Protects businesses from bad faith predatory claims of patent infringement; gives Attorney General’s Office legal enforcement authority
OLYMPIA — Washington State Attorney General Bob Ferguson has proposed the Patent Troll Prevention Act to protect the rights of legitimate patent holders and crack down on deceptive and predatory patent troll practices.
“Patent trolls target and swamp small businesses with deceptive demand letters,” said Ferguson. “The Patent Troll Prevention Act will protect small businesses and provide my office with enforcement authority to hold fraudulent trolls accountable.”
“Washington entrepreneurs should be protected from these fraudulent attempts to extort alleged licensing fees,” said Frockt. “This measure is vitally important to our technology and life sciences sectors, as well as other enterprises, who rely on the fair and legitimate operation of our intellectual property system. I look forward to working with Attorney General Ferguson to pass this important measure.”
“Small businesses are the cornerstone of strong communities and a healthy economy,” said Jinkins. “But too many of our hard-working business owners are being needlessly threatened, forced to spend precious resources fighting bogus claims of patent infringement. It shouldn’t have to be this way. We can do better. I am proud to sponsor legislation that will put a stop to these dishonest business practices and stand up for small businesses across Washington.”
Patent trolls have become an expensive and escalating problem for businesses across the country, hurting the economy and stifling innovation. A study from the Boston University School of Law estimates that patent trolls cost the economy $29 billion in direct legal costs in 2011.
Patent trolls work by acquiring exceptionally broad patents. They then blanket the state with bad faith ‘demand letters’ targeted at small businesses. These demand letters threaten legal action if businesses do not pay licensing fees.
Unlike legitimate patent holders, patent trolls’ threats are misleading, intimidating and deceptive. Patent trolls know their claims would not prevail in litigation and have no intention of going to court. Their scheme relies on small, uninformed businesses that are willing to pay licensing fees to avoid the threatened lawsuit.
One well-known patent troll alleges to have a broad patent on scan-to-print technology. Rather than targeting Xerox or Canon—companies with patent attorneys on payroll—this troll sends hundreds of letters to small businesses across the country. While the troll has never tested its claims in court, this troll demands a license fee of $1,000 per employee and threatens a lawsuit if the target refuses to pay.
Research conducted in 2012 at Santa Clara University found that 55 percent of patent troll targets are small businesses, and 18 percent of targets give in to the demand without fighting the assertion in court.
The Patent Troll Prevention Act prohibits demand letters that:
- Contain false or deceptive information;
- Are sent by parties who do not have the right to license or enforce a patent;
- Baselessly threaten litigation if a fee is not paid; and
- Fail to identify the individual asserting the patent and explain the alleged infringement.
- The legislation provides the Attorney General with enforcement authority to hold fraudulent patent trolls accountable.
In the past two years, 17 states have passed patent troll legislation to stop this abusive practice.
The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.
Contacts: Alison Dempsey-Hall, Deputy Communications Director