In recent years there have been an increasing number of patents directed towards the financial services community. Continuing this trend, on August 8, 2006, the United States Patent and Trademark Office ("USPTO") issued U.S. Patent No. 7,089,503 ("the ’503 patent"), entitled "Mortgage Loan Customization System and Process" to Fannie Mae. This patent, which was originally filed April 3, 2002, is directed to "a computer-implemented method for providing a borrower with a mortgage loan that is customized to meet the requirements of the borrower."
Fannie Mae is a government-sponsored entity created to establish a secondary market for mortgages. Fannie Mae purchases mortgages on the secondary market and sells them as securities to investors on the open market, but it labors under a number of statutory restrictions on its activities and, in particular, is not allowed to originate loans. While there is no prohibition on the government or federally chartered companies from owning patents, news of the patent’s approval prompted several mortgage industry trade groups to ask Fannie Mae to abandon the patent. These trade groups expressed concern with the fact the patent involves processes Fannie Mae cannot engage in and with the breadth of the patent’s claims, noting that much of the technology has long been used in the mortgage industry. The concerned trade groups argued that the patent may inhibit innovation by discouraging lenders from developing their own similar software or processes to avoid potential legal battles with Fannie Mae.
In response to the criticism of its patent, Fannie Mae announced on November 21, 2006 that it would grant non-exclusive, royalty-free licenses under the patent and would respond to any company that sent it an e-mail request. Fannie Mae did, however, resist the trade groups’ request to place the technology entirely in the public domain, citing the need to protect its intellectual property assets and to protect itself from patent infringement claims. It is unclear whether the terms of any proffered license will be acceptable to mortgage industry participants.
Fannie Mae owns several patents in addition to the ’503 patent and also has a number of patent applications pending before the USPTO. Additionally, a continuation of the ’503 patent is still pending before the USPTO, which could allow Fannie Mae to secure additional claims on its invention.
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