STRONGER Bill Part 4: Pre-Suit Licensing Discussions

Washington DC Capitol Building

by: Robert Kelly | July 6, 2017

 

In recent years a patchwork of state laws around patent demand letters has made it much more difficult to engage in pre-suit licensing discussions and has forced many patent owners to simply file a lawsuit instead of engaging in good faith pre-suit licensing discussions.

Part 1 Here                  Part 2 Here                   Part 3 Here

Thankfully, the recently proposed STRONGER Patents Act of 2017 charts out a number of measures in sections 201-204 to improve and harmonize the laws around abusive patent demand letters. If these measures look familiar, it’s because they mirror the bipartisan TROL (Targeting Rogue and Opaque Letters Act) that was reported favorably by the House Energy and Commerce Committee in early 2015. The STRONGER Act goes a long way towards making it easier and safer to engage in pre-suit licensing discussions (a welcome change in this post-TC Heartland environment where pre-suit licensing letters could again be a valuable tool), and the Act should receive the full support of anyone that believes in promoting innovation.

The need for regulation around patent demand letters arose from events surrounding a few bad actors during the 2008-2014 time frame. These bad actors used patent demand letters in coercive and deceptive ways (e.g., by alleging that a pre-suit investigation had occurred when it had not) to unfairly extract licensing revenues from unsophisticated recipients.

In the wake of those events at least 33 states enacted legislation to address this perceived threat. However, the result of these new laws was an environment that favors filing lawsuits over resolving patent disputes through business channels.

For those practicing in the licensing and monetization fields, the most significant elements of the Stronger Act patent demand letter measures will likely be sections 201 and 204.

Section 201 addresses unfair or deceptive acts in connection with patent demand letters and section 204 is directed to preemption. Section 201 is generally divided into subsections that address 1) affirmative conduct, 2) claims to compensation, and 3) omissions. If the Stronger Act becomes law, these sections would become the go-to guidelines for anyone looking to engage in a licensing letter writing campaign.

Section 204 is generally directed towards preemption of state laws on patent demand letters. Harmonization of these laws will provide additional protection and provide more predictability for patent owners. Having these clear guidelines and a predictable framework of demand letter laws will facilitate a much more efficient patent market and give parties a greater ability to resolve their disputes outside of litigation.

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