Financial services providers recently have been targeted by “patent trolls” in a series of patent infringement lawsuits.  Patent trolls are entities that do not make or market any products.  Instead, the business strategy of a troll is to develop or acquire ownership in a patent portfolio and then seek revenue by licensing its portfolio to multiple companies that use a product or business method arguably protected by its patent.  If a company ignores the initial letter from the troll, or does not agree to purchase a license, the troll will often commence litigation, alleging patent infringement with the hope of achieving a fast settlement. 

The financial services industry has become a recent target of these trolls for three reasons.  First, financial services companies tend to have significant amounts of money and a high volume of transactions, so trolls can earn large revenue just from collecting small royalties.  Second, some financial institutions have traditionally been averse to litigation and prefer settlements, a fact which fits ideally with trolls’ business strategy.  Third, the U.S. Patent and Trademark Office (“PTO”) has issued suspect patents for the financial industry—a result that stems from a combination of two factors.  Principally, financial services patents are weak because historically there has been little focus by the industry on intellectual property; companies have yet to amass (and provide to the PTO) a collection of “prior art”—the PTO’s term for previous patents of same or similar technology.  In addition, the PTO suffers from limited resources and is itself unable to gather the information needed to fully verify the requisite criteria for a valid patent application.  As a result, the PTO has issued suspect patents on business methods as well as software.  Specifically, patent trolls (and reputable financial institutions) have acquired patents for a wide range of products including: digital check imaging and verification technology, call center operations and software, automated futures trading, insurance contracts, methods of risk management, underwriting, and even methods of tax planning.

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