2016 -- S 2418

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LC004654

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO COMMERCIAL LAW - GENERAL REGULATORY PROVISIONS

     Introduced By: Senators Algiere, Pagliarini, Lombardi, McCaffrey, and DiPalma

     Date Introduced: February 11, 2016

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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

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

CHAPTER 41.1

PATENT INFRINGEMENT

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

to build an entrepreneurial and knowledge-based economy. Attracting and nurturing Internet

technology ("IT") and other knowledge-based companies is an important part of this effort and

will be beneficial to Rhode Island's future.

     (b) Patents are essential to encouraging innovation, especially in the IT and knowledge

based fields. The protections afforded by the federal patent system create an incentive to invest in

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

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

protect intellectual property.

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

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

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

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

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

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

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

conflicting with federal law.

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

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

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

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

burden of potential litigation on Rhode Island companies.

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

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

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

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

nonprofits that lack the resources to investigate and defend themselves against infringement

claims.

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

individual Rhode Island businesses, these claims also undermine Rhode Island's efforts to attract

and nurture other knowledge-based companies. Funds used to avoid the threat of bad faith

litigation are no longer available to invest, produce new products, expand, or hire new workers,

thereby harming Rhode Island's economy.

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

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

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

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

patent enforcement actions.

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

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

that the target has engaged in patent infringement;

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

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

any other legal or commercial entity;

     (3) "Target" means a person doing business in Rhode Island:

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

infringement has been made;

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

alleging patent infringement; or

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

service, or technology has infringed upon a patent.

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

bad faith assertion of patent infringement.

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

faith assertion of patent infringement:

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

     (i) The patent number;

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

any; and

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

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

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

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

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

covered by the claims in the patent.

     (3) The demand letter lacks the information described in subsection (b)(l) of this section,

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

reasonable period of time.

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

unreasonably short period of time.

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

estimate of the value of the license.

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

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

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

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

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

     (i) Those threats or lawsuits lacked the information described in subsection (b)(l) of this

subsection; or

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

court found the claim to be meritless.

     (9) Any other factor the court finds relevant.

     (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:

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

section.

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

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

reasonable period of time.

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

upon the patent and to negotiate an appropriate remedy.

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

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

     (5) The person is:

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

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

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

affiliated with an institution of higher education.

     (6) The person has:

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

a substantially similar patent; or

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

     (7) Any other factor the court finds relevant.

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

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

chapter.

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

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

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

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

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

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

bond ordered pursuant to this section shall not exceed five hundred thousand dollars ($500,000).

The court may waive the bond requirement if it finds the person has available assets equal to the

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

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

the same authority under this chapter to conduct civil investigations, bring civil actions, and enter

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into assurances of discontinuances pursuant to chapter 36 of title 6 "antitrust law'' or assurances

of voluntary compliance pursuant to chapter 13.1 of title 6 "deceptive trade practices". In an

action brought by the attorney general under this chapter, the court may award or impose any

relief available pursuant to the provisions of chapter 36 of title 6 entitled "antitrust law" and

pursuant to the provisions of chapter 13.1 of title 6 entitled ''deceptive trade practices''.

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

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

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

     (1) Equitable relief;

     (2) Actual damages;

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

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

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

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

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

attorney general's authority under chapter 36 of title 6 entitled "antitrust law" or chapter 13.1 of

title 6 entitled ''deceptive trade practices" with regard to conduct involving assertions of patent

infringement.

     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

***

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

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

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

fees and punitive damages.

     This act would take effect upon passage.

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