Ronald A. Katz Technology Licensing LP, which has settled disputes over its call center patents with several companies by working out licensing agreements with them, is taking on perhaps its biggest opponent yet: Citigroup Inc.
Last week the Los Angeles company filed a federal patent-infringement lawsuit against Citi and several other defendants, including Morgan Stanley's Discover Financial Services Inc., Wal-Mart Stores Inc., and the cellphone company T-Mobile USA Inc.
Patent-law experts said they doubt that even Citi can prevail against the licensing juggernaut of Katz, which in the past several years has struck technology licensing settlement deals with more than 100 companies, among them a host of banks. If Citi settles, these observers say, other financial services companies will probably do the same, concluding that if Citi cannot stave off a Katz claim, nobody can.
"We're going to see a lot more of these kinds of suits," said Gerald L. Fellows, a partner in the Milwaukee law firm Michael Best & Friedrich LLP who was in New York this week to try to organize a consortium of financial companies to fight what he sees as a rising tide of "patent extortionists."
As financial companies use more developing technologies, they put themselves more at risk of being sued for patent infringement. They are well funded, may be unfamiliar with such matters, and tend to be risk-averse, Mr. Fellows said. "Those factors make the industry, unfortunately, a very attractive target."
On the other hand, if any company has a chance to avoid a settlement with Katz, it is Citi. Michael Bednarek, a partner in the Washington law firm Pillsbury Winthrop Shaw Pittman, said Citi's long experience in the market could enable it to claim "prior art."
"I think they are the innovator in their use of technology," Mr. Bednarek said of the banking giant.
Nonetheless, Citi faces "an absolutely uphill struggle," he said, and "if Citi settles in a way that acknowledges the legitimacy of the patents, then I think a lot of the stragglers will settle pretty quickly."
Spokespeople for Citi did not return phone calls seeking comment.
According to the suit, Katz Technology holds a portfolio of more than 50 patents covering the use of computers in corporate call centers.
Its founder, Ronald A. Katz, was a co-founder, in 1961, of Telecredit Inc., the first company to enable merchants to verify consumer checks over the phone using an automated system, without the assistance of a live operator. Telecredit was later acquired by the credit agency Equifax Inc. and became part of what is now known as Certegy Inc.
In 1988, the suit said, Mr. Katz formed a partnership with American Express Co. to provide interactive call processing services. That partnership eventually became First Data Corp.
Mr. Katz would not comment for this article. Brian Rivette, a spokesman for Katz Technology, said he could not comment on the case. "We really have to let the complaint speak for itself," he said.
Edward A. Kahn, the president of UTEK-EKMS Inc., an intellectual-property management and business development firm in Cambridge, Mass., said Mr. Katz' background in the industry gives him a unique position to assert his patent rights. "He obviously has had seminal patents," Mr. Kahn said.
Mr. Katz appears to have been equally meticulous about developing his patent portfolio after establishing the licensing firm in 1994. He reacquired the rights that First Data had held, and he has continued to refine his position through a series of follow-on filings.
"He has focused on reinfusing his portfolio with fresh patents. He has never stopped," Mr. Kahn said.
Even without going to court, Katz Technology has landed several major licensing deals. It has said its licensees include banking companies such as Bank of America Corp. and Wells Fargo & Co., vendors including Fiserv Inc. and First Data, and nonfinancial companies like AT&T Corp. and International Business Machines Corp.
Mr. Fellows, the Milwaukee attorney, said that even if the Katz patents prove unassailable, a collective approach to licensing could reduce the industry's overall costs. He said he has organized several consortiums in the past, including one representing 22 utility companies around the nation that he claims was the first to negotiate a collective licensing agreement with Katz.
The Katz lawsuit against Citi comes just weeks after JPMorgan Chase & Co. agreed to pay for the right to use check-imaging technology patented by DataTreasury Corp. of Melville, N.Y., a small check processor. DataTreasury has also signed a licensing agreement with Zions Bancorp.'s technology unit, NetDeposit Inc., and it recently filed infringement suits against Bank of America, Citi, Wachovia Corp., and Wells Fargo.
Matthew T. Sant, an intellectual-property attorney at Irell & Manella LLP of Los Angeles, said the ultimate effect of patent licenses could be a tax on business. He noted that there is little competitive disadvantage to a single company when many must sign similar licensing agreements - something that outfits such as Katz and DataTreasury have said is their goal.
Settling such cases can be expensive, but fighting and losing can be even worse, he said.
"The most likely scenario is that both parties will decide it's in their interest to settle," Mr. Sant said.
"Eventually the market is going to shake out, where all the players are paying roughly similar royalties."
