A new Oklahoma law should give would-be plaintiffs pause before alleging abusive patent infringement claims. In May, Governor Fallin signed into law HB 2837, making Oklahoma one of 18 states to enact a state bill aimed at patent litigation reform. Non-practicing entities (NPEs), pejoratively referred to as “patent trolls,” are entities that typically do not engage in research and development or manufacture products or provide services, but whose business model is to purchase patents and then enforce those patents through demand letters and civil lawsuits. Patent infringement suits have steadily increased since 2011, and the majority of those suits are now brought by NPEs. One 2014 study estimated that NPEs accounted for 67% of all patent lawsuits filed the previous year, an increase from 28% five years earlier.
As a result, patent litigation reform has been a hot political topic over the past few years. At the federal level, however, at least 12 bills on the subject have been introduced in Congress, and all have died. Rather than waiting on their federal counterpart, state legislatures have decided to carry their own respective torches. Vermont became the first state to pass legislation aimed at reducing frivolous patent infringement demands in 2013. Since then, 29 other states have followed suit by introducing similar bills, 18 of which now have such laws in effect.
Oklahoma’s new law goes into effect on November 1, 2014. The bill, which was originally introduced by Representative McCall and Senator Jolley, will be codified as Title 23, sections 111 through 114, which can be found here. The new law specifically prohibits any person from sending (or causing to be sent) a “written or electronic communication” that falsely states litigation has been filed, is part of a “consistent pattern” of threatening patent litigation against businesses, or includes allegations that lack “a reasonable basis in fact or law.” An “unreasonable” basis includes omitting the patent number alleged to have been infringed or failing to state how the recipient allegedly committed infringement. Importantly, it is not a violation of the new law to make an allegation of infringement or demand compensation for that infringement, as long as the claim is not done “in bad faith.”
Oklahoma’s Attorney General can conduct civil investigations and file civil suits for violations of the new law, and claims for alleged violations can also be made by private litigants. Violations of the act can result in the violator having to pay the infringement defendant’s damages and attorneys’ fees, and possibly punitive damages up to $50,000. As a result, entities will likely think twice before making abusive claims against Oklahoma businesses. Oklahoma patent owners should, however, take precaution before making infringement threats of their own. Oklahoma’s new law encompasses any communication threatening patent infringement litigation, and could arguably be violated by broadly alleging infringement without specific factual support.
Whatever the effects of Oklahoma’s new law, it is clear that the Legislature’s purpose was to take an affirmative step toward preventing abusive patent infringement demands against Oklahoma businesses.
