A member of the Senate Judiciary Committee is pushing for legislation that would protect banks from a high-stakes patent infringement lawsuit related to check imaging.
The Judiciary panel was expected to begin evaluating a bill Tuesday that would overhaul the nation's patent system. Sen. Jon Kyl, R-Ariz., has circulated an amendment to shield banks from paying monetary damages if they infringe on check-imaging patents, according to two industry sources.
Several banking companies, including Bank of America Corp. and Wells Fargo & Co., are defendants in lawsuits brought by a small Texas company, DataTreasury Corp., that owns patents for processing checks electronically. Other banking companies, including JPMorgan Chase & Co., have settled with DataTreasury.
A 2008 Congressional Budget Office report found that DataTreasury could be entitled to $1 billion or more in patent royalties if it prevails in court.
Kyl's proposal is similar to a provision offered last year by Sen. Jeff Sessions, R-Ala., another member of the Judiciary Committee. The patent bill containing the Sessions provision died last year in the Senate.
Sessions said at the time that the legislation was needed because DataTreasury had abused the patent system, but he later withdrew support for the provision and expressed doubts about its legality.
Kyl's proposal has one key difference from the Sessions amendment: It tries to keep the federal government from shouldering any financial liability for blocking DataTreasury's pursuit of patent damages against the banks.
Under Kyl's amendment, the bank-immunity provision would be voided if a federal court found that the legislation amounted to a government "taking" of DataTreasury's patent rights.
Representatives of Kyl, DataTreasury and Bank of America declined to comment. Wells Fargo referred questions to the Financial Services Roundtable, which also declined to comment.