Jessica M. Karmasek Feb. 24, 2014, 8:30pm

WASHINGTON (Legal Newsline) -- On Monday, more than 40 state attorneys general sent a letter to high-ranking members of the U.S. Senate Judiciary Committee and the Committee on Commerce, Science and Transportation, offering their support for federal patent reform legislation.

A total of 42 attorneys general signed onto the letter sent to Sen. Patrick Leahy, D-Vt., chairman of the judiciary committee; Sen. Chuck Grassley, R-Iowa, ranking member of the committee; Sen. Jay Rockefeller, D-W.Va., chairman of the commerce committee; and Sen. John Thune, R-S.D., ranking member of the committee.

In it, the attorneys general offered their support for legislation that addresses so-called "patent trolls," but also suggested some amendments.

Generally speaking, a patent troll, or non-practicing entity or patent assertion entity, purchases groups of patents without an intent to market or develop a product.

In some cases, but not all, the entity then targets other businesses with lawsuits alleging infringement of the patents it bought.

"So-called patent trolls stifle innovation and harm our economy by making dubious claims of patent infringement and using the threat of expensive litigation to extort money from small businesses and nonprofits," the attorneys general wrote in the five-page letter.

"We have received many complaints from these businesses and nonprofits, our constituents, who are desperate for relief from the misuse of the patent system. While these threats were once focused on tech businesses, they are now levied at all manner of businesses, including banks, hospitals, restaurants and hotels."

The attorneys general said they have responded to the complaints by launching their own investigations and bringing enforcement actions against such trolls.

"Our authority to protect businesses derives primarily from state statutes that prohibit unfair and deceptive acts," they wrote. "Though any patent holder has a right to fight infringement, it may not do so in a manner that is unfair or deceptive."

So far, the Innovation Act, introduced by U.S. Rep. Bob Goodlatte, R-Va., has gained the most traction. In December, the House passed it with overwhelming bipartisan support.

However, it has been lingering for months in the Senate, where lawmakers are carefully considering it.

In addition, Leahy introduced his own measure, the Patent Transparency and Improvements Act. The bill, also referred to as Senate Bill 1720, is considered by some to be a "less ambitious" version of the Innovation Act.

Similar to the Innovation Act, Leahy's bill would increase transparency in patent ownership.

In particular, the person or organization that holds the patent and files an action in federal court would have to disclose any and all persons that have a financial interest in the proceedings, or that could be affected by the outcome.

And like the Innovation Act, the Leahy measure targets the widespread sending of frivolous demand letters.

More specifically, the Senate bill would empower the Federal Trade Commission to consider such letters an "unfair and deceptive act or practice."

S. 1720 also allows cases against customers who are sued for patent infringement to be stayed while the manufacturer litigates the lawsuit.

Leahy's bill also would provide additional resources for small business that are targeted in patent infringement lawsuits, and it calls for various studies to be done by the U.S. Patent and Trademark Office, among others.

The biggest difference between Leahy's proposed legislation and the House version is that S. 1720 does not include the provisions that would force patent infringement case management rules on the district courts or procedures as to pleading, discovery timing and limits, cost-shifting related to discovery or loser-pays fee shifting.

Leahy's bill was assigned to a congressional committee in November and has failed to move.

Though the attorneys general say they are "encouraged" by lawmakers' attempts to enact patent reform, they want more done to deter those "bad actors who are exploiting the system for undeserved gain."

In particular, they are asking Congress to consider amendments that: confirm state enforcement authority; clarify state-court jurisdiction over bad-faith demand letters; increase transparency for patentees that send demand letters; and address patent litigation reforms.

The 42 attorneys general who signed the letter are from Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wyoming.

To read the letter, click here.

From Legal Newsline: Reach Jessica Karmasek by email at

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