Lawmakers Move to Grant Banks Immunity Against Patent Lawsuit
Thursday, February 14, 2008
Sen. Jeff Sessions (R-Ala.) has sponsored an unusual provision at the urging of the nation's banks granting them immunity against an active patent lawsuit, potentially saving them billions of dollars.
Adopted with little fanfare, the amendment would prevent a small Texas company called DataTreasury from collecting damages from banks for infringing on its patented method for digitally scanning, sending and archiving checks. The patents were upheld last summer by the U.S. Patent and Trademark Office after they were challenged.
The provision, passed without dissent by the Senate Judiciary Committee in July and inserted into legislation scheduled for a vote by the full Senate this month, is a rare attempt by Congress to intervene in ongoing litigation, congressional experts say.
Although the amendment would not invalidate DataTreasury's patents, it would spare the banks from paying for infringing them should courts decide that's warranted. If DataTreasury collected a royalty of just a couple pennies per check, the cost would run into billions of dollars.
The federal government would have to pay $1 billion to DataTreasury over 10 years as compensation for taking its property under the amendment, according to estimates by the Congressional Budget Office.
Banks process more than 40 billion checks each year. At one time, those checks had to be delivered physically to be drawn upon. But five years ago -- in the wake of the grounding of aircraft laden with billions of dollars in checks after the Sept. 11, 2001, attacks -- federal law was changed to allow electronic transfers as well.
Some major financial institutions, notably Merrill Lynch and J.P. Morgan Chase, have licensed DataTreasury's technology for the purpose. Lawsuits alleging infringement are pending against others, including Bank of America, Wells Fargo, Wachovia and Citigroup.
When the Judiciary Committee began to draft landmark legislation overhauling the country's patent laws last year, lobbyists for these banks jumped into action.
The Financial Services Roundtable, a lobby group that represents the nation's largest financial institutions, and the banks approached Sessions about sponsoring an amendment to protect them. They said they chose to work with Sessions because of his long-standing antipathy toward plaintiff's attorneys and his previous interest in the electronic check system.
Lobbyists for the Roundtable and the banks, including prominent free-lance lobbying firms Smith-Free Group, Bryan Cave Strategies and Quadripoint Strategies, conducted rush visits with Judiciary Committee members and their aides to advocate the measure. Sessions's staff produced a three-page description of the amendment and its background with the help of the Roundtable and distributed it to the committee.
Commercial banks are considered a potent force on Capitol Hill, in part because of their heavy contributions to lawmakers. They are the 10th-largest donor to federal candidates among the industry groups followed by the Center for Responsive Politics. They also spend millions of dollars a year on lobbying.
Political action committees of financial institutions were the largest single category of industry donors to Sessions, with $52,300 in the current election cycle, the center said. That represented nearly a quarter of PAC contributions he received as of midyear 2007.