José Montet lodged his claim with the Tribunal de Grande Instance in Paris, saying that Paypal's success - and its €1.5billion buyout by eBay in 2002 - was based on his copyrighted system.
He said he had first started researching a way to make online transactions more secure 12 years ago. Credit card fraud was soaring with thieves using easy-to-find card numbers and he hit on the idea of using an email address as part of the security procedure.
Mr Montet spent some time in 2000 trying to sell the idea to several major companies, including LCI and the Groupement des Cartes Bancaires, and lodged details of his "secret mail" system with the Agence Française de Protection des Programmes (APP) and then, a few days later, with the US Copyright Office.
But, despite spending time and money on the project he did not find anyone willing to back him and moved on to other work.
Then, in 2007, he found that Paypal used the same system and it had been a key reason for the company being bought by eBay in 2002.
Mr Montet told the Huffington Post that he had tried to contact eBay with no success. His lawyer had written to Paypal asking for proof their system had been written before his but Paypal replied saying only that the company's history was on its website.
Paypal and eBay made no comment other than to confirm the case had started. The court will give its ruling on February 8.
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