It’s a relatively new phenomenon, and it’s impacting retailers and the technology community across the country. The threat comes from firms whose business model focuses on buying obscure patents for things they didn’t invent and then threatening to sue companies who use technology with even vague ties to the patent are known as “patent trolls,” or officially as patent assertion entities. Trolls conjure up all kinds of images from mythology and folklore. But in the digital age, “troll” has taken on a new meaning. The truth is, patent trolls are causing significant headaches for retailers because they often file claims that are so exorbitant it’s cheaper to settle rather than litigate.
Stories are becoming more commonplace. Before your company becomes the next victim of a greedy patent troll, here are some tips on what to look for, and recent efforts to stop these cases before they reach litigation.
Here are four things retailers need to know about patent trolls:
- Patent trolls inhibit innovation and growth in the retail industry, which harms consumers and job creation.
- Past claims include activities as mundane as adding an item to an online shopping cart and checking out, a retailer’s mobile app linking to their website, and scanning a document to PDF and then emailing the file. In one example, more than 40 online retailers who include a web site link to their privacy policies on smartphone apps have been targeted by a California company claiming to hold a patent on the practice.
- Fighting a patent troll is costly, averaging $2 million. The battle is also time consuming, with most cases lasting at least 18 months and leading most retailers to settle for a fraction of that amount to save time.
- In the rare instance these cases go to trial on the merits, patent trolls lose 92 percent of the time. A decision was passed down in favor of the online retailer Newegg, regarding the function of online shopping carts, earlier this year.
These three things are beginning to make a difference:
- The Federal Trade Commission and Department of Justice held a hearing in December, and are currently seeking comment from companies that have been patent troll victims. The deadline to submit comments is March 10.
- NRF has formed a legislative task force to work with retailers, technology companies, lawmakers, and regulators to tackle this important and costly issue.
- Just this week, legislation has been introduced in Congress. Representatives Peter DeFazio, D-Ore., and Jason Chaffetz, R-Utah, cosponsored legislation that would protect innovators with legitimate claims but allow defendants to recoup money spent to successfully defend themselves against patent trolls’ lawsuits, while also protecting innovators with legitimate claims. House Judiciary Committee Chairman Bob Goodlatte, R-Va., has also indicated significant interest in finding a solution.
Watch DeFazio and Chaffetz’s news conference introducing the SHIELD Act – short for Saving High-Tech Innovators from Egregious Legal Disputes – below. In the meantime, retailers should be wary of these entities “trolling” for patent lawsuits. This is one of many important policy issues we’ll discuss with lawmakers in May at NRF’s 78th Annual Washington Leadership Conference.