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Lawmakers Debate Patent Immunity For Banks
I Don't Believe in Imaginary Property writes "Now that a small Texas company has a patent on scanning and archiving checks — something every bank does — that has survived a USPTO challenge, lawmakers feel they have to do something about it. Rather than reform patent law, they seem to think it wiser to protect the banks from having to pay billions in royalties by using eminent domain to buy the patent for an estimated $1 billion in taxpayer money, immunizing the banks. The bill is sponsored by Sen. Jeff Sessions (R-AL)."
Except AL is Alabama. Alaska is AK.
I saw equipment at Recognition Equipment Inc. in 1982 or 1983 ago that did exactly that--scan checks and store the images. How can they have issued a patent on this.
If you consider that pretty much all money in existence today is backed solely by debt, is anyone really surprised?
Backed by debt? So what? Is a shiny yellow metal any better? Why is gold valuable? There are two main reasons:
1. people think it is valuable
2. it has innate industrial value
Reason #1 can apply to anything else: seashells, silver, euros or dollars. As long as people think it is valuable, it is valuable. Believing in the value of pieces of paper that say "this note is legal tender" is no less valid than believing in the value of gold.
While I despise patent trolls, if you read the article this guy had a business with 150 people developing and selling this technology. SOME not all banks ripped him off, several of the large banks did license the technology. Others just ripped him off. To stay in business in 2001 he had to lay most of his people off, and sell most of the company.
Now after a proper legal vetting the banks that just ripped him off are crying and asking the government to save them. Piss on them. They knew exactly what they were doing. This is not a submarine patent. What about the companies that did play the license fee?
What will the guy who actually developed this get? 2% of the money, less all the legal fees. Just remember, it could have been yhou that developed this.
Patents are supposed to benefit the common good. That's their only purpose.
Actually the original purpose was to reward and protect technological innovators. This was subsequently expanded to innovators of "business methods" with the State Street case, a Federal Circuit decision with incredible ramifications.
Now that they recognize one case (in many) where patents are crippling productivity, harming the economy, and working against the common good, they do nothing to address the problem of people abusing the patent system.
Patents serve as a limited form of government-granted monopoly. It is sort of like a social contract - if you fully and completely disclose your invention to the public through the patent application process, the government will reward you with a temporary exclusive grant to benefit economically from the invention.
The patent system itself is legitimate, and has been in effect in various incarnations since medieval Italian city-states. The main controversies are 1) the recent acceptability of business method patents; and 2) the Federal Circuit standard of review on patent cases is de novo, which means that they reconsider the patent from scratch instead of relying on the USPTO's findings of fact. As a result, the Federal Circuit does not fully benefit from the federal agency's domain expertise. All other federal courts (to the best of my knowledge) have to give deference to the findings of federal agencies under the Chevron test.
**Note: Any patent law attorneys out there are invited to take issue with this, as my understanding is not very nuanced.
Instead, they take more money from the people, harming the common good further, in order to bail out banks.
This is a separate issue entirely, and I agree that it is an absolutely horrible idea. The very thought of the US taxpayer bailing out enormous corporate banks makes the bile rise in my throat.
"If you think you have things under control, you're not going fast enough." --Mario Andretti
So what? There are two major things you need to understand about money systems, then it all makes sense.
1. Commodity-backed currency is not inflation or deflation proof! Instead of being impacted by elected or appointed government officials (who must adhere to various standards of transparency around the world), the value of the currency is impacted by the availability of the commodity compared to the real growth of the economy. If you strike a new major source of Gold your economy experiences massive inflation and a huge shock (see: Spain, 1600s). If you fail to discover new sources of gold, you experience deflation as the same ol' amount of gold must now account for your increased population, productivity, and/or GDP.
2. The Federal Reserve does not adjust the money supply purely by open market operations or reserve requirements; what you were taught in high-school economics is wrong. The Feds have a target overnight lending rate, which is how they control inflation. Banks have set reserve requirements that they MUST meet or they cease operating.
If a bank is below its reserve requirement, the overnight rate will tend toward infinity; if the choice is paying 45% interest or shutting down operations, the bank will pay 45%. The problem is if the Fed buys or sells bonds, or adjusts reserve requirements, that changes the total amount of reserves in the system, which affects the Banks, which in turn requires an off-setting operation by the Fed to push the overnight rate back where the Fed wants it to be.
The real way money is injected or removed from the economy in a fiat money system is through government debt... after all, the only reason you and I need that fiat money is to pay the government's taxes, otherwise we could just use our own money or some other country's money.
