Vermont targets patent trolls with new legislation
The US state of Vermont has passed an act aimed at reducing “bad faith” patent infringement claims, in what is believed to be the first anti-patent troll US legislation.
Vermont Governor Peter Shumlin signed the ‘Bad Faith Assertions of Patent Infringement’ act on May 22, but it will not take effect until July 1, 2013.
Patent trolls, or non-practising entities, typically acquire patents in order to license or litigate them.
The act lists numerous factors that may amount to a bad faith assertion – in a court’s view – including meritless infringement claims and unreasonable licensing offers.
It will apply only to Vermont residents that have received letters alleging patent infringement or that have been threatened with, or are subject to, patent litigation.
Plaintiffs can bring cases in either state or federal courts, and must place a bond (capped at $250,000) equalling a “good faith estimate” of their expected litigation costs and damages.
The act says it is necessary because bad faith infringement claims “impose a significant burden on Vermont businesses” and “undermine Vermont’s efforts to attract and nurture small and medium-sized (SME)” companies.
Peter Kunin, some of whose clients at Downs Rachlin Martin PLLC in Burlington testified before the Vermont legislature ahead of the act’s approval, said local businesses have become angered by patent trolls.
“The most compelling thing is that this was a Vermont state reaction to Vermont businesses that were fed up of patent trolls. They felt the legal system was not working properly ... causing them to defend frivolous claims. My clients and others feel a deep sense of anxiety, frustration and powerlessness.”
Kunin said while the bill is not a “perfect solution”, it gives companies a tool to fight back and force patent trolls “to do their homework”.
Jeff McMahan, an attorney at Dinse, Knapp & McAndrew PC in Burlington, added: “I certainly expect folks who send these shotgun letters to get letters back or claims brought against them. Patent trolls will be better off going somewhere else.”
McMahan said the “open question” now was whether the statute will be trumped by federal law, which can sometimes override state law, for example if a statute hampers the ability to bring lawsuits in good faith.
The “key to why it is not trumped by federal law”, said Kunin, “is that it is narrowly drawn and applies only to bad faith threats or lawsuits”, and that it does not prevent patent owners from making legitimate threats or bringing valid lawsuits.
There are several other anti-patent troll bills being considered at the federal level, Kunin noted, and the “ultimate solution for the US is for Congress to act”.
He added: “But this statute sends a signal from the business community – particularly small and medium-sized enterprises – that the status quo is not acceptable.”
