Legislation sponsored by Assemblymen Troy Singleton and Benjie Wimberly to protect New Jersey businesses from abusive and bad faith assertions of patent infringement was released Monday by the Assembly Commerce and Economic Development Committee.
The bill (A-310) would identify a list of factors that a court may consider as evidence that a person has made a bad faith assertion of patent infringement. One factor is whether a person's demand letter claiming patent infringement does not contain the patent number; the name and address of the patent owner or owners; and factual allegations specifying the patent infringement.
"So called patent trolls are usually the holders of vague patents, who do not use the protected technology themselves. Instead, they demand payment from alleged infringers in the hope that their targets will settle rather than defend themselves in court," said Singleton (D-Burlington). "This legislation aims to curb this pattern of litigation by having certain requirements in place for the company to verify in terms of a potential infringement of an actual patent."
"The people who file these bogus claims do so not because they have a legitimate patent infringement claim, but because they are betting on their victims settling instead of going through a time-consuming court process," said Wimberly (D-Bergen/Passaic). "This is just another way to scam people out of their hard earned money. This would help put these scammers out of business."
Additional factors specified in the bill for a court to consider as evidence of bad faith are:
- Prior to sending the demand letter, the person fails to conduct an analysis comparing the claims in the patent to the entity's products, services, and technology, or such an analysis was done but does not identify specific areas in which the products, services, and technology are covered by the claims in the patent.
- The demand letter lacks the information described above, the target requests the information, and the person fails to provide the information within a reasonable period of time.
- The demand letter demands payment of a license fee or response within an unreasonably short period of time.
- The person offers to license the patent for an amount that is not based on a reasonable estimate of the value of the license.
- The claim or assertion of patent infringement is meritless, and the person knew, or should have known, that the claim or assertion is meritless.
- The claim or assertion of patent infringement is deceptive.
- The person, or its subsidiaries or affiliates, has previously filed or threatened to file one or more lawsuits based on the same or similar claim of patent infringement and those threats or lawsuits lacked the information described above, or the person attempted to enforce the claim of patent infringement in litigation and a court found the claim to be meritless.
The bill would also identify factors that a court may consider as evidence that a person has not made a bad faith assertion of patent infringement. These include:
- The aforementioned demand letter contains the information described above.
- When the demand letter lacks the information described above and the entity requests the information, the person provides the information within a reasonable period of time.
- The person engages in a good faith effort to establish that the entity has infringed the patent and to negotiate an appropriate remedy.
- The person makes a substantial investment in the use of the patent or in the production or sale of a product or item covered by the patent.
- The person is the inventor or joint inventor of the patent or, in the case of a patent filed by and awarded to an assignee of the original inventor or joint inventor, is the original assignee, or an institution of higher education or a technology transfer organization owned or affiliated with an institution of higher education.
- The person has demonstrated good faith business practices in previous efforts to enforce the patent, or a substantially similar patent, or successfully enforced the patent, or a substantially similar patent, through litigation.
The bill specifically excludes a written or electronic communication related to a patent and a "request for disclosure" both currently authorized under federal law. The bill would also protect a written or electronic communication from being considered a bad faith assertion of patent infringement if the communication is sent by: (1) an owner of a patent who is using the patent in connection with substantial research, development, production, manufacturing, processing, or delivery of products or materials; (2) an institution of higher education; or (3) a technology transfer organization which has the primary purpose of facilitating the commercialization of technology developed by an institution of higher education.
The bill would take effect immediately.