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Senate Commerce Committee Holds Productive Hearing on Patent Troll Demand Letters

This morning, the Senate Commerce Subcommittee on Consumer Protection, Product Safety, and Insurance held a hearing on demand letters sent by patent trolls. While there are currently strong legislative efforts to overhaul patent litigation and curb trolling behavior (The Innovation Act, The Patent Litigation Integrity Act, an expected bill from Senator Leahy, as well as a number of House bills that proceeded the Innovation Act), none of the proposals at the present time address demand letter. It is in this pre-litigation period that much of the economic harm to companies occurs. As described in the hearing, these letters are often vague with little or no information about the patents allegedly infringed and those entities claiming to be harmed. Typically, such letters threaten litigation if a licensing fee is not paid, and smaller companies often settle to avoid greater costs of fighting a legal battle.

Among the witnesses was Jon Bruning, the Attorney General of Nebraska. He described examples of the effects trolls have had on businesses in his state, as well as the steps he has taken to curb their abusive practices. Larry Sinewitz, the Executive Vice President of BrandsMart USA testified for his company as well as the National Retail Federation and the Stop Patent Abuse Now (SPAN) Coalition (of which ANA is a member). Mr. Sinewitz provided tangible examples of the threats his business has received and the dilemma his company has faced in deciding between settlement or much more expensive litigation.

Subcommittee Chairwoman Claire McCaskill (D-MO), Ranking Member Dean Heller (R-NV), as well as Senators Amy Klobuchar (D-MN) and Kelly Ayotte (R-NH) all expressed concerns about the practices of trolls. Senators McCaskill and Heller both stated that this hearing was not about harming rights of legitimate patent holders, but was instead about putting an end to extortion. Senator McCaskill expressed support of a registry for demand letters in order to bring transparency to the process. She also invited whistle-blowers within patent trolling companies to come forward in order to help the Congress and the FTC gain a better understanding of how these entities work.

ANA sent a letter, along with four other associations, to the Senate Commerce Committee before the hearing. This letter closely mirrors the one we sent yesterday to the House and Senate Judiciary Committees.

If you have questions on this matter, please contact Dan Jaffe in our Washington office at 202-296-1883 or via email (djaffe@ana.net).

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