What Is Happening In Vermont? Patent Law Reform From The Bottom Up

Guest post by Camilla A. Hrdy, Resident Fellow at the Yale Law School Information Society Project.

Although there have been various proposals for curbing abusive threats of patent litigation by Patent Assertion Entities (PAE’s), or so-called patent “trolls,” and the Federal Circuit appears willing to sanction PAE’s for baseless lawsuits, the U.S. Patent Act does not directly address the problem. Dissatisfied with this situation, the state of Vermont has just passed a new and innovative law amending its Consumer Fraud statute to prohibit “bad faith assertions of patent infringement” against individuals or companies based in Vermont. The law creates a factor-based test for courts to determine when acts constitute “bad faith assertions,” and lists several non-exhaustive factors that courts may consider as evidence of bad faith, including sending demand letters that lack basic information about the infringement claim or that seek payment of unreasonable royalty fees. Targets of bad faith assertions can bring actions (in state or federal district court1) to obtain compensatory damages and exemplary damages, plus costs and fees. Vermont’s Attorney General simultaneously filed a complaint under existing Vermont consumer protection law against a PAE that sent out demand letters to thousands of small businesses in Vermont and around the country.

Some commentators suggest Vermont’s new law is preempted by federal patent law. This is not necessarily the case – so long as courts apply the law in a way that satisfies the Federal Circuit’s standard for a finding of “bad faith.” This requires, at minimum, “clear and convincing evidence” that the infringement assertions are “objectively baseless” to avoid dismissal on summary judgment or a motion to dismiss. As the Federal Circuit explained in Globetrotter, the idea is that patent holders should not be penalized simply for asking the government to enforce their patent rights. That said, as Vermont Attorney Justin McCabe points out, if courts do adhere to the Federal Circuit’s current standard, this will certainly weaken the Vermont law’s utility as a supplement to current options.

Putting aside the question of whether the Vermont law will be preempted, should it be? According to Eric Goldman, we should be wary of state-by-state contributions to patent law (and IP law in general) for numerous reasons, including higher costs for patent owners to enforce their rights and comply with different or inconsistent state standards. Goldman concludes that while he would “enthusiastically favor a nation-wide threats action,” if the choice is between no threats action at all versus state-level threats actions, he might favor the former.

I disagree.

There are certainly costs to introducing decentralization into the patent system, just as there are for any area of law where state and federal governments have concurrent power (immigration, tax, corporate law, to name just a few). But the creation of a novel, state-level solution to the problem of unfounded patent assertions highlights the reasons we accept some of these costs by continuing to support a system of dual sovereignty. Robust federalism can produce a range of benefits, including involvement from local officials in designing policies to support their jurisdictions’ development goals, promoting intergovernmental competition and experimentation, and diffusing authority among different sovereigns in order to avoid consolidation of power in a single lawmaking body or administrative agency (i.e. the U.S. Patent & Trademark Office).

But for federalism to actually benefit patent law and innovation policy generally, states require some autonomy to disagree with federal patent policy and to use state law to grow local innovation ecosystems, like California has with Silicon Valley. According to the preamble of the new law, Vermont is “striving to build an entrepreneurial and knowledge based economy.” State representatives decided the law will facilitate their goal of attracting IT and other knowledge based companies facing costly threats of litigation from PAE’s. Vermont has every right to make this attempt, and we should encourage other states to do the same.

Obviously, as the Supreme Court has made clear, state laws should be preempted when they interfere with the goals and objectives of federal patent law. But Vermont’s law doesn’t: like U.S. patent law, it strives to promote innovation and does not interfere with inventors’ decision to file for U.S. patents and disclose information about their inventions to the public.2 Far from needlessly raising the cost for patent owners to enforce their rights, Vermont’s local solution to a national problem is a prime example of how federalism is supposed to work.

As I argue in a forthcoming article and a recent essay, given the benefits of state involvement in patent law and innovation policy, federal courts should be wary of preempting state laws that attempt to influence national patent policy. I hope the Vermont law is the first, not the last, of its kind, and that it inspires other states to take a greater role in helping federal institutions fix the patent system’s problems. Meanwhile, innovators themselves – whether businesses aggrieved by PAE’s or inventors who are dissatisfied with patent law’s emphasis on propertization versus free access to knowledge – should begin to actively encourage their state and local governments to dissent against federal patent norms by experimenting with laws to make the system work better for everyone. We may ultimately decide that some, or even all, state patent policy innovations are not workable in practice. But the results of a bottom up reform movement will inevitably surprise us. And this is the point.

= = = =

1. Federal district courts have exclusive jurisdiction over patent cases, and the jurisdiction statute was recently amended to clarify that “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.” 28 U.S.C. §    338(a). However, if none of the claims for relief under the Vermont law necessarily requires the resolution of a patent law issue, then federal district courts would not have jurisdiction absent diversity citizenship. See ClearPlay, Inc. v. Nissim Corp., 602 F.3d 1364, 1369 (Fed. Cir. 2010).

2. The same cannot be said for state trade secret laws, which we permit despite the risk that inventors of patentable inventions will keep their inventions secret, due to the independent benefits derived from more information sharing within companies and protection of valuable, if not always patentable, information from misappropriation by competitors. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 490-93 (1974).

112 thoughts on “What Is Happening In Vermont? Patent Law Reform From The Bottom Up

  1. “This law is more about protecting small businesses from unsubstantiated threats that they have to either pay money to investigate or pay money to settle, when the basis of the claim has not been adequately communicated ”

    Curious, have you heard of any parallel legislation aimed at the copyright trolls? They seem to be hitting small businesses in the same fashion, sort of a smash-and-grab settlement technique.

