Prohibits bad faith assertions of patent infringement where the person making the assertion is not engaging, has not engaged or attempted to engage, or does not intend to engage in the bona fide use of the patent in the production, development, licensing or commercialization of goods or services.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A380
SPONSOR: Vanel TITLE OF BILL:
An act to amend the general business law, in relation to prohibiting bad
faith assertions of patent infringement
PURPOSE OR GENERAL IDEA OF BILL:
Prohibits bad faith assertions of patent infringement.
SUMMARY OF PROVISIONS:
376 -Defines important terms.
377 - Prohibits bad faith assertions of patent infringement. Provides
that an assertion is presumptively made in bad faith where there is not
evidence that the patent owner is not engaging, has not engaged or
attempted to engage, or does not intend to engage in the bona fide use
of the patent in the production, development, licensing or commerciali-
zation of goods or services. The court shall consider 10 factors when
making this determination. Where the presumption does not apply, the
court shall consider 9 factors to determine whether the demand was made
in bad faith. Also provides for 7 factors for the court to examine in
determining whether the assertion was not made in bad faith
378 - Provides penalties, including a private cause of action and cause
of action by the Attorney General.
379 - States that this article is severable.
JUSTIFICATION:
In 1903 Henry Ford, the founder of Ford Motor Company - the company that
would go on to revolutionize the automobile industry by making vehicles
more affordable and accessible to the general public - was sued by a
patent troll who claimed exclusive rights to the production of automo-
biles powered by an internal combustion engine. This lawsuit was based
on an 1870 patent for the mere idea of an engine that the troll didn't
know how to manufacture. In 1911, after along court battle with the
troll, Ford came out victorious, along with the entire automobile indus-
try that was threatened by this one patent troll.
Imagine what society and our economy would look like today had that
patent troll won; the innovation and mass production that fueled the
automotive revolution could have been stifled, potentially delaying
widespread access to automobiles, hindering economic growth, and alter-
ing the course of modern transportation and industrial development.
In 2013, Vermont was motivated by a notorious patent troll to enact the
first anti-patent troll law in the country. There, a company called MPHJ
purchased 5 patents for $1 related to computer architecture. They then
created thousands of subsidiaries with random names to hide their iden-
tity and sent 16,000 letters to businesses claiming patent infringement.
This same company did the same thing to New York businesses - sending
out over 1,000 letters through 100 subsidiaries. The Attorney General at
the time reached a settlement with MPHJ in 2014 in relation to their
conduct under a New York law which broadly prohibits "repeated fraudu-
lent and illegal acts.
New York needs more concrete rules related to patent trolling and it
needs more certain and easier laws that can be used against these trolls
by the government and private residents who are the targets of these •
lawsuits, Having more clear and concise laws on the matter will deter
these sorts of frivolous assertions.
This bill would make it easier for New York businesses and the Attorney
General to hold these patent trolls accountable for making bad faith
assertions of patent infringement by making it more costly to send out
frivolous patent infringement letters.
The spirit of patent law is innovation. Patent trolls - or non-practic-
ing entities (NPEs) - purchase broad patents for little money and send
out letters to small and large businesses alike threatening that they
will sue if they do not pay up.
To be clear, NPEs make their money exclusively through assertions of
patent infringement - and subsequent licensing fees from those demands -
not from innovating and commercializing goods and services related to
their patents. Thus, under this bill, an assertion is presumptively made
in bad faith where the demand comes from a company that does nothing
else with their patent except sue and demand payment for alleged uses of
it. And if this presumption does not apply, the court must examine a set
of factors to determine whether the assertion was made in bad faith.
This bill does not and is not intended to affect federal patent law in
any way. It simply creates a state cause of action based exclusively on
deceptive and unfair conduct related to patent infringement.
PRIOR LEGISLATIVE HISTORY:
09/18/24 referred to judiciary
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
N/A
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
380
2025-2026 Regular Sessions
IN ASSEMBLY(Prefiled)
January 8, 2025
___________
Introduced by M. of A. VANEL -- read once and referred to the Committee
on Judiciary
AN ACT to amend the general business law, in relation to prohibiting bad
faith assertions of patent infringement
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The general business law is amended by adding a new article
2 24-E to read as follows:
3 ARTICLE 24-E
4 BAD FAITH ASSERTIONS OF PATENT INFRINGEMENT
5 Section 376. Definitions.
6 377. Bad faith assertions of patent infringement prohibited.
