MONTPELIER -- Gov. Peter Shumlin signed into law Wednesday what he said is the first-in-the-nation measure aimed at protecting Vermont companies from so-called patent trolling, the predatory or deceptive claims of patent infringement that can often lead to costly litigation or settlements.
The law is aimed at protecting companies from frivolous or vague claims of patent infringement, particularly bad faith claims. It allows a court to consider if the claim is deceptive and specifies other factors that can be considered as evidence.
"This bill will help to protect our good Vermont businesses from unscrupulous patent trolls who take advantage of them through bad faith claims of patent infringement. It will help us grow jobs," Shumlin said.
The law gives Vermont companies a way to fight back against patent trolls, officials said.
Coinciding with the new law, the state filed a lawsuit accusing a Delaware company of patent trolling. The attorney general’s office sued Wilmington-based MPHJ Technology Investments and its 40 subsidiary companies operating in Vermont.
The office alleged that MPHJ claimed to have a patent on the process of scanning documents and attaching them to emails via a network and that MPHJ sent letters making deceptive statements to small businesses in Vermont, demanded money, and threatened litigation over licensing fees.
Bryan Farney of Austin, Texas, an attorney for MPHJ, said the company disputes the allegations and is doing its best to identify companies that used its technology. Farney said the company was aware of Attorney General Bill Sorrell’s investigation and stopped its activities in Vermont during the review.
"We are disappointed that they chose to take that step without at least communicating with us further, and we don’t agree with the allegations made in the complaint," Farney said. "And we think that we are attempting as best we can to legitimately identify people who are using the client technology, which has been admitted and issued by the U.S. Patent office and try to figure a reasonable licensing fee from them."
Under Vermont’s new law, a court can consider as evidence of a bad faith claim a letter that does not provide the patent number, the name and address of the patent owner and/or assignee, or an explanation of how the target company’s products or services infringed on the patent.
The court also can consider if the letter demands payment of a license fee or a response in an unreasonably short period of time.
The law allows the attorney general to conduct civil investigations and bring civil action against violators and the court may award relief or damages.
The new law and the attorney general’s lawsuit will send a strong message that Vermont will not allow extortionist activities, said Justin McCabe, a patent attorney with Dunkiel Saunders in Burlington, who said he had not heard of another law like it in the country.
"Where the bill has teeth is that the attorney general is going to be able to come after patent trolls who are trying to extort money from companies in the state of Vermont," he said.