Checkfree Corp., the nation's largest bill-payment processor, said Wednesday that it has sued a subsidiary of personal finance software firm Intuit Corp. for patent infringement.
Checkfree officials said the Columbus, Ohio-based company was granted a patent covering its automated bill-payment process on Tuesday. It then filed a lawsuit in Federal District Court in Columbus against the Intuit unit, National Payment Clearinghouse Inc.
Checkfree is seeking an injunction against Downers Grove, Ill.-based National Payment, as well as unspecified damages.
The broad patent covers Checkfree's approach to automated bill payment, whereby consumers contract with the company to pay their bills, either by electronically debiting a bank account or by issuing a paper check.
Consumers can enter bill-payment information using a personal computer equipped with a modem, or by using a Touch Tone telephone. Checkfree processed about $6 billion worth of payments in 1994, officials said.
Checkfree officials said the patent does not apply directly to banks that currently offer bill-payment services directly to their customers, only to third-party processors like National Payment.
"The thing we do that makes us unique is that it is a program that allows anybody at any bank to do bill payment electronically," said Michael Sapienza, vice president of marketing at Checkfree.
Intuit and National Payment officials were not immediately available for comment on the suit.
The legal wrangle is just the latest maneuver in the battle to control the nascent home banking market. Banks, technology companies, cable television companies, and telecommunications firms are all jostling for position to provide automated bill payment and electronic home banking services to consumers.
National Payment was formed in 1993 by Bruce Burchfield, a payment systems veteran who was previously chief executive of automated teller machine network Cirrus System Inc.
National Payment originally aligned itself with Microsoft Corp. to provide bill-payment processing for the software giant's PC-based personal finance software, called Money. The program competed directly with Intuit's flagship product, Quicken.
Attempting to block Microsoft, Intuit acquired National Payment last July for $6.8 million. Not to be outdone, Microsoft last November agreed to acquire Intuit for $1.5 billion, a deal that is now being reviewed by the Justice Department on antitrust grounds.
Chase Manhattan Corp., First Chicago Corp., Michigan National Corp., and U.S. Bancorp currently have contracts with National Payment to provide bill-payment services to their customers using Microsoft Money.
Microsoft chairman Bill Gates has said that automated bill payment will be one of the first services to ride the emerging information superhighway, and his blockbuster Intuit deal has shaken up bankers and technology providers like Checkfree.
And as the competition has heated up, the home banking market has become increasingly litigious. The Checkfree lawsuit follows another legal fight between Citicorp and Online Resources and Communications Corp., a maker of computerized telephones used for home banking and other electronic transactions.
Citicorp sued Online last November, charging that the McLean. Va.-based firm's so-called smart telephones infringed on patents the bank received for devices it is now testing.
Online has sought to protect itself by using intellectual property laws - in 1993 it received a broad patent covering any home banking transaction that debits a customer's bank account. It has countersued Citicorp.
Online's and Checkfree's patents are similar in that they attempt to safeguard a process, rather than a specific product or technology. Some bankers and consultants have said that patents covering a widely used process like bill payment will be harder to defend than patents protecting a specific product or device.
But Robert H. Loeffler, a partner in the Washington, D.C., office of the Morrison & Foerster law firm disagrees. Process patents "are often harder to interpret, but not necessarily harder to defend," he noted.
"If we didn't feel we had a good case (against National Payment), we never would have filed it," Mr. Sapienza said of Checkfree's lawsuit. "We're not in business just to pay lawyers lots of money."