WASHINGTON – Yesterday, the Senate Judiciary Committee held a hearing titled, “The Impact of Abusive Patent Litigation Practices on the American Economy,” highlighting the negative effects that patent trolls have on American businesses and the economy at-large. Committee members examined legislative efforts to reform patent litigation procedures that would better defend consumers and businesses from abusive practices and costly litigation, while protecting the rights of legitimate patent holders.

NACS has been actively involved with efforts to reign in abusive tactics by patent trolls through the United for Patent Reform Coalition, of which NACS is an executive committee member.

Patent trolls send hundreds, if not thousands, of patent demand letters to alleged patent infringers in hopes of scaring businesses into quick settlements or licensing agreements. The alleged patent infringers are often end-user customers (including retailers) using an everyday technology product, such as WiFi or credit card processing technology. These customers often settle with patent trolls to avoid the lengthy and expensive patent litigation process. Even if a company were to successfully defend itself in court, they could be out hundreds of thousands of dollars with no means to recoup the cost from the patent troll, as patent trolls frequently use shell companies with no true assets to litigate patent claims.

The Senate hearing examined various legislative ideas to reign in patent troll abuses, such as requiring specificity in patent demand letters, shifting fees to the loser of a patent infringement case, or allowing a product’s manufacturer to defend a patent lawsuit rather than the end-user customer. Senate Judiciary Committee leaders, including Chairman Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT), have indicated they are working together to find broad, bipartisan consensus on legislation that would curb patent litigation abuses.

Committee members heard testimony from five witnesses: Brad Powers, general counsel at KINZE Manufacturing Inc.; Hans Sauer, deputy general counsel for intellectual property at the Biotechnology Industry Organization; Steven Anderson, vice president and general counsel of the Culver Franchising System; Michael Crum, vice president for economic development and business engagement at Iowa State University; and Krish Gupta, senior vice president and deputy general counsel of the EMC Corporation.

The Senate Judiciary Committee’s hearing represented their first efforts at patent abuse legislation this year. House Judiciary Chairman Bob Goodlatte (R-VA) has also introduced legislation, the Innovation Act, which addresses many litigation reforms.