Super-Coalition Forms To Fight Patent Trolls

On January 15, 2015, many of the United States’ largest corporations formed a coalition, known as United for Patent Reform, to pursue patent reform legislation aimed at curbing the impact of non-practising entities (NPEs), less fondly known as patent trolls. The Coalition consists of large tech businesses including Google, Facebook, and Adobe, as well as other companies: retailers such as Macy’s, JCPenney, the National Association of Realtors, participants from the hotel and restaurant industry, and telecom companies such as Verizon. Altogether, the group will begin with 23 founding members.

The new Coalition is formed on the collective commitment to:

• reform abusive demand letters;
• require greater disclosure in patent infringement claims;
• protect innocent customers;
• make patent litigation more efficient;
• stop discovery abuses;
• make abusive trolls pay; and
• provide less expensive alternatives.

For example, protecting innocent customers would include ensuring that claims between a patent owner and a manufacturer proceed before claims between the patent owner and the manufacturer’s end users. Under current law, anyone can be sued for infringement for simply using a product, system or method. The Coalition doesn’t want to change that, but it is advocating for cases against end users to be stayed in favour of cases involving the manufacturer.

If achieved, the Coalition’s goals would represent significant reforms to the current US patent litigation model. These reforms would curb what the Coalition sees as abusive practices by NPEs.

A NPE is currently defined by the US Ninth Circuit Court of Appeals as “a small company who enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based upon the patents in question.” By this definition, NPEs include patent aggregators whose sole business is to litigate patents, as well as universities, start-ups, research institutions, and other innovators or companies that have not yet launched products. While this definition may be further refined, it raises the issue that identifying the “acceptable” vs. “undesirable” activities of NPEs, will be a difficult task in drafting any patent reform legislation.

Proponents of curbing the impact of NPEs by reforming patent legislation, such as the Coalition, seek to reduce the significant costs associated with patent litigation. According to a Boston University School of Law study, “The Direct Costs for Non-Practicing Entity Disputes,” NPEs cost United States businesses more than $29 billion in 2011. In the past, much of US patent litigation by NPEs (and costs associated with the litigation) occurred in the tech industry, but many claims have been filed in other sectors as well. According to The Washington Post, companies such as Home Depot, whose employees use in-store WiFi to communicate with one another and to monitor store shelves, have recently been sued by NPEs asserting a claim to patents covering WiFi routers.

Patent litigation by NPEs continues to grow. In 2013, over 3,608 patent infringement suits were filed by NPEs, 18% more suits than in 2012 (RPX Litigation Report). This high frequently of patent litigation initiated by NPEs has pushed many US businesses to work together to reform patent legislation — ultimately coalescing in groups such as the Coalition. While the Coalition consists of members from diverse industries, their desire to curb litigation by NPEs is the same.