  2. your neighbor can credibly threaten to sue you without first demonstrating any evidence that the facts support his position.

    What? Shocking – this ability to bring suit without any evidence that the facts support his position must be stopped. It’s an outrage.

    No wait…

  3. Vermont’s statute doesn’t pre-empt federal law in any way. The statute requires no interpretation of any patent law. It merely sets out a list of things which have already been called out as bad behavior by District Courts and the CAFC over the years. Failure of a threatening letter to provide the number of the patent that one is supposedly infringing? Bad behavior. Refusal to investigate the facts in any way before sending out a threatening letter? Bad behavior. Refusing to threaten the deep-pocketed manufacturer of supposedly infringing equipment, but instead going after their customers so long as they’re small companies with only a few employees? Pretty damning. The statute reads more like a, “How to recognize this new scam.” No pre-emption there.

    And for those who think that such a statute wasn’t necessary, it allows the Vermont Attorney General to go after entities that are targeting Vermont citizens. What’s wrong with that? And to those who think that the recipients of these letters should just be hiring a patent attorney, I say, really? “REALLY?” You obviously haven’t been to Vermont. There aren’t many lawyers there, even fewer patent attorneys, and even less money to pay them. Drive through Vermont sometime. A lot of the lawyers sell fresh eggs and maple syrup at the office. I am NOT making that up, I’ve seen it.

  4. I wasn’t thinking about dickishness so much as the “objectively baseless” standard as it might get applied in state court,

    That’s definitely going to be a factor, but only one factor. This law is more about protecting small businesses from unsubstantiated threats that they have to either pay money to investigate or pay money to settle, when the basis of the claim has not been adequately communicated (whether the plaintiff has a basis or not).

    The state court probably won’t come to a definitive conclusion about whether the case is baseless, unless it’s particularly egregious (in which case it’s unlikely the federal court will disagree). It’ll evaluate the baselessness on a sliding scale as part of a larger test. So you still probably won’t technically have contradictory judgments. Unless, of course, you don’t contest the state litigation too hard by revealing the basis of your infringement case because you don’t want to tip your hand in the federal litigation. But then, losing in state court is just a cost of doing business, I suppose. Patentees have costs of doing business too.

  5. And you’d probably deserve it, too.

    LOL – cite please (and not from the Infringer’s Rights Bible).

  6. Thanks. I wasn’t thinking about dickishness so much as the “objectively baseless” standard as it might get applied in state court, and foreseeing cases where a protectionist state court (protectionist of local companies) might view a patentee’s claims as objectively baseless despite their survival in the infringement action.

    The now-defunct false patent marking craze gives a couple of hundred examples on MTD of how varied the application of the pleading standards were. Even following the Chevron* case that supposedly solidified the pleading standard.

    (*Sorry, going from memory. I think it was Chevron but may have been a different petrochem company.)

  7. does the state court judgment get reversed?

    The two might not even be inconsistent, in which case you’d have a hard time citing either to get the other reversed.

    “several non-exhaustive factors that courts may consider as evidence of bad faith, including sending demand letters that lack basic information about the infringement claim or that seek payment of unreasonable royalty fees.”

    It’s entirely plausible that you might find yourself liable under this law, even if you ultimately win your infringement action, if you were particularly dickish about how you initially approached the defendant for a big cash settlement. And you’d probably deserve it, too.

  8. So if my infringement defendant gets a judgment against me in VT state court, but my infringement allegations against him in federal district court survive MTD, does the state court judgment get reversed?

  9. your neighbor can credibly threaten to sue you without first demonstrating any evidence that the facts support his position.

    What? Shocking – thi sability to bring suit without any evidence that the facts support his position must be stopped. It’s an outrage.

    No wait…

  10. Let’s see: what’s wrong with this scenario?

    Lots of things.

    Not least of which is that your neighbor can credibly threaten to sue you without first demonstrating any evidence that the facts support his position.

    And then, when he does get you to court, there’s no easy way to get the case quickly dismissed, because it turns on a factual dispute. So maybe it’ll wind up before a jury who will decide which of you they like better (I wouldn’t pay money for your chances) instead of who has the legally tenable position.

    Another thing that’s wrong with this scenario is that you haven’t stated anything close to a cause of action. Just because your neighbor happened to be wrong about the fence, that doesn’t mean he was being unreasonable or vexatious.

    Not to mention that innocent home owners and business people have to constantly pay their lawyers thousands of dollars just to have enough peace of mind to go on living like they were before, every time someone threatens them with litigation over a likely-unenforceable right.

    But probably the single most wrong thing about the scenario is that your neighbor didn’t get a patent first. I’m sure you wouldn’t have dreamed of challenging his right to sue you if he had one of those. But then, if he had a patent, he’d have a job, and that would mean better things to do than harassing his neighbor.

    Did I miss any?

  11. LG: I had a similar problem with my neighbor. My neighbor wrote me a letter saying they thought my fence was on their property. Well, I didn’t want them to sue me and have it removed, so I hired a lawyer and surveyor. The survey cost $2,500 and the lawyer interpreted the survey for me and chain of title and wrote an opinion letter for me that I was not on thier property. The layer cost $15,0000. I now want to sue my neighbor.

    Let’s see: what’s wrong with this scenario?

  12. Not an answer.

    And notably, completely evasive as to your blatant 1ying and (yes documented and archived) admissions.

    No wonder you typically won’t give answers – they always seem to torch your agendas.

