Credit unions plagued by patent trolls could receive legislative relief thanks to a billintroduced Wednesday by House Judiciary Committee Chairman Bob Goodlatte (R-Va.). The Innovation Act (H.R. 3309) containsa discretionary fee waiver for covered business method patentreview proceedings that has won critical support from CUNA, NAFCUand other business organizations.

Patent trolls are entities seeking unjust enrichment fromcompanies they claim owe them payments based on questionablepatents they hold. Trolls will send a demand letter threatening tosue or settle for payments they claim are owed them aspatent-holders. The process at a minimum can be costly andtime-consuming, especially for small credit unions, according toCUNA President/CEO Bill Cheney.

“Credit unions have become a target of patent trolls,particularly with regard to ATM and check processing technology,”Cheney said. “Smaller institutions like credit unions areparticularly vulnerable since they may not have the resources tosustain a legal battle.”

Jillian Pevo, NAFCU's director of legislative affairs,said that by strengthening the covered business method patentsection of the America Invents Act, Goodlatte's bill would go along way toward protecting credit unions.

In addition to a discretionary fee waiver, Goodlatte's bill isdesigned to increase the transparency of patent ownership andreduce the threat to unsuspecting companies, ultimately curtailingpayment extortion demands from entities that have purchased thepatents solely to collect underserved payments.

“Managing frivolous patent suits unfortunately has become anexpensive distraction for a large cross section of Americanbusinesses,” the letter said. “Instead of focusing on innovation,job creation and economic growth, we are forced to deal with legalgames that have serious consequences.”

The advocacy letter also identified statistics that point to agrowing level of abuse since 2005 by patent trolls whose activityis left unchecked. Last year alone, trolls sued more than 7,000defendants and sent thousands more threatening letters. Thisactivity cost the U.S. economy $80 billion in 2011, and companiesmade $29 billion in direct payouts.

Moreover, trolls no longer only sue large tech corporations, theletter said. Small and medium-sized businesses of all types,including start-ups, are now the most frequent targets. Firmsreceiving threatening letters can seek review from the U.S. PatentOffice, a process that takes time and can cost as much as$35,000.

Goddlatte's bill would allow the patent office to waive the feeon a discretionary basis.

The Innovation Act is one of several patent reform bills. Untilthe issue is resolved, the threat to credit unions remains veryreal, Cheney said.

“The danger here is that these trolls are preying on financialinstitutions that are only trying to better serve their members,”Cheney said. “This bill is a first step in the direction ofdefeating patent trolls, and CUNA is working to ensure that creditunions have a voice at the table as the legislation movesforward.”