Last month, we focused on the Protecting American Talent and Entrepreneurship (PATENT) Act (S. 1137), one of several bills introduced by the Senate Judiciary Committee this past year. In this installment, we will feature another significant piece of legislation aimed at reforming patent litigation - the Targeting Rogue and Opaque Letters (TROL) Act (H.R. 2045), which passed the House Commerce Subcommittee with bipartisan support. The primary purpose of the TROL Act is to curtail the practice of sending abusive demand letters by stipulating that such actions violate the Federal Trade Commission Act (FTCA).
One of the core issues in the current movement for patent reform surrounds the proliferation of "patent trolls" or Non-Practicing Entities (NPE), who either purchase patents for the exclusive purpose of initiating patent infringement lawsuits or focus their efforts solely on litigating against alleged infringers without actually producing the manufactured product or having the intent to design or market the product. The Obama administration attempted to address these actions in 2013 by directing the United States Patent and Trademark Office (USPTO) to adopt policies to control the rise of patent infringement litigation, including requiring a company to specify the scope of its patent and how another entity is infringing upon it. Many states soon enacted laws targeting the practices of patent trolls and NPES.
The TROL Act standardizes an approach to exploitative patent litigation by classifying bad faith communications in any letter asserting patent infringement or demanding payment for a license "as unfair or deceptive acts or practices." Bad faith misrepresentations in demand letters include assertions that the sender has the right to enforce the patent; that a civil action has been filed alleging infringement against the recipient; or that the letter sender is the exclusive licensee of the patent. The TROL Act also precludes bad faith omissions of any of the following facts: the identity of the letter sender; a description of the allegedly infringed patent; identification of one product or service that is in violation of the patent; or an explanation of how the product or services infringes on the patent.
Enforcement of the TROL Act is delegated to the Federal Trade Commission (FTC), which may penalize any violation of the FTCA as an unfair trade practice. Civil penalties imposed by the FTC against abusive demand letter propagators could reach $5 million for violating a variety of provisions. In addition to the FTC, state attorney-generals are permitted to enforce the provisions of the TROL Act. The TROL Act supersedes existing state laws aimed at combatting illegitimate infringement lawsuits.
The TROL Act seeks to offer clarity and accountability in the dissemination of demand letters and ultimately protect legitimate businesses. According to many patent reform experts, the bill effectively addresses a growing problem that threatens the economic stability of businesses while maintaining the viability of enforcement procedures for patent infringement. However, critics of the legislation in its current form assert that the bill does not go far off to deter and penalize fraudulent demand letters for what amounts to extortion by their senders. Nevertheless, the valid rights of independent inventors - and small businesses - must be protected.