Serverside Group also named  two St. Louis credit unions–the $1.3 billion Anheuser-Busch Employees CU and the $274 million Neighbors CU–along with the $753 million Credit Union 1 of Anchorage.

"These companies have been selected for patent litigation because they are using card customization technology, which Serverside Group alleges to be an infringement of its U.S. patent rights," Dominic Hiatt of Rhizome PR in London told Credit Union Times on behalf of Serverside Group.

Serverside Group did not give specifics of the infringements made by the CUs or CUSOs but said the litigation involves two of its U.S. patents, both of which concern the company's core card customization technology.

"Our belief in card customization has been vindicated by the many millions of cardholders we have served and, unfortunately, the number of competitors now offering copy-cat services," said Serverside Group President Adam Elgar.

Hiatt said he had no information regarding the total damage amounts sought by Serverside.

What could the litigation mean for the CU and CUSO defendants? According to several attorneys, the targeted organizations shouldn't just brush off the lawsuit.

"A defendant should be concerned any time a patent lawsuit is filed, because patent infringement suits can be expensive to defend and/or settle," Phoenix-based patent attorney Thomas W. Galvani said. "The level of concern, however, depends on the scope of each of the patent's rights and the nature of the defendant's allegedly infringing conduct."

And what does Serverside Group mean by "card customization technology"? After taking a brief look at the two patents involved in Serverside's litigation, Galvani said it appears to claim the rights to a system that can receive an image from a customer and then print the image onto a bank card along with the customer's financial account information.

Both patents are titled "Computerized Card Production Equipment" and the claims generally relate to "computerized financial transaction card production equipment operable to apply one or more personalized images to a financial transaction card," said Dallas-based patent attorney Kelly Kubasta, who also noted the hurdles Serverside Group will face.

"Serverside will have the burden of proving that each accused product or process places a personalized image on some form of debit or credit card and that each accused product or process includes each of the elements recited in one or more of the patent claims," Kubasta said.

Galvani added the level of risk posed to the defendants may largely depend on a Markman hearing, a pretrial hearing that determines the scope of the claims. The broader the scope, the more likely the defendants' conduct will fall within that scope, he said.

In any case, the three credit union defendants probably don't have a reason to panic, said Paul Lerner, senior vice president and general counsel for Suffern, N.Y.-based General Patent Corp.

He said credit unions that allow members to order payment cards displaying personalized images are most likely providing the service through a third-party vendor. So in the case of Serverside's patent suit, the burden would fall on the vendor providing the card customization technology, not the CU, he said.

That is, as long as the CU's payment card vendor contract includes an indemnification clause–a provision that requires the vendor to assume responsibility for any harm, liability or loss that arises as a result of the agreement.

"I'm pretty sure these credit unions aren't making their cards themselves," Lerner said. "If I were a credit union CEO, I would not be losing any sleep over this. What I would do is pull out my card manufacturer agreement to make sure it includes an indemnification clause."

E. Andrew Keeney, a Norfolk, Va.-based credit union attorney, added, "The lesson learned for all credit unions is to conduct proper due diligence on all third-party vendors and have an attorney review the contracts."

When contacted by Credit Union Times, several of the targeted CUSOs and CUs acknowledged the litigation but did not elaborate much further. Some are awaiting a copy of the suit filed by Serverside Group, and another has forwarded the claim to its attorney for review.

A statement from PSCU Financial Services said the company believes it has not infringed upon Serverside Group's patents for card customization technology and is also awaiting a copy of the suit in order to understand and evaluate the claims made.