Recently, a joint legislative committee sent a report to the North Carolina General Assembly that recommended passing an anti-troll bill during the legislature’s 2014 Short Session.  A copy of the bill may be found here. The proposed bill, titled “Patent Abuse Bill,” would create a civil and criminal cause of action aimed at preventing bad faith assertions of patent infringement. The bill also make it extortion to obtain or attempt to obtain property through a bad faith assertion of patent infringement. Extortion is a Class F felony under North Carolina law.

On the civil side, the bill would make it an unfair or deceptive trade practice to assert patent infringement in bad faith. Persons entitled to bring a claim are either the N.C. Attorney General or a person called a “Target,” i.e., a person who receives a demand letter that alleges infringement, is threatened with litigation or sued for infringement, or has customers who have received a demand letter asserting that the person’s product or service has infringed a patent.

The bill provides a number of factors to aid in determining whether a patentee has asserted a claim in bad faith, including whether the patentee compared the claims in the patent to the accused product, whether the patentee made an unreasonable licensing demand, whether the patentee knew or should have known its claims would be barred by prosecution history estoppel, and whether the patentee knew or should have known that its claims were meritless. Enumerated factors indicating good faith include whether the patentee responds to an accused infringer’s requests for information regarding the patent within a reasonable time, whether the patentee substantially invests in the active practice of the patent, and whether the patentee has demonstrated good faith business practices or has been successful in previous efforts to enforce the same/similar patent. 

If a court finds a reasonable likelihood of a bad faith assertion, the court must require the claimant to post a bond estimated to equal the costs and fees to litigate the claim, unless the claimant has assets equal to the amount of the proposed bond. The bill also provides for equitable remedies, costs, attorneys’ fees, and treble damages. If the claimant has no substantial interest in the patent other than the assertion of infringement, a court is permitted to join “Interested Parties,” whom the court can hold jointly and severally liable if the claimant is unable to pay. An “Interested Party” is defined as a person other than the claimant who is an assignee of the asserted patent, has a right to enforce or sublicense the patent, or has a direct financial interest in the patent. 

David Boaz also contributed to this article.