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Attempts by Oregon to legislate against trolls perfectly illustrate the dangers of doing so

Oregon is the latest US state to have decided that “something has to be done about patent trolls”. On Friday, its senate unanimously passed Bill 1540 which: “Prohibits person or person's affiliate from communicating demand to recipient if in demand person or affiliate alleges, asserts or claims in bad faith that recipient has infringed or contributed to infringing patent or rights that patentee, assignee or licensee has under patent.” The bill will now be considered by the Oregon house judiciary committee.

While legislators will no doubt be congratulating themselves on their actions, those who actually read what they have approved may wonder if senators have not actually voted to make it much harder for all patent owners – especially those with few resources – to enforce their rights, while at the same time creating something that will give lawyers (billable) hours of endless fun.

Running to seven pages, the bill states that:

If a prosecuting attorney receives one or more accusations from a recipient or recipients that a person or the person’s affiliate has violated subsection (2) of this section, the prosecuting attorney may execute and serve an investigative demand on the person or the person’s affiliate under ORS 646.618 and may take action against the person or the person’s affiliate under ORS 646.632 for engaging in an unlawful trade practice.

Thus, just one accusation of bad faith assertion by one entity is necessary to trigger an investigation. There are eight main ways in which it might be possible to show bad faith. These include:

(a) The demand 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.

(d) The person or the person’s affiliate, before communicating the demand:

(A) Failed to compare the claims in the patent to the features or specifications of the recipient’s product, service or technology that the person or the person’s affiliate alleges, asserts or claims is an infringement of the patent or the rights of the patentee, assignee or licensee under the patent; or

(B) Conducted the comparison described in subparagraph (A) of this paragraph, but in a way that did not enable the person or the person’s affiliate to specifically identify the infringing features or specifications of the recipient’s product, service or technology.

(e)  The person or the person’s affiliate offered to license the patent for an amount that a reasonable person with knowledge of the market value of a license for the invention that is covered by the patent would consider unreasonable.

(h) The person or the person’s affiliate engaged in other conduct that the Attorney General by rule identifies as evidence of alleging, asserting or claiming an infringement in bad faith.

There is a touching naivety in some of these, isn’t there? I particularly like the idea of there being reasonable people out there able to give a definitive judgment on whether a licence fee demand is excessive or not; or that they can determine whether a stated timeframe for compliance with a licence demand is too short. In the real world it might be the case that reasonable people can have different views on these things, but in Oregon, it seems, there is absolute truth and there are individuals able to identify it: they can tell you that nine days is too short, but 10 days is OK; or that $3 per device is too much, but that $2.99 is OK.  

Presumably in the name of balance, the legislation also details eight ways in which an assertion might be considered to be in good faith. These include:

(e) The person or the person’s affiliate has made a substantial investment in using or prosecuting the patent or in producing or selling a product, service or technology covered by the patent.

(f) The person or the person’s affiliate is:

(A) Named in the patent as an inventor or an assignee of the inventor;

(B) An institution of higher education; or

(C) An organization that an institution of higher education owns or is affiliated with and that has as the organization’s principal purpose the transfer of technology from the institute of higher education.

What the legislation doesn’t do is outline what should happen in cases where an assertion might meet some of the tests for being considered bad faith and some of those for being considered good faith. That, no doubt, is to be left to the courts.

Basically, what we have here is a dog’s dinner which allows one party not happy to have a patent asserted against it to prolong a case, perhaps by many months or even years, as definitions are fought over, behaviours are dissected and amounts are disputed. If you are a deep pocket defendant, what is not to like? There seems to be nothing in the legislation that sanctions what we might describe as “bad faith assertion of bad faith assertion”, meaning that for a relatively low additional cost you will be able to drag a case out for longer, inflict higher costs on your opponent and so improve your chances of either driving it to early settlement on beneficial terms or, in the best possible world, forcing it to drop the case and/or to file for bankruptcy.

And this is the problem with all legislation ostensibly designed to tackle trolls: it does not just affect the bottom-feeders, it affects every single patent owner – from lone inventors in their garages up to multinational life sciences companies. If we had a real idea of just how detrimental the bottom-feeders are to businesses in the US this might not be a problem; but we don’t - we have no real idea at all. Instead, different types of assertion, undertaken by very different types of entity, for very different reasons and under very different circumstances have been grouped together to create an overall impression that while suiting certain specific corporate and political agendas is profoundly misleading. As a result, what we are seeing in the US right now is deeply flawed legislation at both the federal and state level that could well end up doing much more harm than good. For a patent system that has served the US so well for 200 and more years to be so lightly tossed away is, to this observer at least, extraordinary.


Joff Wild
IAM Magazine
16 February 2014

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Licensing, IP politics, IP litigation, Patents

Comments

RE: Attempts by Oregon to legislate against trolls perfectly illustrate the dangers of doing so

Well said, Joff..

Stephen Potter, Iprova Sàrl on 20 Feb 2014 @ 07:45

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