Patent trolls continue to draw attention. As Anthony Biller detailed in the July issue of E-Commerce Law & Policy, the White House recently announced a plan to reign in patent trolls. The proposed reforms include, among others, giving federal district courts more discretion to award attorney’s fees to victims of frivolous patent litigation. The audience for the Administration’s proposal is Washington. Increasingly, however, the debate about patent trolls is moving into unfamiliar territory for patent law: state capitols.
Writing for Slate, Mark Koffsky suggests state governments take on patent trolls using the Eleventh Amendment. The Eleventh Amendment bars claims for money damages against states in federal courts. The article proposes that states use this immunity to broker the sale of products that infringe trolls’ patents. A company that makes an infringing product would sell the product to a state and the state would resell it to consumers. The state would collect a fee on each sale and remit the remainer of the proceeds to the product maker. In this model, since a state government sells the infringing product, the patent troll could not obtain damages from the seller because of the Eleventh Amendment.
While it is appealing on its face, this Eleventh Amendment attack would likely falter for at least two reasons. First, as the article itself acknowledges, the Eleventh Amendment does not prevent a federal court from issuing an injunction ordering state officials to stop infringing a patent. That would be a straightforward application of the famous stripping doctrine of Ex Parte Young, 209 U.S. 123 (1908). The threat of prospective injunctive relief is a significant bargaining chip and the Eleventh Amendment does not take it off the table.
Second, and most importantly, the proposal overlooks the possibility that the underlying seller could be held liable for indirect patent infringement. Under 35 U.S.C. § 271(b), “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Selling a product to a state “patent protection exchange” knowing its resale to consumers constitutes infringement sounds like inducement. This would extend liability to the underlying seller.
Even if the Eleventh Amendment could stop patent trolls cold, the relief might be temporary. Congress can abrogate a state’s Eleventh Amendment immunity using its power to enforce the Fourteenth Amendment. If states started engaging in a widespread pattern of patent infringement, Congress could pass a statute exposing states to financial liability. There would likely be calls for such federal legislation if states struggle to distinguish conventional trolls from other patentees like academic institutions that are not actively commercializing patented technology.