Responding to Patent Demand Letters: Leveraging State Laws on Bad Faith Assertion of Patents Determining What to Include or Exclude in Response, Minimizing Risk of Litigation Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. THURSDAY, MARCH 2, 2017 Presenting a live 90-minute webinar with interactive Q&A Sharon A. Israel, Partner, Mayer Brown, Houston Brian R. Iverson, Member, Bass Berry & Sims, Washington, D.C. Baldassare Vinti, Partner, Proskauer Rose, New York
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Responding to Patent Demand Letters: Leveraging State Laws ...media.straffordpub.com/products/responding-to... · 3/2/2017 · •Orrin Hatch (R-Utah), Chairman of the Senate Republican
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Responding to Patent Demand Letters:
Leveraging State Laws on Bad Faith
Assertion of Patents Determining What to Include or Exclude in Response, Minimizing Risk of Litigation
The Landscape of Patent Assertion Legislation: Federal
• H.R. 2045, the Targeting Rogue and Opaque Letters (TROL) Act
• Proposes Federal Trade Commission address claims of patent infringement demand letters sent in bad faith
– Establishes that it is an unfair or deceptive act or practice under the FTC Act to engage in a pattern or practice of sending written communications that contain bad faith misrepresentations about patent rights and allows the FTC and State AGs to fine violators
– Requires such written communications to include key information, such as identifying the person with the patent rights, parent companies, contact information, and information on how the recipient is allegedly infringing the patent.
– Includes a preemption provision – establishing a national standard for enforcement of abusive patent demand letters
• Approved by Energy & Commerce Committee on April 29, 2015
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The Landscape of Patent Assertion Legislation: Federal
• S. 632, the Support Technology and Research for Our Nation's Growth (STRONG) Patents Act
• According to Senator Coons the Act would strengthen our patent system and combat abuse by:
– Cracking down on abusive demand letters by empowering the Federal Trade Commission to target firms that abuse startups rather than invent anything
The Landscape of Patent Assertion Legislation: State
• Now dealing with a patchwork of state laws, which may be hard to navigate.
• Provides recipients of such certain patent-related communications with tools not previously available.
• Varies from state to state regarding scope of bills, tests used, who can enforce, remedies available.
• May impact legitimate enforcement efforts and offers to license.
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Patent Assertion Legislation Among The States
• Assessing Who’s Law Will Apply
– Louisiana’s law can be used to highlight:
“Any person outside the state asserting patent infringement by an end-user in the state shall be deemed to be transacting business within the state within the meaning of R.S. 13:3201 and shall thereby be subject to the jurisdiction of the courts of this state.”
• Applies to “[a]ny person” and could subject a party’s counsel, in addition to the party itself, to jurisdiction under the law
• Provision is not limited to someone merely sending demand letters in the state
• While Louisiana’s law only applies to patent assertions against an “end-user”, the laws of other states are not so limited.
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LA REV. STAT. ANN. § 51:1428 (West 2014) (emphasis added).
Patent Assertion Legislation Among The States
• Assessing Who’s Law Will Apply
– But note “target” language of some bills:
– “(3) 'Target' means a person:
• (A) Who has received a demand letter or against whom an assertion or allegation of patent infringement has been made;
• (B) Who has been threatened with litigation or against whom a lawsuit has been filed alleging patent infringement; or
• (C) Whose customers have received a demand letter asserting that use of such person's product, service, or technology infringes a patent.
– Generally state: “[a] person shall not make a bad faith assertion of patent.”
– Statues list series of factors that courts “may consider” as evidence whether a person has made a bad-faith or good-faith assertion of patent infringement
– Final factor in each list generally directs that a court may consider “[a]ny other factor the court finds relevant”
– Gives courts wide latitude to decide what constitutes a bad-faith assertion of a patent
– No one factor may be dispositive of the outcome
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VT. STAT. ANN. tit. 9,§ 4197 (West 2013)
Patent Assertion Legislation Among The States
• For States With Bright Line Rules:
– “A patent notification shall contain all of the following:”
• “The number of each patent or patent application that is the subject of the patent notification.”
• “A physical or electronic copy of each patent or pending patent.”
• “The name and physical address of the owner of each patent or pending patent and all other persons having a right to enforce the patent or pending patent.”
• “An identification of each claim of each patent or pending patent being asserted and the target’s product, service, process, or technology to which that claim relates.”
• “Factual allegations and an analysis setting forth in detain the person’s theory of each claim identified . . . and how that claim relates to the target’s product, service, process, or technology.”
• “An identification of each pending or completed court or administrative proceeding, including any proceeding before the U.S. patent and trademark office, concerning each patent or pending patent.”
• “No false, misleading, or deceptive information.”
40 WIS. STAT. ANN. 100.197 (West 2014)
Patent Assertion Legislation Among The States
• Determining Who May Be Affected
– Targets and Intended Recipients
• Some states liberally define “Target” to include both the entity that actually receives a demand letter or threat of litigation and the entity’s customers and end users that receive such a letter or threat
• Other states have attempted only to create liability when customers or end users are targeted with a demand letter or patent assertion
• Some (not all) bills have safe harbors
– E.g., 271(e)(2) exemptions
– E.g., Clarifying not a violation to notify another that patent is available for license
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Patent Assertion Legislation Among The States
• Enforcement and remedies vary from state to state
– State’s attorney general
• The attorney general may commence an action in the name of the state to restrain by temporary or permanent injunction a violation . . . [and] to recover a forfeiture to the state of not more than $50,000 for each violation.”
