Lawsuit alleges Apple Pay violates patents related to biometrics

May 23, 2017 - 

Device security company Universal Secure Registry (USR) filed a lawsuit in a Delaware Federal District Court Sunday against Apple and Visa, alleging patent violation by Apple Pay.

Kenneth P. Weiss, CEO of USR, holds 13 patents relating to authentication systems using a smartphone, biometrics, and secure one-time token generation for financial transactions, according to the lawsuit. USR alleges its technology protected by those patents is at the core of Apple Pay. The suit also alleges that Weiss had extensive meetings with Visa officials in 2010, including its CEO, and discussed working together on the technology.

“USR has set forth facts in the complaint which we believe will lead to discovery that will support claims of wilful infringement against both Apple and Visa,” Weiss said.

Weiss told The New York Times that Visa signed a 10-year non-disclosure agreement for access to technology covered by the patents, and that he wrote to Apple around the same time about possibly licensing it, without receiving a response. Visa and Apple began working together to develop Apple Pay in January 2013 or earlier, according to the lawsuit, and it was launched in 2014.

A finding of willful infringement on the part of Apple and Visa could triple damages awarded to USR. Intellectual property lawyer Darin Klemchuk of Klemchuk LLP told Biometric Update in an interview that the willful infringement claim is the element to watch, and that details relating to the non-disclosure agreement and letters to Apple will be vital to that determination.

“Typically a patent plaintiff will try to say that the defendant had knowledge of the patents before the lawsuit was filed, and in light of that knowledge they didn’t change their design,” Klemchuk says of the importance of those interactions.

However, the case will likely reach a settlement, as roughly 90 percent of patent lawsuits filed do not result in a trial decision, according to Klemchuk. As the proceedings reach infringement contentions — a procedural step in which each side presents its position — a settlement is often reached. If not, then a settlement could be reached at the point of claim construction, in which the judge decides on the definitions of the suit’s important terms.

“The plaintiff has to show that every element in the patent claim is present in the accused product or method,” Klemchuk cautions. “If one element is missing than they can’t prove literal infringement. The plaintiff needs to bat 100 percent.”

“It is not uncommon for large companies to be unresponsive to outside suggestions for innovation or improvements to their product or technology,” said Weiss. “Occasionally, these companies infringe patents and force a patent owner to file a lawsuit as the only way to financially benefit from the technology he invented.”

Weiss is the founder of Security Dynamics and inventor of its SecureID technology, and piloted it through the acquisition of RSA and subsequent initial public offering before exiting the company.

USR is represented in the suit by Quinn Emmanuel Urquhart & Sullivan, which has argued several high-profile patent infringement suits, and which represented Samsung Electronics in litigation against Apple over software used in Android smartphones. The firm advised Weiss to file the suit without first seeking a licensing agreement or royalties, the Times reports.

Filing the suit first allowed him to retain control over the circumstances of the suit, though Klemchuk points out that the conditions for determining the forum where a suit will be heard changed Monday, with a decision by the Supreme Court in favor of TC Heartland. This decision will encourage future plaintiffs to send demand or licensing letters, Klemchuk explains.

The USR suit highlights the importance of willful infringement conditions for companies receiving such letters, Klemchuk says. “If you get a letter alleging that there’s patent infringement, it’s better to hire competent patent lawyer to analyze it and get an opinion than it is to ignore it, because if you ignore it, you may get one of these willful infringement claims.”

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About Chris Burt

Chris Burt is a writer and contributor to Biometric Update. He has also written nonfiction about information technology, dramatic arts, sports culture, and fantasy basketball, as well as fiction about a doomed astronaut. He lives in Toronto. You can follow him on Twitter @AFakeChrisBurt."