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Prevention of Abusive Patent Letters Moves Forward in Congress
Monday, June 8, 2015 6:45 AM

Several members of the U.S. Senate Judiciary Committee declared a need for legislation to combat abusive patent demand letters. The committee passed the Protecting American Talent and Entrepreneurship (PATENT) Act (S.1137) by a 16-4 vote.

Credit Union National Association and its coalition partners wrote to the committee prior to the Thursday markup, informing lawmakers that S. 1137 is an important first step and that they look forward to working with the Senate to strengthen the bill's provisions.  

The CUNA letter reads, “S. 1137 would help ensure that demand letters include clear and detailed information, such as the owner of the patent, what entities have a financial interest in the patent, what product or service is allegedly being infringed, and how such product or service infringes the patent. Without this information, financial institutions, and especially smaller banks and credit unions, have no way to effectively evaluate the merits of the demand letter.”

The letter noted that the practice leads many banks and credit unions to unnecessarily pay patent "trolls" a licensing fee rather than enter a costly and lengthy legal battle.

Over the course of the hearing, Sens. Orrin Hatch (R-UT), Dianne Feinstein (D-CA), Mike Lee (R-UT), and David Vitter (R-LA) specifically mentioned the abusive-letter problem.

Feinstein successfully offered an amendment that would essentially forbid a demand letter from requesting a certain amount of money for the granting of a license or settlement. The amendment passed by a voice vote.

“The ratio of demand letters to actual suits was 307 demands for every suit,” Feinstein said, citing a White House study. “The amendment is narrowly targeted at the most coercive element of these letters, the demand for a specific monetary amount.”

While the inclusion of specific language addressing deceptively worded, vague demand letters is appreciated by CUNA, in its joint letter, CUNA advocates for additional changes in the area of patent quality to ensure that meaningful opportunities exist for all sectors to have PTO experts review low-quality patents for invalidity against the best prior art, and to answer the question of subject matter patentability.

In addition to CUNA, the letter was signed by the American Bankers Association, American Council of Life Insurers, American Insurance Association, The Clearing House Payments Company LLC, Financial Services Roundtable, Independent Community Bankers Association, NACHA-The Electronic Payments Association, National Association of Federal Credit Unions, and National Association of Mutual Insurance Companies.