing pay-per-view content.
Patent US7177838B1 is central to multiple litigations filed by AML IP, LLC, against companies operating e-commerce platforms. The disputes likely focus on whether these businesses’ online payment systems, loyalty rewards, or stored-value mechanisms infringe on the patented electronic token-based transaction method. The outcome of these litigations may depend on related patent references that show similar systems existed before the patent’s priority date, potentially affecting its enforceability.
Related Patent References for US7177838B1
#1. US20020111907A1
This patent, filed on January 25, 2002, describes a micropayment-based system for conducting electronic transactions. The invention focuses on issuing and managing electronic tokens that users can purchase and spend across multiple vendor websites without requiring third-party financial institutions. By allowing transactions at micropayment levels and eliminating traditional banking overhead, this system closely parallels key aspects of US7177838B1.
Key Features of this Related Patent:
- Opening a user account with a vendor – The reference describes users establishing individual accounts with vendors for transactions, aligning with the feature in US7177838B1.
- Vendor-issued electronic tokens stored as database entries – It discloses electronic tokens being issued and maintained by the micropayment service provider, without a physical manifestation of accounts.
- Micropayments for goods and services – The invention enables transactions at small monetary values, including those requiring only fractions of a dollar, aligning with the micropayment model in US7177838B1.
Which features of US7177838B1 are disclosed by US20020111907A1?
| Key Feature of Claim 1 | Disclosure Status |
| Opening a user account with a vendor for a user | Fully Disclosed |
| Issuing electronic tokens from vendor to user account where account exists only as database entry | Fully Disclosed |
| Each electronic token has a value of at least a fraction of a dollar | Fully Disclosed |
| Providing products and services purchasable at micropayment levels | Fully Disclosed |
| Prices for products and services are listed in units of electronic tokens | Fully Disclosed |
| User can select products/services for purchase at any participating vendor website | Fully Disclosed |
| Total price is computed at vendor website in units of electronic tokens | Fully Disclosed |
| Purchase transaction is authorized without third-party authentication | Fully Disclosed |
| Purchase transaction does not require physical manifestation of user account | Fully Disclosed |
| User can purchase if account has sufficient token value | Fully Disclosed |
| Purchase can be made without user disclosing personal information | Fully Disclosed |
| Transaction is not subject to minimum processing fee | Fully Disclosed |
Key Excerpt from US20020111907A1:
“These and other objects of the present invention are accomplished by providing systems and methods for conducting micropayment transactions easily and seamlessly on multiple electronic commerce websites to purchase tangible goods or services.”
#2. US20030014315A1
This patent, filed on June 24, 2002, describes a method and system for obtaining services using a cellular telecommunication system. The invention revolves around the issuance and use of tokens to access various services, such as ticketing and vending machines, through mobile communications. While it introduces an electronic token-based system, its disclosures regarding transaction handling, micropayments, and vendor-issued tokens vary in relevance to US7177838B1.
Source: GPS
Key Features of this Related Patent:
- Token-based service transactions – The reference describes a system where users acquire tokens via SMS or internet-based methods and use them for various services, aligning with some aspects of US7177838B1.
- Privacy protection in transactions – It discloses a system where purchases can be made without revealing user identity, which aligns with privacy-related features of US7177838B1.
- Partial disclosure of electronic token management – While it discusses token issuance and usage, it lacks explicit details on certain aspects such as micropayment pricing models or the complete elimination of third-party authentication.
Which features of US7177838B1 are disclosed by US20030014315A1?
| Key Feature of Claim 1 | Disclosure Status |
| Opening a user account with a vendor for a user | Partially Disclosed |
| Issuing electronic tokens from vendor to user account where account exists only as database entry | Partially Disclosed |
| Providing products and services purchasable at micropayment levels | Partially Disclosed |
| Purchase can be made without user disclosing personal information | Fully Disclosed |
Key Excerpt from US20030014315A1:
“Such an embodiment also protects the privacy of the user, since it allows the use of an Internet service without revealing the identity of the user to the Internet service.”
#3. US7177838B1
This patent, filed on April 21, 2000, describes a method and apparatus for conducting electronic commerce using vendor-issued electronic tokens. The system eliminates the need for third-party payment processors, allowing vendors to issue and manage electronic tokens directly. Users can purchase products or services using these tokens, which are stored in vendor-maintained accounts. The invention also enables micropayments for low-cost transactions, such as software rentals and digital content access.
