EDITORIAL: An inventive bank bailout

Special legislative provision exempts financial services from patent trolls

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Sen. Dick Durbin, Illinois Democrat, quipped in a 2009 radio interview that the banks “own” Congress. Congress does its best to prove Mr. Durbin right. This week, the House is scheduled to vote on the Senate-passed “America Invents Act,” a patent-reform bill that includes a provision essentially providing another multibillion-dollar bailout to big banks.

Sen. Charles E. Schumer, New York Democrat, inserted language into the legislation at the behest of Wall Street and financial services institutions looking to void patents that are costing the firms a lot of cash. A company known as DataTreasury patented the idea of scanning check images as a means of making banking paperless, cheaper and more convenient. Last year, a court ordered U.S. Bancorp to pay DataTreasury $27 million for scanning checks on its own. Many more in the industry are at risk of similar judgments.

It’s reasonable to question whether patents should be granted for rather obvious things like the electronic filing of documents. It wouldn’t be the first time that the Patent and Trademark Office (PTO) decided to grant exclusive rights to the most basic of concepts, such as the “one-click” online shopping cart patent granted in 1997. In 1999, U.S. Patent Number 5,993,336 covered “A method of executing a tennis stroke [that] includes covering a knee of a tennis player with a knee pad during tennis play.”

Section 18 of the patent bill carves out “business method” inventions used in the administration of a “financial product or service” from this system. Lawmakers on both sides of the aisle see it as a fix for a bad patent, but only because the banking industry has lobbyists raising a ruckus. The problem isn’t limited to banks. It’s short-term thinking to create an exception for one industry that leaves the rest of the economy at the mercy of patent trolls. Canceling a validly granted patent through legislation also raises constitutional question under the takings clause of the Fifth Amendment.

Rep. Aaron Schrock, Illinois Republican and Rep. Dan Boren, Oklahoma Democrat, will offer an amendment stripping the special-interest giveaway that is Section 18. The better, long-term solution would be to overhaul the PTO so that it no longer grants patents for mouse-clicking and tennis swings, denying trial lawyers the opportunity to mount multimillion-dollar lawsuits against businesses large and small.

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