A patent monitoring service has been active in APACS since mid-2003, providing APACS members with awareness of patents granted and in the pipeline. More than 2,000 patents and patent applications have been reviewed to date and, while none have so far required immediate action by APACS members, several have been referred to terminal manufacturers, payment schemes and others in the payments industry.

What is a patent?

A patent is a right, awarded to an inventor, which protects the ideas behind an invention. It gives the inventor the right for a limited period (usually 20 years) to stop others from making, using or selling the invention without permission. This gives the inventor time to exploit the invention.

Why should APACS be concerned with patents?

In Europe and the UK patents are only supposed to be granted for inventions that are 'technical'. As such they are largely an issue for manufacturers and suppliers of equipment rather than for the businesses that use the equipment. Manufacturers expect to pay licence fees for the right to use patented technology in their products. Banks and other payment providers need not generally be concerned with many of the patents that affect the equipment they use, but it is important to them that their suppliers are not stopped from providing required solutions at reasonable prices.

However, judging whether an invention is 'technical' seems to be a rather subjective procedure, and some patents get granted in Europe and the UK that are really business or software-related, because they make use of complex algorithms or rely on unusual components such as tokens and smart cards. These are of direct interest to payment providers; indeed, some of the applicants for these patents are themselves banks, service providers and payment schemes.

In the USA no such restriction applies, and so business processes and software can be patented there. There are now moves in Europe to clarify (and possibly extend) what can be patented here; a debate has already started about how to define 'technical effect'. The outcome may be that payment providers' business systems could become even more directly impacted by the patenting process. In any case, financial institutions wherever they are based can be affected by patents granted in the USA.

Patent examiners themselves, in judging the validity of a patent, face increasing workloads and cannot be expected to notice every case where there is 'prior art'. Recognising this, the patent offices and the patent courts have well-established mechanisms for patents to be opposed during and after grant. Payment providers need to be aware of patents that can rightly be opposed.

For these reasons it is important for the banks and other payment providers to be aware of patents applied for and granted, to ensure that they respect intellectual property, protect their own investments, and avoid disruption to their business plans.