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More Than 200 Retailers Have Been Targeted By Patent Trolls

Legislation reform is gaining momentum

Rep. Bob Goodlatte (R-Va.)

There’s reason to be optimistic that before the end of the year Washington will put patent trolls in their place. In the last few weeks, the push for reform has gained momentum in Congress, with five bills being introduced or circulated in a rare show of bicameral and bipartisan support. To boot, President Obama last week came out with a set of executive actions and strong suggestions for pending legislation. If a bill reaches his desk, he’s expected to sign it.

“There’s a real shot this year. All the stars are aligned in a way I haven’t seen before,” said Dick O’Brien, evp for the 4A’s.

Patent assertion entities (aka patent trolls) regularly employ the practice of harassing unsuspecting companies by sending thousands of demand letters claiming patent infringement in order to extract a settlement or license fee. Counting on the likelihood that smaller companies will pay up in order to avoid litigation, the cases rarely make it to court.

Until recently, the tech community was the most likely industry to seek a solution. But now, the issue has become a top priority for the advertising and marketing communities, which have been hit with patent claims over the use of QR codes in coupons, promotions distributed in text messages, podcasts, even pull-down menus on websites. The costs to marketers are piling up. More than 200 retailers have been targeted by trolls, according to the National Retail Federation. The 4A’s estimated that trolls have already cost marketing services firms more than $10 million.

To put more pressure on Congress and the Federal Trade Commission to act, the 4A’s and four other ad and marketing organizations collaborated to form the Stop Patent Abuse Now Coalition. The coalition, which includes the NRF, ANA, MMA and DMA, has already made an impression with lawmakers, who were surprised to learn that the issue wasn’t limited to tech companies. Helping SPAN urge the FTC to step in, 18 House lawmakers sent a letter last week to the FTC. “It’s not a niche issue,” said Stu Ingis, a partner at Venable and legal counsel for SPAN.

“We need more industry groups,” said Rep. Bob Goodlatte (R-Va.). Chairman of the judiciary committee, Goodlatte is working with Senate judiciary chairman Patrick Leahy (D-Vt.) on an omnibus bill that combines many of the provisions of the other bills like fee-shifting and patent-owner transparency. Both lawmakers have put patent reform at the top of their agendas this Congress.

SPAN also hopes to convince the FTC to follow the lead of the Vermont Attorney General who filed suit last month against MPHJ, which sent out thousands of letters demanding license fees of up to $1,200 per employee for a patent to attach scanned documents to emails. Never once has MPHJ or its 40 shell companies actually brought a patent suit, leading the Vermont AG to call the practice deceptive. “If the [AG] can do it in Vermont, why [can’t] the FTC?” reasoned Ingis. “This would be a great use of the FTC’s authority.”

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