The FinTech Patent Landscape

In this recent blog, we talked about the boom in blockchain-related patents, especially in China. But blockchain – and its most famous application, cryptocurrency (including Bitcoin) – isn’t the only area of financial innovation these days.

According to Cipher, which uses artificial intelligence to analyze technology trends, Bank of America is far-and-away the leader in FinTech patents, with 2,535 granted and pending patents in 2017.

BofA’s patents include ones for ATMs, banking IT infrastructure, online and mobile banking, and transaction and data processing.

But even BofA’s impressive patent portfolio pales in comparison to IBM’s. IBM held a whopping 23,864 FinTech patents in 2017. In fact, IBM held five times as many FinTech patents as the top-15 banks put together! Microsoft wasn’t far behind IBM, with 19,670 patents and applications.

As Cipher notes, this shows that

Technology companies understand the role of intellectual property to define and protect markets. This is all relatively new to the financial services sector.

The US Supreme Court, in the 2014 case of Alice v. CLS Bank, made it harder than it had been before to get FinTech patents. In Alice, the court held that a method for mitigating settlement risk wasn’t patentable subject matter because it was an abstract idea implemented on a generic, general-purpose computer.

Most of the patents at issue in the Alice case were “business method” patents, which have had an uneven history over the years.

FinTech patent filings decreased by 24% from 2007 to 2009, then increased 58% from 2009 to 2013 (just before Alice), then fell again by 27% from 2013 to 2018 in the wake of Alice.

(Interestingly, patent filings in the cryptocurrency space have bucked these general FinTech trends and have increased twenty-fold from 2007 to 2018.)

The fraction of applications for which patents were granted also varies a great deal in the FinTech realm, from 61% of applications for personal finance management to 37% for capital markets and investing.

What does it take to craft a successful FinTech patent application? As the Alice decision shows, it takes more than an abstract idea or business method implemented on a standard computer.

Patents that solve technical problems in the space, with specific technical methods, are often the most viable.

Improvement to user interfaces (UI) can be protected both by utility patents and by design patents that can cover things like the design and arrangement of icons.

The US Patent and Trademark Office (USPTO) has issued 46 examples from the Manual of Patent Examination Procedure (MPEP) that show how patent examiners will review patents for subject matter eligibility. A number of these examples relate to FinTech patents. As these examples show, a FinTech invention doesn’t necessarily have to be highly technical and sophisticated in order to be patentable.