WASHINGTON (12/17/13, 10:44 a.m. ET)--Demand letters from "patent trolls" represent a great and growing threat to credit unions and other end-users of technology, John Dwyer, president/CEO of New England FCU, Williston, Vt., told the Senate Judiciary Committee this morning.
Dwyer testified on behalf of the Credit Union National Association and his own credit union at a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse." Dwyer was the only financial services representative to speak at the hearing.
In his testimony, the credit union CEO said his credit union is now in the middle of expensive discovery in a patent infringement case related to 23 ATM machines it provides for members. "The case has been a costly and distracting headache," he said.
The case began, he explained, with an "ill-researched, vague demand letter" that referred to his credit union as a bank, did not specify which of his credit union's ATM machines allegedly infringed a patent, and contained absolutely no information as to why the entity believed the credit union infringed. The letter only provided a simple list of patent numbers, he said. Attempts to clarify claims made in the letter were met with similar form letters from the patent trolls, and Dwyer said "the troll has recently turned up the heat in its rhetoric."
He described another patent troll letter offering a financial institutuion 'a special one-time limited time offer for smaller Banks such as yours to receive a fully paid up sub-license' for $2,000 per ATM, and eventually upped this demand to $5,000 per ATM. "Frankly, this language sounds a bit more like a late-night infomercial than a serious attempt at dispute resolution," Dwyer said.
If left unchecked, Dwyer said, the problem of demand letters will deter institutions like his from
using new technologies at all, including ATMs, online and mobile banking, remote check capture, and check processing.
To help prevent future instances of patent trolling, Dwyer, in written testimony, said CUNA supports:
Giving the Federal Trade Commission enforcement and rulemaking authority over patent trolls that operate in unfair or deceptive ways;
Developing minimum disclosure standards that would help ensure that only demand letters trulyasserting a potentially valid claim of infringement are sent; and
Requiring an entity that sends more than 10 demand letters in a single calendar year to enter all letters into a registry that would be publicly available and maintained by a federal agency.