Virginia Republican state Sen. Richard Stuart says his legislation is designed to curb the explosion of abusive patent trolls, whose letters demand that businesses pay thousands of dollars to license equipment or face lawsuits, according to Virginia Business.
The lucrative nature of patent trolling stems from the fact that once these vague demand letters alleging infringements are sent out, businesses would rather just pay the frivolous license fee than rack up an even larger court bill.
Stuart insisted that the bill is not intended to “injure anybody’s ability to protect their patents. But we do want to stop what I like to call ‘legal extortion,’ and there were a lot of businesses suffering from that.”
This legislation places Virginia alongside over a dozen other states that have introduced measures to combat abusive patent trolls and litigation which blocks up the judicial system.
Several of the most important requirements of the bill mandate that patent demand letters must include the patent’s number, names of the patent holder, and an in-depth description of how that particular company is infringing on the patent holder’s rights.
Although at least initially spurred on by Virginia’s tech companies, Erich Spangenberg, owner of IPNav, an intellectual property consulting firm in Dallas, wonders if the legislative approach creates some unintended consequences.
“The safest course of action, therefore, is not to send letters at all — but just go straight to filing a lawsuit,” said Spangenberg. “We wonder if Virginia’s high-tech industry will be cheering the new legislation so much when they find out that the logical response from patent owners will be ‘sue first, discuss later.’ ”
Zach Graves, policy analyst at the R Street Institute, is more concerned about the need for promising developments on the state level to be followed by federal action.
“While there are important reforms the states can tackle on the consumer protection side addressing transparency and demand letters (following the Vermont bill), many key areas are out of their reach due to federal supremacy,” Graves told The Daily Caller News Foundation.
“In particular, we’d like to see federal legislation with a basket of civil litigation reforms much like Chairman Goodlatte’s Innovation Act–for example, reasonable fee shifting, ending discovery abuse, heightened pleading, end-user protection, and transparency of ownership. We’d also like to see measures addressing patent quality and clarity, and we fully expect the patent issue to come back next year.”
R Street Institute associate fellow Steven Titch also added that “one of the biggest complaints from patent defendants is that demand letter provide very little detail when they sue for infringement, yet raise the fear of a costly legal fight. What reformers want to see from plaintiffs are specifics about the patented intellectual property, manufacturing process, software or other such details when they make their claim.”
“This would put a dent in frivolous claims while still allowing the law to continue to protect legitimate patent holders, who should easily be able to provide these details,” he continued.
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