In an ominous sign for banks trying to fend off claims from patent holders, AT&T Corp. has agreed to pay a sizable legal settlement to a California inventor who holds patents on 40 technologies, covering everything from interactive voice-response units to other systems commonly used by banks.

The inventor, Ronald A. Katz of Los Angeles, runs a small, eponymous firm whose primary business is licensing the technologies that Mr. Katz developed early in his career when he formed Telecredit, a real-time credit and check-cashing authorization service, and worked at First Data, which was then a subsidiary of American Express Co.

So far, 43 technology and financial services companies - including Marshall & Ilsley Corp., the AT&T Universal Card Services division of Citigroup Inc., International Business Machines Corp., and the MoneyGram Payment Systems Inc. subsidiary of Viad Corp. - have agreed to pay licensing fees to Mr. Katz's firm, as have several other companies that Ronald A. Katz Technology Licensing LP has slapped with lawsuits.

The situation highlights what bankers say is a growing predicament: inventors and entrepreneurs stepping forward to lay patent claim to widespread and longstanding operating methods in banking. Since the U.S. Patent and Trademark Office began a few years ago granting patents that protect business practices, banks say they have been barraged with demands for licensing fees from people who claim to have patented everything from check-cashing on up, and legal tangles with these claimants are costly. The problem has grown so pronounced that BITS, the technology arm of the Financial Services Roundtable, has made it a priority agenda item for the year.

The patents Mr. Katz holds seem to cover technologies that have become part of the backbone of automated call systems at banks, and Mr. Katz, emboldened by the settlement with AT&T and three previous legal victories, appears eager to collect what he says is his fair due. He estimates that 2,000 companies are using his patented technology for interactive telephone systems and methods of accumulating and processing caller data, and he says he is in negotiations with "well over one dozen" banks about licensing his patents.

Neither he nor AT&T would name the dollar amount of the settlement, which was made in November after three years of litigation, but one expert in intellectual property said the amount was likely to be in the ballpark of $100 million.

Mr. Katz said he expects to finalize licensing agreements with at least two major institutions within the next 60 to 90 days. Though he hopes to avoid filing lawsuits against any banks, Mr. Katz has filed several such suits over the years, and said in a telephone interview that he is now in "meaningful discussions" with various companies that might be in violation.

"We believe a large number of banks utilize our technology," he said.

Mr. Katz's patents cover a wide range of call-related procedures and technologies; a critic called them "vague" in their specificity and scope. People who view Mr. Katz as an opportunist who is trying to cash in on commonly accepted technology procedures say that many companies would rather settle than spend time and money in court.

John Jainschigg, an engineer and programmer who is editor-in-chief of Computer Telephony magazine, said the stuff of Mr. Katz's patents can be found in thousands of computing science textbooks written in the past 50 years. "These are the fundamental techniques of computer science," he said. "This isn't unique intellectual property. It's like trying to patent the idea of putting a file on a disk - well, how else are you going to store information?"

Of Mr. Katz, Mr. Jainschigg said, "Some of the things that he has patented are so vaguely described and so fundamentally conceptual in nature that they almost qualify as ideas rather than what patents are supposed to cover, which are specific applications and processes."

Mr. Jainschigg added: "I think that anybody with a degree of technology intelligence in any field could figure out things that people haven't patented and go patent them, particularly if they were working day-to-day in the field. You amass a frightening amount of quote-unquote intellectual property. Is it morally right? It isn't, in the end."

Mr. Katz strongly disputes such characterizations of his activities, and depicts himself as an inventor who seeks rightful remuneration for the fruit of his labor. He says a 105-page ruling by a judge last year in the AT&T case validates his claims. "It was an order which defined the meanings of the words of the claims," he said. "It backed up our view of what the claims meant."

The patents that AT&T licensed from Mr. Katz will enable the telecommunications giant to continue using technology that runs a number of services, such as 1-800-CALL-ATT, calling card and prepaid calling services, teleconferencing, and numerous others.

In the banking industry, Mr. Katz's patents are said to cover some of the technology that powers automated voice-response units, automated trading, wireless operations, and 800 and 900 numbers.

For example, when credit and debit card issuers send new cards to customers, the cards usually come with an 800 number that the customer must call from a home phone to activate the card. That particular procedure is said to be covered by a Katz patent, which could potentially mean that virtually all U.S. card issuers owe licensing fees to Mr. Katz.

