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Cultivating Patent Innovation: the Case of Financial Services

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Traditionally intellectual property (IP) creation was not viewed as central to the financial services sector as some others, but that has changed significantly.

At a recent conference* intellectual property leaders at well-known financial institutions discussed developing intellectual property as a strategic imperative. Their discussion touches on creating a culture of innovation, educating inventors, setting up invention disclosure programs and rewarding invention in the era of Alice.

In full disclosure, one or more of the companies mentioned is a client of IPfolio and uses our IP management software.

Innovation culture & starting an invention program

For Visa a key threshold issue was determining what patent strategy would support the lines of business (LOB) -- offensive, defensive or revenue generation. Encouraging invention disclosure had to work within that overarching framework.

Royal Bank of Canada (RBC) realized they needed to foster a culture of innovation and knowledge protection to create employee engagement or any invention disclosure process would flounder.  The invention culture starts day one during employee onboarding. Initially there was resistance, some stakeholders felt other priorities were more important than intellectual property.  It took time but now RBC talks about innovation and intellectual property as part of their brand, which allows them to attract talent. USAA's new IP group also realized a few years back that they needed to foster culture of innovation with reward and recognition (R&R) programs.

As of five or six years ago, Mastercard was not filing many patent applications. A few technologists were motivated but most engineers were not submitting invention disclosures. But a new CEO directed the head of IP to make an innovation program happen and then they found a budget. Mastercard consulted widely with other companies about developing an innovation program.

TD Bank runs a lean IP operation and in the company there were proportionally few scientists and engineers as potential inventors. For their new invention reward program to develop their portfolio, TD also retained some sophisticated consultants to help them design the program rather than following a home grown route.

Education, reward and recognition

The speakers agreed that the balance between recognition as a reward for invention and financial rewards is always challenging.

TD Bank was advised that recognition of invention was generally better than financial reward. Initially TD went the other way toward financial reward, resulting in a high volume of weak invention submissions. Even if some were patentable often they were not aligned to TD’s business strategy.

When TD Bank switched emphasis to recognition they developed a stronger level of engagement from a smaller population who were true inventors. The most motivating recognition was the opportunity to share ideas with senior leaders in the LOBs. “True innovation is invention plus commercial application;” inventors wanted to see their idea recognized high up and then implemented.

USAA has a relatively new IP group and like RBC developed a multi-faceted program starting with new employee orientation.  They use an inventor portal for all employee’s submissions then an initial review by the IP group to see if an idea is viable, usually followed by a request for more work from the inventor.  At this point they may have to address Alice and adjust the focus from a business method to some technology attached to it. There are tiered money rewards at each stage including filing a patent. If the patent issues the inventor gets a prize and recognition from a listing on a prominent company-wide patent tree.

USAA located a generational issue with reward: younger employees wanted primarily recognition, older employees wanted money. Today, the reach of the program is broad and one of USAA’s most prolific inventors is a security guard.  They give innovation classes on a regular basis but avoid too much legal training. For example, they urge inventors not to act as attorneys and perform patent searches on their own. In contrast, Visa uses the smart phones patent wars as a more detailed training tool and find engineers really engage with the story.

Mastercard also concluded that focus on company wide recognition was vital, from inclusion on the public invention website to giving out awards at a CEO dinner. They found the kind of recognition that works varies culturally. So in one country money was such a motivator the result was a big spike in weaker invention submissions. Rewards were reduced and local committees established to review invention disclosures earlier. Mastercard also found that giving stock options “can cause people to give up their day jobs” so rewards can go too far.

The invention website has information about inventions, top inventors and patent applications as part of a multi-faceted recognition program that includes money.  Every employee can look into the portal and look up whatever inventions there are. Mastercard carries out varied educational efforts included events at eight offices around the world. The program has increased patent filings tenfold at Mastercard.

For Mastercard, like RBC, the issue is patent quality, relevance to the business and avoiding business method filings that collide with Alice. Visa pointed out though, you often don’t know what quality is for years, so quantity can be a good thing. There is value in `setting out traffic lights and seeing who drives through them.'

