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Bill designed to wipe out patent trolls in Ohio

TIFFANY L. PARKS
Special to the Legal News

Published: October 20, 2014

In sponsor testimony for House Bill 573, Rep. Kristina Roegner said the bill was drafted to send a message to “patent trolls.”

“They are not welcome in the state of Ohio,” she said.

The proposed legislation, which is before the House Judiciary Committee, would prohibit any person from making a bad faith assertion of patent infringement.

Roegner, R-Hudson, said patent assertion entities, sometimes referred to as non-practicing entities or “patent trolls,” generally refer to shell companies that game the patent litigation system and target local businesses with frivolous lawsuits.

“These trolling firms send out thousands of demand letters knowing that many of the companies, usually small businesses, will settle with the firm after receiving the letter to avoid costly litigation even if they are innocent,” she said.

“Because of the tremendous expense of defending a patent infringement claim, trolls have been successful at driving settlements, or ‘licensing fees,’ for less than it would cost a company to defend its right to protect its products technology.”

According to a Boston University School of Law study, Roegner said patent troll cases cost U.S. companies more than $80 billion per year in lost wealth.

Of that figure, nearly $30 billion is spent on direct legal costs.

“Unfortunately, these fees are now considered to be inevitable costs of business,” she said.

“The proposed legislation would prohibit anyone from making a ‘bad faith’ (frivolous) assertion of patent infringement while protecting the patents of legitimate stakeholders.”

HB 573 includes the following list of factors a court could consider as evidence of a bad faith assertion: a demand letter does not contain a patent number, name/address of the patent owner(s) or factual allegations concerning specific areas of infringement; the person sending the letter did not conduct an analysis comparing claims in the patent to the target’s products or services; the demand letter demands payment of a fee/response within an unreasonably short time; and the person sending the letter previously filed similar claims that a court determined were meritless.

If enacted, Roegner said the bill would permit a person aggrieved by a bad faith assertion of patent infringement to bring legal action against the patent troll and authorizes the attorney general’s office to investigate and institute civil action if it’s believed a company has made a bad faith assertion.

“HB 573 was designed to protect Ohio’s businesses from frivolous patent infringement lawsuits, while preserving the lawful ability of innovators to defend their intellectual property,” she said.

In drumming up support for the bill, Roegner said she’s been surprised by the level of interest in the proposed legislation.

“From the banking industry to the grocers to the retail merchants, many of whom I am certain will provide proponent testimony for this bill, there is a serious concern about patent trolls and desire to protect Ohio businesses from these frivolous threats of litigation,” she said.

“There also seems to be interest in this topic across the nation.”

Roegner noted that Ohio joined 29 other states in filing a friend of the court brief with the U.S. Supreme Court asking the court to relax its standard that lower courts use to award attorneys’ fees to prevailing parties in some patent cases.

The brief, which was drafted by Vermont’s attorney general, delves into the damage caused by patent trolls and urges the high court to adopt a rule that would make it easier for businesses that successfully defend meritless claims of patent infringement to recover some of their litigation costs.

“We cannot afford to wait any longer,” said Roegner, who thanked Ohio Attorney General Mike DeWine’s office for their assistance on HB 573. “The issue of patent trolls needs to be addressed.”

HB 573 is co-sponsored by Reps. Matt Huffman, John Becker, Louis Terhar, Lynn Wachtmann, Ron Hood, Gary Scherer, John Adams, Mark Romanchuk and Jeffrey McClain.

The bill has not been scheduled for additional hearings.

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