Patent Filing Strategy for Fintech.

Patent Filing Strategy for Fintech

Hi, it's a pleasure to talk about patent filing strategy in China for financial technology, or Fintech. Fintech is a term referring to application of technology to improve economic activities.

It has been used to automate investments, insurance, trading, banking services, and risk management.

Relevant innovations involve various technologies, including artificial intelligence, big data, robotic process automation, and block chain.

Although the Fintech concept has been around for more than 20 years, its patenting strategy has become more critical in recent years due to patent and business policy changes.

For quite a long time, financial companies generally did not attach great importance to patent filing strategy because it was quite tricky for Fintech inventions to overcome the patent eligibility hurdle. In 2002, Citibank had filed around 20 patent applications with the Chinese Patent Office, and it made big news among patent practitioners because financial companies usually filed very few patent applications back then. Even the central bank sent an official notification to all state-owned banks, urging them to analyze the Citibank patent portfolio and if necessary to follow suit. But at the end of the day, and not surprisingly, just a couple of those Citibank applications ended up patent-granted, reflecting the challenging environment for Fintech applications.

As with other developing industries, patenting regulations have been evolving over time.

Given the rapid development of new business forms like e-commerce integrating the internet, AI, and big data, it is undeniable that Fintech innovations made contributions to society comparable to those in the high-tech sectors. Accordingly, the government gradually changed its patentability regulations, which became more amicable to business methods and computer software inventions at large. In particular, the revised patent examination guideline in 2019 and its proposed revision in 2021 substantially relieve the threshold for patent eligibility.

Business method-related inventions, including Fintech, have a much better chance to be patentable, even without a substantial advancement in the traditional technical aspect. Some interesting examples of eligible subjects include an analysis method for coupon usage preference and a dating partner recommendation method. Surprising, isn't it? A method for recommending a girlfriend or boyfriend! That is a patent freshly granted to Tencent just a couple of months ago.

Another notable change concerning Fintech is the overall open-up policy for the financial industry.

China has achieved significant progress in opening up the financial sector in recent years. This includes further opening the banking, securities, and insurance industries, easing market access, and improving foreign investment law. Up to now, more than 100 foreign-invested banks and securities, insurance, and payment institutions have been approved.

With all those legal and industrial changes in the financial sector, the patent filing landscape has shown similar progress. For example, we did a patent landscape analysis for Chinese patent applications in the field of AI plus finance filed by Chinese companies. The statistics show that with a total of about 2100 patent applications, there were just dozens of applications before 2016. Then it has grown rapidly. The application number in 2018 was 375 and over seven times that of 2017, and the number in 2020 was 735 and nearly twice that of 2018.

In terms of the leading technical fields involved for these patent applications, machine learning and neural network accounted for the largest proportion, mainly used in risk pre-warning, insurance, and claim settlement. What ranked second is computer vision and biometrics mainly used in identity authentication, mobile terminal payment, and fraud identification.

Voice recognition and natural language processing mainly used in insurance claim settlement, voice prompt, and telephone banking ranked third. What ranked fourth is knowledge graph mainly used in risk prevention and control, asset management, and product recommendation scenarios, while intelligent robot mainly used in the customer service scenario of intelligent banks has the least applications.

The landscape shows that some companies adopt a quite aggressive patent filing approach for Fintech innovations. Now the question is, how can companies doing business in the financial sector adapt their patent filing strategy to the ever-changing environment?

There are many factors to consider when developing a filing strategy, and the outcome will be dependent upon the individual company's requirements and other external factors. Some factors include the patent landscape, the standard-essential patent, the supply chain, and the business value.

In defining a company's patent filing strategy, it is necessary to consider the overall patent landscape to understand the opportunities and risks. A patent landscape can provide an overview of a particular technology area in terms of patent ownership and patent coverage. This can assist companies in determining technology growth and gaps for the direction of further R&D.

As just introduced in the filing statistics, a substantial part of AI related Fintech applications is in the direction of risk pre-warning, insurance, and claim settlement. It may make sense to patent even incremental improvements in this area in case of future cross-licensing situations.

In addition, although intelligent robot used in the customer service scenario of intelligent banks has the least applications, it could turn out to be a valuable investment for R&D and patent filing given the transition to a less labor-intensive world.

Standard Essential Patents are vital for the wide adoption of new technologies in the relevant industry. With the development of less restrictive patentability rules and the filing of more patent applications for Fintech innovations, patent standardization should also play an important role in patent strategy. On June 8, 2021, the State Banking Association issued the very first group standard in the financial industry in China for a Fintech patent by the Agriculture Bank of China. The bank also signed a FRAND declaration agreeing to license the patent for free to all the members of the Association.

This first SEP in the financial sector is a reminder for financial companies to consider and incorporate SEP practice into their patent strategy. For financial services with high similarity and easily standardization nature, SEP will help to foster a bigger market and gain competitive advantages.

It is also essential to look at the supply chain when deploying a patent filing strategy. By identifying your customers, suppliers, and competitors, patent deployment will be more business-oriented and efficient. Nowadays, the financial industry has many new players from other sectors. To name just a few, we have Alibaba from e-commerce, Meituan from on-demand food delivery, Didi from mobility service, and Xiaomi from mobile communication. All of them have set foot into financial services, including investment, credit loan, insurance, and others. For traditional financial entities like banks and insurance companies, these newcomers usually have a mixed role of a customer, a supplier, a partner, and a competitor.

In such a cross-industry business environment, financial companies need to closely evaluate the cooperation with these newcomers, properly invest resources, and deploy patent filings in both traditional and extended areas.

For example, in cooperation with an e-commerce company, a bank provides settlement support to online shopping and, in return, has easy access to a massive pool of potential customers. The bank may try to design and patent the settlement solution, which the bank may leverage to have a better position in cooperation with the e-commerce company and also restrict the company's collaboration with other banks.

Another important factor in patent strategy is determining where patenting innovations will bring great value to the company.

Innovations have the greatest value when the business models are platform-based and data-intensive, because such business models have easily extendable service scale and lower marginal cost. In doing so, financial companies will need to choose where they will specialize and where they will rely on external partners. In particular, for the insurance industry, an online insurance platform as the primary sales channel will add tremendous value to the company. With such a platform plus other advanced technologies such as AI, IoT, and 5G, it is possible to achieve substantially faster, more accurate, more transparent, and more cost-effective insurance service,partly because IoT devices will enable insurers to easily collect data and personalize insurance.

Accordingly, it is advisable for financial companies to partner with AI algorithm providers, wireless operators, data providers, and wearable device manufacturers to make innovations and file patents.

All of the above examples of diversified factors are necessary for consideration in patent filing strategy. Companies doing business in the financial industry have to adapt to the fast-changing IP, technological, and business environment and do comprehensive patent planning. Otherwise, you may get left behind in the Fintech patenting world.

Thank you for listening.