Vermont has passed a bill, which the Governor is expected to sign into law (H.299) called “Bad Faith Assertions of Patent Infringements” — hat tip to Eric Goldman for identifying the law. Instead of defining bad faith assertions, it provides factors that may identify bad faith assertions, including:
- Failing to identifying the patent(s)-at-issue;
- Failing to identify the patent owner;
- Failing to explain the alleged infringement;
- Making deceptive/meritless assertions; or
- Demanding too much money or too fast a response.
It also offers factors suggesting good faith assertions:
- The patentholder commercializes the patent;
- The patentholder is the original inventor; or
- The patent has been successfully asserted in court.
Where a court finds a bad faith assertion, there are several remedies:
- Damages. The statute provides for equitable relief which could include an injunction against further assertions, actual damages as well as increased damages of trebling the actual damages or $50,000, whichever is greater, and attorneys’ fees.
- State Enforcement. Vermont’s attorney general can initiate civil enforcement proceedings under the law.
- Bond. The court can require the accused patentholder to post a bond of up to $250,000 in case the accused infringer is awarded its attorney’s fees. In my experience bonds rarely have the significant deterrent effect that they are expected to have.
This is an interesting attempt to handle the patent troll problem. In particular, it allows for a pre-suit remedy. The law could be used against a patentholder that has not yet filed suit, making it a faster and potentially cheaper alternative to things like the SHIELD Act that only provide relief after a successful final judgment. But it still suffers from several problems:
- Preemption. The federal patent law preempts related state laws. Vermont’s statute extends beyond patent law to a degree, but there is still a strong chance it is preempted.
- Limited Jurisdiction. The law only offers protection in Vermont. Any retailer with locations in Vermont could attempt to avail itself of the statute, but that may or may not be enough of a connection.
- More lawsuits. Solving lawsuits with more lawsuits just multiplies lawsuits, and in many (maybe most) cases will require suits in multiple states. If the patent holder has not sued for infringement before being hit with a suit in Vermont, one has to assume they will shortly after. So, you will have a Vermont state case and a federal case, likely outside of Vermont. This is another example of how legal solutions to the troll problem are necessarily imperfect. What we really need are market based solutions.
Vermont’s effort is well-intended and a positive step forward, but it has problems and even if it survives a preemption challenge it will have limited benefit. At a minimum, however, it is another of many patent troll reform efforts and continues a recent trend of governments actively seeking solutions to the troll problem. Several new bills are being introduced in Congress, which I will discuss in future posts.
Interestingly, yesterday Vermont’s Attorney General sued patent troll MPHJ Technology Investments under consumer protection laws, presumably not willing to wait for this bill to be signed into law. The complaint is a good read, carefully laying out the history of an assertion campaign. This is an interesting test case and suggests that Vermont’s law may be somewhat redundant.