Fintech continues to expand in Ireland and internationally. As fintechs rely heavily on technologies such as AI and blockchain, a number of specific IP issues arise, as well as more general IP issues.
The Central Bank of Ireland, in its Innovation Hub 2021 Update noted a number of key trends in innovation. These include the continued growth of institutional interest in digital assets as well as a shift to e-money and a focus on instant payments.
Clearly the growth of fintechs is not going to abate in the near future. We review some key IP issues to be considered by fintechs.
Many fintechs, at start up phase, neglect trade mark protection, often simply due to financial and other constraints. Regulatory requirements are rightfully prioritised.
While this is understandable, as fintechs scale, it is important that trade mark protection is obtained as soon as possible. Securing trade mark rights not only protects the brand from infringement, it is also an asset of the business and assists with due diligence during investment rounds.
For fintechs, it is important to protect the trade mark for the main financial services as well as other technology goods or services provided, such as software applications.
The growth in non fungible tokens (NFTs) is likely to have a significant impact on the fintech market. While companies in the financial services industry will use NFTs in different ways, fintechs should seek trade mark protection for NFTs sooner rather than later. MasterCard, for example, recently filed a number of trade marks for NFTs and other services in virtual environments.
Future growth plans should also be considered, particularly into other markets. In a post Brexit environment, separate UK trade marks will be required, in addition to an EU trade mark, which will cover the 27 states of the EU.
The main IP right that protects software is copyright, assuming it is an original work. Under the Copyright and Related Rights Act 2000, ownership of copyright works created by employees in the course of their employment vests in their employer, unless agreed otherwise. If an employee creates works outside of their employment, i.e. in their own time, then copyright would not automatically vest in the employer.
Many fintechs use third party IT consultants or contractors, rather than employees. Copyright in works created by contractors or third party consultants does not automatically vest in the person who retained the contractor. It is important that copyright in any software or other works created by third party contractors is assigned to the fintech, as this the company’s key asset.
The rights in outputs created by any third party’s artificial intelligence system should be assigned to the fintech.
Patents or trade secret protection?
For many fintechs, the focus is more on protecting their confidential information than patent protection. Often the technology may not be patentable or could be better protected as a trade secret.
In the EU, we have the benefit of the EU Trade Secrets Directive (EU 2016/943), which can protect systems which are trade secrets, where applicable.
In protecting information such as confidential information or trade secrets, it is vital that the fintech has appropriate non-disclosure agreements in place and confidentiality clauses in its third party agreements. This is also important for potentially patentable inventions.
Appropriate internal policies should be implemented to ensure that confidential information within the fintech is secured and only made available to employees that require access.
With patents, the question has arisen as to whether an artificial intelligence system could be named as the inventor of a patent. The answer provided to date, in caselaw in the UK and in Australia (on appeal to the Full Federal Court), is that the AI system could not, which resulted in the refusal or deemed withdrawal of the patent. See our recent article here.
Careful assessment needs to be carried out at an early stage to consider whether protection by way of patent (if possible) or confidential information is appropriate for any new technologies.
As fintechs continue to evolve and innovate, they need to ensure that their IP is sufficiently protected to assist their ongoing development. This should be identified and secured as early as possible so that the fintech can fully commercialise its offering.
For more information, contact a member of our Intellectual Property Team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.