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Starbucks named in patent infringement suit over mobile payment app

Success usually breeds imitators, but in the case of Starbucks and its successful mobile payment application, success has bred a lawsuit. And this lawsuit could have a sweeping effect on mobile banking and finance.

In a story first reported on PaidContent.org, Sunnyvale, Calif.-based semiconductor manufacturer Maxim Inc. has filed suit against Starbucks, claiming the coffee chain's mobile payment app for smartphones infringes on four patents held by Maxim. The suit was filed on Jan. 6 in federal court in East Texas.

Along with the suit against Starbucks, Maxim filed similar actions against travel site Expedia Inc. and Capital One Financial Corp. on the same day. An additional suit was filed against Bank of the West on Monday. All four suits basically allege the same four patents have been infringed on by mobile applications offered by the defendants.

Starbucks said it had tried to amicably resolve the dispute with Maxim and is confident in its position.

According to the lawsuits, the four patents in question describe various methods for making mobile payments and securely transferring data and "cash equivalents" between devices. While the suit is obviously still pending, the patents are broad enough to potentially affect every type of mobile payment, mobile wallet or mobile banking application regardless of handset or mobile operating system.

A spokeswoman for Maxim said in an email to Mobile Payments Today that she could not provide any additional information on the lawsuits at this time or whether additional suits against other mobile banking and payment methods would be filed.

For its part, Starbucks is aware of the claims filed by Maxim, and the company disputes the claims, according to a Starbucks spokeswoman, who said the facts will speak for themselves.

"We were disappointed to see the suit, as we had tried to amicably resolve this matter," she said in an email.

The Starbucks mobile payment app was released last January and has been incredibly popular. As of late 2011 the company said the app had been used for more than 26 million transactions at the point of sale. The app employs a simple barcode linked to a prepaid account and read by scanners at the point of sale to make purchases at Starbucks locations. It proved so popular it was expanded to Canada late last year and just went live in the U.K. and Ireland on Jan. 5.

The app was developed for Starbucks by mFoundry, a Larkspur, Calif.-based mobile banking provider. MFoundry also developed mobile banking apps for major banks like Citi, Bank of America, PNC and BB&T.

In an email, mFoundry CEO Drew Sievers referred all questions about the lawsuit to Starbucks. That company is not named in any of the lawsuits.

For more stories like this, please visit the Regulatory Issues research center.

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