Online Resources' Home Banking Patent Hits Hot Buttons throughout Industry
Fickenscher, Lisa, American Banker
Online Resources and Communications Corp., a supplier of home banking devices, has been getting far more attentioin than it bargained for.
Though Online is one of the more successful manufactuers of telephones enhanced with data screens, the inordinate degree of attention stems from a patent it was granted last June.
That action caused an uproar in electronic banking and patent-law circles. The critics say that Online should not have been able to get a patent on a payment process - a patent that could result in its collecting royalties on certain types of consumer-initiated payments.
Online's patent, No. 5220501, is one of several to raise questions about the applicability of the patent system to new computer and communications technologies.
Online may not have the visibility of Compton's New Media, a division of Tribune Co., which was granted a similarly contro-versial patent last August that is now being reviewed by the U.S. Patent and Trademark Office.
But Online's case has created some nervousness among bankers who see a future in home-based systems, and has attracted its share of challengers.
All of this has Online's president, Matthew P. Lawlor, vigorously defending his coup.
Mr. Lawlor, 45, a former consumer banking executive at Chemical Bank in New York, co-founded Online Resources in 1989, shortly after earning an MBA from Harvard and serving a one-year appointment with the White House Office of Management and Budget.
The company, based in McLean, Va., has supplied the screen telephones for Nations-Bank's home banking program in the Washington-Maryland-Virginia area.
"We fully expected there would be challenges from day one," said Mr. Lawlor. "Bascially, we spent a lot of time and money very early on, when a lot of people were not thinking about this stuff."
So far, the opponents have been meeting behind closed doors, plotting how to respond in the arcane terms of patent law. Like boxers, the two sides are circling cautiously, gauging each other's strength before throwing a punch.
Patent experts and people familiar with Online's product say that nothing less than a good fight can be expected - once someone makes the first move.
Since June 15, when the patent was issued, Online's opponents have have been talking to each other. Some have formed alliance with the intent of taking Online on in force. Others have merely consulted their own attorneys to determine if they are in danger of infringing the patent.
One source - among many ho asked to remain anonymous for this article - said, "There are a lot of folks in the industry, from third-party procesors to ATM networks and banks, who are investigating how their own systems are affected by the patent and how they can prove that it is invalid.
"Quite a few of us are waiting for Online to identify someone who is violating its patent, because that will test the issue of whether it is valid."
The patent appears to cover any home banking transaction or purchase of goods and services that debits a customer's bank account through a home terminal such as a personal computer, television, or screen-based telephone.
Online has the exclusive right to process a request for immediate payment for a product or service ordered from any home terminal using a personal identification code.
As in the NationsBank program, the process utilizes an automated teller machine network. The customer's account is debited immediately, and Online is responsible for paying the merchant or servicer on behalf of the customer.
Home users can check their balances, transfer funds, pay bills from a list of merchants, and review previous payments.
According to the Patent and Trademark Office, others had previously explored the use of an ATM network in connection with bill paying - a fact that can bolster claims that the patent is not original. …