IP Protection For Fintech Companies

Introduction

With advent in technology, Fintech industry has been thriving in the recent past. Fintech is the technology, involved in the financial sector. According to a report titled “$1Tn India Fintech Opportunity”, by Chiratae Ventures and Ernest and Young, Indian Fintech is expected to record a revenue of $200 Billion, it also emphasised that the market for digital lending, which is anticipated to expand to a book size of $515 billion by 2030. The Fintech segments in India mainly comprises of Pay Tech, Lend Tech, Digital banking, Insur Tech, Wealth Tech, Finance and Regulation Tech, hence Fintech companies hold valuable intellectual property. Software being a Grey area can be provided protection under two heads, while trade secrets plays a major role in protection of innovation including patent. A robust and substantive IP portfolio does not only protect inventions but, also demonstrates the strength of the innovative business models of companies.

Protecting Inventions with Patent

Protection of inventions in the concept stage, helps in insuring novelty as the Fintech industry is dynamic in nature. It is hard to deny the innovation boom in the sector due to rise in cryptocurrency and blockchain patents, making the industry more customer centric.

[Image Source : iStock]

1-click purchase technology being the most famous example for a Fintech patent, developed by Amazon, bypasses several processes in online purchasing making it more attractive for customers. Since the core of Fintech breakthroughs typically revolves around so-called business techniques or computer implemented inventions, whose patentability can be problematic in many jurisdictions, patents give the strongest protection for Fintech enterprises but can be challenging to obtain.

The underlying core technology is often protected by a combination of patent and trade secrets rights, which needs to be developed in a global perspective, though trade secrets doesn’t require formal registration, for secret information to remain confidential and not divulge to competitions, confidentiality measures such as signing of NDA and CDA must be practices.  Patentibility faces two major challenges namely, framing of invention and prior art in the rapidly developing industry. Hence filing process and product patents in the concept stage is one of the most essential element to protect inventions.

Copyright Protection

Software and computer code being the backbone of every Fintech company, is the most essential element to be protected through a copyright. As customers tends to use services with easy GUI, program’s code, visual interface features, programming interface is also protected by a copyright. On the same hand, Fintech companies must stay clear of any copyrights belonging to third parties like source codes or software elements because doing so could result in copyright infringement lawsuits.

Digital locks can be used by FinTech businesses to offer an extra layer of security to copies of their works. In some countries, it is illegal to circumvent digital locks, which may offer protection from unauthorised parties. Employees or a hired developer, for instance, might incorporate unauthorized  third-party source code, which could affect ownership.

According to Indian patent regulations, it is specifically forbidden to patent “business techniques” or “computer programmes” in and of themselves, but there is some latitude allowed to computer programmes that are related to or are a part of other inventions. Therefore, there is a strong possibility that a computer programme will be awarded a patent if it is claimed in conjunction with innovative functionality. Contrary to copyright laws, however, patent laws do not contain a comparable provision giving employers the right to inventions made by their employees while they were working for them.

Branding and Trademark

Branding is crucial for promoting a company’s identity, attracting customers, and providing high-quality services. A powerful trademark enables financial companies to set their goods apart from those of their rivals. On the basis of the intended use of their trademark, it also enables fintech companies to combine, acquire, or be purchased, giving them economic value and commercial advantages. Although brands can be registered as trademarks during the development phase or even prior to their launch, there may be difficulties if other companies are using similar names already or the brand is descriptive.

While a trademark has a localised scope, branding is international. Little prohibits copycat competitors from employing the same business strategy and a duplicate platform because innovations made by FinTech companies are typically unpatentable. The only saving grace for established businesses is their name and trademark, which are linked to their reputation in the market for dependability, customer service, and cybersecurity. However, when a rival uses the same or a name that is similar, reputation and business losses may happen nearly right away. Therefore, businesses must commit the resources necessary to swiftly spot any use that could potentially infringe on those trademarks and take action.

When Facebook unveiled the logo for its digital Calibra wallet for the business’s Libra cryptocurrency, which looked strikingly similar to Current’s logo, the FinTech startup mobile banking company Current did exactly that. Lastly, FinTech companies must actively pursue trademark infringers in addition to registering their trademarks. If putative innocent infringers do not promptly stop, sympathy for them and industry efforts to settle infringement claims amicably may only end in irreversible harm. Trademark enforcement and prosecution are even more crucial as the economy adjusts to Covid-19 and market actors concentrate on monetizing the increased demand for FinTech solutions that consumers are willing to adopt.

Conclusion

Having a robust IP portfolio does not just safeguard inventions but also highlights how successfully creative business models work in practise. For companies seeking money from investors who will want assurances that the Fintech they are purchasing is protected, an IP strategy is very crucial. Additionally, if the owner ever decides to sell their company, nothing will be more appealing to potential purchasers than a robust IP portfolio. All financial businesses, especially start-ups, should prioritise protecting their intellectual property, with proper documentation, registration and due diligence, as it provides leverage and numerous economic benefits to the owners of such property.

Author : Dabiru Bhagyashree, a 4^th year IP Hons. Student at KIIT School of Law, Madhya Pradesh, in case of any queries please contact/write back to us via email to [email protected] or at IIPRD.