What credit unions need to know about patent trolls

Credit Union National Association assistant general counsel advises credit unions to fight the trolls

Robin Cook, assistant general counsel, CUNA

In myth and legend, trolls are fairly indiscriminate monsters attacking whatever creatures wander into their home turf. The same holds true for so-called patent trolls, non-practicing entities who use weak patents to extort money from businesses. Increasingly, these trolls are targeting “downstream” users of technology rather than manufacturers of devices like scanners and Wi-Fi equipment. These targets include restaurants, casinos and even credit unions.

Robin Cook, assistant general counsel of the Credit Union National Association (CUNA), is striving to bring attention to this problem and let credit unions know what they can do to fight back. “Credit unions, coffee shops and other small entities get demand letters or get sued and they don’t know how to react,” says Cook. “They are not well equipped to deal with the case. They might not have an in-house lawyer or a patent expert available.” For this reason, the demand letters sent by trolls act as a form of extortion, and credit unions often don’t know how to make heads or tails of these letters.

These demand letters are one of the biggest problems that credit unions face. “There are too many examples within the credit union space of absolutely egregious demand letters being sent by people who do no diligence up front, don’t provide any disclosure of what they believe the claim is or even what the patents are or if they even own or can enforce the patents,” Cook explains. CUNA would like to see the Federal Trade Commission (FTC) go after bad actors as a matter of consumer protection. It’s important, Cook says, to see strong user protections, as credit unions, like many small businesses, tend to buy technology off the shelf from reputable vendors, and should not be embroiled in these types of cases.

Cook also urges credit unions to fight back. “Trolls talk to each other,” Cook says. “They know which companies are not easy marks. Call their bluff and you won’t be targeted as much as those who roll over.” He admits, though, that this is tricky advice to give a credit union CEO. They are in the risk mitigation business, after all, and telling them to do something that opens them up to being sued can be a hard sell. But, Cook explains, fighting back will help in the long run. They just need the courage to fight back. 

Another piece of advice Cook has for credit unions is to reach out to others in their community to see who can help. People in state trade associations, for example, could help them learn if others have received similar demand letters. They should also look for counsel who are familiar with a specific troll and how it behaves. This makes it easier to fight back, as often, if companies that receive demand letters don’t speak up, they don’t realize that others are having the same problem.

Of course, Cook stresses that legitimate patent holders should not be afraid of reform. High quality patents should hold up to disclosure requirements. He notes that financial firms must do a lot of front-end work to collect on a debt or foreclose on a home, to show that they are entitled to do what they are doing. So, he suggests, it would not be unreasonable to require similar processes in the context of patents.

 

For more on the patent troll issue, check out the following:

Attorneys general, general counsel hold frank discussion on patent trolls, Part 1

Is patent trolling on the rise?

South Carolina’s attorney general latest to join war on patent trolls

Top U.S. patent troll sues the government for interfering with its business

Managing Editor

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Rich Steeves

Richard P. Steeves is Managing Editor of InsideCounsel magazine, where he covers the intellectual property and compliance arenas. Rich earned a B.A. in English Literature...

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