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Legislative Protection Against Frivolous Patent Claims

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Merchants could finally be getting some protection against frivolous patent lawsuits that cost the retail industry and other businesses close to $30 billion a year.

The SHIELD Act is aimed at “patent trolls” – firms that buy patents for things they didn’t invent, then threaten lawsuits against businesses unless they pay licensing fees. The connection between the patents and the technology being used isn’t always clear, but companies are faced with a difficult decision of whether to pay up or spend millions to defend themselves in court.

Retailers – particularly online sellers – are among patent trolls’ favorite targets, and have been sued for practices few people would expect to be patented, such as linking to their websites from their mobile apps or attaching a scanned document to an e-mail.

Patent trolls almost always lose when cases go to trial, but the vast majority of cases are settled out of court in order to avoid legal expenses. The legislation attempts to reverse that trend by requiring losers in patent lawsuits to pay for litigation costs. Legitimate patent holders like inventors, businesses that produce patented products and universities would be exempt.

NRF senior vice president for government relations David French says the measure would “provide significant relief to retailers.”

In addition to congressional action, the Federal Trade Commission held a hearing on the issue late last year and is currently working with the Justice Department to gather comments from companies that have been victims of patent trolls.

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