Online payment vendor PayPal is being sued for allegedly infringing
on business process patents owned by First USA Bank.
In a lawsuit filed last week, First USA alleged that PayPal is
using online transaction technologies that are already patented by
First USA.
In its complaint, First USA said PayPal's use of its "cardless
payment system" processes infringe on the patents because PayPal
allows customers to make or collect online payments without having
to enter their confidential bank account or credit card information
each time.
The mechanism uses a database to securely store user account
information so it does not have to be entered each time. Instead it
uses a personal identification number or other identification
marker, under two patents First USA said it holds.
The patents were issued to inventor Kurt Campisano in May 2001 and
January 2002, according to the complaint. First USA is the assignee
of the patents.
Vince Sollitto, a spokesman for PayPal, said his company "does not
believe we infringed on the patents".
"The suit is without merit," he said. "We will defend ourselves
vigorously."
The suit asks for unspecified monetary damages and asks that PayPal
be permanently barred from using the transaction processes that
allegedly infringe on the First USA patents.
First USA is the credit card arm of Bank One and has 53 million
cardholders. It is the third-largest credit card company in the
US.
PayPal, which began operations in 1999, provides a way for online
buyers and sellers to make secure transfers of money worldwide. The
company serves online auctions such as eBay, which purchased PayPal
last July in a deal worth about $1.5bn (£0.96bn).