Whenever the government takes in more money than it spends (surplus), this tends toward deflation. The Treasury pays off its loans from the Fed, resulting in money evaporating from the Reserve Banking system entirely! All those people calling for the government to balance its budget have no idea what they are talking about - if the government did that over the long term it would cause major shocks to our financial system.
When the government spends more than it takes in, the Fed issues new currency (injecting cash into the Reserve system) by buying bonds from the Treasury. If you understand the debt this way, you realize that over half of the "National Debt" is nothing more than accounting entries at the Federal Reserve and don't represent money owed to anyone... nor even money that must ever be paid back!
True, the value comes from somewhere, and that "somewhere" is the inflation "tax". All spending by the government above receipts is captured in the form of inflation, which itself (in small doses) encourages people to put their money to work, lest it sit and have a portion of its value evaporate every year.
Natural != (nontoxic || beneficial)
At least it's a start. Somebody realised that the patent could be abused to fuck practically everyone (if you fuck the banks the banks fuck the people; bankers aren't about losing money).
$1B is a lot of money. Perhaps in the future someone will look back and decide that they could have saved that money by reforming the patent system. It's all too easy to nay-say (I am guilty) but some small movement, even backwards sometimes, is good in what is a mostly stagnant area.
Also, don't forget that this small Texas startup sold their patent for $1B then paid half back in tax on their earnings.
I drink to make other people interesting!
IBM owns the bank check processing business (I did check payment programming for four years and have a 3lb MICR reader decorating my metallic file cabinet to prove it). I'm pretty sure IBM has a patent that covers this. If an IBM patent won't cover it then check with NCR (Bought by AT&T then released into the wild again as NCR).
That being said,
I believe what has been patented here is the method to process checks directly just like a debit card (Those little merchant machines that scan and process your check directly and/or the debit payment inserted into the network from a check by phone payment). Unlike a check which travels through the FED/ACH system, this transaction goes through the debit network (STAR, PULSE, HONOR) etc. There is no FLOAT time for the purchaser.
This claim isn't exactly a software patent, and its sort of unique. Its not revolutionary (more like evolutionary) the banking industry shouldn't pay a dime for it (neither should congress).
If I could find my notebook from 1995/1996 I could show prior art from designing a system to accept payments via users check routing/account info directly into the debit network via a web browser. And no, my design wasn't secure. Note that with this claim (I have no proof without the notebook) and a dime will still equal a dime.
My two cents,
Enjoy.
It's just the normal noises in here.
After scanning through the claims in both patents, this is about routing scanned images onto hierarchical storage. Even back in 1997 this shouldn't have passed the obviousness test.
Banking provides a decent amount of money to Sessions campaign coffers, but not an overwhelming amount. See http://www.opensecrets.org/politicians/indus.asp?CID=N00003062&cycle=2008
who said replace it? jut fix capitalism and you are good.
and looked at the re-exam history, and looked to see if there is any obvious payola going into the good senator's pockets, I have to support the earlier conclusion.
That is just fucking retarded.
Seriously retarded. A billion taxpayer dollars on the line after the banks have spent, by my estimate, around 30k. I guess it's cheaper to send a teenage male hooker to the senate chambers than to fight this thing. More seriously, there are good reasons to fight this thing in court. Write your senator. Here's a few points:
KSR v. Teleflex modified the definition of obvious. Making the banks fight will pull in that case law.
eBay v. MercExchange will make it harder for the patent holder to enjoin the banks from scanning and transmitting check data. so, there's no real danger of banking being shut down as the case is tried.
It's doubtful that this technology saves the banks a billion dollars. They can always turn to low tech fax machines if they don't want to ship pallets of checks. You can fax an awful lot of checks for a billion dollars.
If the senate wants to pass a law, pass one that legalizes something else that the banks can do without infringement.
The banks can easily afford a billion dollars. Bankers award themselves more than that each year as annual bonuses. Furthermore, it gives the banks a legitimate excuse (for a change) to raise fees. The reason will only last a year or two and after that they can use the money to fund reelection campaigns.
I am a lawyer, but not yours. Anything I tell you might be a total lie intended to benefit my clients at your expense.
Republicans controlled congress for 20% of the time and ran up almost all our post WW 2 Debit.
I can play the blame game too in a system that has been rigged since the turn of the 20th century to help the corporatist too.
It's not backed by debt. It is backed by the power of the government to tax their residents.