7 378. Penalties.
8 379. Severability.
9 § 376. Definitions. The following terms shall have the following mean-
10 ings:
11 1. "Demand" or "assertion" shall mean a letter, e-mail, or other
12 communication asserting or claiming that the target has engaged in
13 patent infringement.
14 2. "Target" shall mean a New York resident:
15 (a) Who has received a demand letter or against whom an assertion or
16 allegation of patent infringement has been made;
17 (b) Who has been threatened with litigation or against whom a lawsuit
18 has been filed alleging patent infringement; or
19 (c) Whose customers have received a demand letter asserting that the
20 person's product, service, or technology has infringed on a patent.
21 § 377. Bad faith assertions of patent infringement prohibited. 1. A
22 person shall not make a bad faith assertion of patent infringement.
23 2. (a) An assertion of patent infringement is presumptively made in
24 bad faith when the person making the assertion (i) is not engaging, (ii)
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01940-01-5
A. 380 2
1 has not engaged or attempted to engage, or (iii) does not intend to
2 engage in the bona fide use of the patent in the production, develop-
3 ment, licensing or commercialization of goods or services. A person's
4 efforts to license a patent shall not be considered as negating this
5 presumption where such licensing efforts were solely or substantially
6 made through assertions of patent infringement.
7 (b) In making this assessment, the court shall consider the following
8 factors:
9 (i) The person's internal and external private and business-related
10 communications;
11 (ii) Business activities related to the patent;
12 (iii) Financial records and investments tied to the development or
13 utilization of the patent;
14 (iv) Any licensing agreements or partnerships involving the patent
15 other than those obtained through assertions of patent infringement;
16 (v) Documentation of research and development efforts associated with
17 the patent;
18 (vi) Marketing of products utilizing the patent;
19 (vii) The length of time the patent has been owned by the person, in
20 relation to the industry standard time typically required to engage in
21 business activities and marketing;
22 (viii) Whether any such activities related to the production, develop-
23 ment, licensing or commercialization of the goods and services related
24 to the patent were made in good faith or made with the purpose of
25 circumventing claims under this section;
26 (ix) The person's history of legal actions or assertions of patent
27 infringement related to any patent whether currently or previously
28 owned, including the outcomes of such claims; and
29 (x) Any other factor the court deems relevant.
30 3. Where the presumption provided for in subdivision two of this
31 section does not apply, a court may consider the following factors as
32 evidence that a person has made a bad faith assertion of patent
33 infringement:
34 (a) The demand letter does not contain the following information:
35 (i) the patent number;
36 (ii) the name and address of the patent owner or owners and assignee
37 or assignees, if any; and
38 (iii) factual allegations concerning the specific areas in which the
39 target's products, services, and technology infringe the patent or are
40 covered by the claims in the patent;
41 (b) Prior to sending the demand letter, the person fails to conduct an
42 analysis comparing the claims in the patent to the target's products,
43 services, and technology, or such an analysis was done but does not
44 identify specific areas in which the products, services, and technology
45 are covered by the claims in the patent;
46 (c) The demand letter lacks the information described in paragraph (a)
47 of this subdivision, the target requests the information, and the person
48 fails to provide the information within a reasonable period of time;
49 (d) The demand letter demands payment of a license fee or response
50 within an unreasonably short period of time;
51 (e) The person offers to license the patent for an amount that is not
52 based on a reasonable estimate of the value of the license;
53 (f) The claim or assertion of patent infringement is meritless, and
54 the person knew, or should have known, that the claim or assertion is
55 meritless;
56 (g) The claim or assertion of patent infringement is deceptive;
A. 380 3
1 (h) The person or its subsidiaries or affiliates have previously filed
2 or threatened to file one or more lawsuits based on the same or similar
3 claim of patent infringement, and (i) those threats or lawsuits lacked
4 the information described in paragraph (a) of this subdivision, or (ii)
5 the person attempted to enforce the claim of patent infringement in
6 litigation, and a court found the claim to be meritless; and
7 (i) Any other factor the court finds relevant.
