When it comes to Patent Litigation, Winter is Here

In the Game of Thrones, White Walkers periodically return to the Realm, threatening civilization as we know it. For the last eight years, a Long Summer has kept patent trolls, the White Walkers of the financial sector, at bay. This peaceful period officially came to an end this month, and us here in King’s Landing have been none the wiser.

So what am I talking about? Let’s say a bank or a credit union contracts with a vendor to provide a cutting-edge technological service. After the program has been up and running for a couple of years, it receives a politely worded letter informing it that it’s service violates a patent. But today is your lucky day – you can continue to provide this service as long as you pay a licensing fee.

Without getting too much into the weeds, a Covered Business Method Patent Review was a transitional procedure put in place by Congress in Section 18 of the America Invents Act. The procedure created a fast-track method for parties being sued by patent trolls on questionable grounds. Here’s why this is important to credit unions. To be potentially eligible for this procedure, the alleged patent infringement must involve at least one claim directed to a method for performing data processing or other operations “used in the practice, administration or management of a financial product or service.” 

The bad news is that the program authorizing this review process expired on September 16th, although proceedings brought under the now-expired law prior to that date will still be considered. Credit unions need this law extended. COVID-19 (damn, I thought I was going to get through a blog without mentioning it) has accelerated the use of technology. This is no time to begin making it easier for patent trolls to bring questionable claims demanding the use of time and resources. 

According to this recent column in Law360 (subscription required), the CBM resulted in 4,093 patent claims being cancelled or found unpatentable. These claims touch on issues ranging from shopper discount cards to adjustable car insurance rates. 

So what can you do to protect yourself, assuming dragonglass is not effective? First, remember to always make sure your vendor contract includes rock-solid indemnification language. Another thing you can do is remind your local representative that Section 18 helps your credit union and should be renewed. Incidentally, this is one issue that the banks agree with us on, in much the same way that the Realm ultimately united against the White Walkers.