Regulatory Rumblings

Movement Continues Against Patent Trolls

Posted: Oct 28, 2013 4:00pm ET

On Wednesday, House Judiciary Committee Chairman Bob Goodlatte (R-VA) introduced a long-awaited bipartisan bill, the Innovation Act, to combat the growing threat from patent assertion entities (PAEs), often called patent trolls. This bill requires heightened pleading standards for patent suits, including descriptions of which patents are actually infringed, as well as how they are infringed. Transparency is another key element, with the requirement that plaintiffs disclose any party which has a financial interest in the patent at issue, as well as an allowance for defendants to join these other parties in the litigation. There is a cost-shifting mechanism in the Innovation Act that can allow a court to require that the loser pays for the winning side’s litigation fees. In cases where there is litigation between a troll and a manufacturer, cases against end users are stayed until the resolution of the case against the manufacturer. The Innovation Act also expands the Patent and Trademark Office’s post-grant review authority of business method patents, which are frequently the subject of patent suits involving trolls.

Despite the divisions in Congress over a wide range of issues, efforts to limit patent trolling are an area with real momentum on both sides of the aisle. Republican and Democratic co-sponsors of the Innovation Act include, among others, Anna Eshoo (D-CA), Zoe Lofgren (D-CA), Jason Chaffetz (R-UT), and Spencer Bachus (R-AL). Additionally, Senate Judiciary Committee Chairman Patrick Leahy (D-VT) expressed his support for Chairman Goodlatte’s bill and stated that he is continuing to work on patent reform legislation with Senator Mike Lee (R-UT) and others.

Bad news for trolls might also come soon from the country’s highest court. Last month, the Supreme Court granted certiorari in two cases regarding the award of attorney’s fees in so-called “exceptional” patent infringement claims where it is determined that the claims were 1) brought in bad faith and 2) objectively baseless. In Highmark, Inc. v. Allcare Management Systems, Inc., the Court will evaluate whether or not a trial court’s finding that a case was exceptional (resulting in a subsequent grant of attorney’s fees) is entitled to deference at the appellate level. And in Octane Fitness v. Icon Health and Fitness, the Court will examine whether the test for “exceptional” cases used by the U.S. Court of Appeals for the Federal Circuit (which hears appeals of patent cases and creates patent case law) is too strict and, therefore, actually incentivizes trolling lawsuits. Reversals in either of these cases could potentially raise the stakes significantly for trolls in filing claims.

These newer developments all come in the wake of an investigation into patent trolling activities by the FTC, as well as actions against accused trolls by several state attorneys general. While the ultimate fate of the legislation and outcome of the Supreme Court cases remains unclear, patent trolling may soon become a much more risky game to play. We are hopeful that our members will keep us informed of any developments in this area that affect them.

ICANN Should Look Before It Leaps: Part II

Posted: Sep 24, 2013 12:15pm ET

Yesterday, I wrote about the proposal by the Internet Corporation for Assigned Names and Numbers (ICANN) (which manages domain names (DNS) on the Internet) to expand dramatically the number of those names. Rather than the 22 names we all know (e.g., “.com” “.gov”), ICANN now intends to add more than a thousand new names – but so far, without sufficient care about the potential harms to consumers, businesses and Internet users. These concerns about an overly rapid Top Level Domain rollout are very widespread. Governmental entities – and even ICANN’s own subgroups – have identified serious potential harms.  

Here is what some of our leading companies and industries are saying:

So, let’s see: electricity providers; national security experts; telecommunications providers; insurers; Internet users; large manufacturers; national advertisers; and groups representing business generally—these are just some of the entities that stress that we’re not ready for a major deployment of new gTLDs, and that the rush to roll them out will expose consumers, businesses and users of the Internet to major risk of harm.  The concern about ICANN’s plans is growing and very serious. ANA believes ICANN needs to step back, collect more information, and assess the potential implications before delegating new strings into the root. If not, the very stability and security of the Internet will be jeopardized.

ICANN Should Look Before It Leaps: Part I

Posted: Sep 23, 2013 3:45pm ET

The Internet Corporation for Assigned Names and Numbers (ICANN) manages domain names (DNS) on the Internet, and it is planning a dramatic expansion of those names. Rather than the 22 names we all know (e.g., “.com” “.gov”), ICANN now intends to add potentially more than a thousand new names. Unfortunately, as the Association of National Advertisers has been warning for some time, ICANN appears to be rushing to deploy those names without taking the necessary steps to ensure the stability and security of the Internet. The potential harms to consumers, businesses and Internet users could be very serious, increasing the dangers of fraud, deception, phishing, cybersquatting and other cyber harms. Yet ICANN plows ahead on its determined – and potentially very dangerous – schedule.

