AT&T Sues PayPal and eBay for Patent Infringement

theodp writes "AT&T on Thursday fired the latest shot in the escalating Web patent wars, filing suit against PayPal and eBay. AT&T issued a press release alleging that the PayPal and BillPoint payment systems infringe on AT&T's 1994 patent for the mediation of transactions by a communications system. Besides e-Payments, the AT&T patent purports to cover e-Voting, e-Auctions, e-Gifts, e-Donations, e-Wishlists and e-Referrals. e-Gad! e-Yikes!"

Comments

This is the second time...

[i_want_you_to_throw_]

This has erupted. First USA Bank sued PayPal in September 2002. A year later PayPal countersued the company (now known as Bank One) and Bank One Delaware, also on patent infringement grounds. The companies settled those suits last month without disclosing the terms.

Apparently this would also cover 2checkout and other paying services as well. The question is, can Microsoft and other browser makers be sued for being able to submit credit card info through their browsers? It seems overly broad but then again aren't all tech patents?

What's next?

[mandalayx]

Read the patent.

There are 28 different claims as to what the system patented by ATT is. A cursory layman's look gives the impression that it covers all kinds of commerce done over telcommunications networks.

I am seeing a situation where ATT would require licensing for every credit-card accepter on the Internet. That's not so fun.

Re:What's next?

[zoloto]

the internet isn't a telcom is it? the breakdown of the word is telephone communications. so shouldn't this be relevant to dialup account users and not broadband... right?

AT&T has tried to screw the american public since it's inception and the usual /. rant of "clinging to an old business model"

Most of these companies had better shapeshift some of their mindsets and reasoning or they'll just die, and take out the rest of the interconnected world as they go.

just my 2 bits.

Re:What's next?

[u-235-sentinel]

"I am seeing a situation where ATT would require licensing for every credit-card accepter on the Internet. That's not so fun."

That's a scary thought. Sounds alot like what SCO is doing (I know but I had to say it). IANAL however I have spent some free time reading through the laws regarding this sorta junk. I'm getting the impression that suing a 'user' of a product for use of a product isn't legal.

For example, if I read the New York Times and come across material I have no right to read am I liable? From what I've gathered it's not my fault nor my problem. The New York Times will be liable for their product not me the consumer.

On topic now... most of these patents look rather vague. I've looked over a couple of them already and it's about as undefined as you can get. What is the patent office doing? Accepting money and issuing a patent without looking at what they did?

Re:What's next?

[eggstasy]

Bzzt. Wrong. Telecommunications comes from the greek "tele-" which means far off, distant, remote. Television - seeing stuff that is potentially far away. Telephone (-phone = sound, as in gramophone) hearing sounds, in particular voices that are supposedly distant from you.
"Telecommunications" are thus non-medium-specific. They can be wired or wireless, and consist of sounds, images or data in general.

Re:What's next?

[SpaceLifeForm]

You pay for the right to make a credit card transaction with a credit card. It's recursive. The banks love it.

Re:What's next?

[steve_l]

the patent doesnt start of with telecoms.
Claim 1 says 'a communications routing system of a type which functions generally to establish connections with arbitrary ones of a plurality of entities'. That could cover yodelling credit card info over the alps as much as anything else.

Later on it gets into 'special phone numbers' -the core of the patent is really about humans-on-phones, but unless those primary claims are junked then we are in trouble.

Claim 5 says "the communications routing system is a switching portion of a telephone system;"; the internet may or may not be this, depending upon implementation details. If you disprove this and the previous claim 'any routing system' then ebay have a problem.

On the bright side, I think claim 1 is way too broad. There are lots of places -like many italian shops- where the payment person is split from the billing person, so the mechanism claimed for has existed in the physical world for ages.

Re:What's next?

[D'Sphitz]

wouldnt the telephone be considered prior art? how about the use of pen & paper?

not overly-broad at all...

In one word:

[Anonymous Coward]

e-vil.

Re:In one word:

[machine of god]

e-vil.

That's it. I'll see you in court.

I can't fucking believe this crap. I'm outta here.

[Ayanami Rei]

Tell the Indians they can deal with this bullshit. I'm going to grow Alpalcas or something.

semantics to the rescue!

[vena]

the patent office should just change every instance of "a system" to "this system"

problem solved!

e-Bullsh!t.... Did that on Usenet back in 1990....

[thewiz]

I've bought and sold items on Usenet as early as 1990 using a go between to make sure the sale completed properly (and I'm sure other people did that even before I did). AT&T is trying to patent a method that has been used since the creation of telephones, credit cards, and credit card processors. Just because it's over the Internet doesn't make it patentable; you are STILL using the TELEPHONE.

Re:they'll know we want a pizza!

[Vaevictis666]

the penny arcade crew knows what's up!

and here's a link that will still work when they put up friday's comic in 7-10 hours.