    As they say: svcks to be you.

  13. So what about Francis and Keeping It Real – after you swore that you didn’t do what you accuse others of?

    LOL – hypocrite.

  14. Are you going to blatantly lie about that admission too?

    No, unless you continue to beat your wife.

  15. you mean sockpuppets like Francis and Keeping It Real?

    No, I mean sockpuppets who post thousand of comments to a single blog in a year and pretend to represent multiple voices standing tall and proud against a “vocal minority” when the “vocal minority” is, in fact, the sad bl-gtroll behind the sockpuppets.

    Does that ring a bell, S-ckie? Hmm?

  16. Nice spin Leopold – the fact is just who you did choose to respond to showed who the troll is – NOT responding to every post.

    Try again.

  17. like Dr. Noonan was able to pick up from my English as a second language posts about attacks onthe patent system from both the Right and the Left)

    Let me guess: he thanked you for your comment. How sweet!

    As I recall, Dr. Noonan was the guy who thought that failing to grant a patent on a new way of thinking about an old result was an “attack on patent law” until he changed his mind (sort of, only after the decision) and pretended that he didn’t understand the facts of the case even when those facts were very plainly laid before him. Forgive me for not taking Kevin “Partner in a Law Firm ” Noonan terribly seriously when it comes to beating back perceived “attacks” on his client’s patents. I’m sure that from Kevin’s perspective these perceived “attacks” do come from “all directions”, especially when viewed from the perspective of his clients. I must say that it was pretty funny watching him on TV trying to defend Myriad’s patents (I wouldn’t want him getting on TV to defend my client’s patents, that is for sure!).

  18. The danger is the evisceration of patent law.

    What does “evisceration of patent law” mean on your planet, Humpty?

  19. Humpty: the cost of doing business

    There is again: “Patent litigation – just get used to it!”

    The trolls and their cheerleaders love to pretend that this is just the way things are in our great country. Death, taxes, and being sued for infringing patents. It’s the American way. A True Patriot would just pay the money and undertand that they are helping the economy and encouraging “innovators” to file more patents, which are basically just jobs waiting to be created!

    If only the government and the judiciary would learn to keep their filthy hands off the patent system then everything would be so awesome.

  20. you unilaterally declared immunity from the “troll” label

    Humpty did that??? A unilateral declaration??? I’m shocked! Shocked, I tell you!

  21. You know, the electronic equivalents

    Humpty thinks that email and registered mail are “equivalent”. That’s interesting. In all of the discussions I’ve read online about sending prior art to a third party competitor so the third party can cite the art in an IDS, I’ve never heard anyone suggest that email and registered mail were “equivalent.”

    Tell us why you believe they are “equivalent” in this context, Humpty. And by the way, have you managed to identify a single firm that will admit to using staff to screen and discard registered letters sent to the firm’s attorneys which refer to pending patent applications handled by the firm’s attorneys? How about a single article online that suggests using your scheme, Humpty, to prevent an attorney learning about relevant prior art? Can you find me one of those? What about your super honest and truthful bro’ Gene Quinn? Have you run your scheme by him? Or is it the case that you are alone with your sad little l i e? Let us know, Humpty.

  22. LOL – it’s archived Malcolm.

    Tell me again, what is the controlling law regarding the exceptions to the printed matter doctrine?

    Are you going to blatantly lie about that admission too?

    LOL

  23. every day hiding behind sockpuppets

    LOL – you mean sockpuppets like Francis and Keeping It Real?

    The word for you (still), Malcolm: hypocrite.

  24. there’s long been an assumption

    You know about ASSumptions, right?

    You also know that to enforce any patent, the real party in interest is required to reveal itself in court (right now in today’s laws), right?

  25. The danger is the evisceration of patent law.

    duh.

    (you know, like Dr. Noonan was able to pick up from my English as a second language posts about attacks onthe patent system from both the Right and the Left)

  26. You are still mistaking ownership and what is owned.

    And by the way, Humpty, maybe you should talk to Jay Rust about “mistaking ownership”:

    The lawsuit also claims that lawyer Jay Mac Rust is really the person who owns the patents via the company MPHJ. As you may recall, last month we wrote about Mac Rust after Joe Mullin at Ars Technica interviewed him in connection with the case. At the time, Mac Rust claimed that he was just one lawyer working for the owner of the patent, but who handled the “irate” recipients. So it’s interesting to see the claim that he’s really the guy behind MPHJ. As we’ve noted, there’s long been an assumption that the use of shell companies is often done to hide the fact that it’s the patent lawyers themselves who own the patents being used.

    Of course, we can also be pretty sure that in every case where you have a patent t–b–ger (1) claiming that “every patent creates a job” or (2) spending hours every day hiding behind sockpuppets while “doing battle” with “dangerous academics” or (3) pretending to be an “actual inventor” or a “101 expert”, it’s actually just a self-interested, greedy patent lawyer hoping to work the troll paradigm into a fluffy pile of cash.

  27. You have made the admission, Malcolm: “configured to” is structural language.

    Right, Humpty. I “admitted” that on the same day you “admitted” that you like to strip down to your underoos and hide behind a bush near the schoolyard.

    Great game, Humpty.

    ots of other people (for example, Dr. Noonan…) have no trouble whatsoever understanding me.

    You guys make a cute couple. I remember when you first fell for each other. It was over that Prometheus case, as I recall. How’d that work out for you two?

  28. According to the preamble of the new law, Vermont is “striving to build an entrepreneurial and knowledge based economy.” State representatives decided the law will facilitate their goal of attracting IT and other knowledge based companies facing costly threats of litigation from PAE’s.

