Senators urged to beef up patent troll bill
Witnesses at a Senate hearing on a bill targeting so-called patent trolls have welcomed its provisions but urged lawmakers to add stronger measures.
The Patent Transparency and Improvements Act of 2013, introduced by senators Patrick Leahy (D-Vermont) and Mike Lee (R-Utah), was discussed in the upper house of Congress on December 17.
Its measures include punishing the sending of fraudulent or misleading demand letters and allowing cases against customers to be stayed while a manufacturer litigates the claims.
At the hearing, the troll problem was laid out by John Dwyer, chief executive of financial cooperative New England Federal Credit Union (NEFCU), who explained that last year he received a letter from an NPE “whose only assets are highly questionable patents”.
The demand letter was “vague, misleading and lacking in critical information”, Dwyer said, but focused on 21 of NEFCU’s ATM machines. Following further letters, he continued, the settlement price the NPE is now demanding has increased from $2,000 to $5,000 per ATM.
Probed later by Leahy, Dwyer provided more details on misleading letters. He said when someone receives a demand letter they should be able to understand the problem, not need to hire a lawyer – as Dwyer did – to search patent numbers and establish what might have been infringed.
“It’s reasonable to expect that information to be provided in a basic demand letter,” Dwyer stated.
Reforms are desperately needed, he said, as there is “no end in sight” to the problem. While the customer stay provision could be very helpful in some circumstances, he added, “unfortunately most vendors have taken the position that small credit unions are on their own”.
Dwyer’s sentiments were largely echoed by Dana Rao, associate general counsel for IP litigation at Adobe Systems, who boasted that the company’s software can “remove the blur from a photograph” or “predict the audience reaction to a blog you post before you post it”.
While the Senate bill would have a positive impact, Rao said, it needs to go further, mainly by adopting a fee-provision. Such provisions, which make it easier to force a loser to pay a case’s fees, are included in other similar legislation before Congress.
“Strengthening the fee-shifting provision will be the most effective tool we can use to address and disrupt the trolls’ business model,” Rao claimed, adding that the provision poses the only “adverse” consequence for trolls.
Speaking later in the session, Harry Wolin, general counsel at semi conductor company AMD, agreed with this. He said while the bill’s provisions are encouraging, on their own they are insufficient to address widespread abuses that are “plaguing our patent system”.
“We urge the committee to include heightened pleading, discovery reform and fee-shifting provisions ... we note that these provisions are included in the Innovation Act,” Wolin said.
But Grassley, who has co-sponsored another anti-troll bill, which includes fee-shifting provisions, had earlier questioned Rao on the concerns of smaller companies. There are worries, he said, that changes to fee-shifting and pleading would hamper the ability of small companies to enforce their patents.
Rao responded that the bill would help small businesses because it would reduce patent litigation. Second, he noted, the reforms Grassley mentioned would have “beneficial aspects for many people trying to enforce patents”.
“Fee-shifting ... can also have a positive impact for the person trying to bring the patent,” he added, explaining that obtaining fees in other areas of law in which fee-shifting is allowed “enables a smaller company to retain a contingency fee lawyer”.
The hearing, in which no non-practising entities provided evidence, can be viewed here. The bill is available here.
