First Substitute H.B. 117

Representative Mike K. McKell proposes the following substitute bill:


             1     
PATENT INFRINGEMENT AMENDMENTS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Mike K. McKell

             5     
Senate Sponsor: John L. Valentine

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill creates a cause of action for patent infringement.
             10      Highlighted Provisions:
             11          This bill:
             12          .    defines terms;
             13          .    prohibits bad faith assertion of patent infringement;
             14          .    allows a person who has been the recipient of a demand letter for patent
             15      infringement to file an action;
             16          .    allows the court to require the filing of a bond to cover costs of the action;
             17          .    provides remedies; and
             18          .    sets limits on punitive damages.
             19      Money Appropriated in this Bill:
             20          None
             21      Other Special Clauses:
             22          None
             23      Utah Code Sections Affected:
             24      ENACTS:
             25           78B-6-1901 , Utah Code Annotated 1953


             26           78B-6-1902 , Utah Code Annotated 1953
             27           78B-6-1903 , Utah Code Annotated 1953
             28           78B-6-1904 , Utah Code Annotated 1953
             29           78B-6-1905 , Utah Code Annotated 1953
             30     
             31      Be it enacted by the Legislature of the state of Utah:
             32          Section 1. Section 78B-6-1901 is enacted to read:
             33     
Part 19. Patent Infringement Act

             34          78B-6-1901. Title -- Purpose.
             35          (1) This part is known as the "Patent Infringement Act."
             36          (2) The Legislature acknowledges that it is preempted from passing any law that
             37      conflicts with federal patent law. However, this part seeks to protect Utah businesses from
             38      abusive and bad faith assertions of patent infringement, and build Utah's economy, while at the
             39      same time respecting federal law and not interfering with legitimate patent enforcement
             40      actions.
             41          Section 2. Section 78B-6-1902 is enacted to read:
             42          78B-6-1902. Definitions.
             43          As used in this part:
             44          (1) "Demand letter" means a letter, email, or other communication asserting or
             45      claiming that the target has engaged in patent infringement.
             46          (2) "Target" means a person in this state:
             47          (a) who has received a demand letter or against whom an assertion or allegation of
             48      patent infringement has been made;
             49          (b) who has been threatened with litigation or against whom a lawsuit has been filed
             50      alleging patent infringement; or
             51          (c) whose customers have received a demand letter asserting that the person's product,
             52      service, or technology has infringed a patent.
             53          Section 3. Section 78B-6-1903 is enacted to read:
             54          78B-6-1903. Bad faith assertions of patent infringement.
             55          (1) A person may not make a bad faith assertion of patent infringement.
             56          (2) A court may consider the following factors as evidence that a person has made a


             57      bad faith assertion of patent infringement:
             58          (a) The demand letter does not contain the following information:
             59          (i) the patent number;
             60          (ii) the name and address of the patent owner and assignee, if any; and
             61          (iii) factual allegations concerning the specific areas in which the target's products,
             62      services, and technology infringe the patent or are covered by the claims in the patent.
             63          (b) Prior to sending the demand letter, the person fails to conduct an analysis
             64      comparing the claims in the patent to the target's products, services, and technology, or an
             65      analysis was done but does not identify specific areas in which the products, services, and
             66      technology are covered by the claims in the patent.
             67          (c) The demand letter lacks the information described in Subsection (2)(a), the target
             68      requests the information, and the person fails to provide the information within a reasonable
             69      period of time.
             70          (d) The demand letter demands payment of a license fee or response within an
             71      unreasonably short period of time depending on the number and complexity of the claims.
             72          (e) The person offers to license the patent for an amount that is not based on a
             73      reasonable estimate of the value of the license.
             74          (f) The claim or assertion of patent infringement is meritless, and the person knew, or
             75      should have known, that the claim or assertion is meritless.
             76          (g) The demand letter is deceptive.
             77          (h) The person or its subsidiaries or affiliates have previously filed or threatened to file
             78      one or more lawsuits based on the same or similar claim of patent infringement, and:
             79          (i) those threats or lawsuits lacked the information described in Subsection (2)(a); or
             80          (ii) the person attempted to enforce the claim of patent infringement in litigation and a
             81      court found the claim to be meritless.
             82          (3) A court may consider the following factors as evidence that a person has not made
             83      a bad faith assertion of patent infringement:
             84          (a) The demand letter contains the information described in Subsection (2)(a).
             85          (b) Where the demand letter lacks the information described in Subsection (2)(a) and
             86      the target requests the information, the person provides the information within a reasonable
             87      period of time.