    This seems like a very reasonable and natural response to the p—tent t–b-ggers lurking around here who would rather that small businesses simply get used to being sued for patent infringement. After all, they tell us, it’s just one of the “costs of doing business” in America. And every patent creates a job! Or something.

    Where do these entitled whiners get their talking points? Maybe it’s a result of inhaling all the fumes while “working in their garages” developing a new method for using a computer to sell Grandma something she doesn’t need.

  29. LOL – Anything is ‘allowed.’

    *whew* What a relief!!!

    So … where’s the “danger”, Humpty? Should we call the police to put these “dangerous” academics away? Maybe start some kind of militia?

    The Heritage Foundation and the Hoover Institute can only do some much to slow down these anti-patent communists. Richard Epstein can’t be everywhere at once, you know!

    I’m just worried about the children. So where’s the “danger”? It’s hard to put together a solid defense if you can’t articulate what the specific danger is that you are referring to.

  30. LOL – your admission of when Rule 11 does not help you should make it evident that when Rule 11 DOES help you is in the situation wherein the letters are not legitimate.

    Whatever you say, Humpty. link to en.wikipedia.org

    Or are you forgetting your own self-defeating math exercise which showed that you ‘troll’ me to a far greater percentage than I ‘troll’ you (on the order of magnitude of SIX times as much)?

    Yes, Humpty, I think I remember. Wasn’t that the exercise that showed that you felt compelled to respond to somewhere around 100% of my posts, over a 4-day period, while I responded to only a small fraction of yours? After which you unilaterally declared immunity from the “troll” label because of the sheer number of your posts? Is that the self-defeating exercise you’re talking about?

  31. LOL – your admission of when Rule 11 does not help you should make it evident that when Rule 11 DOES help you is in the situation wherein the letters are not legitimate.

    Not only to I know what I am arguing, I just had you admit that I am correct.

    And please, don’t try to steal my lines – they don’t work just because you type them – they work because they apply to the situation I apply them to.

    Or are you forgetting your own self-defeating math exercise which showed that you ‘troll’ me to a far greater percentage than I ‘troll’ you (on the order of magnitude of SIX times as much)?

    Phhhffft.

  32. You need to make some type of distinction in your example that would not apply to a business faced with a legitimate letter. All you have highlighted is the cost of doing business – nothing more.

    Uh, the Vermont law is of no help to the business faced with a legitimate letter. Neither is Rule 11, for that matter.

    You don’t even know what you’re arguing about anymore, do you? Did that little red cape of “LB said” get you overexcited again?

  33. Still waiting for an answer from you Malcolm…

    (lol – let me be a little more specific, as there are tons of answers from you that still await)

    Still waiting for an answer from you Malcolm concerning whether you employ spam filters on your emails. You know, the electronic equivalents that remove mail directed to you electronically before you ever see it?

  34. why the target of a baseless patent infringement assertion

    ‘why the target of a fully justified patent infringement assertion’

    SAME argument applies to both (from the author’s viewpoint.

    You need to make some type of distinction in your example that would not apply to a business faced with a legitimate letter. All you have highlighted is the cost of doing business – nothing more.

  35. Allowed?

    LOL – Anything is ‘allowed.’ You self defeaating all ove rthe place and not even realizing it is ‘allowed.’

    Even your vacuous posts are ‘allowed.’

    C’est la vie.

  36. LOL – more self defeat from you Malcolm.

    Maybe ‘English’ on your world means that you can read to only understand what you want to understand, but on this world it is a bit different.

    You are still mistaking ownership and what is owned.

    Try again.

  37. You have made the admission, Malcolm: “configured to” is structural language.

    Funny that you want to continuously try to malign my posts, and yet it is your own words that h@ng you. Funny too – that lots of other people (for example, Dr. Noonan, The US Government in their Myriad brief) have no trouble whatsoever understanding me.

    Of course, when faced with these facts and str1pped of your spin, ALL you can do is stand there and [shrug].

  38. Do you laugh at Dr. Noonan too?

    Sometimes. Is that not allowed?

    I’m just trying to figure out what’s “dangerous” about making it harder for NPEs to threaten hundreds of businesses with j–k patents. For instance, let’s say the cretins behind this “scan to email” j—k patent are completely shut down. Where’s the “danger”, Humpty?

    Let’s go further and say all NPEs are shut down, forever, from asserting the patents that they don’t practice. Where’s the “danger”, Humpty?

  39. He’s got a point, LB. Since the damage looks the same after the fact, you haven’t made a very compelling case for penalizing those who cause the damage deliberately for no legitimate reason.

    Ouch – I am so naïve! It did not occur to me that this was the argument anon was making. I misunderestimated him again.

  40. Actually, there are plenty of NPE-f-llating articles that say this, Humpty. Here’s one by by Nosferatu:

    link to forbes.com

    The core of the American entrepreneurial ideal is the ability to profit from innovation. Inventors must be awarded when their patents are infringed. The system as it exists today does not protect them. If inventors do not realize rewards, they will turn their efforts elsewhere. The American economy will be deprived of their inventions and we will all be the poorer. …. In the end, the real distinction is not which entities are “practicing,” but which types truly support innovation.

    Enjoy.

  41. ANY patent letter draws the same response, right?

    You’re speaking in your usual crypto-babble, so I have no idea what you’re asking.

    You have made no distinction as to why the ‘troll’ threat needs special attention.

