Hotel Industry Being "Shaken Down" by Patent Trolls; Costs US Economy About $80 billion Per Year
November 15, 2013 5:24am
Washington, D.C. - November 14, 2013 - Justin Bragiel, general counsel for the Texas Hotel & Lodging Association (THLA), will testify today at a hearing of the House Energy and Commerce Subcommittee on Oversight and Investigations on "The Impact of Patent Assertion Entities on Innovation and the Economy." The hearing has been convened by Chairman Tim Murphy (R-PA) to examine the recent activities of the patent assertion entities (PAEs), also known as "patent trolls," and their impacts on American businesses.
THLA is a partner state association of the American Hotel & Lodging Association (AH&LA), the sole national association representing all segments of the 1.8 million-employee U.S. lodging industry.
Bragiel's submitted testimony notes that in the past year alone, more than 100 Texas hotels have been involved in lawsuits brought by patent trolls simply because of their installation of wireless Internet devices for use by guests. These complaints are "accompanied by a simple demand: Pay the PAE $5,000, or risk going to trial," he said. "Defending a patent lawsuit can cost hundreds of thousands of dollars due to the complexity of the case. Meanwhile, our hotelier has done nothing more than purchase a device off the shelf, install it, and operate it exactly as the manufacturer intended."
Frivolous patent troll lawsuits currently cost the U.S. economy $80 billion annually in lost revenues and productivity, and they are particularly detrimental to the many small hotels of 75 rooms or less found across the country.
"Hoteliers have one goal in mind when purchasing and installing wireless technology in their businesses: meeting the needs of their customers," said Katherine Lugar, AH&LA president/CEO. "Their ability to operate these hotels and provide amenities for their guests should not be hindered by the growing number of frivolous lawsuits that could - even if not battled in the courts at a cost of tens of thousands of dollars - result in payments of $5,000 to patent trolls. For the small hotels and 'mom and pop' establishments that are such an integral part of our local economies, these fines cause particularly substantial hardships, and they should be stopped. We urge Congress to move quickly on legislative remedies to the problem of patent trolls and put an end to these wasteful, harmful lawsuits."
A copy of Justin Bragiel’s opening statement is below:
Hearing: The Impact of Patent Assertion Entities on Innovation and the Economy
Hearing: Subcommittee on Oversight and Investigations
The Impact of Patent Assertion Entities on Innovation and the Economy
Thursday, November 14, 2013
Witness: Justin Bragiel
Texas Hotel & Lodging Association
1707 West Ave., Austin, TX 78701
Mr. Chairman and Members of the Subcommittee:
I am Justin Bragiel; I am general counsel for the Texas Hotel and Lodging Association (THLA). Our organization was founded in 1903, and we represent over 2,000 hotels across the State of Texas. Our member properties range in size from small one-room bed-and-breakfasts, to the largest convention center hotels with thousands of rooms. THLA is the largest state hotel association in the nation in both the number of hotel properties and hotel rooms we represent. It is my pleasure to advocate for our industry, and we appreciate the opportunity to testify before the Subcommittee.
Marshall, Texas is home to the Eastern District of Texas, a federal judicial district that has become synonymous with patent lawsuits. Referred to colloquially as the “rocket docket,” the Eastern District of Texas often hears the most patent cases per capita. As a result, the Eastern District has developed an expertise in patent cases, and many patent lawsuits originate there.
Abuse of the patent litigation process by patent assertion entities (PAEs) has long been an issue for technology-related firms, and estimates from our coalition indicate this abuse costs the U.S. economy about $80 billion every year in lost revenues and productivity. Recently, some PAEs have taken to targeting innocent product purchasers with allegations of patent infringement. Over the last year, almost 100 hotels in Texas have been subjected to lawsuits over alleged patent infringement by, simply because the hotel operates wireless internet devices (i.e. providing WiFi to hotel guests)
The effect on our industry has been detrimental and problematic. It is easy to put yourself into the shoes of a hotelier. Our guests expect WiFi internet connections at our lodging properties, and hotel brands require their franchisees to provide it. The hotelier contacts a vendor, purchases a wireless router or access point off the shelf, and installs it on the property. Months or years later, the hotelier receives a federal civil complaint, alleging that her operation of a WiFi device is infringing upon a PAE’s patent. The complaint is accompanied by a simple demand: Pay the PAE $5,000, or risk going to trial. Defending a patent lawsuit can cost hundreds of thousands of dollars due to the complexity of the case. Meanwhile, our hotelier has done nothing more than purchase a device off the shelf, install it, and operate it exactly as the manufacturer intended.
Our member hotel properties do not have expertise in electrical engineering. It is not possible for us to verify whether a device manufacturer has licensed all appropriate patents before we purchase the device. We do not even know what devices and device manufacturers may be covered by a given
Testimony: Justin Bragiel, General Counsel, Texas Hotel & Lodging Association
patent. Our business is selling hotel rooms and taking care of guests, yet we are being shaken down and forced into a settlement, simply for purchasing an electronic device.
We need smart reform in addressing the PAE problem. Under the current system, it is not possible for us to predict which hoteliers will be sued for which technology, which brands of devices to buy or avoid, how much the PAE will demand in settlement, or whether the device manufacturer will intervene and defend us. Instead, this is a drag on our business, and in addition to the settlement, it is costing us lost productivity and revenue.
The American hotel and lodging sector is an essential part of the U.S. economy. Over 600,000 Texans are employed in the travel and tourism industry, and we are an essential component of both the U.S. and Texas economy. Reforming PAE abuse will help ensure our long-term viability and give our industry predictability and economic grown.
Contact: Matt Rhodes
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