IP strategy for FinTech Start-ups and SMEs - and Other Matters

 

Jane Lambert

On Monday the Intellectual Property Awareness Network ("IPAN") celebrated World Intellectual Property Day with a seminar entitled IP strategy for FinTech start-ups and SMEs. I was one of the speakers and I shared the platform with Alessandro Hatami, Fernando Da Cruz Vasconcellos, Xuan-Thao Nguyen and Janice Denoncourt. Amanda Solloway MP, UK Minister of State for Energy and Intellectual Property sent a recorded video message as did the Dean of Nottingham Law School. Well over 100 people attended the event and I noticed some very well-known names on the attendees' list.

I have been following the law of what is now called FinTech even longer than I have been practising intellectual property law.  Indeed, as I said in Celebrating World IP Day, (26 April 2021 NIPC News), it was FinTech that led me to intellectual property.   The reason for my interest is that I was legal adviser to VISA International for Europe, the Middle East and Africa in the early 1980s I discussed that time n my profile:

"Banks were developing electronic funds transfer systems which gave rise to many new legal issues on such matters as authentication, competition, privacy, software development transactions, telecommunications regulation and trans-border data flow. I wrote a number of articles and other publications including "Electronic Funds Transfer: the Emerging Legal Issues" for the Law Society Gazette in 1984 and contributed sections on computer contracts, data protection and electronic banking to Atkin and the Encyclopedia of Forms and Precedents. I also addressed The International Bar Association in Vienna in 1984 and the International Chamber of Commerce conference on electronic banking in Madrid in 1986."

In 1985 I answered an advertisement in Inner Temple for tenants for chancery chambers in my birthplace Manchester.  I was offered a tenancy and returned to independent private practice at the English bar.  However, I continued to write about FinTech and, occasionally, I was instructed in FinTech cases.

Prof Denoncourt invited me to contribute to Monday's webinar after I  had published a case note on Judge Melissa Clarke's judgment in Communisis Plc v The Tall Group of Companies Ltd and others [2020] EWHC 3089 (IPEC) (Fintech Patents - Communisis Plc v The TALL Group of Companies Ltd. 22 Nov 2020).  That was an action for the infringement of a patent for a method of generating a payment/credit instrument and a counterclaim for revocation on the grounds that the invention was not patentable and lacked an inventive step.  The learned judge held that the patent was invalid on both grounds and that the defendant's product did not infringe.  The reason I wrote about Communisis is that it was about FinTech and disputes over such patents are relatively uncommon, at least in the United Kingdom.

In Fintech Startups – is IP important? 12 Oct 2016 The FinTech Times. Manisha Patent noted:

"It’s worth observing the “unicorns” of the fintech world when considering IP. Of the top 35 unicorns, less than 25% have filed for one or more patents. This means that the average fintech is far from IP-intensive and more centered on commodified software technology than the mythology one would want to believe."

That was the case when I was at VISA during the 1980s and it remains the case now.  As I observed in Kalifa Review fails to mention Patents for FinTech Inventions on 26 Feb 2021 in NIPC Invention, the Kalifa Review of UK Fintech hardly mentioned intellectual property at all and it did not discuss the difficulties of patenting FinTech inventions.

I discussed some of those difficulties in How far (if at all) is it possible to protect Innovation in Financial Technology? in IP Yorkshire as long ago as 12 Aug 2014 and more recently in Protecting FinTech Invention on 27 April 2017 in NIPC Law.   In the first of those articles I wrote:

"The problem is that s.1 (2) of the Patents Act 1977 declares that

'the following (among other things) are not inventions for the purposes of this Act, that is to say, anything which consists of -
(a) a discovery, scientific theory or mathematical method;
(b) a literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever;
(c) a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer;
(d) the presentation of information......'

Much of the technology used in the financial services industry are computer programs and their output consists of methods of doing business and the presentation of information."

In the second article, I added:

"Most FinTech innovation will be software implemented. Software is difficult to patent in England and indeed the rest of Europe because of the exclusion of computer programs "as such" by s.1 (2) (c) of the Patents Act 1977 and art 52 (2) (c) of the European Patent Convention. Moreover, patents are expensive to get and maintain and even more expensive to enforce. There must be full disclosure as to how they work. A 20-year term is likely to exceed many times the economic value of the technology."

