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Financial patents: triumphs or tripwires?
- Posted in: Patents
on 03rd January 2007 Link to this page
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A proliferation of financial patents in the US last year has led industry experts to question whether the rights are being exercised in good faith or simply for litigious purposes. By the end of 2006, 238 US patents had been issued in the financial services category, with General Electric, JP Morgan and Citigroup among the firms with the highest tallies. In stark contrast to Europe’s IP climate, financial services are increasingly patentable in the US – but insiders are worried that such rights are too often used as props for legal action.
On 2 January, Harvard Business School Professor, Josh Lerner, told The Australian: ‘In many cases patents are being used not as a tool to promote innovation but as a tool for extracting “rents” from companies with deep pockets.’ He also spoke of how this could arise from patents awarded to individuals, highlighting the example of Vergil Daughtery’s patent for a method of pricing perpetual options – ‘despite the fact that perpetual options had been extensively studied in the finance literature since the 1960s.’ The company to which Daughtery licensed his patent launched an infringement suit against the Philadelphia Stock Exchange in June. In a recent study, Lerner found that financial patents were litigated at a rate 30 times higher than all other patents.
In August, John Squires, chief patent officer at Goldman Sachs, told the New York Times about the inevitable merging of financial institutions and IP: ‘I think there will be increased filings as the convergence of banking and technology is irreversible. As people spend more and more building systems and deploying technology, they're going to want to make sure they have the rights available to them.’ However, in the wake of the latest news, he has struck a more cautious tone, particularly on the injunctions handed by US courts to infringing companies, ordering them to stop using disputed technology. In such a hugely interdependent sector, he says, these injunctions could affect the entire pattern of business.
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