Expensify sued expense management competitor Abacus Labs for infringement of receipt capture patents.
Expensify’s cap-donning and sometimes pugnacious CEO and founder David Barrett announced the suit on Friday “with no joy.” He claimed Abacus infringed “two of our most core patents surrounding receipt scanning and, most importantly, the automatic matching of the scanned receipt to a credit card feed.”
Innovations allegedly protected by the patents make up Expensify’s SmartScan technology, which allows users to photograph paper receipts such as “credit card slips, odometer readings and cash receipts,” according to the complaint. The software uses optical character recognition (OCR) to extract text from images and insert receipt data into expense reports. It also “analyzes that text to determine what portions correspond to the merchant name, amount, currency and date of the purchase,” according to Expensify. It looks for a currency symbol and if it doesn’t find one, uses a location-based default. It checks already-imported expenses to avoid duplicates.
“In nine years we went from nothing to being the second-largest and fastest growing expense management system in the world,” claimed Barrett’s Friday blog post. Abacus entered the market “late” in 2013, “forcing it to copy” SmartScan “in an effort to gain lost time,” Expensify alleged in the complaint.
Expensify indicated it has more than 4.8 million users at more than 700,000 companies and is growing by 66 percent annually.
Barrett committed to “using every legal tool at our disposal to compete as forcefully as we can.” Expensify filed suit Friday in the United States District Court for the Southern District of New York, located in Manhattan about two miles south of Abacus’ headquarters.
Abacus did not immediately respond to a request for comment.
Expensify claimed Abacus product descriptions and marketing materials demonstrated the patent violations. Its products capture low-quality images of receipts using mobile phones, Expensify noted. They apply OCR to extract and auto-populate date, merchant and amount. If receipt data are not legible, Abacus uses “a second resource” — humans, Expensify guessed — who use card numbers, receipt amounts and vendor info to complete records. The Abacus software then classifies the type of receipt (for example, cash, personal card or corporate card) based on the gathered info, the complaint alleged.
A YouTube video purportedly further illustrates the Abacus infringement. It depicts the process of “associating the captured image with personal or corporate credit cards of the user and then scanning a plurality of transactions recorded in the financial accounts of the user,” Expensify’s attorneys wrote. “Abacus then compares the known information from the receipt with known information from the financial accounts. When Abacus finds an information match, it identifies the information that was undeterminable from OCR.”
It’s not clear whether those details distinguish Abacus’ activities from those of other expense software providers. Vendors including Concur, Databasics, Deem, KDS, Tallie, TravelBank and Unit 4 promote receipt scanning.
According to Chrome River documentation, the firm’s software “enables expense submitters to simply snap and send an image of a receipt into their expense report. From there, its OCR (optical character recognition) technology can automatically extract vendor, amount and date to automatically create and categorize expense items.”
ExpenseBot CEO and co-founder Ed Buchholz during an April 2016 interview acknowledged the existence of Expensify’s first patent, but questioned its breadth. “They do have a patent on a certain process,” he said. “I’m not sure the extent of it. Our counsel reviewed it and our process is apparently not overlapping.”
Coupa, meanwhile, talks about leapfrogging OCR technology with voice. “Just dictate: “$5 Starbucks today,’ ” said Coupa Software VP of strategy and product marketing Donna Wilczek during an interview last year.
PC Magazine last September published a review of eight expense systems, all of which it said use OCR to reduce manual data entry. The article mentioned Abacus but indicated “the products that glean the most data from receipt images are Certify Now and Xpenditure Small Business.”
“A lot of people do receipt scanning,” Barrett told attendees to the Global Business Travel Association convention last summer. “It’s relatively easy to about 70 percent accuracy, but if it’s only 70 percent accurate, that means you have to double check it and automation is very limited.”
Expensify in 2015 settled with competitor Nexonia a lawsuit claiming the latter violated Expensify’s SmartScan trademark. Included in Barrett’s emailed statement at the time:
“To address the elephant in the room since we’ve sorta cornered the market for patents involving mobile receipt scanning (which has since become a required feature for anybody in the expense management space), I’m often asked how aggressive we intend to get with them. The truthful answer is: I’m not sure yet, and I’d welcome your advice. Nexonia was an easy decision since they were an older incumbent who used mobile scanning and our trademark to close a new round of funding, which is obviously unacceptable.”
Nexonia is now a licensee of Expensify’s receipt scanning patents, which Barrett called a “weapon of mass destruction.” Other rivals could be licensees, as well.
Abacus markets itself as an expense report killer, just as Expensify has for years.
Abacus execs told The Company Dime in May 2016 that its software treats each receipt as its own expense item and thus eliminates the traditional notion of a “report” that must be “submitted.” This speeds up reimbursement. Those responsible for approving expenses submitted by large numbers of employees could sift and sort individual receipts, teasing out only those that require attention. “Forget the report,” said Abacus CEO and co-founder Omar Qari. “Here are the expenses that require your attention. We’ll auto-approve the $5 coffees.”
Here’s Barrett at GBTA last summer:
“Everything we do is about total automation to the point where you take a picture of the receipt, you put your phone back in your pocket and you never think of that receipt again. To the business traveler, no one thinks of the expense report. The grouping of expenses in the expense report is not interesting to them. It’s interesting to the finance team, but to the business traveler, they live one receipt at a time. So we give them that experience — one-receipt-at-a-time business travel. And that depends on super-accurate receipt scanning, and we’re the best in the business.”
Barrett said Expensify creates the report for travelers “automatically, according to the accountant’s design.” Is it a cash expense? Then there’s no reason to wait for anything less than daily reimbursement. Perhaps a traditional monthly report still is created, though automatically, to handle card statements.
“There are a whole range of algorithms that can scan an expense report to see if it’s good or not,” he said. “Maybe 48 of these 50 expenses are fine. Don’t even look at it! It’s a waste of everyone’s time to look at a $5 Starbucks receipt.”
In the interview two months prior, Qari bristled at an Expensify graphic depicting the expense management market with Concur, Certify, Chrome River, Expensify and Tallie as key players and Abacus as a lesser brand. (Dozens of other providers were not listed.)
“That’s highly inaccurate,” Qari said of the Expensify depiction. “They’re unaware of our features.”
In the same interview, Qari addressed the Expensify patents, its report-killing maxim and its longtime slogan about expense reports that don’t suck:
“It’s kind of hard to claim that OCR technology or anything around stripping data from a receipt is something that is patented. We don’t take that approach. Our approach is open. When we built something into iOS for swipe-to-approve expenses, we just open-sourced it.
“Making it not suck for employees is only part of it. What about admins? What about making it better? What about empowering you to improve your career [or the company’s position]?
“With Expensify, you have to create an expense and then create a report. If you turn it on, it auto-submits at the end of each day and it’s riddled with errors.”
In its suit, Expensify aims to recover lost profits and seeks a royalty “to be determined” at trial. Attorneys argued Expensify also is entitled to pre-suit damages. They requested a permanent injunction enjoining Abacus from infringing the patents.