Report: VeriFone's SAIL m-payment reader copied Square's user agreement

VeriFone has overhauled its SAIL mobile payment platform merchant agreement after a report revealed the document directly copied chunks of text from rival Square's own user contract.

VeriFone introduced SAIL earlier this month. The reader enables merchants to process credit and debit payments by sliding the customer's card through a dongle that plugs into Apple's (NASDAQ:AAPL) iPhone and Google (NASDAQ:GOOG) Android smartphones. SAIL also offers integration with VeriFone countertop point-of-sale hardware. VeriFone bills lower-volume businesses a flat 2.7 percent fee for swiped transactions; merchants with higher payment volumes may select a monthly $9.95 subscription option with a 1.95 percent transaction rate.

SAIL's swipe technology and business model bear unmistakable similarities to Square's mobile transactions platform, and GigaOM reports that more than half of the text at the heart of the SAIL user agreement copied Square's contract on a word-for-word basis. After GigaOM reported the issue to VeriFone, the firm promptly deleted roughly a third of the SAIL user agreement, paring the document from 10,525 words and 43 sections to 6,452 words and 25 sections.

"Thank you for bringing this to our attention," VeriFone said in a statement issued to GigaOM. "While many legal documents tend to use and reuse industry-acceptable language, we took your feedback into consideration and have made revisions to the agreement so that there is no misunderstanding."

Square is still mulling a course of action, indicating it believes VeriFone violated copyright issues. "When we said that Square made it easy to swipe, we meant credit cards," a Square spokesperson said.

More than 1 million merchants are now using Square to accept card transactions. The company processes mobile transactions at an annualized rate of $5 billion. In addition to SAIL, Square faces competition from the likes of eBay's PayPal Here dongle; last month, eBay CEO John Donahoe said more than 200,000 merchants have signed up for PayPal Here since the platform launched in March 2012.

"VeriFone, taking the copy-cat mentality to the extreme perhaps, now joins what appears to be a growing line of others following in Square's footsteps," said Yankee Group Research VP Eugene Signorini. "Potential legal recourse notwithstanding, Square is faced with a legitimate and increasing dilemma: how to stem the tide of competitors attempting to replicate its model? Beside VeriFone, PayPal and Intuit have already begun the hunt, which means Square will be forced to continue its recent moves of layering additional services and security on top of its base mobile transaction service.  Ultimately, we may wind up seeing IP and patent litigation rearing its ugly head in this area of mobility as we've seen elsewhere, particularly as the stakes get higher."

For more:
- read this GigaOM article
- read this Yankee Group blog entry

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