2014 -- S 2822 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO COMMERCIAL LAW - GENERAL REGULATORY PROVISIONS -

PATENT INFRINGEMENT

     

     Introduced By: Senators Algiere, Lombardi, Hodgson, McCaffrey, and Walaska

     Date Introduced: March 25, 2014

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 6 of the General Laws entitled "COMMERCIAL LAW - GENERAL

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REGULATORY PROVISIONS" is hereby amended by adding thereto the following chapter:

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CHAPTER 41.1

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PATENT INFRINGEMENT

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     6-41.1-1. Legislative findings and statement of purpose. -- (a) Rhode Island is striving

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to build an entrepreneurial and knowledge based economy. Attracting and nurturing small and

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medium-size internet technology ("IT") and other knowledge-based companies is an important

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part of this effort and will be beneficial to Rhode Island's future.

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     (b) Patents can be important to encouraging innovation, especially in the IT and

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knowledge-based fields. The protections afforded by the federal patent system create an incentive

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to invest in research and innovation, which spurs economic growth. Patent holders have every

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right to enforce their patents when they are infringed, and patent enforcement litigation is

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necessary to protect intellectual property.

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     (c) The general assembly does not wish to interfere with the good faith enforcement of

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patents or good faith patent litigation. The general assembly also recognizes that Rhode Island is

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preempted from passing any law that conflicts with federal patent law.

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     (d) Patent litigation can be technical, complex, and expensive. The expense of patent

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litigation, which may cost hundreds of thousands of dollars or more, can be a significant burden

 

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on small and medium-size companies. Rhode Island wishes to help its businesses avoid these

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costs by encouraging the most efficient resolution of patent infringement claims without

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conflicting with federal law.

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     (e) In order for Rhode Island companies to be able to respond promptly and efficiently to

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patent infringement assertions against them, it is necessary that they receive specific information

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regarding how their product, service, or technology may have infringed the patent at issue.

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Receiving such information at an early stage will facilitate the resolution of claims and lessen the

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burden of potential litigation on Rhode Island companies.

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     (f) Abusive patent litigation, and especially the assertion of bad faith infringement claims,

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can harm Rhode Island companies. A business that receives a letter asserting such claims faces

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the threat of expensive and protracted litigation and may feel that it has no choice but to settle and

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to pay a licensing fee, even if the claim is meritless. This is especially so for small and medium-

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size companies and nonprofits that lack the resources to investigate and defend themselves

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against infringement claims.

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     (g) Not only do bad faith patent infringement claims impose a significant burden on

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individual Rhode Island businesses, they also undermine Rhode Island's efforts to attract and

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nurture small and medium-size IT and other knowledge-based companies. Funds used to avoid

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the threat of bad faith litigation are no longer available to invest, produce new products, expand,

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or hire new workers, thereby harming Rhode Island's economy.

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     (h) Through this narrowly focused act, the general assembly seeks to facilitate the

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efficient and prompt resolution of patent infringement claims, protect Rhode Island businesses

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from abusive and bad faith assertions of patent infringement, and build Rhode Island's economy,

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while at the same time respecting federal law and being careful to not interfere with legitimate

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patent enforcement actions.

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     6-41.1-2. Definitions. – As used in this chapter:

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     (1) "Demand letter" means a letter, e-mail, or other communication asserting or claiming

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that the target has engaged in patent infringement;

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     (2) "Person" means any natural person or the estate of any natural person, or trust or

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association of persons, whether formal or otherwise, or any corporation, partnership, company, or

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any other legal or commercial entity;

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     (3) "Target" means a Rhode Island person;

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     (i) Who has received a demand letter or against whom an assertion or allegation of patent

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infringement has been made;

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     (ii) Who has been threatened with litigation or against whom a lawsuit has been filed

 

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alleging patent infringement; or

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     (iii) Whose customers have received a demand letter asserting that the person's product,

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service, or technology has infringed a patent.

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     6-41.1-3. Bad faith assertions of patent infringement. – (a) A person shall not make a

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bad faith assertion of patent infringement.

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     (b) A court may consider the following factors as evidence that a person has made a bad

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faith assertion of patent infringement:

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     (1) The demand letter does not contain the following information:

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     (i) The patent number;

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     (ii) The name and address of the patent owner or owners and assignee or assignees, if

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any; and

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     (iii) Factual allegations concerning the specific areas in which the target's products,

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services, and technology infringe the patent or are covered by the claims in the patent.

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     (2) Prior to sending the demand letter, the person fails to conduct an analysis comparing

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the claims in the patent to the target's products, services, and technology, or such an analysis was

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done but does not identify specific areas in which the products, services, and technology are

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covered by the claims in the patent.

