PRINTER'S NO. 1741
THE GENERAL ASSEMBLY OF PENNSYLVANIA
INTRODUCED BY TOMLINSON, PILEGGI, VOGEL AND EICHELBERGER, FEBRUARY 4, 2014
REFERRED TO JUDICIARY, FEBRUARY 4, 2014
1Prohibiting bad faith assertions of patent infringement;
2conferring powers and imposing duties on the Attorney
3General; and imposing penalties.
4The General Assembly of the Commonwealth of Pennsylvania
5hereby enacts as follows:
6Section 1. Legislative findings and purpose.
7(a) Legislative findings.--The General Assembly finds and
8declares as follows:
9(1) This Commonwealth is striving to build an
10entrepreneurial and knowledge-based economy. Attracting and
11nurturing small and medium-sized Internet technology and
12other knowledge-based companies is an important part of this
13effort and will be beneficial to this Commonwealth's future.
14(2) Patents are essential to encouraging innovation,
15especially in the Internet technology and knowledge-based
16fields. The protections afforded by the Federal patent system
17create an incentive to invest in research and innovation,
18which spur economic growth. Patent holders have every right
1to enforce their patents when they are infringed, and patent
2enforcement litigation is necessary to protect intellectual
4(3) The General Assembly does not wish to interfere with
5the good faith enforcement of patents or good faith patent
6litigation. The General Assembly also recognizes that it is
7preempted from passing any law that conflicts with Federal
9(4) Patent litigation can be technical, complex and
10expensive. The expense of patent litigation, which may cost
11hundreds of thousands of dollars or more, can be a
12significant burden on small and medium-sized companies. The
13Commonwealth wishes to help its businesses avoid these costs
14by encouraging the most efficient resolution of patent
15infringement claims without conflicting with Federal law.
16(5) In order for companies in this Commonwealth to be
17able to respond promptly and efficiently to patent
18infringement assertions against them, it is necessary that
19they receive specific information regarding how their
20product, service or technology may have infringed the patent
21at issue. Receiving such information at an early stage will
22facilitate the resolution of claims and lessen the burden of
23potential litigation on companies in this Commonwealth.
24(6) Abusive patent litigation and the assertion of bad
25faith infringement claims can harm companies in this
26Commonwealth. A business that receives correspondence
27asserting such claims faces the threat of expensive and
28protracted litigation and may make a decision that it has no
29choice but to settle and to pay a licensing fee, even if the
30claim is meritless. This severely impairs small and medium-
1sized companies and nonprofits that lack the resources to
2investigate and defend themselves against infringement
4(7) Not only do bad faith patent infringement claims
5impose a significant burden on individual businesses in this
6Commonwealth, they also undermine this Commonwealth's efforts
7to attract and nurture small and medium-sized Internet
8technology and other knowledge-based companies. Funds used to
9avoid the threat of bad faith litigation are no longer
10available to invest, produce new products, expand or hire new
11workers, thereby harming this Commonwealth's economy.
12(b) Purpose.--Through this narrowly focused act, the General
13Assembly seeks to facilitate the efficient and prompt resolution
14of patent infringement claims, protect businesses in this
15Commonwealth from abusive and bad faith assertions of patent
16infringement and build this Commonwealth's economy, while at the
17same time respecting Federal law and being careful to not
18interfere with legitimate patent enforcement actions.
19Section 2. Definitions.
20The following words and phrases when used in this act shall
21have the meanings given to them in this section unless the
22context clearly indicates otherwise:
23"Demand letter." A letter, e-mail or other communication
24asserting or claiming that the target has engaged in patent
26"Target." A person:
27(1) who has received a demand letter or against whom an
28assertion or allegation of patent infringement has been made;
29(2) who has been threatened with litigation or against
30whom a lawsuit has been filed alleging patent infringement;
2(3) whose customers have received a demand letter
3asserting that the person's product, service or technology
4has infringed a patent.
5Section 3. Bad faith assertions of patent infringement.
6(a) General rule.--A person shall not make a bad faith
7assertion of patent infringement.
8(b) Evidence of bad faith.--A court may consider the
9following factors as evidence that a person has made a bad faith
10assertion of patent infringement:
11(1) The demand letter does not contain all of the
13(i) The patent number.
14(ii) The name and address of the patent owner or
15owners and assignee or assignees, if any.
