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SMS provider sues Visa for alleged patent infringement

Visa Inc. is being sued by Charge Notification Services Corporation for alleged patent infringement.

CNSC is a Miami, FL-based company that offers information processing services to credit card issuing banks. The CNSC patent covers charge card transaction authorization and notification in real-time via SMS to the cardholder's mobile phone. Visa and some of its bank partners have recently been offering this service.

"We are very sorry that it had to come to filing this suit," said Ivan Ochoa, CEO of Hollywood, FL-based CNSC, in a statement. "For months we've tried exhaustively to work with Visa with no results.

"We're a young company but we have experience with this product and the credit card business as a whole," he said. "We have the knowledge and infrastructure to handle even the most extreme transaction volume. We've expended considerable resources on patent registration and product development."

CNSC filed the lawsuit last Thursday in the United States District Court for the Southern District of Florida, alleging that Visa advertised a service that infringed several claims of the patent.

Visa does not comment on pending litigation.

Back in August Visa announced that it and eight financial institutions have agreed to test the delivery of real-time notification alerts on the payments franchise's accounts.

The pilot program had about 2,000 participants testing the delivery of SMS notifications on Visa accounts.

Visa partnered with PNC Bank, SunTrust Bank, U.S. Bank, Wachovia, Wells Fargo, Royal Bank of Canada, TD Bank Financial Group and Vancity in Canada (see story).

Participants received notification alerts from Visa through email or SMS delivered directly to their mobile devices.

The service is based on Visa's transaction authorization system and its ability to analyze and conduct risk score transactions "in-flight." It lets Visa cardholders set thresholds that will trigger a transaction alert.

Visa cardholders get alerted each time they make cash withdrawals, spend cross-border and exceed an amount that has been pre-selected by the cardholder.

"In these economically troubled times people want to use their cards and receive real-time information about charges to their account," said Daniel Davila, chief operating officer of CNSC.

"If cardholders have to wait until they receive their statement to discover possible merchant errors or duplications, it's already too late to avoid the complex and time-consuming process of charge-back that costs cardholders and businesses time, resources and aggravation," he said.

Cardholders want to be confident that their card account will not be used fraudulently. However, all indicators show that card fraud activity is expected to increase even further.

CNSC's aim is to decrease card fraud and give confidence to all cardholders that in the event their card or account information is ever stolen and used fraudulently, the SMS service will send them notification within a matter of seconds from the moment it occurs.

"We are in the business of stopping the fraudsters and providing tremendous savings and other benefits to our card issuing clients," Mr. Davila said. "As Visa continues to infringe on our patent, we really must take this legal action against them to protect our business.

"In the meantime, of course, we continue to actively offer our services to all card issuing financial institutions," he said.