Various companies have expressed interest in licensing JPMorgan Chase's prepaid card technology patents, according to Intellectual Property Exchange International Inc., a financial exchange for licensing and trading intellectual property rights.
The patents cover stored-value prepaid cards and sponsor-funded prepaid cards, or those in which employers or agencies load funds on a regular basis.
Members of IPXI can purchase Unit License Right contracts, or ULRs, online for a certain market-based price for a specific number of prepaid cards, says Bob Moore, managing director of IPXI. IPXI is the first intellectual property and financial exchange to use this model, he says.
"We are getting a lot of good feedback and responses regarding the prepaid patents," Moore says. IPXI is in the "marketing phase" of setting up the offering by spreading the word at conferences and talking to potential buyers, Moore adds.
Because prepaid cards increased in popularity during the past few years, IPXI expects interest from two sets of buyers operational users who will create and issue prepaid cards, and liquidity investors seeking licenses they can resell in the secondary market if the price goes up.
In total, the ULR contract offers a license to a package of 17 U.S. and four U.K. patents, representing a number of technologies used for reloadable prepaid debit cards.
"A buyer could get a ULR and go to a bank and say they can produce cards for that bank," Moore says. "It's a license to practice the technology."
As an example of the process, Moore says a buyer seeking to produce 100,000 cards would need 1,000 ULRs to do so. Buyers can sell back units if they do not use them all, Moore says.
In addition to protecting its patents, Chase is also avoiding potential legal showdowns by making the licensing rights accessible, says Brian Riley, senior research director and analyst with Boston-based CEB TowerGroup.
"With so many startups out there, does Chase really want to take on all of these little guys [if a patent violation took place]?" Riley asks. "It's better to make the licenses available and allow others to get into it early as a way to reduce some friction."
The payments industry has endured numerous patent fights, Riley says. "Behind all great ideas are pretty important patents," he adds. "There are so many little intricacies that come into play with prepaid patents."
For the most part, the Chase offerings provide licensing rights to generic provisioning and basic features of the cards, Moore says. Those include provisions for a consumer reloading funds on the cards, or whether an employer or other agency can add funds to the card, he adds.
"All of these things have patents behind them," Moore says.
After IPXI determines that enough interest for the licensing rights exists, the market will establish pricing for the ULR contract and the exchange will open the offerings for trading. At that time, those who buy contracts in the first 90 days after the initial offering is priced would have amnesty and protection from past usages of the patented technology.