Briefing papers

IP creation, IP strategy

Patenting Black Scholes-views from the edge of a black hole


Peter Langley

Summary

Innovative financial products, implemented on computer, are now regarded as patentable in the US. Almost any commercially useful financial innovation, be it new trading system functionality, new financial analysis algorithms, new risk management software, in fact any of the computer implemented features or systems that are the key drivers for competitive advantage in finance, can probably now be patented in the US. As an example, if the BlackScholes option pricing model was being developed today, its originators could probably patent a computer programmed with the model. That would for all practical purposes give them ownership and control of whenever that model was used on a computer, with the potential for realising extravagant commercial gains through licensing and litigation settlements. importantly, patents enable their owners to prevent competitors using the same innovations, even when independently developed by those competitors and even if those competitors knew nothing about the patents when developing their own products.

Published November 1998.