Virginia to Address Patent Litigation Abuse

Businesses large and small have been the victims of bad faith threats of patent litigation. Recently, Congress has sought to curb abusive patent litigation with new legislation, often directed primarily at "non-practicing entities," which are entities that own one or more patents but do not actually make anything covered by them. Congressional efforts have met with mixed reaction in the media and from industry leaders, and no further federal legislation has been enacted since the America Invents Act was signed in 2011.

States like Vermont and Nebraska have taken up the cause of curbing patent litigation abuse using state consumer protection statutes, often enforced by state attorneys general. Now, Virginia is poised to step into the fray. Delegate Israel O'Quinn (R-5th District) has introduced legislation designed to give Virginia's Attorney General and local prosecutors the power to challenge those who assert bad faith threats of patent infringement against Virginia businesses. This legislation, House Bill No. 375, includes the following:

• A prohibition on bad faith assertions of patent infringement and standards for courts to make a finding of "bad faith."

• A "bonding requirement," in which targets of bad faith assertions may ask Virginia's state courts to make a finding of bad faith and require that the accuser post a bond to cover the target's cost of litigation.

• Authorization for Virginia's Attorney General to investigate violations of the statute. Either the Attorney General or a Commonwealth's Attorney may bring an action in Virginia's circuit courts to enjoin a patent owner who violates this law.

• A civil action whereby private parties harmed by such "bad faith" assertions of patent infringement may file suit for actual damages (or up to 3 times their actual damages for willful violations), attorney's fees, court costs, and injunctive relief.

• A jurisdictional provision whereby anyone who violates this law from out of state by sending a demand letter into the state is deemed to be subject to jurisdiction in Virginia.

While Virginia joins other states that have considered steps to protect its citizens from abusive patent enforcement tactics, patent law is generally an area of law exclusively within the federal domain. Should the General Assembly pass this legislation, it will almost certainly face legal challenge on the grounds, among others, that only the federal government may regulate patent enforcement under the doctrine of federal preemption. Whether part or all of this statute could survive such a challenge remains to be seen. But until the federal courts or Congress address abusive patent enforcement at the federal level, we will likely see more action at the state level to address this perceived problem. We will continue to monitor the Virginia legislation and update its progress periodically.