Dwyer, testifying on behalf of CUNA, said small financial institutions are especially vulnerable since they usually do not have lawyers on staff to evaluate the claims.

“Unchecked, the problem of demand letters will deter institutions like mine from using new technologies at all. The technologies for which patent demand letters and litigation have become common against credit unions and community banks include some of the things that make financial services most accessible to consumers – ATMs, online and mobile banking, remote check capture, and check processing, just to name a few,” he said.

“CUNA has received calls from credit unions worried about making things like smartphone applications available to their members because they are afraid of getting sued. Many institutions will decide these technologies – however much they help their members – aren't worth the risk. If that happens, consumers lose,” he added.

CUNA supports Section 5 of the Patent Transparency and Improvements Act of 2013 as a way to combat the problem.

“The provision would clarify that the Federal Trade Commission has enforcement authority over patent trolls that operate in unfair or deceptive ways, but it does not provide the FTC with the ability to make rules in this area,” Dwyer said.

“We believe the FTC should have the ability to evolve in its enforcement powers as trolls evolve, and rulemaking authority would provide the agency with the means to do this,” he said.

NAFCU also supports the legislation.

“NAFCU was pleased to see FTC policing measures included in the Patent Transparency and Improvements Act of 2013 (S. 1720), bipartisan legislation introduced by Chairman Leahy and Senator Lee,” said NAFCU Vice President of Legislative Affairs Brad Thaler in a letter to the Senate Judiciary Committee on Monday.

“We would support additional language that would help to promote demand letter transparency by requiring certain minimum disclosures be made by trolls to better identify themselves, the patent in question, and the specific nature of the infringement being alleged,” Thaler's letter said.

Dwyer also made some additional policy recommendations in his testimony.

“An entity that sends more than 10 demand letters in a single calendar year should be required to enter all letters into a registry that would be publicly available and maintained by a federal agency, perhaps the PTO or FTC. This is important for a variety of reasons,” he said.

“First, it would provide businesses that receive a demand letter with the ability to communicate with one another,” he said in his written testimony. “A registry would also provide the FTC with the information it needs to conduct enforcement proceedings against abusive trolls, and would also remove one of the biggest factors of intimidation – the fear that you, alone, are being targeted.”