Infamous Check Scanning Patents, That Senators Tried To Bury, Wins First Lawsuit

from the scan-this dept

Wed, Apr 7th 2010 12:55am — Mike Masnick

A couple years ago, there was a really sleazy move by some Senators to try to exempt banks from lawsuits brought by a company called DataTreasury, who held a patent on a method for scanning checks. The only purpose for this legal change was so that banks could avoid having to deal with patent infringement threats and lawsuits for doing something as basic as automatically scanning their checks. What we couldn't understand is why the Senators would single out two specific patents to be ignored, rather than trying to actually fix the patent system. Well, actually, it wasn't hard to figure out: the Senators were trying to do the banks (the same ones they were about to bail out) a big favor -- and doing real patent reform is difficult. Anyway, that story got some publicity and it forced the Senators to back down, so that specific "exemption" never made it through to being law.

That said, it doesn't mean that the patents in question was a particularly good patent. In fact, there's a good argument that the patent is exceptionally broad, way beyond a reasonable level, and was the natural progression of where things were headed. Others have pointed out that, depending on what the Supreme Court rules in the Bilski case, this patent might soon get tossed under the new rules anyway. In the meantime, though, it hasn't stopped DataTreasury from collecting $350 million from banks it has threatened, and, as Joe Mullin points out, the company has also won its first patent lawsuit, against US Bank, who will now have to pay somewhere between $27 million and $90 million (depending on how "willful" the infringement is considered). The decision came out of an East Texas jury, so perhaps it's not surprising.

Mullin's article highlights how questionable a patent this is:

Steve Bartlett, CEO of the bank lobbying group Financial Services Roundtable, says DataTreasury's suit against U.S. Bancorp is a prime example of why business method patents need to be reined in. The patents don't amount to an invention, Bartlett says, just a description of a common business practice--processing checks--that has changed over time, as have answering the phone and opening mail. To Bartlett, that such a patent can be used to extract large sums from banks shows how far the patent system has spun out of control.

"This particular case involves check processing, which every bank in the nation has been doing for 200 years," says Bartlett. "And yet [DataTreasury] somehow got a patent on it."

Furthermore, as the lawyers pointed out at the trial, there appears to be tremendous prior art on the patents in question -- and the only way the company was able to secure the patents after they were initially rejected was to add a bit of encryption to it. Under the KSR test, it seems like that alone should invalidate the patents. Taking two known things -- check scanning and encryption -- and combining them shouldn't be patentable. But that's not how the patent system works, unfortunately. US Bank is planning to appeal, and the Supreme Court could help out quite a bit with a smart Bilski ruling (though that may be too much to hope for).

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Filed Under: check scanning, patents
Companies: datatreasury

31 Comments

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...Big Big Idea, 7 Apr 2010 @ 3:16am

I've got the...
I applied for a patent that describes how people get ideas and patent them. It describes in great detail 37 ways ideas are manufactured, so I guess I have all the bases covered.
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Anonymous Coward, 7 Apr 2010 @ 5:02am

So, a bad patent contributed to the financial meltdown.
Another checkmark in the con column.
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shg, 7 Apr 2010 @ 6:15am

Well, if a lobbyist says so, then it must be true. Or, perhaps the patents have to do with the invention of secure capture technology that no bank knew how to do, and that banks have since stolen and used to save billions upon billions of dollars without compensating the company that created and patented the means, as was found by the USPO, both initially and after subsequent challenges by banks, by juries and by admission of those banks that have settled with DataTreasury.

Or, you could just take the word of the lobbyist and run with it. After all, it's a lot of work to learn the facts, and lobbyists would never lie.
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Anonymous Coward, 7 Apr 2010 @ 6:31am

Re:
I fail to see the lack of obviousness in check scanning. And in terms of encryption, how does tacking that on add anything non-obvious? And please explain how it is possible to steal an idea. Do the banks employ psychic vampires?

I think the main point of the article was that this is just another example of an obvious patent being abused. The difference is that it actually got attention by law-makers. However, instead of actually addressing the problem, they tried to sweep it under the carpet. (Also, yes lobbyists are liars, swindlers, and shills. This does not preclude them from making factually correct statements. His motivation is obvious, but the fact remains that they are enforcing a patent on an obvious business practice.)
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Anonymous Coward, 7 Apr 2010 @ 6:34am

No, I think he was just being sarcastic, (ha-ha), I get it.
We all know that it was Datatreasury's technology that actually saved the banks, and helped them repay that TARP money so fast. After all they're saving billions of dollars a year no longer having to physically transport those checks around the world. Not to mention the billions of dollars they are making on intrest w/ the additional float time. Oh and yes, lets not forget the billions of dollars a year they are bilking out of the public in newly found overdraft fees! They certainly didn't make that money back the old fashioned way...lending money, because we all know they've been horting it!
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Anonymous Coward, 7 Apr 2010 @ 6:40am

