The drumbeat against patent trolls is growing louder. Bipartisan cooperation seems like a relic these days, but both parties, at the federal and state levels, seem to agree on at least one thing—it’s open season on patent trolls. While bills at the federal level continue to stall, the states are stepping in to do what they can to combat bad-faith patent infringement claims. On Friday, Oklahoma became the latest state to join the hunt when the governor of that state approved anti-patent-troll legislation.
At the federal level, at least twelve bills dealing with the patent-troll issue have been introduced this Congress. The bill with the most momentum, the Innovation Act (H.R. 3309), passed the House by a bipartisan vote of 325-91 late last year. The bill seeks to raise pleading requirements in patent infringement cases, unmask the real party in interest in these cases, and reduce the cost of discovery in patent litigation, among other things.
President Obama has also voiced his support for these reforms, urging Congress during his most recent State of the Union address to “pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.” Even the Supreme Court has gotten in on the act, with two recent decisions that make it easier for courts to require patent trolls to pay for frivolous litigation.
The Senate has taken up the Innovation Act, but the bill now faces additional scrutiny and has been stalled for several months; it may not be sent to the full Senate for a vote before elections and other priorities threaten to derail it entirely. Part of the fight is over the scope of the reforms. Opponents worry that the new law would ensnare not just non-practicing entities bringing frivolous patent claims, but also small inventors, academic institutions, and other companies seeking to enforce legitimate patent claims.
Despite the delay in Washington, momentum is building at the state level. While the states are preempted from passing laws that conflict with federal patent law, they are fighting back against patent trolls using existing consumer protection laws. In addition, eleven states have now enacted specific statutes that address bad-faith assertions of patent infringement, including: Vermont, Oklahoma, Georgia, Idaho, Maine, Maryland, Oregon, South Dakota, Tennessee, Utah and Wisconsin. More than a dozen additional states have similar bills at some stage of the legislative process.
Vermont was the first state to enact anti-patent-troll legislation. While the anti-troll statutes in other states vary somewhat, most states have followed Vermont’s lead. The statutes generally create a cause of action for “bad faith” assertions of patent infringement made by someone other than the inventor, the original assignee or a university. There are a number of factors set forth in the statutes that a court may consider as evidence of bad faith, including:
- Sending a demand letter that does not include the patent number and contact information of the owners of the allegedly infringed patent.
- Sending a demand letter that does not include factual allegations concerning specific areas in which the products or services of the target infringe.
- Failing to conduct an analysis comparing the claims in the allegedly infringed patent to the target’s products or services.
- Demanding payment of a license fee or demanding a response within an unreasonably short time.
- Offering to license a patent for an amount that is not based on a reasonable estimate of the value of the patent.
The remedies provided include equitable relief, damages, and costs and fees, including reasonable attorney’s fees, and exemplary damages up to $50,000 or three times the total of damages, costs and fees, whichever is greater.
While the recent activity by the President, Congress, and the states demonstrates an increased awareness of the problems raised by patent trolls, it’s not always easy to determine exactly who is a patent troll. Given the current, widespread anti-patent-troll sentiment, Congress has the difficult task of curbing abusive patent litigation tactics without unnecessarily hampering those companies and individuals seeking to legitimately enforce their patents.