With Patent Reform Bogged Down, New Bill Targets Demand Letters

By William Peacock, Esq. on July 10, 2014 | Last updated on March 21, 2019

We got fee-shifting, thanks to the Supreme Court. And the Innovation Act passed the House ... before it hit a dead end in the Senate.

Well, here's another one to keep patent reform advocates satiated in the meantime: curbing abusive demand letters. The Targeting Rogue and Opaque Letters Act (TROL Act) would target patent troll letters that, in most instances, are frivolous demands for settlements with no legal merits.

Ideas for curbing frivolous demand letters were considered and left out of the Innovation Act, as that bill's sponsor, Bob Goodlatte (R-Va.), noted that it would be difficult to balance speech interests, and legitimate defense of intellectual property, with a law that restricts demand letters.

Curbs 'Bad Faith' Demand Letters

The "discussion draft" bill prohibits trolls from sending, "in bad faith," communications that claim a right to enforce a patent (when no right exists), claims that litigation has been filed, threats of future legal action, and more. "Bad faith" is defined broadly, and includes false or knowingly misleading statements and omissions, statements made with reckless indifference as to the truth, or statements that have a high probability of deception.

The legislation also would require the sender to identify the person asserting patent rights (including any parent entities), the patent at issue, the infringing product or service, a description of how the product infringes the patent, and contact information for a person that is capable of discussing the matter.

Attorneys general of any of the states can bring a civil enforcement action. Penalties are capped at $5,000,000 total for all violations. The FTC can also institute a civil action and must be notified of any planned civil action by state officials and can intervene at will in those proceedings.

Got a Long Way to Go

Like the Innovation Act, which has hit a wall, this legislation has a long way to go before it makes it into law. The bill, currently known as H.R. 4450, is being discussed by the Subcommittee on Commerce, Manufacturing and Trade. If it makes it out of committee, it'd still have to pass the House and the Senate in an election year.

Odds of Congress doing something useful: 1/10.

Related Resources:

New bill tries to limit abusive patent demand letters (Inside Counsel)
3 Ways In House Counsel Can Facilitate Innovation (FindLaw's In House Blog)
3 Things Inventors Wish Their Patent Counsel Would Do (FindLaw's In House Blog)