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 The measure would give the Federal Trade Commission (FTC) the
power to impose civil penalties on patent assertion entities,
sometimes called "patent trolls," which make dishonest licensing
demands.
The bill, introduced by Representative Lee Terry, a Nebraska
Republican, would require the agency to prove that a company it
wants to penalize has acted in "bad faith." Further, the bill would
pre-empt stricter laws already passed by a handful of states.
Terry said his measure "strikes the appropriate balance" by
respecting the free speech rights of companies while also stopping
them from sending dozens or hundreds of aggressive and sometimes
inappropriate letters demanding licensing fees.
A subcommittee of the House of Representatives Energy and Commerce
committee debated the bill on Wednesday, with a vote on whether to
advance the measure expected on Thursday. It is called the
"Targeting Rogue and Opaque Letters Act of 2014," or TROL Act.
Representative Henry Waxman, a California Democrat, opposed portions
of the bill that pre-empt state laws or put additional burdens on
the FTC to prove a licensing demand is dishonest.
Jan Schakowsky, an Illinois Democrat, agreed. "I don't think the
TROL Act adequately solves the problem," she said.
Following the hearing, Terry said he would oppose any effort to
allow state laws to supersede the federal bill. He said such a
change "simply emasculates" it.
Lawmakers have made several attempts to tackle frivolous patent
litigation, which has recently moved from the tech and
pharmaceutical sectors into areas such as retailing, where
intellectual property is less well known.
In some instances, critics complain companies write letters
demanding licensing fees without first establishing that
infringement exists or disclosing who owns the patent. Critics say
these companies hope to badger their targets into paying out of
fear.
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The bill allows the FTC to pursue companies that write demand
letters if they misrepresent who owns a patent; blanket recipients
with unfounded threats of lawsuits; or demand licensing fees for
patents that have been declared invalid. The bill sets a maximum
penalty of $5 million.
Senator Claire McCaskill, a Democrat from Missouri, has introduced a
similar bill in the Senate.
An attempt to win congressional approval for a broader attack on
frivolous patent litigation fizzled earlier this year. That effort
was led by Senator Patrick Leahy and Representative Bob Goodlatte.
The White House has urged lawmakers to take steps to curb abusive
lawsuits. And the FTC has begun a study of patent assertion entities
with an eye toward reining in the worst of them.
(Reporting by Diane Bartz, editing by Ros Krasny and David Gregorio)
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