    That’s because I never said anything about a ‘troll’ threat needing special attention. I did say a great deal about why the target of a baseless patent infringement assertion might spend a lot of money in a good-faith reaction to that assertion. And you haven’t said a word to back up your assertion that Rule 11 is sufficient to take care of that problem. But am I surprised? Go ahead, Humpty, tell me.

  42. The corollary between software configurations and chemical configurations plays out

    Maybe you would make more sense if you typed in your native language, Humpty. Try it some time. Then we can translate and see if your views are as silly in your native language as you are in English.

    The “corollary” you refer to “plays out” only when new chemicals are claimed functionally, as software “configurations” are claimed. I’m happy to see all functionally claimed compositions of matter go belly up, along with “software configurations.”

    [shrugs]

  43. ANY patent letter draws the same response, right? You have made no distinction as to why the ‘troll’ threat needs special attention.

    He’s got a point, LB. Since the damage looks the same after the fact, you haven’t made a very compelling case for penalizing those who cause the damage deliberately for no legitimate reason.

    Any physical injury draws the same medical response? Then why are we imprisoning the people who injure others on purpose? Seems ever so arbitrary.

  44. ANY patent letter draws the same response, right? You have made no distinction as to why the ‘troll’ threat needs special attention.

  45. Do you laugh at Dr. Noonan too?

    Or do you just laugh because you don’t know any better?

    (that’s a rhetorical question)

  46. Consider: molecule X is old and treats

    LOL

    No Malcolm, you have quite missed the point, and really should pay attention to the similarities between arguments against software patenting and against patent in total.

    Consider instead that elements Oxygen, Carbon, Hydrogen, Nitrogen (amongst other chemical elements) are each old. Also consider that bonding of these to make molecules is also old. The corollary between software configurations and chemical configurations plays out despite your feigned ignorance and NIMBY tendencies.

    Be careful of what you wish for.

  47. If the assertion was baseless, chances are that the letter will never be backed up, since the patentee was bluffing and was hoping for a quick shakedown.

    Sure, you’re out a bunch of money, but look on the bright side. The patentee might figure you know where to find that much money, so he’ll sue you for infringement hoping for a slightly-less-quick but slightly more lucrative shakedown. The case will drag on until your company runs out of money, tying up your programmers in depositions all the while.

    You don’t actually get to prove the patentee’s claims frivolous and win the case, because you ran out of money and went out of business some years before that would have happened. But in theory, this is where Rule 11 would have put you almost right back in the position you would have been in six years earlier, when you were sued for no good reason.

    In the end, everybody makes money but you and your small business, and the patent is still “presumed valid”. This is how patents create jobs. What do you have against the patent system, anyway?

  48. I’m still confused why you appear to think that Rule 11 isn’t enough to combat sending threatening letters

    Maybe we should all take Humpty’s approach and just use mail room staff to screen out those threatening letters and throw them away, along with the letters that discuss prior art. Problem solved!

  49. Or when someone tries to get a patent for the new use of old chemical elements

    That’s not an unreasonable position. It’s not my position, necessarily, but it’s not unreasonable.

    Consider: molecule X is old and treats my asthma. I have a cabinet full of it and take it regularly. Then one day Slick Texas Timmy obtains a patent to a method of taking X to treat a headache. One day I wake up with asthma and a headache. I take my pill of molecule X, as usual. Slick Texas Timmy calls his team of bottom-feeding patent attorneys and sends me a threatening letter. What should I tell Slick Texas Timmy?

  50. How are those letters going to be actually backed up Leopold?

    If the assertion was baseless, chances are that the letter will never be backed up, since the patentee was bluffing and was hoping for a quick shakedown. But that’s the whole point – it took me $136,000 to figure that out. Now, how is it that Rule 11 is going to help me?

  51. the state of Vermont has just passed a new and innovative law … Vermont’s Attorney General simultaneously filed a complaint under existing Vermont consumer protection law…

    So a law meant to usurp existing law (which, by the way applies to all litigation) is now euphemistically called “new and innovative.” Figures, as the person espousing this position has the within that person’s equally euphemistic title “Protection of Intellectual Property” – with friends like these, who needs enemies? With protectors like these, who needs patents?

    And what about existing law in Vermont – was not that law proper enough?

    Some commentators suggest Vermont’s new law is preempted by federal patent law. This is not necessarily the case – so long as courts apply the law in a way that satisfies the Federal Circuit’s standard for a finding of “bad faith.”… As the Federal Circuit explained in Globetrotter, the idea is that patent holders should not be penalized simply for asking the government to enforce their patent rights.

    So brushing aside the legality, ignoring the duplicative nature of law already in place, realizing that this additional law is weak and most likely not too worthwhile if the existing law were followed, let’s just peddle the policy view anyway, right?

    for any area of law where state and federal governments have concurrent power… in order to avoid consolidation of power in a single lawmaking body or administrative agency

    I am pretty sure the states do NOT have concurrent PATENT power…, but hey, we are still brushing that aside, right?
    Besides, did the author sleep through the Tafas case which already dealt with the concern about too much power in an administrative agency? Why do I get the feeling that the author was singing a different tune during that proceeding (just a guess)?

    like California has with Silicon Valley

    Silicon Valley? – Seriously? That’s being touted as an icon [pun intended] of state law intervention in to the patent sphere?

    Vermont’s local solution to a national problem is a prime example of how federalism is supposed to work.

    Prime example huh? Maybe the point about certainly weakened the Vermont law’s utility as a supplement needs to be revisited

    inventors who are dissatisfied with patent law’s emphasis on propertization versus free access to knowledge

    Can you try at least to hide the disdain for patents being property – try just a little? You do that and I will attempt to hide my disdain for academics who are merely pursuing a dangerous agenda – deal?

