ChequeMark Technologies Corp. of Palm Coast, Fla., is hurling patent- infringement accusations at a number of companies that are processing check transactions at points of sale.

ChequeMark claims it has patented the process in which checks presented at retail checkout counters are converted into electronic debits instead of being put into regular clearing channels.

The patent was issued in January 1996, and Robert Hills, president of ChequeMark, said he has invited several alleged violators to engage in "licensing discussions."

The invitees seem unconcerned. Some have checked the patent with lawyers, who reportedly have said there is enough "prior art" in the field for these companies to challenge ChequeMark's claim - if they want to spend the money.

Online Resources and Communications Corp. of McLean, Va., set off a similar sequence of events with a 1993 patent for on-line debit transactions through automated teller networks. Initial fears have dissipated. Lori Stewart, senior vice president, said the company has issued some licenses. "Our goal here is to make this industry grow," she said.

Neil Godfrey, president of Tustin, Calif.-based e-Funds Corp., said that up to 29 patents covering check truncation already exist. Among those asserting violations, "Hills is the most vociferous-and the most ignored," Mr. Godfrey said.

But Mr. Hills insisted, "What we have is unique, defensible, and uniquely and specifically addresses the issues that are now being attempted in various pilots."

That there is a dispute indicates how the electronic payment stakes are rising, and some critics say bankers are letting a business opportunity slip away.

About 11.4 billion checks-22% of total U.S. volume-are written at the point of sale each year, according to PSI Global of Tampa.

The truncation business challenged by Mr. Hills is largely the domain of nonbank service companies like Deluxe Corp., First Data Corp.'s Telecheck Services unit, Equifax Inc., National Processing Co., and entrepreneurial ventures like e-Funds and Bankserv of San Francisco.

"Banks have the opportunity of a lifetime to convert a relatively low- profit, low-margin revenue stream into a very high-margin, high-revenue stream," said David Kvederis, president of Bankserv.

But "they have to wake up. There are a lot of private companies out there that are either in the business or are about to go into the business."

Trade groups are trying to whip up interest. The Banking Industry Technology Secretariat, for instance, has placed in-store truncation on a list of electronic initiatives it is investigating.

"We are looking at how we can manage taking more and more paper out of the infrastructure," said Catherine Allen, chief executive officer of BITS, a division of the Bankers Roundtable in Washington.

Ms. Allen said C. Webb Edwards, chief information officer at Norwest Corp., has tackled the issue head-on as the leader of BITS' industry review committee.

The National Automated Clearing House Association, meanwhile, is sponsoring a series of check truncation pilots.

Some bankers see potential problems in check truncation. Keith Theisen, a vice president at Norwest, said check processing revenues are significant to many banks, which may be loath to see the income-and their control over that market-wither away as payments become electronic.

Others see an upside. A survey of 600 consumers by Telecheck Services of Houston found that 80% of consumers view truncation favorably.

Mr. Kvederis, who wants to work in alliances with banks, contends that truncation at the point of sale could generate $3 billion in annual revenue for hardware vendors and transaction processors. With only about 4,000 merchants, by Nacha's estimate, now involved in truncation efforts, most of those dollars remain up for grabs.

ChequeMark's move to protect its patent may signal the start of serious jockeying for market position.

"Do we intend to aggressively defend the integrity of the patent? Of course we do," said Mr. Hills. "Do we want to go out and create a whole bunch of wars? No we don't."

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