Developments in State Anti-“Patent Troll”LegislationAugust 11, 2015

Patent law is within the exclusive jurisdiction of the federal government. In the past several years, however, a number of states have proposed or passed legislation aimed at combatting so-called “patent troll”behavior. Although patent lawsuits are tried in federal—not state—court, these state legislative efforts generally attempt to combat perceived patent-troll behavior by creating a separate cause of action to sue for damages or obtain some equitable relief from a bad faith patent assertion.


One of the most recent states to pass such legislation is Indiana, which enacted Public Law 172 on May 5, 2015. By passing the law, Indiana joins 26 other states that have passed some type of legislation aimed at perceived bad-faith patent assertions within their jurisdictions. The Indiana law is exemplary of these state-level efforts: it creates a state court cause of action for asserting a claim of patent infringement in bad faith, and sets out a number of factors that a court can consider in determining whether an assertion is made in bad faith, including:


  • The person asserting infringement writes a demand letter that does not contain each of several elements, or provide that information within a reasonable amount of time;
  • The person asserting infringement does not conduct an infringement analysis of the accused products or services ;
  • The person asserting infringement demands a license payment or response from the alleged infringer “within an unreasonably short period of time‚¬;
  • A proposed royalty payment “is not based on a reasonable estimate of the value of the license‚¬;
  • The infringement claim is meritless or deceptive; and
  • The person asserting infringement, or the persons subsidiaries or affiliates, filed suit without providing each of several elements. 


The Indiana law also provides that a target of such bad-faith patent assertion who prevail on such an action is entitled to fees and costs, equitable relief, liquidated damages or up to $5000 for each demand letter, and punitive damages. 


It is unclear whether or how many claims for bad-faith patent assertion have been brought in the states where these types of bills have been enacted.   One recent case, however, will test whether these types of statutes can co-exist with federal patent law. The Federal Circuit recently heard oral arguments in State of Vermont v. MPHJ Technology Investments, where the patentee has argued that a Vermont cause of action for a bad-faith patent demand letter belongs in Federal court, and has sought removal from Vermont state court where the action was brought. 


Filewrapper® will continue to track these state legislative efforts and their related cases. 



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