Patent Dispute Holds Ramifications For Most CUs

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WASHINGTON - A group of mom-and-pop inventors, including the man who holds the patent on major Check 21 technology, is lobbying Congress in a last-ditch effort to knock a provision out of a pending patent reform bill that would re-engage the U.S. Patent and Trademark Office in previously resolved patent disputes.

At issue is Section 18 of the America Invents Act, which would allow defendants in patent litigation to ask the Patent Office to reconsider already awarded patents - but only for financial services - once litigation is initiated for patent infringement.

The extraordinary provision, which is being championed by banks and credit unions, not only would protect banks and credit unions from ongoing patent litigation over Check 21 image processing, but new suits claiming dozens of credit unions and banks are infringing on patents for card customization, or that CUNA Mutual Group, among others, is infringing on a patent for electronic customer service processing.

The focus of the bill would change the main criteria for winning a U.S. patent from the age-old "first inventor" system, which acknowledges the person who can clearly prove he/she had the idea first, to one of "first filer" which rewards the first person to file for the patent.

But for credit unions and banks their focus is Section 18, which was prompted by a tiny Dallas company called DataTreasury that has won hundreds of millions of dollars in legal settlements over its Check 21 patents. The bill's Section 18 could potentially protect two major banks, U.S. Bank and Capital One, which have lost patent infringement suits to DataTreasury and face tens of millions of dollars in license fees or damages.

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.

After the bill was passed by the House last month with Section 18 in it, a group of financial service interests, including CUNA, NAFCU, CUNA Mutual Group, the American Bankers Association and the Financial Services Roundtable, called on the Senate, which had approved a different version with Section 18 in it, to pass the final bill into law.

Lobbyists for the group of inventors note the highly unusual nature of Section 18, singling out financial service patents for re-review even after the Patent Office has awarded a patent. They are hoping they can attract one or more senators to support their efforts to dissuade the Senate from voting final passage of the bill and instead force a joint conference between Senate and House leaders where they hope to knock Section 18 out of the bill. "There's some pressure to open up the bill when it gets [back] to the Senate," one source told Credit Union Journal.

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