Archives for April 2013

High Hurdle for State Laws to Curtail Patent Troll Activities

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Patent TrollThe question of how to limit the activities of patent trolls (aka patent assertion entities (PAEs) or non-practicing entities (NPEs)) has been a hot topic over the past several years.  The discussion of options for addressing the issue at the federal level continue, but in the absence of an overarching federal solution, states have been looking for ways to address the problem through state law.

Here in Vermont, for example, the Legislature is considering a bill (S.7.), to amend the Vermont Consumer Fraud statute to defines the criteria used to establish “bad faith” by a patentee sending demand letters (letters indicating that infringement may be occurring) to a potential infringer (see the full text of the bill here).  The legislation is focused on curtailing certain types of demand letters and the abusive practice that many patent trolls engage in, especially with small to medium sized businesses that may not have the financial means and wherewithal to challenge bald and possibly baseless claims of patent infringement.

Of course, seeking state solutions to a problem that is inherently a federal issue is always tricky because state laws in this area may be a) preempted by the broad scope of federal patent law and b) unconstitutional based on the general rule that a person has a right to redress of grievances before the courts, which in this case, includes the right to send demand letters or other notices of possible ensuing litigation so long as those letters are not sent in “bad faith.”  State laws that intrude upon this area run the risk of being held invalid when challenged in federal court.  In terms of patent preemption, the Federal Circuit has determined that in order for any state law tort claim (e.g., tortious interference, unfair business practices, etc.) to exist against a patent asserter, the assertion of the patent upon the potentially infringing party must be “objectively baseless” – which essentially means that a reasonable person would not have believed that they would have had a chance of a positive outcome in a lawsuit.  Unfortunately, the current draft of the Vermont legislation fails to directly address this issue.

Where the current draft of the bill falters is in its omission of language that requires a court (federal or state) to first determine whether or not the patent asserter has made an objectively baseless claim of patent infringement.  The bill does include objective criteria of baselessness, such as if the patentee knows its patent is invalid (see, sections (b)(6) and (b)(7) (and possibly (b)(8)(B), but that would be a stretch in my view), which have previously supported a finding of objective baselessness.  However, the present bill would be stronger, and more closely comport with federal law, if these criteria, individually, were required findings of the court, not just potential basis for determining that the demand letter was served in bad faith.  The law should also include an additional criterion giving broader authority to the courts to account for other factual situations, such as, “other indicia of objective baselessness” or “other indicia that no reasonable person would have considered their potential case to have merit.”

If the current bill goes forward, how is this most likely to play out?  In the past, the Federal Circuit has been quick to look to the definition of “objective recklessness” for guidance in interpreting the meaning of “objective baselessness,” and this has been an increasingly high burden for parties to meet.  Thus, I could see a patent troll, who is hailed into state court, quickly filing a counter claim/suit and having the case removed to federal court, and then successfully using the Federal Circuit’s definition of objective recklessness (which also covers frivolous suits and attorney’s fees under 35 U.S.C. 285) to avoid any state law claims.  Depending on the facts, this could make the law fairly useless if Vermont state courts apply the caselaw set forth by a Vermont district court and the facts in that case are highly supportive of a finding of bad faith.

In the end, the best part of this bill may be the ability of the Attorney General’s office to go after trolls. The Attorney General’s (AG) involvement ups the ante for any patent troll, flips the balance of power in the typically patent troll situation (there by discouraging the basic strategy of most patent troll), and importantly, can serve to insulate Vermont businesses from the claims made by patent trolls because there would be no direct recourse by the patent troll on a potential infringer.  Of course the AG would still need to meet the standard of “objective baselessness” – but the deterrence factor alone may  have a valuable dampening effect on troll activity in Vermont.  It could be strengthened further if the statute required the AG’s office to investigate any complaints of bad faith patent demand letters served on Vermont businesses.

Supplementing federal law with clearly defined and narrow state legislation make sense, and focusing on expanding the remedies and claims available under the Vermont Consumer Fraud statute is a good approach. But the current legislation needs some important revisions before it can serve as an effective deterrent of bad faith patent troll claims.  I will outline some other steps that would complement this approach in future posts.

