Judge denies Heartland restraining order request

AP News
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Posted: Nov 11, 2009 3:34 PM

A New Jersey federal judge denied a request by payment processor Heartland Payment Systems Inc. for a temporary restraining order against VeriFone Holdings Inc. for allegedly misleading customers about their legal spat, the companies said Wednesday.

A subsidiary of VeriFone, the maker of point-of-sale equipment where consumers swipe their cards, sued Heartland, the company that actually processes the payments, for patent infringement in early September in federal court in Northern California.

At issue is a new terminal that Heartland is preparing to roll out that would provide end-to-end encryption of data after its system was breached by a hacker last year. It will be Heartland's first terminal. The current system only encrypts a portion of the data flow.

VeriFone claims that Heartland's new terminal infringes on its patent and that Heartland is gearing up to be a competitor. Heartland sued VeriFone, claiming the company is trying to impede competition.

VeriFone began telling merchants that its relationship with Heartland will end after Dec. 31 and they should contact VeriFone directly for support and ensure continuity of service.

But Heartland claims that it can still process the payments and provide technical support without VeriFone's help, and sued VeriFone a second time in New Jersey for its statements to the contrary. Heartland also sought a temporary restraining order.

Heartland claims that VeriFone wanted to be the exclusive equipment maker for the new system and suggested merchants be charged an extra fee for enhanced data security. VeriFone disputed Heartland's allegations in its second lawsuit filed last week.

Judge Mary Cooper denied the temporary restraining order request on Monday and set a trial date of Dec. 7.

Shares of Heartland, based in Princeton, N.J., fell 4 cents to $12.15 while shares of San Jose, Calif.-based VeriFone were up 26 cents to $14.72 in afternoon trading.