October 29, 2013

Chu notes patent litigation impact on CUs

The toll on credit unions from patent-troll lawsuits was highlighted during Tuesday's House Judiciary Committee hearing on H.R. 3309, "Improving the Patent System to Promote American Innovation and Competitiveness."

Rep. Judy Chu, D-Calif., said one of her constituent credit unions was an end-user of a technology product it used for online banking features on its website, and it received a demand letter claiming infringement. Because of the credit union's limited means, it had to decide whether to reduce staff in order to proceed to defend itself in an action it would likely win, or settle.The credit union, as many entities faced with similar circumstances have done, chose to settle despite no wrongdoing.

NAFCU supports patent reform that addresses the problems credit unions face involving baseless litigation associated with low-quality patents.

Committee members and witnesses agreed that Tuesday's hearing was well-timed.

Lawmakers said they recognize the growing trend of non-practicing entities purchasing patents for the sole purpose of either licensing out or threatening merchants or end-users with litigation.

Committee Chairman Bob Goodlatte, R-Va., author of H.R. 3309, said enactment of this bill is "central to U.S. competiveness, job creation, and our nation's future economic security."

Witnesses in Tuesday's hearing included: EMC Corporation Senior Vice President and Deputy General Counsel Krish Gupta; Yahoo! Inc. Vice President and Deputy General Counsel for Intellectual Property Kevin Kramer; David Kappos, former under secretary of commerce for intellection property at the Patent and Trademark Office; and Eli Lilly & Co. Former General Counsel Robert Armitage.

NAFCU Vice President of Legislative Affairs Brad Thaler wrote the committee leaders Monday in support of several reforms within the bill. He called attention to the Transitional Program for the Review of Covered Business Method Patents, or CMB program, and noted concern about the limits on the scope of patents that can be reviewed.

"Given how problematic this issue has been for not-for-profit credit unions, NAFCU believes that arbitrarily limiting the program could lead to additional and unnecessary burden on our members," Thaler wrote. NAFCU also joined with other trade associations in a letter to Goodlatte thanking him for his leadership and the positive reforms included in this legislation.