Patent Infringement: Rising Tide of State-Enacted Reform
It started with Vermont in 2013. Since then, over half the states have enacted legislation aimed at curbing patent infringement suits from non-practicing entities. Now, the band may add another member: Massachusetts.
Taking a page from those who came before it, Massachusetts styles its bill as one for consumer and business protection, and targets entities engaged in “bad faith assertions of patent infringement.” In its current form, the bill allows the recipient of a believed bad faith infringement allegation to bring an action in state court for damages. The court may then consider a number of factors (outlined in the bill) in determining whether such allegation was, in fact, made in bad faith.
In essence, the bill requires that patent plaintiffs do their due diligence before alleging infringement, with an important caveat. For example, an entity “may” be on the hook for damages if its pre-suit demand letter does not contain: (1) the patent number; (2) the name and address of the patent owner(s) and assignee(s); and (3) factual allegations regarding how the accused technology infringes. But, here’s where it gets interesting – even if an entity complies with these requirements, it appears that the entity still may be on the hook for conduct that preceded the law. In particular, a court “may” find bad faith if the entity previously sent a demand letter without including the information described above.
And to make certain that the legislation primarily impacts non-practicing entities, courts could reject a claim under the statute if the entity alleging infringement “makes a substantial investment in the use of the patent.”
Penalties are also stiff. The law would provide for the recovery of costs and attorneys’ fees trebled, or $50,000 – whichever is greater.
Bill S. 178, titled “An Act Protecting Massachusetts Businesses from Abusive Patent Infringement Claims,” is currently pending at the Massachusetts State Senate.