USPTO in complete and utter chaos

[MikeDawg]

If we haven't posted it once, we've posted it a million times; the USPTO is in complete and utter chaos with these tech patents. I don't the USPTO is equipped, or ever has been equipped to handle these technological patents (at least in regards to say computers and/or the internet technologies).

They need to set up a separate repository of information to store for computers, computer programs, and internet technologies that are looking for patents. They need to hire a staff that can handle the various searching for prior technology (prior art) for this very advanced stage of patent registrations. They probably also need to setup a complete different sort of organization of information to do/handle this.

Until the USPTO gets straightened up, I see a never-ending line of lawsuits for copyright and patent infringement with regards to computer technologies and internet technologies!

In related news...

[Hogwash McFly]

Amazon sues AT&T for suing PayPal and eBay with Amazon's 'One-Click-Sueing' technology. Full story at 11.

Inevitable

[WatertonMan]

As soon as some of the more minor silly patents were allowed, it was only a matter of time before broad sweeping patents were inforced. However think of it this way. When someone tries to enforce a patent this outrageous it is only a matter of time before the government steps in and rethinks things.

Patent reform is long overdue. There was an article on Slashdot a couple of weeks ago from a few government agencies suggesting reforms. But until we get our representatives to pay attention not much will happen. This isn't a democrat or republican thing. There are "bad guys" on both sides. However this really does that the potential to slow the growth of innovation especially in the tech sector.

Scope of patent

[watchful.babbler]

The patent (USPTO link here) covers any system in which a purchaser provides credit information to a mediating party, who then approves the payment and provides authorization and an identifying value to the seller. IANAIPL, but this patent covers a whole lot of ground. Obviously, if you as an e-vendor are processing credit card claims yourself, the patent doesn't apply. But the patent pretends to apply to a whole set of services, an argument that doesn't to my untrained eyes seem to follow from the claims:

Another use for such a system is a gift or donation registration service. An entity seeking gifts or donations would provide a list of what it needed to the registration service. Entities wishing to make gifts or donations would call the registration service and the service would mediate a transaction between the donor and the source of the item to be given or donated.

Still other uses involve assigning available resources of a given type to clients who call for assistance. One example of such a system is a lawyer referral service. The referral service would maintain a database of lawyers and would assign lawyers to clients on a basis which assured that each lawyer would get a fair share of the referrals. The system would determine from the database which lawyer was to get the referral and would connect the lawyer with the calling client.

Additionally, a communications system may be advantageously used to mediate a transaction such as an auction. Customers could make bids. The communications system would validate the bids and provide them to the auctioneer, who would know only the mounts, and not the identities of the bidders. The communications system could then indicate to each participant the current highest bid and solicit new bids until a single highest bid remained. In some embodiments, the communications system itself might play the role of auctioneer. In such an embodiment, the transaction manager would keep track of the current highest bid, would inform the participants of that bid, and when bidding had ceased, would complete the transaction with the highest bidder.

eBay itself seems to be safe as (from what I understand of the auction site) it doesn't handle any payments directly, PayPal excepted. The claim over a lawyer referral service doesn't make much sense to me, since it doesn't suggest that the mediating service handle billing and payment, while the gift service ... well, it seems a stretch to call a recipient of a gift a "vendor" (as in claim 1).

I remember a book from several years ago in in which a cyberpunk lawyer (it was a very strange piece of fiction, yes) used the theory of adverse possession (What's that?) to claim title to a piece of intellectual property left unimproved by its owner. I'm starting to think that implementing such a theory in IP law, as insane as that is, would be an improvement over the current situation ....

Re:I can't fucking believe this crap. I'm outta he

[jpmorgan]

Tell the Indians they can deal with this bullshit. I'm going to grow Alpalcas or something.

No you're not. I've got a patent on that:

Claim 1. A method by which you tell the Indians they can deal with this bullshit.
Claim 2. A method by which you grow Alpalcas.
Claim 3. Or something.

(OT.) Re: Get done with it, already!

[cgranade]

Lovely. Yet another attempt to bash Gore over a statement he never made. Gore said that he is the father of the Internet, from the perspective that it was his bills that gave DARPA the funding it needed to create the Internet. Whether or not this meant he was the Father of the Internet is highly debateable, but at the very least, he did not say that he invented the Internet, despite what the O'Riley's of the world would have you believe.

Re:(OT.) Re: Get done with it, already!

[GreyPoopon]

Lovely. Yet another attempt to bash Gore over a statement he never made. Gore said that he is the father of the Internet, from the perspective that it was his bills that gave DARPA the funding it needed to create the Internet.

Well, the transcript doesn't lie...

