Debt Resolve Declines After Patent Decision

Investors sent the stock of Debt Resolve Inc. down more than 45 percent in midday trading today, just two days after the firm announced its victory in a patent suit.

White Plaines, N.Y.-based Debt Resolve is a provider of an online dispute resolution system for the debt collection industry. Its stock rebounded, trading later at $2.55, down 13.6 percent. Debt Resolve went public in November 2006 at $5.10 a share.

On Monday, Debt Resolve announced that the U.S. District Court of Appeals for the Federal Circuit on July 24 reaffirmed the company’s patent protection on its online system. Debt Resolve said that the court ruled in favor of a firm called Cybersettle Inc. in a suit against the National Arbitration Forum over rights to the “551 Patent” that covers the system.

Cybersettle and Debt Resolve have rights to the 551 Patent, with Cybersettle using it for the settlement of insurance claims while Debt Resolve uses it for the settlement of consumer debt.

James Burchetta, Debt Resolve CEO, on Monday called the ruling “a significant win that protects our intellectual property. This sends a message that we will defend our property in the courts.”

The National Arbitration Forum responded in a statement Monday that it prevailed in the decision, with the court remanding the case for further proceedings. The Minneapolis-based Forum provides arbitration and mediation as a cheaper and less time consuming alternative to lawsuits. It maintains a panel of more than 1,600 attorneys and former judges who render legal decisions.

A spokesperson for the Forum today reiterated it was pleased with the court ruling and declined to comment on the activity in Debt Resolve’s stock.

Debt Resolve did not return calls.

Debt Resolve’s online debt settlement system allows qualified debtors to “bid” in a real time auction format on their debt. A credit grantor invites the debtor to the site where the debtor can view their account. The debtor can offer to pay a set amount over a set timeline to settle the debt. The credit grantor accepts or rejects the best offer.

Debt Resolve hosts and maintains the online site for credit grantors whose brand appears to site visitors. Debt Resolve has about 20 major clients including three of the largest credit card issuers, in addition to debt buyers and collection agencies, according to Burchetta. Debt Resolve charges clients a percentage of the settlement that is collected.