On March 6, 2014, the Virginia General Assembly unanimously passed HB 375, a bill prohibiting bad faith patent infringement assertions.

The Virginia Credit Union League provided CUPatentLitigation with the following statement in support of the new law:

“The Virginia Credit Union League Supports the passage of House Bill 375 which gives the Attorney General the power to investigate bad faith assertions of patent infringement. Over the past several years credit unions have experienced demand letters asking for settlement for alleged patent infringement.  In most instances, there have been no violations. ’Patent trolls’ make the claims subjecting the credit unions to unnecessary licensing fees or expensive litigation. While our efforts to combat this problem have been primarily focused at the federal level (H.R. 3309/S.1720), we believe the state law will help deter the practice of ‘patent trolls’ and provide a measure of protection and relief to our members.”

In the final bill, the General Assembly detailed a non-exhaustive list of circumstances that may indicate the presence of bad faith, including the following:

  • A demand letter that does not contain certain details regarding the patent or patent owner;
  • A person asserting infringement who does not make a reasonable effort to conduct a claims analysis;
  • A demand letter that does not specify the areas in which the products, services and technology are covered by the claims in the asserted patent;
  • An offer to license that is not based on a reasonable estimation of the value of the demanded patent license;
  • A demand that involves subjective bad faith or when a reasonable person would or should know the assertion is baseless;
  • A demand that is deceptive or threatens legal action that cannot or is not intended to be implemented;
  • Where a person asserting infringement has previously, but unsuccessfully, attempted to enforce and litigate the same or similar infringement claims with a court finding the allegations baseless or imposing sanctions; and
  • Where the subject patent was not in force at the time of the alleged infringement or the subject patent claims have previously been held to be invalid.

The General Assembly did not stop there – it also provided examples of circumstances indicating that a patent assertion was not made in bad faith, including where a person asserting infringement:

  • Took reasonable steps to establish that the target has infringed the subject patent and negotiate an appropriate remedy;
  • Makes a substantial investment in the use of the patent or development, production or sale of a product covered by the patent;
  • Demonstrates good faith in previous efforts to enforce the same or a similar patent, or has previously enforced the same or a similar patent in an earlier litigation; and
  • Is an institution of higher education or affiliated technology transfer office.

The bill’s provisions dealing with what may serve as evidence to contradict allegations of bad faith make clear the new law is intended to target entities abusing the system. The General Assembly even included a provision tailored to protect colleges and universities, some of which voiced concerns over getting caught up in the sweeping nature of recent patent reform measures.

Regarding enforcement of the new provisions, the bill provides the Attorney General with the power to investigate violations of the new law, seek voluntary compliance from offenders and prosecute actions in state court. The new law dispenses of any requirement to prove damages, allows courts to issue temporary or permanent injunctions and grants courts the power to award to the Commonwealth civil penalties, reasonable expenses incurred in investigating and preparing its case and attorneys’ fees. The bill, however, does not create a private cause of action for victims of bad faith patent infringement assertions.