Article

Why operators need to know about patent trolls

Patent trolls could cost restaurants money and slow innovation. Here's what operators need to know about patent trolls.

January 22, 2015 by James Bickers — Editor, Networld Alliance

With rising labor costs, protein price pressures and other issues clamoring for attention, patent trolls might seem like a distant concern to most restauranteurs. But operators need to pay attention. 

What are patent trolls?

Patent trolls are firms that buy obscure, general or vague patents with the sole purpose of extracting licensing arrangements and settlement payments by threatening businesses and companies with claims of patent infringement.

Threats often involve opaque claims regarding common practices, services or technology. The trolls' hope is that businesses will settle or pay a licensing fee rather than hire attorneys to fight back in court. The Boston University School of Law estimates that abusive patent troll practices cost the U.S. economy roughly $30 billion per year.

How do they impact restaurants?

Most restaurant operations are dependent upon different technologies -- from POS systems to inventory management tools to loyalty apps -- for day to day operations. Patent trolls are keen to exploit obscure technology patents. Businesses that tangle with patent trolls not only miss opportunities due to hampered innovation and development, they stand to lose real dollars dealing with legal costs.

White Castle has faced patent troll challenges in technology related to its digital menu boards, promotional programs linked to QR codes, website and smartphone apps, and even the link shortener used to tweet offers and updates. In a post on The Hill, White Castle President Lisa Ingram detailed her company's struggle with patent trolls.

Dealing with patent trolls has come at a cost for White Castle, Ingram said. Legal costs alone related to dealing with patent trolls have gone from one-quarter of one percent to nearly twenty percent of the brand's total legal costs.

NRF launches coalition

The National Retail Federation has launched United for Patent Reform, a broad business coalition formed to pursue legislation aimed at curbing abuse of the patent system by "patent trolls." Co-chaired by NRF and Oracle, the group is to be comprised of retail, hospitality and technology associations and companies, a press release said.

"Patent trolls have abused our patent system with their coercive bribery schemes for far too long," said NRF Senior Vice President for Government Relations David French. "There is strong consensus in the business community and in Washington that patent reform legislation is needed to end the patent troll racket. The White House, Supreme Court and Congress have all signaled that patent reform is necessary and now is the time to act."

The coalition has outlined seven core principles:

• demand-letter transparency;
• heightened pleading requirements;
• customer and end user protections;
• litigation procedures efficiency;
• discovery fee shifting;
• legal fee recovery; and
• litigation alternatives.

About James Bickers

---

None

Connect with James: