Intellectual Property Rights in FinTech: Safeguarding and Exploiting Innovations in a Competitive Landscape

30 Sep

In the rapidly evolving world of FinTech, protecting innovative technologies and solutions is critical. As FinTech companies drive technological advancements in financial services, safeguarding intellectual property (IP) becomes more important than ever. In the UK, navigating the legal landscape of IP rights can be complex, but it’s essential for ensuring that a company’s innovations remain secure from competitors, and can be exploited to their maximum value.

1. Why Intellectual Property Matters in FinTech

The FinTech industry thrives on innovation, with companies continuously developing new technologies, apps, and platforms to deliver financial services more efficiently. From blockchain solutions to digital payment platforms, these innovations often define a company’s market position. Protecting intellectual property ensures that these innovations cannot be copied or exploited without permission, maintaining a competitive edge. Without proper IP protections in place, FinTech companies may find themselves vulnerable to infringement or, worse, losing their proprietary technology to competitors.

2. Types of Intellectual Property Protection

There are several key forms of IP protection relevant to FinTech companies in the UK:

• Copyright: For companies creating original software, copyright protection is crucial. Copyright automatically protects original works, including source codes, provided they meet the originality requirement. The key is for companies to maintain  a papertrail of ownership and creation timelines to ensure that in the event of a dispute, they can show they were first.
• Trade marks: FinTech companies often rely on strong branding. Trade marks protect brand names, logos, and other identifying marks, preventing others from using similar marks that could confuse customers. Trade marks filings are relatively easy in the UK, and inexpensive, making them an attractive way to protect their brand and goodwill.
• Trade Secrets: Proprietary algorithms or business methods that provide a competitive advantage can be protected as trade secrets. Keeping these confidential is essential to prevent competitors from accessing sensitive information.
• Patents: FinTech innovations involving new technological processes or (in rare cases) software can be patented. However, software patents are subject to specific requirements under English law and can be very difficult to register, meaning that copyright is more often the relevant (and unregistered) IP right that applies to software; software patents are much more common in the US. Patentsprovide the inventor with exclusive rights to the technology for 20 years maximum, ensuring that competitors cannot use or replicate the invention without consent during that time, in that territory.

3. Regulatory Considerations in the UK

In the UK, the Intellectual Property Office (IPO) oversees the protection of IP rights. FinTech companies must ensure that they comply with English laws and regulations when registering patents, trade marks, and copyrights. Given the global nature of FinTech, companies may also need to consider international protections, particularly if they plan to operate in multiple markets.

4. Enforcing Intellectual Property Rights

Once IP is secured, enforcement becomes a priority. In the event of IP infringement, FinTech companies have the right to pursue legal action in court. This could involve seeking injunctions, damages, or requiring the infringing party to cease using the protected IP. Proactive monitoring of competitors and the market is crucial to identify any potential infringements early on, and the business of course must have the appetite to take legal action to protect its IP crown jewels.

5. Exploiting Intellectual Property Rights

Once IP has been properly audited and protected wherever and however possible, a business will be looking to maximise the value of that IP. Often that will take the form of the business just going to market to its expected customer base to sell the product, whether through subscriptions or otherwise, but depending on the sector various other routes to market may exist:

• Resellers: A reseller effectively buys a right to IP and then resells it on behalf of the business.
• Referrers: A referrer might have e.g. demo rights to IP, and will use that as a hook to bring prospects to the IP owner.
• Value-adds: These are often resellers that combine IP with their own, so selling a combined product.
• Integrations: Similar to value-add, integrating products together can lead to more compelling solutions for prospective customers.

In FinTech, these types of collaborations are often referred to as partnerships. FinTech products typically address specific problems, and by partnering with other products, they can offer a more comprehensive solution that appeals to a wider range of customers. These partnerships are very common and are an effective way to expand customer bases and increase the value of the intellectual property involved.

In the competitive FinTech landscape, safeguarding innovations through intellectual property protection is a fundamental step. With the right IP strategies in place, FinTech companies can focus on growth, innovation and ultimately exploitation of IP to maximise the revenue of the business, while maintaining control over their technological advancements.

For more information, reach out to our Partner and Head of Technology, Simon Weinberg, or our IP & Data Specialist, Deborah Tastiel.