What I don't get about in re Bilski: Why do any financial companies support business method patents?

What I don't get about the in re Bilski case argued Thursday at the Federal Circuit is this—why is there any division at all within the financial sector? The lines are a lot fuzzier than, say, the patent reform battle in D.C., which was Big Tech v. Big Pharma but became Big Tech v. Big Pharma et al.

But why would Goldman Sachs, see recent Economist, or any other financial services business, support business method patents? Or American Express and Accenture, as Mike Masnick notes? Seems like they all stand to lose much more than they gain from patent licensing and litigation, with the threat of another non-practicing entity like DataTreasury. From an industry-wide perspective, the relatively recent arms race doesn't make sense. (and of course the big banking industry trade group came out critical of State Street). So why would any (profitable) financial company be opposed to rolling back the 1998 State Street decision that allowed business method patents?

Are there some banks that have amassed giant arsenals—the Microsoft(s) of the banking world? (Microsoft had less than a dozen patents before the 1998 State Street decision, and now has thousands, according to a former IPLB reporter who was inside the Microsoft war room a year ago.)

Is there a giant settlement, or license agreement, or some other indicator of corporate behavior that would indicate why a particular financial company has a pro-BM patent standpoint? Who are the winners and losers of the first 10 years of biz-meth patent war? Who were the aggressors, the victims? I haven't been in the patents game long enough to know, but I'd sure be interested to talk to some lawyers or bank employees or anyone who thinks they know the real story of the stance of any particular company that has a Bilski amicus brief (like maybe the one they work for.) Litigation, licensing, everything. Let's start collecting the data.

On today's oral arguments, there's legal-geek commentary from an eyewitness here (via 271 blog, with more Bilski argument links). My own article on Bilski (with extras here) focused on issues outside the legal arguments entirely, but I still like linking to it and it has a cool picture.

PTT update: Long day closing our June issue delayed today's fourth post in my four-part series on the lawsuits against and subpoena of lawyer-blogger (and, perhaps, reporter) Patent Troll Tracker. I need a real weekend but that one is coming early next week.

(download Bilski oral arguments on the Fed. Circuit site)

Comments

[PEPE HONCHO]

WHY PICK ON DATA TREASURY WHO HAS BEEN INFRINGED UPON BY THE BANKS FOR THE LAST SIX YEARS AND , MAY I SAY, BY INFRINGING THESE PATENTS THE BANKS HAVE REALIZED A TREMENDOUS COST SAVINGS WHILE PAYING NOTHING TO DATA TREASURY FOR THEIR VALUABLE TECHNOLOGY. DATA TREASURY PATENTS ARE "TECHNOLOGY PATENTS" AND NOT BUSINESS METHOD PATENTS!! PLEASE KEEP THE FACTS STRAIGHT....

[Joe Mullin]

I'm not "picking on" Data Treasury, a company whose patent and lawsuit I've read about but never reported on. My point was just that big financial institutions are concerned about the kinds of damages that could be produced by a patent suit brought by a non-practicing entity; DataTreasury is a non-practicing entity that has become high profile by suing essentially the entire banking industry. Those are just the facts. Here, I'm just asking a question about why companies with divergent legal stances hold the positions that they do.

So it would be wrong to say I'm picking on DataTreasury. I'm not making any point about the company or its claims. It’s just a high-profile example of the kind of lawsuit that financial institutions would like to avoid, rightly or wrongly. (Recall the banks’ failed attempt to insert a “get out of lawsuit free” rider into the flagging patent reform bill.)

[plh]

"But why would Goldman Sachs, see recent Economist, or any other financial services business, support business method patents?"

The answer can be found in that Economist article:

"John Squires, the chief intellectual-property counsel at Goldman Sachs, an investment bank, says business-methods patents are an important way to safeguard the invention of innovative financial techniques."

Goldman Sachs has, like many or even most large companies, delegated responsibility for the consideration of this question (and development of the company's position on it) to the Patent Attorneys of its IP division instead of to its economists and business strategists.

[iplawstudent]

Seems like you are correct: from my reading of some other coverage of the Bilski case (http://www.cfo.com/article.cfm/11078594/c_11081639?f=magazine_featured), most banks would presumably take against pantenting business methods and an anti-State Street position to avoid the very type of lawsuits that DataTreasury has been leveraging against them. Logically, a ruling that makes a clearer distinction between what is technology and what is simply a broad method (photocopying a check) would help prevent the financial industry from being faced with burdensome lawsuits.

[Joe Mullin]

PLH, thanks for your comment.

But I don't think John Squires' quote answers this question. "Safeguarding the invention of innovative financial techniques" doesn't mean much to me; just sounds like IP happytalk, frankly.

Lots of companies have innovative financial techniques and have taken exactly the opposite legal position. For me, the question remains, how is Goldman Sachs (or another pro-BM-patent financial firm) making money off a pro-business-method patent stance? Either it is making money off BM patents, planning to make money off BM patents, or the goals of its IP division or legal team are not properly aligned with its business objectives. I'd like to know, which is it?

[Marty]

Goldman seems to have a unique position among its piers. It must be sitting on some potentially valuable BM patents. If this is the case, you'd have to think Goldman is getting nervous with Bilski. I'd say the suit will almost certainly end up in the Supreme Court, and when it does it is not at all clear which way it will go. Kennedy's comments in eBay (2006) cast a lot of doubt over which way he'll go this time around. He seems to be tiring of the concept of BM patents, and for good reason!

