Financial Patent Quality: Finance Patents After State Street

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Financial Patent Quality: Finance Patents After State Street

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Title: Financial Patent Quality: Finance Patents After State Street
Author: Lerner, Joshua; Speen, Andrew; Baker, Mark; Leamon, Ann

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Citation: Lerner, Josh, Andrew Speen, Mark Baker, and Ann Leamon. "Financial Patent Quality: Finance Patents After State Street." Harvard Business School Working Paper, No. 16-068, December 2015.
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Abstract: In the past two decades, patents of inventions related to financial services (“finance patents”), as well as litigation around these patents, have surged. One of the repeated concerns voiced by academics and practitioners alike has been about the quality of these patents in particular, and business method patents more generally. In particular, because so much of the prior work in these areas has not been patented, concerns have been expressed as to the extent to which the awards reflect this knowledge.
Inspired by these issues, this paper empirically examines the quality of finance patents in the years after the landmark litigation between State Street Bank and Signature Financial Group. We show that relative to two sets of comparison groups, finance patents in aggregate cite fewer non-patent publications and especially fewer academic publications. This finding holds across the major assignee groups. In addition, it appears that patents assigned to individuals and associated with non-practicing entities (NPEs) cite less academic work than those assigned to non-NPE corporations. While not statistically significant due to the small number of academic citations in finance patents, we observe qualitatively similar patterns of under-citation when we restrict our analysis to finance patents held by individuals and NPEs, as opposed to non-NPE corporations. These findings raise questions about the quality of finance patents.
We also explore litigated finance patents and discuss how the results here may reflect differences
in the quality of finance patents relative to other areas. We find that, as earlier work has
suggested, finance patents are more likely to be litigated than non-finance patents, but increased
academic citations appear to reduce that possibility relative to others. Collectively, these findings
raise important questions about the quality of finance patents and the proliferation of litigation in
this domain.
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