Intellectual Property Attorney

Legislative Update – Massachusetts Proposes Patent Troll Act

Last year, the Massachusetts State legislature – led by State Senator Eric Lesser – passed so-called “patent troll” legislation which would have created a private cause of action to help parties who are accused of patent infringement in “bad faith.” However, Massachusetts Governor Charlie Baker vetoed that bill. In doing so, Governor Baker explained that:

“While I agree that states have a role to play in deterring bad faith assertions of patent infringement outside of the context of federal patent litigation, I believe that the Legislature should revisit this topic in a future session and draft a more focused solution to this program.”

This year, Senator Lesser is on a renewed quest to pass a modified version of the anti-patent troll legislation. Entitled “An Act to Protect Innovation and Entrepreneurship in the Commonwealth,” the legislation is designed to create a new cause of action against so-called “patent trolls” while more explicitly defining key exemptions.

What is a “Patent Troll”?

In general, there are two types of entities which own patent rights: (i) practicing entities; and (ii) non-practicing entities. A “practicing entity” is one in which a patent owner is actively engaged in traditional commercialization of patent rights – either through manufacturing / production or legitimate licensing to third parties. A “non-practicing entity” is one in which a rights holder is not actively engaged in traditional commercialization of patent rights (nor actively working towards such an end). A “patent troll” is generally thought of as a type of non-practicing entity which derives a substantial percent of its income from suing third parties for patent infringement rather than trying to commercially exploit its patent rights. In other words, a “patent troll” is an entity which has made a business out of patent litigation.

While so-called “patent trolls” receive a great deal of blame from many quarters, it is important to approach this topic with caution and avoid over-simplification.

First, the line between a “patent troll” and a legitimate patent rights holder is not always clear. As one example, individuals and businesses acquire patent rights which can take years of “behind the scenes” work to exploit – including retooling factories, securing vendors, creating distribution systems and marketing to customers. During this time, such individuals and businesses could be (mistakenly) thought of as “non-practicing entities.” As another example, companies sometimes acquire a competitor (along with that competitor’s patent rights) not with the intention to manufacture the competing product but with the intention of removing such product from the marketplace. Such a company would, thus, definitionally be a “non-practicing entity” with respect to such acquired rights, even though the company still produces other products.

Second, patent rights were traditionally viewed as vested property rights – mooting the distinction between “practicing” and “non-practicing” entities. Under such a view, a patent owner – whether practicing or non-practicing – has just as much right to file a lawsuit as an owner of real estate has to sue a trespasser, irrespective of whether such real estate was being put to “productive” or “non-productive” use. Recently, however, the U.S. Supreme Court rejected that view in favor of interpreting patents as a government franchise – something which our firm respectfully believes was wrongly decided. Indeed, some commentators see such opinions – as well as the push for anti-patent troll legislation – as part of an effort by the so-called “efficient infringer” lobby, namely, a group of large tech companies which want a right to freely use the innovations of others – without paying royalties.

“Patent Troll” Legislation in Other States

If Senator Lessor’s efforts are successful, Massachusetts will not be the first state to pass “patent troll” legislation. According to information compiled by Patent Progress, similar legislation has already been passed in 33 other States, namely: Alabama; Arizona; Colorado; Florida; Georgia; Idaho; Illinois; Indiana; Kansas; Louisiana; Maine; Maryland; Michigan; Minnesota; Mississippi; Missouri; Montana; New Hampshire; North Carolina; North Dakota; Oklahoma; Oregon; Rhode Island; South Carolina; South Dakota; Tennessee; Texas; Utah; Vermont; Virginia; Washington; Wisconsin; and Wyoming.

By way of illustration, in 2015 Florida passed the Florida “Patent Troll Prevention Act” which includes a similar statutory definition of “bad faith assertions of patent infringement”.

One aspect of Florida’s “patent troll” law which is more favorable to accused infringers than the proposed Massachusetts bill is found in Fla. Stat. § 501.994. This Section provides that a party accused of patent infringement can make a motion for a determination that the proceeding “involves a bad faith assertion of patent infringement” and request a protective order. In such a case, if the Court finds a reasonable likelihood that a plaintiff has made a bad faith assertion of patent infringement, the Court “must require” the rights holder to post a bond for the lesser of: (i) $250,000; or (ii) a good faith estimate of the accused infringer’s litigation expenses – including reasonable attorney’s fees. Under Florida’s “Patent Troll Prevention Act,” a Court can waive the bond requirement only for good cause or where a rights holder can show that its available assets equal the amount of the proposed bond.