16(iii) Factual allegations concerning the specific
17areas in which the target's products, services and
18technology infringe the patent or are covered by the
19claims in the patent.
20(2) Prior to sending the demand letter, the person fails
21to conduct an analysis comparing the claims in the patent to
22the target's products, services and technology, or such an
23analysis was done but does not identify specific areas in
24which the products, services and technology are covered by
25the claims in the patent.
26(3) The demand letter lacks the information under
27paragraph (1), the target requests the information and the
28person fails to provide the information within a reasonable
29period of time.
30(4) The demand letter demands payment of a license fee
1or response within an unreasonably short period of time.
2(5) The person offers to license the patent for an
3amount that is not based on a reasonable estimate of the
4value of the license.
5(6) The claim or assertion of patent infringement is
6meritless and the person knew, or should have known, that the
7claim or assertion is meritless.
8(7) The claim or assertion of patent infringement is
10(8) The person or its subsidiaries or affiliates have
11previously filed or threatened to file one or more lawsuits
12based on the same or similar claim of patent infringement
14(i) those threats or lawsuits lacked the information
15described under paragraph (1); or
16(ii) the person attempted to enforce the claim of
17patent infringement in litigation and a court found the
18claim to be meritless.
19(9) Any other factor the court finds relevant.
20(c) Evidence against bad faith.--A court may consider the
21following factors as evidence that a person has not made a bad
22faith assertion of patent infringement:
23(1) The demand letter contains the information under
25(2) Where the demand letter lacks the information under
26subsection (b)(1) and the target requests the information,
27the person provides the information within a reasonable
28period of time.
29(3) The person engages in a good faith effort to
30establish that the target has infringed the patent and to
1negotiate an appropriate remedy.
2(4) The person makes a substantial investment in the use
3of the patent or in the production or sale of a product or
4item covered by the patent.
5(5) The person is:
6(i) the inventor or joint inventor of the patent or,
7in the case of a patent filed by and awarded to an
8assignee of the original inventor or joint inventor, is
9the original assignee; or
10(ii) an institution of higher education or a
11technology transfer organization owned or affiliated with
12an institution of higher education.
13(6) The person has:
14(i) demonstrated good faith business practices in
15previous efforts to enforce the patent, or a
16substantially similar patent; or
17(ii) successfully enforced the patent, or a
18substantially similar patent, through litigation.
19(7) Any other factor the court finds relevant.
20Section 4. Bond.
21Upon motion by a target and a finding by the court that a
22target has established a reasonable likelihood that a person has
23made a bad faith assertion of patent infringement in violation
24of this act, the court shall require the person to post a bond
25in an amount equal to a good faith estimate of the target's
26costs to litigate the claim and amounts reasonably likely to be
27recovered under section 5, conditioned upon payment of any
28amounts finally determined to be due to the target. A hearing
29shall be held if either party so requests. A bond shall not
30exceed $250,000. The court may waive the bond requirement if it
1finds the person has available assets equal to the amount of the
2proposed bond or for other good cause shown.
3Section 5. Enforcement, remedies and damages.
4(a) Enforcement.--The Attorney General shall have the same
5authority under this act to make rules, conduct civil
6investigations, bring civil actions and enter into assurances of
7discontinuance as under the act of December 17, 1968 (P.L.1224,
8No.387), known as the Unfair Trade Practices and Consumer
9Protection Law. In an action brought by the Attorney General
10under this act the court may award or impose any relief
11available under the Unfair Trade Practices and Consumer
13(b) Remedies.--A target of conduct involving assertions of
14patent infringement, or a person aggrieved by a violation of
15this act or by a violation of rules adopted under this act, may
16bring an action in a court of common pleas. A court may award
17the following remedies to a plaintiff who prevails in an action
18brought under this act:
19(1) Equitable relief.
21(3) Costs and fees, including reasonable attorney fees.
22(4) Exemplary damages in an amount equal to $50,000 or
23three times the total of damages, costs and fees, whichever
25(c) Construction.--This act shall not be construed to limit
26rights and remedies available to the Commonwealth or to any
27person under any other law and shall not alter or restrict the
28Attorney General's authority with regard to conduct involving
29assertions of patent infringement.
30Section 6. Effective date.
1This act shall take effect in 30 days.