CNN "Late Edition" Transcript:

BLITZER: ...Why should Democrats, looking at the Democratic nomination process, support you instead of Bill Bradley, a friend of yours, a former colleague in the Senate? What have you to bring to this that he doesn't necessarily bring to this process?

GORE: ...During my service in the United States Congress, I took the initiative in creating the Internet. I took the initiative in moving forward a whole range of initiatives that have proven to be important to our country's economic growth and environmental protection, improvements in our educational system.

Now granted, he doesn't claim to have INVENTED the internet. Instead, he claims to have CREATED it. What he REALLY did in 1986 was articulate somebody elses vision of widespread connected computing, and he introduced a follow-up bill to facilitate more widespread access to the network. I don't want to take away from his accomplishments because they ARE significant, but claiming to have created the internet alludes to illusions of grandeur. So yes, Al deserves to pretty much be mocked for the rest of his career over that statement.

I think most people agree that, historically speaking, the Internet evolved as a result of the work done during the early 1970's on the ARPANET project, where TCP/IP was developed. The WWW concept, which makes the Internet much more useful, was developed primarily by Tim Berners-Lee of CERN.

Re:(OT.) Re: Get done with it, already!

[squiggleslash]

No, he doesn't claim to have created it. He claims to have taken an Initiative through the Senate, the Initiative being the one to create the Internet. That's all he claims.

If you want to argue he's a terrible speaker, I can't fault that. But it's absurd to suggest that he was trying to make people think that he, a politician, created the world's most significant network. That was clearly not his intention.

And Vint Cerf, who with Jon Postel can be genuinely described as one of the co-inventors of the Internet, certainly disagrees with the "He said he invented it" spin on the subject. To quote:

Last year the Vice President made a straightforward statement on his role. He said: "During my service in the United States Congress I took the initiative in creating the Internet." We don't think, as some people have argued, that Gore intended to claim he "invented" the Internet. Moreover, there is no question in our minds that while serving as Senator, Gore's initiatives had a significant and beneficial effect on the still-evolving Internet. The fact of the matter is that Gore was talking about and promoting the Internet long before most people were listening.

I think Gore is being unfairly maligned here.

Joy...

[thenextpresident]

As someone in the ewallet industry developing a new product that is different from other ewallet solutions, this is slightly disturbing. To think that a common concept such as accepting a credit card is patented. Of course, AT&T will have to go after all those credit card terminals now, because they all do the same thing. A consumer and a merchant processing a credit card through a trusted third party (the one leasing the terminal to the merchant).

However, seeing as my company is small, I have no real worries. Oh, sure, they may sue once they have something big to sue for, buy by then, I can afford to fight back. Hopefully, PayPal will fight for me. By fighting AT&T's patent, they could make it difficult for AT&T to sue for it in the future.

Of course, PayPal could also just make a deal, and this won't get taken care of in court.

Oh, the fun of e-commerce. You know, makes me want to patent some of my ideas, not to sue people, but just to make sure people don't sue me or my company. Patenting to defend yourself...hrm, maybe I could patent that? Of course, that is probably been said on /. before.

It's an Obvious patent

[vistic]

I don't sincerely think that any of these websites were even aware of AT&T's work as they developed online payment systems, etc. - much less copied the idea from AT&T.

I think the key is that it was obvious at the time that payments would be accepted online. The same goes for a lot of the technologies they claim are covered by this patent. So a bunch of people found a means to accomplish this obvious goal that was almost *expected* at the time simultaneously.

I don't know much about patents but might this fall under the category of "obvious" which I think is supposed to be unpantentable?

Western Union should sue

[SparklesMalone]

It seems someone writing a check to Western Union back in 1880 to wire money across the continent on a telegraph line was "process(ing) payments over a communications system"

The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.
Ecclesiastes 1:9

The real facts.

[AzrealAO]

McFact No. 1: For years, McDonald's had known they had a problem with the way they make their coffee - that their coffee was served much hotter (at least 20 degrees more so) than at other restaurants.

McFact No. 2: McDonald's knew its coffee sometimes caused serious injuries - more than 700 incidents of scalding coffee burns in the past decade have been settled by the Corporation - and yet they never so much as consulted a burn expert regarding the issue.

McFact No. 3: The woman involved in this infamous case suffered very serious injuries - third degree burns on her groin, thighs and buttocks that required skin grafts and a seven-day hospital stay.

McFact No. 4: The woman, an 81-year old former department store clerk who had never before filed suit against anyone, said she wouldn't have brought the lawsuit against McDonald's had the Corporation not dismissed her request for compensation for medical bills.

McFact No. 5: A McDonald's quality assurance manager testified in the case that the Corporation was aware of the risk of serving dangerously hot coffee and had no plans to either turn down the heat or to post warning about the possibility of severe burns, even though most customers wouldn't think it was possible.

