Patent reform on Main Street

Few issues are more important today than growing our economy and creating jobs on main streets all across America. The restaurant industry is doing its part. As the second largest private sector employer, more than 13 million people work in our industry. But, unfortunately, patent trolls are making it harder to maintain the industry’s growth trajectory.

More politely referred to as patent assertion entities (PAEs), patent trolls do not develop or sell new technologies; they exist to leverage large patent portfolios against operating companies, dragging down our economy, costing us jobs, and putting a tax on our products and services.  In recent years, patent trolls target the restaurant and hotel industries too often for their use of common technologies like Wi-Fi, web-based nutrition calculators and GPS store locators.  These frivolous lawsuits according to a Boston University School of Law estimate, cost the U.S. economy half a trillion dollars in the last 20 years, with over $320 billion of that economic loss occurring in just the last four years.

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Recently, White Castle executive Jamie Richardson told Congress they face major upfront challenges when they receive a demand from a PAE.  This often require claims be examined by an outside patent specialist costing the company money and time. Then, if the infringement claim moves to trial, it can cost way more than most small businesses can afford – sometimes millions of dollars.

The situation we heard from White Castle is similar to that from a number of other restaurant and foodservice companies; many of the PAE demands they receive have negatively impacted their business decision-making processes and stifled innovation by limiting their ability to employ emerging technologies in everyday aspects of their business.  PAE demands have impacted restaurants’ ability to communicate with customers and include claims against practices like inserting a hyperlink in shop promotions or the sending of tweets containing URLs to followers via their Twitter feed. Other patent infringement claims have prevented them from using the restaurant’s own logo to pinpoint locations on their website restaurant locator.

As a result of ever-increasing PAE demands, commonplace, everyday business risks have turned into expensive liabilities and border on the ridiculous. This slows down or stops the growth of entrepreneurs that are trying to gain a foothold in the industry and these setbacks result in the stifling of profitability, ingenuity, and growth, three things that we desperately need in an economy that is straining to grow.

Congress must stop patent troll abuse by passing comprehensive common sense patent reform legislation – now.  The National Restaurant Association has joined a group of organizations to form the Main Street Patent Reform Coalition, which is calling on Congress to address this issue by: making it easier to punish trolls that send fraudulent and abusive shakedown demand letters, eliminating trolls’ ability to hide behind multiple shell corporations, protecting end users from troll lawsuits based on infringements by intermediary manufacturers and producers, making trolls pay when they sue companies frivolously, and disarming trolls by improving patent quality.

In his State of the Union, President Obama encouraged congress to pass a “patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.” Proposed legislation to do just that has been welcomed with bipartisan support in both the House and Senate. The National Restaurant Association stands behind proposals that seek to end the practice of patent trolling so that our members can be free of harassment and focus on serving their customers.

As evidenced by White Castle’s experience and that of others within our industry, it is clear that PAE demands are negatively impacting innovation and the economy.  On behalf of our customers, the industry, and the over 13 million employees who depend on the restaurant and food service industry for their very livelihood, we urge Congress to pass meaningful reforms. Congress can help America’s small businesses by addressing patent trolls and every day they wait more jobs are at stake.

DeFife is the executive vice president of Policy & Government Affairs for the National Restaurant Association.