Interested in Patents? Join me at Norwich Univ. on Wed., May 1.

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Patent Myth Busting: Laying Patent Law Misconceptions to Rest

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Misconceptions are common when discussing almost any legal field, as the law typically contains nuances that are just plain difficult to navigate for the uninitiated.  The patent laws are no exception – there are several mistaken beliefs that folks have when they think about the patent system, and I think it’s time that these are laid to rest.  To that end, below are five misconceptions that I regularly dispel when talking with people about the ins and outs of patent law:

Bicycle Model for Patent No. 222537 - (picture courtesy Rothschild Petersen Patent Model Museum.

Bicycle Model for Patent No. 222537 – (picture courtesy Rothschild Petersen Patent Model Museum.)

  • Misconception #1: I need a prototype

While prototypes or models were once required by law as part of the patent filing process, this is no longer a requirement (although you can still see some of the devices, like the bicycle pictured right, sent in during the 18th and 19th century at the Rothschild Peterson Patent Model Museum or at the USPTO Museum).  Today, although there are numerous technical requirements for a patent application, the main requirement is a description of the invention that is sufficient to a person of ordinary skill in the pertinent art, science, or area to make and use the invention without extensive experimentation.  For most applications, the submission of labeled drawings is also required so as to assist in understanding the invention claimed.

  • Misconception #2: Patents are only for tech companies

All types of ideas can be patented so long as they are novel and non-obvious in view of what has already been invented and disclosed (referred to as Prior Art).  There are still patents being issued to mousetraps, light bulbs, and flower pots in addition to all the high tech gadgetry that is being patented by Apple and Samsung.  Additionally, there are different types of patents that are specifically available for plants and ornamental designs of objects (bottles, gloves, shoes, etc.).

  • Misconception #3: I can’t patent an invention that is a combination of known items

The Supreme Court has said that the “combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” KSR Int’l Co. v. Teleflex, Inc.  Thus, while many combinations of known items may not be patentable, if the items are combined via new or novel methods or a when a combination yields unpredictable results (or both), an inventor may be entitled to a patent.  A new invention may also be patentable if it is a significant departure from the prior art in terms of scale, footprint, throughput, or other metric.

  • Misconception #4: Having a patent gives me the right to make my invention

Unfortunately, obtaining a patent does not mean that you have a right to make your invention.  This may be best understood through an example:

  • You invent the touch screen that is obviously perfect for cell phones.
  • You obtain a patent that covers a cell phone having a touch screen.
  • Apple has the patent to the cell phone.
  • You cannot make a cell phone having a touch screen because if you did so, Apple could sue you for infringing its patent on a cell phone.  However, Apple cannot make a cell phone with a touch screen either.

Although my example is slightly contrived because no-one, including Apple, would have a patent to all cell phones, this situation certainly occurs.  Hopefully, if it does, you’ll be able to work around the other patent or license/purchase the necessary technology.

  • Misconception #5: I can stop people from making my invention once I have a patent

Interestingly, the rule associated with whether an inventor could get an injunction, thereby stopping an infringer from continuing to infringe, has changed within the last five years.  In days past, an injunction was almost issued as a matter of course when infringement of a patent was found.  However, since the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, this tradition has changed and injunctive relief is no longer a guarantee.  In fact, the Supreme Court’s ruling has opened the door for revising the standards for injunctive relief, which we are beginning to see in decisions from the Federal Circuit Court of Appeals (which hears all patent appeals).  Moreover, the Federal Circuit’s reasoning in these recent cases has been construed so as to even further limit the ability of patentees to obtain injunctions, which you can read more about in my previous post.

Conclusion

Not everything you hear about patent law is true.  If you are thinking of protecting an invention with a patent, it’s important to get the facts straight and make sure you understand how the patent system works.  With a better understanding of the actual requirements, costs, and benefits of obtaining a patent, you can make more informed decisions about whether patenting your invention make sense in your situation, or whether it’s better to pursue other methods of protecting your intellectual property.

Disclaimer – As always, we recommend that inventors consult an attorney to discuss the specifics of their situation before making decisions regarding their pursuit, enforcement, or defenses relating to intellectual property.