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Missouri Passes Legislation Barring Persons from Sending Demand Letters Containing Allegations of Patent Infringement Made In Bad Faith

Alert
07.17.2014
By Colin W. Turner

On July 8, 2014, Missouri Gov. Jay Nixon signed into law Senate Bill 706 (to be codified as §§ 416.650, 416.652, 416.654, 416.656, and 416.658), an act aimed at deterring individuals and companies from making bad faith assertions of patent infringement in demand letters sent to Missouri residents and companies.1 The new law goes into effect on August 28, 2014.

The law is similar to various other state laws that have been passed in the last year and a half (the first such law was passed by Vermont in 2013).

Under the new law, a person or entity that receives a demand letter containing allegations of patent infringement that the person or entity believes were made in bad faith may pursue a private cause of action against the sender of the letter seeking:

  1. an injunction; and
  2. either actual damages or statutory damages of $10,000 per violation, whichever is greater.

If successful, the person or entity bringing such a lawsuit is entitled to recover its attorneys' fees.

The attorney general may also investigate, enjoin, and prosecute individuals that are believed to have made assertions of patent infringement in bad faith and is likewise entitled to seek either actual damages or statutory damages of $10,000 per violation, whichever is greater.

A court may consider seven statutory factors as evidence that an assertion of patent infringement has been made in bad faith. These factors are:

  1. that the demand letter does not include the patent number, the name and address of the patent owner, and/or any factual allegations concerning infringement;
  2. that the patent owner does not provide any of the information omitted in (1) when requested to do so by the alleged infringer;
  3. that the demand letter demands a license fee or response within an unreasonably short period of time;
  4. that the patent owner offers a license that is not based on a reasonable estimate;
  5. that the patent owner has previously presented a similar demand letter pertaining to the same patent under similar circumstances, and a court has deemed that demand letter to have been presented in bad faith;
  6. that the patent owner brought a patent infringement suit, and a court declared the claim to have been
    brought in bad faith; and
  7. any other relevant factors as determined by the court.

There are also seven statutory factors that a court may consider as evidence that an assertion of patent infringement has not been made in bad faith. These factors are:

  1. that the demand letter does include the patent number, the name and address of the patent owner or assignee, and factual allegations concerning infringement;
  2. if the demand letter does not include all of the information listed in (1), that the patent owner provides any such omitted information at the request of the alleged infringer;
  3. that the patent owner utilizes good faith efforts to establish infringement and to negotiate a settlement or remedy;
  4. that the patent owner makes a substantial investment in the use, production, or sale of a product covered by the patent;
  5. that the patent owner is (a) an inventor, a joint inventor, or original assignee or (b) an institution of higher education or a technology transfer organization owned or affiliated with an institution of higher education;
  6. that the patent owner has (a) utilized good faith business practices in prior efforts to enforce the same or similar patent or (b) been successful in enforcing the same or similar patent; and
  7. any other relevant factors as determined by the court.

Implications of new law: While this law was intended to impact so-called "trolls," it applies to demand letters from any type of individual or entity. Thus, you should carefully assess the merits of any allegations of patent infringement before sending a demand letter to individuals and companies located in Missouri (and all other states with similar legislation) and make efforts to insure that the delineated information set forth in the statute is included in the demand letter.

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