SB 303-FN – VERSION ADOPTED BY BOTH BODIES
03/13/14 0878s
2014 SESSION
05/01
SENATE BILL 303-FN
AN ACT relative to bad faith assertions of patent infringement.
SPONSORS: Sen. Carson, Dist 14; Rep. Rowe, Hills 22; Rep. G. Hopper, Hills 2
This bill prohibits a person from making bad faith assertions of patent infringement. The bill establishes a private right of action for violations of the chapter and provides for enforcement by the attorney general.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
03/13/14 0878s
14-2747
05/01
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Fourteen
AN ACT relative to bad faith assertions of patent infringement.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Statement of Purpose.
I. The general court recognizes that the state of New Hampshire is striving to build an entrepreneurial and knowledge-based economy. Attracting Internet technology (IT) and other knowledge-based companies is an important part of this effort.
II. Patents are essential to encouraging innovation, especially in the IT and knowledge-based fields. The protections offered by the federal patent system create an incentive to invest in research and innovation, which spurs economic growth. Patent holders have the right to enforce their patents when they are infringed upon and patent enforcement litigation is necessary to protect intellectual property.
III. The general court recognizes that New Hampshire is preempted from passing any law that conflicts with federal patent law.
IV. The state of New Hampshire wishes to help its businesses avoid costly litigation by encouraging the most efficient resolution of patent infringement claims without conflicting with federal law.
V. Abusive patent litigation, especially the assertion of bad faith infringement claims, can harm New Hampshire’s businesses. A business that receives a letter asserting such claims faces the threat of expensive and protracted litigation and may feel that it has no choice but to settle and pay a licensing fee, even if the claim is meritless. Bad faith patent infringement claims impose a significant burden. Funds used to avoid the threat of bad faith litigation are no longer available for a business to expand or hire new employees.
VI. Therefore, the general court hereby seeks to facilitate the efficient and prompt resolution of patent infringement claims by protecting New Hampshire’s businesses from abusive and bad faith assertions of patent infringement, while at the same time respecting federal law and not interfering with legitimate patent enforcement actions.
2 New Chapter; Bad Faith Assertions of Patent Infringement. Amend RSA by inserting after chapter 359-L the following new chapter:
CHAPTER 359-M
BAD FAITH ASSERTIONS OF PATENT INFRINGEMENT
359-M:1 Definitions. In this chapter:
I. “Demand letter” means a letter, email, or other communication asserting or claiming that the target has engaged in patent infringement.
II. “Target” means a New Hampshire person or business:
(a) Who has received a demand letter or against whom an assertion or allegation of patent infringement has been made;
(b) Who has been threatened with litigation or against whom a lawsuit has been filed alleging patent infringement; or
(c) Whose customers have received a demand letter asserting that the person’s or business’s product, service, or technology has infringed upon a patent.
359-M:2 Bad Faith Assertions of Patent Infringement.
I. A person shall not make a bad faith assertion of patent infringement.
II. A court may consider the following factors as evidence that a person has made a bad faith assertion of patent infringement:
(a) The demand letter does not contain the following information:
(1) The patent number.
(2) The name and address of the patent owner or owners and assignee or assignees, if any.
(3) Factual allegations concerning the specific areas in which the target’s products, services, and technology infringe the patent or are covered by the claims in the patent.
(b) Prior to sending the demand letter, the person fails to conduct an analysis comparing the claims in the patent to the target’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.
(c) The demand letter lacks the information described in subparagraph II(a), the target requests the information, and the person fails to provide the information within a reasonable period of time.
(d) The demand letter demands payment of a license fee or response within an unreasonably short period of time.
(e) The person offers to license the patent for an amount that is not based on a reasonable estimate of the value of the license.
(f) The claim or assertion of patent infringement is meritless, and the person knew or should have known that the claim or assertion is meritless.
(g) The claim or assertion of patent infringement is deceptive.
(h) The person or its subsidiaries or affiliates have previously filed or threatened to file one or more lawsuits based on the same or similar claim of patent infringement; and
(1) Those threats or lawsuits lacked the information described in subparagraph II(a); or
(2) The person attempted to enforce the claim of patent infringement in litigation and a court found the claim to be meritless.
(i) Any other factor the court finds relevant.
III. A court may consider the following factors as evidence that a person has not made a bad faith assertion of patent infringement:
(a) The demand letter contains the information described in subparagraph II(a).
(b) Where the demand letter lacks the information described in subparagraph II(a) and the target requests the information, the person provides the information within a reasonable period of time.
(c) The person engages in a good faith effort to establish that the target has infringed the patent and to negotiate an appropriate remedy.
