Not All Technology Patents Require Blanket Royalties

By Koster, Karl | American Banker, July 19, 2002 | Go to article overview

Not All Technology Patents Require Blanket Royalties


Koster, Karl, American Banker


Many lawyers in the financial services industry are being introduced to Ronald A. Katz and his licensing company, Ronald A. Katz Technology Licensing.

Mr. Katz is a prolific inventor who has been vigorously enforcing his portfolio of telecommunications patents and has recently targeted the banking industry.

How are these institutions potentially infringing on these patents? By providing automated access to account information through customer service call centers.

A Patent Holder's Rights. A patent gives its holder the right to exclude others from making, using, or selling an invention. The duration of a patent has varied slightly over the years, and it is currently 20 years from the filing date.

Mr. Katz has been issued over 50 U.S. patents. His patents, which were first filed in 1985 and continue to be filed through the present, frequently include over a hundred claims, so cumulatively his portfolio includes several thousand claims.

The claims define the actual legal scope of protection for the invention, and liability can occur with infringement on a single claim.

In addition to the sheer size of the patents, other factors complicate the process of determining whether one should obtain a license.

First, the patents usually implicated involve complex telecommunications technology. Specifically, they relate to advanced telecommunications services and various forms of computer-telephone integration.

This technology is used to automatically transfer a voice call, along with the caller's data file, to an agent.

While computer experts are frequently not versed in telecommunications, telecommunication experts are frequently not versed in computers. Neither are versed in the arcane world of patents.

Many corporations have licensed the Katz patent portfolio -- including Microsoft, IBM, AT&T, and MCI. Some lawyers assume that because such companies have obtained licenses, they should obtain licenses as well.

How to reduce liability. While the Katz patent portfolio represents a formidable risk of infringement, there are ways to reduce, if not potentially eliminate, your liability.

First, a careful examination of a call center's technical operation is required. This requires interaction with the call center designers to fully understand the call flows of the system. Infringement of a patent claim requires each and every element of the claim to be exhibited in the system's operation. If just one claim element is absent in a particular call flow, then those calls can be excluded from consideration.

Patent royalties are frequently tied to levels of usage. Without ascertaining which calls are implicated, it is all too easy to presume that all calls infringe on a patent, and this increases royalty payments significantly. Obviously, a licensor is quick to suggest that all calls are implicated and should be included when calculating royalty fees. …

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