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Jan 31, 2014 07:06 AM EST

Washington Professor Sues Credit Card Processor ‘Square’ Over Patent Infringement

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Robert E. Morley Jr., a professor at Washington University in St. Louis, filed a lawsuit in the U.S. District Court for the Eastern District of Missouri Thursday against Square, a credit card processing company and its co-founders for patent infringement and breach of fiduciary duty among others.

The lawsuit also accuses the defendants Jack Dorsey and James McKelvey Jr., for Morley's unfair ouster from the start-up company now estimated at about $5 billion.

The electrical engineering professor claims to be the creator and patent holder of Square's signature product: a dongle/card reader. In return, Morley argues he did receive neither patent recognition, nor ownership stake in the Square that is scheduled to go public by the end of this year. Instead, the company and its co-founders sued Morley in 2010 for leaving out McKelvey name on the patent application. The patent-related suit is still pending.

"This lawsuit seeks justice for Dr. Morley, redress and redemption," lawyers for the professor said, NY Times reports.

Aaron Zamost, a spokesman for Square, said that the company has planned to challenge the lawsuit in court.

"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," Zamost said.

The patent infringement suit blames the Square for fabricating the company's origin story. According to the lawsuit, Morley, McKelvey and Mr. Dorsey established a joint venture in February 2009 to develop the value proposition of using smartphones to process credit card transactions ( McKelvey came up with the idea). Morley claims to have provided the 'technological expertise.' He apparently told McKelvey to discontinue his plans of capturing photos of credit cards for virtual transactions and to instead use cell phones to read the cards' magnetic stripe, Mercury News reports. Then Morley invented the reader with mobile plug-in technology that could transform an iPhone into a virtual cash register.

Later Dorsey established Square along with McKelvey and channelled all revenue from the venture to the new business. Morley was promised shares in Square in exchange for transfer of patent to the San-Francisco company. He was not given any ownership status and shortly Square filed some additional patents, according to the civil complaint.

Through the lawsuit, Morley is seeking unspecified amount of damages and his name on the list of owners of the Square patents.

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