Inventor Sues Red Cross in Hopes of Winning Share of Internet Gifts

The outcome of a battle now pending in federal court could pose costly problems for charities that raise money online.

The American Red Cross has been sued by an inventor who argues that he deserves a share of the charity’s online contributions. Witold A. Ziarno says that technology he patented enables the Red Cross — and other charities — to obtain Internet gifts.

Mr. Ziarno, a Chicago lawyer, was awarded a patent last year for a device that can help churches and other charities raise money. In his patent application, first filed in 1993, he described the invention as a portable unit that can be circulated among church members, much like an offering plate, allowing them to use a credit card or bank card to make an electronic gift in any amount on the spot.

The Red Cross says that Mr. Ziarno’s patent has nothing to do with credit-card gifts made to its Web site. But Peter J. Meyer, a lawyer for Mr. Ziarno, said that the invention and the Red Cross’s online appeals are simply different applications of the same technology, and that the charity is infringing on Mr. Ziarno’s patent.

Mr. Ziarno’s invention, he said, won a patent for its “method of interactive fund raising across a data-packet-transferring computer network.” The transfer of data “packets” is how information is transmitted via the Internet; as a result, says Mr. Meyer, the patent covers solicitations conducted through charities’ Web sites.

In the expectation that he will win the lawsuit, Mr. Ziarno has retained a licensing company, Navigant Consulting, in Chicago, to collect licensing fees from organizations that engage in Internet fund raising, donation processing, collection of secure credit-card donations over the Internet, e-mail acknowledgment of Internet gifts, or collection of e-mail addresses for follow-up solicitations.

In a message to The Chronicle, Navigant’s director, Tom Britven wrote: “If organizations are using or wish to conduct fund raising over the Internet or use other aspects of the technology in their fund-raising activities, they are urged to contact Navigant Consulting to obtain a license.”

For now, however, Mr. Ziarno is using the courts to seek money from only one charity, the Red Cross. One of the most successful non-profit organizations to date in raising money online, the American Red Cross brought in $2.5-million through its Web site.

Mr. Ziarno’s suit has been filed in U.S. District Court for the area that includes Chicago. Besides the American Red Cross, the lawsuit names the charity’s Chicago chapter and its international organization, the International Federation of Red Cross and Red Crescent Societies, in Geneva, both of which seek online donations.

In addition, two companies, International Business Machines and Cable News Network, which helped the Red Cross create and promote its Internet fund-raising efforts for disaster relief, were also included in the lawsuit.

“This lawsuit has no merit, and the Red Cross is vigorously defending against it,” said Richard Deshefsky, general counsel for the charity’s national headquarters.

“Under any fair reading of the patent’s claims, we do not believe they can be applied to charitable giving over the Internet,” said Carol Makovich, I.B.M.’s vice president for worldwide media relations.

Lawyers from the organizations included in the suit said they plan to fight Mr. Ziarno’s allegations on two grounds: First, that the patent does not cover Internet fund raising as practiced by the Red Cross. Second, that even if the patent was found to extend to the Internet, many charities had started raising money online more than a year before Mr. Ziarno filed his patent application. If that can be proved, Mr. Ziarno would have no claim under U.S. patent law.

A trial on the issue is now scheduled to begin in January 2001.