Various governmental entities have stated real concerns about the DNS expansion. Officials at the Federal Trade Commission (FTC) have said that, “the potential for consumer fraud is great, and that the planned deployment was a “potential disaster.” Commissioner Julie Brill stated at ANA’s Advertising Law & Public Policy Conference, “I remain concerned, as I have been since ICANN first announced its plans, that the expansion could create opportunities for scammers to defraud consumers online, shrink law enforcement’s ability to catch scam artists, and divert the resources of legitimate businesses into litigating and protecting their own good names.” The Chairman of the US Senate Committee that oversees Internet issues, Jay Rockefeller, wrote to ICANN urging that a limited round of domain name deployment be done at first, so as to permit a one-year review period as to its effectiveness. In July, the US Senate Appropriations Subcommittee with jurisdiction over Internet issues called on the Department of Commerce to assess whether ICANN will have in place the necessary security elements to protect stakeholders during the DNS deployment.

Patent Trolls Are Beginning to Meet Sunlight

Posted: Sep 5, 2013 9:15am ET

In July, I wrote about the growing number of legislative proposals that have been put forward in Congress to battle patent assertion entities, more commonly referred to as “patent trolls.” So-called patent trolls get their names by operating much like a troll from folklore. They produce nothing, buy up broad patents, and then hide and wait until the time is right to strike unsuspecting businesses with threats of highly damaging and expensive litigation. Trolls from folklore often meet their end in sunlight. For patent trolls, legislative and regulatory sunlight appears to be the only appropriate remedy. As we await expected major anti-patent troll legislation from Chairman Goodlatte and Chairman Leahy of the House and Senate Judiciary Committees respectively, momentum has begun to build against patent trolling in other areas.

On August 30th, the Government Accountability Office (GAO) released a report on patent infringement litigation. This report found that between 2010 and 2011, the number of patent infringement lawsuits increased by roughly 33 percent. GAO further found that between 2007 and 2011, the number of defendants in patent litigation increased by 129 percent. The GAO determined that up to twenty percent of those suits were brought by patent trolls. This percentage, however, likely did not capture the true magnitude of the problem, as it is important to note that companies often settle with trolls well before a trial or even the filing of a complaint. Most importantly, this report notes that much of the problem in this arena is sparked by the grant of overly broad patents, especially for business method patents relating to software. A number of the pending legislative proposals would help to remedy this problem. This report will certainly provide momentum to efforts already underway.

State Attorneys General also have begun to indicate a willingness to step in to stop patent trolls. On August 20th, Minnesota Attorney General Lori Swanson announced a settlement with a patent troll known to some as the “scanner troll.” This entity claimed to own a patent on scanning office documents to e-mail and targeted a number of businesses with demand letters threatening litigation if it was not paid $1,000 or more for each employee using the technology. Some of these letters even contained a draft complaint in an effort to increase the threat. Under the terms of the settlement, the company may not send further demand letters without the prior permission of the Attorney General’s office and may not grant its patent rights to any other entity unwilling to comply with these terms. Vermont Attorney General Bill Sorrell also filed a lawsuit against this same patent troll in May alleging unfair business practices under Vermont’s Consumer Protect Act.

The FTC has also indicated its willingness to step into the game. Chairwoman Edith Ramirez has stated that she believes the FTC should use its Section 6(b) investigative subpoena authority to determine whether or not patent trolls may be committing unfair business practices.

The abuse of the patent system by so-called trolls is harmful to innovation and economic growth. The American Intellectual Property Law Association found that patent litigation can cost as much as $650,000 for smaller claims, and as much as $5 million for larger claims. When costs of settlement to avoid litigation were factored in, the White House Report stated that as much as $29 billion was paid by companies to patent trolls in 2011. While recent actions by Attorneys General indicate a growing willingness to fight back against abusive practices, the GAO Report demonstrates that broader reform is needed to help provide the sunlight necessary to put a stop to the “trolling industry.” ANA is continuing to work hard as a part of several coalitions to ensure that such reform happens as soon as possible.

ICANN is Falling Short of its Mission to Protect Internet Security and Stability

Posted: Aug 28, 2013 2:30pm ET

Name Collision is a major concern for global brands and consumers as ICANN prepares to roll out more than 1,000 new web site suffixes or top level domains (such as .hotel, .buy, .bank, .sucks, and .gripe). Name collision occurs when new top level domains (TLDs) are identical to internal company domains, which can lead to major conflicts that could raise significant security and stability issues for the Internet.

