MasterCard Sued in Virtual Payment Patent Infringement Case

California – An inventor by the name of John D’Agostino filed a complaint in a Delaware U.S. District Court accusing MasterCard, Inc. of infringing on his patent for a “System and method for performing secure credit card transactions”.

D’Agostino’s patents, No. 7,840,486 issued in 2010 and No. 8,036,988 issued in 2011, involve a payment method whereby a third party has “custodial control” of the consumer’s information to secure purchases made online or by other means in order to avoid having to provide the actual credit card number.

MasterCard uses a similar technology called “inControl.” D’Agostino believes MasterCard, Discover, Citigroup and possibly others have known about his patent for over 10 years and are now infringing. The complaint alleges that MasterCard is willfully infringing in a complete disregard for D’Agostino’s rights.

MasterCard was formed in 1966, and was originally called “Master Charge” until 1979. It is no stranger to litigation. Both it and Visa lost a class-action lawsuit filed in January 1996, paying over $2.5 billion in damages for price fixing on debit card interchange fees and card swiping fees. In 2010, another anti-trust lawsuit came to a head with a settlement reached between it and the U.S. Justice Department. And, in 2012, a judge decided to grant approval of a settlement agreement reached between all the major credit card companies and merchants and trade associations who felt Visa and MasterCard’s interchange fees were unreasonably high and had been conspiratorially fixed.

MasterCard previously tried to have D’Agostino’s patents re-examined believing some of the patent claims were invalid, but the U.S. Patent & Trademark Office denied the request. According to D’Agostino, MasterCard has also made threats to challenge the patents if he didn’t accept its licensing agreement offer, which he claims was for an unreasonably low amount of money.

The complaint alleges Discover’s “Secure Online Account Numbers” and Citigroup’s “Virtual Account Numbers” use the same technology and tools because each uses a confidential transaction code. D’Agostino’s patents feature this same concept.

To date, none of the credit card companies have made a comment on the case.