December 23, 2013 Articles

Vermont Enacts Legislation Against Patent Trolls

The first-of-its-kind bill gives companies the legal ability to fight back against patent owners acting in bad faith.

By Walter E. Judge Jr. and Eric A. Poehlmann

On May 22, 2013, Governor Peter Shumlin signed into law Vermont's first-in-the-nation (and so far sole) anti-patent troll law. The Vermont legislature approved a bill that provides legal redress for Vermont companies that face extortionate claims of patent infringement from individuals or entities known as "patent trolls." In brief, the legislation gives Vermont companies the legal ability to fight back against patent owners who—acting in bad faith—threaten to sue, or actually sue, a Vermont company.

Background
The fundamental purpose behind the U.S. patent system has been subverted in recent years by the activities of so-called patent trolls. Upon acquiring a patent (regardless of how enforceable the patent actually is), a patent troll seeks out businesses that unwittingly rely on technology or processes arguably covered by the patent in order to extract licensing fees from those businesses. The licensing fees demanded by the troll are often exorbitant, especially when compared with the value of the technology or processes allegedly covered by the patent. On the other hand, the fees are less than the cost of defending an infringement lawsuit; therefore, the target company might make the decision to pay the demanded fees. Some commentators have called the patent troll's business model nothing short of legalized extortion.

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