(September 9, 2008) A small software company that has sued big banks and processors for years over patents it holds that relate to check-imaging and image exchange scored a series of victories in recent weeks as three banks settled with the company and agreed to license its technology. A settlement between Bank of New York Mellon Corp. and DataTreasury Inc. was announced late last week and followed recent settlements with City National Bank and Compass Bancshares Inc. The settlements leave 47 defendants in cases DataTreasury has filed since 2002 alleging banks and processors infringed its patents by developing systems to image checks and store and exchange the images.

Defendants include heavyweights in banking and electronic payments, including Bank of America Corp., Citigroup Inc., The Clearing House Payments Co. LLC’s SVPCO unit, and Viewpointe Archive Services LLC. Two of DataTreasury’s patents related to check image and exchange were upheld last year by the U.S. Patent and Trademark Office following re-examinations initiated by First Data Corp., another defendant (Digital Transactions News, Oct. 30 and July 10, 2007).

Moreover, an amendment sought by the banking industry and aimed at protecting banks from DataTreasury’s suits has apparently stalled along with the Senate patent-reform bill it was attached to. Although the House of Representatives passed its version of patent reform last year, the Senate bill floundered and never came up for a vote.

The recent settlements, along with the failure of the banker-friendly amendment, add pressure on banks engaged in image exchange to do business with DataTreasury rather than fight the Plano, Texas-based company, one legal expert says. “They have patents that cover check clearing and people are going to have to deal with it,” says Vincent J. Roccia, a patent attorney who specializes in financial services with Woodcock Washburn LLC, Philadelphia. Roccia, who is not involved in any of the DataTreasury litigation, advises banks and image-exchange networks to start regarding licensing deals as a cost of doing business. “If I were in the financial-services industry I would be looking for ways to mitigate my losses,” he says, adding that earlier settlements and licensing arrangments are likely to be less expensive than later ones.

Indeed, Roccia says more such cases will emerge in electronic payments as products increasingly rely on technology that may derive in crucial ways from business methods invented elsewhere. “Financial institutions are late to the [intellectual-property] world,” he notes. “Financial institutions are going to see more of this sort of thing in the future.”