This draft legislation — creatively dubbed the TROL Act — addresses the sending of abusive and bad faith patent demand letters by clarifying that such activity may violate the Federal Trade Commission Act and authorizing that agency and state attorneys general to bring actions to stop the abusive behavior, among other things.
On July 9, 2014, AIPLA Executive Director Todd Dickinson wrote Representative Terry Lee (R-NE), who is Chair of the House Commerce, Manufacturing, and Trade Subcommittee, and Representative Janice Schakowsky (D-IL), who is Ranking Member.
Dickinson’s letter stated:
The approach in the draft bill is consistent with AIPLA’s position that a number of the most troubling and visible abusive practice driving some of the current patent reform debate may be appropriately dealt with under the laws governing consumer fraud and deceptive trade practices. Providing the FTC oversight with respect to these abusive practices as described in the bill will deal with the abusive behavior itself, and hopefully ameliorate its negative impact on the patent system as a whole.
In a press release, also dated July 9, 2014, Dickison explained:
As we have testified before Congress as recently as last December, AIPLA believes that the most concerning activity captured in the current debate concerning patent litigation reform is actually taking place prior to the institution of a lawsuit, specifically the widespread sending of demand letters containing vague allegations and minimal information. We believe that this activity should be treated like other acts of consumer fraud and deceptive trade practices, and we commend the Subcommittee for taking an approach that seeks to target the abusive behavior in this manner while not inhibiting free speech or legitimate patent licensing and enforcement. We support consideration of the draft bill at this time, and we will work with the Subcommittee to ensure that the right balance has been struck moving forward.
On July 8, 2014, Innovation Alliance Executive Director Brian Pomper released the following statement regarding the TROL Act of 2014:
The Innovation Alliance applauds the House Energy and Commerce Committee for their work over the past several months to achieve a meaningful, balanced bill on the issue of demand letters that will address the abusive behavior that small businesses and retail interests face. We support the approach taken in the TROL Act and urge the Subcommittee on Commerce, Manufacturing and Trade to report it favorably. We believe the Act appropriately targets abusive behavior rather than particular types of patent owners, while maintaining the integrity of legitimate patent enforcement practices for all patent holders… Patents are essential to incentivizing invention, investment, research and development, and job growth. As such, any patent legislation should enhance those economic functions. The TROL Act targets a real problem while avoiding an overly broad approach that would impair the necessary and beneficial economic functions of the patent system.
So what does this mean? If the intellectual property lawyers are behind this legislation, and innovative companies are behind it, we can expect that at some point before the end of the year the TROL Act, or something similar, will be passed into law. The high-tech industry for the most part is behind patent reform and would like far more, including things that most innovators would not classify as positive change or reform. They will take what they can get and then circle back for more in the next Congress, starting as early as February 2015.
Stay tuned. Watered-down patent reform that attacks bogus demand letters has a strong chance to pass, and makes a lot of sense. There will, of course be resistance in some corners to expanding the FTC reach over patent issues given that the agency has frequently, and recently, been skeptical of patents. If the FTC focuses on bogus and overreaching demand letters they should be able to do quite a bit of good without compromising the positions of legitimate innovators who seek redress for infringement.