Key Features of this Related Patent:
- Vendor-controlled electronic transactions – The reference describes vendors directly issuing electronic tokens, eliminating reliance on external financial institutions.
- Micropayment facilitation – It enables low-cost transactions without incurring credit card processing fees, aligning with the micropayment model in US7177838B1.
- Token-based pricing and authorization – The reference specifies that products and services are priced in electronic tokens, with transactions authorized without third-party involvement.
Which features of US7177838B1 are disclosed by US7177838B1?
| Key Feature of Claim 1 | Disclosure Status |
| Opening a user account with a vendor for a user | Fully Disclosed |
| Issuing electronic tokens from vendor to user account where account exists only as database entry | Fully Disclosed |
| Each electronic token has a value of at least a fraction of a dollar | Fully Disclosed |
| Providing products and services purchasable at micropayment levels | Fully Disclosed |
| Prices for products and services are listed in units of electronic tokens | Fully Disclosed |
| User can select products/services for purchase at any participating vendor website | Partially Disclosed |
| Total price is computed at vendor website in units of electronic tokens | Fully Disclosed |
| Purchase transaction is authorized without third-party authentication | Fully Disclosed |
| Purchase transaction does not require physical manifestation of user account | Fully Disclosed |
| User can purchase if account has sufficient token value | Fully Disclosed |
| Purchase can be made without user disclosing personal information | Fully Disclosed |
| Transaction is not subject to minimum processing fee | Fully Disclosed |
Key Excerpt from US7177838B1:
“Since electronic tokens are used for the business transaction, the need to transmit the user’s credit card number and other personal sensitive information between the user’s computer and the vendor’s computer for each transaction is eliminated, thereby reducing processing costs and enhancing security.”
#4. KR100729085B1
This patent, filed on December 18, 1999, describes an online electronic payment service that utilizes digital payment tokens for conducting transactions. The system allows users to register, receive electronic payment tokens, and use them for purchasing goods and services online. It focuses on token-based transactions that streamline electronic commerce without direct bank involvement.
Key Features of this Related Patent:
- Electronic payment tokens for online commerce – The reference discloses a method where users receive digital payment tokens, which are then used for online transactions.
- Third-party authentication avoidance – The system handles token validation and settlement internally, reducing reliance on external authentication providers.
- Conditional purchasing based on token balance – Users can only complete purchases if their account contains sufficient token value, aligning with the transaction control features of US7177838B1.
Here’s what the mapping from the tool for this particular patent looks like:
Source: GPS
Which features of US7177838B1 are disclosed by KR100729085B1?
| Key Feature of Claim 1 | Disclosure Status |
| Opening a user account with a vendor for a user | Fully Disclosed |
| Issuing electronic tokens from vendor to user account where account exists only as database entry | Partially Disclosed |
| Total price is computed at vendor website in units of electronic tokens | Partially Disclosed |
| Purchase transaction is authorized without third-party authentication | Fully Disclosed |
| Purchase transaction does not require physical manifestation of user account | Partially Disclosed |
| User can purchase if account has sufficient token value | Fully Disclosed |
| Purchase can be made without user disclosing personal information | Partially Disclosed |
Key Excerpt from KR100729085B1:
“The present invention provides an online electronic payment system using digital payment tokens, ensuring secure transactions while minimizing reliance on external banking institutions.”
#5. US6810525B1
This patent, filed on August 3, 2000, describes an Impulse Pay-Per-Use (IPPU) system for providing secure, real-time access to data and multimedia services. The invention allows users to purchase various online services, such as streaming media, software downloads, and shopping, on an impulse basis without requiring traditional subscription models. The system relies on secure entitlement tokens and local verification to authorize transactions.
Key Features of this Related Patent:
- Micropayment-based service transactions – The reference describes a system where users pay for individual digital services without long-term commitments, aligning with the micropayment principles of US7177838B1.
- Token-based authorization without third-party authentication – Transactions are verified locally at the subscriber’s terminal, eliminating the need for external authentication services.
- Account-based purchasing restrictions – Purchases are only allowed if the user’s entitlement balance is sufficient, ensuring control over transactions.
