SPRINGFIELD, Ill. (Legal Newsline) - The head of an Illinois retailers group says a new state law isn’t enough to fight off so-called “patent trolls.”
In a guest column for Reboot Illinois last week, Illinois Retail Merchants Association President and CEO Rob Karr said the federal government is better equipped to fight the entities, and needs to take action.
IRMA, founded in 1957, represents more than 23,000 state retailers. Its membership includes large, national chains and independent store owners.
In August, Gov. Pat Quinn signed into law Senate Bill 3405. The bill, crafted by Attorney General Lisa Madigan, cracks downs on the number of demand letters being sent by patent trolls to retailers and manufacturers in Illinois.
Generally speaking, a non-practicing entity, patent assertion entity or patent monetization entity purchases groups of patents without an intent to market or develop a product.
In some cases, but not all, the entity then targets other businesses with lawsuits alleging infringement of the patents it bought. Often, these are referred to as “patent trolls.”
Karr said a new threat is popping up in some states: patent-trolling companies bankrolled by foreign governments.
“Known as government-sponsored patent trolls (GSPTs), these companies have the financial backing of foreign nations. Japan, Taiwan, France and South Korea all have created patent-trolling firms,” he wrote.
“For American companies large and small, and particularly retailers, these GSPTs could become a huge drain on our economy if left unchecked.”
Karr pointed out that patent trolls tend to prefer to settle out of court, often because of litigation costs.
“But if the troll has deeper taxpayer funded pockets, litigation costs are merely a drop in the bucket,” he wrote. “That is one of the primary problems caused by GSPTs. For a small retailer the thought of taking on a foreign government in court, even if their claim is frivolous, can be a daunting motivator to settle out of court.”
He continued, “Though larger retailers may have more access to legal resources, they are still disadvantaged when facing a government who is slated to regulate the market in which they are participating through their state-controlled troll.”
Federal lawmakers, Karr said, need to act.
“Our lawmakers in Washington should seek to foster an international level playing field which encourages innovation and shields our retailers from trolling threats both private and government sponsored,” he wrote.
“We urge more action to defend against this expanding threat as more and more foreign governments get into the trolling businesses rather than risk falling behind their trading partners.”
Illinois’ new law bans patent demand letters that contain false or deceptive information; are sent by individuals who do not have the right to license or enforce a patent; falsely threaten litigation if a fee is not paid; and fail to identify the individual asserting the patent and explain the alleged infringement.
“This law provides protections for the thousands of Illinois businesses that have been inundated with costly, fraudulent demands from patent trolls,” Madigan said in August.
“The law balances restrictions to crack down on this abusive practice while ensuring legitimate patent holders have the right to pursue infringement claims.”
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.