As with many other pressing issues of the day, Vermont has once again taken unprecedented steps toward addressing problems that Washington has not been able to concern themselves with. Earlier this week, the Vermont legislature passed H.299, which attempts to place barriers in front of entities looking to extort money from businesses based on bad faith assertions of patent infringement (e.g., some patent trolls). Although, as I wrote earlier, I believe the bill could have been stronger, I also believe that this bill can have an immediate beneficial impact on Vermont businesses and is a starting point for future legislation that will continue to frame Vermont as a place that looks out for its people and its business community.
The primary benefits of the bill are twofold.
The Bill Exists
The first benefit is that the bill exists – it puts legislation on the books that makes bad faith demand letters a violation of state consumer protection law and its mere existence makes the playing field more complex and more risky for unscrupulous entities looking to make a quick buck by threatening businesses (and in some cases nonprofits) with expensive litigation.
Patent trolls and other entities that engage in aggressive licensing campaigns will need to reevaluate the risks associated with going after a Vermont business or organization, because of the potential risk of being hailed into state court to answer a state law claim. Even with the possibility of removal to federal court, this risk is one that some patent trolls may not want to take. This may be especially so when the modus operandi for some patent trolls is to extract a quick settlement with little expenditure on their own part. In fact, some patent trolls that get hailed into federal court on a declaratory judgment action fold as quickly as possible to avoid litigation costs. Thus, this bill may change the perceived cost benefit equation of patent troll tactics.
Attorney General Involvement
The second, and likely greatest, benefit of the bill is the potential for the Attorney General (AG) to investigate and initiate lawsuits against entities that engage in bad faith assertions of patent infringement. While the AG would need to clear the same hurdles (mentioned in my previous post) as a patent troll target (e.g., business or organization), the state’s involvement could be significant. When facing off against the AG, the patent troll won’t be able to rely exclusively on a target’s unwillingness, lack of wherewithal, or lack of funds, to engage in a lawsuit to defend itself. Moreover, as those who have litigated against government entities know, there certainly isn’t any “easy money” to be made in that game. The equation – and the troll’s motivation – will change very quickly if there is a risk that the “answer” to a demand letter might come from the AG’s office.
Making the Most of the Law
To make the most of this bill, two things need to happen. First, it must be made widely known to the business community that this state court cause of action is available, and especially that the business community should report all suspect demand letters from patent trolls to the AG’s office. It might be wise for business associations and the Vermont Chamber of Commerce to consider focused PR campaigns in and outside of Vermont to let both businesses and would be patent trolls know about the new law. Second, to make the perception of risk real, the AG’s office should invest the necessary resources in investigating and, where appropriate, prosecuting bad faith demand letters served on Vermont businesses and nonprofits. The more widely known the bill and the more likely it seems that the AG will become apprised of bad faith patent assertions, the higher the risks for patent trolls, and consequently the greater the likelihood that they will decide to leave Vermont businesses alone.