PayPal Sues Bank One Over Patent

EBay Inc.’s PayPal unit sued Bank One Corp., the third-largest U.S. credit card issuer, claiming infringement of a patent for conducting financial transactions over the Internet.

PayPal contends its online bill-payment system, patented in 1998, is being wrongly used by the Chicago-based bank. The Mountain View, Calif.-based EBay unit seeks a jury trial and unspecified damages in the lawsuit filed Monday in U.S. District Court in Wilmington, Del.

Electronic commerce has experienced a boom in recent years, with sales estimated at $43.5 billion last year “and trending about 25% above that” for 2003, excluding travel-related transactions, according to Christa Sober, an analyst at Thomas Weisel Partners in San Francisco.

Online transactions “have certainly exploded in the past couple of years, and more people are coming online as they become more comfortable with this,” Sober said.

“We haven’t seen the lawsuit and don’t comment on pending litigation,” Bank One spokeswoman Calmetta Coleman said.

EBay, the world’s largest Internet auctioneer with more than $1 billion in revenue last year, has been expanding operations and said two weeks ago it would hire 800 people in Dublin, Ireland, for a new PayPal European office and customer-service center. EBay bought PayPal last year for $1.5 billion.

“Bank One’s infringement of the patent has continued unabated” since PayPal notified the bank’s attorneys in February, the lawsuit said.

Shares of Bank One rose 19 cents to $38.65 on the New York Stock Exchange. San Jose-based EBay fell $2.01 to $53.64 on Nasdaq.