Financial institutions are increasingly becoming targets of patent infringement lawsuits initiated by non-practicing entities (NPEs), commonly referred to as “patent trolls.” These entities, which do not manufacture products or offer services, acquire patents primarily to generate revenue through licensing or litigation.
Recent data indicates a significant uptick in such legal actions. For instance, in the first half of 2024, the financial services sector experienced a 63% year-over-year increase in NPE patent suits. This surge underscores the growing vulnerability of banks and related institutions to patent litigation.
One notable example is the series of lawsuits filed by Amadora Systems LLC against various banks. The company alleges that these institutions infringed on patents related to surveillance technologies integrated into ATM systems. Specifically, Amadora claims that by utilizing ATMs equipped with video and audio monitoring capabilities, along with transaction notification systems, the banks have violated its patents. This litigation highlights a broader trend where financial institutions are targeted for using technology they did not directly develop, leading to complex legal disputes over intellectual property rights.
Legal experts advise financial institutions to resist settling these claims hastily. Patrick Muffo, a shareholder at Polsinelli, cautions, “The problem is if you pay every patent troll that comes your way, there’s going to be another patent troll right behind them.” This sentiment reflects a broader concern that settling may encourage further litigation from other NPEs.
To mitigate risks, financial institutions are encouraged to conduct thorough due diligence on their technology vendors, ensure robust intellectual property indemnification clauses in contracts, and stay informed about emerging patent litigation trends. Proactive measures can help institutions navigate the complex landscape of patent litigation and protect their operations from potential disruptions.