This specter was raised in a November issue of the Nilson Report, a newsletter that covers the credit card industry. "One by one, card issuers in the U.S. may find they cannot continue using this card-activation method without violating Katz patents," the article said. "And they are unlikely to halt the practice because this anti-fraud system has become one of the most effective methods of fighting fraud losses on proprietary and general-purpose credit and debit cards in the U.S., which are currently at their lowest point in history."

Marshall & Ilsley last spring purchased a license covering various forms of Katz-patented technology it uses in its call centers, making its move well before the AT&T settlement and putting it in the forefront of financial services companies to do so.

Michael A. Hatfield, Marshall & Ilsley's senior vice president, said some of the call center technology it was using was purchased from vendors and some was developed in-house; none of it was obtained directly from Mr. Katz or his firm, he said. But discussions with Mr. Katz and a great deal of patent research "made it clear that his patents covered a number of things that we were doing," Mr. Hatfield said. "This is something we felt was appropriate to do."

No other banks contacted were willing to comment on the AT&T settlement or its implications for them. AT&T put out a press release about the settlement, but did not make a direct comment. In the press release, Mr. Katz is quoted as saying, "Considering AT&T's prominence in interactive call-processing, this license and significant settlement represent a powerful recognition of the scope and breadth of RAK's patent portfolio."

Mr. Katz said in an interview that his portfolio includes licensing agreements valued at more than $300 million, and he expects that figure to reach $1 billion to $2 billion over the next five to six years.

Edward A. Kahn, the founder of Cambridge, Mass.-based EKMS Inc., an intellectual-property management and business development firm, estimated the AT&T settlement to be worth at least $100 million.

"This is big stuff," said Mr. Kahn, a frequent speaker on intellectual property. "It's computerized, interactive, voice call technology."

The AT&T case will likely prompt purchasing departments in the banking industry to look for vendors who have secured patent licenses, Mr. Kahn said.

An "explosion" in patent disputes over the past decade has forced manufacturers and service companies alike to pay more attention to intellectual-property rights, Mr. Kahn said. A landmark 1998 ruling that allowed the patenting of business practices, including financial business practices, has further increased such cases.

That ruling resulted from a legal challenge by State Street Bank & Trust Co. against a patent received in 1993 by Signature Financial Group on a mutual fund management technique. State Street lost the case, which Mr. Kahn was the first of its kind.

Patent infringement cases typically cost the plaintiff millions of dollars, and are complex and difficult to prove, Mr. Kahn said. The alleged infringer may argue that the patent is invalid, leading to a legal quagmire to determine validity, which Mr. Kahn said is upheld in at least half of all cases.

Companies face a formidable opponent in Mr. Katz. His involvement in telecommunications technology dates back to 1961, when, at age 24, he and partner Robert N. Goldman formed Telecredit, which got a patent for its transaction authorization process. In 1981, the two partners formed Light Signatures Inc., through which they developed technology used in counterfeit prevention systems before selling the company to Telecredit four years later.

In the mid-1980s, Mr. Katz began developing technologies to enable interactive communication between computers and telephones, and applying for patents. His patented technologies were the cornerstone of a system introduced in 1989 by Call Interactive, a unit of First Data, then part of American Express.

At the time, Mr. Katz served as vice chairman of American Express Information Services Corp. He sold his patents to First Data - which eliminated the need for American Express or First Data to license them - but then bought them back seven years ago and began building his licensing portfolio.

The courts have become familiar territory for Mr. Katz, who has successfully sued three other companies for patent infringement. Two of those cases - against Omaha-based West Interactive Corp., a unit of West Teleservices, and MicroVoice Applications Inc., a provider of electronic dating services - resulted in settlements. The other, against 900 Million Inc., a Los Angeles company that offered interactive call processing services for a contest, resulted in an injunction preventing the company from further using the patented technology.

Mr. Kahn, the intellectual-property expert, said vendor companies often try to keep costs down by trying to skirt licensing fees on a patented technology, then they may inadvertently find themselves in violation. Those vendors' customers may purchase the technology without realizing it is unlicensed.

In such situations, Mr. Kahn said, the patentholder could potentially sue both the vendor and the user - for example, a software manufacturer and the bank that buys the software for its call center - but usually, he said, the patentholder will try to "harass" the technology's end users.

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