Know The Law: How Should I Respond to a Claim of Patent Infringement?

Scott C. Rand
Counsel, Corporate Department
Published: Union Leader
September 15, 2014

Q: My company recently received a letter alleging patent infringement and demanding payment for use of commercially available technology. We are not a technology company, but rather an end user of the technology. The patent owner has been referred to in media reports as a “patent troll.” What protections against patent trolls are in place for companies like mine and can I safely ignore the letter?

A: Recently, more and more businesses have been receiving letters of this type. Although so-called patent trolls (persons or companies that assert patent rights to collect license fees, but do not manufacture products or provide services, also known as non-practicing entities or NPE’s) have been around for many years, they have historically targeted companies that either develop, manufacture, or sell the technology in question. A trend has now emerged, however, where NPE’s target end users based on their use of off-the-shelf products.
Given this trend, reform efforts are underway to protect against bad faith or abusive assertions of patent infringement.  A number of states, including Vermont and Maine, have enacted legislation against bad faith assertion of patent infringement. New Hampshire has passed such a bill, which is awaiting the governor’s signature. State legislation of this type typically allows the state or the targets of bad faith enforcement tactics to seek damages and costs for bad or misleading actions on the part of a patent owner in asserting patent infringement.  Such state laws focus on the enforcement tactics used by the patent owner and cannot be used to evaluate the merits of the infringement claim. As such laws are passed, NPE’s will likely tailor their enforcement efforts to be in compliance with such laws.
A number of federal bills have also been proposed that would serve as a deterrent to NPE’s, particularly those targeting end users. Such deterrents include awarding the defendant full costs and attorney fees if defendant prevails, limiting discovery until later stages of the litigation, and allowing manufacturers to intervene in suits against their customers. However, none of the proposed federal legislation has been enacted yet.
Although ignoring such a letter and hoping the patent owner will go away is one option, it is not without risk. Usually, such an approach turns out to be nothing more than wishful thinking. While legislative attempts to curb abusive and bad faith tactics used by NPE’s are underway, such patent reform efforts are still in the early stages. Because patent reform efforts addressing NPE’s do not yet offer significant protection, retaining patent counsel quickly after receiving such a letter remains your best option for minimizing your company’s potential liability.