It has dawned on most retailers by now what a significant part of their business is dependent on technology. From emails and apps, to inventory and shipping and even in-store, there is no aspect of retail that isn’t touched by technology and the need for the best tools around.

And those are the areas of retail — all areas, that is — that are being pounced on by Patent Assertion Entities (PAEs), disdainfully referred to as "patent trolls." A Boston University study found that these companies are costing businesses some $29 billion a year, not including indirect costs, and giving them a big headache.

Some of the firms that now function as patent trolls once operated legitimate businesses, helping inventors and other patent holders defend themselves against theft and abuse. But patent trolls are companies that work in the shadows, buying up broad patents in order to opportunistically sue technology users for infringement. The Boston University study found that their winnings simply accrue to themselves as profits that don’t go to investors or inventors, and that the suits stifle innovation.

“Trolls’ claims not only affect e-commerce applications and the everyday use of technology, but also…the storefront operations of traditional brick and mortar retailers,” says National Retail Federation senior vice president David French. “Some real world examples…cover point of sale and inventory control equipment, including; scanning barcodes, printing receipts, the sale of gift cards, and the connection of…a computer or printer to an Ethernet network.”

Here are some things retailers can do to stop patent trolls:

Fight back in court

Many companies settle these patent-infringement lawsuits, not because they have merit, but because litigation is time-consuming and expensive. But fighting back pays off. Electronics e-retailer Newegg has become something of a hero in the fight against patent trolls, after it prevailed against Soverain Software LLC earlier this year when it attempted to exact fees from several retailers that use online shopping cart software. 

Led by its chief legal officer, Lee Cheng, Newegg has continued to battle other patent trolls in court, and even when it loses, takes the verdict to appeal. In another case, Cheng’s team, along with Geico Insurance Company, fought back hard and won against a PAE that had successfully settled patent suits for $50,000 a pop. 

"People just had to start saying no," said Cheng. "It was very frustrating that people kept writing checks for $50,000. Every single person keeled over before they hit us and Geico.”

The patent troll, MacroSolve, wanted to settle with Newegg or drop the suit against just the retailer to avoid a tussle in court, but Cheng and the team held firm, because Newegg is working with the big picture in mind. “We said, 'Sorry guys, this is part of our strategy. People like you do not get to sue Newegg without consequence,” says Cheng. 

MicroSolve withdrew its lawsuit, unable to afford it. The moral of the story? Fight back. Every defeat against patent trolls has positive implications for all of the companies who are their victims.

State governments are taking action

Attorneys general in several states are going to court themselves, using their states’ consumer protection laws to root out and take action against deceptive practices by patent troll companies.

In May last year, Vermont attorney general Bill Sorrell for the first time ever took a PAE to court for deceptive practices, and later that year Governor Peter Shumlin signed a bill strengthening state law against patent troll activity. 

Nebraska’s AG quickly followed suit later that year, and others are gearing up. 

And New York attorney general Eric Schneiderman is gaining a reputation as a pit bull against PAEs, signing a consent decree a year ago with one entity requiring it to repay all the money it received from businesses in the state. 

“MPHJ [the PAE] falsely told businesses that most other businesses it had previously contacted had acquired licenses when in fact only a handful of businesses had done so,” Schneiderman wrote in a letter. “MPHJ also provided misleading information about the fees that the (few) prior licensees had paid. And MPHJ falsely threatened to sue hundreds of businesses if they did not respond to its letters within two weeks; in fact, it has never filed a patent lawsuit against a New York business.” 

Meanwhile, companies in Idaho, including the Idaho Retailers Association, supported a bill signed into law this week that makes it more difficult to make bad-faith litigation threats based on patents. Other states are working on similar bills.

The National Association of Attorneys General has formed a working group on patent trolls to help them swap information on ways to fight them in court and to pressure regulatory agencies, including the Federal Trade Commission, to take a close look at their methods. In fact, the FTC said in October that it will investigate known PAEs and take action against abusers of the patent system.

Retailers should stay abreast of what’s going on in the states most relevant to them and determine how closely state government is monitoring the problem and what is being done about it.

Call your congressman, now

Literally, now.

There appears to be solid and broad bipartisan support in the U.S. Congress for de-fanging patent trolls, but the bills are stalled. Just this week, Senate Judiciary Committee chairman Sen. Patrick Leahy (D-VT) postponed a vote on one bill until after the congressional spring recess so he can be sure he has the votes to get the bill out of committee. Details of the bill have been kept mostly under wraps, so both reformers and opponents aren’t sure quite what’s in it, exactly. But reformers are confident that it contains most of what they’ve been fighting for. 

That bill is a version of legislation passed by the House late last year. It would require transparency about who owns any patents being litigated and has provisions that discourage patent trolls from lurking behind shell companies. It doesn’t legislate against the patent letters that have so enraged state attorneys general, but it does stipulate that they are "considered abusive" and that they should provide more information about any supposed infringement.

The two-week recess provides a time for senators to get an earful on this topic. Leahy has said he’ll bring the bill up as one of the first orders of business April 28. Here are numbers and emails of all members of the U.S. Senate, and contact information for the Senate Judiciary Committee can be found here.