JAMES McLAUGHLIN
‘A focal point’
Due to an increase in bank products and business methods, the American Bankers Association has created a special advisory group to assist the banking industry on the issue of business method patents.
The ABA Business Methods Patents Advisory Group will pool information and resources from the U.S. Patent and Trademark Office for the banking industry in response to a growing interest in patent matters from association banks. Although the group is still in the process of being formed, the members identified to date are typically lawyers at large banks.
While the concept of patents dates back decades, James McLaughlin, director of regulatory and trust affairs at the ABA in Washington, D.C., said bankers are becoming more worried about business patents as new technology and business methods become available.
“Business method patents are fairly new but somewhere along the way bankers became more worried about it, so we’ve provided the PTO with content to educate them on banking practices,” said McLaughlin.
According to McLaughlin, banking practices involving electronic record keeping and the electronification of checks has prompted bank officials to research what ideas are already used and how banks can obtain patents for unique business ideas.
“We want to formalize some of the things [banks] are doing and we plan to design a database of the prior art that will provide a card catalog of who’s done what and what is available,” said McLaughlin. “We want to monitor more closely what PTO is doing so that we can provide [the PTO] input on the impact of patents in the banking industry.”
‘Bright Minds’
For businesses, the general rule for years was that a method of doing business was not patentable. But in 1998, a landmark ruling by the U.S. Court of Appeals for the Federal Circuit upheld the validity of a patent for a data processing system used to implement a mutual-fund investment structure.
According to the ABA, that began the presumption that such business methods could be patented and since then, a number of business method patents have been issued.
Now, bankers are becoming increasingly interested in protecting existing practices and procedures.
“I’m told that there are hundreds of patents that have been issued in the banking area, some of which are owned by banks and some not,” said McLaughlin.
To help address those issues, the ABA advisory group will create a database of “prior art” – pre-existing practices and procedures that already have been used – to determine whether a new business method is “novel or unique” and would warrant patenting.
Patent law attorneys in the Bay State, however, warn banks to plan strategically, because obtaining a patent on a business method or product is not a quick process.
According to Gerald Altman, a partner at Morse, Altman & Martin in Boston and a former examiner at the PTO, it can take years for a product or service to be patented.
“A patent covers any product, process or procedure … but they must be novel and unobvious,” said Altman. “One aspect of patent law is that [if there is] any prior art you know of that’s relevant [to your idea], you are obligated to supply as relevant backup. Business method patents take years to go through the filing office because business methods are fairly new and people have been filing business methods by the thousands.”
While waiting a few years for a bank’s business method or procedure to be patented, the bank can obtain contingent rights to secure the patentable idea during the lag time. According to the PTO, once a patent is approved, it is only good for 20 years from the filing date.
In addition to industry educational efforts, the group also will work in a liaison capacity with the PTO and provide the banking industry’s perspective on patent issues affecting the financial services industry. Members will aid the association in its efforts to develop and advocate legislative and regulatory policy related to business method patents. Individual working groups on specific patent issues may be established as issues are identified.
Sam Petuchowski, a partner in the Boston law firm of Bromberg & Sunstein who specializes in financial services patents, said bankers who are looking to patent their innovative business ideas are on the right track.
“There are bright minds who are inventing at banks,” said Petuchowski. “Part of our view of patents is from age-old widgets that date back to the Edison era. However, the Supreme Court said that the work of man is subject to patent protection, and there are all sorts of innovative ways of doing things and structuring financial relationships.”
Petuchowski said it is important that banks dedicate people and resources to the development of new ways to do old tricks and “implement different banking procedures and technologies.”
McLaughlin said the ABA’s advisory group hopes to make bank patenting a national issue and provide banks a platform to generate ideas and engage in new business and procedures.
“The advisory committee will provide a focal point and by setting up this committee, it can become a national focal issue. This is a trend that is getting bigger and bigger,” said McLaughlin. “Many banks have patents but it’s hard to know about them and know what they cover. What we’ve tried to do is have knowledgeable people on the committee and provide staff and bankers with some direction.”
Melanie Nayer may be reached at mnayer@thewarrengroup.com.
