Just as changes in federal law appear to have quelled the spate of lawsuits from individuals claiming lack of notifications on ATMs, another series of lawsuits has been filed alleging that ATMs deployed by financial institutions and independent service organizations violate a company's patents.
Automated Transactions LLC of Wilmington, Del., has brought suit against banks, credit unions and ISOs in at least three states alleging that their ATMs violate patents that the patent owner, David Barcelou, holds for automated terminals that conduct transactions over the Internet.
According to docket records from various U.S. District Courts, the company, which Barcelou created to market licenses for his patents, has active complaints against at least 14 banks, five credit unions and four ISOs alleging that the firms' ATMs violate its patents.
Three of the most recent suits involve three credit unions in the Buffalo, N.Y., area: the 7,200-member, $27 million Erie Metro FCU in Blasdell; the 5,800-member, $47 million Buffalo Service CU in Buffalo; and the 8,700-member, $69 million Buffalo Community FCU, also headquartered in Buffalo.
Calls to attorneys involved in the litigation have not yet been returned.
John Funk, a banking attorney with Gallagher, Callahan & Gartrell in Concord, N.H., who has advised over 100 financial institutions facing similar claims, maintains that the patents being enforced are, to some extent, accidents of history.
“One thing that is frustrating about this is that you have to go back to the time when the patent application was made in order to really understand it,” Funk explained. “At that time, in 1996, the Internet was largely not being used for commercial transactions of the sort that ATMs provide. But then the patent was not granted until 2005 and by then there had been great leaps forward in technology.”
At the time the patent application was made, the technology being patented was novel, but by the time it was granted it had become much more widespread.
Automated Transaction's approach in a number of cases, according to court documents, has been to contact a financial institution with a letter alleging the patent infringement and then offering to license the ATM deployer's use of the technology for a fee. Sometimes the fee has been based on numbers of ATMs deployed and sometimes by asset size and has ranged from as low as $1,000 to as high as $100,000, according to Funk. ATM deployers who decide not to pay up have faced suits.
Funk distinguished these cases from the suits over ATM notification, pointing out that in this case there are actual patents which the company is seeking to enforce.
He also distinguished them from the usual “patent troll” cases in which an investor or group of investors will buy a patent or collection of patents and then sue to seek a return. In this case, the company seeking to enforce the patents in one set up by the patent holder, he observed.