The state of Vermont is fighting back against what it calls “unfair business practices” by non-practicing entities. The state passed a law against asserting false patent claims and filed a lawsuit against one so-called patent troll.
The new state law, entitled “Bad Faith Assertions of Patent Infringements,” is intended to distinguish between abusive and valid patent infringement claims. The statute includes a private right of action and also allows the state attorney general to enforce violations.
Factors that indicate a bad faith patent assertion include failing to identify the patent(s)-at-issue, the patent owner, and exactly how the recipient’s behavior violates the patent; demanding too quick a response or too costly licensing fees; and asserting deceptive or meritless allegations. Meanwhile, factors that suggest a valid patent infringement claim include commercializing the patented invention; being either the original inventor or an educational institution; and successfully enforcing the patent in court.
Vermont is also now the first state to file a lawsuit against a non-practicing entity (an NPE). The attorney general’s lawsuit alleges that MPHJ Technology Investments violated state consumer protection laws (not the newly passed law) by threatening to initiate patent infringement lawsuits against small Vermont businesses that did not pay licensing fees.
The lawsuit specifically claims that the NPE failed to conduct due diligence to confirm the businesses were infringing prior to sending the demand letters.
According to the complaint, the letters were also deceptive because the licensing fees suggested by the NPE of $900-$1200 per employee are higher than those normally charged. The lawsuit seeks an injunction and up to $10,000 in penalties per violation.
Given the novel nature of Vermont’s law and the suit, the patent community will be closely monitoring the legal developments surrounding both. It is unclear if the state’s foray into patent law, which is traditionally the jurisdiction of the federal government, will survive judicial scrutiny.
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