NRF Chief Administrative Officer and General Counsel Stephanie Martz says the pandemic has seen an increase in activity by patent trolls using flimsy patents to make fraudulent claims against retailers.
In recent years, about two-thirds of U.S. patent lawsuits have been brought by a relatively new breed of litigants known as “patent trolls.” The trolls are firms that typically do not invent anything or make products. Instead, they buy weak or obscure patents, 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 or 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 close to $1,000 a year for the average household when passed on to consumers
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 e-mail 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.
Patent lawsuits were up in 2020 as increased ecommerce and contactless technology presented patent trolls with new opportunities. In one case, a retailer was sued for operating a website with multiple options to pay. Another retailer was sued for using QR codes to let customers scan and pay for groceries. Both cases involved flimsy patents.
NRF advocates for fair patent laws
NRF has led the retail industry’s efforts on patent reform, both before Congress and in the courts. NRF co-chairs United for Patent Reform, a coalition that includes retail, restaurant, grocery, hotel and technology companies and associations. The coalition has built on work done by NRF’s Patent Troll Working Group, and NRF is continuing to work closely with members of the House and Senate
Among other actions, NRF helped win a landmark ruling by the Supreme Court upholding the constitutionality of an administrative process that allows questionable patents brought by patent trolls or others to be reexamined at the U.S. Patent and Trademark Office without the need for expensive and time-consuming litigation. NRF has supported efforts in Congress to bring patent trolls under control but lawmakers have not passed a patent reform measure since the America Invents Act in 2011.