Retailers say Supreme Court ruling will help stop patent trolls

"The threat of bankrupting a small business with legal fees has been one of trolls' most powerful weapons."

NRF SVP and General Counsel Stephanie Martz

WASHINGTON – The National Retail Federation welcomed a U.S. Supreme Court ruling issued today that upholds the constitutionality of a process that allows bad patents to be reexamined administratively at the U.S. Patent and Trademark Office and thereby eliminates many lawsuits by “patent trolls.”

“This ruling is a major step toward stopping patent trolls and their attempts to commit extortion against retailers and other businesses that have done nothing wrong,” NRF Senior Vice President and General Counsel Stephanie Martz said. “The threat of bankrupting a small business with legal fees has been one of trolls’ most powerful weapons. Making it clear that many cases can and should be resolved by fixing patents at the patent office rather than rushing to court to sue for infringement makes it much easier for our members to fight patent trolls. The justices have removed any doubt that the administrative review of questionable patents is within the authority of the patent office.”

The ruling came in Oil States v. Greene’s Energy Group, a case that examines the constitutionality of the “inter partes review” process. Under IPR, disputes can be heard by the agency’s Patent Trial and Appeal Board, an option that can resolve allegations more quickly and with less expense than full-blown patent litigation.

NRF and other retail groups argued in a friend-of-the-court brief filed in October that IPR is “an efficient and constitutional mechanism” that can “expunge invalid patent claims without the burdensome cost and winner-takes-all posture of litigation and settlement.” The process has saved retailers – and ultimately their customers – millions of dollars annually, and overturning it would have undermined merchants’ ability to defend themselves against frivolous patent claims, the brief said.

Retailers have been heavily targeted by patent trolls in recent years, and NRF has strongly supported patent litigation reform in Congress in addition to supporting today’s court case. The trolls are companies that purchase often-obscure and weak patents for technology that they did not invent, then demand licensing fees from retailers and other businesses that often do not realize the technology is even patented. Trolls usually lose in court, but court costs are so high retailers are often coerced into a settlement.

About NRF
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.