ICANN’s preparations for this deployment have been woefully inadequate. ANA, which represents the interests of major global advertisers, has long expressed concerns about ICANN’s persistent rush to deploy these domains before it has adopted sufficient protections for consumers and brandholders. To date, those protections have been anything but sufficient.

ICANN itself has recently raised red flags that it may not fully know the true ramifications of a roll-out of new TLDs by stating that as many as 20% of all of the proposed TLDs present a large potential risk for name collision.  A recent 3rd party report commissioned by ICANN admits that the chance of clashes is significantly larger than ICANN initially suggested. 

What is more concerning is that the third-party report readily admits that the data only counted the number (and not the types) of potential name clashes, which means ICANN has virtually no data to determine whether delegating new TLDs could interrupt important public safety communications, government web traffic, e-commerce applications, internal corporate communications or just casual web traffic.

Yesterday, ANA sent a letter to ICANN strongly expressing its concerns, stating that “ICANN must know what underlying services could potentially ‘break’ on the Internet to begin to gauge risk” before rolling out any new TLDs. ANA’s member companies are working to determine if clash issues are present within their networks. However, ANA has hundreds of members that must generate new data to determine the potential service failures on their respective network. These issues are highly technical, complex, and they will take more time than ICANN has allowed for a thorough assessment.

It is extremely disappointing that ICANN is forcing companies to rush to conduct this analysis when ICANN has been aware of clash issues since 2009.

ICANN’s failure to determine adequately the extent of the problem means that many companies are only now learning about these clash issues on the eve of the planned new TLD deployment. 

ANA calls on ICANN to fulfill its mission to maintain Internet security and stability in the public interest and postpone the rollout until the full extent of name collisions can be determined.

ANA Requests Extension of ICANN Comment Period on Name Collision Mitigation Proposals

Posted: Aug 9, 2013 1:30pm ET

Today, we sent a letter to ICANN President & CEO Fadi Chehadé asking for an extension of the public comment period for proposals to mitigate name collision risks. In our letter, we argue that the current due date for comments, August 27th, is wholly insufficient given the amount of time needed by stakeholders to run a full technical analysis of possible risks, as well as the fact that many companies are currently short-staffed due to summer vacations. We call for the comment period to be extended to November 1, 2013 and for the reply comments to be due on November 22, 2013.

Companies who are in agreement with these views should strongly consider sending requests for an extension of the comment period as well.

On a related note, Verisign has responded to the letter it received from NTIA on August 2, 2013. This exchange of letters provides interesting background on the security issues which prompted ICANN’s recent release of a third-party report on name collision risks in new Top Level Domains earlier this week.

Don't Let the Third-Party Cookie Crumble - A Guest Post on The Hill's Congress Blog

Posted: Aug 6, 2013 2:30pm ET

I have a guest post on The Hill's Congress Blog on the announcement by Mozilla to block third-party cookies in its Firefox browser. The post also discusses the recent actions of the industry's self-regulatory program, the Digital Advertising Alliance (DAA). You can read the post at The Hill's website.

Earlier this week, the DAA ran an ad in Advertising Age on the Mozilla initiative. You can view that ad here.

The Food Fight Grows

Posted: Jul 31, 2013 10:11am ET

A new front in the ongoing assault against food, beverage and restaurant marketing has recently opened up.  

Last week, Rep. Rosa DeLauro (D-CT) introduced legislation (H.R. 2831) to eliminate the tax deductibility of advertising expenses for marketing to children of “food of poor nutritional quality.” It uses the most recent Dietary Guidelines to determine which foods meet the criteria, and broadly defines marketing to include advertising on television, radio, print, the Internet and social media, product packaging, point of sale displays, character licensing, and celebrity endorsements. The use of the Dietary Guidelines is significant in that the guidelines proposed by the Interagency Working Group on Food Marketed to Children (consisting of the FDA, FTC, USDA and CDC) set far more sweeping and stringent nutritional standards for which foods could be marketed to children. If the IWG guidelines ever were to take effect, it could lead to an extremely high baseline for marketing food and beverages to children.    

