Patent trolls–think twice in Utah

Patent trolling has become a little more risky in Utah and in several other states.  For years, business owners have complained about owners of patents that sue, or threaten to sue, for patent infringement for methods or inventions that are obvious, heavily used on the Internet, or for which substantial prior art exists.  The frustration for business owners is that the threats usually come from well-financed patent owners who are not engaged in practicing or using the patent, but who use it solely to generate income.  These companies are commonly referred to as patent trolls or non-practicing entities.

Patent trolls frequently send demand letters asserting patent infringement, andoffering to settle for a license and license fee.  Targets of the letters have little recourse against such trolls, and are often forced to accept the offer, or to seek industry help in responding to the patent troll threats.

In the real estate industry in particular, patent trolls have aggressively pursued patent infringement claims for online mapping technologies that have been in use for years.  Application software that performed common and routine functions has been used as the basis for patent infringement claims.  In one case, the National Association of Realtors® came to the rescue and orchestrated industry-wide license agreements to avoid having industry participants individually spend further time and resources to battle a patent troll, or risk further action by the patent trolls.

The Utah legislature passed a bill in the 2014 legislative session, similar to bills in some other states, that attempts to walk a fine line between proving protection for innocent uses of technology and other methods and inventions that might be patentable, and inventors and other holders of patent rights who do not want to passively sit by and watch others infringement on valuable patent rights.

Under Utah law, a person that sends a demand letter asserting patent infringement in bad faith to a Utah resident, or a business entity formed under Utah law, may be liable to the recipient of the letter for punitive damages in an amount not to exceed the greater of $50,000, or three times the total of damages, costs, and fees, plus actual damages and attorney’s fees and costs.  In addition, the attorney general may bring a civil action and recover statutory damages of not less than $750 per demand letter plus reasonable attorney’s fees and costs.

The new law describes several factors as evidence of bad faith.  Statements that assert patent infringement based on a patent or a claim of a patent that has been previously held invalid or unenforceable, or false or misleading statements are evidence of bad faith.

There are many issues under the new law that will need to be addressed, but for now, recipients of patent infringement demand letters sent in bad faith at least have some recourse.