Patent Law

Shifting Liability

By Gary Odom and Jordan Kuhn

Money is a lubricant and a salve. Banks apply the salve to others to ease their own pain: potent wads in political lobbying and campaign contributions. With the housing market in deep kimchee, the banking industry is pushing proposals to shift the risk of mangled mortgages to the Federal Housing Administration; considered far-fetched a few months ago, now more a matter of when than whether. Then there's this pesky patent holder, DataTreasury, that practically patented "Check 21," the federal law for digitally archiving checks.

DataTreasury has a license to print money: 5,910,988 and 6,032,137 particularly, part of a larger portfolio known at the "Huntington" patents, acquired by DataTreasury in February 2006 from Huntington Bancshares. The portfolio also includes 5,265,007; 5,583,759; 5,717,868; & 5,930,778. The '998 and '137 patents have already withstood USPTO reexamination.

Of 56 companies and banks that the patents have been asserted against so far, several, including J.P. Morgan Chase, Merrill Lynch, NCR, and Diebold, have bended knee and opened wallet. But some continue to resist, including litigation defendants Citigroup, Bank of America, Wells Fargo, Wachovia, and SunTrust Banks.

Sen. Jeff Sessions (R-Ala.), with drafting help from the banking lobby, slipped a provision into a bill that would offload infringement cost onto the federal government. The provision raised no murmur in the Senate Judiciary Committee with its insertion last July. The legislation is slated for a vote in the Senate this month.

If the courts play along, the provision would shift royalty payments to the federal government, at an estimated cost of $1 billion over a decade, the Congressional Budget Office figures. DataTreasury patents would still be enforceable.

But the Bush administration has already indicated its opposition, in a letter to the Senate last week, rendering enactment problematic.

The Administration opposes the bill's provisions to limit remedies against financial institutions that use patented check collection systems, when such use would otherwise be patent infringement. Limiting patent holders' rights and remedies in this instance could reduce innovation in this technology area. As a general matter, the Administration does not support exceptions to patent protection based on a particular technology.

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Sources: Washington Post; Wall Street Journal, IPLaw 360.

Full post as published by The Patent Prospector on February 14, 2008 (boomark / email).