New Bill Takes Aim at Patent Demand Letter Abuses


Since the end of last year when the House passed the Innovation Act with a resounding bipartisan majority, the President has announced his intention to sign the bill, and he made a strong statement in support of reform in this year's State of the Union address. But we've still spent the early months of 2014 working with Senators, and urging the Senate to act on pending legislation. Today, a new bill was added to the list. The Transparency in Assertion of Patents Act, introduced by Senators McCaskill (D-MO) and Rockefeller (D-WV), is an important bill that would protect consumers and small businesses by curbing the patent demand letter problem.

While the Innovation Act brought great gains to our community by squaring-up against patent trolls, the demand letter problem, which for jurisdictional reasons was left out of the House package, remains a grave concern. Last year, when we launched the demand letter database, Trolling Effects, with EFF and a coalition of tech advocacy organizations, we wrote:

The letters demanding these payments are often evasive, failing to include details about the patents, who owns those patents, and the products or services that allegedly infringe. They fail to give recipients the information to make rational decisions, such as whether they should pay the troll, ignore the letter, or go to court to fight it. Just hiring a lawyer to ascertain that seemingly simple information can easily cost well into the tens of thousands of dollars.

The letters raise even more fundamental concerns, too. Because they happen before a legal complaint is ever filed, they are not part of the public record. And once a settlement or license is signed, it will likely include a non-disclosure provision, prohibiting the letter's recipient from talking publicly about its contents. This means that the scope of the problem is often underreported, making it harder for policymakers to understand the true scale of the patent troll problem.

Here is what Sen. McCaskill and Sen. Rockefeller's bill would do:

  • Require that demand letters contain certain basic information, such as a description of the patent at issue, a description of the product or service that allegedly infringes it, contact information for the patent's owners, and disclosures of ongoing reexaminations or litigations involving that patent.
  • Define as an illegal, unfair, or deceptive practice certain egregious behaviors, such as sending letters threatening litigation without a real intent to file litigation, or sending letters that lack a reasonable basis in the law.
  • Give state attorneys general explicit power to to target similar bad behavior in their own states.
  • Allow the Federal Trade Commission to enforce these rules by levying penalties of $16,000 per each violation.

Signing this bill into law would go a long way to stopping some of the worst demand-letter abuses. We applaud Senators McCaskill and Rockefeller, and look forward to supporting this piece of legislation as it works its way through the Senate.

Speaking of which, urge the Senate to take action on this bill, and other essential patent reform measures, here