WASHINGTON – The Senate today approved the Patent Reform Bill that will, among other things, help curb so-called patent trolls suing credit unions and banks over generally available technology methods.
The bill, which changes the main criteria for granting of a patent to “first to file” from the current “first to invent” principle, includes a key provision championed by credit unions and banks that will allow targets of patent infringement lawsuits to challenge existing business patents they believe have been awarded on shoddy grounds.
The provision, Section 18 of the bill, will allow defendants in patent litigation to ask the U.S. Patent and Trademark Office to reconsider previously awarded patents for as long as eight years - but only for financial services - once litigation is initiated for patent infringement.
The provision is aimed primarily at a Dallas company called DataTreasury that owns the patent on critical Check 21 processing technology which has won it hundreds of millions of dollars in licensing fees from banks using the technology after suing them.
But it also comes as credit unions have been hit recently with a variety of patent suits over mobile banking, webpage authentication, credit card customization and electronic customer service processing, some of which have been dismissed.
New York Sen. Charles Schumer, who supported Section 18, said the provision will ensure that generally available business methods–such as the double-click of a computer mouse--will not be subject to patent protection.
Credit unions and banks say Section 18 will protect them from related lawsuits by allowing the Patent Office to vacate low-quality patents, which they define as patents that should never have been granted. In particular, language in the bill would allow patents to be challenged based on evidence of prior use or sale, which are factors that cannot be considered under current rules.
"The passage of this bill will help eliminate the frivolous lawsuits that are being filed targeting credit unions around the country,” said Dan Berger, chief lobbyist for NAFCU, lobbied for the provision, along with CUNA, CUNA Mutual and the American Bankers Association and Financial Services Roundtable, the lobby group for the big banks and insurance companies.
“Section 18 of the patent bill will help protect credit unions from frivolous patent lawsuits brought by non-practicing entities by establishing a process at the Patent and Trademark Office whereby patent disputes can be reviewed,” said Ryan Donovan, senior lobbyist for CUNA.
"CUNA Mutual commends the passage of this important reform,” said Chris Roe, chief lobbyist for CUNA Mutual, a target of at least one recent patent suit. “It creates a fairer process for evaluating patents, and protects legitimate CUNA Mutual and credit union business practices from abusive lawsuits.”
The main focus of the bill, known as America Invents Act, aimed at avoiding long and difficult legal arguments over who was the first to come up with an idea, by changing the main criteria for awarding a patent to the “first to file” principle most other countries use.
It will also increase funding for the Patent Office through new and revised patent fees (including an "electronic filing incentive" which adds a $400 fee for people who do not file patents through electronic means.)
The bill will now be sent to President Obama, who is expected to sign it into law.
