Autoscribe Corp. wants to obliterate the age-old excuse "the check is in the mail."

The Rockville, Md., company was recently promised a patent for a service that it has been marketing for three years as an alternative to credit cards.

The service, called Auto-Pay, allows consumers to pay for goods and services over the phone using their checking accounts.

Other companies offer similar services, and Autoscribe expects to benefit greatly from the patent. It received a "notice of allowance" from the U.S. Patent Office on April 4, which means the patent will be awarded.

"Our competitors are using a technology that we invented," said Roy Michael. Autoscribe's vice president of sales and marketing. "We were the original company to send preauthorized checks produced with a laser printer and a computer through the American banking system.

"The patent will help in the growth of our client base. We expect our current competiton to drop drastically."

Autoscribe says that some of its competitors are violating what the patent will protect. The company intends to enforce its patent, said Mr. Michael

Autoscribe's software is used primarily for one-time events like credit collections, direct marketing, and initial sign-ups for services.

Auto-Pay lets companies collect funds owed to them by allowing them to print checks on their customers' behalf. If a company purchases. Auto-Pay, it produces the checks. Companies can also elect to have Autoscribe or Accelerated Payment Systems a Cockeysville, Md., company with which Autoscribe has a licensing agreement, produce the checks.

Verbal Authorization

Customers authorize the payment verbally, providing their checking account number and other check information.

Then the payee reproduces and deposits the check, which clears in about two days. The customer has the right to stop payment and receives the Auto-Pay item with the monthly bank statement.

The advantage of this process, said Mr. Micheal, is that it eliminates the time a check is in the postal system, and it provides assurance that the funds will be received promptly. But unlike some on-line home banking or point of sales services that utilize credit or debit cards, Auto-Pay cannot guarantee that the customer has sufficient funds.

On the customer side, the benefit is that Auto-Pay does not require special equipment like modems or computers.

Skeptics say such a service is susceptible to fraud. There have been cases in which a customer has authorized a sale or payment and a scam artis inflated the amount of money payable. Critics also argue that biller-produced drafts clog clearing systems that can be made more efficient, and less prone to error, by moving to electronic payment methods.

Nevertheless, as Mr. Michael pointed out, more money is transferred by check than by any other consumer payment method.

Some Top Clients

Autoscribe has nearly 300 clients, including Dun & Bradstreet Receivable Management Services and Baltimore Gas & Electric Co., and has cleared more than four million preauthorized checks in two years.

The patent, which Mr. Michael estimates will be issued by September, will protect "a stand-alone personal computer with a display screen and keyboard, and a printer that prints checks with magnetic ink," according to a statement issued by Autoscribe's legal counsel.

"The patent is on the apparatus that produces the checks," said Mr. Michael, who added there is no other way to offer such a service without using this equipment.

Autoscribe's competitors are dubious about the patient's validity.

"I'm not worried," said Kevin Faye, president of Intell-a-Check, a Kearney, N.J.-based company that offers the same type of service. "People have been [offering such services] for years," he added.

Steve Peroutka, one of the owners of Direct Chek Inc. in Pasadena, Md., which markets a similar product, said Direct Chek has repeatedly requested copies of Autoscribe's patent files, but that company has not responded.

"We do not believe that any patent that is issued will be valid or will cover the Direct Check System," said Mr. Peroutka.

Western Unions Financial Services Inc. of Paramus, N.J., also offers products that compete with Auto-Pay. Jeff W. Katz, its director of marketing and commercial services, agreed that the market has been rife with such products for longer than Autoscribe has been in existence.

Though Autoscribe's competitors downplayed the significance of its imminent patent, one executive of a bill-payment processing company who wanted to remain anonymous, said, "Financial service companies are going to have to get more used to fact that patents will enter their fields of business."

One such patent was issued last June to Online Resources and Communications Corp. of McLean, Va. The patent surprised businesses in the home banking field, and there has been talk of organizing a coalition to challenge the patent.

Matthew P. Lawlor, Online's chief executive, reports, however, that no challenges have been submitted to the Patent Office, "which speaks to the thoroughness of the patent," said Mr. Lawlor.

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