NEWS RELEASE FROM THE OFFICE OF U.S. SENATOR CLAIRE MCCASKILL (KAN.)
McCaskill Introduces Bill to Crack Down on Patent Trolls, Protect Jobs and Consumers
Senator’s legislation would provide transparency to help combat deceptive ‘demand letter’ practice that harms small businesses
WASHINGTON – In her ongoing effort to crack down on scams impacting consumers and protect job opportunities, U.S. Senator Claire McCaskill today introduced legislation that will better equip the nation’s top consumer protection agency with the tools needed to crack down on “patent trolls”—companies that buy patents, but then fail to actually produce goods or services, opting instead to intimidate or sue other small businesses.
McCaskill’s legislation, the Transparency in Assertion of Patents Act (available online HERE), would empower the Federal Trade Commission (FTC) to help fight back against these deceptive practices by requiring minimum disclosures in letters sent by patent trolls to businesses that allege patent violations and make various demands (commonly referred to as “demand letters”) and allowing the agency to specify for businesses exactly what constitutes a deceptive demand letter.
“Patent trolls are stifling innovation, endangering jobs, and harming businesses and consumers,” said McCaskill, Chairman of the Consumer Protection Subcommittee. “Acting now and giving the FTC the tools it needs to properly address this serious problem will send a message to these bottom-feeders—they will understand that we plan to do whatever it takes to protect American consumers and small businesses from scam artists trying to make a quick buck.”
The legislation follows McCaskill’s recent Senate hearing in the Consumer Protection Subcommittee. Last week, the Obama administration also announced actions to start to address some of the problems small businesses encounter in dealing with patent trolls. Many state legislatures, including Missouri’s, are also considering legislation to combat the problem.
“I’m proud to join Senator McCaskill in this effort to prevent predators from making a quick buck off of small businesses,” said Senator Jay Rockefeller, Chairman of the Senate Commerce Committee and cosponsor of McCaskill’s legislation. “By requiring transparency and basic, common sense disclosures, this bill cracks down on the commercial practice of mailing hundreds, if not thousands, of misleading letters that seek to extort money from small businesses. The bill isn’t about patent law or patent rights; it’s simply about protecting unsuspecting victims from bad actors and their despicable behavior.”
“Patent trolls are costing American businesses tens of billions of dollars a year,” McCaskill said. “That’s money that could be going to hiring new employees or expanding a business. While the administration and some states are taking steps to address the problem, only a federal law can provide the basic transparency small business owners need in these demand letters to determine whether they should be taken seriously, challenged, or simply thrown in the trash.”
Patent trolls, formally known as patent assertion entities (PAEs), are companies that purchase patents and monetize them by demanding licensing fees or settlements—usually under the threat of litigation—from unsuspecting businesses using similar technologies. Unlike some businesses that assert patent rights over patents that they own and use, PAEs do not produce any goods or services with their patents. Until recently, the rampant growth of PAE demands was limited to patents in the technology sector, with PAEs aggressively targeting innovative technology startup companies that could be seen as violating the relevant patent. In a troubling development, PAEs have begun demanding payments from end users—including coffee shops and brick-and-mortar retailers—that use common technologies such as online shopping carts, Wi-Fi, and office scanners.
Most concerning are PAEs that use “demand letters” to unfairly or deceptively target small businesses, which often do not have the resources to engage in protracted and costly patent litigation. To bilk settlements or licensing fees out of small businesses, PAEs will sometimes send thousands of these demand letters—regardless of whether the targeted companies have actually violated any patents—threatening litigation for alleged patent infringement. Despite their threats, these PAEs may have no intention of actually filing a lawsuit, and sometimes misrepresent or obfuscate the patents they own in the demand letters hoping only to intimidate a small business into making a payment for the alleged—but often not real—violation of a patent.
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