I hope this doesn't upset Pepe too much, but Datatreasury is a case in point why BM patents are harmful as a viable member of the patent family. They do indeed own BM patents, and these patents are ones they acquired shortly after State Street and AT&T. I won't argue that it wasn't a good business move, but I will argue it is a prime example of the socially harmful nature of MBPs.

Datatreasury's strategy paid off, but only because they responded to State Street by patenting methods already used by most of the banking industry (and used for years, at that). Of course the industry is now using this technology, if they were all along. And now most of the industry is being held hostage by Datatreasury, and Datatreasury has cut back its business operations to two employees suing full time, and doing nothing else. Hardly the most socially beneficial use of anyone's time.

Datatreasury is only one example of many harmful effects of BMP. Bilski will provide the prime opportunity for the court to reconsider its holding that Congress, under Section 101, meant to make patentable nearly everything. A lot of commentary seems to think the enormous scope of BMP is in trouble. The present non-patentable category of "abstract ideas" is a prime candidate for expansion, to consume some of the questionable BMP terrain. I would think technology like that used by Datatreasury would be one of the first to go.

Anyway, Goldman must be sweating it out a little if they are indeed sitting on a treasure trove of BMPs.

A better solution is for Congress to clear up the ambiguity themselves. The court won't be guessing, or pretending to abide by legislative intent any longer, and maybe Congress can come up with a better solution than the current system.

[Drake Fallington]

Well, I have to say I don't really know why some banks are for the business methods patent, except that I think you are right in presuming that they wouldn't be supporting the idea if there wasn't something really tasty in it for them.

I for one completely disagree with business patents or the like. I mean they go against the original and current purpose for patents. Originally patents were designed to protect technology, not concepts. Further, patents were created to provide economic incentive for inventiveness. This makes sense because without a patent, inventing something wouldn’t really do you much good if someone else was just going to steal your idea. But, people generally don’t need economic incentives to improve their business methods because the whole purpose in doing that is to make one’s business better & thereby earn more money.

[Drake Fallington]

Well, I have to say I don't really know why some banks are for the business methods patent, except that I think you are right in presuming that they wouldn't be supporting the idea if there wasn't something really tasty in it for them.

I for one completely disagree with business patents or the like. I mean they go against the original and current purpose for patents. Originally patents were designed to protect technology, not concepts. Further, patents were created to provide economic incentive for inventiveness. This makes sense because without a patent, inventing something wouldn’t really do you much good if someone else was just going to steal your idea. But, people generally don’t need economic incentives to improve their business methods because the whole purpose in doing that is to make one’s business better & thereby earn more money.

[plh]

Well Goldman Sachs is the world's largest investment bank (according to wikipedia), so perhaps it is the IBM of the finance industry and John Squires its Marshall "father of the IBM tax" Phelps.

Another example of a company in a dominant position using a large portfolio of business method (and other) patents strategically and to its advantage is Pitney Bowes:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=599743

[DTdefender]

I am SICK and TIRED of people bad mouthing Data Treasury. These are regular people with real jobs just working for a living. And they are having to go up against the %^#k'n fat-cat banks to protect their hard work. Data treasury is the American dream and anyone who attacks them should burn in the hot place.

[Drake Fallington]

Okay Mr "DTdefender." Geez, that was the most biased post I have seen in a long time. If I didn't know better I'd think you were a hired spammer.

Anyway addressing the content of your post (if you can call it that): Data Treasury is NOT the American Dream. Unless you call the American Dream stealing someone else's idea, patenting it and then suing for billions the American Dream - you might... but I don't.

Data Treasury literally just went out and found a process which was #1 already being used by most major banks and #2 was already required by federal law. Then it patented this very simple & obvious business patent and then sued Americans biggest banks for billions.

I think your condemnation of people who attack DT is ridiculous. The banks may be "self interested," we all are, but Data Treasury goes way beyond self interested. Instead of the American Dream, they are the American Scam. They a patent trolls. They are patent pirates and must be stopped before you and I have to pay the tab.

[Marty]

yea, I think DTdefender missed the point entirely.

You must be defining the American dream as taking advantage of bad Supreme Court rulings to patent something you didn't invent, and then using that patent to extract millions and millions from banks directly and consumers indirectly.

This is what DT has done. It's a fact

[plh]

Neither the Supreme Court nor Data Treasury deserve any blame. SCOTUS is not responsible for the rulings that resulted in expansion of patentable subject matter, lower standards etc. and Data Treasury is just making good use of the tools made available to it by the CAFC and PTO.

[Marty]

I'm not arguing anyone is "too blame." Like I said above, DT made good strategic decisions. Unfortunately their decisions are not good in any way for business in general, principles of innovation, or society. They are really only good for the two employees' pocket books.

In this way they are a perfect illustration of the problem with BMP. They incentivize foot races to the patent and trademark offices, instead of inventiveness and productivity.

Banks had been using the process which DT patented--the process involved in electronic check processing (think credit cards)--for quite some time prior to State Street and AT&T. Once Congress passed Check 21 which permitted banks to use this technology for a process which is truly valuable and economical, checks, the option was no longer available b/c DT had managed to secure a BMP. As a result less than 20% of banks have began to use the process for check processing, despite Congress' overwhelming desire to effect a industry-wide transfer.

Again, I say, this is a perfect illustration of the harm behind BMP. I blame no one, but hope SCOTUS--once it gets the chance--will overrule State Street with its Bilski decision. It needs to seriously consider the past determinations of legislative intent, especially in light of DT.