McFact No. 6: After careful deliberation, the jury found McDonald's was liable because the facts were overwhelmingly against the company. When it came to the punitive damages, the jury found that McDonald's had engaged in willful, reckless, malicious, or wanton conduct, and rendered a punitive damage award of 2.7 million dollars. (The equivalent of just two days of coffee sales, McDonalds Corporation generates revenues in excess of 1.3 million dollars daily from the sale of its coffee, selling 1 billion cups each year.)

McFact No. 7: On appeal, a judge lowered the award to $480,000, a fact not widely publicized in the media.

McFact No. 8: A report in Liability Week, September 29, 1997, indicated that Kathleen Gilliam, 73, suffered first degree burns when a cup of coffee spilled onto her lap. Reports also indicate that McDonald's consistently keeps its coffee at 185 degrees, still approximately 20 degrees hotter than at other restaurants. Third degree burns occur at this temperature in just two to seven seconds, requiring skin grafting, debridement and whirlpool treatments that cost tens of thousands of dollars and result in permanent disfigurement, extreme pain and disability to the victims for many months, and in some cases, years.

Excerpt from: Courtesy Legal News and Views, Ohio Academy of Trial Lawyers

Also see Van O'Steen and Partners

Newsaic : Mirrow Law

Compare these patents with drug company patents

[darnok]

If drug companies could patent their products with the ease that the USPTO seems to allow IT patents, then the first company to apply for a patent covering "something that makes sick people better" would pretty much have the market cornered.

a better IP system

[Nick haflinger]

What we ought to do is have a property tax copyrights and patents. The owners of intellectual property could set the price of their inventions then anybody that ponies up the scratch can take it from them unless the inventor ups the price and pays a huge penalty and some back taxes. If the tax is to onerous one can always lower the cost or even release the IP to public domain. You could also get rid of time limits with this since the cost of protecting IP indefinately would be general prohibative. The increased revenue could fund an effective and staffed USPTO.

Bad trend

[lurker412]

We need to think hard about the consequences of becoming a litigation based society. One can imagine a day in which the US does not produce anything at all but merely sues the shit out of everyone who does. I guess there will be a few techies left--only those with 15 years experience supporting law firms need apply. Everything else will be outsourced off-shore. The only jobs left will be for lawyers, para-legals and judges. If we get lucky, we might be called upon to serve on juries once in a while.

I used to be cynical, but reality has overtaken me.

Re:e-Sex???

[Monkelectric]

Please tell me they didn't patent e-sex....

I think you're talking about Teledildonics? ;-)

What about banks?

[macdaddy]

All bank transactions are conducted over telecom lines of some sort, not to the Internet mind you be directly to their parent branch or HQ. They still are making a financial transaction via telephone communications.

Good grief

[emarkp]

I e-think I'm going to be e-sick.... (apologies to Foxtrot)

not so fast AT&T...

[some damn guy]

They obviously forgot about MY patent (#101,936,345)

"A method of maximizing the returns of any large-scale finanical-enrichment scheme which utilizes courtroom-based justice-mediated settlements as a method for increasing cash flow, increasing the possiblities for success through the aquisition of patents for the most extremely fundamental and obvious aspects of every-day existence."

Nice try though.

Needs to satisfy all claims, not any

[cgenman]

Of particular interest are claims 5 and six, which sets forth

5. The method set forth in claim 1 wherein:

the communications routing system is a switching portion of a telephone system; and

the step of receiving a transaction specifier includes the steps of:

receiving a special telephone number in the switching portion; and

using the special telephone number to derive the transaction specifier.

6. The method set forth in claim 5 wherein:

the step of receiving a transaction specifier further includes the step of using the special telephone number to derive a telephone number of the vendor and

the step of responding to the transaction specifier includes the step of using the telephone number to obtain transaction information concerning the transaction from or provide transaction information to the vendor.

Claim 7 is similar.

In other words, to be a valid patent violation, the parties must use a telephone number to identify eachother. I don't know about you, but I've never given nor received anyone's telephone telephone numbers on paypal.

Now, AT&T may argue that IP addresses are a "special" telephone number... Which is utter bunk, as VoIP is after 30 years of IP just starting to exist. But even then, Paypal does not connect independent parties with eachother via IP address, but rather e-mail address. Any respectable judge would throw out of his or her courtroom a lawyer that attempted to argue that "telephone number" meant any system that involved routing, including IP, E-mail, Telegraph, AIM, Kazaa, and Shared Printers.

Overall it looks like the original patent wasn't quite that bad... A shared telephone authentication system based upon the telephone company's then-new caller ID system as an identifier. As AT&T noted in their patent application, this is a way to mediate a transaction over the telephone while shielding the buyer's information from the seller. What's bad is then taking this and attempting to apply it to all internet transactions.

You filed your patent application. It was accepted because it was sufficiently narrow. Don't go whining now because it wasn't as broad as you would like.