Evolving Requirements of Patent Notice Letters and Complaints

• Citation: Vol. 20 No. 2
• Publication year: 2014
• Author: By David B. Abel

Evolving Requirements of Patent Notice Letters and Complaints

By David B. Abel

David Abel is an intellectual property lawyer with experience representing plaintiffs and defendants in patent, copyright, trademark, trade secret and unfair competition litigation. He is licensed in California and before the U.S. Patent and Trademark Office, having prosecuted over 70 applications. Before starting his own practice, David was a partner in DLA Piper, and Squire, Sanders & Dempsey. He has been named a Southern California Super Lawyer in 2013 and 2014.

Patent infringement license demands and litigation impose substantial financial burdens on companies and businesses, including small businesses with limited resources. Monetization activities of so called "Non-Practicing Entities" or simply "NPEs" often start with demand letters sent to a business that include an assertion of infringement and an offer to license intellectual property rights. The demand letter may be the first step in an enforcement action, as the U.S. Patent laws provide that damages do not accrue until after an alleged infringer has notice of the patent.

Notice from an NPE requires a written infringement allegation or the filing of a complaint.¹ If the offer to license is not accepted and the patentee (the owner of the patent, here, the NPE) proceeds with filing a complaint, the complaint may only need to comply with the minimal allegation requirements of Form 18² of the Appendix of Forms to the Federal Rules of Civil Procedure.³ A patentee can take advantage of the minimal pleading requirements and initiate licensing and litigation actions without a substantial investment.

By comparison, the receipt of a demand letter may effectively impose on the recipient an obligation to consult an attorney, who must then review the patent, its file history, and any potential use of the claimed invention by the recipient's business. The expenses incurred may be substantial when the patent describes and potentially covers an invention that may have nothing to do with the business. In some circumstances, paying for a license may be a cost effective alternative to hiring an attorney.

Recognizing that the expenses associated with investigating and defending against patent lawsuits may be detrimental to businesses, a few states and the Federal Government have adopted or are considering legislation to address assertions of patent infringement.

Vermont was the first state to enact a statute entitled "Bad Faith Assertions of Patent Infringement," which became effective as of July 1, 2013.⁴ Oregon and Virginia have followed Vermont's lead with their own "Bad Faith" legislation.⁵ At least Kentucky, Maine, Nebraska, Tennessee and Wisconsin are in the process of adopting similar legislation. The proposed modification of the Kentucky Consumer Protection Act could require payment of the accused's damages, attorney's fees, and exemplary damages equal to $50,000 or three times the total damages, costs, and fees for bad faith assertions of patent infringement. The Tennessee legislation creates an independent cause of action with remedies similar to the Kentucky legislation.

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The state statutes specifically target the "demand letter," which, for example, the Vermont statute defines as "a letter, e-mail, or other communication asserting or claiming that the target has engaged in patent infringement."⁶ The Vermont statute effectively requires that a demand letter must include the patent number, the name and address...