The Tech Scene: Patent Abuse May Plague Banks Next

Article excerpt

As if banks lacked enough to worry about, up comes the issue of intellectual property. Thanks to a two-year-old change in policy at the U.S. Patent and Trademark Office, people outside the banking industry now can patent business practices that banks have always taken for granted -- everything from the way credit cards are processed to how checks are handled. Both the banking industry and the patent office are waking up to this problem, and both seem to be taking steps to correct it. BITS, the technology arm of the Financial Services Roundtable, has set up a working group to study the issue and make recommendations. Officials of the U.S. Patent Office have acknowledged that some patents it has granted may be problematic in their breadth. Congress has taken some corrective action in the form of the American Inventors Protection Act, which was signed into law late last year. It protects companies that have used computerized processes for at least a year from being sued for infringement by a latecomer who patents the existing process. But it is still an issue to which bankers should pay attention because it could potentially cost them a lot. Entrepreneurs who are seeking patents on business methods -- or have already won them -- are doing so largely to get licensing fees from the banks and other institutions that already use unpatented versions of the method. Though no egregious example has arisen of what might amount to intellectual extortion, the potential is alarming enough that the industry should be acting in concert to protect itself. Until 1998 the general rule was that a method of doing business was not patentable. A patent-seeker had to prove that his or her submission was an invention, machine, or device. But the advent of patents on software began eroding this rule, and the landscape changed that year when the U.S. Court of Appeals for the Federal Circuit ruled in State Street Bank & Trust Co. v. Signature Financial Group Inc. that software inventions embodying business models -- such as a mutual fund management model -- should not be excluded from the scope of patentable subject matter. This ruling broke the dam, leading to a string of successful patent applications that previously would have been rejected summarily. One example -- and a case study in why the industry should sit up and take notice -- is a patent granted to Steven I. Weissman, a 47-year-old corporate attorney in Florida, for a credit card scheme that sounds suspiciously similar to a purchasing card system. As Mr. Weissman explains it, early in his practice as a lawyer it occurred to him that it would be useful to have a credit card that would keep track separately of expenses incurred for each client. If all the travel and other business-related expenses for Client A were stored on the card separately from expenses for Client B, he said, it would make billing much simpler. As Mr. Weissman envisioned it, the credit card itself would have a keypad, display, and microprocessor chip so that the lawyer could enter a client code at the point of sale and the device could store all the information. …