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CUNA joint testimony seeks patent rule tweaks

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WASHINGTON (5/16/12)--The Credit Union National Association, the Financial Services Roundtable, and other financial services groups are largely supportive of the U.S. Patent Office's proposed patent law changes, but the patent proposal could also use some additional tweaks, Eliot D. Williams of Baker Botts L.L.P., will tell members of the U.S. Congress today.

Williams is scheduled to testify at a House Judiciary Committee hearing on implementation of the America Invents Act. U.S. Patent and Trademark Office Director David Kappos, Eli Lilly and Company General Counsel Robert Armitage, General Electric Chief Intellectual Property Counsel Carl Horton, 3M Chief Intellectual Property Counsel Kevin Rhodes, University of Michigan Associate General Counsel Richard Brandon, and Business Software Alliance Director of Government Relations Timothy Molino are also slated to testify.

The America Invents aims to protect businesses, including credit unions, from outside claims on some of their specific customer service, payment and marketing practices. It was signed into law by last September.

Outside patent claims, which are often brought by non-practicing entities, can become expensive for credit unions and others if they are end up in court.

In his testimony, Williams is expected to address section 18 of the new law, which creates a transitional program for review of business method patents.

"The importance of the transitional review program cannot be overstated," as the review program "offers a less-costly and more efficient alternative to litigation, so that businesses acting in good faith do not have to spend the millions of dollars it costs to litigate a business method patent of questionable validity," Williams' prepared testimony says. The review process allows the patentholder and patent challenger to make their own arguments, it adds.

However, Williams will suggest fees associated with the business method review program could be revised to ensure the program is "broadly accessible" to both large and small entities against whom covered business method patents are asserted. Accordingly, the fee should be reduced in instances where the petition is filed by a small (or micro) entity.

The current fee structure "may enable owners of business method patents to extract settlements from small entities using a settlement value based on avoiding the cost of filing a business method review which, in the case of patents with numerous claims, may exceed $100,000 -- even if the review is not ultimately granted," Williams will warn.

Williams will recommend that a staged fee structure could be used, imposing an initial fee due at the filing of a petition for business method review, and a subsequent fee due if the review is instituted.

Williams' testimonyt also represents the American Bankers Association (ABA), the American Insurance Association (AIA), the Independent Community Bankers of America (ICBA), NACHA – The Electronic Payments Association, and the National Association of Federal Credit Unions are also noted in his testimony.

Williams also suggested some technical changes and changes to definitions in the rule be added.

For more on the hearing, use the resource link.

Bill would extend NFIP to June 30

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WASHINGTON (5/16/12)--The National Flood Insurance Program (NFIP) would be extended until June 30 under legislation that is expected to be offered by Rep. Judy Biggert (R-Ill.) today.

The NFIP is scheduled to lapse on May 31.

In the past the program has lapsed for brief periods--three times in 2010, and CUNA has noted that these lapses have caused significant disruption in the mortgage underwriting process for thousands of prospective homeowners.

The Credit Union National Association (CUNA) has urged members of the U.S. Congress to extend the NFIP or reform the program, as credit unions and other lenders cannot write certain mortgages without NFIP coverage. CUNA also recently joined a coalition of associations representing homebuilders, the insurance industry, other financial institutions, brokers, and others to ask Congress to act on NFIP issues.

Comprehensive NFIP reform has not been agreed to in the House or Senate, but many Democrats and Republicans have said the NFIP is in need of reform, and other bills that would extend the NFIP and make some changes have been offered.

On the Senate side, S. 2344, which would extend the NFIP through the end of this year, was introduced recently by Sen. David Vitter (R-La.). Vitter has said he would offer the bill as a potential floor amendment.

Legislation that would extend the NFIP for five years has also been approved in the House and by the Senate Banking Committee.

Inside Washington (05/15/2012)

