Supermarkets’ solution to patent trolls: fight it out at the USPTO

New anti-troll bill allows for many patents to be challenged outside of court.

Joe Mullin – Jul 22, 2013 2:30 pm | 49

Not just tech: supermarkets, hotels, retailers all want to see patent reform in 2013. Credit: Nate Gray / flickr

Reps. Darrell Issa (R-CA) and Judy Chu (D-CA) will introduce an anti-patent-troll bill on the House floor today, Issa’s legislative director told reporters in a call this morning. The gist of the bill is that it will greatly expand a modest “review” program for business method patents that was part of the 2011 America Invents Act.

“Patent trolls have become an enormous headache for our industry, and those costs are sent down to consumers,” said Erik Lieberman, a lawyer for the Food Marketing Institute, a supermarket trade group that was also on the call. “The average profit margin in our industry is less than one percent. This is not just a high-tech issue.”

Lieberman explained why the supermarket industry was getting heavily involved with patent reform: in growing numbers, supermarkets are being accused of patent infringement for using basic website functions. In recent years, supermarkets have been hit with patents claiming rights to “store locator” features on websites, having a clickable menu on a website, rendering JPEG graphics, and sending out text messages with embedded links, said Lieberman.

Some reform-oriented groups, including Communications and Computer Industry Association (organizers of today’s call), are looking to the business method review process as one that could be effective in blocking more bad patents. The first such review to be completed resulted in SAP knocking out a patent owned by Versata Software, which may save the company from a $345 million patent damages verdict.

Fees and costs to conduct such a review add up to about $100,000, according to CCIA patent counsel Matt Levy. That’s much less than the cost of litigating a patent case through trial, which is typically $2 million or more. The review process also lends itself to a situation where many small businesses could mount a collective attack on a bad patent, whereas managing joint defense groups in litigation is a trickier affair. “If a troll is targeting 20 or 30 companies, they can each chip in,” explained Levy.

Currently the review process is limited to financial patents, and it’s a temporary program scheduled to be phased out in 2020. The Issa bill would make the program permanent and expand it to many types of patents. The bill is similar in many regards to one introduced by Sen. Charles Schumer (D-NY) in May, but it’s clearer in what types of patents it will apply to and when, according to Issa’s legislative director.

Expanding this review process for business method patents is a tactic also endorsed by the Obama Administration, which published a report last month on actions that could be taken to chip away at patent trolls.

Issa’s bill is the sixth bill to be introduced this year regarding patent trolls, suggesting Congress will take up the issue directly some time this fall. While this bill seeks to directly invalidate bad patents, others take different approaches: some are focused on protection for end-users, for instance, or tipping the scales toward patent defendants in lawsuits.