Usually, the first thing an alleged patent infringer will receive is some kind of demand or cease and desist letter from a third-party ostensibly describing that party’s claims. The practical reality is that most patent infringement demand letters, especially by those considered “trolls,” are often vague, misleading and incomplete. While short on substance and detailed allegations of infringement, many of these letters will, however, contain claims for lump-sum payments or warn a party can avoid litigation by entering a license agreement. On July 1, 2015, the Patent Troll Prevention Act, F.S. 501.991, went into effect. The law is intended to address patent infringement demand letters and bad-faith patent litigation.
This new legislation sets forth requirements that any demand letter sent to a Florida recipient must contain certain information, including relevant patent numbers, identity of the patent owners and detailed facts regarding what product or conduct of the recipient violates the sender’s patent. Additionally, because the law is intended to address bad-faith claims, it also requires the sender of a demand letter to “conduct an analysis comparing the claims in the patent to the target’s products” before sending the demand.
To determine whether a demand was sent in bad faith, a number of factors are relevant under the statute. First, failure to include the basic patent number, owner, or detailed infringement claim information can be considered evidence of bad faith. Similarly, if a demand letter contains a request for a licensing fee that is not reasonably based on the patent’s value it may be considered as sent in bad faith. Likewise, bad faith may be found where a party sends a demand based on a patent it knows is unenforceable or when the claims are deceptive. Finally, further evidence of bad faith can be found where the sender has previously filed or threatened similar lawsuits against others.
The statute also identifies negating factors that can be used to show a demand was not sent in bad faith. Such evidence can include a showing that the demand contained all the basic information required by the statute, or the information was provided to the recipient when requested. Good faith can also be found where it is demonstrated that the patent owner is the actual inventor or assignee of the original inventor or in instance where the sender has made significant investment in the patent, i.e., is commercially exploiting it, or where it is shown that the patent has been successfully enforced in prior situations.
Procedurally, once a lawsuit is filed, the defendant can motion the court to determine whether the initial demand was asserted in bad faith. If it is found there was bad faith, the court can require a plaintiff to post a bond of up to $250,000 to cover defendant’s costs of litigating the claim. In addition, the Patent Troll Prevention Act provides for private causes of action and further provides that a bad faith assertion of patent infringement is an unfair and deceptive trade practice. As such, in any private action under the Act, the prevailing party is entitled to their reasonable attorney fees.
The most interesting provision of the Patent Troll Prevention Act is this final provision of a private cause of action. This could allow successful patent infringement defendants an avenue to potentially recover some of their costs and fees sustained defending a bad faith claim. It essentially provides for a potential “loser pays” rule in bad faith patent litigation. What impact this law might ultimately have on patent trolling and the filing of patent actions against Florida companies is unclear at present given the relative newness of the statute. Further, with more patent reform possibly coming out of Washington in the near future, some of these provisions may ultimately be preempted. For now, however, Florida patent infringement defendants have one more card they can play.