Aug 16, 2013One sign that radio frequency identification technology is catching on is the growing number of lawsuits claiming patent infringement. As with Wi-Fi and other technologies, patent holders see the growing RFID market and hope to make money by suing end users that have deep pockets.
But end users of RFID and other technologies are fighting back. Dozens of major U.S. companies signed a letter addressed to lawmakers in Washington urging them to pass bills they said would protect new products against "extortive demands" from patent holders. Among those companies were Wal-Mart and Macy's; both are being sued by Round Rock Research, a firm that owns ultrahigh-frequency RFID patents originally filed by semiconductor company Micron Technology (see Update on the Round Rock Patent-Infringement Lawsuit and Patent Lawsuit Not a Major Issue for RFID).
Many companies feel they are being unfairly targeted by "patent assertion entities" (PAEs), which purchase patents with the sole purpose of suing users of technology that might or might not infringe on their patents. These firms are called, derisively, "patent trolls."
In the letter to the leading Democrats and Republicans on the Senate and House of Representatives' Judiciary Committees, 44 companies urged the passage of bills that would reform the U.S. patent system. The letter says: "Members of both parties, the White House, legal scholars, economists, businesses, and public and private organizations increasingly recognize the need to address the growing problem of patent abuse. Wasteful and often frivolous litigation is burdening businesses and innovators across America. We need to ensure that our patent system promotes innovation and job creation, not abusive litigation. Real and lasting patent reform must deal with both symptoms—lengthy, expensive, and abusive lawsuits—and causes, including the flood of low-quality business method patents commonly behind the current epidemic of litigation."
The letter goes on to say that litigation brought by PAEs has exploded in size and scope, and now represents a majority of all patent litigation: "In 2011 alone, patent troll activity cost productive companies $29 billion in direct payouts, and even more in indirect costs."
Passage of the patent bills would broaden the power of the U.S. Patent and Trademark Office to review patents and invalidate any it determines should not have been granted. Today, the patent office has the power to review business-method patents that relate to financial services more aggressively than other patents. The proposed legislation would expand that authority to include all business-method patents, which are often used by PAEs.
This change in the law, the letter says, "would increase certainty for innovators actually bringing new products to market, who now face an increasing threat of extortive demands based on low-quality patents."
In a separate letter, 50 industry organizations—including the American Bankers Association, American Hospital Association, Consumer Electronics Association, Food Marketing Institute and National Retail Federation—pushed Congressional leaders to act on the bills, citing the same issues. "In 2012, trolls sued more non-tech companies than tech, spanning a wide range of American businesses," the letter said. "We seek reforms to the current system that would significantly curb trolls' ability to extort settlement demands from retailers, technology companies, small businesses, financial services institutions, state and local government entities, and many others who are today the targets of their outrageous claims."
That letter goes on to state: "There is no single solution to this complex question, but meaningful reforms like [those in the bills and legislation proposed by President Barack Obama] would make it more difficult for patent trolls to continue their destructive business model. This broad support and the willingness of Congress to work across the aisle and across chambers on this complex issue is a testament to its importance."
Senator Chuck Schumer, a New York Democrat, introduced the Senate version of the bills in May, and California Representatives Darrell Issa, a Republican, and Judy Chu, a Democrat, launched a similar measure in the House in July. These bills have not moved out of the committee stage for a vote in either the Senate or the House, but these letters could get Congress to act.