AT&T Aims At EBay, PayPalAT&T Aims At EBay, PayPal

AT&T has filed a lawsuit against eBay Inc. and its subsidiary PayPal, alleging that the two companies' online-payment systems violated AT&T's patents.

The suit, filed in federal district court in Delaware, alleges an infringement of a patent granted to AT&T in 1994 for a system to send money across the Internet through a trusted intermediary. The patent, No. 5,329,589, covers "methods and apparatus for employing a communications system with [sic] actively connects communicating entities to mediate transactions."

AT&T says it notified eBay and PayPal of the alleged infringement more than a year ago and attempted unsuccessfully to reach a settlement. The company now seeks compensation for PayPal's and eBay's unauthorized use of the patented technology and the money AT&T could have made in licensing fees. Representatives of eBay said the company has not seen the suit and has had some conversations with AT&T, but based on what they know, the suit is meritless, and the company will defend itself vigorously.

This isn't the first patent lawsuit filed against company. Last May, a federal judge ordered eBay to pay $29.5 million to MercExchange LLC, ruling that eBay's "Buy It Now" feature infringed on the smaller company's patents. That ruling is being appealed. Just last month, eBay settled a suit filed against PayPal by First USA Bank (as well as countersuits filed against the bank), and another charge from Tumbleweed Communications Corp. is still pending.