– Private right of action/Remedies
• A temporary or permanent injunction
• An appropriate award of damages
• Costs and reasonable attorney fees
• Punitive damages not to exceed $50,000 for each violation or 3 times the aggregate amount awarded for all violations.
– Alabama’s statute includes criminal penalties
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Patent Assertion Legislation Among The States
• Bond
– A number of states have potentially made a bond available
“Upon motion by a target and a finding by the court that a target has established a reasonable likelihood that a person has made a bad faith assertion of patent infringement in violation of this chapter, the court shall require the person to post a bond in an amount equal to a good faith estimate of the target’s costs to litigate the claim and amounts reasonably likely to be recovered under subsection 4199(b) of this chapter, conditioned upon payment of any amounts finally determined to be due to the target. A hearing shall be held if either party so requests. A bond ordered pursuant to this section shall not exceed $250,000.00. The court may waive the bond requirement if it finds the person has available assets equal to the amount of the proposed bond or other good cause shown.” (emphasis added)
43 VT. STAT. ANN. tit. 9,§ 4198 (West 2013)
The Landscape of Patent Assertion Legislation: State
• Writing Required? Demand required?
– Some bills use language: “Or other communication”
– Some say “letter, email or other written communication”
– Some not limited to patent assertion, e.g., “or that the actions of target would benefit from the grant of a license to a patent” or “or should obtain a license to a patent”
• Who can bring an action?
– “A target or a person aggrieved by a violation …”
– “Any person who suffers injury or damage as a result of a violation …”
– “A target of conduct involving assertions of patent infringement, or a person aggrieved by a violation ….”
• Relief – Possible Restitution:
– “Restitution of any person or persons adversely affected” by the violation – Georgia
– “An order requiring restitution to a victim for legal and professional expenses related to the violation” - Texas
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Patent Assertion Legislation Among The States
• Considerations Going Forward
• Recipients of Communications: May consider whether the communication is actionable or whether they should report it to an appropriate state attorney general
• Patent Rights Holders: Need to consider to whom a demand letter is sent or patent assertion is made and what to include in letter/communication
45 VT. STAT. ANN. tit. 9,§ 4198 (West 2013)
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Responding to Patent Demand Letters
Brian R. Iverson
Member
Bass, Berry & Sims PLC
No “One Size Fits All” Response
Nature of the Demand Letter
Client’s Strategic Objectives
Client’s Place of Business
Ethical Considerations
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No “One Size Fits All” Response
Nature of the Demand Letter
Client’s Strategic Objectives
Client’s Place of Business
Ethical Considerations
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Nature of the Demand Letter
Who is the sender?
► NPE
► Competitor
► Supplier
► Purchaser
► Unrelated Business
Who are the attorneys?
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Nature of the Demand Letter
What is the assertion?
► Single patent vs. portfolio
► Duration of alleged infringement
► Scope of alleged infringement
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Nature of the Demand Letter
What is requested?
► Cessation of activities
► Lump sum payment
► Royalty payment
► Meeting to discuss
► No specific demand
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Nature of the Demand Letter
What can you learn outside the letter?
► Term
► Assignment history
► Litigation history
► Licensing history
► Post-grant proceedings
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No “One Size Fits All” Response
Nature of the Demand Letter
Client’s Strategic Objectives
Client’s Place of Business
Ethical Considerations
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Client’s Strategic Objectives
Strategies Often Driven by Risk Level
► Strength of Infringement Allegations
► Prior Notice of the Patent
► Existence of Invalidity / Non-Infringement
Opinion
► Strength of Invalidity Arguments
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Client’s Strategic Objectives
Resolve Without Litigation
► Continue or Discontinue Activity
► Willing or Unwilling to Pay
► Willing to Cross-License
► Creative Business Resolution
► Alternative Dispute Resolution
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Client’s Strategic Objectives
Improve Litigating Position
► Gather additional information
► Self-serving statements
► Avoid disclosing too much
► Protections and limitations of FRE 408
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Client’s Strategic Objectives
Make an Example
► Will not pay nuisance value to NPEs
► Will use new state legislation
► Will use post-grant proceedings at PTO
► Will leverage membership in trade
organization
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No “One Size Fits All” Response
Nature of the Demand Letter
Client’s Strategic Objectives
Client’s Place of Business
Ethical Considerations
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Client’s Place of Business
State anti-trolling statute
State deceptive trade practices statute
Attorney General interest
Proper venue for infringement action?
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No “One Size Fits All” Response
Nature of the Demand Letter
Client’s Strategic Objectives
Client’s Place of Business
Ethical Considerations
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Ethical Considerations
Activities Touching Other Jurisdictions
► Analyzing another state’s statute
► Where is the attorney?
► Where is the client?
► What is the most likely forum?
Unauthorized Practice of Law
Multi-Jurisdictional Practice Rules
Competence
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Ethical Considerations
Criminal Prosecution
ABA Model Rules
► Removed specific prohibition on threats of criminal
prosecution solely for advantage in civil dispute
► Certain threats may violate other more general rules