Financial engineering is a multidisciplinary approach to finance that uses mathematical modeling, computer algorithms, and economic principals to develop various sophisticated financial instruments. The goal, as with every alchemist, it is generate something of immense value from something of very little value.
Where the end product of financial engineering intersects with IP law is the notion of the "business method patent". Most of the concern regarding Non-Practicing entities (Patent Trolls), are focused squarely on the validity of patents relating to financial engineering implementations.
The U.S. Supreme Court has recently granted Cert. in CLS Bank v. Alice Corporation. The internet is full of blogs explaining the merits of each parties' position, and i have nothing useful to add to that conversation.
What I do add is this: The general disposition of people opposed to business method patents is that the concepts are abstract, and do not do anything new with old concepts. Unfortunately, that opinion confuses the prohibition on non-patentable subject matter (Sec. 101) and novelty (Sec 102).
If the argument is that a financial engineering concept, like the 3rd party escrow arrangement in ALS, were abstract, then why are we arguing about it? Clearly someone implemented the idea, hence making it tangible. Once something can be made tangible, it is no longer abstract. Really, most positions on business method patents collapse into a novelty argument.
The patent office was issuing loads of patents on financial concepts tied to various computer implementations. When these patents are challenged, the argument is always that the patentee is merely applying the concept with a computer. The parties could point to the prior art, but they usually find it lacking. Thus, they settle into a long patent-eligible subject matter argument instead of a novelty, obvious argument.
The result is that Congress, the President and various industry groups are attempting to change the law to suit the goal of eliminating harmful business method patents.
A better way to solve the problem is to move the issue back into the patent office. It is my theory that one of the reasons that business method patents get through the patent office is that most of the Examiners in the art unit have a computer science background and not a financial engineering background. If the PTO actively recruited a financial engineering unit, and stationed them in a Manhattan Satellite Office, they would have the synergy of a examiner corp that is familiar with high-end financial concepts, and a store of knowledge as to what constitutes prior art.
Why Manhattan? Proximity to Wall Street; home to several leading financial engineering graduate programs. Supply of former and current financial industry employees who can transition into the examiner role.
Before we close off an entire field of patentable subject matter, we should at least try to diligently examine them.
Jordan Garner
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