Meanwhile, a senior member of the U.S. Senate is also pressing to get rid of the tax deduction. Recently, four powerful members of the U.S. Senate – Richard Blumenthal (D-CT), Dick Durbin (D-IL), Tom Harkin (D-IA) and Jay Rockefeller (D-WV) – recently wrote a letter to Viacom urging it to implement strong nutrition standards for marketing. In a statement released concurrently with the letter, Senator Rockefeller noted that he is working to eliminate the tax deduction for advertising of “junk food” to children. As Senator Rockefeller states, “this effectively results in the federal government footing the bill for corporations to market junk food and sugary beverages – that are directly tied to increased rates of obesity – to children.” His statement further indicates that he will push for a provision to end the deduction as part of the Senate Finance Committee’s consideration of tax reform. As the second ranking member of the Senate’s tax writing committee, Rockefeller’s views have to be seriously considered.  

Obesity continues to be a major health concern.The American Medical Association recently recognized obesity as a disease. The pressure on Congress to be seen as taking action against a public health threat will remain high. These proposals to end the tax deductibility of some food advertising are a clear shot across the bow.

Industry and Lawmakers Take Steps to Battle Patent Trolls

Posted: Jul 30, 2013 2:00pm ET

In a time when the Congress too often looks like it cannot agree on anything, one issue seems to be gaining both momentum and increasing bipartisan support. That issue is combating the growing business of patent trolling and the legislative proposals to curb it.

When used properly, patents foster innovation by granting limited exclusive rights to inventors. The public is served by the advent of newer and better technologies and products, and producers benefit by reaping rewards for expensive research and development. However, if abused, patent rights serve only to stifle growth and hinder economic progress.

In recent years, a growing number of patent infringement claims have been filed by patent assertion entities, also called “patent trolls.” They exist not by producing or manufacturing patentable products themselves, but instead by purchasing numerous patents with broadly defined terms and then filing infringement suits against manufacturers and service providers with deep pockets. The trolls also attack numerous end users like small businesses or advertisers with shallower pockets, but far less ability to fight extortionist demands.

The White House recently released a report showing that as many as 100,000 companies were threatened with litigation by patent trolls in the last year and that these suits inflict significant harm on both companies and the economy. Given the immense cost of patent litigation, most businesses settle with these trolls, even though the trolls would likely lose at trial. The trolls grow further energized and enriched and are only incentivized to repeat the process over and over again with new claims.

Members of Congress on a bipartisan basis have shown their mounting frustration with these practices with a burst of legislative initiatives just this year:

The White House, in June, announced seven legislative recommendations, as well as five executive directives, designed to combat abusive practices by patent trolls. Federal Trade Commission Chairwoman Edith Ramirez said in a June speech that she believes the FTC should use its investigative authority (basically, subpoena powers) under Section 6(b) of the FTC Act to investigate these practices. And the Attorney General of Vermont recently filed suit against an alleged patent troll that had sent demand letters to a number of Vermont organizations, including non-profits.

ANA is working as a part of several coalitions to address these abusive and economically damaging actions. We are focusing on indemnity issues, as well as proposed legislative fixes. We signed a letter to congressional leadership, along with more than 50 others organizations from nearly every sector of the economy, encouraging legislative action against patent trolls. We are working to collect data on demand letters and the numbers of suits threatened against our members.

There is serious momentum to address this problem. Advertisers need to step up to fight these entities in order to protect themselves and the consumers they ultimately serve. Please let ANA know if your company is confronted with patent troll issues so we can effectively stay on top of trends in this area and help combat these problems.

Digital Advertising Alliance Releases Guidelines for Expansion of Self-Regulatory Principles to Mobile Media

Posted: Jul 24, 2013 12:00pm ET

The Digital Advertising Alliance (DAA), of which ANA is a founding member, released guidelines today for expanding its self-regulatory program of consumer choice to the mobile environment. These guidelines cover cross-app, personal directory, and precise location data in mobile apps.

The release of these mobile guidelines is critically important given the explosion of the mobile environment as a major point of contact with consumers and the enormous number of activities that are now carried out with the use of mobile devices. These guidelines demonstrate that the DAA is the real mechanism for true consumer choice in the online world.

ANA President and CEO Bob Liodice said, “The DAA program is not only global, but now also mobile. The expansion of the DAA program into the mobile realm is an extraordinarily important development. Mobile is, by far, the fastest growing media category. Half of all U.S. adults now have a connection to the web through either a smartphone or tablet, so it’s all the more critical that they have control over how they receive advertising on their mobile devices. The DAA mobile guidelines give them that control.”

The full press release can be found here. For more information about the DAA program, visit http://www.aboutads.info.

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About This Blog

Focuses on all federal and state government and legal initiatives that threaten national advertisers' freedom of commercial speech. The blog is penned by Dan Jaffe, the ANA's Group Executive Vice President, Government Relations, who also heads the trade association's Washington office.