Patent ‘Demand Letter’ Legislation Back In The News

Twice this week, legislation to regulate patent “demand letters” popped up in the news. In the wake of 2014’s FTC case against MPHJ Technology Investments, states began to adopt legislation to regulate the practice of patent owners attempting to license their intellectual property outside of litigation. According to reports, MPHJ had sent “letters claim[ing] that many other companies had licensed the patents, an assertion the FTC said was untrue.” These, and other allegedly false or misleading statements in MPHJ’s correspondence prompted the FTC to pursue legal action for deceptive trade practices. It was revealed that MPHJ had sent letters out to over 16,000 companies, and they ultimately settled with the FTC. In response, many states passed their own form of consumer protection legislation governing letters alleging patent infringement.

Massachusetts looks to become the latest, proposing a bill that regulates the content of such letters by requiring inclusion of specific information and providing a “reasonable” time period to respond. Speaking on the legislation, State Senator Eric Lesser “said Massachusetts is ‘one of the innovation capitals in the world,’ but one of just 17 states that does not protect entrepreneurs from patent trolls.” However, what’s amazing is that anyone thinks this kind of legislation actually “helps” anyone with anything at all. No one has ever identified another coordinated patent licensing campaign involving the level of deception and misrepresentation that was alleged to have taken place in the MPHJ campaign. In addition, the actions of the FTC demonstrate that anyone engaging in similar behavior will likely meet the same fate.

Further, while companies have attempted to build a repository of so-called “demand letters” all such attempts have failed to generate any kind of usable data or patterns. The reason for this is simple: patent infringement, and patent licensing by extension, occurs and is resolved on a case-by-case basis. Nevertheless, we’re now left with a patchwork of state regulation, ready to trip up inexperienced patent owners who don’t realize that the very act of sending a letter while innocently omitting some arbitrarily required piece of information could end up being used as a sword against their rightful attempt to license their intellectual property.

Perhaps this is why the so-called TROL Act was recently re-introduced to Congress. The act, briefly, makes it unlawful to assert any one of a laundry list of conditions in “bad faith.” Amusingly enough, the bill goes beyond false statements and misrepresentations, but actually bans communication of certain facts even if they are true. While this bill is likely DOA, there is a silver lining as well. There are also bills before Congress that would actually help patent owners.

Subscribe to get the latest news