January 17, 2012

Intellectual property lawsuits aren't an uncommon occurrence among technology companies. But the recent news that Fiserv has filed a patent infringement lawsuit against rival financial tech vendor FIS has raised eyebrows because of the players involved. Fiserv and FIS are by far the largest core services vendors in the space and are direct competitors with one another.

In the suit, Fiserv alleges that FIS' Payments Manager products infringe on patents owned by Fiserv subsidiaries CheckFree, an online bill pay service, and payments provider CashEdge. The Payment Manager solution processes inter-bank account-to-account fund transfers, processes payment instructions and provides electronic biller notifications.

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Since Fiserv and FIS are two of the biggest financial technology vendors, it's likely that many banks use solutions from both, says Nancy Atkinson, senior analyst with Aite Group. That could lead to complications down the road if Fiserv is successful in its suit and FIS has to cease offering Payment Manager products, she notes. Banks that use the solution would have to implement another payments processing technology, which would cost time and money, she says, and FIS could point at Fiserv and say, "this is all their fault."

Atkinson also sees a possibility that the suit adversely affects the business proposition of both companies. "If banks have bids out right now and they're trying to make a decision, this is going to make it harder," she says. "[A bank] might even decide to go with another vendor outside of those two, just to avoid this issue."

While many IP lawsuits often get settled out of court and never make it to a trial, Atkinson believes this one may be different because "Fiserv made investments in CheckFree and CashEdge and they did that to get their IP and capabilities. If they believe FIS has come out with something comparable, Fiserv won't just accept a payment." Conversely, Atkinson says that if FIS believes it did not violate any patents and came up with the processes, the company would seek a trial to exonerate itself.

Atkinson also says the outcome of a potential trial could be based on the professional expertise of the jury, if it comes to that. A jury composed of experts in financial technology might be less inclined to think that Fiserv created something unique, she suggests.

John Cronin, managing director of ipCapital Group, a Williston, Vt.-based intellectual property consultancy, says intellectual property lawsuits in the technology sector are tricky because of "how technology quickly changes."

He said to be awarded a patent in the tech sector, often a company or individual doesn't have to show a lot of specifics regarding the technology but just a "conceptualization" of how it might work.

Cronin says a plaintiff in such a lawsuit, such as Fiserv, has to prove that the process FIS is using to implement its solution is the same as its own processes, rather than just proving that the technology is the same.

"For the plaintiff it's about 'I have to prove you do those same six steps that I do,'" he said.

ABOUT THE AUTHOR
Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as ...