The belief at Visa is you can you recognize great ideas even if they are not patentable. They think of an innovation pyramid where some ideas at the highest pinnacle will become patentable, other ideas are not patentable but highly valuable to the bank. Consequently, Visa created two types of inventor rewards schemes accordingly.

USAA concurs and also has two separate reward programs. On the non-patentable innovation side, great ideas are uploaded into website accessible to all employees who can vote on which ones go forward.  This helps overcome inventor frustration when ideas do not go all the way to patent filing.

Harvesting & mining invention

Visa observed that financial services may not have a formal R&D process like other industries and instead ideas “just bubble up” and this may be inefficient.

Consequently, the focus today is toward ‘harvesting’ or `mining’ invention -- much more proactive and complex than just creating an environment for invention disclosures.  Methods vary, RBC, for example, holds formal regular invention sessions with open office attorney hours for key groups who are doing innovative work.

For USAA, harvesting sessions now create most of what they file, not the inventor portal. The harvesting program uses seven separate tools, for example, problem statements.  USAA legal also engages with internal research and development teams dedicated to disruptive projects including ones LOBs have passed on to them. LOBs can also brainstorm with R&D to look at a particular business area. This can sometimes result in a broad concept requiring legal to follow up and help narrow it down to a useable idea.

Mastercard similarly offers challenges that pose a particular business problem and employees and employee teams submit solutions to win awards up to $150K.

Visa found a passive Recognition and Reward (R & R) program was not sufficient, their needed to be some push as well as pull. The fundamental building block at Visa is invention disclosures by LOBs and metrics around what is expected from each LOB. TD Bank finds its LOBs are now encouraged to compete against each other in innovation.  MasterCard tries to set goals and targets for LOBs but it can be challenging.  Organizing budget from each LOB for the innovation program is another area that needs careful handling.

According to Visa, cost control and accountability concerns are particularly acute at financial institutions, as one might expect. Cost per issued patent is by far the most vital metric and the prosecution budget is always under scrutiny by internal stakeholders. You need sound defensible arguments behind the program for the senior level finance people.

All identified the issue of paying for these programs and patent filings and that this is usually shared with LOBs. International patent filings in particular become expensive. However, TD Bank found LOBs actually become competitive with each other and even ask to give more money to the patent program.

Alice considerations in inventor programs

While some education about patent law is essential for their inventor community, a dilemma for all these companies is how deep to delve into the challenges around patents for business methods and Alice without deterring or confusing inventors.

TD Bank does standard patent law and section 101 training for LOBs. TD warns, however, that if employees learn too much law they can start being their own attorneys, edit themselves prematurely and not submit inventions.  MasterCard used to give a general Section 101 training widely, but now less so. Instead they give a more advanced training for technologists at innovation units around the world, like the MasterCard labs. RBC also does some minimal section 101 training just to targeted groups of likely innovators.

The speakers concurred that a central job of in-house IP Counsel is to translate invention into what is patentable.  Visa, tries to identify Alice problems early in the invention disclosure review stage and go back to inventors to try to resolve the challenges.

In the era of Alice the speakers agreed you generally need to add as much technology around or instead of the business method. Business processes are still patentable if you can integrate technological components in the inventions. Focus on technical improvements and put that in spec so you can cite it to the USPTO. To succeed, avoid broad claims and get inventors focused on developing and disclosing the four or five ways of doing something to help support independent claims.

If claiming technology improvements, it is key to have IT involved as well as product people because you need the right expertise and information to follow through to a patent application. On the other hand, while TD found technologists submit more inventions sometimes these can be incremental. General employees can be more adventurous, sometimes more business relevant and the results more valuable.

On the whole there needs to be a bigger, internal multi-stakeholder discussion now around invention disclosures because of Alice.

Regardless of the challenges, encouraging innovation and invention is vital to the business of modern financial institutions.


*13th Annual Patents for Financial Services Summit, New York.

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