Earlier this year, we reported on the full-frontal legal assault on so-called patent trolls (here) and (here). Now at the end of the year, we thought a look back on what has happened in the conflict since our last posts and a look forward into what may be in store for 2015 would be of interest to those who have or may be impacted by allegations of infringement by non-practicing entities.
The Federal Trade Commission dipped its toes into the troll infested waters in early 2014 when it initiated a study of patent assertion entities (PAE) and their impact on American commerce. Shortly thereafter, the FTC, for the first time, initiated its consumer-protection authority against a PAE. Specifically, the FTC issued an administrative complaint against MPHJ Technology Investments, LLC (a PAE ); its officer, Jay Mac Rust; and its outside legal counsel, Farney Daniels, P.C., for deceptive sales practices in violation of the FTC Act by conducting a campaign to promote and sell licenses for the company’s computer scanning and networking patents. Most of the 8,000 plus demand letters sent by MPHJ (or its sister licensing companies) were sent to small business across the country, including several animal heath related entities. In early November, the FTC announced a proposed settlement where, without admitting or denying the allegations, the respondents agreed to cease making certain misleading or unsubstantiated representations in patent assertion communications. The FTC’s continued interest in monitoring and evaluating demand letters from PAEs will no doubt be something to watch in 2015.
Congress is also revving its engines for the upcoming legislative session. After the midterm elections, Republications now have a majority in both the Senate and the House. Senate Majority Whip Jon Cornyn (R-Texas) has expressed a stated goal of the party to pass a bill next year to further block “patent trolls.” Last year’s efforts were shut down by then Majority Leader Harry Reid (D-Nevada) late in the legislative session with one of the stumbling blocks believed to be the bill’s attorneys’ fee shifting provisions. With the shift to Mitch McConnell (R-Kentucky) in the majority leader’s office, a reform bill could become law in the next twelve months, maybe before. In the end, patent reform may be one of the few areas where one can find bipartisan support in Washington D.C., as the White House has also signed support for a bill to address patent litigation abuses. Look for action on the subject in the first quarter of the year.
Our last post on patent trolls identified the efforts of several states, including Missouri, which had taken up the fight against bad faith demand letters from PAEs. (Here – hyperlink July 15 post) In most instances, states are providing their citizens with private rights of action to initiate suit against PAEs that send vexatious patent licensing demands letters. Since that post, the number of states with enacted legislation on the topic has swelled to 17, including Illinois, with 12 others that are reviewing proposed legislation on the subject. State legislatures are no doubt sending a message that the PAEs’ favored method of threatening litigation to collect licensing fees may come with consequences. There remains the question of whether these state laws are constitutional or if they are preempted by federal patent law. Stay tuned to see if or how these legislative efforts are enforced in 2015.
Rest assured that we will continue to monitor the situation and report to you the potential impacts to your business.