That the card brands and security vendors increased their number of technology patent filings in the wake of a major credit card data breach in 2007 is no coincidence.

Take into account that payments companies’ development of Near Field Communication and other mobile-payments technology went into high gear not long afterward, the result was “a dramatic change in a short space of time” for the intellectual property portfolios of such companies, new research confirms.

Major fraud cases will result in a sudden influx of companies reviewing their security and submitting patents for new technology, according to a report from Southampton, England-based ClearViewIP Ltd.

Some of the increase in patents can be tied to security issues, but many come because of “changes in the way we pay for things,” Clio Davies, ClearViewIP marketing analyst, tells PaymentsSource.

ClearViewIP, a consultancy that helps companies monitor patent portfolios and understand their industry position as it relates to product development, compiled the industry report from a Thomson Reuters Corp. database to highlight patent filings of payments companies from 2000 to 2010. The report also provides trend comparisons with the previous decade.

The report cites the 2007 credit card data breach at TJX Group, the world’s largest breach that affected millions of cardholders, as a key driver behind new patent filings. The hacker, Albert Gonzalez, was sentenced in 2010 to 20 years in prison.

Patent filings can measure the influence of the TJX hack on 18 major payments companies, including card brands, processors and security vendors, the report notes. Those companies combined filed about 500 patents in 1990 compared with 4,000 in 2007, the report states.

Inventions related to card security, such as holograms, chip-and-PIN, network infrastructure and cryptography methods account for the significant patent increase, with electronics companies such as Fujitsu Ltd. and Toshiba America Information Systems Inc. joining traditional payments companies in those filings.

The research beyond 2010 likely would show a continuation in an increase in patents because the recent filings of Apple Inc. are not included in the report, Davies notes.

“Apple is considered a new player in this industry, one that hasn’t really acted on some of its patents related to payments,” Davies says.

Some of Apple’s most recent patents for NFC technology were not published in time for the report, she adds. Still, Apple’s patent filings stir much speculation in the payments industry.

Based on the data, American Express Co. stands out as a card brand exploring nearly all facets of payments technology, including possibly developing a more secure magnetic stripe card, Davies notes.

“Based on what companies are applying for, we can really see that development of the mag-stripe card has tailed off, but that does not mean there wouldn’t be a case for it coming back,” she adds.

Davies said she could not speculate on companies’ intentions based on patent filings, but she agrees that any future development on a mag-stripe card may coincide with EMV smart cards, which in the U.S. will continue to have mag-stripes during the first phase of conversion.

The report also confirms that mobile-payments technology has plenty to do with an increase in filings, Davies says.

Indeed, the industry continues to develop hardware and software related to emerging payment technology.

Other than chip-and-PIN development, patent filings for new technology for plastic card features has declined over the past 30 years, the report states. However, patents for network technologies and authentication methods has risen, with filings increasing 25% for payments networks in 2007 during the first contactless card payment tests in the United Kingdom.

A key measure of a patent’s influence is the number of citations it receives, which generally indicates market value, the report notes. As such, patents with the most citations included those related to describing on-card chips, biometric security and online authentication. “This shows that the intellectual property behind the electronic infrastructure and transmission of transactions across a network underpins the most important technology aspects of today’s credit card system,” the report states.

Visa Inc. stands out with the most patent filings, at more than 800 at the end of 2010. But that does not indicate Visa is exploring the most new technologies, Davies explains.

When Visa submits a patent, it may have to submit that same patent in different countries, making a patent for a single technological development result in up to 50 filings, Davies says. MasterCard Worldwide, for example, with about 400 patent filings in 2010, may have a wider range of technological patents, but it didn’t file for them in as many countries.

In the same vein, American Express has a higher citation rating than Visa, but it had far fewer patent filings in 2010 at just more than 400, the report notes.

Future development of cryptographic systems and advanced authentication methods likely will represent a key battleground in intellectual-property dominance in the credit card industry, with network and contactless payment technologies not far behind, the report notes.

“Overall, the report shows dramatic changes in the payments industry and shows which factors are affecting those changes,” Davies says.

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