When the two biggest core providers in the U.S. get involved in a patent dispute, what happens to their customers and competitors? The question arose in January, when two Fiserv subsidiaries, CashEdge Inc. and CheckFree Corp., filed a lawsuit alleging that Fiserv's top competitor, Fidelity National Information Services Inc. (and the FIS unit Metavante Corp.) had violated three Fiserv patents.

Experts say bank clients of the two vendors are unlikely to be affected by the lawsuit in the near future because of the indemnification clauses most have in their contracts that protect them from such disputes as well as the fact that the suit is expected to take years to settle.

Nevertheless, industry analysts and legal experts predicted that the suit will be closely watched as it could have far-reaching effects. The results could range from higher prices for payments technology to closed doors to smaller vendors attempting to gain ground.

"Fiserv is betting big," says Nancy Atkinson, a senior analyst at Aite Group LLC. "Fiserv is trying to exert dominance over FIS. These two companies are huge rivals."

James G. Gatto, a partner who handles intellectual property cases at the law firm Pillsbury Winthrop Shaw Pittman LLP, says that patent infringement suits generally fall into one of two categories — ones where companies are looking to generate revenue from settlements and licensing agreements from patents and ones where a company wants to protect its position within a particular field. Fiserv said in the complaint, which was filed in the U.S. District Court for the Middle District of Florida, that it is pursuing the suit because it has a "responsibility to its investors and its employees to take all necessary actions to protect its valuable intellectual property from further infringement and exploitation."

Fiserv's litigious action is part of a growing trend. "As we see person-to-person payments and money movement move to center stage, vendors are more aggressively defending their IP in the space," says Emmett Higdon, founder and principal at the banking technology consulting firm Prizm Strategy. "This is something that is very hot right now, especially in the mobile space, so it's no surprise that they are moving to protect that space."

Fiserv has a lot at stake with its 2011 acquisition of CashEdge, a provider of online payments and account transfers, says Gwenn Bezard, a research director at Aite Group. Fiserv also bought CheckFree, an online bill-payment unit, in 2007. Fiserv is willing to pursue litigation that could cost millions of dollars because of its financial investment in those deals, Gatto says. [Fiserv, of Brookfield, Wis., provided a press release about the lawsuit and the complaint but declined to comment further. FIS, of Jacksonville, Fla., also did not return calls and emails seeking comment.]

At the same time, FIS has made its own deals, including purchasing Metavante in late 2009 for $4.2 billion. This increased the company's offerings in areas such as electronic bill payment, cash management and card payments processes.

These companies overlap in the services they provide and they pursue the same financial institutions as clients. In 2010, 84% of FIS' revenue, or $4.4 billion, came from the financial services industry. For the same year, 95% of Fiserv's revenue, or $3.9 billion, came from this sector. The two companies appear in Bank Technology News/American Banker's FinTech 100 annual listing of the hundred largest technology vendors to the financial services industry. On the 2011 list, FIS came out first and Fiserv second. Through the first nine months of 2011, FIS reported $4.3 billion in total revenue while Fiserv lagged behind with $3.2 billion for the same period.

"So much money is at stake," says Jennifer Lefere, an attorney at Hool Law Group PLC. "It's not just that someone has to stop what they are doing. The other party then has to pay licensing fees or royalties if the plaintiff wins."

Even though this lawsuit may not be resolved for several years, it could help Fiserv's bottom line in the near term with Higdon describing it as "bad news for FIS." Fiserv could use the case to seal deals with clients who are wavering between them and FIS. Atkinson says that customers may see the lawsuit as proof that Fiserv owns the patents to the technology and go with them, even if that's not what is ultimately decided in the case. (The suit could result in a finding that the patents were invalid or were not infringed upon.)

The lawsuit also could slow down other companies, especially smaller ones. Lefere says that because of their financial resources, the leaders in an industry, like Fiserv and FIS, have the best options when it comes to acquiring a company for its intellectual property or pursuing patent litigation. Gatto says that companies may now do much more research or wait until the lawsuit is resolved before they enter a field that the patents cover.

Experts say that the three patents listed in the suit were very broad and might cover technology used by not only FIS, but other companies as well. The first patent listed in the suit covers CheckFree's "Dynamic Biller List Generation." The purpose of the system is to help increase the usage of electronic bill presentment. This includes determining whether bills for a company are available electronically, and if so, sending a notice to a customer about this option.

The second patent covers CheckFree's "Systems and Methods for Risk-Based Determination of a Form for Crediting a Payee on Behalf of a Payer," which is a computerized system for paying bills. The system facilitates collecting consumer information and creating a master file with banking information and routing codes, applying payment instructions, using software to determine factors such as what is the appropriate form of payment, comparing each transaction against a dynamic credit file and making the payment to the biller.

The final patent covers CashEdge's "Method and Apparatus for Managing Multiple Accounts." Multiple accounts can be registered at a single point, thus allowing the transfers to occur.

However, the patents' broadness also could be Fiserv's downfall. An invention must be determined to be new, useful and nonobvious for a patent to be issued. FIS could raise the question of the validity of these patents. Experts wondered if the workflows for the three contested patents provided in the lawsuit's complaint were distinct enough.

"Based on some of the layouts, I'm not sure how else you would structure it," Atkinson says. "By my personal definition of nonobvious, I'm not sure it meets it. But I am not saying Fiserv is wrong."

The lawsuit also could spur other players, including FIS, to re-evaluate their offerings and find ways to work around the disputed technology. Bezard says that this was a likely option for FIS.

"Sometimes these suits result in improvements and enhancements to the system," Gatto says. "You look for ways to innovate and design around it."

Experts predicted a protracted battle and that FIS could potentially file counterclaims. Some also thought there would be little chance for a quick settlement as neither company will want to give up ground.

"It's really hard to know what the outcome will be," Atkinson says. "There will be some concerns in the industry and people will wonder how adversarial does Fiserv want to be going forward. But I have a hard time seeing how this will settle with Metavante licensing Fiserv's capabilities."

The FIS/Fiserv case is hardly alone among patent lawsuits impacting firms tied to banking and technology-particularly regarding which party controls the model to deliver a particular service.

In early January, for example, U.S. Bank settled a patent infringement lawsuit with DataTreasury related to check processing technology. DataTreasury has been a frequent participant in patent lawsuits, filing numerous times since 2002 — alleging that various banks have infringed on its patents for image capture, centralized processing and electronic check data and document storage.

In 2010, a jury awarded DataTreasury $26.6 million in damages, finding that U.S. Bank and Viewpoint — a technology firm in which U.S. Bank and other banks hold stakes — infringed on DataTreasury's check imaging patents. That award was later doubled by a federal judge to more than $50 million.

DataTreasury later asked for the case to be dismissed because it reached a settlement and agreed to a deal to license its technology. DataTreasury has filed more than a dozen such suits in all, with Capital One, Regions Bank, Prosperity Bancshares and American Bank of Texas all finding themselves served. At issue was billions of dollars in royalties tied to check imaging.

In another recent suit, digital card design provider Serverside Group sued several firms in the summer of 2011, including Anheuser-Busch Employees' Credit Union, American State Bank and T8 Webware, alleging they infringed on Serverside's patented card customization technology. Serverside's patent covers the tech that receives an image from a customer and transmits it to the card.