Column: Put the brakes on patent trolls

WASHINGTON -- Automatic Teller Machines (ATMs) are a convenient way to access our bank accounts. But, if patent trolls continue to have their way, ATMs, like other newer inventions, could be held for ransom.

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WASHINGTON - Automatic Teller Machines (ATMs) are a convenient way to access our bank accounts. But, if patent trolls continue to have their way, ATMs, like other newer inventions, could be held for ransom.
Never heard of a patent troll? Most consumers haven’t, yet patent trolls wreak havoc on businesses and drive up costs for millions of products and services we use all the time. In short, they are businesses that buy up patents (for products or technology they didn’t invent, with rare exceptions) and then threaten lawsuits, for money.
How can that affect a consumer? Lots of ways. Take ATMs as an example.
While ATM machines are sold to banks as one piece of equipment, ATMs rely on hundreds of parts and pieces of technology to operate. Patent trolls have purchased low-quality patents for some of those parts and pieces and then threaten, and in some cases have initiated, frivolous lawsuits demanding money from banks that purchased the whole ATM.
Patent trolls, with very few exceptions, are not in the business of trying to do right by the inventors. Their goal is to make money, and they do. But when a business that has purchased and deployed a widely available product - such as ATM machines - is the target, everyone gets hurt. Except, of course, the troll.
Unclear demand letters, the specter of a frivolous lawsuit and deep pockets to finance the litigation, all add up to a lawyer’s dream - and a business owner’s nightmare. A business may know little about the alleged infringement involving a component part of a machine they own, or how to effectively respond to the threat. The choice becomes whether to engage in a costly, lengthy legal battle or settle with the troll (read: pay the ransom) for what is a more modest “licensing fee.” Often and understandably, the business makes the economic calculation to pay the fee. The troll moves on to its next target. Consumers incur more costs, and access to products and services can be diminished.
Patent claims against financial services companies grew almost 290 percent from 2009 to 2013. A study by Harvard Business School Professor Josh Lerner found financial patents are 27-39 times more likely to be the focus of a lawsuit than non-financial patents, and that no type or size of financial institution is immune. Patent trolls have brought patent litigation against virtually every type of financial institution, including credit unions, community banks, regional banks, payment networks, insurance companies and even Federal Reserve banks.
Congress has been working to address this problem over the past year. This month, the House plans to consider patent reform legislation. The legislation is a critical step forward but it does not go far enough.
Congress should include provisions in patent reform legislation that address vaguely worded demand letters, requiring more clarity and detail. Patent reform legislation should also make permanent the ability for the Patent Office to review the validity of patents being asserted and, if warranted, invalidate flimsy patent claims. The fee for using this option should also be waived for small businesses.
By making these two changes, Congress will reasonably reign-in frivolous behavior by patent trolls, protect consumers and businesses from higher costs, and encourage real innovation that will continue to make America’s economy the best in the world.

Tim Pawlenty is the chief executive officer of the Financial Services Roundtable. He was a two-term governor of Minnesota. He served as chair of the National Governor’s Association from 2007-2008.

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