Hart Helps Patent Holder Get Access to Smart-Card Issuers

By Kuykendall, Lavonne | American Banker, March 23, 2001 | Go to article overview

Hart Helps Patent Holder Get Access to Smart-Card Issuers


Kuykendall, Lavonne, American Banker


Alex W. "Pete" Hart, the former head of MasterCard International and of Advanta Corp., has signed a five-year contract to promote a company that owns a smart card patent and plans to hit up the major U.S. card issuers for licensing fees.

The company, called Quest Products Corp., expects to earn the fees from a patent it holds on multiapplication smart cards -- cards able to store more than one account.

Hiring Mr. Hart, who formally is a "special consultant" to Quest Products, was an explicit part of the company's strategy to gain the attention of big card issuers and extract fees from them, according to Herbert M. Reichlin, president of the company, which is based in Syosset, N.Y.

"Pete Hart walks through the top doors," Mr. Reichlin said. "We are looking to license our patent to the major institutions, and I understand what access means."

Quest Products' business plan goes like this: As U.S. credit card issuers' smart card offerings gather momentum, they will almost certainly encounter growing consumer demand to store multiple accounts. Companies that opt to meet the demand will owe licensing fees to Quest.

Mr. Hart, who has been an independent consultant in the cards industry since his departure from Advanta in 1997, said in a telephone interview that he decided to work with Quest Products after doing lengthy interviews with company executives and their intellectual property attorneys.

"It would appear that they appear to own the rights to very significant technology that has bearing on the future of the smart card business," he said. "I like what the attorneys have told me, and I like what I read about it. I am just a consultant, and I am offering them my best advice."

Asked whether the placing of multiple financial accounts on a chip card could be patented, Mr. Hart declined to discuss the specifics of the patent owned by Quest Products.

"I respect opinions of the patent counsel," Mr. Hart said. "My hope is we have a very clear claim to involvement in that activity. It would be premature for me to say much more than that."

Smart card consultant Jerome Svigals, director of the Smart Card Institute in Redwood City, Calif., predicted that a patent on multiple applications would not hold up to serious scrutiny. He holds several patents of his own on card technology and has developed both magnetic stripe and smart card technology.

"I think they are out of their minds for thinking they have a strong claim," he said, adding that microprocessor chips have been used to store multiple applications since the 1950s. "There is so much prior art on multiple applications on smart cards."

The U.S. Patent Office has been cutting down on the number of patents it grants for business methods, but there are still many companies like Quest that have broad patents and sometimes make money by trying to enforce them.

Quest's Web site describes the company as a product incubator that aims to bring to market various patented or patentable consumer products. Quest is seeking to bring to market a multiapplication smart card product of its own, Big1card, which is covered under its patent. Mr. Hart's responsibilities include the "development and commercialization" of Big1card, which Quest Products says can hold a wide variety of accounts, including credit, debit, frequent-flyer, telephone calling card, frequent hotel stay, and other loyalty programs. …

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