FOR IMMEDIATE RELEASE
Contact: Vicki Christner – CUNA Communications; (202) 508-6754; firstname.lastname@example.org
Washington, D.C. (February 25, 2015) – In advance of the Commerce, Manufacturing, and Trade Subcommittee hearing this Thursday, CUNA, along with fellow financial trade associations, sent a joint statement for the record. The statement notes that any legislation should include the following:
See the full statement below:
February 25, 2015
The Honorable Michael C. Burgess
Chairman, Subcommittee on Commerce,
Manufacturing and Trade
U.S. House of Representatives
2336 Rayburn House Office Building
Washington, DC 20515
The Honorable Jan Schakowsky
Ranking Member, Subcommittee on
Commerce, Manufacturing and Trade
U.S. House of Representatives
2367 Rayburn House Office Building
Washington, DC 20515
Statement for the Record for the Energy and Commerce Subcommittee hearing entitled
“Update: Patent Demand Letter Practices and Solutions”
Dear Chairman Burgess and Ranking Member Schakowsky:
On behalf of the thousands of financial institutions of all sizes and charters represented by the undersigned trade associations, we are writing to commend you for your leadership in holding a hearing entitled, “Update: Patent Demand Letter Practices and Solutions.” We respectfully request that this letter be included as part of the record for the hearing.
We fully support your goal of developing legislation to tackle the scourge of bad faith patent demand letters. Financial institutions of every size have been targeted by Patent Assertion Entities (PAEs), often referred to as patent trolls, who in most cases assert patents of dubious quality through vaguely worded demand letters or intentionally vague complaints. Indeed, patent trolls’ recent focus on credit unions, community banks and other financial institutions threatens to pose additional, unwarranted costs on lenders and the communities they serve. In our industry alone, there are hundreds of examples of a patent troll attempting to sell a product – the patent license – to a bank or credit union using tactics resembling fraud or extortion.
Although legislation has not yet been introduced, we strongly believe any legislative solution should include provisions clarifying the Federal Trade Commission’s (FTC) authority to fight against deceptive practices, while not affecting legitimate patent holders’ rights to send demand letters or otherwise assert their patent rights. FTC and state Attorneys General enforcement would help alter the fraudulent business model of trolls by removing some of their financial incentive to send intentionally vague demand letters in the hope of quick settlements. Although outside the scope of your Committee’s jurisdiction, we believe it would also make sense for patent troll legislation to provide that if a demand letter does not contain specific information about the patent, the alleged infringement and who is asserting the patent, any civil action that is later brought by the troll would be dismissed. Compromise language developed by Senators Cornyn and Schumer in the Senate Judiciary Committee in 2014 provides a good model. Indeed, such a provision would complement this Committee’s work because it would help provide the FTC the evidence of unfair and deceptive behavior it needs to bring enforcement actions against the worst actors.
Added transparency would also help businesses make sense of a demand letter upon receipt so they are better equipped to evaluate the claim. We also urge the Committee to limit the number of exceptions provided to patent trolls, such as through affirmative defenses to fraudulent behavior. In addition, we note that states have proven to be effective laboratories for developing and furthering robust policy relating to patent trolls. While most states could see a reduction in unsubstantiated bad faith demand letters if this legislation were to be enacted, the bill should also allow states that have proactively enacted laws to discourage bad faith demand letters to continue to enforce them. If state law is preempted, it is imperative that strong and enforceable national standards for demand letter transparency be put in place.
We look forward to continuing to work with the Committee and stakeholders to craft a bipartisan solution that directly addresses the growing abuse of our patent system and these specious claims that are having a negative impact on our industry, our customers, and the American economy. To that end, the following is a more detailed summary of the financial services recommendations for comprehensive legislation dealing with the patent troll problem.
Patent Troll Legislation – Principles Advocated by the Financial Services Industry
The financial services industry, like many other sectors of the economy, has faced deceptive demand letters and frivolous litigation from patent trolls asserting low-quality patents.
We have serious concerns about the current patent litigation environment as well as the quality of patents granted by the Patent and Trademark Office (PTO). In addition, patent trolls continue to assert low-quality patents through vaguely- worded demand letters with the full knowledge that their targets, our members, are more likely to pay unnecessary licensing agreements than engage in lengthy, costly litigation. The deadweight cost of compliance with demand letters and the threat of litigation are ultimately born by our customers.
To that end, the financial services industry has coalesced around a set of key principles needed to address this critical issue. These principles fall into three distinct yet interrelated baskets that, if enacted, would improve the patent system, promote innovation and discourage the assertion of low-quality patents as a legitimate business model.
Collectively, these principles will go a long way in protecting the financial services sector and the millions of customers our members interact with on a daily basis from the harm wrought by patent trolls. As the issue of patent reform unfolds in the 114th Congress, we look forward to working with you to advance these core principles.
The following summarizes a set of principles that the financial services sector is advocating for inclusion in any patent reform legislation during the 114th Congress:
American Bankers Association
American Insurance Association
The Clearing House Payments Co., L.L.C.
Credit Union National Association
Financial Services Roundtable
Independent Community Bankers of America
National Association of Federal Credit Unions
National Association of Mutual Insurance Companies