A small provision in a big patent reform bill could make a big difference to the banking industry at the expense of a small patent holder that claims broad rights over the process of creating and storing check images.
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Broad efforts to reform patent law have been made in recent years only to be snuffed out at the committee level. That changed when a Supreme Court ruling in April raised the standard for granting patents for innovations that stem from "prior art."
The banking industry has been supporting the reform effort, which also would make it harder to get so-called "business method" patents.
Sen. Jeff Sessions, R-Ala., offered the check-clearing amendment during the final markup session Thursday. The amendment says that the enforcement provisions of the patent law will not apply to "the use by a financial institution of a check collection system" found to be infringing on patents held by others.
The provision would apply "to any civil action for patent infringement pending or filed" after enactment of the legislation.
A staff member for the Senate Judiciary Committee said the amendment was adopted by unanimous consent.
The amendment appears to be aimed specifically at DataTreasury Corp., a Plano, Tex., payment processor that has sued 60 banking companies and others involved in image processing. It has signed licensing agreements with such companies as JPMorgan Chase & Co., Diebold Inc., and NetDeposit Inc., an imaging unit of Zions Bancorp.
An aide to Sen. Sessions said the amendment also could apply to other companies that held similar patents.
Industry groups had lobbied to have the check-clearing provision included in the patent legislation. Floyd Stoner, the chief lobbyist for the American Bankers Association, complained in a letter to the committees this month that business-method patents have encouraged the creation of companies that "merely hold patents and demand licenses instead of using those patents to create real products or services."
Without identifying DataTreasury by name, Mr. Stoner wrote, "The banking industry has paid millions of dollars to settle such cases. … There is more to come as holders of dubious patents continue to bring infringement suits against financial institutions."
Don Rhodes, the trade group's policy manager for payments and technology, said in an interview that current patent law "seems to inhibit innovation rather than to encourage it."
Business-method patents — established, ironically enough, in a 1998 banking case, State Street Bank and Trust v. Signature Financial Group — have created "a lot of heartburn for a lot of people," Mr. Rhodes said.
Patent reform is more important than a single issue or company, he said.
The legislation would provide new ways to challenge a patent without going to court, limit the use of triple damages to cases where a defendant intentionally infringes on a patent, and make it more difficult for a patent holder to "forum shop" for a favorable court.
The amendment is the latest twist in DataTreasury's fortunes. The Patent and Trademark Office reinstated one of its patents this month after rejecting its claims during a re-examination in November. A re-examination of a second patent is pending.
A spokesman for DataTreasury said Friday that it is studying the amendment but cannot discuss it further.