  52. Patent assertion entities (PAEs), or so-called patent “trxxls,” brought over 50% of patent infringement litigations in 2012, with small companies making up the majority of PAE defendants and often reporting…

    There is a lot of assumptions buried in this opening statement.

    And a lot of innuendo that needs to be challenged (gee, when the AIA made joinder impossible, who would have thought that the natural outcome would be used to spin the facts to paint the ‘trxxls’ as m@licious entities and enforcing patent rights – which NATURALLY occurs in the court system – as such ‘the worst thing evah’…? Um, yeah, right like that wasn’t obvious…),

    but start with a bit of common sense – aren’t ANY defendants brought into the court system going to NATURALLY say the very same things?

  53. Some replies to “What Is Happening In Vermont? Patent Law Reform From The Bottom Up” Aka “More Left Wing Academic Chum”

    in pieces – filter catching something

  54. How are those letters going to be actually backed up Leopold?

    Obtuse. Is it on purpose?

    (said in the best Andy Dufresne tones)

  55. Did not the lawyer in your hypothetical explain the possibilities of court action to the client in order for the client to have the required understanding of his options, or did you just charge full speed ahead with a patentability study?

    What court action? (And what patentability study?) I just told you (and my patent attorney) that I didn’t want to get sued, and I asked her to determine whether I was really infringing the patent. Are you suggesting that I should initiate a court action without investigating whether there was a basis for the infringement assertion?

    As far as the rest of your “parade of horribles,” do you care to explain how the Vermont law (or any law) removes the reality of potential conflicts like this?

    I don’t think I claimed that it removes the reality of potential conflicts like this. The Vermont statute purports to provide a remedy when the assertion is clearly baseless, though.

    I’m still waiting for you to explain your statement that “Rule 11 is enough to combat the sending of threatening letters asserting patent infringement that cannot be backed up,” and how Rule 11 applies to the situation that the Vermont law tries to address.

  56. Paranoid rumblings? You guys called me “wiper” before CLS Bank came out and it turned out that my comments were more measured than either Moore’s or Rader’s.

    I’ll tell it to you again: I can see beyond your horizon. I am not paranoid. I can see where we are headed right now.

  57. Just because NWPA is paranoid does not mean that they (the Big Corp Right and the academic Left) are not out to harm patents.

    The attack on the patent system is very, very real.

  58. I say that you have not finished your explanation.

    Did not the lawyer in your hypothetical explain the possibilities of court action to the client in order for the client to have the required understanding of his options, or did you just charge full speed ahead with a patentability study?

    As far as the rest of your “parade of horribles,” do you care to explain how the Vermont law (or any law) removes the reality of potential conflicts like this? Or perhaps this is just step one in your ‘master plan’ wherein you reveal that the panacea of all of this is to just eliminate patents altogether?

  59. I’m still confused why you appear to think that Rule 11 isn’t enough to combat sending threatening letters asserting patent infringement that cannot be backed up.

    OK, we’ll go slow. I’m a small, but very successful, Vermont software developer with 20 programmers and other staff working for me. I have no in-house legal staff. I receive a threatening letter, on fancy attorney letterhead, asserting patent infringement and demanding payment of substantial royalties. The letter references a patent #, but gives no details regarding which of my 30-40 products infringes.

    I take patent infringement very seriously, and I definitely don’t want to get sued. So, I immediately hire a good patent attorney, at $400/hour, and ask her what to do. She spends two weeks on the problem, including 5 full days spent interviewing my top programmers, which delays the launch of my latest product and loses me a lucrative contract with a big-name distributor. Then I get a bill from the attorney for $36,000, along with a memo that says that she could find no basis for the allegation whatsoever, and that she is of the opinion that the assertion was made in bad faith. I’m out $36,000, plus $100K or so for the lost contract.

    I now hire you to see what my remedies are. You say, “Rule 11 is enough to combat the sending of threatening letters asserting patent infringement that cannot be backed up.” I say, “What? Can you please explain?” What do you say?

  60. Yes, well, let’s just adding and adding possible laws that can apply. The more the merrier. Hello banana republic good-bye freedom.

  61. Some Federal Judges and Magistrates are so lazy that it is impossible to tell if they are corrupt or just lazy.

    (I have experience with them.)

  62. Does it add another step? Does it add costs? Can a bad infringer raise this in state court even though it isn’t true?

    Doesn’t that apply equally to any frivolous retaliatory claim under state law? If a company wants to add a step, add costs, and drag you into state court, couldn’t they have done that already? Pick any state law, and sue.

    If corruption is as rampant as you say (which is still only a 1/3 chance, but we could all serve our clients much better if you’d share with us the names of these corrupt judges and lawyers), and presuming all infringers are sneaky, vindictive jerks who will stop at nothing to inflict harm on poor, innocent patentees, why weren’t they doing it already?

    I most definitely agree that the patent infringement litigation system can’t be fixed by adding litigation about the litigation, particularly when the underlying problem is frivolously suing people who can’t afford litigation. I’d much rather see a quick and cheap way for defendants to invalidate patents or get summary judgement of non-infringement when the case is actionably frivolous. But your paranoid ramblings are not helping your cause.

  63. If you’re a good faith patentee pursuing a bad-faith infringer, then you’re going to have to sue him to enforce your patent anyway. Sure, this could add a couple of steps, but you’re already talking about multi-hundred-thousand dollar litigation anyway. I’m not convinced that the added costs are very significant, except to the patent owner who never wants to go to court and wants to be able to run around asserting patent infringement without any risk to himself.

