FinTech companies have the potential and momentum to disrupt the rigid world of finances and put it on a track to becoming more user-friendly. Furthermore, the COVID-19 pandemic proved just how useful FinTech companies and services can be and why today’s world wouldn’t function without them.
Overall, the segment is expanding rapidly all over the world. For instance, according to Statista.com, in February 2020, there were over 8,700 financial technology startups in the Americas alone, with Europe and the Asia Pacific region coming right behind.
However, in a market that’s expanding so rapidly, some important aspects tend to be neglected. In this case, many FinTech startups would rather risk losing their intellectual property than come in second to the finish line (in this case, the finish line can be the launching of a new product or service).
As such, today we’ll dedicate a bit of space and time to the quiet (and sometimes boring) process of patents. More importantly, we will focus on the challenges most companies face and how to overcome them.
Time is the Main Ingredient
Have you ever wondered just how long does it take to file a patent?
While the filing process in itself is not that lengthy (even though you need to submit a detailed description), the examination of the patent can take up to a year or more. Furthermore, each application needs to follow a series of steps after the initial documentation is filed.
In addition, the time span may extend if you apply for a patent in more than one country (which is recommended in the case of FinTech products).
Depending on your team and the complexity of the project, there are cases when the product is ready for launch, but the patent is still pending. In this situation, many startups would risk launching without proper protection instead of losing the start.
How to Handle This
Before you start anything, it’s best to ask a patent attorney for advice (you should get all the information you need in one or two sessions). An attorney can provide useful details about the filing process, the length of the examination process, and tips on how to speed things up.
Discrepancies and Outdated Regulation
The world of technology is moving at an incredible pace (just look at how IoT brings new challenges to the FinTech industry!), so it’s easy to understand how some outdated structures and laws are left behind.
However, it is difficult to navigate the waters of intellectual property without proper backup. In the case of financial technologies, this backup should come from the Supreme Court (in the case of the U.S.), but this is not always true.
For instance, there are several cases where FinTech’s pursuit of protection via patents has been hindered. The famous Supreme Court’s Alice v. CLS Bank decision is one of the most resounding examples of such issues. In this situation, the court ruled against a FinTech company (Alice Corp) who accused CLS Bank International of using technology that was too similar to theirs (protected via patent).
How to Handle This
Sadly, we don’t have any certitude that similar situations won’t continue to show up. As such, it is best to make sure you get specialized legal advice before filing for a patent. It may also help to hire a patent advisor, who can help search for legal breaches that may affect your business in the future.
Since they are a product of two worlds (financial and tech), FinTech companies must follow two sets of rules. As such, the world of tech has recently been turned upside down by stricter rules regarding users’ data and privacy (which is a good thing).
However, this also means that companies who collect and process the type of data needed for financial transactions online are under more pressure. Furthermore, data privacy concerns and new regulations may delay the approval of a pending patent, even if the current regulations are being met by the product.
FinTech companies don’t have an easy job (especially as a startup), but we also need to consider the fact that they handle highly sensitive information. As such, it will take a while before the current laws and regulations catch up.
Until then, intellectual property protection can only be handled via patents and other legal forms. It may be challenging, but it is worth the wait if you plan on long-term development.