Sen. Charles E. Schumer, D-N.Y., is helping banks try to reverse a patent ruling that has required them to pay $400 million in legal settlements and royalties to a small Texas company, The New York Times reports.
A provision inserted by Schumer into an overhaul of patent law appears to have only one aim: Strip DataTreasury Corp., of Plano, Texas, of a patent for processing digital checks that has made the company wealthy at banks’ expense.
Supporters of the Schumer provision, which passed as part of the Senate-approved bill, insist it will provide a much-needed appeals process for banks seeking relief from dubious and costly patents. But at least two House members want the provision removed, prompting a lobbying battle over its fate in the next round of voting.
The dispute centers around so-called “business method” patents held by companies that have devised a process for a particular task even if they didn’t invent the underlying technology.
Critics say method patents are so vague they promote litigation over innovation. Schumer described a “cottage industry” that shakes down deep-pocketed defendants for patent royalty payments.
Supporters of method patents say that assembling existing technologies in a unique way is a legitimate and long-recognized form of invention.
“Steel had been around forever, tungsten had been around forever, glass had been around forever. But somebody put all those elements together and created the light bulb,” said DataTreasury CEO Claudio Ballard.
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