One of the grounds on which the claim in  Communisis failed is that the invention was not patentable as a mathematical method and program for a computer.  Communisis is therefore an object lesson as to why patents are not usually a good way of protecting FinTech innovation.

There are alternative ways of protecting such innovation.   Flowcharts, specifications, screen output, source and object code, manuals and the contents of databases can be protected from unlicensed reproduction by copyright.  The disclosure and use of sensitive technical or commercial invitation can be prevented by the law of confidence or the new Trade Secrets Directive (Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (OJ 15.6.2016 L 157/1). Goodwill accruing to a brand can be protected by the registration of the brand name or logo as a trade mark. Finally, there is first-mover advantage.   

My colleagues' presentations were excellent.   One important takeaway for me was the lead that China has taken over the rest of the world in FinTech. That was stressed by Prof  Xuan-Thao Nguyen in her presentation but also mentioned by Alessandro Hatami in his. Prof  Xuan-Thao reminded the audience that China applies for some 1.4 million patents every year and has now supplanted the USA as the main user of the Patent Cooperation Treaty (see China Increases its Lead in International Patent Applications 11 March 2921 NIPC News).  She also mentioned the speed with which the Chinese courts can dispose of infringement and invalidity actions. China has effectively eliminated cash for most transactions.  Even beggars accept electronic payments there (see Beggars in China go cashless, but there's more than what meets the eye 2 July 2018 Business Today).

Our moderator on Monday was John Ogier who is Chair of IPAN.  He was previously Registrar of the Guernsey Intellectual Property Office. Guernsey has some curious intellectual property laws.  It is one of the few jurisdictions in the world to protect image rights (see Jane Lambert Guernsey's Image Rights Legislation 2 Jan 2013 NIPC Law and Kate Storey Guest Post - Kate Storey: Guernsey's Image Rights  8 Jan 2013 NIPC Law).  The article by Kate Storey is particularly interesting as she helped to draft the legislation when she was with Collas Crill.   Guernsey also has its own patent law even though it has no facilities of its own for examinations and searches.  The patents of any country that is listed in Sched. 2 to The Registered Patents and Biotechnological Inventions (Bailiwick of Guernsey) Ordinance, 2009 can be registered without any examination in Guernsey.   As I said tn Guernsey's Patent Law 18 Jan 2011 NIPC Law, China, India, New Zealand, Russia and the USAQ are listed as well as the EPC countries but not Australia or South Korea.

The evening finished with a Q & A.   I was asked what could be done to reduce the cost of enforcement.  I said that a lot had already been done with the adoption of Lord Justice Arnold's proposals in 2010. These limited trials to 2 days, recoverable costs to £50,000 for trial and £25,000 for an account on inquiry and damages to £500,000. I added that for most IP claims under £10,000 that could be tried in one day there was a small claims track. CPR Part 27.14 limited recoverable coss to a few hundred pounds. I recommended greater use of alternative dispute resolution such as ICANN's UDRP for domain name disputes, the IPO's opinion service for disputes over the infringement and validity of patents and the Company Names and the Company Names Tribunal. 

I reminded the audience that intellectual property law did not exist solely for the benefit of intellectual asset owners. The purpose of IP laws was to strike a fair balance between rights holders, consumers and competitors.  The high cost of litigation kept patents, trade marks and designs on the register which should not be there. 

Finally, I observed that the Unified Patent Court Agreement that Mr Boris Johnson himself had ratified in his capacity as Foreign Secretary on World IP Day 2018 would have reduced the cost of patent litigation considerably but that ratification had been reserved by none other than our fellow panellist Amanda Solloway MP on 20 July 2020. I had been looking forward to asking the Minister for the reason for that volte-face (see Jane Lambert Has the Volte-Face on the Unified Patent Court Agreement been worth it? 25 April 2021 NIPC Brexit). Sadly, the Minister was not there to justify herself.

Anyone wishing to discuss this article or any of the topics discussed in it should call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.

IP Clinics with a Difference

Between 15:00 and 17:00 on the last Wednesday of every month we shall hold IP clinics at 4-5 Gray's Inn Square. Between those hours we shall offer 4 free 30-minute slots where you can discuss any aspect of IP law with a barrister specializing in intellectual property, technology or media law.

