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National Restaurant Association - NRA testimony: Patent trolls are stifling innovation

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NRA testimony: Patent trolls are stifling innovation

Claims by so-called “patent trolls” over restaurants’ use of new technologies are forcing companies to hold back plans to implement tools that could improve guest service, Jamie Richardson, White Castle vice president of government and shareholder relations, told the House Energy and Commerce Subcommittee on Oversight Thursday.

The hearing, “The Impact of Patent Assertion Entities on Innovation and the Economy,” is the latest in a series of congressional actions on patent assertion entities, commonly known as patent trolls.

Patent trolls are companies that seek to profit through claims of ownership of patents related to common business tools and practices. Often, their initial demands are for a one-time fee or settlement, which frequently is less costly for a business than challenging the claim. The subcommittee is investigating the impact patent trolls have on business and innovation, and called the hearing to get the perspective of companies that have received demand letters from patent trolls. Various pieces of legislation aimed at curbing patent abuse has been introduced in the House and Senate.

Richardson, who testified on behalf of the National Restaurant Association, said White Castle has faced patent infringement claims focusing on its use of online restaurant locators, its use of hyperlinks in social media, and the restaurant company’s use of QR codes on packaging during a promotional event. While all of these are common business practices, patent trolls seek profit by claiming ownership to a patent on the service or on technology used to deliver the service.

“These examples have major implications for the future of our promotional and loyalty programs, development of our website, and enhancement of our mobile smartphone app,” Richardson said.

The threat of future patent infringement claims against the chain led White Castle to change its business decisions, Richardson said. “Rather than pay fees to patent trolls, or spend significant resources to hire outside patent counsel, we have refrained from utilizing the alleged infringed activities,” he said. “The unfortunate byproduct is that our use of QR codes and hyperlinks will be limited in the future despite the value those basic technologies can bring to our customers…Where we continue to utilize any of these, or similar technologies in social media, advertising, or other parts of the business, we will proceed with extreme caution, treating uncharted territory like a field of landmines.”

The number of lawsuits brought by patent trolls has risen dramatically in the past two years, increasing from 29 percent to 62 percent of all patent infringement lawsuits, according to a 2013 White House report. The report estimated that patent trolls threatened more than 100,000 companies with infringement suits last year.    

Read the National Restaurant Association’s issue brief on patent abuse.

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