Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Patent troll prevention law proposed by Washington Attorney General, (Jan 14, 2015)

By Linda O’Brien, J.D., LL.M.

On January 13, Washington Attorney General Bob Ferguson announced that his office has proposed the Patent Troll Prevention Act—legislation intended to protect businesses from bad faith predatory claims of patent infringement and to give the Attorney General legal enforcement authority. The proposed legislation, Senate Bill 5059, is sponsored by Sen. David Frockt (D, Seattle). The companion bill, House Bill 1092, is sponsored by Rep. Laurie Jinkins (D, Tacoma).

According to the Attorney General, patent trolls have become an expensive and escalating burden for businesses across the country, hurting the economy and stifling innovation. A study from the Boston University School of Law estimates that patent trolls cost the economy $29 billion in direct legal costs in 2011.

Patent trolls make money by acquiring exceptionally broad patents and blanketing the state with bad faith “demand letters” targeting small businesses. These demand letters threaten legal action if businesses do not pay licensing fees. Unlike legitimate patent holders, patent trolls’ threats are misleading, intimidating, and deceptive. Patent trolls know their claims would not prevail in litigation and have no intention of going to court. Their scheme relies on small, uninformed businesses that are willing to pay licensing fees to avoid the threatened lawsuit.

The proposed legislation will protect the state economy from abusive bad faith assertions of patent infringement, while not interfering with federal law or legitimate patent enforcement actions, according to the Attorney General.

The Patent Troll Prevention Act prohibits demand letters that contain false or deceptive information; are sent by parties who do not have the right to license or enforce a patent; baselessly threaten litigation if a fee is not paid; and fail to identify the individual asserting the patent and explain the alleged infringement. The legislation also would provide the Attorney General with enforcement authority to hold fraudulent patent trolls accountable.

Under the proposed law, in determining whether a person has made an assertion of patent infringement in bad faith, a court may consider several nonexclusive factors as evidence, including: (1) the demand did not contain the patent number issued by the U.S. Patent and Trademark Office (USPTO) or facts relating to specific areas in which the target’s product, service, or technology infringes the patent; (2) the demand requested payment of a licensing fee within an unreasonably short period of time; (3) the patent infringement assertion contained false, misleading, or deceptive information; and (4) the person previously filed or threatened to file one or more lawsuits based on the same or substantially equivalent patent infringement assertion and the assertion was found to be without merit by a court.

Research conducted in 2012 at Santa Clara University found that 55 percent of patent troll targets are small businesses, and 18 percent of targets give in to the demand without fighting the assertion in court. In the past two years, 17 states have passed patent troll legislation to stop abusive patent troll practices, the Attorney General noted.

“Patent trolls target and swamp small businesses with deceptive demand letters,” said Attorney General Ferguson. “The Patent Troll Prevention Act will protect small businesses and provide my office with enforcement authority to hold fraudulent trolls accountable.”

News: ConsumerProtection WashingtonNews