  64. I’m still confused why you appear to think that Rule 11 isn’t enough to combat sending threatening letters asserting patent infringement that cannot be backed up.

  65. So, now be a big boy, LB. The conversation will have to be with the client. Let’s see: we have this problem that the bad actor infringer has this state action they may bring against us. We have to figure out which county we may get stuck in and assess how corrupt the county is and look for the right attorney who is friends with the judge.

    That is the conversation that will be going on.

  66. LB: does it add a step or not? Does it mean having to retain an attorney in some local county or not?

    Please try to argue fairly: good actors can be accused of being bad actors and if the state law permits a bad infringer to accuse a good patentee of being the bad actor that adds a step in litigation and adds cost.

    Please, LB. Every possible defense that an infringer has and new forum adds costs and the ability to game the system. We have just added a whole batch of new reviews at the PTO, and now we are going to add a whole new batch of state laws.

    Please………………..be real. Answer the simple questions. Does it add another step? Does it add costs? Can a bad infringer raise this in state court even though it isn’t true? Are state courts less safe to litigate in then federal courts? (YES!!!!!!!!!!!!!!!!!!)

  67. Or do you not realize that the points you are making speak against this State action?

    No, I did not realize that. Thank you so much.

  68. And, if the remedy is to be removed to federal court what is the point of the state law?

    The state law is aimed at bad actors, who probably don’t really want to be in court at all. You and I were talking about the impacts on good actors, such as yourself.

    I’m still confused about why you want to be able to send threatening letters asserting patent infringement without ever having to back those assertions up.

  69. Because it is merely a “GREAT” computer brain – who cares, right?

    Where would top-secret military intelligence arms race countermeasures be without the incentive of patent protection?

  70. Given everything you say in this post at 9:06 AM, Leopold, why is Vermont even trying to do what it is trying to do?

    Or do you not realize that the points you are making speak against this State action?

  71. Give me a break. There are so many open issues in what you wrote it is ridiculous. And, even if what you say is true, the client would have to hire a local attorney.

    And, if the remedy is to be removed to federal court what is the point of the state law? And, I won’t get into the many ways that it may be difficult to have the case removed to federal court.

  72. Nice. Ignore all the issues I raised and just repeat yourself with a high moral tone. Certainly persuasive to a three year old.

    Which issues would you like me to address, NWPA? And where did I repeat myself?

    I already got you out of state court, so your county courthouse corruption issue is moot. You’ve already sent a letter accusing someone of patent infringement, so you’ve exposed your client to a DJ action anyway. If your complaint is simply that patent litigation is costly and complicated, then I agree with you, as do quite a few defendants. If your complaint is that you have to sue willful infringers in federal court, then not much has changed by this law, has it?

  73. Nice. Ignore all the issues I raised and just repeat yourself with a high moral tone. Certainly persuasive to a three year old.

  74. Now I can only make bad faith assertions of patent infringement in some states?

    There is already a rule of law against that – Rule 11.

    Why are we “all about” making more things when we should just be applying the things we already have?

  75. LB: now is that playing fair? If I am making a good faith assertion of patent infringement guess what? I am going to need to hire a local attorney that is going to exact a big chunk of change. That is the way it works. And, worse is that it will go county by county so the patentee’s attorney will likely not have contacts if the accused can pick the county.

    If it’s a good faith assertion, remove it to federal court, and throw in a patent infringement claim while you’re at it. If you’re not prepared to do that, then maybe the infringement assertion was not in good faith after all.

  76. I agree with Malcolm that the real problem here is the PTO issuing patents that describe and claim no new technology, but claim applications of old technology without any essential change.

    Malcolm seems to think the guy in charge at the PTO is the problem. Partly, true. But the real problem is 103 and the Federal Circuit. Hotchkiss v. Greenwood and its surrounding cases focused on function. If there was no new function, but mere application, the claimed invention was considered within the skill in the art. This was codified in 103, but in a way that made the legal criteria a determination of what was obvious to a POSITA. This is not the right question. The question should be whether new functionality is claimed, and if so, whether it would have been obvious to a POSITA.

    This is something like the question one asks in the EPO when considering invention. Is there a technical solution to a problem? Rather than reinvent the wheel, we may consider simply adopting their law and case interpretations.

    But 103 is not working. We have patents issuing on applications of existing technology, especially computers, without covering a new technology.

    What we really need is to reconsider 103.

    (And we all need to eliminate functional claims.)

  77. Besides LB your comment is really disgusting.

    Any attorney representing a client that wants to enforce a patent will have another step to go through. The accused infringer may bring a complaint against them in a county court. This may work differently in different states how this would play out including removal, timing, jurisdiction, etc. But, it adds to the time and expense. And, gee, we better put a local attorney on retainer.

    Come on. Grow up and be real. This constant intellectual dishonesty is revolting.

  78. And, LB, what remedy do you think an out of town attorney has? Not much. I could trace out in detail how the local judges extract money and I have and I have spoken to the FBI. You what the FBI will tell you? They don’t have time. It would be too hard to prove and it would take years. The local judges have a cycle of money. The local counsel forces you to pay 2 to 3 times what you should pay for “fair” justice.

  79. LB: now is that playing fair? If I am making a good faith assertion of patent infringement guess what? I am going to need to hire a local attorney that is going to exact a big chunk of change. That is the way it works. And, worse is that it will go county by county so the patentee’s attorney will likely not have contacts if the accused can pick the county.