Because we are barristers and not patent or trade mark attorneys our clinics are rather different from those run by the Chartered Institute of Patent Attorneys at the Intellectual Property Office every Tuesday evening or the Innovation Surgeries run by Ideas21 at the British Library. If you want to know more about what the different IP professions do, read my article "IP Professionals - who does what?"  9 Sept 2013,

We can advise you on IP generally, IP strategy, enforcement, responding to claims by third parties, licensing, joint ventures and so much more. Although we know about patent, trade mark or design registration we do not do that work ourselves. If it appears to us that you we may need a patent, trade mark, registered design or other professional's services, we would introduce you to one of the patent or trade mark attorneys or other professionals on our panel.

We can also advise you of some of the other resources that are available such as the Business and IP Centre of the British Library and the three inventors' clubs in London. We can guide you to some of the useful on-line materials that are published by the Intellectual Property Office, European Patent Office, World Intellectual Property Office, Chartered Institute of Patent Attorneys, Institute of Trade Mark Attorneys and, of course, ourselves.

If you want to book a 30 minute slot on the 29 Jan, 26 Feb or 28 March please call Linda on 020 7404 5252 or complete our booking form.

IP Professionals - who does what

Jane Lambert

In his review of IP and growth, Professor Ian Hargreaves noted that there is "a plethora of organisations providing advice and information in relation to IP" and that "the extent of information available on IP can actually act as a significant barrier to SMEs, particularly to start ups." Clearly what is needed is a simple guide as to who does what in the intellectual property jungle.

IP Professionals
In England and Wales there are four established IP professions:

• patent attorneys (or agents);
• trade mark attorneys (or agents);
• specialist solicitors; and 
• specialist counsel.

A fifth profession, that of IP strategists is beginning to emerge here and in the United States.

Patent Applications
If you, your company, university or other organization have invented a new product or process you may want to apply for a patent for your invention.  If you do, you would be wise to consult a patent attorney.

Patent attorneys specialize in drafting applications for patents that are broad enough to provide the necessary protection but not so broad as to be invalid. They are used to dealing with the Intellectual Property Office, European Patent Office and other patent offices around the world and can usually deal with objections by patent examiners and third parties. They will carry out or procure searches of the prior art (previous patent applications and the technical literature) to find out whether your invention is patentable and advise you accordingly.

You cannot however expect patent attorneys to advise you whether it would be wise to apply for a patent because few of them are trained to give business advice. Those that are would probably describe themselves as patent strategists.   It is important to bear that in mind because most patents cost more to obtain than the revenues that they generate. If you want advice on the wisdom of patenting an invention you should consult some other professional such as a management consultant or chartered accountant or, if you can find one, a patent strategist.

Patent attorneys can also draft applications for the registration of new product designs either as registered designs in the UK or as registered Community designs for the whole of the EU.

Most patent attorneys belong to the Chartered Institute of Patent Attorneys ("CIPA") and are regulated by the Intellectual Property Regulation Board ("IPReg").

IPReg keeps a register of patent attorneys which includes those who are employed in-house as well as those in private practice. If you want to find a firm of patent attorneys CIPA has a searchable database on its website.

Many patent attorneys and other intellectual property professionals give up to an hour of their time free of charge to members of the public who consult them at patent clinics.   In London an IP clinic is held every Tuesday at the London branch of the Intellectual Property Office at 4 Abbey Orchard Street, London SW1P 2HT.  Consultations are by appointment only and these can be booked through Sarah Harmsworth on 020 7405 9450.

Until 2006 patent attorneys in the UK were known as patent agents. In that year CIPA changed its name from the Chartered Institute of Patent Agents to the Chartered Institute of Patent Attorneys. In a short article by Ted Blake "Patent agents change name after 124 years" which remains on its website, the President of CIPA explained why:

“This change means that the official name of the Institute is now much more appropriate given the truly international aspects of our profession. Back in 1882 when the Institute was formed, the title patent agent was in use, and it remains a respected title, but with the passage of time members have adopted the term patent attorney which is the title used by patent practitioners throughout the rest of the English-speaking world. The members of the Institute deal every day with the very latest technological ideas which emanate from the four corners of the world, so we must move with the times no matter how proud we are of our history”.

The reference to "international aspects" is surprising because there are two separate professions in the USA:

• patent attorneys who are lawyers specializing in patent practice, and 
• patent agents who are not.

