Heller vs. the “Patent Trolls”

(NN&V Staff) – The following was the opening statement by Sen. Dean Heller (R-Nevada) at the Senate Consumer Protection Sub-committee on “Demand Letters and Consumer Protection” on November 7, 2013…

Good morning.

I would like to thank Chairman McCaskill for holding this hearing and I would also like to thank our witnesses for being here and sharing their expert testimony today with the sub-committee.

Today, we are taking a hard look at patent litigation. Specifically, we are looking at the practice of some entities that engage in aggressive pre- litigation practices based on alleged patent infringements.

We all agree that patent holders should be protected under the law and they should be able to assert patent protection methods. Patents are incredibly important to our economy and we all agree that a patent holder should receive compensation for their innovation.

Unfortunately, there are some actors in this sphere who are aggressively asserting that a patent they own has been infringed on in a manner that some believe is in fact deceptive.

Examples brought to our attention include a business that accumulates patents, often by purchasing them from defunct companies or directly from individual inventors. The company then makes use of patents that are ambiguous or broadly written in order to maximize the number of companies against which the troll can assert the patent.

These companies generally do not make or sell anything related to these patents. Instead, they identify companies using a technology that it can allege is an infringement of the patent, then they write a letter to the alleged infringer stating that infringement has occurred and litigation will commence unless a licensing agreement is entered into—i.e., “pay us or we’ll sue you for patent infringement.”

This practice seems to have initially started with technology companies; however other industries including retailors, hospitals, banks, restaurants and the gaming industry have become targets as well.

This practice concerns me and I am sure it concerns many Senators. If frivolous lawsuits are being filed across my state of Nevada because a coffee shop allows their customers to use free Wi-Fi in Reno or a Las Vegas Casino receives a demand letter on a game they offer, it can have a negative impact on the economy because it could hinder innovation and economic growth.

So, I do not believe there is any question that this practice is taking place, it is.

What I hope the hearing today sheds light on is the scope of the problem and the most appropriate method to stem this behavior.

It is my understanding that the Federal Trade Commission has authority to act under its existing Section 5 authority to enforce against unfair and deceptive acts and practices. I also understand if they are waiting the results of their own 6B study to be completed before moving forward.

I think it is important to see that study or at the very least have a stronger understanding of the scope of the issue before us, especially before moving on to any proposal that may be under this Committee’s jurisdiction regarding the FTC.

I also know that patent reform is an issue that the Judiciary Committee has looked at and will continue to look at. Many of the issues that will be discussed here may also be solved by passing rule making authority instructing the Patent and Trademark Office to enforce standards on these “demand letters.”

I hope that we can aid in solving this problem by using this hearing today to shed more light on this issue but this Committee is somewhat limited due to the narrow lane of jurisdiction we have.

Nevertheless, this is an important issue and even by holding this hearing, we are drawing attention to it and rightly so.

So again, I thank the Chairman for holding this hearing, the effect it has on consumers and discuss ways in which we can work to ensure patent holders can protect their patents and frivolous patent lawsuits are mitigated.

Thank you again Ms. Chairman.