Del. Jon S. Cardin’s Patent Troll Legislation Passes House Unanimously

FOR IMMEDIATE RELEASE – March 6, 2014

DEL. JON S. CARDIN’S PATENT TROLL LEGISLATION PASSES HOUSE UNAMIMOUSLY; MOVES TO SENATE FINANCE COMMITTEE
Cardin says patent trolls cost money, jobs and innovation and have no place in Maryland.

Annapolis, MD – On March 6th, Delegate Jon S. Cardin’s proposed bill preventing patent trolls, HB430, passed unanimously out of the House of Delegates. It will now move onto the Senate Finance Committee for consideration.  The bill prevents companies from demanding money from another company through bad faith claims of patent infringement – a practice commonly known as “patent trolling.” A nearly identical bill, SB585, sponsored by Finance Committee Chairman Thomas “Mac” Middleton passed the Senate unanimously also on March 6th.

Across the country, patent troll companies are using the threat of frivolous but costly patent infringement suits to extort money from innocent companies.  These patent troll companies send boiler plate letters to thousands of companies, often small businesses and start-up technology companies, demanding thousands of dollars as the cost of avoiding a law suit.  Even though the target company may not even be using the patent at the heart of the complaint, it may still find it necessary to pay in order to avoid costly and time-consuming litigation. This is not only unjust and wasteful, it leads to a lack of innovation and investment out of fear of future litigation.

Delegate Cardin said, “When a business is legitimately infringing on someone’s patent, they should be held accountable, but patent trolls shouldn’t be allowed to send boiler plate demand letters to every technology company in the State demanding they pay ransom or face costly litigation for a patent they aren’t infringing upon in the first place. This stifles innovation and investment while costing us jobs and productivity.”

The legislation gives the recipient of a bad faith patent infringement suit or demand letter the right to countersue the patent trolling company. To create a deterrent to patent trolling, damages for a successful plaintiff may be up to three times the total costs of litigation and actual damages combined. The Attorney General’s office will also have the authority to bring suits against patent trolls to enforce the State’s interest in protecting businesses and fostering a fair business climate.

Jay Steinmetz, an entrepreneur and CEO of Barcoding Inc, a Baltimore based technology firm, stated “Most patent trolls have no idea if the business owner is truly infringing on their patent nor do they really care if they are. They are simply attempting to extort money from a business by using the threat of expensive litigation. To be successful business owners need to be focused.  Patent trolls are leveraging their ability to create distractions and uncertainty to commit a business owner to pay them off.”

Nebraska Attorney General Jon Bruning, who led the successful fight to pass similar legislation in Nebraska said, “Companies that aren't violating anyone's patents are settling these cases just to avoid the cost of litigation. That's not what the courts are designed for." He went on to call patent trolling a “transfer of wealth that occurs via a perversion of the court system.” Vermont has also passed similar legislation.

Delegate Cardin concluded “Small businesses, especially technology start-up companies, are tremendous job and wealth creators for our State. Patent trolls often target these businesses and end up putting them out of business based on fake patent infringement claims and extortion. This isn’t fair, and it costs us money, jobs and innovation. Bad faith business practices like these have no place in Maryland.”

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