Va. legislature passes its own patent troll bill

By Jessica M. Karmasek | Mar 7, 2014

RICHMOND, Va. (Legal Newsline) -- The Virginia General Assembly this week passed bills designed to protect state businesses from so-called "patent trolls."

The compromise legislation -- Senate Bill 150 and House Bill 375 -- passed the legislature unanimously Wednesday.

The bills would crack down on misleading demand letters by trolls and establish criteria for when patent infringement allegations have been made in bad faith.

The legislation was crafted by newly-elected Attorney General Mark Herring's office.

Last week, Herring joined 41 other state attorneys general in sending a letter to high-ranking members of the U.S. Senate Judiciary Committee and the Committee on Commerce, Science and Transportation. The attorneys general offered their support for federal patent reform legislation, 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.

"Virginia's high-tech industry has been an incredible engine of economic growth over the last two decades, and I was proud to work with these Virginia businesses in the legislature, but in recent years it has become a frequent target of baseless lawsuits that stifle growth and tie up the courts," Herring, a Democrat, said Wednesday.

"I've signed on to efforts to fight patent trolling because far too many of our businesses, especially small businesses, are being forced to spend huge sums of money defending themselves against these frivolous claims.

"We need legislation to protect their interests, and the rights of parties to file legitimate claims, while allowing space for innovation and growth."

Herring called the two bills "strong," adding that they strike the proper balance.

"It is my hope that Congress will quickly follow our example," he said.

Both SB 150 and HB 375 establish criteria for determining that a patent infringement claim is being made in bad faith.

Such standards include: the making of false statements, not identifying the patent holder, failing to specify how the target is infringing, demanding an unreasonable license fee, or re-asserting infringement claims that have previously been declared baseless by a court.

The legislation also would empower the attorney general to investigate cases of patent trolling, and allows the office and the state's attorneys to file lawsuits to recover civil penalties and to force trolls to change their behavior.

Where settlements can be reached with patent trolls, the attorney general also would be able to present such settlements to the court for approval and enforcement.

Herring noted that the bills not only protect the targets of patent trolls, but also the holders of strong, legitimate patents who may need to bring a legitimate claim of infringement.

The bills, he said, would not preempt federal patent laws or make it harder for a person or organization to get a patent.

The bills also would not change how valid patents are issued and valued, and there would be no interference with legitimate, good faith patent enforcement efforts, he said.

"Until Congress can enact meaningful patent reform at the federal level, this legislation will help cut down on the baseless claims which tie up the courts and cost Virginia businesses thousands in legal fees," said state Sen. Richard Stuart, patron of SB 150 and a Republican.

Del. Israel O'Quinn, sponsor of HB 375, agreed.

"No Virginia business owner should live in fear that they will go under because of the cost to defend a frivolous lawsuit brought by a patent troll," said O'Quinn, also a Republican.

"I'm glad we were able to work in a bipartisan way to protect the small businesses that form the backbone of Virginia's economy and the high tech companies that help drive innovation and our Commonwealth's economic growth."

The legislation is supported by a bipartisan coalition, including the Northern Virginia Technology Council, Virginia Chamber, Fairfax County Chamber of Commerce, Virginia Bankers Association, Virginia Retail Association, and Virginia Hospitality and Travel Association.

"We appreciate the attorney general's leadership in championing this legislation to protect Virginia businesses from patent trolls who abuse the patent system by employing bad faith assertions of patent infringement," said Bobbie Kilberg, president and CEO of the Northern Virginia Technology Council.

Virginia joins the growing list of states passing their own legislation aimed at combating patent trolls.

Last week, the Kentucky Senate passed its own bill. Also last week, a similar bill passed out of the Oregon legislature, and is awaiting the governor's signature. Maine also is working on its own bill.

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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