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On Track Innovations Moves To Protect NFC Patent In Lawsuit Against T-Mobile

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The payments industry is seeing only the “first steps” of Near Field Communication development as a contactless-payment technology, so it stands to reason that lawsuits related to NFC patents would not be far behind.

On Track Innovations Ltd. proved that theory March 26 in filing a patent-infringement lawsuit against T-Mobile USA Inc. in New York District Court, claiming T-Mobile sells NFC-enabled phones that incorporate OTI design elements for implementing NFC.

The complaint asks the court to issue an injunction against T-Mobile to stop selling the handsets, particularly the HTC Amaze 4G and the Nokia Astound.

In addition, Iselin, N.J.-based On Track Innovations, or OTI, seeks compensation for the alleged infringement or a “reasonable royalty” for use of the technology, the complaint states.

Ohad Bashan, president and chief marketing officer of OTI Global and CEO of OTI America, declined to discuss specifics of the lawsuit, but he did say the company believes T-Mobile put in place a “critical design” of the OTI technology without OTI’s permission.

“Any new technology has different levels of implementations, and companies developing those implementations put their own spin on them,” Bashan tells PaymentsSource. “Our claim discusses our belief of patent infringement.”

The lawsuit marks the first OTI has filed related to NFC technology. OTI has dealt with a couple of instances in which it filed complaints against other companies for alleged Intellectual Property infringements, but those were settled out of court, Bashan notes.

“Filing patent-infringement lawsuits is definitely not in our line of business,” Bashan says. “We will let the lawyers do what they do in handling this.”

Asked if OTI suspects a former employee might have shared technology information with T-Mobile, Bashan said he could not comment on any speculation regarding the case. Former technicians going to other companies and integrating designs patented by former employers “is not a common practice” in the industry, he contends.

A T-Mobile spokesperson declined a PaymentsSource request for comment, saying the company does not comment on pending litigation.

So much innovation is occurring in mobile payments, it is likely filing lawsuits for patent infringement will become similar to land-grab complaints of the past, Brian Riley, senior research director and analyst with Needham, Mass.-based TowerGroup, tells PaymentsSource.

“As mobile-payment technology really gets going, there could be tons of patents like this for every aspect of the technology,” Riley suggests.

Eventually, the courts may have to decide how bogged down they want to get in determining the differences and slight nuances of certain technologies and the patents protecting them, Riley says.

Yet many patent-infringement complaints are “very valid,” he adds.

In the case of NFC patent infringement, the court will have to decide “how different is different?” in determining what T-Mobile’s equipment provides compared with what OTI develops, Riley contends. “We can’t forget that the mousetrap has 4,000 different patent variations,” he adds.

It is not surprising that OTI seeks to protect its NFC-technology patent because the company considers itself a pioneer in contactless payments.

OTI was “an active participant” in helping MasterCard Worldwide develop contactless-payment technology with PayPass cards in 2003 and Visa Inc. with payWave cards in 2007, Bashan says.

The company has been at the forefront of NFC development, Bashan contends. The payments industry tends to term different forms of contactless technology as NFC without a full understanding of how it works, he adds.

The key aspect of true NFC technology is that it allows a consumer to initiate a payment transaction through a mobile handset at a terminal that has an NFC reader and, in turn, instantly receive information back to the handset about the payment balance, a store coupon, loyalty program points or updates, Bashan says.

“Constant feedback and a personalized program is what NFC is all about,” Bashan says. “We really are in the first steps of this technology, which will provide many more capabilities [for consumers and merchants],” he adds.

It will be interesting to see how Apple responds to any infringements on the more than two-dozen of its recently awarded NFC patents (see story).

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