S1 Corp., still aglow from winning an Internet banking patent this month, has wasted no time suing its chief rival in the software business, Corillian Corp., for patent infringement.
Atlanta-based S1, which sells software and services to 800 global financial institutions, filed a lawsuit Monday against Corillian of Beaverton, Ore., in U.S. District Court in Atlanta.
S1 says Corillian is in violation of its patent for a "three-tier financial transaction system," which involves the way Internet banking customers access their financial information on a host computer. The patent covers the way S1 maintains the host system on behalf of banks.
Robert Stockwell, chief financial officer of S1, said the suit is meant to protect its property from unauthorized use on behalf its shareholders and bank customers. He said his company has poured millions into research and development efforts since 1995. It applied for a patent in 1997 to protect its investment.
"We understand from public information that is available and other sources that their technology currently infringes on our patent," Mr. Stockwell said.
He said S1 is evaluating whether other Internet software vendors are in violation. "It has been a very deliberate process and one that we feel we stand on very solid ground," Mr. Stockwell said.
Matthew Cone, chief marketing officer at Corillian, said S1 doesn't have a case. He said the banks manage the data storage process, not Corillian, therefore there is no infringement.
He added, "We have not actually seen the suit, so the practice of putting out a press release before we have actually received the suit is a little strange. It does seem a bit hastened."
Jeffery Baker, an equity analyst at SunTrust Equitable Securities who covers S1, said the suit comes at an inopportune time for Corillian. It has filed a registration statement with the Securities and Exchange Commission for an initial public offering of stock. The company is about to start a road show for analysts and investors this week, in hopes of raising $69 million in a stock offering that would occur sometime in April.
Corillian develops Internet banking software for financial institutions. Mr. Baker said its strength in the market is selling to banks that have $10 billion to $25 billion of assets. It has signed contracts with 26 financial institutions, 12 of which have installed the system.
Mr. Baker said some people on Wall Street believe S1 sprang the lawsuit on Corillian to upset its IPO. He declined to say whether he believed that allegation himself. "That's what I heard," he said. "I'll let you draw your own conclusions."
He did note, however, that the marketing war between the two companies has heated up in recent weeks. Corillian has made much of the fact that Wachovia Corp. and Citigroup - both of which own stakes in S1 - have recently licensed and started using Corillian's system.
In 1997, Wachovia and Citigroup were among six prominent financial institutions that invested $14 million in Security First Network Bank, which was bought by Royal Bank of Canada a year later. The technology group became an independent company called Security First Technologies that later changed its name to S1.
And in a late Monday filing with the SEC, 724 Solutions, Lehman Brothers Holding Inc., Bank One Corp., and Huntington Bancshares (Huntington is another early S1 investor) have agreed to invest in Corillian.
"S1 is interested in protecting their patented rights," Mr. Baker said. "With Corillian being probably the biggest threat to the company right now, [S1] is going after them."
Mr. Stockwell meanwhile brushed aside the timing of the lawsuit, noting that the legal action began after the patent was awarded. He added, "It's capitalism at its best. This is competition, and competition that we enjoy."
