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Utah Joins the War Against Patent Trolls

May 29, 2014 Blogs

If trolls are bad—eating billy goats and terrorizing the kiddies—patent trolls maybe even worse according to popular opinion. A patent troll is generally defined as an entity that does not sell the product behind its patent; rather, it extracts licensing fees and/or infringement damages from the unsuspecting (boo! we hate trolls!). This year, congress launched an opening salvo against patent trolls with the proposed “innovation act” (h.r. 3309). the act would require plaintiffs asserting patent infringement to be very specific and detailed in alleging and proving their claims and would make them pay for a defendant’s legal costs in the event of an adverse judgment.

Interestingly, there is a debate in the small business community as to whether the act would actually help or hurt small business. Intel, google, and Microsoft and other tech biggies were among early proponents. Moreover, the national small business association (NSBA) opposes the bill. It argues that four in ten small businesses sell or license patents, whereas only one in ten are ever threatened with a lawsuit.

Regardless, the innovation act is now stalled in the senate. So, the states have entered the fray. Over half have proposed or passed their own bills aimed at trolls. Significantly, in April, Utah’s governor signed into law h.b. 117, entitled “patent infringement amendments.” This law affects both patent holders and their targets.

The law prohibits “bad faith” demand letters that assert patent infringement. It states that any written communication (e-mail, etc.) to another asserting patent infringement must contain certain kinds of information and must omit other kinds of information. Furthermore, a patent owner who asserts patent infringement against a target, but who does not comply, could find itself in the “troll” category. This may result in actual and punitive damages and responsibility for the target’s legal defense costs. In certain circumstances, a court may actually require a patent owner asserting infringement to first post a bond in the amount of the target’s prospective legal defense fees. Finally, there is also a provision that allows the state’s attorney general to investigate and initiate enforcement actions against “bad faith” demands.

So, patent holders asserting infringement, beware! if you are not careful, you may find yourself among the trolls (boo!). On the other hand, if you are a target threatened by a vague claim of patent infringement, take heart; you have a new tool to fight the trolls!