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     (3) The demand letter lacks the information described in subdivision (1) of this section,

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the target requests the information, and the person fails to provide the information within a

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reasonable period of time.

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     (4) The demand letter demands payment of a license fee or response within an

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unreasonably short period of time.

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     (5) The person offers to license the patent for an amount that is not based on a reasonable

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estimate of the value of the license.

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     (6) The claim or assertion of patent infringement is meritless, and the person knew, or

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should have known, that the claim or assertion is meritless.

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     (7) The claim or assertion of patent infringement is deceptive.

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     (8) The person or its subsidiaries or affiliates have previously filed or threatened to file

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one or more lawsuits based on the same or similar claim of patent infringement and:

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     (i) Those threats or lawsuits lacked the information described in subdivision (1) of this

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subsection; or

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     (ii) The person attempted to enforce the claim of patent infringement in litigation and a

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court found the claim to be meritless.

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     (9) Any other factor the court finds relevant.

 

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     (c) A court may consider the following factors as evidence that a person has not made a

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bad faith assertion of patent infringement:

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     (1) The demand letter contains the information described in subsection (b)(1) of this

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section.

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     (2) Where the demand letter lacks the information described in subsection (b)(1) of this

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section and the target requests the information, the person provides the information within a

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reasonable period of time.

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     (3) The person engages in a good faith effort to establish that the target has infringed the

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patent and to negotiate an appropriate remedy.

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     (4) The person makes a substantial investment in the use of the patent or in the

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production or sale of a product or item covered by the patent.

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     (5) The person is:

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     (i) The inventor or joint inventor of the patent or, in the case of a patent filed by and

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awarded to an assignee of the original inventor or joint inventor, is the original assignee; or

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     (ii) An institution of higher education or a technology transfer organization owned or

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affiliated with an institution of higher education.

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     (6) The person has:

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     (i) Demonstrated good faith business practices in previous efforts to enforce the patent, or

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a substantially similar patent; or

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     (ii) Successfully enforced the patent, or a substantially similar patent, through litigation.

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     (7) Any other factor the court finds relevant.

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     6-41.1-4. Exemptions. – A demand letter or assertion of patent infringement that

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includes a claim for relief arising under 35 U.S.C. 271(e)(2) shall not be subject to the provisions

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of this chapter.

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     6-41.1-5. Bond. – Upon motion by a target and a finding by the court that a target has

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established a reasonable likelihood that a person has made a bad faith assertion of patent

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infringement in violation of this chapter, the court shall require the person to post a bond in an

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amount equal to a good faith estimate of the target's costs to litigate the claim and amounts

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reasonably likely to be recovered under § 6-41.1-6(b), conditioned upon payment of any amounts

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finally determined to be due to the target. A hearing shall be held if either party so requests. A

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bond ordered pursuant to this section shall not exceed two hundred fifty thousand dollars

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($250,000). The court may waive the bond requirement if it finds the person has available assets

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equal to the amount of the proposed bond or for other good cause shown.

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     6-41.1-6. Enforcement, remedies, and damages. – (a) The attorney general shall have

 

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the same authority under this chapter to make rules, conduct civil investigations, bring civil

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actions, and enter into assurances of discontinuances as provided under chapter 36 of title 6

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entitled "Antitrust Law". In an action brought by the attorney general under this chapter, the court

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may award or impose any relief available under chapter 36 of title 6 entitled "Antitrust Law".

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     (b) A target of conduct involving assertions of patent infringement, or a person aggrieved

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by a violation of this chapter may bring an action in superior court. A court may award the

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following remedies to a plaintiff who prevails in an action brought pursuant to this subsection:

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     (1) Equitable relief;

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     (2) Actual damages;

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     (3) Costs and fees, including reasonable attorney's fees; and

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     (4) Exemplary damages in an amount equal to fifty thousand dollars ($50,000) or three

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(3) times the total of actual damages, costs, and fees, whichever is greater.

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     (c) This chapter shall not be construed to limit rights and remedies available to the state

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of Rhode Island or to any person under any other law and shall not alter or restrict the attorney

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general's authority under chapter 36 of title 6 entitled "Antitrust Law" with regard to conduct

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involving assertions of patent infringement.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO COMMERCIAL LAW - GENERAL REGULATORY PROVISIONS -

PATENT INFRINGEMENT

***

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     This act would authorize the attorney general and/or persons aggrieved to file a bad faith

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patent infringement suit in superior court seeking equitable and/or monetary relief from persons

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filing frivolous patent infringement claims as well as costs, fees, including reasonable attorney's

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fees and punitive damages of at least fifty thousand dollars ($50,000) or three (3) times the total

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of actual damages, costs, and fees, whichever is greater.

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     This act would take effect upon passage.

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