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Patent trolls must be stopped, ABA tells House subcommittee

April 8, 2014

Congress must act to protect banks and businesses from abusive and deceptive patent demand letters that pose a serious risk, according to testimony this morning before the House Subcommittee on Commerce, Manufacturing and Trade.

Rheo Brouillard, director, president and CEO of the Savings Institute Bank & Trust, testified on behalf of ABA. The Savings Institute is a $1.3 billion community bank headquartered in Willimantic, Conn. Brouillard also serves as chairman of the ABA Community Bank Council.

In his testimony, Brouillard described the serious threat abusive patent litigation poses for banks and small businesses across the country. Since banks are often end users of technology, many institutions have been inundated by abusive and deceptive patent demand letters by patent assertion entities, or "patent trolls."

Patent trolls use overly broad patents, threats of litigation and licensing fee demands in an effort to extort payments from banks across the country. These demand letters often prey on small businesses of all kinds, which do not have the resources to fight such claims. Fighting these claims has a real cost: For banks it means less capital and fewer resources available for making the loans that drive economic growth.

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At present, patent trolls are able to make patent infringement claims for nothing more than the price of a postage stamp and the paper the claim is written on. These claims are often unintentionally vague and based on shaky legal standing. However, when confronted with threats of expensive litigation, many banks — especially smaller banks — find that their only option is to settle, rather than paying millions to defend against extortive claims of patent infringement.

Brouillard thanked Congress for seriously addressing the patent troll issue, and commended the House for passing bipartisan legislation — H.R. 3309, the Innovation Act. But he noted that more needs to be done:

There are a number of actions that can be taken to protect small businesses against these abusive patent demand letters, which will also help protect the holders of legitimate patents. Chief among them is to ensure that more details are included, in other words more 'transparency,' in any allegation of a patent infringement. We urge Congress to take action to ensure that our small businesses cannot be taken advantage of by patent trolls.

Read Brouillard's full testimony.