Stop Bad Patents Before They Become Problems

"Stop Bad Patents" is a campaign to bring attention to patent trolls.

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The U.S. Patent and Trademark Office is seen in Alexandria, Va., Friday, Feb. 25, 2011. The patent system hasn’t changed much since 1952 when Sony was coming out with its first pocket-sized transistor radio and bar codes and Mr. Potato Head were among the inventions patented. Now, after years of trying, Congress may be about to do something about that. The Senate is about to take up the “Patent Reform Act,” which would significantly overhaul a 1952 law and, supporters say, bring the patent system in line with 21st century technology of biogenetics and artificial intelligence.

We all love to shop? And why not? American retailing is the model of a competitive market, where choice, transparency and innovation lead to a countless array of alternatives. But imagine you go into your favorite store and everything is suddenly 15 percent more expensive. You pull out your phone to go online and find out what is going on, but the store no longer offers Wi-Fi. You get home to check prices online, but the store's webpage has all of your favorite features missing.

That's what happens when patent trolls find their latest victims. Patent trolls are targeting retailers as easy targets for quick money over questionable patents covering things like Wi-Fi and website features. The problem is so bad that a group of retailers led by the Food Marketing Institute, National Restaurant Association and the Internet Association launched an ad campaign asking Congress for help. "Stop Bad Patents" is a campaign launched in 17 states to bring attention to the problem of patent trolls targeting end users and to encourage people to share their stories of run-ins with trolls. (Here is its terrific radio ad).

The Food Marketing Institute and the National Restaurant Association have already commented to the Federal Trade Commission on the harm of patent trolls. First, the cost of litigation significantly increases their costs, which are then passed on to consumers. There is not only the cost of litigation and settlement, but also the time and effort by the retailer's staff.

Second, this litigation threatens to drive up costs for the legitimate provider of products or services that are subject to the infringement claims. Finally, troll tactics disincentivize future investment in technology, limiting retailers' ability to compete and depriving customers of important product alternatives.

[See a collection of political cartoons on the economy.]

I've commented on the patent troll problem extensively (for example, here and here), but in order to understand the urgency of the Stop Bad Patents campaign it may be best to look at the problem from a patent troll victim. FindTheBest.com is a popular website that lets consumers research purchasing decisions. On May 29, patent troll Lumen View Technology filed suit against the FindTheBest.com.

In the complaint, Lumen View claimed that FindTheBest was infringing for, among other things, "offer[ing] recommendation services ... for individuals seeking the purchase of products and individuals offering to sell the products." Along with the complaint, Lumen View delivered a demand letter "to discuss license terms." The deadline for FindTheBest.com to discuss these license terms was only 21 days.

Lumen View's demand letter creates a prime example of a patent troll trying to force companies to settle on fear rather than merits. The letter threatens "full-scale litigation" including "all motion practice as well as protracted discovery." (Translation: we will make litigation as expensive as possible for you.) However, if the defendant were to engage in early motion practice then "[Lumen View] must advise that it will force us to reevaluate and likely increase Plaintiff's settlement demand." (Translation: Don't fight back.)

The demand letter then goes on to emphasize how disruptive to FindTheBest's business the discovery process will be. (Discovery is the information gathering process before a trial). In a more amusing example, the letter states "it should be anticipated that users may seek to delete or destroy information unrelated to the Suit that they regard as personal, confidential or embarrassing and, in doing so, may also delete or destroy potentially relevant [information]." The letter even recommends "confiscating" and "sequestering" electronic devices owned by "certain individuals with significant knowledge of Company's products implicated by the '073 Patent." (Translation: Take away the phones and computers of all the important people at your company.) This demand letter is one of many that can be found at TrollingEffects.org.

[See a collection of political cartoons on Congress.]

Sharing information about patent trolls is vitally important to defeating the problem. TrollingEffect.org provides another example why: IntPar, LLC, HarNol, LLC, and AllLed, LLC have all sent out demand letters that are substantially the same and cover the same patents. The common thread among these companies is their association with MPHJ Technologies – the same troll recently thrown out of Minnesota for targeting small businesses. The letters are only materially different in one respect: They each list the "fair price" of a license "negotiated in good faith" differently ($9,000, $10,000, and $12,000 per employee).

StopBadPatents.com is a welcome resource for bringing this problem to light. The site contains pages to help people contact their congressmen, find out more about the problem, share their stories, and contact the initiative with further questions. Stop Bad Patents will provide a welcome avenue for sharing information between the public and policy makers.

David Balto is a former policy director of the Federal Trade Commission, attorney-adviser to Chairman Robert Pitofsky, and antitrust lawyer at the U.S. Department of Justice. He represents retailers and consumer groups on patent issues. He has been a senior fellow at the Center for American Progress and has worked with the International Center on Law and Economics, both of which receive funding from many organizations including Google. Balto has also published research and authored scholarship for Google on technology policy topics.

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