One aspect of Massachusetts’ proposed “patent troll” bill which is more favorable to accused infringers than Florida’s Patent Troll Prevention Act is the ability of an accused infringer to “pierce the corporate veil” and recover damages, costs and – critically – attorney’s fees from rights holders who bring a bad faith claim. More specifically, the proposed Massachusetts bill provides that:

“Any person who by contract, agreement, or otherwise, directly or indirectly, arranged for the bad faith assertion of patent infringement and any person who otherwise caused or is legally responsible for such bad faith assertion of patent infringement under the principles of the common law shall be liable to a prevailing plaintiff for all damages, costs and fees. Such liability shall be joint and several.”

Importance of Attorney’s Fees in Patent Lawsuits

Both the Florida “bond” approach and the proposed Massachusetts “veil piercing” approach recognize the central important of attorney’s fees in patent infringement litigation. Any experienced patent litigator will explain that attorney’s fees are often the biggest determining factor in navigating patent issues. According to a 2011 survey by the American Intellectual Property Law Association, attorney’s fees and costs through to a final judgment in patent litigation average:

  • $650,000 for cases with under $1 million in potential damages;
  • $2.5 million for cases with between $1 and $25 million in potential damages; and
  • $5 million for cases with more than $25 million in potential damages.

Naturally, such fees are often cost-prohibitive – sometimes forcing companies to choose between a cost effective (but unjust) settlement or a just (but cost prohibitive) legal battle.

Potential Constitutional Issues

In general, the Constitution provides that Patent Law is an exclusively Federal area of legislation, i.e., an area where States are generally unable to pass legislation (a concept known as “preemption”). One question which some constitutionally minded readers may have is how States are justified in passing such legislation related to patent rights. Indeed, some State statutes explicitly recognize this Federalist principal. For example, Section 501.991 of Florida’s “Patent Troll Prevention Act” includes the following note concerning legislative intent:

“The Legislature recognizes that it is preempted from passing any law that conflicts with federal patent law. However, the Legislature recognizes that the state is dedicated to building an entrepreneurial and business-friendly economy where businesses and consumers alike are protected from abuse and fraud. This includes protection from abusive and bad faith demands and litigation.”

In evaluating whether Federal patent laws preempt state-law tort claims, Courts apply the precedent of the Federal Circuit – the Court which Congress has empowered with original appellate jurisdiction for all Federal patent matters. Globetrotter Software, Inc. v. Elan Computer Grp., Inc., 362 F.3d 1367, 1374 (Fed. Cir. 2004). In making such precedential evaluations, the Federal Circuit has:

“…held that federal patent law preempts state-law tort liability for a patentholder’s good faith conduct in communications asserting infringement of its patent and warning about potential litigation. State-law claims … can survive federal preemption only to the extent that those claims are based on a showing of ‘bad faith’ action in asserting infringement. Accordingly, to avoid preemption, bad faith must be alleged and ultimately proven, even if bad faith is not otherwise an element of the tort claim.” Id. (Internal citations and punctuation omitted).

In other words, while States are prohibited from passing general patent laws (e.g., having Massachusetts issue its own patents), States have a limited right to pass laws prohibiting bad faith patent-related conduct.

Potential Strategies If the Massachusetts Patent Troll Act Passes

Patent owners and accused patent infringers should determine their strategies in consultation with a competent intellectual property attorney.

Based upon the current language of Massachusetts’ “patent troll” bill, some potential strategies might include:

Massachusetts Patent Owner Potential Strategies

  • Engage in a “good faith effort to establish that the [accused infringer] has infringed the patent and to negotiate an appropriate remedy.” In other words, a patent owner should do “due diligence” to confirm that the underlying patent is, in fact, being infringed before sending a cease and desist letter and evaluate and be prepared to negotiate an appropriate remedy.
  • Alternatively, simply file a lawsuit rather than sending a cease and desist letter prior to suit in order to avoid exposure to a declaratory judgment action.
  • If the patent owner is amenable to licensing the invention, indicate as much at the earliest possible opportunity and base the proposed licensing fee on a reasonable estimate of the value of the license.

Massachusetts Accused Patent Infringer Potential Strategies

  • Consider filing a claim under the “patent troll” statute against any patent owner who makes an accusation of patent infringement (in lieu of, or in addition to, a potential declaratory judgment action to determine the validity and/or non-infringement of the underlying patent).
  • If a cease and desist letter does not contain the requisite information outlined in the proposed Massachusetts’ “patent troll” bill, demand such information from the patent owner (and extend a reasonable time for the patent owner to comply with such demand).


Our firm will continue monitoring the status of Massachusetts’ proposed “patent troll” litigation. In the meantime, if you believe someone is infringing your patent rights, or if you have been accused of patent infringement, call us today for a free consultation.

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