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Business

June 30, 2013

Public transit agencies deride 'patent trolls'

CHICAGO (AP) — Public transit agencies nationwide are being targeted with questionable lawsuits by so-called patent trolls squeezing settlements out of financially strapped public entities unable to mount legal defenses against claims they are infringing on intellectual property protections, industry representatives said Thursday.

Lawsuits or threats of legal action have been lodged against at least 23 transit providers in some of the nation’s largest cities, including New York, Boston and Chicago. Opponents say the claims are frivolous and are stifling innovation, draining resources and costing taxpayers millions.

“We are seeing this huge onslaught of patent lawsuits,” said James LaRusch, chief counsel for the nonprofit American Public Transportation Association, which has filed a federal lawsuit seeking to protect its member agencies.

Critics of the practice deride the firms as “patent trolls” because they appear to do little genuine business or technology development beyond buying up patents and using them to demand licensing fees from other companies.

Known in technical jargon as patent assertion entities, they have also gone after private sector companies but are increasingly targeting public and governmental agencies, including utilities, cities, the U.S. Postal Service and now transit providers. The resulting settlements are draining already depleted public coffers.

That shift is alarming some in Congress, where several pending bills could help limit the damage from frivolous claims. The head of the Federal Trade Commission is seeking an investigation of such firms and their business practices.

“This type of litigation undercuts the purpose of the patent system and exploits the fact that public agencies are at a disadvantage in defending themselves,” said U.S. Rep. Daniel Lipinski of Illinois, the state’s senior member on the House Transportation and Infrastructure Committee.

The claims against transit companies have largely challenged the use of GPS-based tracking systems that alert customers to bus and train arrival times at stations and online.

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