Minnesota has recently passed legislation prohibiting bad-faith assertions of patents held by patent trolls. And what exactly are patent trolls?
Small and midsize business owners are too often confronted with dubious legal threats from business entities or individuals. When the entities or individuals don’t actually use the patents they hold, but assert them anyway, they’re known as patent assertion entities (PAEs).
PAEs are considered patent trolls. Some patent trolls hold multiple patents; they send out a constant barrage of threatening letters demanding payments for no legitimate reason.
The PAE letter will explain how the recipient is violating the PAE’s legal rights, asks for a hefty one-time or annual payment based on the recipient’s revenues, and threatens a lawsuit if payment isn’t received in a timely manner. One-time payments can be a minimum of $5,000 to $10,000 but can be many times that amount.
Most PAEs are small operations that target businesses that are vulnerable – they generally don’t go after large corporations that are equipped to detect patent trolling.
A patent troll often buys inexpensive patents from struggling companies who are trying to monetize their dwindling resources, such as patents. Since the Patent Office often issues patents for ideas that are neither new nor novel, the patents can be very broad, and vague.
Then the patent troll sends out threatening letters to those they claim are infringing on their patent. These letters threaten legal action, unless the alleged infringer pays a licensing fee, which can cost tens of thousands or even hundreds of thousands of dollars.
Many who receive infringement letters pay the licensing fee, even when they believe the claim is false because patent litigation is incredibly costly. Most small and midsize businesses cannot afford a protracted legal battle. Settling is frankly faster and easier.
The ideal solution to this problem is federal legislation to create uniform regulations. Until that happens, states have been forced to pass individual regulations to protect businesses in each state.
Minnesota’s new law permits an individual or business to file a complaint with the Attorney General. The Attorney General is then authorized to pursue civil action against the patent entity alleged to have made the bad-faith assertion of a patent.
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