Sen. Claire McCaskill (D-MO) convened a meeting of the Senate Commerce Committee this week, with the goal of ending the practice by patent trolls using demand letters to extort funds from individuals and companies, according to a lengthy report in Ars Technica. The meeting brings four key personalities in patent reform to Capitol Hill to pick their brains on how to go about accomplishing such a lofty goal. Three of the four individuals testifying think something drastic needs to be done to combat this practice.
"The issue here is not about the right to assert one's patent," said McCaskill. "It's not even really about the patent system. It's about the deceptive and unfair practice of threatening consumers. It's about scam artists preying on the vulnerable."
Jim Bruning, the Nebraska Attorney General who is engaged in a long-running fight with alleged patent trolling firm MPHJ Technology spoke before the committee. Bruning told lawmakers that MPHJ does little or no research before making its infringement allegations. The group is best known as the "scanner trolls" who have sent out thousands of letters threatening everyone from corporations to governments to an Alzheimer's patient in a nursing home and Voices of Omaha, a community choir run on a shoestring budget.
"Use your subpoena powers," Bruning urged McCaskill. "Have them explain why they sent a demand letter. Through these efforts we can stop patent trolling in America..We consider this similar to garden-variety extortion."
Mark Chandler, general counsel at Cisco told lawmakers that his company went to court to stop patent trolling firm Innovatio from demanding thousands of dollars from coffee shops and chain motels for using basic router technology.
"They told [letter recipients] that thousands of companies had already paid Innovatio," said Chandler, while leaving out the fact that those payments occurred under the auspices of the patents' previous owner, Broadcom. "Did they tell them that manufacturers like Cisco were eager to defend them? No."
"We need your help bringing sunlight to a dark corner of the patent system," he concluded.
Cisco filed a RICO claim against Innovatio, but that failed. Luckily a recent court ruling has limited Innovatio to asking for just pennies per Wi-Fi access point.
"We spent $13 million fighting Innovatio," he said. "But I'm proud of every cent."
Julie Samuels of the Electronic Frontier Foundation emphasized that transparency is important and that the Federal Trade Commission could keep a registry of patent threat letters that get sent. It would be like the Trolling Effects threat-letter site that the EFF recently set up but with real legal ramifications for those who engage in abuse.
"These trolls conduct the vast majority of their business under the veil of secrecy," she said.
The only witness who spoke against the idea of registering demand letters was Adam Mossoff, a law professor who also works for the Innovation Alliance, a group of large patent holders. He told lawmakers that there is no proof of "existing harm to consumer welfare" in demand letters that requires the FTC to step in.
"The problem is we don't have any statistical evidence." He dismissed oft-quoted studies about the costs of patent trolls as "non-random and non-generalizable studies" based on "proprietary secret data." The evidence was anecdotal.
"We're not talking about systemic changes to the patent system," said Sen. McCaskill. "We're talking about bottom feeders… You're a smart guy. You're not going to sit there and tell me you don't think these letters are scams."
Mossoff countered by saying that there is no statistical evidence about the issue and that creating a registry for demand letters would raise costs. He also said that under such a system Thomas Edison would have been considered a patent troll.
"I don't think Edison would have been offended if he had been asked to file a licensing letter he would have been sending," said McCaskill. "Isn't a registry [of patent demand letters] a way we would get past anecdotal evidence?"
Lawmakers are toying with legislation to deal with patent trolls and have already introduced a bill that has bipartisan support. We'll continue to follow this legislation as it makes its way through both chambers of Congress.