VeriFone Battles Heartland Publicly While the Two Talk in Private

Payment card terminal maker VeriFone Holdings Inc. on Monday issued a press release trumpeting its victory in a courtroom skirmish with merchant acquirer Heartland Payment Systems Inc. What VeriFone didn't mention, however, was that it is in settlement talks with Heartland that could end their multifront legal war. That war, which might affect tens of thousands of Heartland's merchants beginning Friday, started when VeriFone sued Princeton, N.J.-based Heartland for allegedly infringing on its patent for end-to-end encryption of payment card data. Indications of a possible settlement surfaced Dec. 23 when a Lawrenceville, N.J., attorney working for VeriFone, Joseph Schramm III of Fox Rothschild LLP, filed a request with a U.S. District Court magistrate judge in Trenton, N.J., asking for an extension of VeriFone's Dec. 28 deadline to respond to Heartland's lawsuit against VeriFone in that court. “This request is presented on consent of both parties,” Schramm's letter reads, and is being sought “due to preliminary discussions that may result in resolution of the above mentioned matter and several related actions …”. Those actions include the original patent-infringement lawsuit San Jose, Calif.-based VeriFone filed Sept. 9 against Heartland in the federal court in that city, and a business-infringement and defamation suit Heartland filed shortly afterward in a New Jersey state court. Heartland later sued VeriFone in the New Jersey federal court for alleged false advertising. And VeriFone filed a second suit in the California federal court claiming a Heartland press release was false and misleading. VeriFone also wants the cases moved to California (Digital Transactions News, Nov. 11). Citing the alleged patent infringement, VeriFone is threatening to cut off support on Dec. 31 for its terminals Heartland merchants use unless they sign up for free support from VeriFone, the largest U.S.-based point-of-sale terminal maker. Heartland contends it can provide all the support merchants need. It is unknown whether a settlement might be reached before VeriFone's Friday deadline because the companies are saying little. Asked about Schramm's letter, a VeriFone spokesperson told Digital Transactions News by e-mail on Monday that, “we are always open to settlement discussions but we don't conduct them in the public forum. Unless and until any settlement is finalized, we will continue to vigorously prosecute our claims.” A Heartland spokesperson on Monday morning said that she did not know anything about settlement discussions. Schramm did not return a call for comment. Monday's release from VeriFone, headlined “VeriFone Prevails Again in Heartland Dispute,” highlighted the denial last week by U.S. District Judge Mary L. Cooper in New Jersey of a Heartland request for a preliminary injunction to prevent VeriFone from communicating its offer to Heartland's merchants. Heartland in its court filings made “contradictory claims” about its ability to service its merchants using VeriFone systems, VeriFone's release says, citing Cooper's opinion explaining the denial. (The actual opinion is not public.) In an emergency hearing last month, the New Jersey federal court refused a Heartland request to stop VeriFone from publicizing to Heartland merchants its offer of free terminal support. Heartland's spokesperson, however, says Cooper's Dec. 23 opinion “was a preliminary ruling” and that Heartland intends to pursue its damage case in the New Jersey state court. Heartland, which disclosed a huge data breach nearly a year ago, contends in that lawsuit that VeriFone's real beef is that Heartland is using manufacturers other than VeriFone to develop its so-called E3 end-to-end encryption terminals. VeriFone counters that the dispute strictly involves patent infringement.