Square, the innovative new payment solution for iPhone faces patent problems

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by Mike
Posted December 17th, 2009 at 10:41 am

Patent and IP problems oh my. For a quick refresher, “Square” is an innovative new piece of hardware that attaches itself to any iPhone/iPod Touch and instantly transforms it into a mobile POS station. Cool, right? Definitely. But the startup is far from the finish line. A patent problem is looming that could derail Square’s launch and ultimately cost them big time.

The founders of Square consisted of Twitter’s Jack Dorsey and Jim McKelvey. The two coined the whole idea and plan you see in front of you. The brains behind the engineering side of things however was the work of Jim McKelvey’s friend Bob Morley. So we have the 3 amigos working to make an evolutionary new mobile payment system. Keep following…

From the beginning to what we have now, the Square hardware has undergone several changes though the underlying software behind it has remained unchanged. The software in particular is where it gets dicey. Apparently the 3 amigos had a minor disagreement that led to Morely filing a patent for the Square’s technology — in his own name. The disagreement allegedly centers around the fact that in return for ownership of the Square patent and IP, Morely wanted shares of the company. So far negotiations haven’t gone well. Complicating matters, chances of the patent being turned down are slight as Morely was in fact the man who did the software engineering work.

So now you see the problem. Square relies on this software developed by Bob Morely to function. If reports of a falling out are true, it leaves Square and it’s founders in an interesting mental limbo. Do they risk it and push ahead with the technology, at first ignoring any payments or licensing fees towards Morely. Or, do they buy/license the technology. The latter could end up costing quite a pretty penny, especially so because the three are all familiar with each other as well as the companies bank accounts.

On the flip side, pushing onward only to later face one or many lawsuits can quickly rack up costs as well. It’s again a problematic circumstance. If the patent is granted to Morely, how will he play his card? If it’s not, well then we have nothing to talk about. Business as usual, oh happy day. For the sake of Square’s members and the technology sector as a whole, I sure hope any looming problems can be settled peacefully and outside of court. Agreed?

Electric Pig > Fast Company

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