July 10, 2014

Patent bill reported, concerns remain

July 11, 2014 – A House Energy and Commerce subcommittee favorably reported out draft legislation advancing patent reform Thursday, but NAFCU maintains some concerns about the measure and hopes it can be improved as it moves through the process.

The "Targeting Rogue and Opaque Letters (TROL) Act" aims to provide further protection for businesses from so-called patent trolls, which profit from frivolous demand letters and lawsuits. The bill was authored by Commerce, Manufacturing and Trade Subcommittee Chairman Lee Terry, R-Neb.

The subcommittee amended the bill to clarify the civil penalties section; the bill will now proceed to the full committee.

On Wednesday, NAFCU and other financial trades jointly wrote the leaders of the subcommittee asking that it consider strengthening the legislation. The letter was from NAFCU, CUNA, the American Bankers Association and the Independent Community Bankers of America.

"In particular, expanding the definition of ‘bad faith,' or removing the requirement altogether, would help ensure more small businesses can enjoy the protections of the bill," the groups wrote. "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."

NAFCU has been working for patent reform as a growing number of credit unions report the receipt of demand letters from patent assertion entities. These often target the use of commonly used technology. NAFCU views the above legislation as a positive step forward but believes more work is needed to strengthen credit unions' ability to defend themselves against frivolous claims.