Disruptive financial technologies, such as blockchain, new electronic payment systems and transaction authentication technologies, are changing financial services, raising a number of legal issues FinTech companies should consider.
In this post we address the issue of the legal protection of FinTech, taking into consideration the main intellectual property rights protecting innovative technologies and software relating to finance.
New financial technologies are in large part software-driven. Therefore, the first intellectual property right to consider in relation to such innovative technologies is copyright.
Indeed, software is typically protected by copyright and the protection begins as soon as it is created, without any registration or other formalities being necessary.
On the other hand, certain issues should be considered when relying on copyright protection.
More precisely, copyright protection extends to the source code, as the expression of the idea underlying the software, whereas the idea itself or the function of the software are not eligible for copyright protection. For this reason, copyright grants protection against the copy or use of the source code, but does not prevent third parties creating different source codes in order to replicate the functionality of a FinTech software.
Moreover, where the software is developed on the basis of third parties' software, the relating licences must be taken into account. In particular, if the relevant FinTech software consists of a "derived work" resulting from a modification to an existing open source software, then it is possible that a copyleft license establishes the obligation to distribute the derivative software under the same license, disclosing and making available to the public the source code.
In light of the above, in order to take advantages of copyright protection in the field of financial innovations, it is fundamental to clearly establish the ownership of the software, as well as regulate any rights in software, by means of specific contractual arrangements.
FinTech companies should also consider using the opportunity to patent certain innovative technologies, provided that the strict requirements set forth by the applicable law are met.
In particular, unlike copyright protection, patents may under certain circumstances prevent third parties from reproducing the same function of a patented financial technology.
However, obtaining a patent on a financial software may not be so easy.
Indeed, within the European Union, business methods and software "as such" are not eligible for patent protection. However, it is possible to patent computer-implemented inventions where they are shown to produce a further technical effect which goes beyond the mere interaction between the software and the hardware, provided that the other criteria, such as novelty and the inventive step requirement, are met.
Patents constitute a valuable asset for any businesses as they grant the exclusive right for their holders to exploit the patented inventions for a 20-years period from the filing before entering the public domain. Such a duration can be considered long term in fast-paced innovative markets such as the FinTech market.
In light of this, major financial institutions, banks, but also large tech companies that are entering the FinTech market are already taking advantage of patents on financial technologies, with a particular growth in patents in the field of payment processing.
3. Trade secrets
Trade secrets represent a valuable alternative or supplementary means to protect and exploit FinTech-related innovations.
Indeed, know-how and business information are protected to the extent that they (i) are not generally known to the public nor easily accessible, (ii) have commercial value because they are secret and (iii) are subject to reasonable steps to keep them secret. The duration of the protection is indefinite, as it lasts as long as the information is kept secret.
The recent EU Directive 943/2016 enhanced and provided a more uniform protection of trade secrets among member states, thus making trade secrets more and more a valid option to protect innovative solutions.
In relation to financial-related software, trade secrets are a good option, in particular where, for example, an algorithm cannot be reverse engineered. Moreover, trade secrets may not only cover patentable know-how but also commercial and business information that is not eligible for patent protection.
Also with regard to trade secret protection, it is essential to enter into appropriate contractual arrangements. In particular, reasonable steps to keep the relevant information secret include specific contractual agreements, such as non-disclosure agreements (NDAs) and confidentiality clauses.
In addition to the main means of protection of financial technologies described above, the protection of distinctive signs by FinTech companies is important as well: trademarks, domain names and brand names are essential to gain competitive advantages in the FinTech marketplace.
oreover, the protection granted to registered or unregistered designs should be considered by FinTech companies in relation to innovative technologies including software; indeed certain elements and features such as layouts and graphic configurations are eligible for design protection.
ltimately, in addition to and along with the protection granted by the law, IP clauses in contractual arrangements with employees, suppliers, customers and any other parties are fundamental to protect and better exploit FinTech innovations.
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