WASHINGTON – On Thursday, Congress held its second patent reform hearing of the week. The hearing in the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade examined draft legislation to reign in the abuses of patent assertion entities – commonly known as patent trolls, specifically their sending of vague and deceptive patent demand letters to shake-down businesses for money.

Patent trolls frequently send hundreds of patent demand letters to alleged patent infringers to scare these businesses into quick settlements or licensing agreements. Unfortunately, patent demand letters are often targeted at retailers, such as convenience store owners, who are end-users of technology products (such as WiFi or credit card processing technology). Patent trolls use excessively vague and threatening language when alleging patent infringement, and retailers – including many NACS members – often find it cheaper to settle or enter into a licensing agreement with the patent trolls than risk costly litigation.

Throughout the hearing, most Subcommittee members expressed strong support for curbing the abuses of patent trolls but were less certain about how to address the demand letter problem, the focus of the draft legislation titled the Targeting Rogue and Opaque Letters Act (TROL Act). The legislation seeks to curb the serious problem of abusive patent demand letters by establishing certain criteria for patent demand letters, such as ensuring that they contain a minimum level of transparency about who the patent troll is and what patent is allegedly being infringed.

NACS submitted a letter to the Subcommittee urging policymakers to strengthen the TROL Act to better “protect businesses, like convenience stores, that have been victimized by abusive patent trolls.”

The Subcommittee heard testimony from four witnesses: Diane Lettelleir of the J.C. Penney Corporation, who testified on behalf of the United for Patent Reform Coalition of which NACS is an executive committee member; David Long of Kelley Drye, testifying on behalf of the Innovation Alliance; Professor Gregory Dolin of the Baltimore University School of Law; and Charles Duan of the Patent Reform Project.

Patent demand letters are only one issue in the patent reform debate currently underway in Congress. Earlier this week,the House Judiciary Committee held a hearing on legislation NACS supports, the Innovation Act, which would make a series of important changes to the patent litigation system. Further congressional action is expected in the coming months on legislation to stop abusive patent troll tactics.