House 'Trolls' For Patent Letter Abuse Solutions

E&C Subcommittee vets draft bill that would crack down on deceptive demand letters
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The issue of reining in patent assertion entity demand letter abusers ("patent trolls" in the lingo of their critics) took on the metaphorical tenor of a garment industry sweat shop Thursday as both sides said it might be helpful to lock themselves in a room so they could thread the needle of coming up with legislation that would hammer abusers without harming legitimate patent protection.

The venue was not the Lower East Side but Capitol Hill, where the House Commerce, Manufacturing and Trade Subcommittee and its chairman Lee Terry (R-Neb.) gathered stakeholders on both sides of the issue for input on a draft he circulated last week of a bill that would make certain some patent assertion entities (PAEs) are found as unfair and deceptive practices.

Actually the two sides were agreed that there were abuses that needed reining in, but not much agreement on how legislation could accomplish that.

Demand letters warn people of infringing conduct and often trying to solicit a settlement under the threat of legal action. Lois Greisman, association director of the Bureau of Consumer Protection at the FTC, who was a witness at the hearing, described them as letters that "may be sent very broadly and without prior investigation, may assert vague claims of infringement, and may be designed to obtain payments that are based more on the costs of defending litigation than on the merit of the patent claims."

The bill would try to discourage such deceptive communications to consumers, end users or "systems integrators" by spelling out the ways in which those would be illegally unfair and deceptive.

The hearing came a day after Senate Judiciary chairman Patrick Leahy (D-Vt.) pulled patent troll legislation from the committee's calendar, saying that stakeholders could not come to an agreement. Rep. Tom Marino (R-Pa.), who testified at the hearing, said he was disappointed that the Senate had "fumbled the ball" on the patent troll abuse bill, but vowed his House colleagues would continue the fight "until we have won." Marino read from some examples of what he said were abusive demand letters, including one that said accessing e-mail or a printer infringed a patent. "Ridiculous," he said.

Terry said he had received many complaints by end users over what they said were fraudulent demands in such letters. He said he does not want to make it harder for real patent holders to assert their rights and called for making sure "we have the needle threaded appropriately" in terms of the "art and science" of getting the wording right.

Witnesses and other legislators echoed that needle-threading metaphor, with Rep. Jerry McNerny (D-Calif.) saying it would be challenging. That might have been an understatement.

Representing the extremes were Adam Mossoff, Law Professor at George Mason University, and John Potter, president of the application developers alliance.

Mossoff warned that the bill's mandate of specific disclosures in all demand letters was forced speech that could run afoul of constitutional protections on free speech and the right to petition the government for redress of grievance. He suggested overprescriptive legislation would burden those properly asserting their patents against real infringers.

He warned that not allowing the threat of lawsuits in such letters, infringers would not comply.

Potter said that demand letters should have to include details of exactly what infringement was being asserted and why.

He said the First Amendment argument was bogus, that courts had not found demand letters to implicate the right to petition, and that the bill needed to protect more of his members than it currently did from "trolls," who he clubbed rhetorically with much vigor. "Smash-and-grab patent trolls send baseless letters that scare small companies into extortionist settlements," he said.

"Legitimate innovators already behave fairly, but trolls do not and so standards must be legislated," he added.

Wendy Morgan, chief of the Public Protection Division Office of the Attorney General of Vermont, said she did lot like the bill's preemption of state laws and was concerned the bill might actually make it harder for the state to go after bad actors.

She was also worried that the bad faith language in the bill requires actual knowledge that the information in a letter is false, rather than current state law under which actual knowledge does not have to be established. If you have to prove knowledge, she said, the state would be less likely to proceed. She also pointed out that bad actors will find a way to make statements that aren't entirely false.

Alex Rogers of Qualcomm praised the bill's focus on those with a "pattern and practice" of sending unfair or deceptive letters, its focus on end users and consumers—the focus that Potter did not like because it did not include enough of his members targeted with such letters, and preempting state demand letter laws. Rogers also said the disclosure requirement was not unduly burdensome.

But he had problems with some of the language, including an overly broad definition of systems integrator and the vagueness of saying the bill applies to communications that "imply" infringement.

"A demand letter law that is too broad or too punitive may deter appropriate and useful efforts to provide notice of patent infringement activity and runs the risk of undermining incentives to innovate," he said.

None of the half-dozen witnesses gave their full-throated support to the bill exactly as written. All had objections and tweaks.

While Potter said the bill did not cover enough of his app developer members for him to be able to support it, but that he thought if "everybody could get in a room with the doors locked and no meal breaks, they could get to a good, and even a great bill."

Terry seemed to like the idea, at least the underlying point that they needed a bill and he hoped that there was a way to get there.

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