In the wake of Checkfree Corp.'s patent-infringement suit against a home-banking competitor, experts are bemoaning the scope of some recent patents and questioning the rules for granting them.

Upon receiving a patent for its processing services two weeks ago, Checkfree - the country's leading bill payment processor - immediately sued fast-rising rival National Payment Clearinghouse Inc.

So quickly did events develop, say sources close to the situation, that the case was in the newspapers before some high-level executives at National Payment and its parent, Intuit Inc., had been served with all the required papers in the case.

The lawsuit has caused a stir among bankers and other observers of the industry who see electronic bill payment as essential to banks' future.

The suit raises questions about which company created the payment process under dispute and what the process encompasses. On a broader level, the case points up larger questions about the criteria for getting a patent and about what, indeed, is patentable.

"Process patents are a reality. I think they are a troubling reality and can be overly broad in their application," said Edward L. Neumann, a senior consultant with the Washington-based consulting firm, Furash & Co. "Process patents may indeed represent hurdles to developing electronic commerce."

Electronic commerce seems rife with opportunity for banks, software companies, and other related service vendors. But many pundits feel that broad patents on these new and rapidly expanding products and services will muzzle these efforts and create monopolies rather than foster competition within the incipient market.

To obtain a patent, a product or process must meet three basic criteria: It must be new, useful, and nonobvious, according to officials from the U.S. Patent Office. But from there, the procedure for determining a patent appears to get a bit fuzzy.

"It seems easy to me to get a patent for something that's blatantly obvious," said Catherine Corby, the director of retail strategy for Barnett Banks Inc.

Barnett is actively pursuing home banking as a line of business, with projects in the works that involve interactive television and personal computers. Ms. Corby expressed concern that the current patent laws may be outdated and unsuitable, particularly in such a rapidly changing technical marketplace.

"I'm quite skeptical of patents that involve processes already in use in the industry," said Nancy O'Brien, a senior vice president for business development at SmartPay, a bill payment processor that handles transactions for more than 50 banks, including Norwest Corp. and Midlantic Corp. Ms. O'Brien said the various players in the payment business - which also include Amresco, Paymate, and U.S. Order - all use different protocols and process transactions in different ways. Thus, a broad patent would not be fair, and a narrow one should not affect competitors.

Sources have accused Checkfree of singling out National Payment out of envy over the business that competitor had been picking up since being acquired by Intuit, the leading maker of personal finance software. But the fact remains that this patent, if expansive enough, could indeed launch infringement suits against other bill payment providers and potentially other players in the home-banking market.

Checkfree officials have claimed that the company does not intend to pursue litigation against banks or other bill payment processors - like SmartPay - that work more directly with the banks. But financial institutions and vendors have already started mixing it up over the patent issue in the home-banking arena.

Last November, Citicorp sued Online Resources and Communications Corp., a McLean, Va.-based maker of screen phones used for home-banking transactions, for infringing on three of the bank's patents. Online, which itself had received a controversial patent covering certain on-line payments, countersued to invalidate the bank's patents, saying it had developed the process and the device first.

The Online patent was so general that many contended it could easily cover even basic automated teller machine transactions.

"I think these broad patents are generally indefensible," said Mark Burns, a vice president for on-line services at Chase Manhattan Corp.

But whether they are legitimate or not, these patents are still necessary and they not going away. And for banks, this may become one of the key issues - or stumbling blocks - as they enter the information age.

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