EU banks warned of patent law perils

EU banks warned of patent law perils

Banks and securities houses in Europe must be wary of the adoption of US-style, patent rights for business processes and software programs in the financial services sector according to a report published by the International Securities Market Association (Isma).

The report, 'Patenting Finance: Financing Patents' provides a commentary on the way in which patents have been sought and, in some cases, successfully obtained to protect business methods and software systems developed by some of the major global financial institutions.

The report reveals how the boundaries of patentability have been extended by courts in the United States to cover business methods, such as methods for managing mutual fund structures and monitoring the value of an index-linked bond. It further explains how guidelines issued by the US patent authorities make it possible for software to be afforded the protection of a patent.

Clear differences still exist between the position in the US and developments in Europe, particular with regard to the patentability of business methods and computer programs. But a lack of clarity means that EU firms must remain vigilant and ready to influence the debate, states the report.

Whilst patent law in the European Union is left to national legislation, all 15 member states are signatories to the European Patent Convention (EPC), which steers patent law in currently 19 European countries. Isma's publication follows the outcome of a key diplomatic conference - held in Munich in November 2000 - where members agreed to defer a decision on expanding the EPC to include business processes and software. Additionally, ahead of plans for a draft directive relating to patents, the European Commission has published a consultation document canvassing opinions on whether or not software could be patented.

Firms will have mixed views on the extension of patents to business methods and software, states the report's author Julian Walmsley. Whilst banks and securities houses may wish to safeguard their investment in new concepts through the protection afforded by a patent, they must also weigh up the disadvantages of the requisite need to publish details of the invention into the public domain.

Walmsley suggests banks and securities houses in Europe should consider whether their business methods - whether inside or outside the US - might be affected by patents that have so far been granted in the States. He further advises that firms have documentation in place to demonstrate when a specific business method and its associated computer system was implemented or 'invented'.

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