Florida's Patent Troll Act

Last year, Florida (like a few other states) passed a "Patent Troll Prevention Act."  Fla. Stat. 501.991 et seq.  The act sought to discourage "bad faith" assertion of patent rights in Florida.  The Legislature described its goal:

Patents encourage research, development, and innovation. Patent holders have a legitimate right to enforce their patents. The Legislature does not wish to interfere with good faith patent litigation or the good faith enforcement of patents. However, the Legislature recognizes a growing issue: the frivolous filing of bad faith patent claims that have led to technical, complex, and especially expensive litigation.

Fla. Stat. 501.991(2) (2015).  The law created a number of tools patent infringement defendants (and other recipients of demand letters) could use to ward off expensive patent litigation.  These tools included requiring the patent owner to post a bond of up to $250,000 to proceed with the case as well as punitive damages.  But the law did not clearly define what a "bad faith assertion of patent infringement" was.  This uncertainty made it difficult to enforce patent rights in Florida as the patent owner was likely subjected to the damages and bond provisions of the act.

I currently serve as Chair of the Florida Bar Business Law Section's Intellectual Property Committee.  One of our legislative priorities this year was to work on fixes to this law to more properly strike a balance between legitimate enforcement of patent rights and the behavior sought to be discouraged by the law.  To that end, I testified in front of a number of Florida legislative committees to help with passage of fixes to the law.  I am happy to report that House Bill 1181 was passed (unanimously by both Houses of Florida's Legislature) and signed into law last week by the Governor.  This amended law took effect immediately and includes a number of improvements.

First, there is no longer a bond component, meaning a patent owner will not be subjected to litigating whether or not it should post a bond of up to $250,000 simply to ask a court to resolve its patent infringement claim.

Second, the act specifically defines what a patent owner can do to make sure its demand is not a "bad faith" assertion of patent rights.  For a demand letter (which includes an email) to be a "bad faith assertion of patent infringement" it must:

1. Include a claim that the target (i.e. the recipient of the letter) has infringed a patent and is liable for the infringement; and
2. Meet one or more of the following criteria:
1. It falsely claims that a lawsuit has been filed; or
2. It asserts an "objectively baseless" claim because:
1. The sender doesn't have a right to assert the patent;
2. The patent has been held invalid in a final judgment or administrative order; or
3. The alleged infringement took place after the patent expired.
3. It is likely to materially mislead because it does not contain enough information to determine:
1. The identity of the person asserting the patent;
2. Which patent is alleged to be infringed; and
3. At least one allegedly infringing product or service.

Fla. Stat. 501.993 (2016).

Third, the act makes clear that it does not interfere with a party's ability to license its patents, by specifically indicating that the act does not prohibit:

1. Notifying other parties of a person's ownership or rights under a patent
2. Offering the patent to others for license or sale
3. Notifying someone that they infringe the patent; or
4. Seeking compensation for infringement of the patent

Fla. Stat. 501.991(4) (2016).

Fourth, the act revises the criteria for punitive damages in an effort to focus the act on the nefarious behavior sought to be discouraged.  Now, to pursue punitive damages, the violator must be a repeated violator of the law.  Thus, a small entity that only asserts a single claim should be free from the law's restrictions.

It will be interesting to see how this law continues to develop in Florida and throughout the country.

Fla. Chapter 2016-101.