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RAPAPORT... The government is addressing Patent Assertion Entities (PAEs) or "patent trolls," lawsuits that can cost retailers and tech firms dearly -- victims of this scam have paid about $29 billion to settle lawsuits in 2011, up from only $7 billion in 2005, according to a Boston University study by two law professors. The National Retail Federation (NRF) has also received complaints from more than 200 retailers recently who have been subject to patent troll threats and or lawsuits.
“Retailers have become one of the largest groups of non-tech companies targeted by patent trolls,” said Mallory Duncan, the senior vice president and general counsel for the NRF. “Retailers are using precious capital resources to fight or settle infringement claims that they should be using to invest in their businesses and create jobs. This is an abuse of our nation’s laws that needs to be stopped.” Retailers have seen an increasing number of patent lawsuits in recent years, and about 40 percent come from patent trolls, according to the NRF. The trolls focus their business model on buying obscure patents for things they didn’t invent, then they threaten a retailer or tech company with a lawsuit for using the technology involved unless they pay a licensing fee. The threats often involve technology or a business practice that the user doesn't even realize was patented, and aren’t clearly linked to the patent in question. Of cases that make it to trial, patent trolls lose more than 90 percent of the time, according to the NRF. But the cost of defending against the claims is so high – the average case costs $2 million and can take 18 months – that many victims settle out of court.
In one example, more than 40 online retailers whose smartphone apps include a link to privacy policies posted on their websites have been sued or threatened, the NRF warned. In another, companies that scan a paper document into a computer and then attach it to an email have been asked to pay a licensing fee. Even adding an item to an online shopping cart and checking out has been challenged as patent infringement.
In response, the Obama Administration issued five executive actions and seven legislative recommendations in early June. (See http://www.whitehouse.gov/the-press-office/2013/06/04/fact-sheet-white-house-task-force-high-tech-patent-issues)
Some of the major themes in the recommendations include penalties for abusive lawsuits, a call for more transparency within the patent process and expanding outreach in determining policy. During the same month, a study on the situation by the National Economic Council and the Council of Economic Advisers was also released. The Patent Assertion and U.S. Innovation report reviews the current challenges "patent trolls" lawsuits result in and addresses the need for more legislative action.
Some recently introduced legislation also addresses the problem. A bill, HR 6245 "Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act of 2012," sponsored by Representatives Peter A. DeFazio (Democrat from Oregon) and Jason Chaffetz (Republican from Utah) was designed to force patent trolls to absorb the financial burden brought by such litigation. It was referred to the House subcommittee on Intellectual Property in August 2012, where it died. The bill was re-introduced as HR 845 in February 2013 and referred to committee.
"Patent trolls contribute nothing to the economy," said Chaffetz in a press release. "No industry is immune to these attacks. Instead of creating jobs and growing the economy, businesses are wasting resources to fight off frivolous lawsuits. This bipartisan legislation will curb future abuse by requiring trolls to bear the financial responsibility for failed claims.”
The new bill will apply to all patent types, unlike the previous version. According to Gov.Track.us, it has a 5 percent chance of getting past the subcommittee stage.
The NRF addressed patent trolls during their May Washington Leadership Conference and joined other business groups at an early June event on Capitol Hill discussing patent reform.
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