The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( MagicDiligence.com) -- LML Payment Systems ( LMLP) is a small provider of payment transaction services to merchants providing products or services over the Internet. The company has three divisions. The first is the Transaction Payment Processing unit, which accounted for 27% of sales in the fiscal year ended this March. TPP provides website and mobile developers a set of application program interfaces for credit card authentication, fraud protection, and payment clearing, in addition to hosted solutions (users are redirected to LML's Web site for payments). LML earns revenue from one-time setup fees for new merchants, monthly recurring gateway fees, and per-transaction fees. LML has over 10,000 merchants using its solutions in Canada. The second division is the Check Processing unit. The business here is providing merchants a way to recover amounts on returned checks, including electronic checks. Revenue is earned when the firm is successful at recovering amounts, often based on a percentage of the principal. The CP unit accounted for just 5% of 2011 revenue, growing at just 6% over the prior year. The real wild-card, and most of the value in the stock, is the Intellectual Property Licensing division. LML holds five patents pertaining to electronic check processing methods. One in particular, dubbed the RE40,220 patent, has earned significant returns. >> Get your financial news on the go with TheStreet's iPad app. In 2008, the firm sued a whole roster of financial institutions for infringing on the patent. To date, LML has won settlements from Citigroup ( C), PayPal ( EBAY), PNC Bank ( PNC), Bank of New York Mellon ( BK) and several other large regional banks, pocketing over $30 million in the process. These nonrecurring settlements made up about 68% of LML's 2011 revenue and virtually 100% of operating profits. Given this, LML certainly raises the common Magic Formula "red flag" of showing up on the screen due to a nonrecurring, one-time revenue windfall. In order to value the stock, though, we need to consider the IPL division's potential moving forward. Can they continue to pocket big gains by settling with even more banks? Certainly there is potential for more big payments this year. Two separate infringement trials involving heavy hitters JPMorgan ( JPM), Wells Fargo/Wachovia ( WFC), Deutsche Bank ( DB), and Capital One ( COF) are set to commence in October of this year. One of the defendants in those cases, Northern Trust ( NTRS), recently settled for $1.25 million.