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NAFCU, with other financial trade organizations, laid out principles for patent reform to address the issue of demand letters and deceptive patent troll behavior in a letter to all members of the House and Senate on Wednesday.

Last Congress, House Judiciary Committee Chairman Bob Goodlatte, R-Va., introduced House-passed H.R. 3309, the "Innovation Act," that would help discourage patent trolls from filing frivolous lawsuits. NAFCU supported that reform bill and several others in the Senate. The association is urging Congress to address the abusive practice of demand letters.

"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)," the groups wrote. "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 then engage in lengthy, costly litigation. The deadweight cost of compliance with demand letters and the threat of litigation is ultimately born by our customers."

The groups listed three categories of principles to "improve the patent system, promote innovation and discourage the assertion of low-quality patents as a legitimate business model":

• ease the cost and burdens of patent litigation and make the system more efficient;
• require demand letters to provide more details about the patent and who claims to assert it; and
• improve the post-grant review of patents, for example, by making permanent the "covered business method" review and making it more usable for smaller entities.

The letter was signed by NAFCU, American Bankers Association, American Insurance Association, The Clearing House, CUNA, Financial Services Roundtable, Independent Community Bankers of America, Mortgage Bankers Association, NACHA – The Electronic Payments Association and National Association of Mutual Insurance Companies.