Big Banks and Business Method Patents
The banking industry and the patent system are longstanding American institutions whose histories date back to the founding of this country. Historically, however, the paths of these two institutions rarely crossed. Although financial firms have been increasing their innovative output for decades now, until recently they relied on trade secrecy, first mover advantages, and other business mechanisms to protect and monetize their intellectual property — not patents. Through a convergence of circumstances over the past several years, that pattern has changed. The shift began when the Federal Circuit decided that business methods — banks’ primary mode of innovation — are patentable subject matter. That decision triggered an increase in the number of business method patents issued by the PTO, and, correspondingly, a surge in patent infringement litigation targeting big banks. When the banks found little success in court, their powerful lobby persuaded Congress to include a special carve out for financial patents in the America Invents Act — the comprehensive patent reform legislation enacted in 2011. Meanwhile, as the financial industry sought legislative favor to ward off future infringement suits, many of the big banks built substantial patent portfolios of their own. This Article explores this nascent relationship and considers some potential implications of growing bank involvement in our patent system. It suggests that the intersection of these institutions could yield some benefit, for example by improving the publicly available information regarding financial innovations. Yet, more pointedly, it warns of possible harms, especially if big banks use their political and economic power to disproportionately influence patent reform and innovation policy in the future.
The Dodd-Frank Wall Street Reform and Consumer Protection Act
Preface The Dodd-Frank Wall Street Reform & Consumer Protection Act: Issues & Summary Brief Summary of the Dodd-Frank Wall Street Reform & Consumer Protection Act The Dodd-Frank Wall Street Reform & Consumer Protection Act: Systemic Risk & the Federal Reserve The Dodd-Frank Wall Street Reform & Consumer Protection Act: Titles III & VI, Regulation of Depository Institutions & Depository Institution Holding Companies Hedge Funds: Legal History & the Dodd-Frank Act The Dodd-Frank Wall Street Reform & Consumer Protection Act: Regulations to be Issued by the Consumer Financial Protection Bureau The Dodd-Frank Wall Street Reform & Consumer Protection Act: Title VII, Derivatives Dodd-Frank Act, Title VIII: Supervision of Payment, Clearing, & Settlement Activities The Dodd-Frank Wall Street Reform & Consumer Protection Act: Title IX, Investor Protection The Dodd-Frank Wall Street Reform & Consumer Protection Act: Executive Compensation The Dodd-Frank Wall Street Reform & Consumer Protection Act: Title X, The Consumer Financial Protection Bureau The Dodd-Frank Wall Street Reform & Consumer Protection Act: Standards of Conduct of Brokers, Dealers, & Investment Advisers Rulemaking Requirements & Authorities in the Dodd-Frank Wall Street Reform & Consumer Protection Act The Dodd-Frank Wall Street Reform & Consumer Protection Act: Changes to the Regulation of Derivatives & Their Impact on Agribusiness Index.
Patents, Invalidity, and the Strategic Transmission of Enabling Information
The patent system encourages innovation and knowledge disclosure by providing exclusivity to inventors. Exclusivity is limited, however, because a substantial fraction of patents have some probability of being ruled invalid when challenged in court. The possibility of invalidity-and an ensuing market competition-suggests that when an innovator's capability (e.g., cost of production) is private information, there is potential value to an innovator from signaling strong capability via a disclosure that transfers technical knowledge to a competitor. We model a product-innovation setting in which a valid patent gives market exclusivity and find a unique signaling equilibrium. One might expect that as the probability that a patent will be invalid becomes low, greater disclosure will be induced. We do not find this expectation to be generally supported. Further, even where full disclosure arises in equilibrium, it is only the less capable who make full disclosures. The equilibrium analysis also highlights many of the novel and appealing features of enabling knowledge disclosure signals. Copyright (c) 2003 Massachusetts Institute of Technology.