AT&T is suing eBay and Pay Pal for violating its 1994 patent that governs "Mediation of transactions by a communications system." AT&T filed this patent in 1991 and got it approved in 1994, well before eBay and PayPal existed.

Patent 5,329,598 governs "transactions in which a trusted intermediary securely processes payments over a communications system such as the Internet." It also states credit card information is to be secure from the other party.

eBay says AT&T has brought up this issue before and eBay is ready to defend itself. This lawsuit comes after many cases lately regarding software patents. eBay lost a similar case in May to MercExchange over the "Buy it Now" feature.