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Lawmakers Go Hunting for “Patent Trolls”

Posted in IP Antitrust

Oregon has now become the second state to take aim at non-practicing entities (NPEs), more colorfully called “patent trolls,” with laws addressing patent enforcement.  On February 25, 2014, the state attorney general announced that the legislature had passed a measure making it a violation of the Oregon Unlawful Trade Practices Act to send a demand letter that fails to identify the patent and the violation, or that insists the recipient make a licensing payment in an “unreasonably short” amount of time.

The Oregon law is only the latest, however, in a flurry of activity.  Vermont passed a similar measure last year and Nebraska is considering doing so now.  Also last year, the U.S. House of Representatives passed a bill designed to raise the stakes for NPEs that threaten or engage in patent litigation.  The House bill would force plaintiffs to include in complaints the identity of their parent companies and greater detail regarding the alleged infringement.  The bill further imposes restraints on discovery to prevent plaintiffs from using discovery costs to pressure defendants for a settlement early in the litigation.  In some circumstances, costs could be imposed on losing plaintiffs.  The U.S. Senate has not yet acted on the legislation.  However, U.S. Senator McCaskill introduced a bill on February 27, 2014 called the Transparency in Assertion of Patents Act that, like the state laws, particularly focuses on making it harder for patent assertion entities to issue demand letters to small companies.

Finally, President Obama is implementing new measures to reduce the prevalence of NPE patent litigation in the future by raising the overall quality of patents.  These measures include additional training for patent examiners and crowdsourcing “prior art” from the public.

Lawmakers and commentators disagree over whether NPEs stifle innovation or perform a useful role by creating a broader market for patents.  But the movement toward greater regulation of the enforcement and litigation tactics that some NPEs favor is unlikely to lose steam.