             88          (c) The person engages in a good faith effort to establish that the target has infringed
             89      the patent and to negotiate an appropriate remedy.
             90          (d) The person makes a substantial investment in the use of the patent or in the
             91      production or sale of a product or item covered by the patent.
             92          (e) The person is:
             93          (i) the inventor or joint inventor of the patent or, in the case of a patent filed by and
             94      awarded to an assignee of the original inventor or joint inventor, is the original assignee; or
             95          (ii) an institution of higher education or a technology transfer organization owned or
             96      affiliated with an institution of higher education.
             97          (f) The person has:
             98          (i) demonstrated good faith business practices in previous efforts to enforce the patent,
             99      or a substantially similar patent; or
             100          (ii) successfully enforced the patent, or a substantially similar patent, through litigation.
             101          Section 4. Section 78B-6-1904 is enacted to read:
             102          78B-6-1904. Action -- Enforcement -- Remedies -- Damages.
             103          (1) A target of conduct involving assertions of patent infringement, or a person
             104      aggrieved by a violation of this part, may bring an action in district court. The court may award
             105      the following remedies to a target who prevails in an action brought pursuant to this part:
             106          (a) equitable relief;
             107          (b) damages;
             108          (c) costs and fees, including reasonable attorney fees; and
             109          (d) punitive damages in an amount equal to $50,000 or three times the total of
             110      damages, costs, and fees, whichever is greater.
             111          (2) The attorney general may conduct civil investigations and bring civil actions
             112      pursuant to this part. In an action brought by the attorney general under this part, the court may
             113      award or impose any relief it considers prudent. The court may award costs and fees, including
             114      reasonable attorney fees, to the attorney general.
             115          (3) This part may not be construed to limit rights and remedies available to the state or
             116      to any person under any other law.
             117          (4) A demand letter or assertion of a patent infringement that includes a claim for relief
             118      arising under 35 U.S.C. Sec. 271(e)(2) is not subject to the provisions of this act.


             119          (5) The attorney general shall report annually to the Executive Appropriations
             120      Committee regarding the number of investigations and actions brought under this act. The
             121      report shall include:
             122          (a) the number of investigations commenced;
             123          (b) the number of actions brought under the provisions of this act;
             124          (c) the current status of actions brought under Subsection (5)(b); and
             125          (d) final resolution of actions brought under the act, including any recovery under
             126      Subsection 78B-6-1904 (2).
             127          Section 5. Section 78B-6-1905 is enacted to read:
             128          78B-6-1905. Bond.
             129          (1) Upon motion by a target and a finding by the court that a target has established a
             130      reasonable likelihood that a person has made a bad faith assertion of patent infringement in
             131      violation of this part, the court shall require the person to post a bond in an amount equal to a
             132      good faith estimate of the target's costs to litigate the claim and amounts reasonably likely to be
             133      recovered under Subsection 78B-6-1904 (2), conditioned upon payment of any amounts finally
             134      determined to be due to the target.
             135          (2) A hearing shall be held if either party requests one.
             136          (3) A bond ordered pursuant to this section may not exceed $250,000. The court may
             137      waive the bond requirement if it finds the person has available assets equal to the amount of the
             138      proposed bond or for other good cause shown.


[Bill Documents][Bills Directory]