8 4. With respect to a court's assessment under subdivisions two and
9 three of this section, a court may consider the following factors as
10 evidence that a person has not made a bad faith assertion of patent
11 infringement:
12 (a) The demand letter contains the information described in paragraph
13 (a) of subdivision three of this section;
14 (b) Where the demand letter lacks the information described in para-
15 graph (a) of subdivision three of this section and the target requests
16 the information, the person provides the information within a reasonable
17 period of time;
18 (c) The person engages in a good faith effort to establish that the
19 target has infringed the patent and to negotiate an appropriate remedy;
20 (d) The person makes a substantial investment in the use of the patent
21 or in the production or sale of a product or item covered by the patent;
22 (e) The person is:
23 (i) the inventor or joint inventor of the patent or, in the case of a
24 patent filed by and awarded to an assignee of the original inventor or
25 joint inventor, is the original assignee; or
26 (ii) an institution of higher education or a technology transfer
27 organization owned or affiliated with an institution of higher educa-
28 tion;
29 (f) The person has:
30 (i) demonstrated good faith business practices in previous efforts to
31 enforce the patent, or a substantially similar patent; or
32 (ii) successfully enforced the patent, or a substantially similar
33 patent, through litigation; and
34 (g) Any other factor the court finds relevant.
35 5. Nothing in this section shall be construed as limiting, expanding
36 or altering any parties' rights with respect to a patent infringement
37 claim brought in a court of competent jurisdiction.
38 § 378. Penalties. 1. A person who is the recipient of a bad faith
39 assertion of patent infringement may bring a civil action in a court of
40 competent jurisdiction and, upon a finding that the person violated the
41 provisions of this article, the court shall award the defendant:
42 (a) Equitable relief, as the court deems proper;
43 (b) Reasonable attorney's fees and costs;
44 (c) Exemplary damages in an amount of fifty thousand dollars or three
45 times the total of damages, costs, and fees, whichever is greater; and
46 (d) Any other relief the court deems proper.
47 2. A court, in its discretion, may award to any party or attorney in
48 any action brought under this section costs in the form of reimbursement
49 for actual expenses reasonably incurred and reasonable attorney's fees,
50 resulting from frivolous conduct as defined in section 130-1.1 of title
51 twenty-two of the New York codes, rules and regulations, as amended from
52 time to time.
53 3. Wherever the attorney general shall find that a person has engaged
54 in a persistent course of conduct in violation of this article, an
55 application may be made by the attorney general in the name of the
56 people of the state of New York to a court of justice having jurisdic-
A. 380 4
1 tion to issue an injunction, and upon notice to the defendant of not
2 less than five days, to enjoin and restrain the continuance of such
3 violations; and if it shall appear to the satisfaction of the court or
4 justice, that the defendant has, in fact, violated this section an
5 injunction may be issued by such court or justice enjoining and
6 restraining any further violation, without requiring proof that any
7 person has, in fact, been injured or damaged thereby. In any such
8 proceeding, the court may make allowances to the attorney general as
9 provided in paragraph six of subdivision (a) of section eighty-three
10 hundred three of the civil practice law and rules, and direct restitu-
11 tion. Whenever the court shall determine that a violation of this
12 section has occurred, the court may impose a civil penalty of not more
13 than fifty thousand dollars per bad faith assertion of patent infringe-
14 ment or three times the total of damages, costs, and fees, whichever is
15 greater. In connection with any such proposed application, the attorney
16 general is authorized to take proof and make a determination of the
17 relevant facts and to issue subpoenas in accordance with the civil prac-
18 tice law and rules.
19 § 379. Severability. If any clause, sentence, paragraph, section or
20 part of this article shall be adjudged by any court of competent juris-
21 diction to be invalid and after exhaustion of all further judicial
22 review, the judgment shall not affect, impair or invalidate the remain-
23 der thereof, but shall be confined in its operation to the clause,
24 sentence, paragraph, section or part of this article directly involved
25 in the controversy in which the judgment shall have been rendered.
26 § 2. This act shall take effect immediately.
