Business coalition urges action against 'patent trolls'

Troll firms send letters claiming that businesses are violating patents on technology.

A group of Minnesota businesses is calling on Congress to pass patent reform to protect businesses against harassing demand letters from so-called patent trolls.

The push for reform, however, has some groups concerned about potentially stifling innovation.

Patent trolling has picked up in the past two years for reasons that aren’t clearly understood, said William Schultz, partner at Merchant & Gould in Minneapolis.

Schultz took part in a forum on the patent problem Thursday in St. Paul hosted by the newly formed Main Street Patent Coalition, a nonpartisan national organization backed by several trade groups such as the National Restaurant Association and Retail Industry Leaders Association. State Attorney General Lori Swanson was in attendance, as was Brent Christensen, president of the Minnesota Telecom Alliance.

Christensen said some of his group’s members have been hit with demand letters from patent trolls regarding patents in equipment the companies use, such as the software that runs routers and switches. Some members have paid fees to avoid costly litigation, he said.

“It’s harassment,” said Christensen. “These are small companies.”

The problem isn’t going away and needs to be fixed, he said.

Schultz, a patent lawyer, said he thinks Minnesota as been hit a bit harder than some other states because of its concentration of medical device and financial companies, popular targets for patent trolls.

Patent trolls buy patents with the aim of suing large numbers of companies for infringement to extract payments, while doing little investigation of whether the accused infringer actually practices the patent, Schultz said. They fall outside legitimate patent protection activity.

The patent reform coalition is pushing Congress to pass bills in the House and Senate — the Innovation Act and the Patent Transparency and Improvements Act — to require that demand letters about patents provide far greater detail on the patent and alleged infringement.

Swanson said that she just rejected the request of MPHJ Technology Investments to resume sending patent letters to Minnesota companies. The company had been accusing businesses of infringing on patent rights by using basic office scanners.

Swanson got a court order banning MPHJ from patent trolling in Minnesota last August, and doesn’t want it to resume. The company sent demand letters to more than 300 Minnesota companies and nonprofit groups, she said.

“What they really capitalize on is how expensive it is to hire a lawyer,” Swanson said in an interview.

Swanson said she has discussed the problem with about a dozen of the state’s largest corporations over the past eight months.

Not everyone is riding the reform wagon.

Deb Hess, program director at the Minnesota Inventors Congress, a nonprofit in Redwood Falls, Minn., said she can understand why companies are alarmed by the letters. However, she said, there is research indicating the trolling problem is not as severe as it’s been made out to be.

Hess said she worries that overreaching reform could have unintended consequences that could curb job-creating innovations. Inventors “are very concerned about it,” she said.

“It is essential that our legislators hear both sides of the story.”

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