Excentus Corp. this week filed a lawsuit against Safeway Inc. and Safeway subsidiaries, including Blackhawk Network Inc., Blackhawk Marketing LLC and Randalls/Tom Thumb in the U.S. District Court for the Northern District of Texas in Abilene, alleging willful and deliberate patent infringement and the misappropriation and theft of trade secrets, among other things. The lawsuit seeks injunctive and equitable relief along with unspecified damages.
According to the suit, during 2006 and 2007, Safeway, through its Blackhawk subsidiaries, attempted to acquire Excentus as well as the patents owned by Auto-Gas Systems Inc. (which are now owned by Excentus). The suit alleges that after Blackhawk failed to complete a transaction with either party, Safeway wrongfully used the patents, trade secrets and confidential information belonging to Excentus to develop its fuel rewards program called PowerPump Rewards. Excentus’ complaint also asserts that Safeway’s PowerPump Rewards program is a willful and deliberate infringement of four patents owned by Excentus.
Among the loyalty patents held by Excentus are the fuelperks! program, which is currently used by Giant Eagle, Winn-Dixie, Ukrop’s and Uppy’s convenience stores in Virginia. As part of the Uppy’s program, which is a partnership with Ukrop’s, customers can save on fuel purchases by shopping at Ukrop’s and using their Ukrop’s Valued Customer (UVC) loyalty card. Rewards are tracked by fuelperks! and can be redeem for discounted gas or diesel (up to 20 gallons) from any participating Uppy’s location. For every $50 spent at Ukrop’s, customers earn a five-cent per gallon discount.
“We believe our patent-protected fuelperks! rewards program is the most powerful customer loyalty program ever offered in the U.S.,” said Dickson Perry, president and CEO of Excentus. “We have made significant investments over the last ten years to develop our world-class technology, services and expertise and acquire the related trademarks and patents, all of which are valuable components of the fuelperks! program and assets of our company. When faced with situations like this one with Safeway, we are prepared to take the necessary steps to assure our assets and interests are protected.”
Randy Nicholson, an Excentus board member and a named inventor on the patents, added, “I am extremely excited about the opportunities our fuelperks! program holds for Excentus. I strongly believe that these actions are appropriate to recognize and protect our rights and interests created through the significant amount of time, hard work and monies invested in them over the last 10 to 15 years.”
Industry in Danger?
According to one insider with familiarity with compliant, if the patents hold up, it could have a far-reaching impact on several industry loyalty programs. For example, last October, BP partnered with Safeway as part of the grocer’s PowerPump Rewards program. For each $100 in accumulated store purchases, Safeway customers earn a $1.50 reward towards a fuel purchase at a BP or ARCO station.
“If one reviews the patents, one would clearly see that they carefully covered all the bases making sure that no one could get around them,” said the insider, who asked not to be identified due to the sensitivity of the data and the pending suit. “No doubt, there are several programs that I can think of that are in trouble. Some may believe they can beat the patents–that they have some proof of prior art, or perhaps believe that since no one was sued in nearly 10 years that the owners lost the right to enforce the patents. Who knows? We will have to see how it pans out.”
Furthermore, Excentus has given no indication that it would license its technology to competitors, which could call into question the future of existing loyalty programs if they are found to be in violation of the patents. “One has to seriously wonder as to the future of any retailer’s program that is operating under a legacy licensing agreement found to be violating an Excentus patent,” the insider said.