PayPal hit with patent infringement lawsuit

Online payment vendor PayPal Inc. is being sued for allegedly infringing on business process patents owned by First USA Bank NA.

In a lawsuit filed last Friday in U.S. District Court in Delaware, First USA alleged that Mountain View, Calif.-based PayPal is using online transaction technologies that are already patented by Wilmington, Del.-based 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. That mechanism, which uses a database to securely store user account information so it doesn't have to be re-entered, instead uses a personal identification number or other identification marker, under two patents First USA said it holds.

The patents were issued to inventor Kurt M. Campisano in May 2001 and January 2002, according to the complaint. First USA is the assignee of the patents.

A spokesman for First USA, which is the credit card arm of Bank One Corp. in Chicago, had no comment today on the lawsuit. First USA has 53 million cardholders and is the third-largest credit card company in the U.S.

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 two-count 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.

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 San Jose-based eBay Inc., which purchased PayPal last July in a deal worth about $1.5 billion (see story).

Copyright © 2002 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon