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Patent Lawsuits

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The House has passed legislation intended to curb patent trolls’ abusive practices and protect retailers and other end users of technology from frivolous patent infringement lawsuits. Action now moves to the Senate, which could vote on the issue early in 2014. Retailers need to contact senators and tell them patent reform legislation must include key provisions needed to protect retailers from frivolous lawsuits. Take action.

The Issue

Retailers and other businesses are seeing an increasing number of patent lawsuits, and about 40 percent of the cases come from a relatively new breed of litigants known as “patent trolls.” The “trolls” are firms whose business model focuses on buying obscure patents for things they didn’t invent, then threatening to sue companies that use the technology involved unless they pay a licensing fee. The threats often involve technology or practices users don’t realize are patented, and that aren’t clearly linked to the patent in question. Of cases that make it to trial, patent trolls lose 92 percent of the time. But the cost of defending a company against the claims is so high – the average case costs $2 million and can take 18 months – that many victims settle out of court and the cases cost legitimate businesses close to $30 billion a year.

Why it Matters to Retailers

Retailers are among the most frequent targets thanks to the industry’s increasing use of cutting-edge innovations, especially in online and mobile retailing. In one example, more than 40 online retailers whose smartphone apps include a link to privacy policies posted on their web sites have been sued or threatened by a California company claiming to hold a patent on the practice. In another, companies that scan a paper document into a computer and then attach it to an e-mail have been asked to pay a fee. Even adding an item to an online shopping cart and checking out has been challenged as patent infringement. Whether retailers go to trial or settle out of court, the cases consume time and money that could be better spent creating jobs, growing the economy, and serving customers.

NRF Advocates for Fair Patent Laws

NRF believes retailers should be protected against frivolous lawsuits and has formed a task force to work with retailers, technology companies, lawmakers and regulators. NRF has worked closely with members of the House and Senate, and BrandsMart USA Executive Vice President Larry Sinewitz testified on behalf of NRF before the House Judiciary Committee in November. The Innovation Act, sponsored by committee Chairman Bob Goodlatte, passed the House in December. While the bill takes a number of steps intended to bring frivolous lawsuits under control, NRF believes it needs refinements in order to fully address retailers’ concerns and will now focus efforts on the Senate. NRF is seeking a requirement that “demand” letters be clearer about the patent infringements being alleged, an effective “customer stay” provision putting suits against retailers on hold when the manufacturer of technology counter-sues a patent troll, and expansion of a program that allows patents on methods of doing business to be reviewed without going to court.

Additional Resources

Washington Retail Insight:

Retail's BIG Blog:

Patent Trolls Ad

Download, print, and share the "Stop Patent Trolls" ad (PDF).

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