Congressman Michael Burgess (R-Tex.), Chairman of the Commerce, Manufacturing, and Trade Subcommittee of the House Energy & Commerce Committee, reintroduced the Targeting Rogue and Opaque Letters (“TROL”) Act this week.

The TROL Act includes a variety of provisions that seek to combat abusive patent demand letters.  According to Congressman Burgess, the “misuse of patents as a business strategy is a massive drag on the economy to the tune of tens of billions of dollars a year.”  Congressman Burgess believes that his TROL Act “offers a balanced solution to this pressing problem, targeting bad actors without compromising a strong patent system that is necessary to protect innovation and job growth.”

Congressman Burgess’s bill would categorize “certain bad faith communications in connection with the assertion of a United States patent” as “unfair or deceptive acts or practices.”  Specifically, the TROL Act classifies misrepresentations in demand letters as unfair trade practices when a sender wrongly and in bad faith states that:

  • The sender has the right to license and enforce the patent;
  • A civil action for infringement has been filed against the recipient;
  • A civil action for infringement has been filed against others;
  • Legal action for infringement will be taken against recipient;
  • The sender is the exclusive licensee of the patent;
  • Others have purchased a license for the patent asserted in the letter;
  • Others have purchased an unrelated license and it is not identified as such; or
  • An investigation of the recipient’s infringement occurred.

The bill also prohibits a sender from seeking compensation in bad faith for:

  • A patent that is held to be unenforceable or invalid in a final determination;
  • Activities taken by the recipient after expiration of the patent; and
  • Activity of the recipient that the sender knew was authorized by a person with right to license the patent.

In addition, the bill prevents a sender from omitting in bad faith:

  • The identity of the person including the name of the parent entity unless the person is a public company and the name of the public company is identified;
  • An identification of at least one patent allegedly infringed;
  • An identification of at least one product or service of the recipient infringing the identified patent;
  • A description of how the accused products or services infringe the patent claims; and
  • A name and contact information for a person the recipient may contact about the assertions or claims.

The provisions in the TROL Act would likely have a significant impact on limiting abusive demand letters.  The Act hands over enforcement of the law to the FTC.  The FTC would treat any violation of the Act as unfair trade practices under § 5 of the Federal Trade Commission Act.  The bill would allow the FTC to use is civil penalty powers against demand letter abusers, making them potentially liable for up to $5 million for a series of related violations.  Moreover, if the FTC does not have the resources to adequately pursue all abuse, the bill empowers state attorneys general to bring enforcement actions.

The TROL Act also preempts all state laws relating to the assertion of patent rights.  This provision aims to standardize the piecemeal approach taken by a majority of states to the problem of bad-faith patent demand letters.  At the same time, both state attorneys-general and the FTC would have authority to enforce the measure.

In the coming weeks, we will provide further analysis on how the TROL Act stacks up against the other patent reform legislation introduced earlier this year.