For several
years players in the industry have been trying to determine who, if
anyone, has a patent on the concepts that are becoming known as Check
Conversion. While at least two patents have been granted that seem to deal
with various aspects of the process of collecting paper checks at the
point-of-sale through the use of the ACH system, one patent seemed to us
to most closely mirror the current NACHA approved approach.1
So
if you are like me, you may have been wondering, why the “5,484,988”
patent holder for Check conversion2
has not been defending their patent against a multitude of “would-be”
infringers.3 The answer
may lie in the fact that a battle has been underway over the ownership of
the patent itself.
The
original patent holders, Mr. Robert R. Hills and Mr. Henry R. Nichols,
entered into an agreement to sell the patent to a Canadian company, which
through several holding company/sub-company iterations and name changes
has come to be known as LML Payment Systems, Inc.4
According to records
obtained by The Green Sheet from the U.S. Patent Office, the patent was
transferred on March 11, 1998 from Messieurs Hills and Nichols to
ChequeMARK Patent Inc. (apparently later to be called LML Payment Systems,
Inc.)
The
Canadian press has been slamming LML recently.5 Mr. David
Baines an investigative reporter for The
Vancouver Sun reported
that the company is a front for two individuals suspended from the B.C.
stock market (Don Choquer who was suspended in 1997 for two years along
with Robert Moore, who is serving a five-year ban for fraud offenses
relating to a Canadian company called Cam-net Communications Networks
Inc.) and that the company is a money-losing public shell.
While
LML is getting raked over the coal by the press, it has gone on the
offensive issuing a press release on June 136
denying the claims about its business, and noting that “The
Company wishes to take this opportunity to refute certain errors and false
allegations contained in the article and confirm to our shareholders and
the public that the affairs of the Company have been and are conducted in
utmost faith and in accordance with the highest legal standards.”
Perhaps
an even more interesting aspect of the June 13 LML press release is the
restatement by LML of their ownership of patent 5,484,988. “The
Company’s intellectual property estate will include a recently allowed
patent application regarding Internet checking transactions, in addition
to U.S. patent No. 5,484,988.”
Returning
to the documents secured by The Green Sheet, Inc., from the U.S. Patent
Office, as of mid-June 2000, patent No. 5,484,988 is actually registered
to Robert R. Hills7,
with a patent office execution date of August 20, 1998.
According
to patent office records, the Patent Purchase agreement between Messieurs
Hills and Nichols to ChequeMARK contained a repurchase right exercisable
in the event that a $1,500,000 funding or, in its stead, consecutive
monthly minimum funding of $45,000 each were not evidenced. As a result of
ChequeMARK Patent, Inc., having failed to satisfy minimum funding criteria
as established with the Patent Purchase Agreement and pursuant to the
repurchase rights provided Patent 5,484,988 was transferred from
ChequeMARK Patent, Inc., to Robert R. Hills. So then, this issue is
straightforward. The public company, LML Payment Systems, Inc., is issuing
press releases that they own a patent that is actually registered to
someone else, namely Robert Hills. Well no, it is not quite that simple.
In fact, LML Payment Systems Inc., a Canadian Corporation, as successor to
Leisureways Marketing, Ltd, a Canadian corporation and ChequeMark Patent,
Inc. a Delaware corporation have sued8
Robert R. Hills, Mark Technologies, Inc. f/k/a ChequeMARK Technologies
Corporation to attempt to perfect their ownership of the technology and
underlying patents. Based on court records secured by The Green Sheet at
the time this story was going to press, it appears that the dispute may
soon be settled through court ordered mediation.
Perhaps
the most interesting part of the case is that LML does not seem to be
keeping its public stockholders informed of the current status of the
Electronic Check Conversion patent, namely that they are currently
involved in a legal action to secure the patent. The final result of this
lawsuit should be interesting because it will allow the prevailing entity
to finally take whatever infringement actions that it plans to take, and
at this point it would seem that everyone in the industry would like to
know that answer.
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© Copyright 2000; The
Green Sheet, Inc.
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