Credit Unions versus Patent Troll Demand Letters

Credit unions are non-profit financial institutions with nearly 100 million members, but they can’t afford to fight patent trolls either. Two days ago, a Vermont credit union CEO testified before the Senate Judiciary Committee chaired by Sen. Patrick Leahy, of Vermont. John Dwyer spoke for the Credit Union National Association, and they have good ideas about urgently needed pre-litigation help to protect small businesses from patent trolls. His complete remarks are at cuna.org.

Mr. Dwyer’s FCU is a defendant in a patent infringement lawsuit involving their 23 ATM’s, but his statement goes beyond litigation reform and supports the kind of pre-litigation demand letter restrictions that deserve legislative and regulatory attention. This is a notable additional voice as the limited reach of litigation reform and its intrusion into the federal judiciary are being argued in the Senate.

Although confidential settlements deprive us of data, there is every reason to believe that most first or second round demand letters from patent trolls result in small businesses paying money they can’t afford for licenses they may not need. FCU’s are small organizations that don’t have staff counsel or outside IP lawyers. They’re like tens of thousands of other small businesses vulnerable to scare tactics.

The CUNA legislative proposals, like the demand letter restrictions I’ve advocated, could make small business safer from trolls. They include:

  • give the Federal Trade Commission explicit enforcement authority over patent trolls
  • require these detailed descriptions in troll demand letters:
    • each patent and each claim allegedly infringed
    • how asserted patent claims correspond to the functions of the recipient’s accused products or methods
    • the recipient’s acts involved in each claimed infringement
    • the basis of the right of the party sending the letter to allege infringement of each patent and claim
    • the principal business and ownership of the party sending the letter
    • current or past litigation and the status or validity of each patent alleged
    • licenses associated with the asserted patents.
  • require senders of over 10 demand letters in a single calendar year to file the letters in a publicly available registry maintained by a federal agency.

None of these restrictions will interfere with the federal courts’ management of patent cases. But they’re ideas now, not law.

Yet you can ask for many of these things now if you get a troll demand letter. Your requests won’t have the force of law, but they could help off a troll. Ask for a claim chart. Several CUNA recommendations amount to requiring troll demand letters to contain claim charts. Keeping things vague serves the patent troll business model for collecting money from small businesses. A claim chart makes them get specific. It shows the troll you know vagueness when you see it, and it isn’t enough to make you pay them.

About Craig Pinkus

Craig Pinkus is a partner in the Intellectual Property Group. He also is a member of the Litigation and the Sports, Entertainment and Media Groups. He assists clients with a broad range of disputes and transactions involving all areas of intellectual property, entertainment, and other complex business arrangements. He has conducted trials and arbitrations throughout the United States and has argued appeals before the Seventh, Sixth and Federal Circuit Courts of Appeal, the Indiana appellate courts, and United States Supreme Court.
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