Data Treasury: Billions in the balance

Some big gloves came off; the duel has been savage. And now the six-year patent infringement lawsuit filed in 2002 by Data Treasury Corp. against Bank of America Corp., Wachovia Corp., Wells Fargo & Co. and Citigroup Inc. is being officiated by Congress.

Sen. Jeff Sessions, R-Ala., introduced into the U.S. Senate the Patent Reform Act of 2007, S. 1145, which contains provisions that would free banks of any liability or potential damages awarded to Data Treasury for patent infringement. An identical bill, H.R. 1908, was passed by the U.S. House of Representatives in September 2007.

The Senate bill is now in committee. If passed, it would become impossible for a patent holder to collect damages from any United States bank found guilty of infringing patents related to electronic check collection and storage.

The U.S. Department of Commerce, in a letter dated Feb. 4, 2008, to Sen. Arlen Specter, R-Pa., stated that "such a dramatic change may reduce the rewards of innovation and encourage patent infringement. The U.S. Patent and Trade Office (USPTO) must preserve the incentive to innovate and continue to offer inventors the opportunity to be adequately compensated and recover their investments."

The bill, as written, would make patents more expensive to acquire and retain. Provisions in S. 1145 would make the following changes to the wording for patent applications and patents:

• "First to invent" would be changed to "first to file." For the small innovator, the cost of filing could run into tens of thousands of dollars for multiple filings. This appears to benefit large corporations that have financial wherewithal.

• The introduction of a post-grant review process. Currently, any company can request a one-time re-examination of a patent if it feels the patent was improperly issued or not original. But if this bill passes, it will provide a platform to challenge a patent's validity in perpetuity.

Claudio Ballard founded Data Treasury in the mid-1990's after he invented technology used to capture, transmit and securely archive images of checks. He filed for two patents covering this process in 1997 and was awarded those patents (U.S. Patent numbers 5,910,988 and 6,032,137) in 1999 and 2000.

The USPTO re-examined Data Treasury's patents at the behest of the banks involved and revalidated them in May and October 2007. The patents were upheld, though passage of Section 14, which specifically addresses Data Treasury, would effectively eliminate any royalties from licensing agreements to which Data Treasury would be entitled.

Section 14 of S. 1145 bears the title, "Limitations on damages and other remedies with respect to patents for methods in compliance with check imaging methods."

The Department of Commerce reportedly does not support such exceptions to patent protection. "This is a challenge to the backbone of entrepreneurship in this country," Ballard said. "We're in danger of killing off innovation."

According to Ballard, when S. 1145 was introduced by Sessions in 2007, Data Treasury was given no notice that this provision was being inserted and given no opportunity to make its case before Congress. Now billions of dollars hang in the balance as both parties await the Senate's vote, which is scheduled for the current congressional session.

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