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10Questions: IP Issues In The Financial Services Sector « Back
August 2012
 
FW speaks with Mike Connor, a partner at Alston & Bird LLP, about IP issues in the financial services sector.



FW: In your view, how important is intellectual property to financial institutions? Are they doing enough to maximise and safeguard the inherent value in these assets?

Connor: While intellectual property for many years was underappreciated in the financial services area, the field has begun to recognise its importance. Today, IP rights are as important to financial services companies as has long been the case for high tech companies. As financial services companies have migrated their businesses to technology platforms, opportunities for protecting new developments with patents, copyrights, trade secret and other legal means have grown. ‘Patent trolls’ may have awakened many in the industry to the power and importance of IP rights, but today’s sophisticated financial institutions have developed institutional programs to identify and protect their IP rights. This is vastly important to the development of new systems, as solid IP protection, and avoidance of IP rights of third parties, are necessary to safeguard major investments in business platforms and new products and services. Recognition and adoption of IP protection processes have been uneven, but most significant financial companies today have IP programs and procedures in place. Larger entities may have in-house IP counsel and IP committees in place.

FW: Are you seeing growing popularity in the patenting of payments processing systems?

Connor: The technology-driven nature of this area of financial services led payments companies to recognise early on that IP rights were important. There is a fair amount of IP litigation in the United States concerning payments systems, relating to patents on POS devices, communications protocols and methods, and overall systems. Licensing of technology platforms and software packages to run the platforms is often an important part of a payments processor’s business. Industry standards that are necessary for the compatibility of linked systems may come into play in some of these matters and may affect the availability of IP rights. Early innovators who protected their systems have secured their market positions and have reaped substantial rewards from excluding later entrants or licensing them. The payments field is a rapidly evolving business, and new patents in this area are being issued at a high rate.

FW: Could you outline some of the key issues surrounding the patentability of business method claims?

Connor: The claims in a business method patent cannot be too abstract and cannot be directed solely to mental processes. In the United States, recent cases stemming from the Federal Circuit Court of Appeals’ famous In re Bilski case in 2008, and the Supreme Court’s affirmation of that decision in 2010, have addressed patentability of business method claims. Bilski concerned a claim for a method of hedging risks in commodities trading that was held not to be patent-eligible. One way to avoid the problem of unpatentable subject matter is to have the claim implemented in a meaningful way with a computer or using other technological elements.

FW: What provisions are now available to address concerns of patent invalidity?

Connor: Financial services companies that are concerned that patents may be invalid have multiple ways to seek determinations from courts or the US Patent and Trademark Office (PTO), and they will soon have new ways to seek redress. First, for substantial disputes where subject matter jurisdictional concerns are met, financial services companies may petition a federal district court to rule that an issued patent is invalid. Federal court litigation of invalidity is a frequent defence in patent infringement suits, as an invalid patent cannot be infringed. An action for declaratory judgment of patent invalidity may be filed in appropriate situations. Alternatively, a company concerned with patent validity has been able to seek review from the PTO in a re-examination proceeding. There have been two versions; inter partes re-examination and ex parte re-examination. Strategic decisions and cost have influenced the choice of these avenues. The recent America Invents Act is introducing new procedures that come into effect beginning in September 2012 that are known as post grant review and inter partes review. The extent to which these new vehicles will be used remains to be seen, but they may be popular alternatives to district court litigation where cost is a concern.

FW: Do you expect patent pools and cross-licensing among financial entities to become more prevalent? What licensing issues might come into play as a result?

Connor: As financial services entities acquire more and more patents, in time we would expect that some institutions may cross licence each other, especially where each has patents that block the other, or where each entity needs its system to be compatible with the systems of other entities. Patent pools, or cross-licensing encompassing larger industry groups, are likely to become more popular, although competition law issues will become important in these situations. Where standards are involved, licences may be required on reasonable and non-discriminatory terms. Some technology-driven businesses such as telecommunications already face these issues every day, and I would expect that financial institutions that must deal with each other regularly will in time develop a similar, although perhaps less entangled, environment.
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