Heartland CEO: Encryption on track despite dispute

A patent infringement lawsuit filed two months ago by VeriFone Inc against Heartland Payment Systems Inc. has escalated into a full-fledged food fight between the two companies.

VeriFone has claimed that an end-to-end encryption technology being developed by Heartland for protecting payment card data on transaction processing networks, infringes on a VeriFone patent. Heartland in turn has accused VeriFone of filing the case only because it does not want Heartland competing in the payment terminal space which VeriFone currently dominates.

Caught in the middle are tens of thousands of Heartland customers who are using VeriFone point of sale terminals. VeriFone has said that after Dec. 31 it will stop supporting such customers, unless they register separately for free support with VeriFone before then. VeriFone has claimed that Heartland cannot by itself update and maintain VeriFone code and to claim otherwise is "ludicrous."

Heartland meanwhile has claimed that VeriFone is simply trying to scare away its customers and has insisted that it can support all of its customers. In a conversation with Computerworld today, Heartland CEO and Chairman Robert Carr blasted VeriFone's lawsuit and its suggestion that Heartland is incapable of supporting VeriFone customers.

VeriFone has said that Heartland cannot by itself support merchants using VeriFone terminals after Dec. 31. What's your message to those merchants? VeriFone is lying and you can quote me on that. We have 250,000 customers and some of those are large customers. We have about five petroleum clients that need VeriFone. They have many locations between them. VeriFone has continued to support them their relationship is directly with VeriFone. VeriFone has unfairly represented a quote out of our litigation that was about our petroleum customers and applied that to our entire merchant base.

What exactly is it that VeriFone is alleging that you infringed? In the beginning they alleged that we had stolen the copyright on their operating system. When they found out we had Linux for our terminals and they didn't, they tried to find something else to accuse us of violating and accused us of stealing their patent for [the tamper-resistant technology.] We are not violating their patent.

What prompted Heartland to get into the terminal business? We got into the terminal business simply because there was nobody else that had a product and would do encryption the way we wanted to do it. We wanted to work something out with VeriFone but VeriFone wanted to charge a two cent transaction fee to our customers for using our encryption software on their terminal. [VeriFone] is trying to use encryption as a way to change its business model to a recurring revenue model.

What has this dispute done to the whole end-to-end encryption effort? It has not pushed it back in any way whatsoever. We are making great progress. We are in pilot right now. We are rolling out a significant amount of deployments in the next couple of months.