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March 20, 2014Client Alert

Wisconsin Legislature Passes Bill to Regulate Patent Notice Letters

On March 20, 2014, the Wisconsin Assembly passed a bill aimed at regulating written communications attempting to enforce or assert patent rights against Wisconsin individuals and entities. Such letters are commonly referred to as patent notice letters or demand letters. Already passed by the Wisconsin Senate, this bill will proceed to the Governor for his signature.

 

Wisconsin lawmakers introduced Senate Bill 498 (SB 498) in an attempt to curb the tactics of so-called patent trolls or non-practicing entities. These entities often derive income by demanding patent licensing payments based on vague allegations of infringement under a threat of litigation. The bill’s requirements, however, apply equally to all patent owners seeking to enforce their patents with a few exceptions. The exceptions are limited to institutions of higher learning and their technology transfer organizations, entities whose patents are related to devices subject to approval by the FDA or the federal department of agriculture, federally funded health care or research institutions with annual expenditures of at least $10 million, and entities attempting to assert rights related to drugs and biological products under 35 U.S.C. § 271(e) or 42 U.S.C. § 262.

 

Under SB 498, a patent demand letter must include the patent number, a copy of the patent, the patent owner’s name and address, the asserted patent claims and accused products, detailed facts forming the basis for the infringement allegations, and an identification of any pending or completed court or administrative proceeding related to each asserted patent. Should a patent notice letter fail to comply with the bill’s requirements, the recipient may notify the sender of any deficiencies. If the sender fails to cure the deficiencies within 30 days after notification by the recipient, the sender could face steep criminal and civil penalties. For instance, SB 498 authorizes the Attorney General to commence an action for an injunction and to recover a forfeiture of up to $50,000 per violation. The bill would also allow the recipient of an improper patent notice letter or other aggrieved person to bring a private action for an injunction, damages, costs, fees, and punitive damages, totaling up to $50,000 per violation.

 

SB 498 will likely affect many patent owners’ strategies for communicating with potential infringers prior to filing a lawsuit. While the law may curb certain tactics used by patent trolls, it may also impact a patentee’s ability to initiate licensing negotiations in a non-threatening manner, and without triggering litigation from the recipient.

 

Nineteen other states have proposed legislation similar to Wisconsin’s SB 498. In addition to state legislation, several anti-troll bills are pending on the federal level, including a bill introduced in the U.S. Senate in February of 2014 that includes provisions similar to those in Wisconsin’s SB 498. It remains to be seen how this wave of anti-troll legislation plays out, and how the laws will be enforced by private parties and government entities.

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