In a refreshing turnabout, a bank that's been sued for patent infringement is fighting back.
Branch Banking and Trust, a $182.7 billion-asset institution based in Winston-Salem, N.C., was hit with a patent infringement claim in June 2012 by Maxim Integrator, a manufacturer of computer chips. (The company also sued other banks including Capital One and Bank of the West, as well as Starbucks and Walmart for the same reason.) Maxim claims they violate a patent it holds on the idea of electronically transferring value from a source to a recipient through an electronic device and recalculating the balance on the source account.
BB&T this week decided to challenge the patent. The bank filed a petition for a Covered Business Method review -- it has asked the Patent Trial and Appeal board to reconsider the merits of Maxim's original patent -- through the legal firm Ropes & Gray. (Spokespeople at the bank and Maxim declined to comment on the case.)
"BB&T is saying the patent should never have been issued because the subject matter is ineligible for a patent - it's too abstract, too general, and too intangible," says Jim Myers, patent litigator at Ropes & Gray, who is leading representation for BB&T in district court. "You can't patent an idea. We believe Maxim with the 880 patent [patent number 5,949,880] has patented the idea of moving digital cash from one place to another."
A second reason Myers believes Maxim's patent should be canceled: two other companies already had patents on this idea, Motorola and Casio. Motorola's is for an electronic wallet and the movement of information onto and off of that wallet as part of cash and purchase transactions. Casio's is for an integrated circuit card that can communicate with a bank's computer through an ATM or with a purchaser to buy goods.
The U.S. Patent Office has a hard time vetting such patents, Myers says. It issues about 5,000 patents a week. Its examiners have little time for their patent reviews.
"In the late 90s, the patent office was limited in the amount of information it had on financial services activities," Myers. "Traditionally, there had not been a lot of patents issued in that space. With a limited amount of time, a limited set of data about prior art, and examiners that don't have financial services experience and technical experience, it increases the chances there would be patents issued that should not have been issued," Myers says.
The rules on patent eligibility have changed significantly since Maxim's patent was issued in September 1999. At that time, very broad patents were permissible.
The Supreme Court changed that with a decision it handed down in 2010, referred to as the Bilski case. Bernard Bilski and Rand Warsaw had tried to patent a very basic process for hedging risk in commodities trading. The Supremes called the process an unpatentable, abstract idea and sided with a Federal appellate court that had already rejected the patent.
Using the same process BB&T is pursuing, SAP in June was able to push back on a patent suit filed by Versata, which claimed to have patented the idea of software that customizes pricing based on customer or order size. Upon review, the U.S. Patent and Trade Office found that Versata had tried to patent a mental process rather than an actual invention, and SAP avoided a $400 million payout to Versata.
Now that BB&T's paperwork is before the Patent Trial and Appeal Board, Maxim will have three months to decide whether and why it opposes initiation of a CBM proceeding and if it does, file a formal paper. Then the board will have three months to decide whether to start a CBM proceeding. Once that begins, it needs to render a decision within a year. So in a little over 18 months, the bank should get a decision about whether or not Maxim's patent is deemed valid.
More than 100 judges sit on the board; three have been assigned to this case.
Patent lawsuits have been a trial to the financial services and other industries for some time. Earlier this year, patent troll firm Intellectual Ventures sued SunTrust Banks for patent infringement, claiming that the bank's online banking system intrudes on five patents. Patent trolls are companies that don't invent or create products themselves, they exist only to sue other companies for violating the patents they've bought. They're sometimes more politely called "patent assertion entities."
Where many patent trolls try to deny what they are, Intellectual Ventures bellied up to the term in its complaint against Suntrust, describing its business as, "purchasing important inventions from individual inventors and institutions and then licensing the inventions to those who need them." It owns more than 70,000 patents and has earned more than $3 billion from licensing those patents to technology companies. However, the company also says it creates inventions and has created a network of 4,000 inventors.
The White House hopes to crack down on such activity.
In a White House blog written in June, Gene Sperling, Director of the National Economic Council and Assistant to the President for Economic Policy wrote, "In recent years, there has been an explosion of abusive patent litigation designed not to reward innovation and enforce intellectual property, but to threaten companies in order to extract settlements based on questionable claims." He says last year patent trolls sent out over 100,000 demand letters, "threatening everyone from Fortune 500 companies to corner coffee shops and even regular consumers to pay a settlement or face a day in court."
Congress has six bills before it that would reform the patent system, making it harder for patent trolls to sue and requiring the U.S. Patent Office to improve its recordkeeping and patent review process.
Meanwhile, the CBM review process appears to be giving companies like BB&T a way to defend themselves against these suits.