Payment processing patent infringement lawsuit – MobilePay v. PayPal

Retailers are under constant pressure to make it easier for customers to do business with them. The internet has enabled people to order products online from their homes. This has negatively impacted retailers who have physical stores. When a customer enters a store, the store owner needs to make it as easy as possible for the customer to purchase a product in the store. One of the strategies store owners use to make it easy for a customer to purchase a product is to outfit store employees with mobile credit card readers. Every store employee equipped with a mobile credit card reader is capable of making a sale to a customer. Mobile card readers reduce the time a customer needs to wait before they can buy a product by removing the the need for the customer to stand in line waiting for a cashier.

Mobile card readers are inventions that can be protected by patents. The patents associated with mobile card readers are becoming increasingly valuable as more retailers seek to purchase them.

A patent is a government grant of certain exclusive rights to the inventor of an invention. An inventor can obtain a patent in the United States by filing a patent application with the United States Patent and Trademark Office. The patent application must describe the invention and demonstrate that the invention meets the requirements to be patented. For the patent application to be granted the invention must be new, useful and not obvious. If the patent application is granted the owner of the patent will be granted the exclusive right to make, use, sell and import the invention in the United States. If someone other than the patent owner exercises one of these rights that can be considered patent infringement. A patent owner can file a lawsuit for an injunction to stop patent infringement and for money damages that occurred because of the patent infringement.

MOBILEPAY LLC v. PAYPAL, INC., 18-cv-00287 (W.D. TX 2018) is a patent infringement case that involves mobile card readers. MobilePay owns a patent on mobile card reader technology, specifically U.S. Patent No. 9,800,706 entitled ELECTRONIC DEVICE INPUT/OUTPUT SYSTEM AND METHOD which issued on October 24, 2017. PayPal is a major processor of credit card transactions which sells a device which can turn just about any cell phone into a mobile card reader. PayPal’s device plugs into the audio port of a cell phone. PayPal’s device transmits the information stored on a credit card’s magnetic stripe to the cell phone through the audio port when the credit card is swiped through the device. MobilePay feels that PayPal’s device infringes on the ‘706 patent.

The complaint outlines the claims of the patent and how PayPal’s device infringes on those claims. The patent claims a three part invention which reads data from the card, transmits the data to the cell phone and then uploads the data to a cloud service. The third part of the claim could be tricky for the plaintiff. The definition of cloud service is not defined in the patent claim so to find the definition of a cloud service must be derived from the description section of the patent. If it turns out that the PayPal device does not upload data to a cloud service, as defined in the patent, then it is possible that the patent is not being infringed.

PayPal has not submitted their answer to the complaint yet so we will have to wait and see how they respond.

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