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Card Activation Technologies Inc. (Pink Sheets: CDVT)—In the action pending in the United States District Court for the District of Delaware (the "Delaware Action"), the Court recently ruled that the '859 Patent owned by Card Activation Technologies is invalid. This press release is intended to provide further information concerning the Court's conclusions, its effects upon the '859 Patent, and the circumstances facing the company at this juncture.
Initially, we disagree with the Court's Order and continue the process of determining the issues for appeal, the likely effects of the Order on the pending reexamination of the '859 Patent being conducted by the U.S. Patent and Trademark Office ("PTO"), and the likelihood of success in prevailing against adverse rulings by the Federal District Court and PTO. On January 3, 2011, Judge Jordan from the Third Circuit Court of Appeals took over the case from presiding District Court Judge Stark in the Delaware Action. Shortly thereafter, the Court on its own raised a validity challenge to '859 Patent based upon a defense known as Section 112. SVS had never previously raised this issue in the litigation between the parties. In 2010, the Third Circuit Court of Appeals determined that it was improper for a court to raise a defense on its own and then dismiss the claim on that defense. In our case, however, the Court's Order did indeed invalidate claims of the '859 Patent based upon a Section 112 defense first raised by the Court. The opinion neither cites the Third Circuit Court of Appeals' prior contrary position nor does it distinguish that opinion. We believe this to be one of several errors in the Order.
The claim construction previously given to the '859 Patent was also changed in the Order. A claim construction was initially entered by Judge Stark on April 28, 2010, and confirmed by Judge Farnan on June 3, 2010, which we believed was very favorable. The changes made in the claim construction significantly alter the scope of the '859 Patent and thus its susceptibility to prior art invalidation. The changes to the claim construction were the primary bases for the Court to invalidate the remaining claims of the '859 Patent.
The Court also held that the prior art reference known as "MicroTrax" was indeed prior art even though SVS provided no corroborating evidence that the document was disseminated to the public prior to the filing of the '859 Patent with the PTO. We believe the Court's Order in this regard is directly contrary to over 100 years of Supreme Court precedent and numerous recent cases throughout the country.
We believe the Delaware Court's Order contains numerous additional errors. However, we anticipate that the PTO will likewise make a final determination that the '859 Patent is invalid. Consequently, we will be required to appeal in both the Delaware Action and the PTO reexamination proceeding.
The realities of Card's financial status surely impact our ability to appeal these decisions. The costs of appeal, as well as the cost of maintaining an ongoing entity, are estimated to reach $750,000.00 over the next two years. It is also important to understand that success on appeal means the action will be returned to the Delaware District Court for further proceedings regarding the validity of the patent. It is also common for the Federal Circuit Court of Appeals to affirm a trial court's ruling without written explanation.
Although we strongly disagree with the Court's Order and what we presume will be the findings of the PTO, we are mindful of the economic realities facing the company at this juncture. A telephone conference has been scheduled for August 2, 2011 at 9:00 AM PDT, dial in # 800-895-0198 Conference ID: CASUPDATE, in which President Bob Kite will answer questions concerning these important issues. Please bear in mind that we know, and expect, our adversaries to be listening on this call. Consequently, the company will not be inclined or able to fully disclose all of its strategies.
About Card Activation Technologies Inc.
Card Activation Technologies, Inc. is a Chicago-based company that owns the patent rights to a proprietary payment transaction method used for processing gift cards and other debit purchase transactions. The company is actively seeking to license its patent to the thousands of retailers, gas stations, phone companies and others that utilize the patented payment method.
For further information about Card Activation Technologies go to www.cardactivationtech.com.
Certain statements in this press release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as "anticipate," "believe," "expect," "future," "may," "will," "would," "should," "plan," "projected," "intend," and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Card Activation Technologies, Inc. (the Company) to be materially different from those expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to the Company's ability to: (i) defend its patent; (ii) build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Company's control; and (iv) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission, which are available for review at www.sec.gov under "Search for Company Filings."