Evan Schuman's StorefrontBacktalk

Sears and OfficeMax have agreed to settle a lawsuit against them—and several other major retailers, including Walgreens, Barnes & Noble and Aeropostale—as the chains find themselves losing legal challenges to a company with a gift card validation process patent. That vendor argues that almost every retailer today is in violation of its patent if they accept gift cards at their physical stores.

Sears and OfficeMax join TJX and McDonald’s as having settled—or agreed to settle—their roles by agreeing to license the technology from Card Activation Technologies.

The only amount released was associated with the very first settlement—McDonald’s, which paid $45,000. Asked how much Sears and the others have agreed to pay, Card Activation EVP Mike Malet said, “They won’t be McDonald’s numbers, I can promise you that.” He clarified it to mean that the others would pay much more than McDonald’s did.

The Patent itself (click for full text of Patent 6,032,859) was filed in 1996, and it anticipated the next wave of gift card and phone card usage. At the time, the cards were issued for a specific value and then thrown away when emptied. The Patent envisioned POS units that could add and deduct value. Such POS processes are commonplace today, and therein lies the Patent infringement issue.

The vendor has sent out almost 500 letters to other potential retail defendants and, according to Card Activation attorney Mark Roth, that’s only the beginning.

“We’re going to be taking this to numerous other retailers,” he said. “The more we dig into it, the more people we find who infringe, everyone from golf courses to universities to mom-and-pop operations that have two stores.”

To be immune from the Patent infringement claim, Roth said, a retailer would have to limit its gift card operations entirely to online. If either end of the process—the gift card being created and issued and the gift card being authenticated and having its value changed—happens inside and uses a counter-top terminal or a kiosk, the Patent is violated, Roth said.