    It will be a logistical nightmare that will cost a fortune. I’ll bet too you are going to get judges that get a cut of the profits of some of these companies. LB: you are very naive. You don’t realize that the U.S. has moved to the Banana Republic stage in many county courthouses. About 1/3 of local judges should be doing 20-40 years in federal prison.

  80. The reality: imagine 50 state laws. The cost of enforcing a patent would skyrocket.

    I know – this is crazy! Now I can only make bad faith assertions of patent infringement in some states? How am I supposed to keep up with which ones?

  81. After all, they are the innovators and job creators upon whom the economy depends, or so they continually tell us

    Nice spin.

    Except that is not what is being said.

    You are mistaking (on purpose) ownership and what is owned.

  82. Or when someone tries to get a patent for the new use of old chemical elements, configured under old laws of molecular bonding.

  83. No, that is like law professors publishing articles with intentional misrepresentations in law journals and claiming they are “scholarship.”

    I’ll take on any substantive comment Fred & Wilma even from Dino.

  84. Just read some of what O’Connor has written about this. The election of a judge costs money and that starts this process.

  85. That’s right MM. Federal Court has some serious problems too, but relatively they are much, much better.

    What I find amazing is that in the trenches every attorney will tell you that county courts are corrupt. You have to hire a local who takes too much money and finds some way to plow some it back to the judge or his/her friends.

  86. you ridicule the “GREAT” computer brain

    Not at all. I ridicule granting patents to people who claim to have “invented” methods of using a computer to process information when in fact they are simply describing a specific instance of using a computer for its intended purpose: processing information.

  87. with the benefit of hindsight you would have invented this.

    Rest assured that I and many, many, many other people “invented” such concepts (and many others in a similar vein, including some that apply only to grandmothers driving Chevy trucks in states ending with the letter “I”) well before this application was filed. The only thing that wasn’t obvious in hindsight was that some sl–zeball troll would think it worth the trouble to use the patent to shake down an industry decades later.

    Thankfully under the Kappos regime it was much, much harder to obtain patents on basic applications of pre-existing technology. Yeaaaaaright.

  88. if one is worried about the patent trolls, yeah, that would hurt their bottom line.

    Or maybe it will simply encourage the trolls to innovate around the law and come up with even better, more profitable patent-trolling business methods. After all, they are the innovators and job creators upon whom the economy depends, or so they continually tell us. Promote the progress!

  89. I’ve had attorneys say right in county courtrooms that the law doesn’t matter friends do–and friends cost money.

    Sounds like a banana republic. You know, the kind of place where a clerk who knows the local attorney would enter a late filing if that attorney shed enough crocodile tears.

    Thank goodness that every Federal district court in our country holds itself to much higher standards.

  90. I can see how this wouldn’t be the case, if every other state took up this exact law to protect people from patent trolls.

    Of course, if one is worried about the patent trolls, yeah, that would hurt their bottom line.

  91. And, Dennis, really, the fact that to have a chance in a local court you have to hire a local attorney is well-known. And, even former Supreme Court Justice O’Connor recognizes and is working to reform state judges. They are corrupt. Federal judges are not. An attorney can run a federal case from any state with just a local attorney filing papers and win. It goes quite well. Go to a local judge and a crocodile will want a big junk of change to get you a chance at winning in the local court. I’ve had attorneys say right in county courtrooms that the law doesn’t matter friends do–and friends cost money.

    What I find odd is that consistently professors don’t seem to believe or recognize this. Test it. Don’t let anyone know you are a professor and try a case in a county court far from where you live. Just be prepared to lose no matter the facts and law.

  92. And, we know, with the benefit of hindsight you would have invented this. I suspect you imagine yourself being a great inventor if only you had a time machine. If you have such a great mind, let’s see you invent now.

    And, what is ironic is that you ridicule the “GREAT” computer brain, but that great computer brain is now better at many tasks than people and is projected to replace 10’s of millions of information processing jobs over the next decades. How does that square with your attitude?

  93. And, besides, have you ever worked with a company that has sales in many states? Filing tax returns in 10’s of states is a costly nightmare. And, the biggest problem is that each time a swamp is created a lawyer has to hired to guide the business through the swamp. Create 50+ swamps and a company may have to hire 50 attorneys just to enforce a patent.

  94. The reality: imagine 50 state laws. The cost of enforcing a patent would skyrocket. What you aren’t taking into account is that to fight in state court you almost always have to hire local counsel, and about 1/3 of the time you have to pay off the judge. What will happen is you will have a race to the bottom with patent “reform.” The reality is what you’ll get is bandit companies that make deals with local judges to start companies that openingly infringe patents and to come after them the cases will have to be removed to federal courts. What a nightmare this could end up being.

    Besides, this is preempted by federal law which includes the creation of the Fed. Cir. to harmonize patent law.

  95. Texas law firm Farley Daniels LLC also represents another notorious tr-ll, “PJC Logistics, LLC”. That “technology” broadly claims using GPS (old at the time of filing) to … (get ready, this will BLOW your mind): monitor the location of vehicles! Yes, it’s all done with the magic of a (get ready for it!) “mobile unit” with a POWERFUL COMPUTER BRAIN that (try to believe it!) is capable of receiving and sending information (!) using cellular frequencies!

    This awesomeness (5223844) was originally filed back in 1993, only one month after the first cellular communications satellite was launched and two years before the invention of the so-called CB radio (nobody could ever afford those so they are largely forgotten except by fans of country music).

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