America’s patent system should protect and reward true innovation — not serve as a tool for abuse by entities that exploit vague or low-quality patents for financial gain. Unfortunately, “patent trolls,” or non-practicing entities, continue to target productive businesses with lawsuits based on questionable patents. These suits often have nothing to do with actual inventions and everything to do with extracting settlements from companies for using everyday technologies.
In recent years, these abusive lawsuits have grown more aggressive and widespread. Retailers are increasingly targeted over the use of commonplace technologies — tools that are essential for modern commerce but have become a magnet for frivolous claims. Businesses have faced lawsuits for offering basic website functions like product searches, enabling mobile orders, providing customer service chat features or even allowing guests to access Wi-Fi. These claims often have little to do with genuine innovation and everything to do with exploiting legal uncertainty for financial gain.
Patent trolls lose more than 90% of the cases that make it to trial. But the cost of defending companies against the claims is so high — the average case costs $2 million and can take 18 months — that many victims settle out of court. The cases cost legitimate businesses close to $30 billion a year in direct costs and $80 billion indirectly, amounting to close to $1,000 a year for the average household when passed on to consumers.
Retailers are among patent trolls’ most frequent targets thanks to the industry’s increasing use of cutting-edge innovations, especially in online and mobile retailing. In one example, more than 40 online retailers whose smartphone apps include a link to privacy policies posted on their websites have been sued or threatened by a California company claiming to hold a patent on the practice. In another, companies that scan a paper document into a computer and then attach it to an email have been asked to pay a fee. Adding an item to an online shopping cart and checking out has also been challenged as patent infringement. Whether retailers go to trial or settle out of court, the cases consume time and money that could be better spent creating jobs, growing the economy and serving customers.
The number of patent lawsuits has grown as increased ecommerce and contactless technology have presented patent trolls with new opportunities, fueled by anonymous third-party litigation funders. In one frivolous case, a clothing retailer that previously sold only through its four store locations was sued for offering multiple options to pay on its newly established website. In another, a supermarket chain was sued for using QR codes to let customers scan and pay for groceries as they shopped rather than standing in a checkout line.
NRF co-chairs United for Patent Reform, a coalition of businesses advocating for a fair and efficient patent system. NRF continues to push for reforms that curb abusive litigation and improve patent quality. Our key priorities include:
Strengthening Patent Quality:
NRF supports efforts to ensure the U.S. Patent and Trademark Office issues higher-quality patents by investing in examiner training, better review processes and feedback mechanisms from post-grant proceedings.
Preserving Inter Partes Review:
IPR offers a cost-effective way to challenge invalid patents without resorting to expensive courtroom litigation. NRF opposes efforts to limit or weaken this critical safeguard, including the use of discretionary denials that undermine IPR’s effectiveness.
Protecting End-users:
We advocate for legislative measures that stay litigation against small businesses when the technology provider or manufacturer is also sued. This would prevent NPEs from targeting downstream users like retailers that did not create the technology at issue and are poorly positioned to defend complex patent claims.
Promoting Litigation Transparency:
NRF supports disclosure of third-party litigation funding in patent cases, particularly where foreign investment may fuel abusive lawsuits. Transparency ensures that businesses know who is really behind a claim and protects against foreign interference.
Preserving Key Legal Precedents:
Alice Corp. v. CLS Bank: This Supreme Court decision rightly bars patents on abstract ideas and has helped prevent a resurgence of patent claims based on basic business methods, now being repackaged as “AI-enabled” inventions.
eBay v. MercExchange: This ruling brought balance to injunction standards, preventing NPEs from using injunction threats as leverage in settlement negotiations.
NRF is committed to working with Congress, the administration and the broader business community to promote a patent system that encourages true innovation while protecting legitimate businesses from abuse. We support reforms that raise the bar for patent quality, streamline challenges to invalid patents, and increase fairness and transparency in litigation.
Together, we can ensure that the patent system serves its intended purpose: advancing innovation and protecting American competitiveness.