Business

Another ugly cofounder dispute: Square sued by Washington University professor

Above: The Square card reader

Image Credit: Square
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A university professor is suing Square for fraud and patent infringement, essentially claiming that he was ousted.

Earlier today, Washington University associate professor of engineering Robert Morley filed a lawsuit against Square cofounders Jack Dorsey and Jim McKelvey. According to the St Louis Post Dispatch, Morley has a long-running dispute Square.

In 2010, Square and its cofounders filed a lawsuit against Morley’s company, REM Holdings 3 LLC, alleging McKelvey was wrongly left off a patent for the card reader device. That lawsuit remains pending, and the U.S. Patent and Trade Office is currently reviewing other patents related to Square’s technology.

Square is a small plastic device that fits onto iPhones, tablets and other devices, making it easier for small businesses to process credit card payments. The San Francisco-based company is considered by financial analysts and the press to be a strong candidate for an initial public offering.

According to the 2010 lawsuit, McKelvey came up with the idea for the credit card reader and contacted Dorsey. He then reached out to an old friend, Morley, for help developing the prototype.

Morley is alleging that he alone invented the card reader and should be recognized as a cofounder of Square.

By email, his lawyer Austin Curry, a principal at the firm Cassady, Caldwell and Curry, said that Morley would seek “monetary damages that are commensurate with Dr. Morley’s role as a co-founder of Square and royalties for Square’s ongoing patent infringement.” Curry said Morley is also hoping to be rewarded “equitable relief in the form of a constructive trust of shares in Square.”

“Square’s business has centered around using Dr. Morley’s invention, but at no point has Square had any authority to use Dr. Morley’s patents,” Curry added.

Intellectual property expert Efrat Kasznik said this is a problem that many tech companies grapple with. “This story goes to the heart of inventorship rights,” said Kasznik in an interview. Kasznik, who runs a practice called the Foresight Valuation Group, also advises budding entrepreneurs at the Stanford Business School.

Kasznik sees parallels with this case and a lawsuit against the founders of Snapchat. If you’re not familiar with that drama, a former friend of Snapchat founders Evan Spiegel and Bobby Murphy claims he invented the idea of the disappearing messages and helped found the company.

“If McKelvey is found to be a coinventor, and Square the proper assignee, then there is no merit for this case. The patent is not clean, with all these inventorship and prior art issues. The lawsuit was probably filed as an extortion measure to reach a high settlement, not unlike the Snapchat case that we have recently seen filed. A lawsuit that probably never would have [been] filed if Square was not the mega successful startup that it is today,” Kasznik explained.

Square spokesperson Aaron Zamost issued the following statement to VentureBeat:

“It’s not surprising that Morley would file another desperate, baseless patent lawsuit given how poorly his initial claims have been received by the patent authorities.”

More about the companies and people from this article:

Square is a revolutionizing millions of everyday transactions between buyers and sellers with its free credit card reader for iPhone, iPad and Android devices. Square for iPad services as a full point of sale system for business to acc... read more »

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