The past 16 months have shown us how crisis can present opportunities for innovation. The COVID-19 pandemic forced us to be resilient and innovate our way out of a deadly pandemic and a devastating economic recession. It has changed how we work, how we educate our children, and how we can receive health care.
It has also changed how many businesses operate, prompting them to adopt new channels in order to stay afloat while keeping their customers and employees safe. Many of these new business tools, such as online merchant accounts and touchless payment methods, are becoming mainstream and will remain commonplace beyond the pandemic.
While most businesses tried to push through the pandemic and adapt to difficult circumstances, a handful of litigious shell firms saw the pandemic as an opportunity to make a cheap buck by taking advantage of others. These firms, known as non-practicing entities or NPEs, have also earned the moniker “patent trolls,” and they exploit loopholes in our patent system by buying vague, low-quality patents and then using them to sue legitimate businesses for patent infringement.
The patent troll business model is to threaten businesses with baseless litigation and require a settlement payment in order to drop their suit. NPE suits cost legitimate businesses about $60 billion in 2014, and while NPE suits had been on the decline for several years, their volume has recently started to increase again — with the number of patent lawsuits in 2020 up about 9 percent year-to-year.
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While demanding a settlement is less expensive and time-consuming than going to court, it still extorts tens of thousands of dollars from businesses that have worked hard to survive the pandemic. Retail is the top industry targeted by NPEs; last month, for example, an NPE sued a women’s clothing boutique in Texas for using a website that offers customers multiple payment methods.
This family-owned boutique, which had previously relied on its four bricks-and-mortar locations to reach customers, quickly adopted ecommerce as a way for customers to buy clothes on its website using digital wallet technologies such as PayPal and ApplePay. The NPE claimed that running a website with multiple options to process a transaction violated its flimsy patent, and it sued the boutique just as the business was getting back on its feet after more than a year of economic uncertainty.
NPEs also wield low-quality patents to hurt retailers’ ability to do business safely. In April 2020, when we were so desperate to avoid COVID-19 that supermarkets reserved special hours for the elderly and made shopping aisles one-way, a prolific patent troll sued supermarket chain Hy-Vee for using QR codes.
Used hundreds of millions of times since its invention more than 20 years ago, a QR code allows customers to access information by scanning a code with their phone’s camera app. You may have encountered QR technology by using it to open a restaurant menu or check into a doctor’s office. Hy-Vee insightfully deployed QR codes to help customers shop safely by scanning and paying for their groceries as they shopped instead of going through the checkout line. Yet this NPE decided to sue Hy-Vee for violating its flimsy patent on a “Method for Providing Mobile Services Using Code-pattern.”
The only way to stop NPEs is to protect patent quality. High-quality patents used for legitimate purposes help promote innovation and competition, while low-quality patents only slow down our economic growth. If NPEs cannot obtain vague, low-quality patents, they will lose their ammunition to sue businesses who are simply using commonplace technology to help their customers.
As we rebuild from the devastation of the COVID-19 pandemic, Congress and the U.S. Patent and Trademark Office need to wield all the tools at their disposal to preserve patent quality. The pandemic has shuttered enough American businesses; we cannot let NPE suits be the reason that even one more business closes its doors.
Patent quality is vital to protect innovation and support economic growth. That’s why July 19 - 23, we're joining Engine Advocacy in celebrating Patent Quality Week with organizations across the country — to encourage conversations on quality and balance in patent policy. Learn more here!