Although English patent attorneys can and increasingly do conduct IP litigation and appear as advocates in the Patents and Patents County Courts they are more like US patent agents than US patent attorneys. The problem lies in the fact that an "attorney" (which means "agent") was a lawyer who practised before the common law courts of England and Wales until the Judicature Act 1873 and the title "attorney at law" is still used by lawyers in the USA, South Africa and many other countries. 

Trade Mark Applications

If you want to register a British or Community trade mark you should consult a registered trade mark attorney.  Trade mark attorneys can also advise and assist you with the registration of designs either for the UK ("registered designs") or the EU ("registered Community designs").  Their professional association is the Institute of Trade Mark Attorneys ("ITMA") and they are also regulated by IPReg.   A list of registered trade mark attorneys is kept by IPReg and the ITMA website has a searchable database of trade mark attorneys in private practice on its website. Those practising in London are here.

Trade mark attorneys used to be known as trade mark agents.   They and their institute have also adopted the description "attorneys".

Many patent attorneys and some solicitors are also trade mark attorneys.   Some law firms prosecute trade mark and design applications even though they may not employ attorneys.

IP Transactions

If you want advice or assistance on a licensing, joint venture or other business transaction where intellectual property is one of several issues you should consult a law firm with expertise in IP.  Most such firms are very large but there are a few such as Filemot Technology Law where the principal Barbara Cookson is qualified as a solicitor, registered patent attorney and trade registered mark attorney.

Many of the larger law firms with specialist practices are members of the Intellectual Property Lawyers' Association ("IPLA"). 

Solicitors are regulated by the Solicitors Regulation Authority ("SRA") though some solicitors (such as Ms. Cookson) who are also patent or trade mark attorneys are regulated by IPReg.

Litigation

If you believe that someone has infringed your patent, copyright, trade mark, registered design or other intellectual property right or your are accused of infringing someone else's you should consult a solicitor or other authorized litigator.   

If you consult a solicitor make sure that he or she or at least one member of his or her team is an IP specialist. All the firms in the IPLA have such expertise.

Some patent and trade mark attorneys have qualified as patent and trade mark attorney litigators.  If the only or principal issue in the litigation is a matter of intellectual property law their knowledge and experience of patent or trade mark prosecution may be advantageous.  Also, some patent and trade mark agencies, such as Marks & Clerk and Harrison Goddard Foot, have associated law firms.

Specialist Counsel

If a new or difficult point of law arises during an application for a patent, registered design or trade mark or a business transaction the patent or trade mark attorney or solicitor may wish to consult a barrister specializing in intellectual property law. Such a barrister can also draft complex legal instruments such as software development contracts, source code deposit deeds and other documents.  

Occasionally, there is a hearing before a hearing officer of the Intellectual Property Office, Appointed Person or other tribunal.   Again, a barrister can help by settling statements of case, witness statements and skeleton arguments and presenting oral arguments to the tribunal.

A barrister can also advise on the strength of a claim for infringement of a patent, copyright, trade mark, design or other intellectual property right, the revocation of a patent, invalidation or revocation of a trade mark or other action in the Patents or Patents County Courts or Intellectual Property list of the Chancery Division or Chancery County Courts.  He or she can settle proceedings and evidence and present cases before those courts. 

The two great strengths of a barrister are that he or she is trained in advocacy and he or she will have been appeared before, or even against, the judges when they were at the Bar. Through such appearance he or she will have learned how the judges think. He or she will thus be in a better position than most to predict how they will determine new issues of law.

Barristers practise as sole practitioners in unincorporated associations known as "chambers" or "sets of chambers".  Well over half are in London and most are established near the Royal Courts of Justice in the historic Inns of Court. A handful of chambers specialize or have expertise in intellectual property and a list of those chambers can be downloaded from the Intellectual Property Bar Association website.

Barristers are regulated by the Bar Standards Board.

For further information see my article "IP Services from Barristers" 6 April 2013 4-5 IP.