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  • WASHINGTON (5/16/12)--Sens. Sherrod Brown (D-Ohio) and Sen. Bob Corker (R-Tenn.) sent a letter to Housing and Urban Development Secretary Shaun Donovan expressing dissatisfaction with the Obama administration's decision to leave mortgage investors out of talks that led to a $25 billion mortgage servicer settlement. Investors in mortgage bonds complained they were left out of talks when the settlement was announced in February (American Banker May 15). Servicers will get credit for write-downs of mortgages that are separately owned by investors. Brown and Corker also posed several questions regarding potential conflicts between the owners of first liens, which include many bond investors, and the owners of second liens. Banks sometimes have conflicts of interest because they own second liens and also serve as the servicer of the first-lien mortgage. Last week the House voted to bar the Justice Department from taking part in further mortgage settlement talks without allowing bond investors to participate in negotiations …
  • WASHINGTON (5/16/12)--The Senate Banking Committee has not announced if it will call for executives of J.P. Morgan Chase to testify about the firm's $2 billion trading loss. In a statement released Monday, Committee Chairman Tim Johnson (D-SD) said the trading loss will be discussed during upcoming Wall Street reform implementation hearings. "The unfortunate news of J.P. Morgan's $2 billion trading loss confirms two things," Johnson said. "First, the good: Market reaction so far shows that the financial system and the bank itself are stronger today than in 2008, thanks to improvements adopted after the financial crisis including the Wall Street Reform Act. Second: The fact that this can happen at a bank with a solid reputation like J.P. Morgan is evidence that our banking regulators must remain vigilant, and why opponents of Wall Street reform must not be allowed to gut important protections for the financial system and taxpayers." In a letter, Sen. Bob Corker (R-Tenn.), a member of the Senate committee, asked Johnson to hold a hearing regarding the J.P. Morgan Chase trading losses. "Clearly the losses posted by JP Morgan are significant, and as policy makers we should understand in detail what has transpired," Corker said …
  • WASHINGTON (5/16/12)--U.S. Senate candidate and consumer advocate Elizabeth Warren called for more serious Wall Street reforms, including a modern Glass-Steagall Act to protect consumers from Wall Street gambles in the wake of J.P. Morgan Chase's $2 billion trading loss. "JP Morgan's recent losses show that there are still serious risks in our banking system, and if we don't act, then the next trade that goes bad could threaten our whole economy," Warren said. "A new Glass-Steagall would separate high-risk investment banks from more traditional banking. It would allow Wall Street to take risks, but not by dipping into the life savings and retirement accounts of regular people." In 1933, as a response to the crash of 1929, Congress passed the Banking Act, more commonly known as the Glass-Steagall Act, after its two authors, Sen. Carter Glass (D-W. Va.) and Rep. Henry Steagall (D-Ala.). Glass-Steagall is best known for separating commercial banks from investment banks, said Warren's press release. The idea was to divide the risky activities of investment banks from the core depository functions that consumers rely upon every day. Under Glass-Steagall, commercial banks, which take deposits from consumers, were prohibited from underwriting most types of securities; investment banks were allowed to underwrite securities, but could not receive deposits. The Glass-Steagall Act's regulations came under heavy attack starting in the 1980s and the Gramm-Leach-Bliley Act repealed its core provisions in 1999, the release said …
  • WASHINGTON (5/16/12)—The National Credit Union Administration's Office of the Inspector General has completed a review of the circumstances surrounding the agency's recent regulatory dispute with North Carolina State Employees CU (SECU). The North Carolina credit union regulator last year allowed SECU to make its CAMEL rating public, a decision the NCUA alleged "violated the trust of confidentiality of CAMEL ratings." The revelation of this CAMEL rating resulted in the NCUA ending temporary joint examinations in the state…
  • WASHINGTON (5/16/12)--Many financial industry observers believe the Consumer Financial Services Bureau (CFPB) must share oversight with other regulators in regard to unfair, deceptive or abusive acts or practices (UDAAP). The Dodd-Frank Act provided the CFPB with oversight authority for banks and nonbanks to comply with pre-existing and new consumer statutes and enforcement powers over larger institutions (American Banker May 15). But the regulators such as the National Credit Union Administration, Federal Deposit Insurance Corp., Federal Reserve Board, and Office of the Comptroller of the Currency maintained authority to ensure institutions under $10 billion in assets were in compliance with Dodd-Frank and its resulting regulations. In areas where a rule does not exist, the prudential regulators are obligated to make sure their institutions are not violating the law, said Michael Calhoun, president of the Center for Responsible Lending. CFPB Director Richard Cordray has said he does not anticipate writing a specific rule around UDAAP …
  • WASHINGTON (5/16/12)--The Federal Housing Finance Agency (FHFA) has released for public comment its strategic plan for 2013-17. FHFA is updating its plan, sent to Congress in February, to incorporate the conservatorships of Fannie Mae and Freddie Mac. FHFA said it set four goals for the plan: 1) create safe and sound housing government-sponsored enterprises (GSEs); 2) provide stability, liquidity and access in housing finance; 3) preserve and conserve enterprise assets; and 4) prepare for the future of housing finance in the U.S. All comments on the draft plan must be received by June 13 …