Congress Happy To Knock Out Patents That Impact Financial Institutions... But Everyone Else?

from the funny-how-that-works dept

For about five years now, we've been discussing the ridiculous rise of "tax strategy" patents. There have been a bunch of them. Three years ago, an attempt was made by Congress to effectively dump such patents. It didn't go anywhere. What I hadn't realized is that this particular provision has made its way back into Congress in the current patent bill, and it seems likely that such tax strategy patents will effectively be killed off as well as one famous patent on digitally scanning checks that the big banks have been trying to get Congress to dump for years.

Make no mistake about it: these are ridiculous patents that have no business existing. So I'm happy that they'd be ditched, but I'm troubled by the fact that Congress seems to see no problem carving out such patents when they hurt financial institutions, but doesn't do it in other cases. Senator Schumer, who is a major backer of this, highlighted the check scanning situation specifically in supporting the bill: "This is a case where one company has made a cottage industry out of extracting legal settlements by exploiting a fuzzy part of the law on patents." But couldn't this be said about pretty much all patent trolling? So why isn't Congress dealing with that?

Again, it's a good thing that Congress recognizes that there are bad patents, but it seems to only cherry pick the bad patents that harm the financial sector. In fact, when people bring up all the bad software and business method patents, all you hear is how it would be "impossible" to reasonably carve those out of the patent system. Yet, for some reason, they seem to have no problem doing that when it comes to Wall Street and other financial institutions?

Separately, highlighting just how ridiculous this is, it appears that this carve out of tax prep patents has a separate negative carve out that says it won't apply to tax prep software patents. Think of it as the Intuit exception. Basically, you can't patent tax preparation strategies anymore, because that hurts big financial institutions... but you can patent tax prep software, because that helps Intuit.

Instead of creating special carve outs in the patent system for big special interests with massive lobbying budgets, how about if Congress actually did its job and fixed a broken patent system to get rid of all bad patents?

Filed Under: check scanning, chuck schumer, financial institutions, patent reform, patents, tax preparation strategies
Companies: datatreasury

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

from the scan-this dept

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).

Filed Under: check scanning, patents
Companies: datatreasury

Alberto Gonzales Finds A Job: Helping To Settle Patent Trolling Disputes

from the easier-than-fighting-terrorism dept

Back in April, the NY Times had reported that former US Attorney General Alberto Gonzales was having trouble finding a job. However, it appears that he's now found at least a temporary one: sorting through a patent mess. Against Monopoly points out that Gonzales has been hired as a "special master" to help sort through the legal issues in a high profile patent lawsuit.

This particular lawsuit is doubly interesting, because politicians have gotten involved. On the face of it, it looks like a typical patent holding lawsuit, where a company (that doesn't do anything) holds a very broad patent on the concept of automatic check scanning. It's suing a whole bunch of banks for their use of automatic check scanning without paying a big licensing fee for permission to do so. Where it's gotten ridiculous is that politicians dumped some language into a bill to exempt banks from having to obey this patent. That may create the right result (not forcing banks to license this unnecessary patent), but in a very, very bad way. Congress shouldn't be creating exceptions. It should be fixing the patent system.

In the meantime, given Gonzales' already seriously skewed view of intellectual property law (he wanted to make "attempted copyright infringement" a criminal offense and pushed for other laws that would greatly increase the coverage of copyright law), it seems unlikely that he's going to recognize just how damaging patents are in these sorts of cases.

Filed Under: alberto gonzales, check scanning, patents
Companies: data treasury

Rather Than Giving Banks A Patent Exemption, Why Not Fix The Patent System?

from the still-wondering... dept

Back in February, we wrote about how some folks in Congress had hidden a sneaky bit of legislation into a bill that would exempt banks from a particular patent on automated check scanning. This was a terrible abuse of Congressional power, that would only lead to more similar actions. But the real problem isn't Congress trying to protect banks from a bad patent (and rest assured, it's a ridiculously broad patent on an obvious idea), it's that they're trying to create a specific exception, rather than fix the entire system.

However, no matter how ridiculous this particular "exception" is, Tom Giovanetti's latest article complaining about it has numerous problems. First, he starts off by suggesting that traditional property and patents are similar, and that they're there to "protect the little guy." Unfortunately, patents and property are quite different, and patents were never designed to "protect the little guy," but to promote the progress, which again is entirely different. Giovanetti then claims that: "there is something heroic, even romantic, about the small inventor who comes up with a breakthrough idea." Yes, there is something romantic about it -- but perhaps that's why it's generally a myth. There are very few stories of small inventors coming up with breakthrough ideas. Most of the stories you can think of are actually revisionist history of those who actually copied the ideas of others, and were better marketers (and able to abuse the patent system to their own advantage).

So, yes, this particular exception is bad, even if it's for the right reasons. The patent itself is quite questionable and covers a broad and obvious topic. The company has done little to commercialize the offering itself and has been looking to sit back and cash in. But, the idea that this is an affront to "small inventors" making "breakthrough inventions" is a myth that's better left by the wayside. This is merely yet another example of a broken patent system and Congress' unwillingness to fix the root causes of the problem, preferring instead to treat the symptoms.

Filed Under: check scanning, congress, exemptions, patents