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Time to Stop Patent Trolls

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The last time Congress updated the nation’s patent laws — only two years ago — few people in retail were talking about the issue. Disputes over patents were a problem mostly for the high-tech industry.

Since then, however, patents have become front-page news — and retailers are among the biggest targets of frivolous lawsuits claiming patent infringement for things as innocuous as attaching a scanned-in copy of a customer’s receipt to an e-mail.

The legal claims are coming from “patent trolls,” firms that buy old, obscure patents from inventors and then make millions by demanding licensing fees from innocent users of the technology — and threatening to sue those who won’t pay. Patent trolls lose more than 90 percent of the cases that go to trial, but the cost of defending against a lawsuit is so high most victims choose to pay up rather than go to court.

NRF has received complaints from more than 200 member companies. And when the White House decided to crack down last month, officials highlighted the retail industry, citing claims over point-of-sale systems and saying patent trolls “are increasingly targeting Main Street retailers.”

Why retail? It’s largely because so much of retail is high-tech now. Retailers are on the cutting edge of technology, and increasingly so. Retailers use technology in POS, signage, inventory, supply chain and loss prevention, to name just a few areas. And that’s to say nothing of online retailing and mobile commerce.

Retailers are innovators, but are merchants first. They identify problems and find solutions, but usually partner with third parties to provide the technology. Suing retailers over the technology inside their cash registers is like suing consumers over the patents behind their smartphones.

Fortunately, Washington is starting to do something. In addition to the White House’s announcement of executive actions and legislative recommendations, half a dozen members of Congress have unveiled proposals.

As Congress works on this issue, NRF has outlined key elements that should be included in patent legislation. To start, end users of technology should have immunity against infringement claims. Patent trolls who lose should have to pay the costs of defending against lawsuits. Litigation discovery should be limited to core documents unless the plaintiff bears added costs. Claims should spell out the specific patent, how it is being infringed and clearly identify the patent holder. And in patents on methods of doing business, a stay should be issued while a review of the patent is conducted.

To fight these patent claims, retailers are dedicating precious financial resources that could be better used to invest in their businesses and create jobs. Small retailers are among the biggest targets because they don’t have the legal expertise or money to fight back. It’s time for Congress and the White House to put this abuse of our nation’s laws to an end.