13 April 2020

Fintech innovation: protecting your ideas

As part of the ‘Legal Focus: IP in innovation’ section of the April 2020 edition of FinTech FuturesBanking Technology magazine, Mathys & Squire partner Dani Kramer has provided his expert answers in response to a series of questions about the patent process for fintech startups.

Does your fintech need a patent? Does your invention need protection, or will you need something else?

Innovation drives the fintech industry, and the latest ideas often need protection. Whether it is from a potential competitor or a litigious corporation, fintechs must get to grips with intellectual property (IP) law at an early stage of their inception or risk endless legal battles.

FinTech Futures interviewed some legal eagles from fintech-focused law firms to find out more about the patent process for budding startups.

What is the procedure for obtaining a patent in the UK as a fintech company? Additionally, is it through legal statute or common case law precedent?

Dani Kramer, partner at IP firm Mathys & Squire: “The procedure for obtaining a patent in the UK for a fintech invention is the same as that for inventions in most other technological areas. Somewhat simplifying the process, the first step is filing a patent application – to obtain a UK patent, this can either be a UK patent application filed at the UK Intellectual Property Office (UKIPO), or a European patent application filed at the European Patent Office (EPO), which is notably separate from the EU (so unaffected by Brexit).

“Subsequently, the relevant patent office (UKIPO or EPO) performs a search to identify similar prior technology and examine the patent application. At this stage, the patent office would in most cases raise objections against the patent application, after which the applicant (the fintech typically represented by a patent attorney) and the patent office would go through one or more rounds of negotiation. Once all of the patent office’s objections are overcome, a European or UK patent is issued (to obtain a UK patent from a European patent, it needs to be validated in the UK).

“Both at the UKIPO and the EPO, the laws and regulations with regards patents and their application are governed by legal statutes – the Patents Act of 1977 for the UKIPO, and the European Patent Convention for the EPO. That said, case law precedent does influence how these legal statutes are applied by the patent offices.

How long does the procedure for obtaining a patent take and what are the average costs incurred?

Dani Kramer: “It usually takes about 18 months to three years from the date of the application to obtain a granted UK patent. However, this process can be expedited, if certain fees are paid early and if you respond promptly to letters from the UKIPO, down to as little as 12 months. Once a UK patent is granted, renewal fees need to be paid annually to keep it in force.

“As much of the cost of obtaining patent protection depends on the time taken by the patent attorney to draft and prosecute the patent application, the average costs incurred vary widely depending on the complexity of the invention and the objections raised by the patent office. The total costs from preparing and filing a UK patent application to grant are typically between £6,000 and £12,000 but can be higher or lower than this range.”

Have there been any disputes between a fintech and a large tech/bank in an innovation lab claiming that the product was theirs?

Dani Kramer: “Yes, there have. A notable case – USAA v Wells Fargo – was settled only earlier this year. This was the first fintech patent suit launched by a bank, and it ended in a $200 million damages order from Wells Fargo to the United States Automobile Association (USAA). This verdict may very well result in increased patent filing activity among financial institutions, as it demonstrates the need for building a ‘defensive’ portfolio (implying a threat of a countersuit) to protect yourself from patent suits from competitors.”

What kind of protection does each type of IP confer? Do certain kinds of inventions lend themselves better to patents, or to trade secrets?

Dani Kramer: “When protecting a given invention, the trick is usually to use a combination of both types of IP. Aspects of the invention that are likely to become, or are inherently, publicly available (such as client-side code in a web-based banking application) may not be suitable for trade secrets, and patents (as well as other forms of protection such as copyright) may be more appropriate.

“On the other hand, aspects that can be kept secret more easily (such as serverside code) and that may not be patentable (for example, that may fall entirely within the exclusions from patentability) may be better kept as ‘trade secrets’. A skilfully drafted patent application would describe and protect the innovative features that are inherently patentable, while keeping material that would likely be nonpatentable out of a patent application and maintained as trade secrets. This avoids, in effect, donating the non-patentable subject matter to the public and competitors, while keeping patenting costs down.”

This commentary was originally published in the April 2020 edition of Banking Technology, the FinTech Futures magazine. Click here to read the full article (pp. 22-23).