AT&T sues PayPal, eBay

Long-distance telephone company AT&T Corp. said on Thursday it filed a lawsuit against online auction house eBay Inc. and its PayPal Inc. unit, saying their online payment systems violated its patent on secure Internet payments.

AT&T SAID ITS patent covers transactions in which an intermediary securely processes payments over a communications system such as the Internet.

The use of an intermediary ensures that one party will not have to disclose sensitive information, such as a credit card number or bank account number, directly to the other party in a deal.

eBay, which acquired PayPal in 2002, did not immediately return calls seeking comment.

PayPal’s service enables individuals or businesses with an e-mail address to send and receive payments online. It has said its “proprietary fraud systems” ensures safe, real-time payments.

In the lawsuit, which was filed in federal district court in Delaware, AT&T said it notified the companies more than a year ago that they were using technology patented in 1994.

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AT&T offered to license the patented technology to each of the companies, but it said the two companies have refused to pay for a license. A copy of the lawsuit was obtained by Reuters.

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AT&T also said the transaction fees eBay charges customers for the use of PayPal has generated significant revenues for the auction house. AT&T also said it has suffered financially since it was unable to sell the patented technology.

The long-distance company asked the court for a permanent injunction preventing eBay and PayPal from using the technology. It also asked for the profits and revenues the companies gained from its use, and an award of compensatory damages.

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