Chuck Schumer Trying to Change Patent System to Please Banks, Committing Falacious Special Pleading

The banks have demanded a change to the patent system, and Senator Chuck Schumer has moved to please his constituents.

DataTreasury, a small business run by Claudio Ballard, owns the patent for software that digitizes checks in an end-to-end process. The finance industry has had to pay his small business hundreds of millions of dollars to use the process in the years since his company invented the technology and patented it (NYT). The banks hate this patent and have tried to take the company down before, but the patent remains, and so more than 3 dozen financial institutions pay this small business for its invention. Three financial lobbying organizations have moved to include this provision in a patent overhaul bill to weaken patent claims that cost the industry money.

Chuck Schumer sneaked a provision into the patent overhaul bill that would allow banks to get a federal re-examination of certain patents that the banks accuse of infringement. The kicker is this re-examination allowance would only apply to financial products or services. This patent has already been reviewed and approved by the patent office, but the proposed re-examination would allow “other factors” to influence a second review decision.

Schumer is committing the logical fallacy of special pleading, designing legislation specifically to have a second set of rules for banks than for other industries because banks are special – because they’re special. It’s not really surprising, it’s not like High Finance doesn’t have their own rules anyway.

Two implications about this are more disturbing and new than a pro-bank senator writing special conditions for banks. One, the banks clearly feel that if they can broaden and obfuscate the conditions to make a patent, that they can influence the patent office to win more cases. Two,  the wider bill that Schumer’s attaching his “banks are special” provision, will move our patent system from first-to-invent to first-to-file.

What kind of company is better at filling out paperwork: large corporations with private bureaucracies or small businesses with 2-20 workers?

Not a good overhaul for small businesses or those who believe in fairness.

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