Academic journal article ABA Banking Journal

Turning the Tide on Patent Abuse: Vermont's New Law Already Inspiring Other States to Act

Academic journal article ABA Banking Journal

Turning the Tide on Patent Abuse: Vermont's New Law Already Inspiring Other States to Act

Article excerpt

The patent-troll forecast may be less gloomy for some banks thanks to a 2013 Vermont statute providing relief from bad-faith claims of patent infringement. The mighty patent-troll winds that are fueled by demand letters laced with claims of patent infringement and threats of litigation have caused banks to look for effective legal countermeasures.

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Patent infringement demand letters generally claim a bank's use of patented hardware, software, or business methods infringe on patents held by another entity. As end users of patented vendor service packages, banks are at the wrong end of the distribution chain that begins with an inventor and a manufacturer. Patented software and hardware like ATMs are vital to bank operations, and banks are often forced into user agreements barring them from receiving reimbursement or legal assistance from the service vendors to dispute infringement claims. Unfortunately, some banks do not discover that these contracts leave them vulnerable to infringement lawsuits until after a demand letter is received.

Demand letters often lead to litigation that drains the bottom line--even while a bank is prospering. Due to potentially enormous litigation costs, many banks accede to even dubious infringement claims to avoid legal costs. The settlements that result usually force banks to purchase licenses for thousands of dollars that grant use of the patented items.

So far, banks have looked in vain for effective tools to fight off patent claims. Though Congress is moving in positive directions on the issue, overwhelming passage of the helpful Goodlatte bill by the House of Representatives does not guarantee major federal law changes. …

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