WASHINGTON – The Senate Judiciary Committee held a hearing yesterday to review S. 1137:  the Protecting American Talent and Entrepreneurship Act (PATENT Act), which seeks to reform the nation’s patent litigation system and address abusive practices by patent trolls. NACS, an executive committee member of the United for Patent Reform Coalition, has been actively involved with efforts to reign in abusive tactics by patent trolls and submitted a letter  to the committee expressing its support for the PATENT Act and the incredible costs that patent trolls impose on our industry.

The bipartisan legislation was introduced by Chairman Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT), along with five additional committee members: Senators John Cornyn (R-TX), Charles Schumer (D-NY), Orrin Hatch (R-UT), Amy Klobuchar (D-MN) and Mike Lee (R-UT). To deter frivolous patent lawsuits, the bill would make a number of changes to existing patent litigation procedures.

The legislation includes a “customer stay” provision that would allow a product’s manufacturer to litigate alleged patent infringement rather than the end-user of the product. This provision would be particularly important for NACS members, who are generally “end-users” of technology products such as Wi-Fi or card processing technology. As such, they often receive vague and threatening patent demand letters that try to shake end-users down for money by threatening to sue for patent infringement should the recipient refuse to pay a licensing or other settlement fee.

Diane Lettelleir, senior managing counsel of litigation for J.C. Penney Corporation, testified to this particular concern. She noted that many small retailers, such as convenience store owners, do not have the resources (either the legal expertise or financial resources) to fight patent litigation and have “no option but to pay the demanded settlements.” As Lettelleir explained to the committee, money lost to patent trolls is money that could have otherwise been used to “expand business, hire new workers or invest in new technology.” Many committee members expressed their support for the bill, and for the customer stay provision in particular.

Relatedly, and also of benefit to convenience retailers, the legislation would allow the Federal Trade Commission (FTC) to fine bad actors that send those misleading patent demand letters.

Patent reform continues to be a top priority on Capitol Hill. The PATENT Act is expected to move swiftly to markup and the House patent reform bill, the Innovation Act, is slated to be marked up in two weeks’ time.