The power to tax is what gives it enduring value because the government can tax current and future generations in order to pay its bills. Thus, it is backed by the sum total production of the economy rather than any one particular commodity. Gold backing is just like the government being able to tax gold producers. But modern money is backed by the ability of the government to tax everyone: gold producers, silver producers, paper producers, Microsoft, etc. That is a much more enduring, less distorting and stable way to determine the value of the currency than the amount of one particular commodity that is subject to a lot of volatility in its supply and demand.
In come the regulators. They say, "You can loan the money back out, but you have to keep 10% of it on hand." So you get your $10 in deposits and loan out $9 to another person. He spends the $9 and it trickles back to you. Of that $9, you can loan out another $8.10. Eventually, you asymptotically approach zero dollars loaned out (and you've loaned out $100 for your original 10). At the end of it all, you have a balance sheet that looks like this:
Assets: $100 (Loans: People owe you $100, so that's an asset.)
Liabilities: $90 (Savings accounts: *You* owe your depositors $100, which they could choose to withdraw at any time.)
Equity: $10 (You're holding $10 in a drawer somewhere.)
Here's where your thought experiment goes wrong: Let's say people decide not to pay $50 worth of loans back to you. Where are you now?
Assets: $50 (Loans: People owe you $100, but you'll only ever see $50 of it.)
Liabilities: $90 (Savings accounts: *You* owe your depositors $100, which they could choose to withdraw at any time.)
Equity: $-40 (You're in some serious shit if people decide to pull their money out. Your business is worthless now.)
In the real world, odds are good that your depositors aren't going to eat it because the government will bail them out, but you can bet that you're going to get shut down. You see, the banks didn't "create" the money so much as they borrowed it. Even if borrowers don't pay back their debt to the banks, you can bet that demand deposit account holders are going to want the banks to pay them back. This is why the banking industry is regulated. It's a huge leverage machine. There's nothing wrong with that in general, but it's inherently risky. That's why there's all manner of risk pooling and rules about what banks can and can't do with the money they control.
The real world, obviously, is more complicated, but this is a rough illustration of the money multiplier effect. In the US, normal banks don't "create" money as much as they multiply it. For every $1 that the Fed creates, banks multiply the effect in the real economy. It's not any sort of a trick. It's just how the system works.
An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
Before 9/11 banks were required to forward paper copies of all of their checks through a central clearing house. This is where the term "waiting for a check to clear" comes from. Now, they can convert these paper checks into electronic transfers. By keeping scanned copies of the paper checks, they are actually protecting you in the case that there is an error in the electronic transfer.
Just to clarify, given the current spending to date: your reasons cost about $2 each.
I feel fantastic, and I'm still alive.
I'm going to be classy and reply to myself here... I was fixated enough on the grandparent's common misunderstanding of how money multiplication works that I forgot to address a more fundamental point: My example above doesn't really illustrated what happened with the mortgage crisis accurately. It's an illustration of what happens to banks when people don't pay back the "fake" money that they loaned out.
In the case above, the bank got shut down and the FDIC member banks lost out because they had to cover the demand deposits for a failed bank. In the case of the mortgage crisis, the loans weren't paying back into savings accounts. The debt was owned by investors all over the place (check your 401k). Anybody who bought a mortgage backed security lost some value on this one, and there's no FDIC to step in to pay you back. The issue here is the same, though: Somebody paid some money to buy some debt and then the debt became worthless. In the first example, the bank and the bank's insurer got screwed. In the second case, some insurers got screwed along with anybody holding the debt. No matter how you slice it, this mortgage crisis thing is going to hurt a lot of people. It does, however, have the nice side effect of me being able to afford a house and say "I told you so" to people who advised me to buy one when the market was clearly dangerously screwed up. I just feel like a bad guy for enjoying it so much.
An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
Before: The private sector has $X in cash and $X in interest bearing assets in the form of securities from the Treasury
The government then forcibly takes $X from the public through taxes and transfers it to the bond holders, dissolving those interest bearing assets in the process.
After: The private sector still has $X in cash, although that cash has been redistributed from the tax payers to the bond holders. However, the private sector no longer has those treasury securities. The net result is that the public (you and I) are poorer by $X.
Fiscal responsibility requires deficit spending by the federal government. The trick is to keep the debt burdon within a "safe" range to prevent runaway inflation, and to make sure that the government spending is focused on the projects and infrastructure that are necessary to enable future economic growth.
"The defense of freedom requires the advance of freedom" - George W Bush