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Nine States Now Have Enacted Legislation Targeting Patent Troll Demand Letter Abuse

Wednesday, May 7, 2014

By Tony Dutra  

May 2 --Tennessee on May 1 became the ninth state to enact legislation creating a cause of action against any person who makes a bad faith assertion of patent infringement. Georgia, Maine, Utah and Wisconsin enacted similar legislation in April.

These “demand letters” are typically sent by a firm representing a patent owner, whereby the allegedly infringing product is bought off the shelf at business supply stores. The letter is sent to hundreds if not thousands of small businesses and individuals who conceivably could have purchased the product--the senders rarely investigate--demanding a license payment or else patent infringement litigation will ensue.

The U.S. Congress has so far failed to address the situation, and the states have taken the lead rather than wait for federal legislation.

Following is a list of the nine states with enacted legislation:

• Georgia H.B. 809 became Act 513 as it was signed into law April 15 and is effective July 1.

• Idaho S.B. 1354 was signed into law March 26 and is effective July 1.

• Maine S.P. 654 was signed into law April 14.

• Oregon S.B. 1540 was signed into law March 3.

• South Dakota S.B. 143 was signed into law March 31.

• Tennessee H.B. 2117 was signed into law May 1.

• Utah H.B. 117 was signed into law April 1.

• Vermont's Act 44 was signed into law on May 22, 2013.

• Wisconsin S.B. 498 (Act 339) was signed into law April 24.

Related bills are sitting on the desks of the governors of Alabama (S.B. 121), Maryland (S.B. 585), New Hampshire ( S.B. 303) and Virginia (H.B. 375) as well. In Virginia, the governor made a recommendation for a change, which both the House and Senate rejected on April 23.

One house in the legislatures of four other states has moved legislation on to its counterpart--Connecticut (S.B. 258), Illinois (S.B. 3405), Kentucky (S.B. 116) and Missouri (H.B. 1374).

Since February, six other states have begun the equivalent legislative review--Pennsylvania (S.B. 1222) on Feb. 4, South Carolina (H. 4629) on Feb. 6, Kansas (H.B. 2663) and New Jersey (S. 1563) on Feb. 12, Louisiana (H.B. 564) on Feb. 27 and Rhode Island (S.B. 2822) on March 25.

Two other bills were introduced earlier but are unlikely to see any action this year.

H.B. 521 in Mississippi passed in the House on Feb. 27 but is reported as “dead,” having “died in committee” in the Senate on March 4.

Nebraska L.B. 677 was listed as “Indefinitely postponed” in the Nebraska state legislature as of April 17. However, Nebraska Attorney General Jon Bruning joined Vermont's Attorney General William Sorrell and counterparts in New York and Minnesota (10 PTD, 1/15/14) in taking legal actions against patent trolls.

Will Congress Take Over?

Both Bruning and Sorrell have appeared before the U.S. Congress on this topic.

Bruning testified at a Nov. 7 hearing before a subcommittee of the Senate Committee on Commerce, Science, and Transportation. He called for “collective action” by states' attorneys general similar to their efforts against tobacco firms in the 1990s. However, he said that states acting alone could not stop the problems presented by demand letters.

Sorrell testified at a hearing held on April 8 by the House Committee on Energy and Commerce's Subcommittee on Commerce, Manufacturing and Trade. He asked the subcommittee--however it chooses to legislate nationally--not to preempt state laws and to allow states to continue to pursue litigation against demand-letter senders in state courts.

Legislation in Congress targeting patent troll abuses (H.R. 3309 and S. 1720) has focused on abuses in litigation rather than the pre-litigation demand letters.

The Demand Letter Transparency Act (H.R. 3540, 226 PTD, 11/22/13) would give some enforcement powers to the Patent and Trademark Office and the Federal Trade Commission. However, elements of that bill were proposed as amendments to H.R. 3309 in the House and failed before the House approved the bill on Dec. 5. The subcommittee that heard Sorrell's testimony was clearly considering a different bill, but none has yet been introduced.

The Transparency in Assertion of Patents Act (S. 2049, 40 PTD, 2/28/14) introduced in the Senate in February came out of the Nov. 7 hearing, but that bill is likely on hold until the Senate Judiciary Committee marks up S. 1720 and decides whether or not to add a demand-letter related provision.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

 

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

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