The "non-obvious" Patents
They're linked in the typepad article, but I figured I would repost the links here.

http://www.google.com/patents/about?id=s0sWAAAAEBAJ&dq=5,910,988
http://www.google.com /patents/about?id=BZsDAAAAEBAJ&dq=6,032,137

If you want to get bank information off of paper and into a computer and then transfer it securely to a central location, how is the solution of "take a picture of it and send it as an encrypted message" not obvious?
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Anonymous Coward, 7 Apr 2010 @ 6:41am

Re:
"No, I think he was just being sarcastic, (ha-ha), I get it."

I think you're right. Sorry shg.
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Dallas IT Guy, 7 Apr 2010 @ 6:50am

There needs to be a check and balance in place for the award amount.

If the patent holder doesn't offer a product for sale that the infringer could have used, the damages should be very limited.

If there is a product available, the damages should be limited to the net loss in sales.

Or, limit damages to a small multiple (like 10x) of the amount paid by the patent holder in Intellectual Property Taxes.

Not that I like the idea of another tax structure, but if payment were voluntary and it helped stop these abusive awards, I'd support it.
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NullOp, 7 Apr 2010 @ 6:58am

Surprise!
Like this surprises me that senators are helping friends... IT IS TIME FOR THE AMERICAN PEOPLE TO TAKE BACK THE GOVERNMENT! VOTE ALL INCUMBENTS OUT AT YOUR NEXT OPPORTUNITY! Hello? Hello? Is anybody there? Does anybody care??????
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Anonymous Coward, 7 Apr 2010 @ 7:01am

"Taking two known things -- check scanning and encryption -- and combining them shouldn't be patentable."

Agreed. I can't believe they can do this......

So can Resses sue any candy maker that combines chocolate and peanut butter?
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Bankrupt, 7 Apr 2010 @ 7:12am

Patent for everyone
My company developed a prototype for removable media that is proprietary secured (won't work any where else but the company computer). After running the patent search it was determined that over a thousand patented "ideas" could have sued me. Most of these patent ideas are from China. It would help if a patent would only be issued if you can produce an actual working prototype. Throw patent ideas out the window. Oh..wait..I need to patent this idea..gotta run...
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Les, 7 Apr 2010 @ 7:22am

Is nothing worthy of a patent?
The Wright Bros. plane was a combination of known components too (wood, cloth, rope or cable). Does that mean it was not worthy of a patent?

If the claims were allowed because of the inclusion of insignificant encryption, then the solution for the infringing banks is simple. Just don't use the insignificant encryption and carry on processing checks THE OLD WAY.
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senshikaze (profile), 7 Apr 2010 @ 7:36am

Re:
only if they patented it.

and i was under the impression that it was a process that was patented, not a product per se.
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Ronald J Riley (profile), 7 Apr 2010 @ 7:42am

IBM, just another greedy transnational destroying US job creation.
IBM's goal is to fix the patent system to ensure that upstart startups by independent, academic and small business interests cannot rock IBM's boat. When they talk about Patent Reform they are really talking about class warfare and corporate dominance of everyone and everything worldwide.

IBM floods the patent system with large quantities of minor incremental inventions. One aspect of their vision for Patent Deform is First to File which will greatly aid their efforts to cloud real inventors patent rights. It will lead to patent system flooding, where the number and type of minor incremental patents will greatly increase, further bogging down the patent office.Everyone needs to remember that when IBM followed in Microsoft's footsteps as seems to always be the case nowadays they were really asking for a free pass to take others inventions.

While I think I understand why TechDIRT carries Microsoft and IBM water I do not understand why people buy their propaganda and then are surprised when the reality of how they and for that matter all the members of the Coalition for Patent Piracy & Fairness and the Coalition for 21st Patent Deform and HARMonization operate surfaces.

Ronald J. Riley,

Speaking only on my own behalf.
President - www.PIAUSA.org - RJR at PIAUSA.org
Executive Director - www.InventorEd.org - RJR at InvEd.org
Senior Fellow - www.PatentPolicy.org
President - Alliance for American Innovation
Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
Washington, DC
Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.
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kirillian (profile), 7 Apr 2010 @ 7:42am

Re: Is nothing worthy of a patent?
Last I checked, wood, rope, cloth, and cable were not abstract ideas combined into a single thing...the plane was an abstraction and an implementation that was unique from its predecessors.

