Recently, the ARM world was hit with news of a new patent which may affect much of the debt purchasing industry. TriCap – a company which has typically dealt with medical receivables – recently patented a process by which debt can be bought and sold online.
I am a layman when it comes to patents – I am an experienced debt analyst, not a patent attorney (who may be far better to weigh in on this issue). But from what I understand about patents, the TriCap Arxchange goes too far in its description. The patent – viewable at http://www.patentgenius.com/patent/8234209.html – protects a process that a handful of other debt brokers more or less already do and have done for years. The standard for patents is whether or not the patent is non-obvious. If the patent comes from something which is already being done in the industry (prior art), then it should probably not be patentable.
To many in the debt selling industry, the process TriCap patented appears to have a certain level of obviousness to it.
“It’s ridiculous,” says Jeffrey Hartman of Fitzgerald Debt Acquisitions, LLC, “It practically patents something that the debt industry has been doing since spreadsheets were invented.”
The process which was patented by TriCap covers an online debt sale in which the accounts are:
organized by a computer into a portfolio
scored whereas the final score represents the collect-ability and base value of the portfolio
a final score posted to a secure website on the Internet.
(summary thanks to Michael Klozotsky’s article on Forbes.com)
The patent covers when each of the above is combined into a single process. Now, from everything that I have gone over, no broker has technically combined the above on their website for all to see…but who has not done it all on a spreadsheet after applying an internal scoring criteria (offline)? What counts as “scoring?” What counts as “online” or “offline” in some instances?
TriCap typically deals with medical receivables; however, the patent avoids any language where it is limited to the medical receivable realm in the description (it just uses medical receivables as an example in the summary).
My first reaction to reading the news of TriCap’s patent was that it should be challenged, but I think that most, if not all brokers, can get around it by not posting a score, or just releasing portfolios for debt buyers to examine offline on Excel or some other spreadsheet program. As long as TriCap does not attempt to extend its patent beyond online usage, and keeps the parameters of the patent strictly to its own platform, I do not see a problem going forward or in challenging a patent. Problems will come if TriCap attempts to corner the market on all debt sales by broadly interpreting its patent and its terminology.
Finally, TriCap’s patent on ArXchange, at least to the layman, is obvious and, frankly, pointless. I think that they wasted a lot of time and energy in patenting the process, as other debt brokers do not use anything similar enough online and the process falls in line with what the debt sales industry has been doing for years. I DO advise anyone seeking to build an online debt brokerage business to consult with an attorney to make sure no process violates TriCap’s patent…or if you believe it should be challenged.
Ryan Watson is an experienced debt analyst, with more than six years experience examining debt portfolios of every size and shape. He has also authored multiple articles on financial matters and dabbles in website content and other side writing projects. He lives in Georgia with his wife and two sons.