payment-processing rival Intuit Inc. Reversing earlier vows to pursue its claims aggressively, Checkfree said last week that it preferred not to incur the expense of a court battle. Mark Johnson, executive vice president of the Columbus, Ohio, company, said there was no financial settlement. The suit was "voluntarily dismissed ... without prejudice," the company said, meaning it could refile later. Checkfree filed the claims against Intuit and its subsidiary, Intuit Services Corp., last January - a day after Checkfree was granted a patent for an electronic bill payment system. Ironically, the competitors are also business partners: Checkfree handles some of the transactions initiated with Intuit's Quicken personal finance software. Barbara Smiley, an analyst at the Tower Group in Wellesley, Mass., said patent suits typically cost at least $500,000 per claim to litigate. Checkfree made three claims against Intuit, she said, regarding the ability to make payments to a number of recipients, selecting payment method, and managing credit risk. In addition to cost considerations, Mr. Johnson attributed Checkfree's change of heart to the diverging paths the two companies have taken in the past year. He characterized Intuit as having a more "bank-dependent approach," while Checkfree has embarked more on commercial than retail endeavors. In its statement announcing the withdrawal of the suit, Checkfree noted that Intuit, with its new Quicken release on Oct. 26, "announced a different bill payment offering to users who maintained accounts at a number of specified institutions." "They're consistently modifying where they're going," Mr. Johnson said of his rival. "We don't lose anything in dropping the patent." David Weisman of Forrester Research in Cambridge, Mass., said the suit "probably wouldn't have held up." But he said Checkfree had made its point to the market. In an interview this summer, Peter Kight, Checkfree's chairman and chief executive officer, said that although the legal action would "not stop them (Intuit) from getting off the ground ... it is very clearly going to affect their business." When the suit was filed, some observers said Checkfree's action was driven by bad feelings over the loss of transaction volume - and was motivated by competitive as much as legal considerations. Checkfree's suit was part of a trend in which intellectual property law is coming into play in electronic banking. In November 1994, Citicorp sued Online Resources and Communications Corp. of McLean, Va., claiming it infringed on patents covering screen phone devices. Online, also a patent owner, countersued, and the companies eventually settled without disclosing terms. According to a September 1995 report by Ms. Smiley on financial software patents, Citibank alone holds 23 relevant patents, including one on "electronic cash" that was issued only two months ago. Merrill Lynch & Co., BankAmerica Corp., Huntington Bancshares, Bankers Trust New York Corp., First Chicago Corp., and Digicash Inc. were among the other patent holders cited in the Tower Group report. Bruce Burchfield, chief executive of Intuit Services, described patent disputes as "high-level blinking contests ... The organization that believes they can capture a market with a patent has put its resources in the wrong place."
