Can Anyone Stop DataTreasury In its Patents Crusade?

It looks like Data Treasury has claimed yet another victim in its patents game. It was announced recently that PNC Financial was the latest FI to settle with the notorious patent litigant over technology around electronic check imaging.DataTreasury had accused PNC of infringing on patents which were issued to the company in 1999 and 2000 for image capture, centralized processing and electronic storage of document and check information. DataTreasury also had accused PNC of infringing two other patents that were issued in 1993 and 1996 for a central check clearing system. Keep in mind-DataTreasury merely acquired these patents from another company. They did not develop the technology themselves, from what I understand.

Like so many FIs and financial services solutions providers before it (JPMorgan Chase, NCR and NetDeposit-the division of Zionsbancorp that provides remote deposit capture technology), PNC settled. And why not? Litigation is very costly and this was probably in the bank's best interests. PNC agreed to a worldwide licensing agreement from DataTreasury for its patents. Terms of the agreement are confidential, according to a release, but they "include protections for PNC's customers, giving the bank a competitive edge in check processing."

"It is clear that PNC understands the importance of DataTreasury's patents, which help the bank realize the benefits afforded by the underlying technology," said Rod Cooper, DataTreasury's patent and licensing counsel, in a statement.

I think it is crucial to protect one's patents. However, the DataTreasury issue has been a thorn in the side of banks for several years. I won't pretend to understand all the intricate details about this case. But I think what it boils down to is that the financial services industry feels that DataTreasury has laid claim to much the technology and processes related to the Check Clearing for the 21st Century Act-Check 21. One person commenting on a different blog about this topic put it into even simpler terms, saying this is akin to DataTreasury's saying it invented document-imaging technology. For the financial services industry, the drawn-out litigation process around this issue, along with the rulings in favor of DataTreasury (thanks to the plaintiff-friendly U.S. District Court, Eastern District of Texas), have been detriments to banks' innovation in this space.

Speaking of drawn-out, so is the patent process. One patent attorney I spoke with for a feature on patents in our April issue said a company can obtain a patent in China in about two years from start to finish. In the U.S., this can take as much as four years. And in the technology space (banking or otherwise), a lot can happen in those four years that may even make the original patent obsolete.

On top of that is the issue of whether "business methods" can be patentable material. I discuss this topic in my April feature. But according to experts, the DataTreasury case does indeed deal with a business process, as opposed to an actual piece of tangible technology. The courts and the Patent & Trademark Office (PTO) have been struggling with whether to differentiate the two categories and how to do so. Their confusion on the issue has contributed to the general unease that technology companies and financial institutions feel with regard to the patent process in this country.

Further complicating the patent issue is that in the U.S we use the "first to invent" methodology. If someone is the first person to invent a particular technology, then they have a case to make in saying that they own that technology. However, in most of the other industrialized nations, patents work on a "first to patent" basis-first one to file for the patent is the owner. If you're the inventor and did not file with your patent office, then tough luck. So far, Congress has been unsuccessful in affecting significant change in this area.

The point that I'm trying to make is that the patent system in this country is in serious need of an overhaul. That's probably no big surprise to the industry. Congress is trying to address the patent issue, especially as it relates to technology. However, these efforts become stalled for one reason or another, and the innovators in this country are left to languish for more months and years as the PTO struggles to work with an imperfect system.

I realize DataTreasury is a touchy subject for many of our readers, but I would enjoy hearing your comments. No need to put your bank affiliation in the comments section. Or for more privacy, you can email me with your thoughts. I won't reveal your identity! You can even simply comment on the state of the patent process in general.