Patent Troll Watch - States Are Pushing Patent Trolls Away from the Legal Line

by Foley Hoag LLP
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Oregon introduces bill to make improper patent license demands a violation of its unlawful trade practices law

In February 2014, Senate Bill 1540 was filed, which would  make patent trolling a violation of the Oregon’s Unlawful Trade Practices Act, and  allow an individual or business targeted by a patent troll to sue and recover attorneys’ fees.

The bill would make it a violation of the Unlawful Trade Practices Act to send a letter demanding that someone license a patent without identifying the patent or explaining why the recipient infringes. It would also be a violation to demand payment of a patent licensing fee within an "unreasonably short" period of time.

California holds informational meeting for legislators on patent trolls, and attorney general investigates troll

In October 2013, California legislators attended an informational meeting to discuss the effect that patent trolls are having on California businesses held at Google. And at that meeting, a representative of California state Attorney General Kamala Harris explained that California’s existing state laws, including the Cartwright Act, the state's unfair competition law, and other business tort laws can help businesses fight back against “overly aggressive patent assertion entities.” In addition, he indicated that the attorney’s general’s has investigated and confidentially confronted one unnamed troll in an effort to make it stop sending demand letters to California businesses.

Minnesota reaches settlement agreement with patent troll

In August 2013, after initiating an investigation, Minnesota Attorney General Lori Swanson becomes the first state Attorney General to reach a settlement agreement with a patent troll.  The agreement require the troll, MPHJ (the “scanner troll”) to give the attorney general's office 60 days' notice and obtain its consent before it sends any letters targeting Minnesota businesses.

Wisconsin passes law restricting patent-licensing demand letters

In March 2014, the Wisconsin State Assembly and Senate passed a bill making it a crime to send patent-licensing demand letters that contain false or misleading information.    The law requires, among other things, an analysis setting forth in detail how the recipient of the letter allegedly infringes.  It also authorizes the state attorney general to investigate misleading demand letters, and imposes penalties of up to $50,000.

Kentucky introduces bill to make bad faith assertion of patent infringement an unfair trade practice

In February 2014, Kentucky state senator Whitney Westerfield has introduced bill that would criminalize making bad faith patent infringement allegations or making baseless demands for licensing fees.  The bill would also render groundless infringement accusations a violation of the Kentucky Consumer Protection Act, and would enable purported infringers to sue the non-practicing entities, or patent trolls, that have approached them and to recover tripled damages, court costs and attorney fees.  “Making or threatening to make a bad-faith assertion of patent infringement shall be deemed an unfair, false, misleading, or deceptive act or practice in the conduct of trade or commerce,” the unofficial copy of the bill stated.

Nebraska Attorney General investigates patent troll, and introduces legislation to make baseless claims of patent infringement

In July 2013, Attorney General Jon Bruning initiated an investigation into the business and patent enforcement activities of Farney Daniels, based on the state’s belief that letters sent by Farney Daniels to Nebraska businesses violated the state’s unfair competition law.   The investigation was based on both the state Consumer Protection Act and the Uniform Deceptive Trade Practices Act.   AS part of the investigation, the Attorney General issued a cease and desist order against Farney Daniels.  Farney Daniels responded by adding members of the Nebraska Attorney General’s Office as parties to a patent lawsuit brought on behalf of Activision TV in federal court.  On September 30, the federal judge presiding in that case held that the cease and desist order violated the constitutional rights of Activision TV and enjoined its enforcement.  The Attorney General appealed that decision to the US Court of Appeals for the Eight Circuit, but voluntarily withdrew his appeal in November 2013.

In January 2014, Bruning proposed a bill in the Nebraska state legislature that would make it a crime to allege patent infringement in bad faith.

The Nebraska Patent Abuse Prevention Act, which was introduced by state Senator Heath Mello at Bruning's request, would make it a violation of Nebraska's existing state consumer protection law to send letters making baseless allegations of patent infringement.

The bill sets out numerous criteria for courts to consider as evidence that a patent infringement allegation was made in bad faith. The factors include sending a demand letter that does not identify the patent owner or patent number and does not provide factual allegations about how the recipient infringes.  In addition, demanding a license fee "within an unreasonably short period of time" or offering to license the patent for an amount that is "not based on a reasonable estimate of the value of the license," would count as bad faith under the bill, as would making an infringement allegation the patentee knew or should have known was meritless.

Missouri Attorney General announces investigation of  impact of patent trolls on Missouri businesses

In November, 2013, Attorney General Chris Koster announced that he is actively engaged in investigating the impact of trolls on Missouri businesses.

New York Attorney General investigates and settles investigation of patent troll

New York Attorney General Eric Schneiderman initiated and eventually settled an investigation of alleged patent troll MPHJ Technology, which resolved hundreds of law suits MPHJ had threatened to file against the state's small and mid-sized businesses.

Massachusetts Attorney General begins research whether existing consumer protection Law protects against patent trolls

In November, 2013, Massachusetts Attorney General Martha Coakley announced that her office was exploring ways to end baseless patent trolling.    The initiative includes investigating Massachusetts’ existing consumer protection statute, Chapter 93A, which deals with consumer rights and business rights, to bring legal actions against unfair or deceptive business practices by a business against a consumer, or against another business, as well as reviewing the statutes enacted by states such as Vermont and Nebraska, and the lawsuits the attorneys general those states have brought.

Vermont passes amendment to state consumer protection statute to address patent trolls, and Attorney General files lawsuit against patent troll

Also in May 2013, Vermont Attorney General William Sorrell filed a lawsuit suit under the state consumer protection law against an alleged patent troll, Vermont v. MPHJ Technology, Inc.  The first effort by an attorney general to use state consumer protection law to stop a patent troll, the complaint alleges that MPHJ sent letters containing false and misleading statements about, among other things, the asserted value of the license it was offering and the response the sender had received from the business community. Vermont also alleges that the letters’ threats of imminent litigation were false. The case was filed in state court, but the defendant removed it to federal court. The defendant has also moved to dismiss for lack of personal jurisdiction.

Maine introduces legislation to allow state lawsuit for bad faith patent infringement claim, and to allow state Attorney General to bring action for bad faith patent assertion

Legislation introduced in January 2014 would allow a company or person to file a lawsuit in superior court against someone who has made a bad faith assertion of patent infringement against them.  It would also allow the state Attorney General to bring an action for a bad faith assertion in violation of the state’s Unfair Trade Practices Act.

Pennsylvania introduces bill to limit frivolous patent lawsuits

Pennsylvania Senate Bill No. 1222, introduced in February 2014, would limit and discourage frivolous patent infringement lawsuits. It would allow a target of a demand letter, someone threatened with patent infringement, or a defendant in a patent infringement lawsuit to bring an action in state court (the court of common pleas) for bad faith.

Virginia approves legislation to prohibit bad faith patent claims

In January 2014, the Virginia House and Senate approved legislation to prohibit patent trolls or anyone from making in bad faith an assertion, claim, or allegation that a resident of the Commonwealth is infringing a patent.

National Association of Attorneys General submits letter from 42 states supporting federal legislation to curb patent trolls

On February 24, 2013, the Attorneys General from 42 states signed a letter supporting federal patent reform legislation, including measures to curb patent trolls.  Those states were Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and Wyoming.

The states who did not participate were California, Delaware, Georgia, Montana, North Dakota, Ohio, Oklahoma, South Dakota, and West Virginia.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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