The Vermont Statutes Online

Title 9: Commerce and Trade

Chapter 120: Bad Faith Assertions of Patent Infringement

• § 4195. Legislative findings and statement of purpose

  (a) The General Assembly finds that:

  (1) Vermont is striving to build an entrepreneurial and knowledge-based economy. Attracting and nurturing small- and medium-size Internet technology (“IT”) and other knowledge-based companies is an important part of this effort and will be beneficial to Vermont’s future.

  (2) 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.

  (3) 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 Vermont is preempted from passing any law that conflicts with federal patent law.

  (4) 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. Vermont wishes to help its businesses avoid these costs by encouraging the most efficient resolution of patent infringement claims without conflicting with federal law.

  (5) In order for Vermont 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 Vermont companies.

  (6) Abusive patent litigation, and especially the assertion of bad faith infringement claims, can harm Vermont 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 small- and medium-size companies and nonprofits that lack the resources to investigate and defend themselves against infringement claims.

  (7) Not only do bad faith patent infringement claims impose a significant burden on individual Vermont businesses, they also undermine Vermont’s efforts to attract and nurture small- and medium-size IT and 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 Vermont’s economy.

  (b) Through this narrowly focused act, the General Assembly seeks to facilitate the efficient and prompt resolution of patent infringement claims, protect Vermont businesses from abusive and bad faith assertions of patent infringement, and build Vermont’s economy, while at the same time respecting federal law and being careful to not interfere with legitimate patent enforcement actions. (Added 2013, No. 44, § 6; 2013, No. 47, § 2, eff. May 24, 2013.)

• § 4196. Definitions

  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) “Target” means a Vermont person:

  (A) who has received a demand letter or against whom an assertion or allegation of patent infringement has been made;

  (B) who has been threatened with litigation or against whom a lawsuit has been filed alleging patent infringement; or

  (C) whose customers have received a demand letter asserting that the person’s product, service, or technology has infringed a patent. (Added 2013, No. 44, § 6; 2013, No. 47, § 2, eff. May 24, 2013.)

• § 4197. 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:

  (A) the patent number;

  (B) the name and address of the patent owner or owners and assignee or assignees, if any; and

  (C) 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 subdivision (1) of this subsection, 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:

  (A) those threats or lawsuits lacked the information described in subdivision (1) of this subsection; or

  (B) 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 bad faith assertion of patent infringement:

  (1) The demand letter contains the information described in subdivision (b)(1) of this section.

  (2) Where the demand letter lacks the information described in subdivision (b)(1) 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 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:

  (A) 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

  (B) an institution of higher education or a technology transfer organization owned or affiliated with an institution of higher education.

  (6) The person has:

  (A) demonstrated good faith business practices in previous efforts to enforce the patent, or a substantially similar patent; or

  (B) successfully enforced the patent, or a substantially similar patent, through litigation.

  (7) Any other factor the court finds relevant. (Added 2013, No. 44, § 6; 2013, No. 47, § 2, eff. May 24, 2013.)

• § 4198. 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 subsection 4199(b) of this chapter, 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 $250,000.00. 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. (Added 2013, No. 44, § 6; 2013, No. 47, § 2, eff. May 24, 2013.)

• § 4199. Enforcement; remedies; damages

  (a) The Attorney General shall have the same authority under this chapter to make rules, conduct civil investigations, bring civil actions, and enter into assurances of discontinuance as provided under chapter 63 of this title. In an action brought by the Attorney General under this chapter, the court may award or impose any relief available under chapter 63 of this title.

  (b) A target of conduct involving assertions of patent infringement, or a person aggrieved by a violation of this chapter or by a violation of rules adopted under 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) damages;

  (3) costs and fees, including reasonable attorney’s fees; and

  (4) exemplary damages in an amount equal to $50,000.00 or three times the total of damages, costs, and fees, whichever is greater.

  (c) This chapter shall not be construed to limit rights and remedies available to the State of Vermont or to any person under any other law and shall not alter or restrict the Attorney General’s authority under chapter 63 of this title with regard to conduct involving assertions of patent infringement. (Added 2013, No. 44, § 6; 2013, No. 47, § 2, eff. May 24, 2013.)