Today, Representatives Jared Polis (D-CO) along with Jason Chaffetz (R-UT), Tom Marino (R-PA), and Gerry Connolly (D-VA) successfully passed their amendment to the H.R. 3309, the Innovation Act, to tackle the growing problem of patent trolls.
Specifically the Polis amendment strengthens the demand letter transparency language already included in the Innovation Act by mandating that claimants seeking to bring willful infringement claims identify the ultimate parent entity in the demand letters they send to their targets.
Increasingly, businesses of every size are finding themselves on the receiving end of patent infringement demand letters. These letters, which seemingly come out of nowhere, 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.
“My amendment will ensure that patent trolls can no longer hide behind shell companies to conceal their true identity from the demand letter recipient,” said Rep. Polis. “This language is a step in the right direction in providing businesses and entrepreneurs with the tools to better assess the validity of the demand letter and deter abusive demand letter practices in the first place.”
Two weeks ago, Representatives Polis and Tom Marino (R-PA), along with Rep. Ted Deutch (D-FL) introduced a comprehensive bill to increase transparency and accountability in the demand letter process. The Demand Letter Transparency Act would 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. The bill would 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.
“My amendment 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,” Polis concluded. “Businesses are increasingly coming under attack by entities abusing current patent law by sending vague, overbroad and threatening demand letters. 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.”
The amendment was supported by a variety of businesses and organizations including App Developers Alliance, American Hotel and Lodging Association, American Association of Advertising Agencies, American Bankers Association, Association of National Advertisers, Credit Union National Association, Direct Marketers Association, DISH Network, Electronic Frontier Foundation, Food Marketing Institute, Independent Community Bankers of America, International Franchise Association, Mobile Marketing Association, National Association of Convenience Stores, National Council of Chain Restaurants, National Grocers Association, National Restaurant Association, and National Retail Federation.
