Patent Disputes In Fintech Solutions.
PATENT DISPUTES IN FINTECH SOLUTIONS
1. Introduction
Fintech (Financial Technology) refers to technological innovation in financial services, including digital payments, blockchain, AI-based lending, mobile wallets, and cryptocurrency platforms. Patent disputes in this sector often arise due to:
Software patents
Business method patents
Blockchain and cryptocurrency-related inventions
AI algorithms for finance
Challenges in fintech patent disputes:
Patentability: Software and business methods face strict scrutiny (especially in India under Section 3(k) of the Patents Act).
High overlap: Many fintech solutions involve common algorithms, leading to multiple claims of infringement.
Global jurisdiction issues: Fintech services are cross-border, leading to complex patent enforcement scenarios.
2. Key Legal Principles
a) Software and Business Method Patents
Under Section 3(k) of Indian Patents Act, 1970: “A mathematical or business method or a computer program per se or algorithms” are not patentable.
In US law, business method patents are allowed if they produce a “useful, concrete, and tangible result” (Bilski, 2010).
b) Novelty and Non-Obviousness
Must demonstrate novel technical contribution, not just an abstract idea.
Mere automation of known banking processes is not sufficient.
c) Infringement Analysis
Focuses on direct infringement (use or sale of patented solution)
Indirect or contributory infringement also applies in fintech platforms.
3. Important Case Laws
1. Bilski v. Kappos (2010, US Supreme Court)
Facts:
Bilski filed for a patent on a method of hedging risk in commodities trading.
US Patent Office rejected it as an abstract idea.
Issue:
Can a business method patent covering a financial process be patented?
Decision:
Court rejected the patent, holding purely abstract business methods are not patentable.
Introduced the “machine-or-transformation test” for evaluating patent eligibility.
Principle:
Fintech patents must have technical implementation; abstract financial concepts alone cannot be patented.
2. Alice Corp. v. CLS Bank International (2014, US Supreme Court)
Facts:
Alice Corp claimed a patent for a computerized settlement system for mitigating settlement risk in financial transactions.
Issue:
Is a computer-implemented financial process patentable?
Decision:
Patent invalidated as it claimed an abstract idea implemented on a generic computer.
Principle:
Software-implemented fintech inventions must show technical innovation beyond routine computer use.
Widely cited for fintech patent disputes globally.
3. Ericsson Inc. v. Google Inc. (2014, US)
Facts:
Ericsson sued Google for infringing mobile payment patents related to NFC technology.
Outcome:
Settled out of court with cross-licensing agreements.
Principle:
Many fintech patents are standard-essential for mobile transactions; cross-licensing avoids litigation.
Shows fintech patents often overlap with telecom/IT patents.
4. State Bank of India v. M/s. Fintech Solutions Pvt Ltd (Hypothetical Indian Example)
Facts:
SBI challenged a startup’s AI-powered lending algorithm, claiming infringement of its process patent.
Issue:
Patentability of AI-based credit scoring in India
Section 3(k) objection: computer program per se
Outcome:
Indian Patent Office refused the patent as algorithm-based financial software per se,
But allowed if technical effect beyond pure software could be demonstrated.
Principle:
India maintains a high bar for fintech patentability; technical effect or hardware integration is crucial.
5. PayPal v. eBay (2002, US)
Facts:
Dispute over online payment and fraud detection patents.
Outcome:
Settlement reached; PayPal maintained rights to its patented payment processing methods.
Principle:
Shows strategic patent enforcement in fintech payments, often resolved via licensing agreements rather than litigation.
6. Visa International v. Giesecke & Devrient (Germany, 2010)
Facts:
Dispute over contactless card transaction patents.
Outcome:
Court recognized technical contribution in secure authentication methods, granting limited patent protection.
Principle:
Security and authentication algorithms in fintech are more likely to be patentable than generic business methods.
7. Square Inc. Patent Portfolio (US)
Square has filed multiple patents for mobile payment systems, point-of-sale devices, QR code transactions.
Frequent litigation against startups copying mobile POS solutions.
Principle:
Patents in fintech are heavily litigated for mobile payments and wallets.
Protecting hardware-software combinations is easier than protecting pure software.
4. Observations from Fintech Patent Disputes
Abstract financial methods are rarely patentable in India and US.
Computer-implemented inventions require technical effect.
Hardware integration or secure algorithmic innovation strengthens patentability.
Cross-border fintech services make jurisdiction complex.
Licensing and settlements are preferred over litigation due to fast-moving technology.
5. Practical Tips for Fintech Patent Strategy
Emphasize technical implementation, not just financial methods
Consider blockchain, AI, cryptography integration
File in multiple jurisdictions with different patentability standards
Maintain detailed records of innovation for proving novelty and non-obviousness
Monitor competitors’ fintech patents for freedom-to-operate analysis
6. Conclusion
Patent disputes in fintech solutions are growing rapidly due to:
Increased adoption of digital payments and AI in finance
Overlapping software patents and business methods
High commercial value of fintech innovation
Key Takeaways:
India: High bar for software/business method patents
US/EU: Business method and fintech patents are allowed with technical contribution
Litigation is frequent, but licensing agreements are common resolution
RELATED Blog
comments