Business leaders seek relief from ‘patent trolls’

PATENTLY OFFENSIVE: Providence-based attorney John Capone said that “patent trolls acquire patents simply for the purpose of suing.” / PBN PHOTO/MICHAEL PERRSON
PATENTLY OFFENSIVE: Providence-based attorney John Capone said that “patent trolls acquire patents simply for the purpose of suing.” / PBN PHOTO/MICHAEL PERRSON

David Anderson, president of Skillbuilders, first became acquainted with so-called “patent trolls” in 2011. The 19-year-old software company based in South Kingstown has an international client roster.
“There’s an ongoing case being handled by Oracle Corp. because we’re an official Oracle partner and it has to do with an Oracle software product,” said Anderson.
His firm is hardly alone in Rhode Island in dealing with such companies that acquire a patent, often on a widely used technology, then threaten or sue many businesses for patent infringement.
“We are aware of 15 companies in Rhode Island that have been affected – who have had lawsuits filed against them – by patent trolls,” said Kathie Shields, executive director of the Tech Collective, Rhode Island’s technology-industry association. “Some have settled and some are in litigation.
“Patent trolls go out and patent open-source tools and once they have the patents, they go file lawsuits against big and small companies,” said Shields.
“One example is if you go to a retail online site and put in a zip code to find the closest store, the zip code search tool is an open-source plug in,” said Shields. “The open-source information is the coding.”
Patent trolls have been around for about 10 years, but the frequency of their lawsuits has been escalating, said Shields.
These shell companies have found states where laws make it easier for them to exist, such as Delaware or Texas, so they establish entities there, then sue companies across the U.S., said Shields.
“The biggest imposition is on small companies. They don’t have the money to fight or to settle,” said Shields. “With small companies, it’s a threat to the sustainability of their business.”
The challenge for large companies is whether to spend large amounts of money and possibly years involved in litigation fighting the lawsuit by the patent troll, or to settle, said Shields.
“Those who settle end up funding the litigation by patent trolls,” said senior counsel and patent attorney John L. Capone with Duffy & Sweeney in Providence. “Patent trolls acquire patents simply for the purpose of suing. They are not the inventors … they are simply the owners of the technology.” An example of a patent troll is a company that has sued a number of businesses for using the technology for activating a debit card by phone, said Capone.
“They try to collect licensing fees for products they don’t manufacture or services they don’t supply,” said Capone, who will speak Dec. 10 at a Tech Collective forum on patent trolls. “They’re called Non-Practicing Entities, or NPEs.”
“NPEs sued four times more defendants in 2011 compared to 2007,” according to an article on opensource.com by Mark Bohannon, vice president of corporate affairs and global public policy at Red Hat, a Raleigh, N.C.-based international technology company whose mission is “to be the catalyst in communities of customers, contributors and partners creating better technology the open-source way.”
The Rhode Island Retailers Association, along with many national retailers and technology organizations, is urging Congress to pass reforms to stop patent abuse.
In a Sept. 16 letter to Sen. Sheldon Whitehouse, D-R.I., Greater Providence Chamber of Commerce President Laurie White said, “I am writing to express concern about “patent trolls” and the threat they pose to the general business community. No longer just a problem for tech companies, patent trolls are now targeting banks, credit unions, retailers, hotels, restaurants and Main Street businesses with frivolous infringement claims.”
White said the “highly dubious claims” include suits claiming infringement for using WiFi routers, scanning documents and for using online shopping cart features on a website.”
In addition to small businesses being targets of patent trolls, White said, “several companies in Rhode Island, including [CVS Caremark Corp.], Citizens Bank, Stop & Shop, Home Depot and Rite Aid have been targets of patent trolls.” Citizens Bank is named as a defendant in a lawsuit with multiple defendants, DataTreasury Corporation v. Fiserv Inc., for patent infringements on automated sales and service systems and automated multimedia data-processing network, according to the website of Chicago-based patent trial attorney R. David Donoghue, who is with the intellectual-property group of the firm of Holland & Knight.
In an Oct. 11 letter to Whitehouse, urging him to support Senate Bill 866, “The Patent Quality Improvement Act” and H.B. 276, “Stopping the Offensive Use of Patents Act,” Rite Aid Senior Counsel Ron S. Chima wrote “at Rite Aid, we have been the target of a number of these frivolous patent-troll threat letters and lawsuits. Faced with years of expensive litigation versus paying a license fee, we often settle. … This is extremely frustrating and is diverting capital we could otherwise use.
Some patent issues are valid, of course, especially with the rapid developments in technology and increasingly complex issues related to intellectual property. But patent trolls are considered to be working outside that range of legitimate patent disputes.
Patents trolls are able to acquire patents for a variety of reasons.
“Sometimes an inventor gets a patent on technology but doesn’t put it into practice. The company may have gone bankrupt,” said Capone. “Sometimes patents are sold in bankruptcy. Sometimes when a company sells off its portfolio, it might include a group of patents.”
In the letter to Whitehouse, White urged examination of potential resolutions of the patent-troll issue, include expanding the U.S. Patent Office’s Covered Business Method Program, which would create an expedited method to invalidate bad patents, as well as passage of Senate Bill 866, the Patent Quality Improvement Act.
“Let’s force patent trolls to take financial responsibility for their lawsuits by allowing defendants to recoup money spent to successfully defend themselves against junk lawsuits,” White said. •

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