Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Bipartisan proposal aims to give FTC authority over abusive patent troll practices, (Apr 30, 2015)
By Linda O’Brien, J.D., LL.M.
A bipartisan group of senators on April 29 introduced legislation intended to protect businesses and innovators from patent assertion entities (PAEs) or “patent trolls” that misuse the patent system for their own financial gain by sending vague demand letters and threatening to sue unknowing customers. The bill would give the FTC authority over illegitimate patent demand letters.
The legislation was drafted after 18 months of negotiations between Senators seeking to craft a comprehensive bill that deters abusive conduct while preserving the strength of America’s patent system, according to a media release by one of the bill sponsors, Sen. Patrick Leahy (D-Vt).
The measure—entitled the ‘Protecting American Talent and Entrepreneurship Act of 2015,’ or the ‘PATENT Act”—was sponsored by Sen. Leahy, Judiciary Committee Chairman Charles Grassley (R-Iowa), and Senators John Cornyn (R-Texas), Chuck Schumer (D-NY), Mike Lee (R-Utah), Orrin Hatch (R-Utah), and Amy Klobuchar (D-Minn).
The proposed PATENT Act would impose civil penalties on PAEs that engage in the widespread sending of abusive patent demand letters. Such letters would be deemed unfair or deceptive acts or practices under Section 5 of the FTC if the communications falsely (1) represents the administrative or judicial relief sought or (2) threatens litigation if compensation is not paid and there is a pattern of false statements or threats made without litigation having been pursued. Under the Act, the FTC would be given authority to enforce the provision.
Additionally, the Act would:
establish clear, uniform standards for pleading in patent infringement suits to give defendants real notice of the claims against them, and keep meritless lawsuits from clogging federal court dockets;
increase transparency by requiring early disclosures about the patent-in-suit;
protect customers who are targeted for patent infringement by allowing the stay of an infringement case against an end user of a product while the manufacturer of the product litigates the alleged infringement;
require courts to stay discovery while they resolve key early motions in the case, including motions to dismiss and transfer venue;
provide that reasonable attorney fees will be awarded if the winner proves and a court rules that the losing party was not “objectively reasonable”;
add requirements that demand letters contain meaningful information so they cannot be used merely to scare recipients into early settlements; and
require the USPTO to keep information about patent ownership in order to provide a resource about patents being asserted in a demand letter or lawsuit.
“When small businesses in Vermont and across the country are threatened with patent infringement lawsuits for offering Wi-Fi to their customers, or for using document scanners in their offices, we can all agree the system is not being used as intended,” said Sen. Leahy. “I have been working with senators from both parties and a range of stakeholders for two years to design legislation that protects Main Street businesses and innovators. I am proud to be introducing the PATENT Act [w]ith Chairman Grassley, Senators Cornyn and Schumer, and other bipartisan members to protect those who are targeted by patent trolls, while preserving what has made America’s patent system great.”
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