Credit unions plagued by patent trolls could receive legislative relief thanks to a bill introduced Wednesday by House Judiciary Committee Chairman Bob Goodlatte (R-Va.). The Innovation Act (H.R. 3309) contains a discretionary fee waiver for covered business method patent review proceedings that has won critical support from CUNA, NAFCU and other business organizations.
Patent trolls are entities seeking unjust enrichment from companies they claim owe them payments based on questionable patents they hold. Trolls will send a demand letter threatening to sue or settle for payments they claim are owed them as patent-holders. The process at a minimum can be costly and time-consuming, especially for small credit unions, according to CUNA 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 are particularly vulnerable since they may not have the resources to sustain a legal battle.”
Jillian Pevo, NAFCU's director of legislative affairs, said that by strengthening the covered business method patent section of the America Invents Act, Goodlatte's bill would go a long way toward protecting credit unions.
In addition to a discretionary fee waiver, Goodlatte’s bill is designed to increase the transparency of patent ownership and reduce the threat to unsuspecting companies, ultimately curtailing payment extortion demands from entities that have purchased the patents solely to collect underserved payments.
“Managing frivolous patent suits unfortunately has become an expensive distraction for a large cross section of American businesses,” the letter said. “Instead of focusing on innovation, job creation and economic growth, we are forced to deal with legal games that have serious consequences.”
The advocacy letter also identified statistics that point to a growing level of abuse since 2005 by patent trolls whose activity is left unchecked. Last year alone, trolls sued more than 7,000 defendants and sent thousands more threatening letters. This activity cost the U.S. economy $80 billion in 2011, and companies made $29 billion in direct payouts.
Moreover, trolls no longer only sue large tech corporations, the letter said. Small and medium-sized businesses of all types, including start-ups, are now the most frequent targets. Firms receiving threatening letters can seek review from the U.S. Patent Office, a process that takes time and can cost as much as $35,000.
Goddlatte’s bill would allow the patent office to waive the fee on a discretionary basis.
The Innovation Act is one of several patent reform bills. Until the issue is resolved, the threat to credit unions remains very real, Cheney said.
"The danger here is that these trolls are preying on financial institutions that are only trying to better serve their members,” Cheney said. “This bill is a first step in the direction of defeating patent trolls, and CUNA is working to ensure that credit unions have a voice at the table as the legislation moves forward."