Trouble Looms for Apple Inc. (AAPL) With Apple Pay Lawsuit

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Apple Inc.’s (NASDAQ:AAPL) Apple Pay may be picking up steam, but the company’s mobile payment system just hit a major speed bump. Universal Secure Registry, a Boston-area company, filed a lawsuit yesterday claiming that Apple Pay violates its patents. The company claims its CEO approached AAPL in 2010 about licensing the technology, but that Apple never responded.

Trouble Looms for Apple Inc. (AAPL) With Apple Pay Lawsuit

Source: Apple

The company is seeking unspecified damages, but with Tim Cook talking up Apple Pay’s success, a ruling against it could cost AAPL dearly.

Universal Secure Registry Files Apple Lawsuit

Universal Secure Registry sent out a press release yesterday, announcing it was filing suit against Apple and Visa Inc (NYSE:V).

According to the suit, Universal Secure Registry and its CEO Kenneth Weiss holds 13 U.S. patents related to payments, secure financial transactions, physical access and an improvement on the SecureID token — a computer security method invented by Weiss and later sold to Dell, which uses it in enterprise security. The New York Times says these patents include authentication for financial transactions using a smartphone and biometric ID including fingerprints.

The reason Visa is included as part of the Apple Pay lawsuit becomes clear in the press release. It claims Weiss and Universal Secure Registry made detailed presentations of its mobile payment technology to Visa under an NDA in 2010. Weiss told the New York Times that the NDA Visa signed in order to give its engineers access to the technology was for 10-years. The two companies were unable to come to an agreement and Visa passed on licensing it. However, the press release then gets to the heart of the complaint, stating:

“Apple and Visa began working together on Apple Pay at least as early as January 2013, and Visa dedicated approximately 1,000 people towards the development project with Apple.”

In other words, the Apple Pay lawsuit is suggesting that Visa’s team used Universal Secure Registry’s secure payment technology while developing Apple Pay with AAPL.

The suit does make it clear that AAPL is not exactly innocent from wrongdoing itself. Although much of the focus is on the Visa team that worked on Apple Pay, it also points out that in 2010 Weiss approached Apple about his company’s secure payment technology, but AAPL never responded.

End Game of the Apple Pay Lawsuit?

The goal for Universal Secure Registry will be to get an ongoing cut of Apple Pay revenue as a licensing fee, ideally with initial damages awarded for AAPL and Visa having willfully infringed on the company’s patents.

In the press releases, Weiss makes his case:

“It is not uncommon for large companies to be unresponsive to outside suggestions for innovation or improvements to their product or technology. Occasionally, these companies infringe patents and force a patent owner to file a lawsuit as the only way to financially benefit from the technology he invented.”

Universal Secure Registry has hired the law firm of Quinn Emanuel for the Apple Pay Lawsuit. Its lawyers have experience in Apple patent suits, including representing Samsung Electronics Co Ltd (OTCMKTS:SSNLF).

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.

At this point, it seems likely that Apple, Visa and Universal Secure Registry are headed to court. With iPhone sales softening, AAPL is looking to grow revenue and the last thing it wants is to have to give up a cut of what it makes from Apple Pay transactions. As the New York Times points out, Apple has been getting more aggressive with companies it pays licensing fees to, including its current bitter battle with Qualcomm, Inc. (NASDAQ:QCOM) over iPhone royalties.

AAPL hasn’t officially responded to this latest Apple lawsuit — and declined to comment to the New York Times — but when it does respond, expect AAPL to be in full denial mode.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/05/apple-inc-aapl-apple-pay-lawsuit-trouble/.

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