Mercury News | 02/07/2002 | Lawsuit delays eagerly awaited PayPal IPO ::: Recall my observations about micrpayments and PayPal in late December and early January? One of my comments then: “Here’s hoping PayPal’s IPO is strong. They represent the best opportunity we’ll have in 2002 to see a solid, viable infrastructure play for enabling micropayments next year.” Well, we’ve got a bit longer to wait. After pricing their shares and readying their opening on the Nasdaq on Wednesday, PayPal had to delay the IPO. At the 11th hour, CertCo filed a lawsuit that claimed PayPal’s payment system infringes on a patent obtained in February of 2000 (US Patent 6,029,150) by CertCo. (CertCo filed the patent application on October 4, 1996, prior to PayPa’s founding.) Here’s a snippet from the patent app itself:
In one aspect, the invention is a method of payment in an electronic commerce system wherein customers have accounts with an agent and where each customer shares a respective secret between that customer and the agent. This secret is set up prior to the actual transaction or payment and, in preferred embodiments, is a dynamic secret.
According to the method of this invention, a customer obtains an authenticated quote from a specific merchant, the quote including a specification of goods and a payment amount for those goods. The customer then sends to the agent, in a single authenticated one-pass communication, a payment request message representing a request for payment of the payment amount to the specific merchant along with a unique identification of the customer. The agent, after processing the payment request, issues and sends to the customer, in a single one-pass communication, an authenticated verifiable payment advice message. The issuing by the agent is based only on:
the single communication from the customer to the agent,
the secret shared between the customer and the agent and
non-cryptographic customer information (“customer status information”) and/or non-cryptographic merchant information (“merchant status information”) which the agent has.
The customer and merchant status information are referred to collectively herein as “status information.”
Upon receipt of the payment advice message, the customer forwards a portion of the payment advice message to the merchant. The merchant then provides the goods to the customer in response to receiving the portion of the payment advice message.
Aside from the validity of CertCo’s claims (and the absence of any information on CertCo’s web site), you’ve got to wonder about the timing. PayPal’s IPO was hardly a secret – so it stands to reason that the filing of this lawsuit was timed deliberately to derail PayPal’s float and raise awareness of CertCo’s own offering.
Day-traders who were looking forward to another profitless .com IPO will have to wait until another day. (Can a hack of CertCo’s web site by frustrated day-traders be far behind?)