Patent Troll Legislation Update

Share on Twitter+1Share on LinkedInSubmit to StumbleUpon

CaptureSeveral states passed laws in the last year to go on the offensive against patent trolls, following in Vermont’s footsteps. Some variants of Vermont’s law of note:

1. Several states have codified the jurisdiction of the state courts to include the conduct of out-of-state patent trolls. However, it’s fairly clear that this provision cannot pass constitutional muster – personal jurisdiction is simply not established by the mere sending of a demand letter. With that said, however, it would be interesting to see how this would play out with the AG of a state involved and with the law being interpreted as a quasi-criminal matter (for example, Louisiana’s AG is the only entity allowed to go after patent troll activities). As Judge Toor made clear a few weeks ago, the constitutional protections offered to patent holders to send demand letters may not be as broad if their conduct trends toward nefarious activity.

2. Several states did not include a bond – it may be that this is already allowed generally in their jurisdictions, but it seems odd not to mention or delineate any boundaries.

3. Some states only allow their AG’s to prosecute patent troll activity.

Interestingly, no state has attempted to take on some of the more vexing activities of patent trolls. For example, there is no attempt to get past the endless shell corporate structures that these entities employ to avoid potential liability. I would think that a state could require an entity to provide notice to the state (similar to what Minnesota negotiated with MPHJ) of its desire to send an infringement letter and in that notice the state could require a) evidence of actual use of the patented technology by the entity and/or b) identification of the real party-in-interest with assets sufficient to present a bond (could they be required to register as a foreign corporation?). This would at least make the AG aware of patent litigation activity in the state (if a troll is sending thousands of letters, requiring notice may dissuade them from doing so).  But I’ve talked about some of these issues before.

Links to each state’s legislation and a brief summary of the differences from Vermont’s law are just below:*

VERMONT:

Standard Bad Faith/Good Faith Assertions of Patent Infringement used.

Bond: Motion by target, determination by court. Troll must post bond equal to good faith amount target would pay to litigate the assertion (not to exceed $250K).

Damages: Standard range of damages.

ALABAMA: No significant differences.

GEORGIA: No significant differences.

IDAHO:

Includes 3 year statute of limitations.

Regarding Bond: No upper limit (typically $250K) imposed by statute. The target of a patent troll must establish a reasonable likelihood that a person has made a bad faith assertion.

LOUISIANA:

Only the state’s attorney general has the authority to investigate and pursue claims.

Person’s (or entities) from outside the state making an assertion in-state is subject to the jurisdiction of the state.

No bond provision.

MAINE: No significant differences.

MARYLAND: No bond provision.

MISSOURI: No bond provision.

OKLAHOMA: Only state attorney general has authority to investigate and pursue claims.

OREGON: No bond provision.

SOUTH DAKOTA:

Includes an exception for publicly traded companies and patent owners using the patent in manufacturing and production of products and materials (in addition to the VT exceptions for higher education and technology transfer organizations for higher education institutions).

TENNESSEE: No bond provision.

UTAH: No significant differences.

VIRGINIA:

No bond provision.

Person from outside the state making an assertion in-state is subject to the jurisdiction of the state.

$2,500 civil penalty for each infraction.

WISCONSIN: No bond provision.

*Many thanks to Mathew Kryman, student at Vermont Law School and former intern at Dunkiel Saunders, for his help in analyzing the statutes.

*Thanks also to Rupalee Rashatwar, Program Coordinator/ Acting Legislative Coordinator at the National Association of Attorneys General for the compiling the legislative activities.

AG Sorrell Addresses Congress Regarding Patent Trolls

Share on Twitter+1Share on LinkedInSubmit to StumbleUpon

Bill Sorrell, Attorney General for the State of Vermont addressed The U.S. House of Representatives’ Committee on Energy and Commerce regarding patent trolls, and specifically, as I’ve commented on before, the need for States to be allowed to intervene on behalf of troll targets.  If any federal legislation should be passed on this issue, its the concept that States shouldn’t be preempted under the patent laws from asserting claims of unfair competition.

You can read the full press release below (note the links in the release are inactive):Sorrells tesitmony re Patent Trolls 4-8-14_Page_1 - Copy Sorrells tesitmony re Patent Trolls 4-8-14_Page_2 - Copy

 

Patent Troll “Light” in Minnesota?

Share on Twitter+1Share on LinkedInSubmit to StumbleUpon

Patent trolls may not feel so welcome after the MN AG’s actions.

MPHJ (patent troll of Vermont fame) and the Attorney General of Minnesota (AG) have settled a disagreement about MPHJ’s activities in Minnesota.  The Assurance of Discontinuance, which can be found here, includes some interesting provisions, and while some commentators have noted that this capitulation may signify the end of MPHJ’s activities in Minnesota, the agreement does present some interesting questions.

For example, would the agreement actually be enforceable if MPHJ sent a demand letter without getting the AG’s prior approval?  Constitutionally, MPHJ has the right to send demand letters so long as the letters are not objectively baseless.  The agreement may fall under the covenant-not-to-sue rubric, but covenants not to sue are only enforceable “if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement.”  Newton v. Rumery, 480 US 386, 392 (1987).  While this agreement may serve MPHJ and the citizens of Minnesota, it does not serve the overall interests of the patent system, which is the existence of valid and enforceable patents (and the challenge and invalidation of improvidently granted ones).

There are several questions surrounding the AG’s approval of future MPHJ demand letters:

  1. What process is the AG going to use to vet the demand letters?

Is the AG going to conduct invalidity and unenforceability analysis (won’t it have to in order to determine whether the letters are objectively baseless)?  Will MPHJ be required to provide a claim construction so that the AG can evaluate the claims or will the AG do it themselves?  Is the AG going to reach out to potential infringers and request information regarding potential liability?  If a request for information is made, is that information kept confidential?  Does the potential infringer have a right to refuse to provide information?

  1. Will that process be open for public inspection?

If a letter is vetted by the AG, what information about that vetting will be available to members of the public so that people can understand what amount of diligence has gone into reviewing the demand letters? What information collected by the AG will be available?  If a claim construction is completed, will it be available for public inspection?

  1. Along the same vein, what impact will the AG’s stamp of approval have on subsequent recipients of MPHJ’s demand letters?

If approved, has the state of MN just said: “Yes, we think MPHJ has a legitimate claim”?  Would a business, who has received an AG approved letter, think that they have basis to challenge the validity of the demand?  What if the AG is wrong and the patent was actually unenforceable and therefore the sending of the demand letter was objectively baseless?

Other interesting questions include:

Does the scope of the letter include businesses outside of MN?  MPHJ appears to have agreed not to send a letter to anyone having an address in MN, but it is not clear that this would exclude a company having its headquarters in MN and a business in Wisconsin.  Should all business set up a corporation in MN for receipt of service of process to be under the protection of this agreement?  Could this be a national agreement that could completely doom MPHJ?

Which patents does this agreement apply to?  It appears to apply to any and all patents owned or acquired by MPHJ and its affiliates.  Why would MPHJ acquire any additional patents with this agreement in place?

Lastly, MPHJ attested that it has not received any money from anyone it sent a letter to and if this representation turns out to be false it has to pay $50K.  Given scope of MPHJ’s activities and its many, many subsidiaries, it will be very interesting to see whether any MN residents come forward.