Financial Innovation in Retail and Corporate Banking
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Financial Innovation in Retail and Corporate Banking

Edited by Luisa Anderloni, David T. Llewellyn and Reinhard H. Schmidt

This valuable book discusses in detail, through a blend of theory and empirical research, the processes of innovation and the diffusion of new financial instruments.
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Chapter 7: Intellectual Property Rights and Standard Setting in Financial Services: The Case of the Single European Payments Area

Robert M. Hunt, Samuli Simojoki and Tuomus Takalo


7. Intellectual property rights and standard setting in financial services: the case of the Single European Payments Area* Robert M. Hunt, Samuli Simojoki and Tuomas Takalo† 1 INTRODUCTION Intellectual property is widely regarded as the main policy tool of modern societies for moulding private incentives to innovate and to diffuse innovations.1 Alan Greenspan has frequently (for example, April 3, 2003, and February 27, 2004) pondered the question: ‘If our objective is to maximize economic growth, are we striking the right balance in our protection of intellectual property rights?’. This is a difficult question for economists to answer in general. It is especially difficult to address this question in the context of financial services, including payment systems.2 One special feature of financial services is that, until recently, patents have only rarely been used to protect financial innovations as such (Tufano 2003; Frame and White 2004). In most other industries patents are common, providing their owners with strong and relatively broad protection of their technological innovations. But in the United States, at least, financial patents became commonplace after the landmark 1998 decision in State Street Bank & Trust Co. v. Signature Financial Group.3 This decision made it clear that computer-implemented methods of doing business, including those involving finance, were indeed patentable subject matter (Hunt 2001; Lerner 2002). The use of formal intellectual property rights to protect financial innovations is more limited in Europe than in the US. But most contemporary financial services rely on information technology. Unlike business methods...

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