Which features of US7177838B1 are disclosed by US6810525B1?
| Key Feature of Claim 1 | Disclosure Status |
| Issuing electronic tokens from vendor to user account where account exists only as database entry | Partially Disclosed |
| Providing products and services purchasable at micropayment levels | Fully Disclosed |
| User can select products/services for purchase at any participating vendor website | Partially Disclosed |
| Purchase transaction is authorized without third-party authentication | Fully Disclosed |
| Purchase transaction does not require physical manifestation of user account | Fully Disclosed |
| User can purchase if account has sufficient token value | Fully Disclosed |
| Purchase can be made without user disclosing personal information | Partially Disclosed |
Key Excerpt from US6810525B1:
“The subscriber terminal verifies whether the cost of the IPPU selection is within the credit entitlement of the subscriber, enabling secure pay-per-use transactions without requiring real-time third-party authentication.”
Feature Comparison Table
| Key Feature of US7177838B1 | US20020111907A1 | US20030014315A1 | US7177838B1 | KR100729085B1 | US6810525B1 |
| Opening a user account with a vendor for a user | Fully Disclosed | Partially Disclosed | Fully Disclosed | Fully Disclosed | Not Disclosed |
| Issuing electronic tokens from vendor to user account where account exists only as database entry | Fully Disclosed | Partially Disclosed | Fully Disclosed | Partially Disclosed | Partially Disclosed |
| Each electronic token has value of at least a fraction of a dollar | Fully Disclosed | Not Disclosed | Fully Disclosed | Not Disclosed | Not Disclosed |
| Providing products and services purchasable at micropayment levels | Fully Disclosed | Partially Disclosed | Fully Disclosed | Not Disclosed | Fully Disclosed |
| Prices for products and services are listed in units of electronic tokens | Fully Disclosed | Not Disclosed | Fully Disclosed | Not Disclosed | Not Disclosed |
| User can select products/services for purchase at any participating vendor website | Fully Disclosed | Not Disclosed | Partially Disclosed | Not Disclosed | Partially Disclosed |
| Total price is computed at vendor website in units of electronic tokens | Fully Disclosed | Not Disclosed | Fully Disclosed | Partially Disclosed | Not Disclosed |
| Purchase transaction is authorized without third-party authentication | Fully Disclosed | Not Disclosed | Fully Disclosed | Fully Disclosed | Fully Disclosed |
| Purchase transaction does not require physical manifestation of user account | Fully Disclosed | Not Disclosed | Fully Disclosed | Partially Disclosed | Fully Disclosed |
| User can purchase if account has sufficient token value | Fully Disclosed | Not Disclosed | Fully Disclosed | Fully Disclosed | Fully Disclosed |
| Purchase can be made without user disclosing personal information | Fully Disclosed | Fully Disclosed | Fully Disclosed | Partially Disclosed | Partially Disclosed |
| Transaction is not subject to minimum processing fee | Fully Disclosed | Not Disclosed | Fully Disclosed | Not Disclosed | Not Disclosed |
How to Find Related Patents Using Global Patent Search?
Identifying related patents is essential in evaluating a patent’s validity, especially in litigation cases like those involving US7177838B1. The Global Patent Search (GPS) tool streamlines the process by providing:
- Patent number and description search – Instantly retrieve patents related to a specific technology or legal dispute.
Source: GPS
- Feature mapping analysis – Compare the claims of the target patent against related patent references to determine overlap.
- Disclosure status breakdown – Assess whether each feature of the subject patent is fully, partially, or not disclosed in related patent references.
- Comprehensive reports – Review detailed comparisons and direct excerpts from relevant patents to strengthen legal arguments.
- Data-driven decision making – Leverage GPS insights to challenge a patent’s validity or refine litigation strategies effectively.
With GPS, legal teams can quickly and accurately identify related patents, reducing research time and enhancing case preparation.
Take the Guesswork Out of Patent Research
Patent disputes can be complex, but identifying strong related patents doesn’t have to be. The Global Patent Search (GPS) tool provides:
- Instant related patent discovery – Find relevant patents within seconds.
- Accurate feature mapping – Compare key claims against existing patents with precision.
- Comprehensive legal insights – Strengthen your case with data-backed evidence.
Don’t leave related patent research to chance. Start your search with Global Patent Search today and gain a competitive edge in patent litigation.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered legal advice. The related patent references mentioned are preliminary results from the Global Patent Search (GPS) tool and do not guarantee legal significance. For a comprehensive related patent analysis, we recommend conducting a detailed search using GPS or consulting a patent attorney.