IP Strategists
The US IP lawyer and strategist Jackie Hutter described patent strategists as "a new type of Intellectual Property advisor" who "combines business acumen with IP knowledge to provide business-focused advice." She continued:

"An IP Strategist does not advise you to spend your money on obtaining IP because you can, but because you need to. That is, an invention may be legally entitled to a patent, but if that patent does not protect a product or technology that your company is selling currently or planning to sell in the future, obtaining a patent is a waste of your company’s valuable resources. To ensure that you do not waste money on IP rights that do not align with your goals, an IP Strategist works with you to ensure that you only get IP that supports and maximizes your business value. In other words, an IP Strategist first listens to you to determine what your business goals are and how you wish to achieve them and only then will the IP Strategist suggest that you move forward with obtaining cost appropriate IP protection."

In the UK individuals with an interest in IP strategy are appearing in all four professions. Many are members of the IP Strategists Association ("INTIPSA").

Further Information
If you want to discuss this article or intellectual property in general call me on 020 7404 5252 during office hours or fill in my contact form.

Choosing the Right Kind of IP - Five Top Tips

Jane Lambert

What is Intellectual Property?
As I said in my presentation, "Introduction to Intellectual Property", which you can download here, intellectual property ("IP") is "the collective term for the bundle of laws that protect investment in intellectual assets. ("IA"). In the same presentation I defined intellectual assets as the brands, designs, technology or works of art and literature that give one business a competitive advantage over all others.

Different Ways of protecting IA
Most of those IA can be protected in a variety of ways. For example, you can apply for a patent for a new product or process but you have to the your invention to the world in sufficient detail for anyone with th right skills and experience to make it. That's fine if you get a patent, if t is valid and if you can afford to enforce it but these are three very big ifs,  Alternatively, you can rely on some other IP right such as the the law of confidence, unregistered design right or in some cases confidence.

Patenting does not come cheap.  According to research that had been commissioned by the European Patent Office in 2004 the cost of a typical European patent over 10 years amounted to €32,000. Since a fair proportion  of the patents on the register are never worked, and of those that are worked only a tiny number make serious money for their proprietors, patenting an invention can often be a complete waste of money.

Of course if you really have invented something like Emerson's better mousetrap and the world really is beating a path to your door, then it would be a shame not to have patented the invention.

Five Top Tips
So how do you find the right king of IP protection for your IA? The answer is that it is very difficult but here are some useful tips:

1. When you write your business plan for your business or project, try to identify the income streams for the planning period. Consider the potential threats to those income streams during that period and then think of some possible countermeasures. In most cases, the threats will be commercial rather than legal and most of the countermeasures will be commercial too. If, however, one of those threats is imitation of your product or process by a competitor then maybe you need some kind of legal protection. The appropriate legal protection will depend on the nature of the threat. If your competitor is likely to copy the shape or configuration of your product then maybe some kind of design protection is required. If it is the mechanism of the product that is likely to be imitated then perhaps you need to consider unregistered design right or even patents.
2. An IP right ("IPR") is essentially a title to bring a lawsuit. Except for a handful of infringements that are also criminal offences it is up to the IPR owner to enforce his rights in the civil courts.  Though the cost of IP enforcement has come down considerably with reforms to the Patents County Court litigation is still expensive.  It is important to ensure that you can enforce your IPR which in most cases means taking out specialist IP insurance (see my articles "Intellectual Property Litigation - the Funding Options"  23 April 2013 NIPC Law and "IP Insurance Five Years on" 23 Oct 2010 Inventors Club).
3. You do not have to protect your IA everywhere. If you have no market in Ruritania and nobody is capable of making the product for export there then you do no need patent protection in that state.
4. Make sure that you get the right kind of professional advice for each type of problem. For instance, if you want to apply for a patent you should consult a patent agent (aka patent attorney).  Although it is easier to apply for a registered design or trade mark and many businessmen and women make successful applications without an agent that I would still advise you to seek professional help. Attorneys are specially trained in IP law and practice. Their professions are regulated by the IP Regulation Board. They carry professional indemnity insurance if things go wrong.  If you do not already have a patent or trade mark attorney then we can introduce you to one with whom we have worked well. Alternatively, the Chartered Institute of Patent Attorneys and the Institute of Trade Mark Attorneys have searchable databases on their websites.
5. Before you spend any money on patenting, trade marking or registering a design it is a good idea to devise an IP strategy and perhaps talking to an IP strategist.  IP strategists are a rapidly developing profession in its own right whose practitioners can be members of any of the IP professions (see "What is IP Strategy" 9 Jan 211).

Further Information

If you want to discuss any of these points in greater detail, give me a ring on 020 7404 5252 or fill out my contact form.