(d) 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.
(e) The person is:
(1) The inventor or joint investor 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
(2) An institution of higher education or a technology transfer organization owned or affiliated with an institution of higher education.
(f) The person has:
(1) Demonstrated good faith business practices in previous efforts to enforce the patent, or a substantially similar patent; or
(2) Successfully enforced the patent, or a substantially similar patent through litigation.
(g) Any other factor the court finds relevant.
359-M:3 Bond. Upon motion by a target and a finding by the court that a target has established a reasonable likelihood that a person has made a bad faith assentation of patent infringement in violation of this chapter, the court shall require the person to post a bond in an amount equal to a good faith estimate of the target’s cost to litigate the claim and amounts reasonably likely to be recovered under this chapter, conditioned upon payment of any amounts finally determined to be due to the target. A hearing shall be held if either party so requests. A bond ordered pursuant to this section shall not exceed $250,000. The court may waive the bond requirement if it finds the person has available assets equal to the amount of the proposed bond or for other good cause shown.
359-M:4 Enforcement; Remedies; Damages.
I. The attorney general may bring an action in superior court for appropriate relief, including a temporary or permanent injunction, to enforce the provisions of this chapter.
II. A target of conduct involving assertions of patent infringement, or a person aggrieved by a violation of this chapter may bring an action in superior court. A court may award the following remedies to a plaintiff who prevails in an action brought pursuant to this section:
(a) Equitable relief.
(b) Damages.
(c) Costs and fees, including reasonable attorney’s fees.
III. This chapter shall not be construed to limit and remedies available to the state of New?Hampshire or to any person under any other law and shall not restrict the attorney general with regard to conduct involving assertions of patent infringement.
359-M:5 Exemption. A demand letter or assertion of patent infringement that includes a claim for relief arising under 35 U.S.C. section 271(e)(2) or 42 U.S.C. section 262 shall not be subject to the provisions of this chapter.
3 Effective Date. This act shall take effect upon its passage.
LBAO
14-2747
Amended 03/18/14
SB 303-FN FISCAL NOTE
AN ACT relative to bad faith assertions of patent infringement.
FISCAL IMPACT:
The Judicial Branch and Department of Justice state this bill, as amended by the Senate (Amendment #2014-0878s), may increase state expenditures by an indeterminable amount in FY 2014 and each year thereafter. There will be no fiscal impact on county and local expenditures, or state, county, and local revenue.
METHODOLOGY:
The Judicial Branch states this bill enacts RSA 359-M regarding bad faith assertions of patent infringement. Proposed RSA 359-M:4, I allows the attorney general to bring an action in superior court, including injunctions, to enforce RSA 359-M. Proposed RSA 359-M:4, II allows the target of an alleged bad faith assertion of patent infringement to bring an action in superior court seeking equitable relief, damages, and/or attorney’s fees. In such action, the target can also seek a bond pursuant to proposed RSA 359-M:3. The Branch states each of these may have a potential impact on the Branch. The Branch has no information on which to estimate how many additional actions might be pursued as a result of this bill. The Branch does have the costs associated with each type of action. Enforcement actions by the attorney general pursuant to proposed RSA 359-M:4, I, would be classified as complex equity cases. Actions in superior court by the target of an alleged bad faith assertion of patent infringement pursuant to proposed RSA 359:4,II has characteristics of both equity actions and civil actions. The motion for a bond pursuant to RSA 359-M:3 would be treated as a complex civil case. Depending on how the case is classified, it would be treated either as a complex equity case with an average cost of $576.05 in FY 2014, $668.25 in FY 2015, and $683.30 in FY 2016 and each year thereafter or a complex civil case with an average cost of $633.81 in FY 2014, $686.96 in FY 2015, and $699.09 in FY 2016 and each year thereafter. The possibility for a case to be appealed increases the cost. All costs are estimated based on case weight information from the last needs assessment completed in 2005. Since that timeframe there have been various changes that may impact the costs, such as the creation of the circuit court, the increase in self-represented litigants, and the anticipated implementation of the NH e-court project in FY 2014.
The Department of Justice states the highly specialized nature of patent infringement litigation and the general need for expert testimony in patent infringement litigation, it is expected any action brought by the Department to enforce provisions of the proposed law will result an indeterminable increase in state expenditures. The Department also assumes, in addition to hiring experts to provide testimony, any such litigation would require the resources of two assistant attorneys general, possible need for outside counsel if the patent at issue involves a specialized area of law and a paralegal. The Department has no information to predict the number of actions resulting from this bill to determine the exact fiscal impact.