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Attorneys General Join Legislators in Pushing Patent Trolls Back Under Bridges

Vermont’s Democratic Attorney General Bill Sorrell recently came out swinging in a lawsuit against one of the biggest so called ‘patent trolls,’ or entities that exist for the purpose of licensing patents in order to sue companies for alleged infringement of those patents. Known as non-practicing entities (NPEs), or patent assertion entities (PAEs), these organizations have been operating in the shadows over the past decade, gradually ramping up their activities to a point where lawmakers are starting to take notice. These entities typically operate by sending vaguely worded letters to companies demanding payment in the form of licensing fees with an unreasonably short payment deadline – sometimes two weeks or less. The cost of dealing with these legal threats can be costly for many companies, who would rather settle than take the matter to court, where potential legal fees far exceed the cost demanded by the trolls. Through a combined effort by Sorrel and state legislators, Vermont was able to pass the first patent troll law making bad-faith assertions of patent infringement illegal, thereby allowing the Attorney General to prosecute patent trolling offenders.

Vermont is not the only state that has moved to end or curb the potential economic damage caused by patent trolling organizations, as Sorrel’s work has emboldened other states, and the U.S. Congress to act on the matter. Among the states taking action:

  • Kentucky SB 116 passed the Senate on February 25 and is pending in the House Judiciary Committee. The bill would make bad-faith assertion of patent infringement a violation of the state’s consumer protection law.
  • Maine LD 1660 is currently pending in the Joint Judiciary Committee. It would allow victims of patent trolls to bring forth civil suit in order to recoup losses caused by bad faith assertions of patent infringement.
  • In Minnesota, the state’s Attorney General has issued a ‘stay-away’ order to the largest and most egregious patent troll, MPHJ Technology Investments, LLC.
  • Nebraska’s Attorney General has warned patent trolls operating in the state, and legislation that would prohibit them, LB 677, is pending in the House Judiciary Committee.
  • New Jersey AB 2462 would prohibit making bad faith assertions of patent infringement. The bill is pending in the Assembly Commerce and Economic Development Committee.
  • New York’s Attorney General reached a deal with MPHJ to create new guidelines to assure patent claims to not use improper tactics.
  • Oregon SB 1540 was signed by Democratic Gov. John Kitzhaber on March 3 and took effect immediately. This new law prohibits bad faith claims of patent infringement.
  • South Carolina also has a bill pending in the House Judiciary Committee, HB 4629, which would make it an unlawful trade practice to make a bad faith assertion of patent infringement.

The largely bipartisan movement to regulate patent trolls is unlikely to lose steam in the near future as the number of lawsuits filed by patent trolls has increased nearly six-fold since 2004 to a peak of 4,600 in 2012. Under existing federal law, companies that are targeted by patent trolls may only recover litigation fees if a suit is deemed to be objectively baseless and filed in bad faith. Federal judges up to this point have been reluctant to do so, leaving companies and small businesses on the hook for their own legal expenses caused by these frivolous lawsuits.

As such, a federal resolution is likely. The U.S Supreme Court took up the issue in February. Federal legislation, HR 3309, sponsored by Rep. Bob Goodlatte, R-Virginia, is scheduled for a March 12 hearing in the Senate Judiciary Committee. The bill previously passed the House in December with a vote of 325-21. The two Supreme Court cases, expected to be ruled on in early July, include Octane Fitness, LLC v. Icon Health & Fitness, Inc. andHighmark Inc. v. Allcare Health Management Systems, Inc.

States Seeking Private Sector Solutions to Public Sector Headaches

While much of the nation is stuck in a deep freeze from the recently hyped polar vortex, state Departments and Agencies of Transportation around the country are quietly at work making plans to begin their summertime agenda, one that is the bane of commuters and travelers alike – highway and bridge maintenance. Though routinely decried by motorists everywhere, it is generally accepted that these projects are a necessary evil. Healthy roads and sturdy bridges are crucial to the commercial economy and private commuter experience, making it one of the few decidedly non-partisan issues in today’s hyper-partisan political atmosphere.

With nearly everyone is in agreement that proper upkeep of the public infrastructure is necessary, and revenues to do so from traditional sources like gas taxes dwindling in the face of new and emerging technologies, legislators are taking a new approach to save money and raise revenue for infrastructure improvements. Public Private Partnerships, or P3s, have emerged over the past several years as one of the key tools used by legislatures to deliver quality infrastructure maintenance programs at a fraction of the traditional cost. The concept is simple – the state enters into an agreement with a private sector entity to design, build, construct or maintain critical transportation infrastructure for an agreed upon cost. This type of agreement aims to be beneficial for both parties as the state gets necessary work done for a fraction of the cost. While not all PPPs follow the same scope or method of action, the goal is always the same – to save the state money while encouraging investment in the private sector.

To date, 33 states have enacted legislation that allows for private sector participation in public sector endeavors; another eight have bills pending that would do the same. While the West Coast and Southern states have embraced PPP-enabling policies, many Midwestern and Northeastern states, which are ravaged annually by winter-related transportation costs, have yet to do so. Some currently pending proposals include:

  • New Jersey AB 1558 is pending in the Assembly Transportation and Independent Authorities Committee and would authorize the Commissioner of Transportation to select transportation projects to be used as demonstrations of PPP agreements.
  • New York SB 4846 is pending in the Senate Finance Committee and would authorize state agencies to contract with private entities and sets strict requirements related to rulemaking, regulations and reporting requirements related to PPPs.
  • Oklahoma HB 2898 is pending in the House Government Modernization Committee and would allow the Department of Transportation to enter into PPPs and sets guidelines regarding procurement of proposals and guidelines for PPPs.

PPPs will likely be one of the keys to reducing cost and improving quality of life for both citizens and governments in the coming years, however, they are unlikely to be the end-all to state transportation infrastructure costs. As former Kansas Republican Governor Bill Graves remarked, “PPPs are one of the many tools that can be used to help address America’s infrastructure deficiencies. PPPs, however, are not the panacea for infrastructure funding.” Moving forward, responsible legislators and executives must learn how to properly leverage the use of PPPs as part of a comprehensive approach to infrastructure maintenance.

As PPP-enabling policy continues to evolve and flourish expect to spend less time in traffic next time you decide to take a week off for your summer vacation.

States Pave the Way For Higher Minimum Wage

During his State of the Union speech this year, President Barack Obama called on the U.S. Congress to raise the federal minimum wage from its current level of $7.25 to $10.10 an hour. In doing so he also took advantage of his own executive powers to increase the rate to $10.10 for federal contractors. A federal bill that would extend this benefit to all workers around the country, U.S. S 460, has not seen movement in the Democratically-controlled Senate in nearly a year.

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Health Care Reform Remains On Center Stage

In deep-red Georgia, legislators have introduced a bill that attempts to block implementation of the federal Affordable Care Act (ACA). HB 707, which is currently awaiting consideration in the House Judiciary Committee, would prohibit the state from participating in any health care exchange and preclude any state or local government agency or employee from actively aiding in the enforcement of the ACA.

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