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Home Depot faces patent infringement suit over mobile payments

March 7, 2013

The Home Depot’s use of an in-store checkout system enabling shoppers to pay with PayPal and  their mobile phone number is the focus of a patent infringement lawsuit brought by PayOne. However, with numerous other retailers also using the technology, the impact could be much broader.

PayOne, a mobile payments and carrier billing provider, alleges that The Home Depot’s deployment and use of PayPal’s in-store checkout infringes several of its patents, including the use of a mobile phone number and a PIN to pay at the point-of-sale. The complaint seeks unspecified damages and a court-ordered injunction against future infringement by The Home Depot.

“PayOne will continue to work with industry participants to help bring seamless mobile payments to market,” said Joe Lynam, president and CEO of PayOne, San Jose, CA. “We will review what we believe to be ongoing infringement scenarios on a case by case basis and keep those options open.

“While PayPal announced other major national retailers use of this technology, The Home Depot was the first to broadly deploy the technology at its in-store checkout,” he said.

A spokesman for The Home Depot said that the company had not yet seen the complaint and declined to comment further.

Core transaction device
PayOne is also involved in an ongoing suit with PayPal, alleging the latter infringed a similar set of patents.

Retailers are experimenting with a variety of ways to leverage mobile technology to enable payments in stores, including near-field communication, QR codes and systems tied to user’s mobile phone number.

None of these has been a break-out star yet, but consumers and retailers are both moving towards mobile payments.

PayOne’s platform is focused on existing billing relationships that mobile phone owners have with carriers to instantly enable mobile payments. Its customers include online digital merchants such as AOL, Blizzard Entertainment, Wargaming and Badoo.

PayPal is interested in supplying in-store POS solutions because this is a way to get its digital payments solutions into physical retail locations but is also working on other solutions, such as outfitting in-store mobile devices so they can process card-based payments.

“Whether or not consumers are typing in a phone number, or if it is automatically detected, mobile is the core transaction device of the future,” Mr. Lynam said. “It has unparalleled potential to not only enhance the in-store checkout process, but also transform the total commerce experience from shopping lists, to loyalty, to hyper-targeted marketing of the right types of products and offers and to in-store price compare.

“The most successful methods of mobile payment at checkout will be completely seamless while using solid security and authentication technology to validate the transaction and the mobile user,” he said. “We believe some deployments will have user input elements of the account data to be validated – such as a PIN – while some elements may be automatically detected – such as the subscriber account data using NFC, for instance.”

Many options
It is not immediately clear what impact the PayOne suit will have on The Home Depot or PayPal, as reports suggest that the uptake on the in-store checkout system has not been very great.

However, a number of  other retailers are also using PayPal’s in-store POS, including Famous Footwear, Dollar General, Abercrombie & Fitch, Aéropostale, Barnes & Noble, Foot Locker, Jamba Juice, JC Penney, Office Depot and Toys R Us.

Mobile-focused POS systems face several challenges, including the need for consumers to set up accounts, security concerns and a lack of the necessary NFC infrastructure in bricks-and-mortar retail locations.

Per PayOne, Home Depot has reported on panel sessions at several mobile payments events that of the customers choosing to use PayPal at point of sale, more than 80 percent opt to use PayPal mobile check-out using their mobile phone number and PIN.

“Thus far I haven’t heard anything solid about PayPal’s experience with their mobile phone number and PIN-based payments, which I think speaks just as loudly as anything they could possibly say,” said David Kaminsky, emerging technologies analyst at Mercator Advisory Group, Maynard, MA.

“Home Depot clerks have mentioned that customer interest in paying with PayPal’s method has been barely above non-existent,” he said. “In addition, PayPal seems to have switched their primary method of bringing PayPal to the point-of-sale from mobile phone numbers to the plastic card they are going to be issuing with Discover.

“With this in mind, I don’t see the mobile number and PIN solution as having a major future role in payments.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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