Alleging that patent trolls stifle innovation and harm the economy, Massachusetts Attorney General Martha Coakley joined 41 other states Monday in submitting a letter to two Senate committees voicing support for federal legislation that will address frivolous and abusive patent lawsuits that threaten small, start-up businesses.
Abusive patent practices are closely linked to a business model known colloquially as “patent trolling.” A patent troll does not invent new technology, make or sell products, or provide services to clients, but rather buys patents from others and makes money solely by asserting infringement and extracting licensing fees and settlement payments.
Massachusetts AG Coakley Takes Aim at ‘Patent Trolls’
Consumers, small businesses and non-profit agencies are often targeted by patent trolls because they have purchased or used products with a wide-range of patented technology such as printers or scanners.
The Senate bill (S.1720) and the recently passed House bill (H.R. 3309), also known as the Innovation Act, would require greater clarity in patent demand letters and include patent litigation reforms that will help limit the power of patent trolls.
“While the Innovation Act has the potential to be an important step forward to improve the patent process generally at the federal level, Massachusetts and other states continue to review all options,” Coakley said.
“It’s crucial that we’re able to protect companies, especially those in our innovation and start up sector, from abusive and frivolous demands that can shut a business down before it even starts.”
The attorneys general expressed a desire, however, that any legislation confirm their existing state authority to protect their citizens from patent trolls. A number of states have taken action against patent trolls whose activities run afoul of state consumer protection and unfair trade practice laws.
Defending a patent lawsuit can cost a small company hundreds of thousands of dollars, which is a huge hurdle for many startups and often forces those businesses to settle lawsuits regardless of whether the infringement claims would hold up in a court of law.
The letter from attorneys general was sent to ranking members of the Senate Judiciary and Commerce, Science and Transportation Committees. The letter voices support for the bipartisan federal legislation that will address patent trolls.
Coakley has also pledged to explore the issue further, in order to determine whether state legislation or other legal remedies are available to fend off frivolous suits and protect Massachusetts businesses on the cutting edge of innovation.
The letter, authored by Nebraska and Vermont, was joined by Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming.
In December, Coakley and a coalition of states sent a letter to the Federal Trade Commission to express support for its proposed nationwide investigation of patent enforcement abuse, urging protection of small businesses.
In November, Coakley toured LevelUp, a Boston-based company whose pay-by-phone system is growing rapidly, but has recently been forced to respond to inquiries searching for potential patent violations. LevelUp has already spent hundreds of thousands of dollars defending against three separate lawsuits, money that could have been used to grow the company and hire new employees. In January, LevelUp announced a patent holder that sued the company in September 2013 voluntarily dismissed all patent infringement claims.
Source: Massachusetts Attorney General’s Office
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