Business Groups Applaud Legislation
Attorney General Peter F. Kilmartin has filed legislation (S0596/H5455) that would prohibit bad faith assertions of patent infringement against Rhode Island businesses and individuals. "Patent trolls" are individuals or companies that acquire patents solely for the purpose of using them to extract license fees and settlements from those targeted as alleged infringers. Consumers, small businesses and non-profit agencies are often targeted by patent trolls because they have purchased or used products with a wide-range of patented technology such as printers or scanners.
The legislation, filed on behalf of Attorney General Kilmartin by Senate Minority Leader Dennis Algiere (R, District 38 – Westerly, Charlestown, South Kingstown) and Chair of the House Corporations Committee Representative Brian Kennedy (D, District 38 - Hopkinton, Westerly), would prohibit a person from making bad faith assertions of patent infringement against a Rhode Island target. The law would also allow a target to bring action in Rhode Island Superior Court against the patent troll, where they may be awarded equitable relief, actual damages, costs, attorney's fees and exemplary damages.
The law also gives the Office of Attorney General civil investigative powers, including the ability to bring civil actions against patent trolls; if found to have made a bad faith assertion, the patent troll could face a maximum penalty of $250,000.
"The threat of a frivolous lawsuit, let along the cost of litigation should a lawsuit ever be filed, can be devastating, particularly for small business owners and non-profit agencies. Patent trolls bank on a small business simply paying the alleged license fee versus fighting the matter in a court of law. It's deceptive and a misuse of our current patent system. Rhode Island's small businesses have enough obstacles to success already. They cannot afford to be attacked by dubious patent trolls looking to make a quick buck," said Attorney General Peter Kilmartin. "My office needs the right tools to go after these outfits and our small businesses and non profits need protection from what are essentially boardroom shakedowns by those who have found a loophole in the existing patent infringement laws."
"I have been working to get this valuable protection for businesses for the past few years," said Minority Leader Algiere, who has sponsored a version of the bill in past legislative sessions. "Small businesses face enough roadblocks without having to worry about predatory patent trolls and the potential cost of litigation to protect their businesses."
"Rhode Island needs to enact legislation aimed at reining in the 'patent trolls' who have saddled small businesses with costly legal fees and hindered job growth and development, by making bad faith claims and frivolous threats against Rhode Island's business and non-profit communities," said Chairman Kennedy.
According to a report published by the Practicing Law Institute, frivolous patent litigation costs U.S. businesses approximately $29 billion a year in direct costs and $80 billion in indirect costs. And, according to a study published in July by Price Waterhouse Coopers, almost 6,500 patent lawsuits were filed in the United States in 2013, of which 67 percent of those lawsuits were filed by patent trolls.
"We have received many complaints from Rhode Island businesses and nonprofits, our constituents, who are desperate for relief from the misuse of the patent system. While these threats were once focused on tech businesses, they are now levied at all manner of businesses, including banks, hospitals, restaurants and hotels," continued Kilmartin.
The legislation has the support of the Rhode Island Hospitality Association and the Greater Providence Chamber of Commerce. According to a published report, in 2014 at least 20 businesses in Rhode Island had been sued by patent trolls.
According to the RI Hospitality Association, which represents more than 650 restaurants, hotels and affiliated businesses, patent trolling is becoming more prevalent within the industry.
"The hospitality industry is comprised predominantly of small-business owners who are working day and night to keep their doors open and provide jobs to the more than 70,000 folks who choose to work in our industry," said Dale J. Venturini, President & CEO, RI Hospitality Association. "Patent trolls are becoming more and more problematic within our industry, and we applaud Attorney General Kilmartin and the members of the legislature who are taking a stand against this baseless monetary attack."
"As the advocate for growing and protecting the business community in Rhode Island, the Greater Providence Chamber of Commerce is pleased to join with Attorney General Kilmartin, Representative Kennedy and Senator Algiere to help shield companies from needless, costly and abusive patent infringement lawsuits," said Laurie White, president of the Greater Providence Chamber of Commerce. "Rhode Island businesses are looking to expand, but their growth is threatened by the actions of a few bad actors. If we want to create new jobs and grow our economy, we must crack down on these harmful and illegitimate threats from patent assertion entities."