Thursday, 4 April 2013

Innovation and Data Protection In the Banking Industry

Banking Hall
By Olufola Wusu

It all began with the announcement by Professor Charles Soludo, the then governor of the Central Bank of Nigeria that all 89 licensed Nigerian banks had to raise their capital base to N25 billion by December 31, 2005 or have their licenses of operation revoked.
This led to flurry of mergers and acquisitions in the Nigerian Banking Industry, understandably many bank workers moved, resigned or had their appointments terminated.
Then came the present CBN governor who in August, 2009, sacked chief executive officers of eight banks and announced the first bailout of N620 billion.
He later nationalised some banks. All these events and more have made bank workers particularly mobile in recent times.

 In essence what we have seen is a large number of employees being laid off at one time.
This kind of employee mobility usually heightens the possibility of loss of valuable data or even intellectual property.

 It may seem wise for financial institutions to pay more attention towards protecting such IP and proprietary information, especially as it concerns former and disgruntled employees.

Please find below the legal regime for the protection of Intellectual Property Rights in Nigeria.
Copy Right Act, Cap. C 28 Laws of the Federation of Nigeria 2004 Patents and Designs Act, Cap P2, Laws of the Federation of Nigeria 2004; and Trade Marks Act, Cap. T13 laws of the Federation of Nigeria 2004
What Does IP Have To Do With Banking?
Banks are most times users of innovative systems. They seldom license their system or products to third parties, they can actually do this and earn more money but alas banks are conservative and tend to avoid risk of any sort.
Although core banking software which is based on proprietary or open-source code usually includes copyrighted components, those copyrights are licensed by the vendor.
Internal Innovation
Most times any invention that takes place within the bank's IT department is probably protected by trade secrets. This might be because it is more expedient or management is just coming to terms with patents as a means to protect innovation; and Shareholders (investors) have not bothered to find out about IP and are not keen on the company spending money on them.
Nevertheless IP rights have a defensive value; they also have an economic or licensing value at the very worst.
The basic types of Intellectual property prevalent in the Banking Industry are the following; Patents, Trademarks, Copyrights, Trade Secrets etc.

Benefits of Intellectual Property to Banking
A key benefit of an intellectual property system is that a contractual right is only enforceable against the person who entered into contract with you; while a property right is enforceable against the whole world.
A patent is a document issued, upon application by a government office (or a regional office acting for several countries), which describes an invention and creates a legal situation in which the patented invention can normally only be exploited (manufactured, used, sold, imported) with the authorisation of the owner of the patent.
Patents cover things like cutting-edge technologies used in banking operations from, automated telephone technology, ATM machines to security doors and counting machines.
It was reported some time ago that one of South Africa's telecoms company and a bank faced a claim of up to 1 billion rand ($136.4 million) for alleged infringement of technology patents in their joint venture for using technology that was patented.
Trade Secrets

 The Banking Industry depends heavily on trade secret protection. Large amounts of customer data, marketing strategies, information on technology, trademarks, finances, strategy, prototypes M&A plans, compliance management, customer care and transaction-tracking processes are confidential and fiercely protected as trade secrets.
Who Owns The Data?
It's not totally unheard of for laid-off workers to seek a position with a competitor of their former employer.
It was reported that Bank of America has accused a former computer programmer of stealing trade secrets from databases before he left the bank. He was said to have worked for the bank's global markets portfolio management group in New York until September 22 2010, the day after the bank announced it was laying off 400 employees.

 The suit against the said RaoChalasani was filed in federal court in New York - BANK OF AMERICA V RAO v CHALASANI, U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, No. 10-7681.
Are Non-Compete Forms and Non-Disclosure Agreements Ineffective?
It is alleged that Mr. Chalasani sent an email on September 20 from his company address to a personal email address containing 21 files containing confidential and proprietary, non-public information concerning Bank of America, including profit and loss figures for different lines of its businesses throughout the world.
Do You Have a Data Management Policy?
Interestingly the lawsuit said the email transfer was discovered on September 30 in a regular review of emails containing unusually large attachments that company employees send to addresses outside the company.
Innovative Contract Terms and Data Protection
There is a possibility that contract review and negotiation can help stem the tide of data loss and making sure we negotiate and include clauses that make data return a stringent condition for collection of terminal benefits.
It just might be that protecting company secrets is a legal, personnel and ICT issue.
Commercialisation of Patents and Trade Secret

 Patents are public documents which disclose information about the invention (technology) in exchange for state protection, which is the exact opposite of trade secret protection. However commercialisation of patents and trade secret is always a desirable option. Sometimes trade secrets are licensed along with patent rights, in what is called a “hybrid” license.
Copyright exists in a work on the basis of originality and fixation. Copyright protection is particularly important to the Banking industry in the protection of software, databases and customer data, the results of a customer survey. It would also cover operational manuals, marketing strategies, television adverts, predictive analytics and data management of financial data of Banks.
A good name they say is worth more than silver and gold thus the Bank’s name should be registered as a trademark.

Exploiting Innovation
Research and operations in the Banking industry produce new ideas, procedures, software, compositions, equipment and plenty of data, especially in areas bordering on e-banking marketing, and customer care.
Prudent Financial Institutions will need to convert available information on IP rights into actionable plans directed at enhancing keys areas like e-banking, the retail banking, investment banking and enhancing profitability.

 In this regard permit me to borrow the words of Robert Frost, “…Two roads diverged in a wood, and I,  I took the one less travelled by,  And that has made all the difference.”
The Banking Industry has been described as a “knowledge industry” because of new technologies making banking faster, cheaper, global and possibly safer.
Perhaps the National assembly would do well by passing laws addressing the gaping lacuna in Data Protection in Nigeria thus placing clear duties and responsibilities on all concerned parties.

 This should help nudge the Banking Industry in the right direction IP wise and could help it grow even bigger and stronger.

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