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Fair Patent Laws

Fair Patent Laws

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Promote Technology Development

The NRF Retail Opportunity Index encourages Congress to promote technology development by passing reform legislation that would block frivolous lawsuits threatened by “patent trolls” over dubious infringement claims. Learn more.

The Issue

Retailers and other businesses are seeing an increasing number of patent lawsuits, and about two-thirds come from a relatively new breed of litigants known as “patent trolls.” The “trolls” make no products. Instead they are firms that buy obscure patents for things they didn’t invent, then threaten to sue companies that use the technology involved unless they pay a licensing fee. The threats often involve technology or practices users don’t realize are patented, and that aren’t clearly linked to the patent in question. Patent trolls lose more than 90 percent of the cases that make it to trial. But the cost of defending companies against the claims is so high – the average case costs $2 million and can take 18 months – that many victims settle out of court. The cases cost legitimate businesses close to $30 billion a year in direct costs and $80 billion indirectly, amounting to $943 a year for the average household when passed on to consumers. Patent lawsuits filed in U.S. District Court during 2015 totaled nearly 5,800, up 14 percent over the year before and two-thirds higher than the 3,500 cases seen in 2011, the year Congress passed its most recent attempt to bring patent abuse under control. Counting cases handled administratively at the U.S. Patent and Trademark Office, the total number of disputes in 2015 was more than 7,500, the highest on record. Two-thirds of the cases came from patent trolls.

Take Action

In 2016, NRF is continuing to push for passage of legislation to curb patent trolls’ abusive practices and protect retailers and other end users of technology from frivolous patent infringement lawsuits. In a statement submitted for a February hearing held by the Senate Small Business Committee, NRF told lawmakers it is time to put an end to “shakedown settlements” forced on retailers by patent trolls. NRF is also holding a series of fly-ins for retailers to come to Washington and meet face-to-face with lawmakers on patent litigation reform. Resources are also available for retailers who want to write, call or tweet Congress.

NRF hopes to see further action on two key bills that moved forward last year, the Protecting American Talent and Entrepreneurship Act, or PATENT Act, sponsored by Senate Judiciary Committee Chairman Charles Grassley, R-Iowa, and the Innovation Act, sponsored by House Judiciary Committee Chairman Robert Goodlatte, R-Va. The Grassley bill won Senate committee approval in June 2015 and Goodlatte bill saw House committee approval a week later. Retailers need to contact members of Congress and tell them patent reform legislation must include key provisions needed to protect retailers from patent troll abuses and frivolous lawsuits.

Capstone Photography, a small, family owned and veteran-operated business in Connecticut, is one of many companies that have been targeted by patent trolls. Owner Michael Skelps explains how a patent lawsuit ground his business to a halt, nearly forcing him to close his doors.

Why it Matters to Retailers

Retailers are among patent trolls’ most frequent targets thanks to the industry’s increasing use of cutting-edge innovations, especially in online and mobile retailing. 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 by a California company claiming to hold a patent on the practice. In another, companies that scan a paper document into a computer and then attach it to an email have been asked to pay a fee. Adding an item to an online shopping cart and checking out has also been challenged as patent infringement. Whether retailers go to trial or settle out of court, the cases consume time and money that could be better spent creating jobs, growing the economy, and serving customers.

NRF Advocates for Fair Patent Laws

NRF welcomed the Goodlatte bill as “an important step toward disrupting the operations of patent trolls.” The legislation would require that court papers be more specific, judges would have to decide early on whether a patent is valid, losing patent trolls would have to pay court costs, rules would be changed to reduce discovery costs, and lawsuits against end users who simply bought a product off the shelf could be postponed while claims against the manufacturer are resolved. In the Senate, NRF called the Grassley bill evidence that “action is being taken to disrupt the patent troll business model.”

NRF member company J.C. Penney testified at a 2015 House Energy and Commerce Committee hearing, saying “abusive patent enforcement tactics have a detrimental impact on innovation, job creation and the integrity of our patent system.” NRF said J.C. Penney is “just one of many NRF members that has been forced to defend itself against baseless accusations.”

NRF helps lead a major coalition intended to ensure that legislation is not blocked again. The United for Patent Reform group is chaired by NRF and computer technology giant Cisco, and includes retail, restaurant, grocery, hotel and technology companies and associations among its members. The coalition is building on work done by NRF’s Patent Troll Working Group, and NRF is continuing to work closely with members of the House and Senate.