The implementation factor is key to patents. It takes a specific implementation to be guarded by a patent.
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senshikaze (profile), 7 Apr 2010 @ 8:02am

Re: IBM, just another greedy transnational destroying US job creation.
....What?
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Anonymous Coward, 7 Apr 2010 @ 8:02am

Re: Re:
Patents at issue contain both product and method claims.
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Les, 7 Apr 2010 @ 8:04am

Re: Re: Is nothing worthy of a patent?
"The implementation factor is key to patents. It takes a specific implementation to be guarded by a patent."

...and so the patents in question are to specific implementations of methods for processing checks. Apparently the specific implementations involve encryption and other specific steps.
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Anonymous Coward, 7 Apr 2010 @ 8:38am

Re: Re: IBM, just another greedy transnational destroying US job creation.
Pay no attention to RJR. Every time the word "patent" appears on Techdirt, he and his obnoxious signature are sure to follow. His comments are often off-topic and low to no-content.
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Anonymous Coward, 7 Apr 2010 @ 9:23am

Re: Re: Re: Is nothing worthy of a patent?
But how is that non-obvious to anyone, let alone an expert in the field?
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Les, 7 Apr 2010 @ 10:02am

Re: Re: Re: Re: Is nothing worthy of a patent?
I haven't read the application. But I know that it is never easy to convince a patent examiner that something is not obvious.

In this case the examiner and several courts came to the conclusion, that AT THE TIME THE INVENTION WAS MADE, it would not have been obvious to one of ORDINARY skill in the art.

After looking at the Wright Bros. plane and then, in hindsight, at a seagull in flight, an arrogant onlooker might say the plane was obvious too....yet no one had done it before....
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Les, 7 Apr 2010 @ 12:16pm

Re: The "non-obvious" Patents
That MIGHT have been obvious in 1999. But, that isn't what is covered by either patent. The methods covered by the patents include at least 6 steps including:

encrypting subsystem identification information and the transaction data;

Why would it have been obvious in 1999 to encrypt subsystem identification information and transaction data in a method for processing checks?
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nasch (profile), 7 Apr 2010 @ 1:03pm

Re: Re: Re: IBM, just another greedy transnational destroying US job creation.
In this case he actually copied and pasted his comment from the IBM story, I think with no changes at all, into this story that has nothing to do with IBM. Talk about lazy shill/trolling (shitrolling).
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Anonymous Coward, 7 Apr 2010 @ 1:31pm

Re: Re: IBM, just another greedy transnational destroying US job creation.
Every comment RJR makes is just a veiled advertisement trying to get inventors to pay him for his scam services.
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Anonymous Coward, 8 Apr 2010 @ 5:49am

Re:
What ever happened to the peanutbutter and jelly sandwich patent?
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abc gum, 8 Apr 2010 @ 5:51am

Re: Patent for everyone
"won't work any where else but the company computer"

Is it a one time pad?
If not, then I doubt your claim
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bad analogy guy, 8 Apr 2010 @ 5:53am

Re: Re: Re: Re: Re: Is nothing worthy of a patent?
analogy fail - for obvious reasons
please, go buy a clue
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Anonymous Coward, 8 Apr 2010 @ 5:55am

Re: Re: IBM, just another greedy transnational destroying US job creation.
I think it is the RJR auto-troll
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sz, 8 Apr 2010 @ 2:44pm

These patents passed through the patent office twice. It does not matter what anyone thinks of the patents. They are valid and US Bank new they were valid and decided to ignore them. This is why you get patents and if you have a valid patent that went through the system not once but twice then you darn well better protect them if someone decides to ignore them. They proved in trial that not only did they use the patents, but new they existed and willfully ignored them. Doesn't matter what anyone thinks about the patents,they are valid and being abused. If datatreasury cant get money from people who use its patents then why have a patent system at all.
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Inspector Cluseau, 9 Apr 2010 @ 8:34am

A patent, is a patent, is a patent!
The law, is the law, is the law!
OK ladies and gentlemen. How about this scenario?
You`re traveling at 85 miles per hour on Florida Interstate
(I-75). The speed limit is 70 miles per hour. You explain to the State Trooper, that stops you, that you don`t like the 70 MPH. speed limit and decided that 85 MPH. is more to your liking. The Judge listens to the same pathetic story. The Judge now advises you that you have willfully and intentionally broken the law. Your fine instead of $125 it is $375 (triple the amount)for a willful and intentional violation. US Bank has willfully and intentionally infringed Data Treasury`s Patents!(YOU CAN`T CHANGE THE LAW,OR INFRINGE A PATENT, BECAUSE IT`S NOT TO YOUR LIKING!) IF YOU DO SO YOU PAY THE PENALTY!
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Anonymous Coward, 9 Apr 2010 @ 12:11pm

"If datatreasury cant get money from people who use its patents then why have a patent system at all."

=Reeeeeeetarded
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