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Big Banks and Business Method Patents

65 Pages Posted: 24 Apr 2014 Last revised: 5 Jun 2014

Megan M. La Belle

Catholic University of America (CUA) - Columbus School of Law

Heidi Mandanis Schooner

Catholic University of America (CUA) - Columbus School of Law

Date Written: April 22, 2014

Abstract

The banking industry and the patent system are longstanding American institutions whose histories date back to the founding of this country. Historically, however, the paths of these two institutions rarely crossed. Although financial firms have been increasing their innovative output for decades now, until recently they relied on trade secrecy, first mover advantages, and other business mechanisms to protect and monetize their intellectual property — not patents.

Through a convergence of circumstances over the past several years, that pattern has changed. The shift began when the Federal Circuit decided that business methods — banks’ primary mode of innovation — are patentable subject matter. That decision triggered an increase in the number of business method patents issued by the PTO, and, correspondingly, a surge in patent infringement litigation targeting big banks. When the banks found little success in court, their powerful lobby persuaded Congress to include a special carve out for financial patents in the America Invents Act — the comprehensive patent reform legislation enacted in 2011. Meanwhile, as the financial industry sought legislative favor to ward off future infringement suits, many of the big banks built substantial patent portfolios of their own.

This Article explores this nascent relationship and considers some potential implications of growing bank involvement in our patent system. It suggests that the intersection of these institutions could yield some benefit, for example by improving the publicly available information regarding financial innovations. Yet, more pointedly, it warns of possible harms, especially if big banks use their political and economic power to disproportionately influence patent reform and innovation policy in the future.

Keywords: patents, business method patents, America Invents Act, financial institutions

Suggested Citation

La Belle, Megan M. and Schooner, Heidi Mandanis, Big Banks and Business Method Patents (April 22, 2014). 16 U. Pa. J. Bus. L. 431 (2014); CUA Columbus School of Law Legal Studies Research Paper No. 2014-4 . Available at SSRN: https://ssrn.com/abstract=2427986

Megan Maureen La Belle (Contact Author)

Catholic University of America (CUA) - Columbus School of Law ( email )

3600 John McCormack Rd., NE
Washington, DC 20064
United States

Heidi Mandanis Schooner

Catholic University of America (CUA) - Columbus School of Law ( email )

3600 John McCormack Rd., NE
Washington, DC 20064
United States
202-319-5672 (Phone)
202-319-4459 (Fax)

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