New Jersey Assembly Advances Bill To Address Bad-Faith Patent Infringement Actions

We have previously posted on proposed federal and state legislation aimed at addressing the toll of “patent troll” litigation by non-practicing entities on the U.S. economy. The Gibbons IP Law Alert has previously posted regarding such issues on August 26, 2014June 25, 2014March 10, 2014, and  December 13, 2013. Continuing the trend, the New Jersey General Assembly panel recently advanced bill A-2462  to address so called “Patent Troll” litigation. Consistent with other recent efforts at curbing patent litigation abuses, this bill attempts to identify wrongdoers and penalize specific abuses through monetary sanctions.

The proposed bill is aimed to “protect New Jersey businesses from abusive and bad faith assertions of patent infringement.” The bill specifically refers to Patent Assertion Entities (“PAEs”) and defines them as entities that “focus on aggressive litigation” employing tactics such as:

  1. suing thousands of companies at once;
  2. bringing suit without specific evidence of infringement;
  3. creating shell companies that make it difficult to identify the actual asserting entity; and
  4. bringing infringement allegations on technologies “not imagined” at the time the asserted patents were granted.

The bill provides guidance on the evidence that a court may consider in making a “bad faith” determination, with a significant emphasis on the plaintiff’s presuit activity. For example, the bill emphasizes what was contained in the demand letter, whether a sufficient pre-suit infringement analysis was performed, the amount, timing, and conduct regarding an offer to license or settle, or whether the same party has asserted the same patent against one or more other entities and whether those actions were brought in good faith. The bill implies a presumption of good faith to parties that:

  1. “make[] a substantial investment in the use of the patent or in the production or sale of a product or item covered by the patent”;
  2. are the inventor, joint inventor, or the original assignee; or
  3. are an institution of higher education or a technology transfer organization owned or affiliated with an institution of higher education.

Should a party make “a showing of a reasonable likelihood” that the suit was brought in bad faith, the bill requires that a bond of up to $250,000.00 be posted. The party may also be awarded exemplary damages equal to the greater of $50,000 or three times the total of damages, costs, and fees.

Gibbons will continue to monitor the innovative efforts by the various branches and levels of government to address PAEs.

Charles H. Chevalier is an Associate in the Gibbons Intellectual Property Department.
Print