Oregon and Kentucky crack down on "patent trolls"

Recently, Oregon and Kentucky became the latest states to crack down on "patent troll" activity, seeking to provide relief to small businesses whom legislators believe have been unfairly targeted by patent assertion entities (PAE's).

The Oregon legislation seeks "to protect small businesses from 'patent trolls' who extort licensing fees by threatening litigation," according to state Sen. Jackie Winters (R-Salem) who, along with state Rep. Jennifer Williamson (D-Portland), introduced Senate Bill 1540.

"I think citizens and small businesses of this state should not have to feel like they're getting these demand letters for no reason," Winters stated at a state Senate Judiciary Committee meeting last week, "and then it ends up costing them an unnecessary amount of money."

The bill would prohibit any person or entity from sending a person or another entity a demand letter that "alleges, asserts or claims in bad faith that the recipient has infringed or contributed to infringing a patent or the rights that a patentee has, or has granted to an assignee or licensee, under the patent."

Even a single infraction could trigger an investigation by a state prosecutor, depending on the following factors:

• Whether the demand letter "required the recipient to respond or to pay a license or other fee within a period of time that a reasonable person would consider to be unreasonably short";
• Whether the demand included the patent number, accurate contact information for the demanding entity, and a statement of alleged facts that "would enable a reasonable person to understand the basis of the allegation or claim that the recipient has infringed the patent";
• Whether the letter included a comparison of the patent claims and the accused product that "specifically identif[ies] the infringing features";
• Whether the company seeks an "unreasonable" amount of money;

"This type of harassment," Winters said, "is something we should actively and aggressively discourage."

Meanwhile, in Kentucky, one state legislator has introduced a similar bill that equates "[m]aking or threatening to make a bad-faith assertion of patent infringement" with "an unfair, false, misleading, or deceptive act or practice in the conduct of trade or commerce."

Like the Oregon bill, the proposed Kentucky legislation, co-authored by state Sen. Whitney Westerfield (R-Hopkinsville), would enable the recipients of bad-faith demand letters to sue the entities and recover treble damages, costs, and attorney's fees.

All of these proposals come on the heels of similar efforts in Vermont and Nebraska and amidst activity at the federal level, currently in consideration by the U.S. Senate (see our Innovation Act of 2012 blog post), designed to target the worst abuses of some PAE's.

Further states are likely to jump into the fray in the near future, and further congressional action is expected in the spring. Stay tuned.