Industry Groups Demand Congressional Action on Anti-Patent Abuse Bills

By Wayne Rash  |  Posted 2013-09-03

Industry Groups Demand Congressional Action on Anti-Patent Abuse Bills

Sometime during the long Labor Day weekend you may start hearing a series of ads by an unlikely group of trade associations pressing members of Congress to put patent reform legislation at the top of their priority list.

The associations, including the National Retail Federation, the National Restaurant Association, the Food Marketing Institute and the Internet Association, are targeting the home districts of committee leaders in the U.S. House and Senate, as well as their staffs in Washington with ads explaining that aggressive patent litigation by so-called "patent trolls" is hurting the economy and killing jobs.

According to the NRF, patent trolls are unfairly attacking retailers, small restaurants and grocery stores for simply using technology that they bought off the shelf or from on-line retailers. "Patent trolls use bad patents to bully companies of all sizes, in every economic sector, from coast-to-coast," Michael Beckerman, president and CEO of the Internet Association, said in a prepared statement. "This is essentially legalized extortion, forcing hard-working businesses to go to court or write a check—money they can't spend on hiring and growth."

"Litigation demand letters from patent trolls is a significant and growing concern for the restaurant and food service industry," Scott DeFife, executive vice president policy and government affairs, National Restaurant Association, said in a prepared statement. "It is critical that we increase transparency and disclosure around who these companies are in order to change the market dynamics behind these frivolous and litigious claims."

The concern is growing in all areas of the retail sector, including in the restaurant business because the patent trolls have started changing their focus to users of technology, such as stores and restaurants. Some of the patent claims that these businesses have been sent demand letters for include activities such as providing WiFi in a coffee shop, listing calorie counts in online menus or sending a scanned image as an email attachment. And the proportion of actions against retailers and other technologies is growing.

According to a new report just released in August by PatentFreedom, the percentage of companies involved in such patent litigation is shifting to the point that 50 percent of all such actions were against companies in retail. It's worth noting that PatentFreedom does not use the term "patent trolls" to describe organizations asserting patent claims. Instead, the organization refers to them as NPEs, or "non-practicing entities," which includes all such companies that own patents, but don't use them in their own business.

PatentFreedom also points out that not all NPEs could be classified as "patent trolls," a term that the organization says is not helpful in dealing with the issue.


Industry Groups Demand Congressional Action on Anti-Patent Abuse Bills

Instead, PatentFreedom says that many of these entities are legitimate owners of patents that the U.S. Patent and Trademark office originally granted to them. But they either chose not to use or found that they weren't able to use it profitably. For example, the organization points out, many companies exist to do research and development and then license the resulting patents.

Still, the patent lawsuits continue. PatentFreedom points out in their study that the largest number of companies being sued for patent infringement are exactly who you'd expect, with the top one being Apple.

So why is there all of this attention to abusive patent litigation now? There are two primary reasons. In the case of PatentFreedom, it took until August to compile its report.  In the case of the group of retailers focusing on Congress, the timing of their action is related to a time-honored congressional tradition—summer vacation. Unlike the rest of us, Congress has a five-week break in August in which members perform fact-finding missions in far flung places such as the beach.

The mass radio and newspaper ad attack is timed for when the members of Congress are wrapping up their time back home and returning to Washington where they can resume their normal activities. According to Stephen Schatz of the NRF, their member organizations are demanding action. "The reason is that NRF started hearing from members including brick-and-mortar stores and online retailers," Schatz told eWEEK. "Members are getting demand letters." Then, he said, "We were inundated by retail companies getting similar letters."

"We know that PAEs have been hitting sector after sector," Schatz said. "They are increasingly targeting retail companies, including large companies and small brick-and-mortar companies. They're suing because of on-line shopping carts, public WiFi, printing of receipts or using QR codes. These claims have grown to preposterous levels," he said. "They are costing members millions of dollars."

Some action is already taking place in Congress where patent reform bills were introduced into the House of Representatives in July and into the Senate in May. But, so far, those bills are tied up in committee hearings. While many observers expect the diverse legislation to be wrapped into a single bill in each chamber after Congress returns after Labor Day, so far there's been no indication that this is actually happening. The current campaign to draw attention to the need for this legislation is to try to convince Congress to move forward before the current session ends.


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