Should State Attorneys General Step Into the Fight Against Patent Trolls?

Yesterday, Massachusetts Attorney General Martha Coakley participated in a conference to discuss the negative impact patent trolls (also called non-practicing entities or NPEs) are having on the booming tech and startup industry in the Commonwealth. Showcased as part of the discussion was the CEO of tech startup LevelUp, who reported that fighting patent trolls had cost his company upwards of $1 million and prevented him from hiring as many as 20 workers. LevelUp was fortunately backed by a larger parent with the resources to fight frivolous patent claims; patent trolls typically target companies with enough resources to pay a settlement demand, but not enough resources to fight a long, complicated patent infringement suit. Attorney General Coakley announced that her office was looking into the possibility of filing unfair business practice suits against patent trolls who target companies in Massachusetts, following the lead of Vermont Attorney General William Sorrell, who earlier this year brought a state action against MPHJ Technologies, LLC, for violations of the Vermont Consumer Protection Act. Sorrell also worked with the Vermont legislature to pass a bill, the Bad Faith Assertions of Patent Infringement Act, that is designed to prohibit suits brought by patent trolls (while protecting the rights of legitimate practicing patent holders). Since the suit against MPHJ was filed back in May, Attorney General Sorrell claims his office has received no further reports about Vermont startups being targeted by patent trolls In addition, the Minnesota Attorney General recently concluded a settlement with MPHJ that prohibits them from sending cease and desist letters to companies in the state. Therefore, given that state Attorneys General who have stood up to patent trolls have managed to scare them out of their states (at least for the moment), should every state Attorney General launch similar consumer protection or unfair business practice actions against patent trolls who target companies in their states? Unfortunately, it may not be as simple as that. For one, patents are a product of federal law, so states may be limited in how they restrict the activities of entities who are nominally enforcing rights under federal law. Moreover, these efforts could attract the opposition of established tech companies with large patent portfolios, who might be concerned that any anti-troll legislation may have the unintended side effect of reducing their ability to protect their portfolios. However, given that the patent troll economic model depends on as little resistance as possible, efforts by states to disrupt the activities of patent trolls could make the business model unattractive.

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