Bipartisan Bill Tackling Abuses by Patent Trolls Introduced by Reps. Polis, Deutch, and Marino
This week, Rep. Ted Deutch (D-FL) joined his colleagues Reps. Jared Polis (D-CO) and Tom Marino (R-PA) to introduce bipartisan legislation to tackle the growing problem of patent trolls. The Demand Letter Transparency Act will help businesses that increasingly find themselves on the receiving end of vague patent infringement demand letters that often make allegations that the use of everyday technology, such as wireless email, digital video streaming, and the interactive web, is in violation of a patent holders’ rights. While it is estimated that the Patent Assertion Entities (PAEs) behind these demand letter lose 92% of the merits judgments in courts, retailers, advertisers, marketers, and other often simply settle these nuisance claims rather than running the risk of complicated, expensive, and protracted discovery and litigation in federal court.
According to the Congressional Research Service, PAEs generated $29 billion in direct costs from defendants and licensees in 2011, a 400% increase over $7 billion in 2005. Another study reported that 62% of all patent suits filed in 2012 were brought by PAEs.
“Intimidating small businesses, entrepreneurs, and nonprofits with vague demand letters has become one of the most common ways that patent trolls take advantage of the lack of transparency in our patent system,” said Congressman Ted Deutch. “The targets of these demand letters are often left to decide whether or not to enter into expensive litigation without knowing any of the details regarding the patent in question, whose rights are being infringed, or how often similar demand letters are sent. I am pleased to join Reps. Polis and Marino to introduce a bipartisan bill that uses to transparency to solve a growing problem.”
“Businesses are increasingly coming under attack by entities abusing current patent law by sending vague, overbroad and threatening demand letters to businesses that are playing a vital role in our economy. As a result of this threat of litigation, consumers are forced to pay more and many companies are diverting significant dollars from R&D and other activities promoting job growth to simply cover their increasing legal fees,” said Rep. Jared Polis. “The Demand Letter Transparency Act strikes the right balance in protecting the rights of legitimate patent holders to enforce their patents while protecting consumers and businesses against non-legitimate abusers of the patent system.”
“Chairman Goodlatte’s Innovation Act makes significant strides to dismantle the fraudulent business model that is otherwise known as “patent trolling. I believe it is imperative that we also take on the issue of demand letters, which is at the very root of the problem,” stated Rep. Marino. “Demand letters target family-owned businesses and entrepreneurs who are essential for creating jobs and generate revenue for the economy. Small businesses in my district cannot afford the legal fees associated with litigation and they should not have to sacrifice valuable resources to defend themselves against such vague and unsubstantiated claims. Shell companies and trial lawyers are running a muck, frauding the courts and businesses alike. It is time Congress address this hostile practice.”
The Demand Letter Transparency Act aims to assist small companies and end users who lack the money, time, and resources to fight demand letters they receive from PAE’s by putting additional information about the PAEs claims at their fingertips enabling them to determine whether to ignore, settle with or defend against assertions made by a PAE. It would be a very necessary first line of defense before they are forced to spend valuable resources to hire a patent specialist. This bill will help erase the “asymmetry of information” problem, collect data, improve transparency, and promote information sharing among those who receive demand letters from non-legitimate companies who hide behind vague, overboard and threatening demand letters.
Specifically, the bill would:
The legislation is supported by a variety of businesses and organizations including Dish Network, Public Knowledge, the National Restaurant Association, Application Developers Alliance, and the Electronic Frontier Foundation, National Retail Federation.