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Friend: Inventor's passion "infectious"

By Robin Y. Richardson
March 16, 2010 at 6:17 p.m.

Claudio Ballard's enthusiasm was "bouncing off the walls" when he disclosed his check imaging technology idea to Virginia Lupoli, friend and former client, back in 1994.

"He was bubbling," Ms. Lupoli told jurors Tuesday as the testimony in the joint patent infringement trial of DataTreasury versus U.S. Bank, Viewpointe Archive Services, the Clearing House Payments Company and SVPCo (Small Value Payments Co.) continued here Tuesday in the U.S. District Court, Eastern District of Texas.

Testimony continues today at 9 a.m.

Ballard, founder of DataTreasury and inventor of its check imaging technology, is suing the defendants named in the suit for allegedly infringing his '988 and '137 patents. The patents cover DataTreasury's system for capturing and exchanging digital images of checks. DataTreasury received patents for the check imaging technology in 1999 and 2000.

In her testimony, Ms. Lupoli recounted how Ballard bumped into her in 1994, anxious to tell her about his check imaging idea.

"He said, 'Wait until you see what I got going on!'" Ms. Lupoli recalled, sharing she invited him to dinner to tell her.

Ms. Lupoli, who currently owns shares in DataTreasury, said he told her he developed a system where users will be able to read checks and credit cards and transfer it to another system.

"I wasn't getting what he was telling me," she said, explaining she isn't a technical person.

She remembers him telling her, however, that the system was going to revolutionize things. Ballard also showed her a diagram, detailing how it would work.

He explained that the point of entry would be the place where an entity - "whether it's a store, bank, small business or hospital - would initially use the machine. Ballard also envisioned that point of entries would be stationed across the country.

"It was one of those moments you felt you had stepped into greatness," said Ms. Lupoli. "I understand why he was so electrifying when he talked about it."

Ms. Lupoli wrote in her diary of her meetings with Ballard about his invention.

"All I wanted to do was hear more," she said. "His enthusiasm was infectious. It was exciting to be around him. He has insights most people don't have and he creates the future now."

When asked by a defendant's attorney if she has reviewed Ballard's patents, Ms. Lupoli said, "no."

"Are you aware the first patent doesn't talk about checks at all? Only the second patent mentions checks," the attorney asked. “If he was talking to you about checks in '94 or '95, why didn't the first patent mention checks?"

In addressing Dr. Hugh Smith, director of the computer engineering program at California Polytechnic State University and hired by DataTreasury to review the patents, U.S. Bank's attorney asked if he was aware that BancorpSouth, Bank of America, Wells Fargo, Key Bank, Sun Trust and LaSalle allege that DataTreasury's patents are invalid. Smith said he wasn't sure.

"None of these banks have taken licensing agreements," U.S. Bank's attorney said. "Thre just waiting for their day in court."

Viewpointe's attorney noted in order to prove joint infringement, DataTreasury must prove direction and control from someone other than Dr. Smith. Smith said he does have an opinion on the technical side.

In answering questions from DataTreasury's attorney Anthony Bruster, Susan Long, vice president of the Clearing House and senior vice president of SVPCo, maintained she had never heard of DataTreasury before the lawsuit despite the fact that DataTreasury is listed in her company's documents as one that they sent a request for proposal (RFP) to about their imaging project for input.

Ms. Long said John Don was the project manager at the time and sent the RFP to DataTreasury.

In his deposition tape, Don, a vice president at the Clearing House, testified he met Ballard while working for another company that was interested in expanding into check imaging. Don said he met with Ballard and discussed DataTreasury's technology then. After being hired to work on the imaging project at SVPCo as an employee at Clearing House, he contacted DataTreasury because he felt they would be interested.

"It seemed like they had expertise in archiving images and protecting these images, but we were not looking for a code or (proprietary) information from these vendors to come up with a solution," Don said.

He noted DataTreasury decided not to respond to the RFP because they had patent issues.

"I don't recall them saying what the patent issues or patent numbers were," Don said.

Bruster noted CitiBank paid DataTreasury $50 million for a license to use DataTreasury's property.

"You still think patents are invalid?" he asked Ms. Long, listing other banks that did the same.

"We believe we don't infringe the patents," she said. "Why would we spend a lot of money to fight something that's not true?"

Judge David J. Folsom instructed jurors to not consider testimony about other banks entering into licensing agreements with DataTreasury as evidence in the case.

"Do not consider this evidence in determining infringement," he instructed. Folsom explained that the jury's duty was to only decide if any alleged infringement was willful, if patents in suit were obvious in regards to prior art and if any damages need to be awarded.



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