🚀 go-pugleaf

[Economist, Aug 25]

Imagine you run a securities company.  Your backroom boys dream up a
wizard product that you think will prove a winner with your clients --
say, a system to finance the purchase of floating-rate zero-coupon
notes through the issue of renewable term insurance.  These days, if
it is a potential winner, your rivals will have copied it within
weeks, or days.  If only you could have patented the thing...

That is exactly what securities companies in America have quietly
started to do.  Sutherland, Asbill & Brennan, a Washington DC law
firm, has tracked down about half a dozen current securities-product
patents (including one for the scheme mentioned above).  The firm is
advising its clients that patents, which in America run for 17 years,
are better than copyrights or trademark protections.

All intellectual-property law requires a fine judgement of what can or
cannot be protected.  Though a security cannot itself be patented, the
computer system necessary to support it can be.  This legal
distinction has let at least two cash-management systems be patented,
including one drawn up by Merrill Lynch, America's biggest brokerage.
The firm has successfully sued others for patent infringement.

This ability to gain indirect control of the use of a security through
its computerization, allied to the scope of the one-sentence
definition of the invention in tha patent-approval document,
potentially makes whole classes of securities patentable.  Sutherland,
Asbill thinks, for example, that the automated aspects of
mortgage-backed securities could have been patentable if anyone had
thought of it a decade ago.  That would not have stopped other firms
from developing such instruments, but all those except for the
patent holder would have had to do the calculations involved by hand.
Most would not have reckoned it worth the pencil lead.

If the patenting of securities products really takes hold, then
lawyers, as always, will have a field day.  Patent litigation is
hard-fought and expensive.  With manufactured goods, a standard court
remedy for patent infringement is damages plus an order for the
offender to repurchase the goods to take them off the market.  Just
imagine the chaos if courts started ordering copy-cat securities firms
to buy back their products.