Patent Battle Continues Despite Court Ruling

Two providers of dispute resolution systems battled publicly over who won a recent court ruling on a patent covering the system.

White Plaines, N.Y.-based Debt Resolve Inc. announced today that the U.S. District Court of Appeals for the Federal Circuit on July 24 reaffirmed the company’s patent protection on its online dispute resolution system. The National Arbitration Forum Inc., also a dispute resolution provider, responded in a statement that the court actually ruled in its favor, and not for Debt Resolve.

Debt Resolve announced that the court ruled in favor of a firm called Cybersettle Inc. in a suit against NAF over rights to the patent known as “551 Patent” which allows for online dispute resolution. Cybersettle and Debt Resolve have rights to the same patent, with Cybersettle using it for the settlement of insurance claims while Debt Resolve uses it for the settlement of consumer debt.

Debt Resolve announced in a statement that the ruling “reaffirms Debt Resolve’s patent protection, since Debt Resolve and Cybersettle both have rights under the same patent.” Debt Resolve said the decision “will prevent NAF from entering the online dispute resolution business in the field of consumer collections.”

However, NAF in its statement said that it had prevailed in the suit, and that the Appeals Court remanded the case for further proceeding. The NAF said it is reviewing the “complicated” judgment and “considering our next steps.” The Minneapolis-based Forum provides arbitration and mediation as a cheaper and less time consuming alternative to lawsuits. It maintains a panel of more than 1,600 attorneys and former judges who render legal decisions.

Debt Resolve’s online debt settlement system allows qualified debtors to “bid” in a real time auction format on their debt. A credit grantor invites the debtor to the site where the debtor can view their account. The debtor can offer to pay a set amount over a set timeline to settle the debt. The credit grantor accepts or rejects the best offer.

Debt Resolve hosts and maintains the online site for credit grantors whose brand appears to site visitors. Debt Resolve has about 20 major clients including three of the largest credit card issuers, in addition to debt buyers and collection agencies, James Burchetta, Debt Resolve CEO tells insideARM.com.

Burchetta called the court ruling “a significant win that protects our intellectual property. This sends a message that we will defend our property in the courts.”

Burchetta said that Debt Resolve has a law suit against Apollo Enterprise Solutions, an operator of an online debt claims resolution system. That case has just begun the discovery process and is about a year behind the NAF case, he said.

The online debt auction sites say that many consumers prefer the anonymity of a Web-based system than dealing with a live collection agent. Burchetta says his system collects 15 percent more than a card issuer expects to get on a portfolio of charged off accounts. Debt Resolve charges a percentage of the settlement that is collected.

Debt Resolve’s stock didn’t open for trading until about 12:30 Eastern Time, trading at $3.00, down less than 1 percent.