EU banks face less threat of infringing software patents than those in US, says expert

Out-Law News | 27 Jun 2013 | 12:52 pm | 2 min. read

EU banks are less likely to infringe software patents than their counterparts in the US but should still evaluate whether to undertake a freedom to operate (FTO) analysis before launching new products or services to the market, an expert has said.

A patent licensing company is seeking to enforce a number of patents against banks in the US, including the Bank of America and JP Morgan Chase, and has filed a number of patent infringement claims in US district courts.

Intellectual Ventures has claimed (110-page / 6.99MB PDF) that the banks have infringed patents it holds the rights to through the operation of their online banking services and other systems.

Research undertaken by Pinsent Masons, the law firm behind Out-Law.com, has revealed that applications were made to the European Patent Office (EPO) for patents equivalent to some of the ones granted in the US which Intellectual Ventures is seeking to enforce against the US banks. The applications sought patent protection for security infrastructure for electronic transactions, a way of searching digital images, and controlling access to and distribution of data.

All three of the patent applications submitted to the EPO have lapsed or been withdrawn.

Patent law expert Deborah Bould of Pinsent Masons said: "It has traditionally been easier for companies in the US to obtain patent protection for business methods and software inventions than it has in Europe. The law has since been tightened up and now the US Patent and Trademark Office take a much more restrictive view. That still leaves a large number of patents granted in more laissez-faire times, which companies like Intellectual Ventures seek to enforce even though there are question marks over validity of those patents."

"Banks are increasingly developing new systems and technology that allow customers to manage their accounts and make transactions online, via mobile internet and through applications. With these developments come new inventions and new patents," Bould added.

"The risk of patent infringement for European banks is less severe than it is in the US. This means that European banks should evaluate on a case-by-case basis whether it makes commercial sense to undertake an FTO analysis before launching those products or services," Bould said.

"A freedom to operate analysis is something businesses wishing to launch new products or services to the market can undertake in order to assess the risk of infringing existing patents in entering that market," Bould said. "The search can help companies establish whether patented technology already exists that impacts on their products or services and help inform their decision making about what to do if there are 'blocking' patents."

"If an FTO search establishes that businesses are hindered by blocking patents in their target market then they have several options available to them. The company can elect to negotiate a licence for the patents that their products or service will infringe, they could try to buy the patents that apply to their technology, they could try to re-engineer their products or services in a way that avoids infringing, or they could test the patents' validity in an opposition before the EPO or in court," she said.

"However, banks must weigh up the cost of undertaking an FTO analysis with the perceived threat. As the Intellectual Ventures example shows, the risk of infringing software patents in Europe is lower than the risks faced by banks in the US. FTO analyses are most useful for game changing products and services in the financial services sector, where there has been fairly radical innovation," Bould added.