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Summary:

While VeriFone’s Square rival SAIL looks nothing like Square’s credit-card-swiping dongle, the company veered into flat-out imitation with its legal user agreement, which lifted much of its language directly from Square’s merchant user agreement.

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Square is by now used to watching a parade of established payment companies try to duplicate its mobile payment system, including most recently VeriFone, which rolled out its SAIL platform earlier this month. However, while VeriFone’s actual credit-card swipe reader doesn’t look like Square’s dongle, it’s pretty clear Verifone used Square as a blueprint for its own service, going as far as to lift much of the language in its legal user agreement directly from Square’s merchant user agreement.

When I notified VeriFone that wholesale portions of its user agreement had been copied from Square on Tuesday afternoon, the company promptly deleted about a third of its user agreement — including most of the offending text. The SAIL agreement went from 10,525 words and 43 sections to 6,452 words and 25 sections, with a couple mistakenly numbered twice. This is the statement VeriFone released to me on Tuesday night:

Thank you for bringing this to our attention.  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.

More than just boilerplate language

SAIL’s user agreement, however, did more than reuse “industry-acceptable language.” More than half of the sentences at the heart of the user agreement were lifted directly from Square’s legal agreement with almost no alterations. It swapped out all the references to Square and included some original language. And some of the sentences and sections were moved around. But the language was a word-for-word match in numerous sections, including one stretch of more than a dozen sections that were taken directly from Square.

Here’s an example. From Square’s merchant agreement:

18. Square Account History – When a payment is made to your Square Account, we will update your Square Account activity on the website and provide you a transaction confirmation. The confirmation will serve as your receipt. Summaries of your Square Account activity, including monthly statements, are available on our website for up to one year of account activity. Except as required by law, you are solely responsible for (a) compiling and retaining permanent records of all transactions and other data associated with your Square Account and your use of the Services, and (b) reconciling all transactional information that is associated with your Square Account. If you believe that there is an error or unauthorized transaction activity is associated with your Square Account, you agree to contact us immediately.

Here’s the same passage in SAIL’s original agreement. You can see a preserved version here.

XIV. SAIL Account History – When a payment is made to your Sail Account, we will update your Sail Account activity on the website and provide you a transaction confirmation. The confirmation will serve as your receipt. Summaries of your Sail Account activity, including monthly statements, are available on our website for up to one year of account activity. Except as required by law, you are solely responsible for (a) compiling and retaining permanent records of all transactions and other data associated with your Sail Account and your use of the Service, and (b) reconciling all transactional information that is associated with your Sail Account. If you believe that there is an error or unauthorized transaction activity is associated with your Sail Account, you agree to contact us immediately.

<a href="http://gigaom2.files.wordpress.com/2012/05/screen-shot-2012-05-16-at-5-28-19-am1.png"><img title="Screen Shot 2012-05-16 at 5.28.19 AM" src="http://gigaom2.files.wordpress.com/2012/05/screen-shot-2012-05-16-at-5-28-19-am1-e1337172369203.png?w=300&quot; alt="" width="300" height="135" class="size-medium wp-image-522063" /></a> SAIL’s website also bears a resemblance to Square’s

This was repeated throughout SAIL’s user agreement, but following my inquiry, this section and others that took directly from Square’s document were removed from VeriFone’s website. The wholesale copying shows just how much SAIL’s processes and features were built with Square in mind. For example, SAIL, like Square, was requiring merchants to offer a written receipt for any transaction of more than $15. Square, of course, has a number of competitors such as PayPal, PayAnywhere and Intuit, but they all have their own legal agreements for their mobile payment products that do not reuse Square’s language or replicate the exact same policies.

Square concerned about copyright issues

Square is still deciding what it wants to do, but it said it believed copyright issues were raised with VeriFone’s user agreement.

“When we said that Square made it easy to swipe, we meant credit cards,” said Square spokesperson Aaron Zamost.

Sean Kane, a member of law firm Pillsbury’s social media, entertainment and technology team, said a company caught copying another firm’s legal user agreements or terms of service could be sued for copyright infringement. But that is rarely pursued when it comes to terms of service and user agreements. It is still an issue, said Kane, because companies who copy a user agreement or TOS could be accused of fraud if their service actually differs from the user document. That could be a problem now for VeriFone, which now has a slimmed-down user agreement that doesn’t address many key points about the service.

A unique user agreement can also help defend against larger claims of infringement or DMCA violations by other companies. At the very least, he said, copying a company’s TOS  can leave a stain on an offending company.

“Just because a big company is doing something similar doesn’t mean you should copy their terms of service,” Kane said.

The incident highlights the increasing competition in the mobile payments space as larger companies such as PayPal, VeriFone and Intuit take aim at the fast growth of Square. Square recently announced it was now processing $5 billion on an annualized rate and was rumored to be raising $250 million at a valuation of up to $4 billion. In the past month VeriFone and PayPal have rolled out their answers to Square, but it remains to be seen if they can cut into Square’s growth. For now, it looks like VeriFone is rethinking just how closely it wants to follow Square’s example. Imitation is not necessarily the sincerest form of flattery when legal documents are involved.

  1. Rewind back to a year ago when Verifone was using grey-hat techniques against Square to create bogus security concerns about their product – http://www.fastcompany.com/1736916/verifone-attacks-does-square-actually-have-security-flaws

    Class act all around.

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    1. Thanks, good reminder. Square’s had a target on its back for a while.

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  2. David Bortfeld Friday, May 18, 2012

    Good catch… For a large, well-capitalized publicly-traded company to blatantly rip-off creative of a smaller start-up is shameful, if not unethical and an infringement.

    Cloning Square’s website was an obvious rip-off to anyone remotely paying attention to the space. Copy and pasting legal documents of a competitor and presenting them as their own says a lot about the culprit.

    Verifone needs to step up and make some updates to their marketing and public relations team.

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