A card manufacturer's lawsuit against American Express Co. alleges the infringement of patent rights over payment cards made with clear plastic.
Perfect Plastic Printing Corp. filed the suit Jan. 6 in the Eastern Division of the U.S. District Court for the Northern District of Illinois. The St. Charles, Ill., company (which made standard opaque cards for Amex for several years) says it is the real inventor of the technology Amex is using to issue clear cards.
The suit alleges that at the time the New York card company filed its patent applications, it had been closely negotiating a contract with Perfect Plastic. By introducing its own clear card, Amex willfully and directly infringed on Perfect Plastic's patent rights and caused substantial damage to its business, the suit says.
In addition to seeking monetary damages and legal fees, Perfect Plastic wants the court to invalidate Amex's patent and enjoin the issuer from making any more cards according to the patent.
Amex, citing a policy of not discussing pending litigation, would not comment on the case. But Channing Barringer, an Amex spokeswoman, confirmed in an e-mail that its patent "covers clear technology for transparent and translucent charge/credit cards that use visible or invisible compounds to block, diffuse, reflect, refract, and absorb infrared light" - exactly the method that Perfect Plastic says it invented.
Payment cards block beams of light emitted by automated teller machines and other devices, enabling them to be "read" at the point of transaction. Earlier test versions of clear cards could not be detected, because the light beams simply passed through them. Perfect Plastic says it was the first to make "a card that was transparent or translucent to visible light" yet could be picked up by ATMs.
The manufacturer says its research scientist, John Kiekhaefer, hit upon the solution through the use of special light filters.
Doug Eden, Perfect Plastic's director of marketing, would not discuss the suit, saying the company would let the complaint speak for itself. But the attachment of a Nov. 5 Amex press release to the complaint indicates the manufacturer's frustration with what it sees as the issuer's unearned bragging rights.
In that release, Amex announced that it had received a patent for the clear-card technology, which it uses for its popular Blue cards. Amex said it was "the first time a card issuer has successfully developed transparent and translucent card products to be used with infrared-beaming machines, such as ATMs."
The patent allows Amex to block other companies "from producing and marketing clear technology" for the creation of such cards, the release said.
Perfect Plastic says it got there first. Though Amex filed its first provisional patent application in September 1999, one month before the manufacturer did and without its knowledge, Amex did not have the technology to back its claim, Perfect Plastic says. The complaint suggests that Amex fraudulently listed its own employees as the inventors of the clear card technology.
According to Perfect Plastic, in August 1999 Amex said it "had not been able to design or have manufactured" an effective clear card, and it subsequently offered the contract for making such cards to Perfect Plastic. The manufacturer says Amex representatives toured its shop in October 1999 and then issued a letter of intent authorizing the purchase of materials necessary to make one million cards. Nonetheless, "despite lengthy further negotiations," Amex gave the contract to the French manufacturer Oberthur Card Systems.
Oberthur would not comment, apart from confirming that it continues to make Amex Blue cards.
Don Rhodes, the policy manager for e-strategy at the American Bankers Association, said in an interview Wednesday: "Very few things are clear-cut in the area of patents, but if in this case" Perfect Plastic "can document and show that they were a first inventor and that they had developed this technology and that it was in use" before Amex received the patent, "then I think they might have a legitimate claim."
However, cases like this are highly technical and put an enormous legal burden on the party challenging the patent, he said.
Because patent suits are so complicated, parties often negotiate a settlement involving some kind of licensing arrangement, Mr. Rhodes said. "Banks certainly do not want to infringe on a valid patent, but they also do not want to be held hostage if a patent may have been granted in error."
