The patent-licensing victory Ronald A. Katz Technology Licensing LP announced Tuesday could lead to others, observers say.
The Los Angeles company said that Citigroup Inc. had signed a licensing agreement for its interactive voice technology that automated systems and customer service representatives use to provide information over the telephone.
Katz filed a lawsuit in July against Citi, Morgan Stanley's Discover Financial Services Inc., Wal-Mart Stores Inc., and T-Mobile USA Inc. The case is still pending against the other companies; a spokeswoman for Discover would not discuss the case, and spokespeople for Wal-Mart and T-Mobile did not return calls requesting comment.
Michael Bednarek, a partner in the McLean, Va., office of the law firm Pillsbury Winthrop Shaw Pittman LLP, who has followed the case closely, said that Katz may have offered Citi favorable licensing terms as an incentive to settle the case, and that Katz could use the agreement as leverage against other companies.
"Trying to read the tea leaves, I think this is a settlement trying to get other settlements. This is probably very favorable to Citibank," Mr. Bednarek said.
Katz has asserted broad patent rights over the electronic technology used in call centers, including credit card authorization, remote ordering, and drawing information from databases.
Mr. Bednarek said Citi is "the biggest marquee licensee yet" for the technology company. "Katz is trying to complete its licensing program by getting Citi into the fold."
Gerald L. Fellows, a partner in the Milwaukee law firm Michael Best & Friedrich LLP, who has consulted with other companies in cases against Katz, said it has spent years refining its patent dispute strategy, and that he was not surprised by Citi's decision to settle.
He also said that the agreement could lead to others.
"This will only drive up the settlement cost for other companies," Mr. Fellows said. "I can only imagine the pressure that the CEO of Discover is under when Citi caves." In his cases, he has suggested that companies form consortia to negotiate common terms with patent holders.
Ronald A. Katz, the licensing company's chief executive, said in a press release, "Considering Citigroup's sophisticated call-processing systems, this highly significant license represents a powerful recognition of the scope and breadth" of his patent portfolio.
Spokespeople for Citi did not return phone calls, but the New York company is well known for its willingness to settle suits rather than fight.
Brian Rivette, a spokesman for Katz, said it has signed licensing agreements with more than 150 companies, including more than 15 in the past year. He would not provide any details about the Citi agreement.
Michael A. Kayat, the president of Utek-EKMS Inc., a Cambridge, Mass., consulting firm that specializes in patent-law issues, said patent disputes are increasingly threatening technological innovation, such as the radio frequency identification tags used in a growing number of industries, including contactless payment cards.
"RFID and other technology markets are becoming legal minefields," he said.
A company may developing a product "unaware of these submarine patents," and when a patent holder emerges to demand a technology licensing fee, it could threaten a company's revenue stream, he said.
Mr. Bednarek said the growing prominence of technology in business operations is making historically obscure intellectual property disputes more important.
For example, he cited the dispute between Research in Motion Ltd., the Waterloo, Ontario, company that developed the Blackberry mobile e-mail service, and NTP Inc. A judge has told Research in Motion that unless a settlement is reached by next month, it could face an injunction that would shut down the service, because it uses technology patented by NTP.
"When you start touching everyone's Blackberries or the Citibanks of the world, IP has moved into the mainstream," he said.
Mr. Bednarek also referred to a dispute over eBay Inc.'s use of technology patented by MercExchange LLC of Great Falls, Va. MercExchange has requested an injunction that would permanently bar eBay from using its technology. In November, the Supreme Court agreed to review the case.
Such injunctions could threaten many companies' operations, Mr. Bednarek said. "There is the possibility that the Supreme Court could try to get this under control a little bit. Essentially, at its heart, it is a matter of public policy."
