In May 2016, the Arizona Patent Troll Prevention Act became law, and Arizona joined the ranks of states that create laws geared at stopping patent trolls. Time will tell whether this law is a ray of sunshine that will effectively combat the problem of trolls, or whether the Act is simply another tool in an accused infringer’s kit.
The Problem of Patent Trolls
As explained in a previous Venjuris post, “What is a Patent Troll?,” patent trolls exploit the economic inefficiencies of patent litigation to their advantage. Fighting a patent infringement lawsuit can easily take three to five years and cost $300K-$6M. So even if the patents owned by the troll are junk, which is often the case, the troll can still exploit the reality of high litigation defense costs by threatening enforcement against many different defendants and accepting nuisance settlements for far less than damages typically sought in meritorious patent infringement litigation, and for far less than the cost to defend the patent infringement litigation. It’s a bitter pill to swallow, but the recipient of an enforcement or licensing letter from a patent troll may accept that it is less expensive to license and settle than it is to defend the case in court. The existing deterrents to patent trolling simply aren’t sufficient to solve the problem.
A court may be convinced to penalize or sanction a patent troll under Federal law. These rules require the plaintiff to perform an adequate prefiling investigation prior to filing a patent enforcement action. What is “adequate” varies depending on circumstances, but failure to meet the requirement may result in the plaintiff being ordered to reimburse to the defendant’s expenses and attorney fees incurred in preparing the motion.
Even with these rules aimed at protecting defendants, they may nonetheless shoulder a substantial financial burden during this process. The time and expense to make a case for sanctions is usually much less than the settlement the troll is willing to receive.
The Arizona Patent Troll Prevention Act
The Arizona Patent Troll Prevention Act deters trolls by imposing damages for bad faith assertions of patent infringement. A court may find a violation of the Act by considering several nonexclusive factors including:
- The person making the demand did not provide basic information about the patent, the patent owner, or facts relating to the specific areas in which the target’s technology infringes the patent or fails to provide this information in a reasonable time if requested by the accused infringer.
- The person making the demand failed to conduct an analysis and compare the patent claims to the accused infringer’s technology.
- The person making the demand requested payment of a licensing fee within an unreasonably short time period.
- The person knew or should have known the assertion of infringement was meritless or contained false, misleading, or deceptive information.
A violation of the Act is an Unlawful Practice under Arizona’s Consumer Fraud Act. Under this law, the defendant who was falsely accused of patent infringement recover actual damages, including consideration paid in a contract, and out of pocket expenses and be awarded punitive damages. These cases are generally heard in Arizona State or the Federal Court; however, the Arizona Attorney General may enforce the Arizona Patent Troll Prevention Act.
Every legal situation is different and must be evaluated on its own merits. If you have been contacted by a patent troll, please contact us regarding representation. We have registered patent attorneys in skilled in all technologies and attorneys licensed in Arizona, Connecticut, and New York. Venjuris PC can handle federal intellectual property matters in any U.S. state and assist with international matters. For even more information, be sure to connect with us on Facebook too.