IP Law Daily, PATENT—S.D.N.Y.: American Express defeats loyalty-program patent infringement suit at pleading stage, (Jul 10, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

The patent owner again failed to plausibly allege that the accused loyalty programs practiced the patents' "association network" and "token cannot be used as tender" limitations.

A federal district court in New York has dismissed with prejudice a patent infringement lawsuit accusing American Express of infringing two patents covering customer loyalty programs. The court held that the patent owner failed to cure pleading deficiencies previously identified by the court, finding that its amended complaint still did not plausibly allege that American Express's discontinued Plenti Program practiced the patents' "association network" limitation or that its Membership Rewards Program satisfied claim limitations requiring that a loyalty-program token could not also be used as tender for payment. As a result, all remaining infringement claims were dismissed with prejudice (Loyal-T Systems LLC v. American Express Co., No. 1:24-cv-07506-JGK (S.D.N.Y. Jul. 6, 2026)).

Background. The plaintiff, Loyal-T Systems LLC, is a patent licensing company that owns patents relating to customer loyalty program technology. The defendants, American Express Company and American Express Travel Related Services Company, Inc., provide payment card, travel, and customer rewards services. The accused products were American Express's former Plenti Program and its Membership Rewards Program.

The dispute involved U.S. Patent Nos. 8,712,839 (the ’839 patent) and 10,210,537 (the ’537 patent). The patents generally relate to administering customer loyalty programs using an existing credit card association network rather than dedicated hardware. They disclose systems in which a merchant identifies a customer through a token, transmits the token over an association network to a loyalty-program processor, and separately communicates transaction details through a distinct communications network to determine and award customer rewards.

Loyal-T originally sued American Express in 2024, alleging that the Plenti Program infringed claim 1 of the ’839 patent and that the Membership Rewards Program infringed claim 11 of the ’537 patent and claim 1 of the ’839 patent. In September 2025, the court dismissed the first amended complaint without prejudice after concluding that Loyal-T merely recited claim language without plausibly explaining how the accused programs met several claim limitations. Loyal-T then filed a second amended complaint containing additional factual allegations and claim charts. American Express again moved to dismiss under Rule 12(b)(6), arguing that the amended pleading still failed to state a plausible claim of infringement.

Plenti Program. The court first considered the allegations concerning the discontinued Plenti Program. Loyal-T attempted to cure the deficiencies identified in the earlier dismissal by alleging that the Plenti card used a 16-digit card number similar to Visa and Mastercard cards, contained a magnetic strip, could be used at checkout, and allowed customers to earn reward points through participating merchants. According to Loyal-T, those features demonstrated that the program "piggy-backed" on an existing association network, a central feature of the asserted invention.

The court disagreed. It concluded that the amended complaint merely supplemented conclusory allegations with additional factual details but still failed to explain why those facts established use of an association network within the meaning of the patent claims. A 16-digit card number, a magnetic strip, and use at checkout did not plausibly establish that the Plenti Program employed the patented "piggy-backing" architecture. Instead, exhibits attached to the complaint appeared to depict a separate checkout terminal dedicated to the Plenti Program rather than the use of an existing association network.

Relying on Bot M8 LLC v. Sony Corp. of America, 4 F.4th 1342 (Fed. Cir. 2021), and K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc., 714 F.3d 1277 (Fed. Cir. 2013), the court held that merely matching claim limitations to product features without explaining why the accused system satisfies those limitations does not state a plausible infringement claim. Because Loyal-T failed to cure the previously identified defects, the court dismissed the Plenti-related claims with prejudice.

Membership Rewards Program. The court likewise dismissed the remaining claims involving the Membership Rewards Program. In its earlier decision, the court had concluded that the asserted claims expressly required that the claimed "token" could not be used as tender for payment. The Membership Rewards Program, however, used the same American Express card both to identify the customer and to complete payment.

The second amended complaint attempted to avoid that conclusion by arguing that only the card's primary account number (PAN), rather than the card itself, constituted the claimed token. The court rejected that argument, finding that it merely repackaged a theory previously rejected in the earlier dismissal order.

Accepting Loyal-T's interpretation would effectively read the "token cannot be used as tender" limitation out of the claims because every multifunction payment card could be conceptually divided into separate components performing different functions. Citing Bicon, Inc. v. Straumann Co., 441 F.3d 945 (Fed. Cir. 2006), the court reiterated that claim constructions rendering claim limitations superfluous must be avoided.

The court further observed that Loyal-T's own exhibits consistently described the American Express card itself, not merely its account number, as the item customers used both to identify themselves and to complete purchases. Because the accused Membership Rewards Program used the same card for both purposes, it was fundamentally inconsistent with claims expressly requiring that the token could not serve as tender.

Accordingly, the court held that the amended complaint failed to state a claim for either literal infringement or infringement under the doctrine of equivalents. Having already allowed Loyal-T to amend its pleading, the court dismissed all remaining claims with prejudice.

The Case is No. 1:24-cv-07506-JGK.

Judge: Koeltl, J.

Attorneys: Joseph M. Pastore, III (Pastore LLC) for Loyal-T Systems LLC. Lewis V. Popovski (Patterson Belknap Webb & Tyler LLP) for American Express Co.

Companies: Loyal-T Systems LLC; American Express Co.

Cases: Patent NewYorkNews