Holding Patents on Mobile Acceptance, a Small Firm Won’t Rule out ‘Legal Remedies’

With a pair of U.S patents in hand, a small, Montreal-based engineering firm may have placed itself in a position to strongly influence the fast-growing market for mobile card acceptance. The patents, awarded last month to AnywhereCommerce, cover payments via a dongle connected to a mobile device’s audio jack, a common setup that has been adopted  over the past couple of years by highly publicized startups like Square Inc., established payments companies like PayPal Inc., and a slew of companies in between.

How AnywhereCommerce plans to enforce its patents remains to be seen, but with more companies entering the market seemingly every month, chief executive Mitchell Cobrin isn’t ruling out legal action. “There’s a lot of people in the industry who are infringing on our patents,” he says. “Our plan is to preserve all our legal remedies and protect our intellectual property. We spent a lot of time and money to get to this point.”

Patent No. 8286875, with 31 claims, began with an application filed June 16, 2011 and was granted by the U.S. Patent and Trademark Office on Oct. 16. A separate patent, No. 8281998, contains 22 claims and was awarded Oct. 9 after an application filed Sept. 22, 2011. Both patents are headed “apparatus and method for commercial transactions using a communication device.”

Cobrin says he has received a number of inquiries from unnamed parties since the patents were posted by the USPTO. “I think the entire industry is aware of our patents,” he tells Digital Transactions News. “We’ve had press releases and other ways of making sure infringers are aware of our patents. When the patents were posted, that was the opening of the curtain, that’s when we started to get some inbound interest.”

But the impact AnywhereCommerce’s newly awarded patents might ultimately have on a rapidly unfolding market is hard to predict. Rick Oglesby, a senior analyst at Boston-based Aite Group who follows mobile payments, says it’s early days and so any possible result in a courtroom would be highly speculative . “It would have to be a major judgment to cause these companies to make a major adjustment to their models,” he says. “For a small provider, it could be disruptive, but for these larger guys you just pay it and move on.”

At the same time, many players, including Chicago-based offers giant Groupon Inc., have begun using mobile acceptance as a way to smooth out coupon redemption or other non-payment functions. To them, the payment piece of the puzzle is not a major cost factor, Oglesby says. Also, not all mobile-acceptance systems rely on the handset’s audio jack. Some connect a card-reader dongle or sleeve to a smart phone, for example, via the serial port used for charging the device.

Still, Cobrin says the increasing number of companies offering mobile acceptance only proves the value of his company’s intellectual property. “When Square launched [in 2010], we were surprised,” he says. “The number of companies that have come into the market has demonstrated how big the stakes are.” As a result, “no option is off the table” for AnywhereCommerce when it comes to defending its property, he adds.

AnywhereCommerce, known until a few years ago as HomeATM, sells a range of card-reading devices for mag-stripe, EMV, and PIN-protected payment cards (a cofounder of HomeATM, Kenneth Mages, is listed on both recent patents as one of the inventors). It has contracts to supply readers to four of the 10 biggest acquirers, Cobrin says, and also provides devices to Delta Airlines for in-flight purchases. “We have a very aggressive growth expectation,” he notes. “We’ve been fairly quiet, but in 2013 we’re going to start escalating our visibility.”