Friday, January 4, 2013
In a Dec. 3, 2012, order, Judge Fernando Olguin said a hearing on the request for a protective order was not necessary and he denied the request. Olguin stated that the card brands' argument in support of the protective order request did "nothing more than identify and authenticate exhibits. No attempt is made to establish – with concrete examples – the significant harm defendants will suffer to their competitive and financial position if the requested protective order provision is not entered."
SmartMetric, manufacturer of fingerprint activated Europay/MasterCard/Visa (EMV) banking and ATM cards, holds a patent on a system that connects contact and contactless cards to payment networks. The SmartMetric suit alleges Visa and MasterCard violate this patent when card-present EMV payments are made in the United States.
The card companies are promoting a nationwide transition to the EMV global standard. In 2012, Visa and MasterCard stated that liability for card-present fraud will shift to merchants in 2015 if the retailers are not EMV compliant. At the same time, the Durbin Amendment to the 2010 Dodd-Frank Act requires card companies to provide a choice of at least two unaffiliated networks for debit transactions.
The SmartMetric complaint, filed in August 2011, alleges that Visa and MasterCard violate its patented system every time a contactless transaction automatically allows a user access to a choice of network service providers.
Visa and MasterCard filed the request for the protective order in November 2012 after the parties to the lawsuit failed to mutually agree on terms of a protective order covering discovery material. SmartMetric objected when the card companies' proposed order barred Hendrick, the inventor of the network switch, from accessing confidential Visa and MasterCard information turned over to SmartMetric attorneys in discovery.
In a company press release, Hendrick said she is curious to find out what material the card companies want to keep her from seeing. In the same release, SmartMetric called the request for a protective order an attempt to exclude Hendrick because, as the inventor and holder of the patent, she is the most capable person to analyze technical information.
"The introduction and use of ATM and banking cards with data chips or smart card chips on them in the United States is what is at stake," the company said. SmartMetric contended that the issuing and adoption of this chip card technology by Visa and MasterCard in the United States "is a clear violation of its patent."
Judge Olguin said any new request for a protective order must outline what specific prejudice or harm would result if the proposed order is not granted.
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