DigiCash Saves PayPal?

[R. A. Hettinga]

>And Greg Aharonian, San Francisco-based patent expert, said eBay could get
>the case dismissed if it finds a company or institution that developed its
>own "trusted intermediary" or similar electronic payment system even
>before AT&T researchers filed for their patent.

Bingo.

Somebody at First Data should haul out the old DigiCash pitch-ware they
probably have laying around, and beat AT&T over the head with it...

Cheers,
RAH
------


<http://finance.lycos.com/qc/news/story.aspx?story=36570023>

Lycos



 AT&T: EBay, PayPal Infringe on Patents E-mail orPrint this story


20 November 2003, 6:03pm ET
By RACHEL KONRAD AP Business Writer

SAN JOSE, Calif. (AP) -- AT&T Corp. reached out and smacked eBay Inc. with
a patent infringement lawsuit Thursday, claiming the online auction company
has been using a payment system that the telecommunications giant developed
more than a decade ago.

The case, filed in federal court in Delaware, comes on the heels of an
August verdict in which a Virginia judge ordered eBay to pay $29.5 million
to an inventor who accused the company of stealing his ideas for fixed
price sales formats.

AT&T's suit demands that eBay pay an undisclosed amount in licensing fees
because its lucrative PayPal division functions as a "trusted intermediary"
between buyers and sellers who may not know each other.

The system _ widely regarded as critical to eBay's gangbuster growth and a
boon to e-commerce in general _ lets buyers provide credit card or bank
account information to a reliable third party instead of individual sellers
around the world. Buyers merely have to trust PayPal, and they don't have
to worry about disreputable sellers using sensitive financial data for
fraudulent purposes.

AT&T says three senior engineers working for the phone company filed for a
patent in 1991 for exactly such a process, which they called "Mediation of
Transactions by a Communication System." The patent was granted in 1994,
AT&T said.

EBay spokesman Chris Donlay dismissed the lawsuit as "meritless," and he
said customers should count on continuing to use PayPal.

EBay acquired PayPal in October 2002, and the division immediately became
an engine of profits for San Jose-based eBay, one of the few Silicon Valley
companies to emerge unscathed from the dot-com collapse.

PayPal produced $106.4 million in revenue in the third quarter of 2003,
nearly twice what it generated in the same period last year. More than 11
million people used PayPal to conduct transactions from July to September,
according to eBay's most recent earnings statement.

Before PayPal, eBay relied on a similar system called Billpoint, which is
also named in the lawsuit.

Mentioned
Last
Change

INDU
9605.7913.63 (0.14%)

EBAY
51.800.23 (0.44%)

T
19.630.53 (2.77%)

AT&T spokesman Gary Morgenstern said the lawsuit is the result of more than
a year of negotiations between the two companies. EBay refused to pay any
licensing fees, he said.

"AT&T invests hundreds of millions of dollars every year in our research
and development efforts, which have yielded a sizable portfolio of patents
_ that's what we're vigorously protecting here," Morgenstern said. "EBay
and PayPal have refused to compensate us for patented technology, and so
we're forced to take this to the courts."

Numerous inventors and small companies have sued or threatened to sue eBay,
and legal experts have been skeptical of many such claims. But some said
the newest plaintiff's heft gives the AT&T lawsuit the credibility that
cases brought by obscure inventors and operators of now-defunct dot-coms
lacked.

"To be sure, AT&T's involvement makes this case different from others,"
said Neil A. Smith of the San Francisco-based law firm Howard, Rice,
Nemerovski, Canady, Falk & Rabkin. "AT&T's a well respected company that
doesn't just wave around patent lawsuits unless there's some merit."

Others, however, said that AT&T is unlikely to even force a settlement _
which is the way Amazon.com and Barnesandnoble.com resolved what might have
been the last such high-profile legal skirmish over Internet sales
strategies. That case, involving Amazon's "one-click" checkout method, was
filed in 1999 and settled last year. The companies have refused to disclose
the terms.

David Pressman, a San Francisco patent lawyer and author of "Patent It
Yourself," said at least half of all patent infringement lawsuits are won
by the defense or eventually dropped before reaching the courtroom.

And Greg Aharonian, San Francisco-based patent expert, said eBay could get
the case dismissed if it finds a company or institution that developed its
own "trusted intermediary" or similar electronic payment system even before
AT&T researchers filed for their patent.

"The question is, did anyone else have trusted third parties in the 1980s?
My gut reaction is that they existed," said Aharonian, publisher of the
daily Internet Patent News Service newsletter. "Some university professor
could have written an article on this, but no one paid attention and no
banks adopted it. Something like that could invalidate the lawsuit
completely."

___

On the Net:

http://www.att.com

http://www.ebay.com

-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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