Australia: Patents And The Financial Services Industry - Show Me The Money!

Key Point

  • Patents allow the financial services industry to protect technologies, methods and processes that they develop while focusing on their core business.

It goes without saying that for the financial services industry, it's all about the money. This is true whether the economy is booming (aaah, the good old days of 2004-2007), or, as is currently the case, experiencing a downturn.

For many companies in the financial services industry, however, a significant potential means of growing or protecting their business remains underutilised. Too often, while focusing on the business of making money, they ignore the enormous potential value of the technologies, methods and processes they develop, and which are vital to their core business. Provided they satisfy the requirements for a patent, these technologies, methods and processes can be protected by patents.

Playing offence

Traditionally, having your successful product, method or process mimicked by a competitor was an expected external cost in the financial services industry. In 2006, for example, ABN AMRO created its "constant proportion debt obligation", only to see many other banks offer the same product soon thereafter.

If you've invested in developing a great financial product, or a system to manage client information, or a formula for calculating insurance, why let others ride on your coat-tails? Any glory that stems from being the thought-leader will be quickly outweighed by regret as unprotected competitive advantage in the market is lost! A patent can be used offensively – to protect a company's competitive advantage against unauthorised attempts by competitors to use it – through letters of demand (cease and desist letters) and patent infringement litigation.

Playing defence: the ball's still in your court

A patent can also be your defensive shield – acting as a potential deterrent to patent infringement litigation by a competitor if such litigation would be met by a cross-claim for infringement of one of your patents. The ability to cross-license your patents also gives you something to bargain with in commercial settlements.

Playing a whole different ball game

In an industry where a similar product, system, process, or method will be used by many actors, you don't need to sue every time a competitor copies your patented invention. You can negotiate license agreements so others can apply your patented invention and pay you licensing fees. Did you think royalties were just for record labels?

More details about patents please!

A patent is a temporary monopoly right granted by the Commonwealth government for new, inventive and useful things, methods or processes.

There are two types of patents in Australia:

  • standard patents, which have a life of 20 years; and
  • innovation patents, for inventions that are not sufficiently inventive to meet the inventive threshold required for standard patents, with a duration of up to eight years.

Patent protection is not automatic. It does not arise immediately upon conception of the invention that is the subject of the patent. Rather, it depends upon the filing of a detailed patent application, and the decision by IP Australia, the body responsible for the grant of patents in Australia, that the invention that is the subject of the patent application satisfies the requirements for patentability: that the invention is new, inventive1, useful, and a manner of manufacture.

The right granted by a patent is legally enforceable and gives the owner of the patent the right to exclude others from exploiting in Australia the invention claimed in the patent during the life of the patent.

Too much law! Give me examples

Current patents in the financial services industry

  • UBS's US patent for a method of allowing Islamic investors to be exposed to the commodities market without infringing the Koran.
  • Chicago-based Trading Technologies International's US patent over the display method for prices in futures trading products, which has been unsuccessfully used to sue ESpeed, an electronic bond trading company, for patent infringement.
  • US patentee Ronald A Katz has a series of US patents for various telephonic interface systems, which he has asserted against, among others, many US banks, including CitiGroup. Mr Katz is predicted to earn more than $US2 billion from licensing his patented technology.
  • US entrepreneur Claudio Ballard patented a method of remote cheque image processing, and has sued more than 50 US banks, including Citigroup.

Failed attempts

  • An Australian entrepreneur has failed to gain patent protection despite numerous appeals for a method of protecting assets though loaning monies gifted to a trust back to the trust owner, the loan secured with a charge. This was determined to be unpatentable as being merely a discovery in interpreting trust laws.


Patents are not just for engineers and scientists. They are also for creative business people. For the financial services industry, they provide a means for protecting technologies, methods and processes that they develop while focusing on their core business. Not only do they provide a means for protecting competitive advantage, they can lead to a potentially significant revenue source through a licensing program.


1 Inventiveness is a requirement for a standard patent. For an innovation patent, this requirement is reduced to one of innovativeness.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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