Michael Ford
Intellectual Property

Fintechs should get tough on patent assertion entities

Fintech firms should take a more aggressive approach to filing and acquiring patents to defend against patent assertion entities, Toronto patent lawyer Aaron Edgar tells AdvocateDaily.com.

A recent story by ITBusiness.ca reported that Vancouver startup FI.SPAN and banking giant TD Canada Trust have become the latest Canadian members of the U.S.-based License on Transfer (LOT) Network.

The non-profit network, formed in 2014 by tech heavyweights such as Google, SAP and Red Hat, protects its members from patent assertion entities, pejoratively referred to as patent trolls, who file meritless actions against businesses in the hopes of a big payoff.

Edgar, a partner with Edgar Chana Law, says he agrees with the collaborative approach used to prevent possible patent law suits, both in Canada and in other jurisdictions, but would prefer a different style.

“This kind of network is a defensive measure, but I think these Fintech firms should be going on the offensive,” he says. “Fintech companies should be looking for the value in their own technology and filing patents, or trying to acquire patents to try and prevent these types of lawsuits.”

The story says patent assertion entities operate on the basis that their targets would rather pay a quick settlement than get tied up in long and expensive legal fights.

According to LOT Network, software companies spend an average of US$3.3 million on lawsuits filed by these patent assertion entities.   

“It prevents you from operating your business. When you’re a startup, you’re cash constrained. You should be protecting your IP that you generate and make sure it’s not in (legal) violation. But there’s a whole bunch of demanding things for your time and often, (patent protection) gets pushed to the wayside,” Clayton Weir, co-founder of FI.SPAN, which builds application program interfaces for banks, tells ITBusiness.ca.

The year-old firm has yet to face a court challenge from a patent assertion entity, but TD spokesperson Josh Death told the website it has considerably more experience in that realm. In the last decade, the bank has faced an average of more than one suit a year, all arising out of its U.S. operations.

However, Death says that Canadian firms could become a target as American lawmakers crack down on trolls, thanks to its thriving fintech scene.  

“They’re looking at new jurisdictions where they can do this,” Death tells the site.  

The network’s defence against patent assertion entities kicks in when a member’s patent finds its way into the hands of a patent assertion entity. At that stage, the targeted LOT member grants a licence for the patent to all other members of the group, shielding them from lawsuits involving the patent at issue.

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