Letter to Judiciary Committee regarding Amendments to Innovation Act of 2013

Dear Chairman Goodlatte,

We commend you for your work on the Amendment in the Nature of a Substitute to HR 3309, the “Innovation Act of 2013,” to address the continued onslaught of frivolous patent litigation brought by non-practicing entities (“NPEs”). Following the successful implementation of the America Invents Act of 2011 (“AIA”), the Innovation Act holds the promise to further constrain the abuse of the patent system by NPEs by lowering the overall costs of litigation (for both parties) and bringing much needed transparency to the space.

Financial institutions of every size have been targeted by NPEs, often referred to as patent trolls, who in most cases assert low-quality business method patents through vaguely worded demand letters or intentionally vague complaints. Indeed, patent trolls’ relatively recent focus on credit unions and community banks threatens to pose additional, unwarranted costs on smaller lenders and the communities they serve. Components of the Innovation Act could help alter the business model of trolls by removing some of their financial incentive to assert low-quality patent infringment in the hope of quick settlements. 

In the amendment, we appreciate your focus on enhanced pleading standards and limits on discovery. Enhanced pleading standards will provide much-needed transparency related to the merits or weaknesses of a lawsuit. If plaintiffs are required to specifically identify the accused product as well as asserted claims and factual basis for infringement, would-be defendants will be better able to make determinations regarding licensing or litigation. The limitations on discovery help balance the costs of litigation. In addition, the focus around core documents could save would-be defendants from exorbitant costs related to document production for documents beyond in the needs of any given proceeding. Discovery should not require defendants to provide patent trolls with an unlimited window into a company’s business operations. H.R. 3309 will help ensure that the discovery process is no longer abused.

We also appreciate your attempts to address the concerns of end-users. We, however, believe the legislation must go further. As end-users, financial firms of all sizes find themselves in litigation given that virtually all business method patents claim a method or process implemented through some type of technology. Because it is rare for our technology providers to voluntarily step into a lawsuit and stand in the place of their customers, we believe that adding a “right of contribution” or “mandatory joinder” to the patent law would enable a more equitable distribution of liability between end-users and suppliers. Under the “right of contribution,” the tortfeaser, or party that committed the tort, would be able to seek contribution from joint tortfeasors where one tortfeasor has paid more than its fair share of damages to the plaintiff. To accomplish this, the legislation should make clear that state contribution rights are not preempted or enumerate the right of contribution in the Patent Act. 

To read the full Comment Letter, download the PDF.